Govt Eases GST Registration Rules to Encourage Small Businesses

In a move aimed at supporting micro, small, and medium enterprises (MSMEs), the Central Board of Indirect Taxes and Customs (CBIC) has introduced new guidelines to streamline the Goods and Services Tax (GST) registration process. These changes follow stakeholder consultations where MSMEs raised concerns about excessive and non-uniform scrutiny. 

As per Mint, MSMEs, which contribute around 30% to India’s GDP, highlighted procedural hurdles that led to registration delays and rejections. CBIC has now directed its officers to reduce physical verification and approve applications within seven days for businesses deemed non-risky.

Simplified GST Documentation to Help Small Businesses

According to Mint, the CBIC order dated 17 April acknowledged that officers were following varied practices during the verification of documents submitted in FORM GST REG-01. It stated, “It has also been observed that while processing the application, avoidable clarifications are being sought by the officers, leading to delay in getting registration as well as rejection of applications."

The order directed officials to seek only minimal documents. For owned properties, any one document from the property tax receipt, municipal khata copy, or electricity bill will suffice. For rented spaces, a rent or lease agreement with one property document is enough.

Disparities in GST Contributions Among Taxpayers

Mint reported that as of June 2024, publicly listed companies, though only 0.5% of taxpayers, contributed over 34% of GST revenue. In contrast, proprietorships, which form 80% of taxpayers, contributed just 13.3%, and partnerships, 10% of taxpayers, contributed 7.31%.

India has around 6.4 crore MSMEs, largely operating as proprietorships or partnerships. CBIC’s simplification is expected to help increase their formal participation in the GST system and potentially improve their revenue share.

State-Level Implementation Remains a Key Concern

Vinod Kumar, president of the India SME Forum, told Mint, “The streamlining of GST registration is likely to make the process easier for such companies and increase their contribution to GST revenue.” He added that implementation must be consistent across all states to be effective.

He further stated, “While the CBIC has taken a progressive step through this circular, its full implementation effectiveness would be enhanced through complementary circulars from state GST authorities.” Uniform directives from both central and state levels are essential for success.

Read More: Loan Threshold for MSMEs Under the Digital Footprint Model Raised to ₹10 Crore!

Conclusion

CBIC’s efforts to reduce red tape and ensure a smoother GST registration process mark a step forward for MSMEs. However, uniform execution across jurisdictions will be essential to ensure genuine businesses benefit without facing undue delays or inconsistencies.

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