MSMEs Battered by Extra Costs: India SME Forum Flags Rs 1.5 Lakhs Annual Burden Due to IMS
PRNewswire
New Delhi [India], April 2: As the nation's biggest organization, the India SME Forum (ISF) has been recognized as such in the country. non-governmental organization For small and medium-sized businesses, there has been an appeal to the government to review the schedule for implementing the Invoice Management System (IMS). Goods and Services Tax (Micro, Small, and Medium Enterprises) face considerable operational and financial hurdles within the (GST) framework. MSMEs In incorporating IMS, the Forum advocates for a gradual rollout during the transition phase to help small enterprises adjust financially and operationally without experiencing significant strain.
Since being launched in 2017, Goods and Services Tax (GST) has significantly contributed to the formalization of India’s economy, enhancing transparency and improving tax adherence processes. As an enhancement to the GST framework, the Invoice Matching System (IMS) was established with the purpose of resolving discrepancies related to input tax credits (ITCs). This is achieved through real-time verification of invoices. Under the present setup, companies must perform these IMS tasks every month within a specific timeframe, obliging them to verify their invoices prior to the creation of GSTR-2B documents. The stringent deadlines, particularly those concerning credit notes which do not allow deferrals, create hurdles that demand precise synchronization right up until the submission of GSTR-3B forms.
Regarding the launch of IMS, Vinod Kumar, President of the India SME Forum, commented, " MSMEs value the government's dedication to using technology for enhancing tax adherence. Although the intentions behind IMS are commendable, the swift implementation has been somewhat hasty. MSMEs Facing challenges such as infrastructural constraints, insufficient software preparedness, and regulatory obstacles, companies anticipate an extra annual cost of Rs. 1.5 Lakhs to achieve compliance. Therefore, a substantial adjustment phase is essential to synchronize their operations and prevent compliance requirements from obstructing the progress of smaller enterprises.
Based on industry projections, more than 75% of MSMEs confront difficulties when adjusting to the demands of digital compliance, meanwhile 95% of smaller enterprises believe they need extra time and resources to incorporate IMS into their current processes. MSMEs Often deficient in sophisticated digital infrastructure and specialized tax personnel, these entities are especially susceptible to the difficulties presented by IMS. The limited time for reconciliations, heightened compliance requirements, and the potential denial of input tax credits can put significant pressure on their cash flow and interfere with daily operations.
Key Concerns:
* Restricted Prep Period: On September 3, 2024, the GST Network (GSTN) issued an advisory about the upcoming IMS launch on October 1, 2024, leaving companies minimal time for system updates and staff training.
* Technical Challenges: Critical features of the API designed for invoice reconciliation faced delays and were pushed back to mid-October, which impeded integration processes. The supplier-side dashboards, crucial for monitoring ITC claims, became available only on November 13, 2024.
* Operational Disruptions: MSMEs Companies relying on fundamental accounting tools encounter substantial financial and regulatory hazards because of this abrupt change. The lack of features like bulk upload utilities and offline reconciliation tools adds complexity to their transition.
* Instantaneous Credit Memo Handling: According to IMS rules, receivers must promptly approve or decline credit memos without delay, eliminating the possibility of postponing actions for later reconciliations with suppliers. This may impose unexpected fiscal pressures on suppliers through higher taxes and additional interest charges.
* Transaction Volume Constraints: The GST portal presently restricts suppliers from viewing and downloading more than 500 documents simultaneously. This limitation greatly impedes enterprises dealing with large transaction volumes, resulting in operational inefficiencies and delays in invoice processing, thereby driving companies to enroll in GSPs for managing such regulatory requirements.
To tackle these issues, the India SME Forum suggests implementing IMS gradually, akin to the phasing of e-invoicing, over a period of six to twelve months, giving companies sufficient time for adjustment. Enhancing transparency among suppliers requires quicker deployment of APIs along with introducing a supplier portal designed for streamlined bulk document access and simplified reconciliations. Additionally, authorities ought to offer leniency when dealing with contested bills, enabling firms to defer their resolution instead of immediately triggering additional tax liabilities. Through refined execution tactics and organized discussions involving key players from various industries, regulators can guarantee that IMS bolsters the GST system without imposing excessive strains on enterprises. MSMEs .
About India SME Forum
India SME Forum is India's leading organisation for MSMEs , with over 98,200 MSMEs As paid members directly enrolled (which includes over 9,400 women entrepreneurs) and 1,236,000 MSMEs As members spanning 19 State Chapters, the India SME Forum has initiated numerous nationwide projects over the last nine years aimed at fostering innovation among small and medium-sized businesses throughout India. These efforts by the ISF seek to motivate promising SMEs capable of becoming globally competitive entities, offering them an opportunity to showcase their capabilities to stakeholders such as partners, investors, and collaborators for sustained development. With this objective in mind, ISF aims to become a driving force within the SME sector, providing comprehensive assistance to achieve these goals.
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