The current GST rates for businesses are 5%, 12%, 18% and 28%, which may vary depending on the nature of the business. Since the introduction of the GST Act, the most common rate at which the majority of businesses pay this tax is 18%.

As a service industry, where nothing tangible is sold or bought, opting for a GST composition scheme is said to be beneficial.

The composition scheme states that there is less input tax credit from the vendor’s, and the supplier’s end. One of the issues faced by SMEs was that they did not have enough bandwidth to hire chartered accountants who would have to face heavy compliances from the GST.

Hence, a GST composition scheme came into force stating that businesses providing services can claim input tax credit or pay a lower tax flat of 1% to 6%.

Understanding more on how small packaging businesses (SME/MSMEs) are coping with the GST compliance, BS Jolly, managing director, Edelmann India, tells us, “Since the implementation of the Goods and Services Tax (GST), the MSMEs got a lot of benefits in terms of compliance reliefs in the form of threshold exemptions, and composition levy schemes.”

Jolly points out that MSMEs enjoy certain threshold exemptions (Rs 40-lakh for normal category states and Rs 20-lakh for special category states) under GST, which provides relief to smaller businesses with lower turnovers.

“Under the composition scheme, taxpayers with a turnover up to 1.5-crores (or 75 lakhs in the case of North-Eastern states) can pay tax at a flat rate (1% to 6%) and are allowed to file returns on a quarterly basis, simplifying the tax payment and filing process,” he shares.

Jolly believes that even though GST has brought several benefits for the MSMEs, it has increased the need for technical skills and IT infrastructure which may not be readily available with them.

Edelmann has appointed a GST consultant to address any challenges encountered during the process of filing returns and availing tax credits. The consultant provides training sessions to keep the members informed about the new amendments in the GST Act. Also, helps in addressing any discrepancies and notices issued during audit by tax authorities.

To ensure easy compliance with GST provisions, Jolly says that an automated GST software is established which helps in accurate preparation of GST returns and availing credit returns.

Sharing his views, he highlights, “GST laws and rules undergo complex amendments annually, demanding greater technical skills and expertise, businesses must invest in additional resources and services. However, deploying skilled manpower and accounting software for compliance can be costly for small enterprises. Therefore, adopting a simplified compliance mechanism would be more convenient for MSMEs.”

Adding to this, Chandrasekhar Rajagopalan, president of Indian Flexible Packaging & Folding Cartons Manufacturer Association (IFCA), says, “I think the smaller and the medium companies are getting used to the various compliances of GST, and it is not that complicated as it is sometimes made out to be.”

He says but there are challenges at times. Either because of the changing rules or because of the way in which the various departments interpret GST and its rules.

Rajagopalan points out that most of these small and medium companies have outsourced the function. So, it is not an inhouse function anymore. There is an outside consultant who maintains the records, keeps track of what is happening and advises accordingly.

He highlights, “There are certain thresholds about eInvoicing, which really keeps a small micro enterprise outside the ambit of eInvoicing. But I think the dust is now settling down and companies are getting more familiar and more comfortable.”

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The packaging industry is looking ready with the GST composition scheme, and WhatPackaging? shares more of what the industry has to say. If you want to share your thoughts over the same, drop an eMail to abhay.avadhani@haymarketsac.com.