MSMEs in Coimbatore demand reduction in GST rates

MSME representatives in Coimbatore demand reduction of GST rates for products, facing challenges due to logistics and raw material costs.

Micro, Small and Medium-scale Enterprises (MSME) representatives, who discussed their demands with officials from the Ministry of MSMEs in Coimbatore on September 10, 2024 (Tuesday), mainly demanded reduction of GST rates for various products made by these units.

According to Mithun Ramdas, president of the Southern India Engineering Manufacturers’ Association, following the increase of GST on pumpsets to 18 %, a larger section of the industry had moved to the unorganised sector. The size of the pumpset industry was ₹25,000 crores and of this, the unorganised sector was ₹3,000 crore to ₹5,000 crores. Now, the unorganised sector was worth almost ₹15,000 crores, mainly because of higher GST, he claimed.

Further, industries in south India were at a disadvantage because of the logistics costs involved in transporting raw materials from the northern States. The NSIC’s raw material scheme was not helpful to these units as the NSIC asked for advance payments and bank guarantees, he said.

The textile mills said raw material - be it cotton or manmade fibre - should be available to the units at internationally competitive prices. Currently, the raw material prices in India was higher.

According to K. Veluswami, chairman of the Institute of Indian Foundrymen, Coimbatore, foundries and engineering industries that export castings or machined parts, made tools for each order as per the needs of the customer. The cost for the tools was paid by the international buyer. The tools made for one customer cannot be used for another and was not shipped. For the last one year, the GST officials were levying 18 % GST on the tools with penalty for five years. The tools were not taxed before 2017, he said.

J. James, president of the Tamil Nadu Association of Cottage and Tiny Enterprises, said the long-pending demand of the micro units was reduction of GST on job works to 12 % or tax deduction at source for the orders given by the larger industries to the micro units for job work.

With the new definition of MSMEs, based on investment and turnover, almost 90 % of the units which are in the category of less than ₹25 lakhs investment, do not get any benefit as the schemes are largely used by the bigger industries in the MSME segment. Hence, there should be a separate classification or board for the micro and tiny units, he said.