• Notification Date: 29-12-2023
• Notification No: N/A

GST-related Developments in 2023 significant for MSMEs

While small businesses continue to expect more reforms related to Goods and Services Tax (GST) in the coming year, a few developments related to GST took place in 2023 that mattered for MSMEs. Here’s a quick recap of the year that was for small businesses that have been resilient and persistent to survive amid regulatory changes:  

MSMEs’ Recovery Post-Covid  

The Economic Survey 2022-23 in January this year noted that GST paid by MSMEs, after declining in FY21, crossed the pre-pandemic level of FY20, reflecting the financial resilience of small businesses and the effectiveness of the pre-emptive government intervention targeted towards MSMEs. According to the data shared in the survey, the GST paid by MSMEs dropped from Rs 5 lakh crore in FY20 to around Rs 4.7 lakh crore in FY21 before climbing to around Rs 5.5 lakh crore in FY22. The recovery of the MSME sector from the pandemic-induced shock is evident in the trend in GST paid by MSME units, the survey noted. 

Index for MSMEs’ Economic Activity  

Financial advisory and technology company Jocata on Friday announced its partnership with SIDBI, the principal financial institution for MSME development, to launch an MSME Economic Activity Index – Sumpoorn. It is a relative amplitude-adjusted composite diffusion index developed using consent-led and anonymized monthly sales data reflected in official GSTN returns of more than 50,000 MSMEs seeking credit from financial institutions from October 2019 to date instead of based on a survey data. 

Formalisation of Non-GST Units  

The number of informal micro units (IMEs), which are not covered the GST regime or exempted from the CGST Act, 2017, registering for the Udyam certificate via the government’s Udyam Assist Platform (UAP) to be eligible for priority sector loans (PSL) has crossed the 1-crore mark. At the time of filing this report, 1.10 crore IMEs were Udyam-registered, according to the data from the Udyam portal. UAP was launched in January this year to aid Udyam portal in bringing such into formal economic fold.  

Reduced Turnover Threshold for e-invoicing   

The Central Board of Indirect Taxes and Customs (CBIC) under the finance ministry in May notified the reduction in the turnover threshold for e-invoicing or electronic invoicing. According to the notification, enterprises with a turnover of more than Rs 5 crore, from earlier Rs 10 crore, in any financial year will have to generate e-invoice for business-to-business (B2B) transactions including supply of goods and services and exports with effect from August 1, 2023.   

The revised turnover threshold by CBIC will get more small enterprises into its ambit that have turnover between Rs 5 crore and Rs 10 crore. As of now, micro enterprises (turnover less than Rs 5 crore as per the new MSME definition) remain outside the e-invoice purview.   

Intra-state Supply for Unregistered e-Commerce Sellers  

E-commerce sellers supplying goods with a turnover of up to Rs 40 lakh and services with a turnover of up to Rs 20 lakh but unregistered under the Central Goods and Services Tax (CGST) Act allowed to make intra-state supply with effect from October 1, 2023. To facilitate e-commerce for micro enterprises, the GST Council in its 47th meeting in June last year had granted in-principal approval for allowing unregistered suppliers and composition taxpayers to make the intra-state supply of goods through ECOs such as Amazon, Flipkart etc., subject to certain conditions.