MSMEs fear harassment by the new draconian GST regime

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• Dec 27, 2021 | Sourav Boruah

Digital Desk: The new GST rules were revised to authorize the GST officials to initiate recovery proceedings against businesses without providing a show-cause notice for any mismatches in forms GSTR-1 and GSTR-3B is creating a buzz around the owners of the Micro, Small, and Medium Enterprises. They fear this draconian GST regime will put hurdles in the way of their trade and eventually shut down their respective businesses.

The owners of the MSMEs also emphasize the 'fact' that the government ensured of smooth and easy functioning of businesses. Instead, the government is about to put a lot of pressure on the MSMEs, said a businessman.

Interestingly the revised rules were notified in the latter part of December, i.e., December 21.

The revised Goods and Services Tax(GST) will come into effect from January 1, 2022.

The tax officials under the Government of India were required to issue a show-cause notice before the commencement of recovery procedures. Still, now after the amended GST regime, this procedure is declared null and void.

Along with it, many other changes will come into effect from January 1, 2022.

The goal behind the sudden move in the GST functioning in the country is to curb cases of fake billing by the buyers whereby the sellers show high sales under the GSTR-1.

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Such practices allow buyers to claim input tax credits (ITC) and underreport sales in the GSTR-3B form to reduce their GST liability.

The MSME associations predict misuse of legal power provided to the authorities in the future.

They observed that the incoming stricter GST rules would increase the compliances and litigations for the MSMEs and lead to harassment at the hands of tax authorities.

Vinod Kumar, president of India SME Forum, said that the incoming GST changes would give exclusive power to the officials in the GST department because the new system does not enquire into the reasons behind the mismatch in the forms.

He explained several instances wherein the buyers return the products to the seller and demand a refund. However, the same would not reflect in the form GSTR-3B which had originally captured the transaction.

"So while the seller has to give a refund to the buyer, he will also be forced to give the GST on the same transaction," said Kumar.