Parliamentary Panel Highlights GST Challenges Faced by MSME Exporters

A parliamentary panel has identified challenges faced by MSME exporters under the GST regime, highlighting issues related to refunds, compliance requirements, duty structures, export benefits, and operational costs.

One of the primary concerns is the delay in GST refunds, which affects liquidity for MSMEs dependent on timely reimbursements. While automation has been introduced, refund processing delays persist, particularly in cases requiring manual verification. Additionally, compliance requirements, including frequent regulatory changes, multiple filings, and detailed documentation, create difficulties for small exporters, sometimes resulting in penalties.Another issue is the inverted duty structure, where tax rates on raw materials are higher than on finished goods. This leads to the accumulation of input tax credit, affecting cash flow. The transition from the Merchandise Exports from India Scheme (MEIS) to the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme has also been noted, with concerns that it does not fully offset embedded taxes, potentially impacting export competitiveness.

Compliance costs remain a challenge, as many MSMEs rely on external consultants due to limited in-house expertise. E-way bill requirements, invoice reconciliations, and mandatory e-invoicing for certain businesses add to operational complexities.

To address these concerns, the panel has recommended measures such as expediting refund processes, simplifying compliance procedures, rationalizing the duty structure, and reviewing export incentive policies. It also suggests capacity-building initiatives, including training and digital tools, to assist small exporters in understanding GST regulations.As MSMEs contribute significantly to India's exports, addressing these GST-related issues could support their growth and enhance their participation in global trade.