Demand for Displaying Country of Origin for Goods may not be well timed for Indian MSMEs

Indian MSMEs are witnessing one of the worst period due to disruption in business as a result of the COVID-19 pandemic. A survey by the All India Manufacturers’ Organisation  revealed that about 35% of micro, small and medium enterprises and 37% of self-employed individuals have already started shutting their businesses due to lack of recovery in sales.

Even as the government has started opening up the economy, the recovery of sales remainssubdued. The compliance burden for displaying Origin of Goods adds to the existing challenges for online sellers such as mandatory GST registration irrespective of their annual turnover, additional TDS and TCS levies on e-commerce transactions, mandating online sellers to registerevery warehouse as an Additional Place of Business (APoB) with the state authorities etc. These burdens are time-consuming, have complex processalong with having a negative impact on the revenue for online sellers.

The move mayalso hinder online sellers from marketing their products freely, and the origin of their products can affect the sale of their inventory. Furthermore, a sudden ban or spotlighting of products from certain countries will create a vacuum for such products amongst Indian businesses that might not be immediately filled due to lack of domestic business capacities.

Speaking on the issue, Mr. Kazim Rizvi, Founding Director, The Dialogue, said “Considering that there is a lack of clear definition for country of origin, Indian MSMEs will face difficulties to declare country of origin in cases where they have imported certain equipment in their finished product.As small businesses stumble to get back on track, the government should focus on making their experience easier. Putting additional compliance burden on sellers right now is not well timed. Instead of opting for sudden measures, the government should focus its reform centric approach on creating a three year roadmap on increasing capacity of domestic businesses and thereby reducing the need for import of finished goods, raw materials.”

These burdens, when put in the context of current condition of the Indian MSMEs, display the need for relaxation in compliance and regulations, rather than an increase in it. The Union Government has taken several measures and policy directives for the revival of Indian MSMEs. It is expected that the Government would continue providing support to the MSMEs and reconsider their decision on imposing  additional burdens for  small businesses.