Complex GST compliance to sell online among reasons for MSMEs’ low digital penetration: FISME

Ease of Doing Business for MSMEs: One of the reasons for the low digital penetration of MSMEs are complex Good and Services Tax (GST) compliance requirements needed to make the transition from offline to online selling platforms, said MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME). “Only around 10 per cent of India’s small businesses sell online,” FISME added as it urged the government for efforts required to simplify the GST system, rationalise rates, and harmonise GST thresholds between offline and online sellers.

Currently, online businesses are required to register under the GST system regardless of their turnover even as for offline sellers, it applies to businesses with a turnover of over Rs 40 lakhs. This creates an unequal playing field between offline and online retail and has discouraged small businesses from becoming a part of the digital economy, said FISME in a statement on Friday. 

“Digitally-enabled MSMEs have the potential to grow twice as fast as their offline counterparts. There is a dire need to educate and encourage MSMEs to sell online, and spread awareness of the growth opportunities available through e-commerce platforms,” said Anil Bhardwaj, Secretary General, FISME. 

Subscribe to Financial Express SME newsletter now: Your weekly dose of news, views, and updates from the world of micro, small, and medium enterprises 

Around 5 crore MSMEs are estimated to be unable to sell online due to complex and mandatory GST requirements while those operating through online platforms are burdened with cumbersome and time-consuming periodical compliances like registration and filing monthly returns, which further dissuades them from registering under GSTN, the association noted citing market intelligence and secondary research.

Earlier this month, the traders’ body Confederation of All India Traders (CAIT) had also released a survey on GST compliance recording responses from 630 traders. While 72 per cent respondents believed e-commerce is a significant channel for business, 66 per cent said GST registration is a big hurdle. Moreover, 94 per cent respondents said e-commerce companies are killing their business by their monopolistic terms and flouting policies while 89 per cent opined that e-commerce policy and rules are necessary for a fair e-commerce business.