MSME Exporters GST Refund of Rs 10,000 Crore stuck

21 Aug
MSME Exporters GST Refund of Rs 10,000 Crore stuck

Liquidity crunch is threatening to severely cripple Micro, Small and Medium Enterprises (MSMEs) exporters with their Input Tax Credit (ITC) refunds under the Goods and Services Tax (GST).


The overall exports has shown healthy growth, some of the MSME exporters were not able to ride on the current wave because they were facing working capital issues.


Even though the GST refund issue of exporters had been addressed to a large extent, close to around Rs 10,000 crore of ITC refunds of the MSME sector were still to be cleared by the government. Most of this amount was blocked due to gaps in the returns filing by the MSME exporters.


Exports are growing, but certain MSME units are still experiencing a liquidity problem, particularly those dependent on bank finances. Many MSMEs do not take credit from the banks. They pool their capital or raise capital from close relatives. For those dependent on bank credits, the situation is also not so good. If the liquidity issue is addressed and the banks extend a helping hand to SME exporters it will give further fillip to our exports growth".


Many MSME exporters are dependent only on refunds for their working capital requirement. Delay in refund of GST adversely affecting the operations of the MSMEs. 


MSME contributes approx 40% of the Country's export and refund of GST delays hit MSME exports adversely, as MSME are largely dependent on daily cash flows for their working capital. 


Many MSME don't have a strong balance-sheet, hence, they were not able to avail credit from bank. They are either a proprietorship or partnership firms and many of them may not even have a proper legal entity. In contrast to credit growth, MSME exports appear to be affected more by GST implementation vis-à-vis demonetisation.


Despite significant contribution to economic growth, MSMEs face several bottlenecks inhibiting them from achieving their full potential. A major obstacle for the growth of MSMEs is their inability to access timely and adequate finance as most of them are in niche segments where credit appraisal is a major challenge.