India SME Forum Calls on Maharashtra Government to Address Tax Issues in E-commerce

Mumbai, February 15th, 2024: Micro, Small, and Medium Enterprises (MSMEs) in Maharashtra play a significant role in India’s economic landscape, constituting 24% of the state’s workforce and contributing 13% to the overall MSME output in the nation. Despite their crucial contribution, MSMEs in Maharashtra encounter challenges related to Goods and Services Tax (GST) obligations, particularly for online sellers. In response, the Forum for Internet Retailers, Sellers & Traders (FIRST) India, a division of India SME Forum, has sent a representation letter to the Hon’ble Chief Minister of Maharashtra, Shri. Eknath Shinde, stresses the importance of providing clear guidelines regarding the requirements for conducting e-commerce business.

The current GST regulations impose cumbersome requirements on online sellers, especially MSMEs operating across multiple states. These requirements include the necessity for a physical presence and Principal Place of Business (PPoB) in each state, traditional office setups, restrictions on shared workspaces, and the mandate for the physical presence of directors or employees. Such obligations escalate working capital and labor costs for MSMEs, hindering their competitiveness and scalability.

FIRST India proposes that sellers using e-commerce platforms should be allowed to establish their PPoBs at shared facilities without the need for specific physical demarcations or records. This approach would enable MSMEs to share resources efficiently, reducing significant overhead costs. Additionally, the recognition of electronic records as valid audit documentation would expedite transactions, reduce paperwork, minimize errors, and improve overall efficiency.

The recent issuance of detailed FAQs by the West Bengal government, providing clarity on exemptions, Tax Collection at Source (TCS) obligations, returns, statements, and invoicing, underscores the importance of allowing multiple sellers to register the same additional place of business. FIRST India urges other state governments to follow suit.

Vinod Kumar, President of India SME Forum and Trustee and President of FIRST India, emphasized the critical role of MSMEs in Maharashtra’s economic growth and highlighted the complexities faced by 55% of sellers regarding GST regulations. Enabling sellers to establish PPoBs at shared facilities without specific demarcations would alleviate burdens, enhance efficiency, and empower MSMEs to offer competitive prices, fostering growth and sustainability in the sector.

Hardik Gandhi, Partner – Indirect Tax at Deloitte Touche Tohmatsu India LLP, stressed the importance of creating a conducive environment for MSMEs to thrive in today’s digital era. He suggested the adoption of state-wise GST registrations based on the concept of virtual places of business, while maintaining states’ autonomy over audit powers. This approach, he believes, would promote ease of doing business and expand market presence for MSMEs across India.