General Provisions For Msme Sector Under GST

What is MSME?

MSME stands for Micro, Small and Medium Enterprises. As per MSMED ACT 2006 MSME’s has been classified into two classes:

1.Manufactuirng Sector

2.Service Sector

They are further subclassified into micro, small, medium enterprises based on the investment in Plant & Machinery as below

Type OF Enterprise Manufacturing Sector Service Sector
Micro Enterprise Less than/Equal to 20 lakhs Less than/Equal to 10 Lakhs
Small Enterprise More than 20 Lakhs but less than 5 crores More than 10 Lakhs but less than 2 Crores
Medium Enterprise More than 5 Crores Less than 10 Crores More than 2 Lakhs but less than 5 Crores

General Provisions for MSME sector in GST.

GST council has formed a Group of Ministers (GOM) for MSME’s to provide them necessary assistance for their growth in the present competitive environment.

1. Provisions relating to Registration:

  • Service providers making inter-State supplies whose aggregate annual turnover does not exceed Rs. 20 lakhs have been exempted from the requirement under GST.
  • In contrast to previous composition scheme where only Restaurant services are allowed now, a person who opts for Composition scheme can supply services of value not exceeding 10% of turnover or Rs. 5 Lakhs, whichever is higher. This will make many MSMEs eligible for the composition scheme.

2. Low rates of tax/Exempted from tax, for Goods predominantly manufactured and/or used in the unorganized MSME sector.

  • Electrical switches and wires, pipeline, plastic products, etc. are largely produced by MSMEs and they earlier did not pay Central Excise duty and therefore tax rate on these have been brought down from 28% to 18%.
  • Similarly, rates of GST on jute and coir like handbags, ropes, Rate on Fishing hooks used by fisherman etc., which are mainly made in the cottage sector, have been reduced to 5% from 12%.

3. Excemption From Compulsory Audit by CA for MSME sector.

  • A taxpayer must get his accounts Audited by a Chartered Accountant or a Cost Accountant if his turnover crosses a certain limit.
  • As a trade facilitation measure govt. has notified that registered taxable persons having turnover upto Rs. 2 Crores need not get their account audited.


  • MSME’s registered under GST can get 2% interest subvention from govt for incremental loans of Rs 1 Crore under the MSME credit scheme.
  • Option of nil return with simplified process
  • Registered persons making supply of goods are required to make payment of tax at the time of the issuance of invoice and not at the time when advances are received.
  • The uniform rate of tax @1% (0.5% under the CGST Act and 0.5% under the respective SGST Act) is payable under the composition scheme for manufacturers AND TRADERS.


The micro, small and medium enterprises sector is of Special Significance for Indian Govt. It is expected to offer higher employment opportunities by 2020. In line with the commitment to MSME sector, certain relaxations have already been implemented for them.

With the Government’s commitment to strengthen MSMEs on all fronts including GST, it is expected that the current challenges would be stabilized, and the industry will gradually take a positive turn to fulfil the nation’s vision.

Disclaimer:"The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation."

Prepared By

Partheep Thupakula