The Indian MSME sector is bracing for a tax shock. The GST on job work has jumped, sparking concerns about liquidity and survival.
GST Rate Upped
The government's decision
to increase the GST on labor charges, or job work, from 12% to 18% is a cause of worry. This change is particularly concerning for MSMEs across India, as they form a vital part of the economy. The Coimbatore Tiruppur district Micro and Cottage Entrepreneurs Association highlighted the impact of this increase.
MSME Concerns Emerge
Industry bodies, like the Coimbatore District Small Industries Association, have voiced their concerns. They are advocating for a reconsideration of the tax rates on job work. The higher rate will block MSMEs' liquidity, affecting their ability to operate. The original demand was to lower the GST rate to 5% from 12%.
Liquidity & Challenges
The increased GST could lead to liquidity problems for MSMEs. The Coimbatore District Small Industries Association highlights that these businesses often act as vendors to larger industries, primarily earning on labor charges. The higher rate will further complicate their financial management.
Seeking Rate Review
The focus is now on urging the government to re-evaluate the current GST rates applied to job work. The aim is to ensure MSMEs, particularly those relying on labor charges, benefit from any tax adjustments. A relook at the tax implications will provide stability to the MSME sector.
