India SME Forum Appeals to Maharashtra Government: Address Tax Challenges in E-commerce

MSMEs in Maharashtra are pivotal to India’s economy, constituting 24% of the state’s workforce and contributing 13% to the overall MSME output in the country. Despite being a vital contributor to the nation’s GDP, these MSMEs face challenges regarding the GST obligations for online sellers. In line with this, the Forum for Internet Retailers, Sellers & Traders (FIRST) India, a division of India SME Forum, shared a representation letter to the Hon’ble Chief Minister of Maharashtra, Shri. Eknath Shinde, underlining the need for clear guidance on the requirements related to the place of business in e-commerce.

The existing GST law places burdensome requirements on online sellers, especially MSMEs operating across multiple states, mandating a physical presence and Principal Place of Business (PPoB) in each state. This includes conventional demands for traditional office setups, restrictions on shared or co-working spaces, and the mandate for the physical presence of directors or employees. This increases working capital and labor costs for MSMEs, ultimately impeding their ability to compete and scale efficiently.

FIRST India recommended that sellers utilizing e-commerce operators (ECOs) should be permitted to establish their PPOBs at shared facilities without the need for specific demarcations or physical records. This would enable MSMEs to efficiently share resources and reduce significant overhead costs. Furthermore, the endorsement of electronic records as valid audit documentation will help MSMEs expedite transactions, reduce paperwork, minimize errors, and enhance overall efficiency.

Recently, the West Bengal government issued detailed FAQs providing clarity on exemptions, TCS obligations, returns, statements, and invoicing, laying emphasis on allowing multiple sellers to register the same additional place of business and warranting attention from other governments to do the same.

Speaking on this, Mr. Vinod Kumar, President, India SME Forum, and Trustee and President, FIRST India said, “MSMEs in Maharashtra are crucial to achieving a $1 trillion economic output by 2028. FIRST India’s recent report revealed that 55% of sellers find GST regulations complex. Allowing sellers to establish PPOBs at shared facilities without specific demarcations will reduce the additional burden, enhance efficiency, and empower MSMEs. This will also enable businesses to offer competitive prices, fostering growth and sustainability in the MSME sector.”

Mr. Hardik Gandhi, Partner – Indirect Tax, Deloitte Touche Tohmatsu India LLP emphasized the importance of a conducive environment for MSMEs, stating, “In today’s digital landscape, e-commerce is the key to MSMEs reaching wider audiences. Facility of state-wise GST registrations based on the concept of virtual place of business should foster without the States loosing the autonomy the power to audit such MSME sellers would promote an environment of ease of doing business and enhanced market presence for such sellers across the length and breadth of the country.”