Lucknow: In a key stakeholder engagement, the ASSOCHAM Uttar Pradesh Development Council presented pressing ground-level GST compliance challenges faced by small businesses, MSMEs, and artisans to the Office of the Comptroller and Auditor General of India (CAG), Lucknow.
The delegation, led by Hasan Yaqoob, Co-Chair of ASSOCHAM UP Development Council, met with Sanjay Kumar, Principal Director (Commercial), CAG, as part of the audit of Ease of Doing Business initiatives under GST. Other CAG representatives included T Manohar Rao, Deputy Director (INDT/Admn).
Fear of Compliance: The Small Business Dilemma
Yaqoob highlighted the anxiety small businesses face due to complex GST documentation and compliance procedures. “Many small traders and artisans hesitate to register for GST, fearing penalties and overwhelming paperwork. While younger entrepreneurs are embracing digital compliance, older business owners remain apprehensive, slowing formalization and growth,” he noted.
Key Issues Raised
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Input Tax Credit Delays: MSMEs reported ITC blockages taking six to eight months due to supplier compliance dependencies, impacting working capital. Sheikh Mohammad Tariq, Managing Director of Ensky Ventures Private Limited, said, “For small manufacturers on thin margins, this creates severe liquidity crises.”
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Penalty Relief: The delegation recommended periodic amnesty schemes, emphasizing that ₹50 per day late fees accumulate quickly, especially during genuine operational or technical challenges.
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Supplier Defaults: Despite Supreme Court guidance, buyers still face ITC reversals due to supplier defaults. Rishabh stressed, “A manufacturer cannot monitor whether 50 suppliers have deposited GST. The onus should be on tax authorities to recover from defaulters, not penalize compliant recipients.”
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Interstate Trade Barriers: Compliance fears prevent many artisans from registering under GST, limiting interstate trade. The delegation suggested raising the composition scheme threshold from ₹1.5 crore to ₹3 crore and enabling simplified B2B transactions.
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Compliance Burden: Multiple returns and complex reconciliations were flagged as disproportionately burdensome. ASSOCHAM proposed a single unified return system with auto-populated data.
Recommendations for GST 2.0
ASSOCHAM outlined a roadmap for reform, including:
- Deadline flexibility for businesses with turnover below ₹10 crore
- Time-bound ITC processing with provisional credit mechanisms
- Protection for recipients when suppliers default
- Unified monthly return filing
- Enhanced composition scheme limits
- Streamlined startup exit procedures
- Clarity on financial credit notes
- Transparent tender evaluation incorporating statutory taxes
Collaborative Approach for Reform
“This engagement reflects the cooperative federalism at the heart of GST. With 3.16 crore MSMEs contributing 30% of India’s GDP and nearly 50% of exports, getting GST right is crucial for economic growth,” Mr. Yaqoob said.
He added, “Uttar Pradesh is poised to reach 21 lakh GST assesses. Simplifying compliance will unlock entrepreneurial potential and position the state as a manufacturing and investment hub.”
The Associated Chambers of Commerce and Industry of India (ASSOCHAM), established in 1920, represents over 4,50,000 members. The Uttar Pradesh Development Council acts as the voice of industry in India’s most populous state.
