Gujarat MSMEs Raise Alarm Over GST Refund Delays and ITC Blockages
Small and medium enterprises in Gujarat have brought to light significant challenges related to Goods and Services Tax (GST) that are severely impacting their financial liquidity and day-to-day operations. At a recent interactive session organized by the India SME Forum with officials from the Central GST and State GST departments, business owners flagged three primary concerns: delayed GST refunds, the inverted duty structure, and persistent blockages in claiming input tax credit.
Widespread Sectoral Impact on Working Capital
Vinod Kumar, President of the India SME Forum, emphasized that Gujarat, as a major hub for MSMEs, is witnessing these issues across various industries. He stated, "Textiles, chemicals, ceramics, engineering, pharmaceuticals, and trading sectors are particularly affected by refund delays and ITC mismatches. These problems are putting immense pressure on working capital, making it difficult for businesses to sustain operations."
Beyond the direct financial hurdles, MSMEs also expressed frustration over the inability to verify whether their suppliers are GST-compliant. This lack of transparency often leads to the denial or blockage of input tax credit for buyers, even in cases of genuine and legitimate transactions.
Procedural Delays and Administrative Hurdles
Tax advocate Varis Isani highlighted that the time required for processing ITC refunds has increased substantially. He also pointed to significant delays in the cancellation of GST registrations. "Businesses that have already ceased operations are still compelled to file GST returns until their registration cancellation is formally completed," Isani explained, adding an unnecessary administrative burden on defunct entities.
GST Department's Response and Assurance
Senior officials from the GST department present at the session assured attendees that efforts are underway to protect honest taxpayers from adverse effects. They clarified that less than one percent of cases are selected for audit through a system-based process, indicating a limited and highly targeted scrutiny mechanism designed to minimize disruption.
The officials further stated that the department is committed to adhering to prescribed timelines for various procedures, including refunds, fresh registrations, premises verification, and cancellation processes. They reiterated their focus on streamlining operations to support the MSME sector, which is a critical component of Gujarat's economy.
In summary, while the GST department emphasizes procedural compliance and targeted audits, Gujarat's MSMEs continue to grapple with liquidity strains due to delayed refunds, structural tax issues, and credit blockages, calling for more efficient resolutions to sustain business growth.
