IFMR Digest Sep 2017

SKILL INDIA
GOODS AND SERVICE TAX
The Ministry of MSME which has been awarded the
quality system certification – ISO 9001-2008, is
engaged in skill development programmes besides
providing support, market and fund assistance to
entrepreneurs. The Ministry has set a target of
training 15 million youth by 2022. To achieve this
goal, the Ministry has collaborated with Samsung
Electronics to set up 10 MSME Samsung
Technology Schools for skilling youth in repair and
maintenance of electronics. In the year 2014-15,
The Entrepreneurship Development Institutes (EDI)
made 260,888 youth job-ready through 9,142
programmes. The talent ‘melas’ organised in the
same year provided jobs to 9,000 youth in the
MSME sector. The Central government has been
pushing for linking skilling initiatives like the DDU-
GKY and EST&P to employment outcomes. There is
a symbiosis here as the MSMEs absorb the skilled
youth and in turn benefit from it.
DIGITAL INDIA
Another important initiative of the Government of
India is the ‘Digital India’ movement that focuses on
digitization of the economy. With increasing
penetration of internet-enabled smartphones and a
population that looks up to technology for solutions to
problems big and small, the MSME sector could
become a prominent beneficiary. Several technology
solution providers that have started with a boost from
the ‘Digital India’ movement are attempting to forge
B2B relationships with MSMEs through digital
transactions. Technology platforms have also found
ways to connect MSMEs to buyers, suppliers, financial
institutions and other enabling agencies. Digital India,
though not directly focusing on MSMEs, has been
instrumental in improving the business ecosystem –
from the ease of filling up forms to getting access to
finance and markets.
Perhaps the most talked about policy reform in the
recent terms, the Goods and Services Tax (GST) is
about to roll out in July 2017 and there is an air of
uncertainty and apprehension around it. The reform
will provide equal footing to the big enterprises and
SMEs alike and will remove the tax differentiation on
stock transfer. The GST may turn out to be a mixed
bag for MSMEs. It has been proposed to bring down
the threshold to around Rs 10 lakhs to increase the
tax net. As a result, more MSMEs will come under
GST coverage and their working capital will be
affected. Cost of production is supposed to increase
under the new tax regime as the GST which will be
levied on supply will not be available for input credit.
Further, tax neutrality of GST would mean same
taxation for large businesses as well as SMEs which
will be a difficult position for an SME competing
against a large business.
However, the GST also holds opportunities for the
MSME sector. Due to the standard processes without
slab discrimination for VAT as under the current
regime, MSMEs will find it easier to start business.
Further, the GST eradicating the burden of tax on
interstate sales, will make it easier for MSMEs to
expand to new markets. Transfer of tax credit
irrespective of the location of the buyer & seller,
elimination of border tax procedures and toll check
posts will help in reducing logistical overheads. The
GST is also supposed to enable availing input credit,
single-point tax, and eliminate the cascading tax
system.
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