SBI explains how turnover-based MSME definition will help GST mechanism, transparency and more

SBI is of the opinion that under the new tax regime, turnover declared by GST registered MSME units can be easily verified through GSTN (Goods and Service Tax Network).

The State Bank of India (SBI) has hailed this decision to define the MSMEs from their annual turnover. Photo: Reuters

Finance Minister Nirmala Sitharaman yesterday announced the change in the definition of the Micro Small and Medium Enterprise (MSME). For an MSME to be defined as a Small unit, FM Sitharaman raised its investment limit from Rs 5 crore to Rs 10 crore with a turnover of less than 50 crore. The State Bank of India (SBI) has hailed this decision to define the MSMEs from their annual turnover. SBI is of the opinion that under the new tax regime, turnover declared by GST registered MSME units can be easily verified through GSTN (Goods and Service Tax Network).

On how GST will become transparent in turnover-based MSME definition; Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India (SBI) said, "The proposed definitional change for MSME is considered progressive and suitable because of the introduction of Goods and Services Tax (GST). Under the new tax regime, turnover details of enterprises are being captured by Goods and Services Tax Network (GSTN) and turnover declared by GST registered MSME units can be easily verified through GSTN. Hence, the turnover based definition would be transparent, progressive and easier to implement."

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Dr. Ghosh went on to add that as the lender will get 100 per cent credit guarantee on principal and interest which will save the capital of around Rs 25,000 – Rs 30,000 crore for banks (zero risk weights) and increase in credit disbursal which will translate into a direct credit growth of 20 per cent to the eligible accounts. As on March’20 around Rs 14 lakh crore is outstanding to the MSME sector, which translates into Rs 2.80 lakh crore immediate credit boost.

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