The Federation of Indian Small and Medium Enterprises (FISME) and the Tamil Nadu Chamber of Commerce recently held a virtual media briefing to address the significant challenges faced by online MSMEs in Tamil Nadu in obtaining GST licenses. Tamil Nadu, which boasts the third-largest number of MSMEs in India with a 8% share, totaling five million enterprises, sees many of these businesses struggling with GST registration due to bureaucratic hurdles and stringent state authority requirements.

The obstacles faced by MSMEs include excessive scrutiny of shared business spaces, the need for constant presence at workstations, and the requirement to justify Tamil Nadu as their primary state of registration. Additionally, the mandates for physical offices under Principal Place of Business (PPoB) registration and the convoluted process for updating GST certificates for Additional Place of Business (APoB) registration add to the operational difficulties.

Online sellers have expressed concerns over the cancellation of licenses due to the physical presence requirements, highlighting a significant disconnect between GST guidelines and their practical implementation by authorities. One expert noted, “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 our inability for physical presence further exacerbated the challenge. It’s disheartening as India strives to promote MSMEs, yet barriers persist.”

Another expert added, “The department struggles to adapt to the concept of shared or cooperative spaces, increasing the woes of MSMEs. Sellers face harassment and intimidation by state tax authorities. The requirement for multiple state registrations perplexes sellers, compounded by cumbersome verification processes demanding physical presence, which contradicts the digital era we live in. Sellers do not deny compliance; they simply want a clear and laid-down process.”

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

The Secretary General of FISME remarked, “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. The solution lies not in tax avoidance but in streamlining processes for easier compliance.”

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