Lok Sabha Question No. 2980 (UNSTARRED), answered on 2018-08-03
Subject: GST Exemption to MSMEs
Ministry: FINANCE
Asked by: BHARATENDRA SINGH, KRISHNAN NARAYANASAMY RAMACHANDRAN, PR. SENTHILNATHAN, R.K. BHARATHI MOHAN

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF REVENUE

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## LOK SABHA

## UNSTARRED QUESTION NO. 2980

TO BE ANSWERED ON FRIDAY, THE 3 RD  AUGUST, 2018 / SHRAVANA 12, 1940 (SAKA)

GST Exemptions to MSMEs

2980. KUNWAR BHARATENDRA: SHRI K. N. RAMACHANDRAN: SHRI PR. SENTHIL NATHAN: SHRI BHARATHI MOHAN R. K.:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has undertaken or intends to undertake any measures to  give  exemptions  to  Micro,  Small  and  Medium  Enterprises  (MSMEs)  from paying Goods and Services Tax (IGST) by inclusion of Integrated Goods and Service Tax (GST) refund under duty drawback  and if so, the details thereof;
- (b) whether any other measures are being undertaken to increase the access to capital for MSMEs and if so, the details thereof;
- (c) whether  the  Government  has  any  plans  to  exempt  Small  and  Medium Enterprises (SMEs) having annual turnover of Rs. 50 lakhs or less from the ambit of GST, if so, the details thereof and if not, the reasons therefor;
- (d) whether  the  Government  has  received  plea  from  the  State  Governments  or MSME associations/federations  in  this  regard,  if  so,  the  details  thereof  and Government's stand in this regard; and

(e) the effective steps taken by the Government to protect the interests of MSME sector from the implications faced by them under GST regime ?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SHIV PRATAP SHUKLA)

Part (a): No, Madam.

Part  (b):  The  Government  has  undertaken  various  measures  to  increase  the access to capital for MSMEs. These are given at Annexure - I.

Part (c) & (d): No, Madam.

Part (e): Based on the representations received from various trade and industry bodies, the Government has taken various steps to protect the interests of MSME sector under Goods and Services Tax (GST). These are given at Annexure - II.

Annexure - I Annexure referred in answer to part (b) of Lok Sabha Unstarred Question No. 2980 to be answered on 03.08.2018 on GST Exemption to MSMEs.

- i. Collateral  free  credit  under  Credit  Guarantee  Fund  Scheme,  Margin  Money Subsidy under Prime Minister's Employment Generation Programme (PMEGP) and credit linked capital subsidy under Credit Linked Capital Subsidy Scheme (CLCSS) is provided to MSMEs.
- ii. Reserve  Bank  of  India  (RBI),  in  February,  2018,  advised  all  banks  and  Non Banking Financial Companies (NBFCs) regulated by the RBI, to extend the time period  from  90  days  to  180  days  for  classification  of  loan  account  as  Non Performing Asset (NPA)to those borrowers who are registered under the Goods and Services Tax (GST) regime as on 31.01.2018 and applicable to the payments from  the  borrowers  due  between  01.09.2017  to  31.01.2018,  subject  to  certain conditions.
- iii. RBI, vide its Circular dated June 06, 2018, has also decided to temporarily allow banks  and  NBFCs  to  classify  their  exposure,  as  per  the  180  days  past  due criterion to all MSMEs including those not registered under GST as a standard asset subject to certain conditions. Further, in respect of dues payable by GSTregistered  MSMEs  from  January  01,  2019  onwards,  the  180  days  past  due criterion shall be aligned to the  extant  Income  Recognition  and  Asset Classification (IRAC) norms in a phased manner as given in the circular.
- iv. Besides,  Government  and  RBI  have  taken  several  measures  to  facilitate provision of hassle free loans to MSMEs, which inter-alia include, advise to all Scheduled Commercial Banks (SCBs) to achieve 20% year-on-year growth in credit  to  Micro  and  Small  Enterprises  (MSEs),  allocation  of  60%  of  the  MSEs advances to the micro enterprises accounts, a 10% annual growth in number of micro enterprise accounts, additional working  capital limit to meet  the requirements arising due to unforeseen/ seasonal increase in demand, adoption of  one  cluster,  operationalising  at  least  one  specified  MSME  Branch  in  every district etc., computation of working capital requirements of MSE units has been simplified to make it minimum 20% of the projected annual turnover of the unit for borrowal limits uptoRs. 5 crore and set up Trade Receivables Discounting System (TReDS) Platform to solve the problem of delayed payments to MSMEs.

Annexure - II Annexure referred in answer to part (e) of Lok Sabha Unstarred Question No. 2980 to be answered on 03.08.2018 on GST Exemption to MSMEs.

- i. Service providers making inter-State supplies whose aggregate annual turnover does  not  exceed  Rs.  20  lakh  have  been  exempted  from  the  requirement  of registration under GST.
- ii. Extending the Advance Authorization (AA) / Export Promotion Capital  Goods (EPCG) / 100% Export Oriented Units (EOU) schemes to sourcing inputs etc. from abroad as well as domestic suppliers. Holders of AA / EPCG and EOUs are not  required  to  pay  Integrated  Goods  and  Services  Tax  (IGST),  Cess  etc.  on imports.  Further,  domestic  supplies  to  holders  of  AA  /  EPCG  and  EOUs  are treated as deemed exports under section 147 of Central Goods and Services Tax (CGST)/State Goods and Services Tax (SGST) Acts and refund of tax paid on such supplies is given to either the supplier or the recipient.
- iii. The supply of taxable goods by a registered supplier to a merchant exporter for exports shall attract a total GST rate of 0.1%. This will reduce capital blockage for exporters.
- iv. Registered persons making supply of goods are now required to make payment of tax at the time of the issuance of invoice and not at the time when advances are received.
- v. Recommendations made by the GST Council meeting in its 28th meeting held on 21st July, 2018 are as follows:
- I.  It has been decided to amend the law in order to increase the upper limit of turnover  for  opting  for  composition  scheme  from  Rs.  1  crore  to  Rs.  1.5 crores.
- II.  The  provisions  of  reverse  charge  mechanism  under  sub-section  (4)  of section 9 of the CGST Act, 2017 and sub-section (4) of section 5 of the IGST Act, 2017 will be suspended till 30.09.2019.
- III.  Taxpayers having annual turnover upto Rs. 5 crores in the previous year would have the option to file quarterly returns under GST.
- IV.  The  threshold  exemption  limit  for  registration  in  the  States  of  Assam, Arunachal Pradesh, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand is to be increased to Rs. 20 lakhs from Rs. 10 lakhs.