Tamil Nadu stands out for housing the country’s third-largest number of MSMEs, flaunting an impressive 8% share, totalling five million enterprises. Even so, many MSMEs in the state are encountering significant hurdles in obtaining GST registration. Bureaucratic inefficiencies and stringent, often misinterpreted, requirements from state authorities pose challenges for sellers. These include excessive scrutiny regarding shared business spaces, the necessity of constant workstation presence and the obligation to justify Tamil Nadu as their primary state of registration. Moreover, the requirements for physical offices mandated by Principal Place of Business (PPoB) registration and the complex process for updating GST certificates for Additional Place of Business (APoB) registration further compound operational complexities and inefficiencies.

Online sellers voice concerns over license cancellations amid physical presence requirements. They emphasized a significant gap between GST guidelines and their practical implementation by authorities, leading to unwarranted challenges for legitimate sellers. Speaking on this, Manish Singla, CEO & Founder, Healthy18, said, “Despite our earnest efforts to obtain GST registration in Tamil Nadu, we’ve faced repeated rejections, hindering our ability to serve the region. The short notice and inexplicable reasons  further exacerbated the challenge. It’s disheartening as India strives to promote MSMEs, yet barriers persist.”

Adding to it Ankit Sarika Jain (CA), E-commerce Consultant Founder at CAAJIB ECOM SERVICES, said,“As the department struggles to adapt to the concept of shared or cooperative spaces, the MSMEs woes are increasing. The sellers have constantly faced instances of harassment and intimidation by state tax authorities. The requirement for multiple state registrations often perplexes sellers, compounded by cumbersome verification processes that demand physical presence, contradicting the digital era we live in. The sellers do not deny compliance, they simply want a laid down process.”

Ms. Sangita Prakash, Director, Deloitte, emphasized, “As the GST law matures, the government must address the evolving needs of businesses. Simplifying registration processes, understanding and adapting to new business models, like shared spaces, and providing clear guidelines on procedural aspects are essential steps to enhance the ease of doing business. Training for both taxpayers and officials can also improve compliance and understanding of GST regulations.”

Speaking along this line, Mr. Anil Bhardwaj, Secretary General, FISME said, “While GST was expected to bring transparency and simplicity, challenges persist, particularly for emerging business models like e-commerce. Clear and concise guidelines are essential, along with increased awareness among GST officers. Meaningful dialogue between MSME bodies and the GST department is vital to finding common ground. It’s crucial to emphasize that the solution lies not in tax avoidance but in streamlining processes for easier compliance. Simplifying the process will make compliance more manageable for businesses.”

Mr. Chozha Naachiar Rajasekar, President of the Tamil Chamber of Commerce, highlighted, “The session brought out various GST registration challenges confronting MSMEs in our state. We’ve carefully noted all the concerns raised by experts and sellers during the session. Moving forward, we are committed to collectively addressing these issues through official channels with the Tamil Nadu government and the GST officials.”

During a panel discussion titled, “GST Reforms to Boost Indian Retail,” retailers highlighted issues faced by MSMEs in the current GST regime. Retailers with multi-state presence emphasized the burdensome tax processes, citing instances of harassment and intimidation by state tax authorities. They also face challenges with the requirements for physical offices in each state, mandated by Principal Place of Business (PPoB) registration, introducing operational complexities and inefficiencies in working capital management. Also, updating GST certificates for additional premises is complicated by the lengthy waiting period for Additional Place of Business (APoB) registration.

During the discussions, stakeholders also shared recommendations highlighting how the introduction of digital invoicing by the government can simplify GST compliance for MSMEs, reducing paperwork and errors while enhancing efficiency. Also, adopting a single home state PPoB model in GST regulations will enhance operational flexibility for retailers. Addressing challenges in co-working spaces, stakeholders emphasized the need for clearer guidelines tailored to their unique nature to resolve classification and taxation issues. Collaboration between retailers and tax authorities was highlighted as crucial for addressing concerns and establishing mutually agreeable solutions. Additionally, cross-utilization of central tax was proposed to optimize tax liabilities, improve cash flow management, and streamline tax administration for a more seamless indirect tax regime.

Ganesh Pansare, CEO, Zeroharm Sciences Private Limited said, “Over the years, our business has undergone an extraordinary 20-fold expansion, greatly propelled by the support and expansive reach facilitated by e-commerce platforms like Amazon. Despite our remarkable growth, we’ve faced challenges, particularly in navigating GST regulations. The requirement of securing separate GST registrations for each state has emerged as a bottleneck hindering our scalability. ‘One nation, one GST’ policy, wherein a single PPoB suffices would alleviate the burden of multi-state registrations.”

Ankit Sarika Jain (CA), Founder, CAAJIB ECOM SERVICES said, “By leveraging e-commerce, sellers have achieved remarkable growth, with sales increasing by up to 40 to 50%. Yet, amidst this progress, challenges persist, especially in navigating the complexities of GST compliance. The necessity for multiple state registrations often perplexes sellers, exacerbated by cumbersome verification processes that mandate physical presence, contradicting the digital era we live in. Government’s role in alleviating these challenges is pivotal. Embracing digital invoicing and simplifying registration processes for e-commerce sellers can foster a conducive environment for growth. Government policies must align with the realities of the digital age, empowering MSMEs to harness the full potential of e-commerce.”

Kumar Rajagopalan, CEO, Retailers Association of India added, “The Retailers Association of India advocates for pragmatic GST reforms that align with the evolving retail landscape. Simplified registration processes, harmonised across states, and digital invoicing mechanisms are paramount to fostering a conducive environment for MSMEs to thrive in the digital age. Embracing these reforms will not only alleviate operational burdens but also drive inclusive growth in the retail sector. This will also increase certainty and ease of doing business and would ensure the government objective of ‘One Nation, One Tax, One Market’.”