MSMEs to get pending GST refunds within 30 days: Nirmala Sitharaman

Finance Minister Nirmala Sitharaman, MoS for Finance Anurag Thakur, and finance secretary Rajiv Kumar during a press conference in New Delhi | PTI
The government on Friday unleashed a series of reforms — from payment of all pending goods and services tax (GST) dues in 30 days to easier borrowing norms — for the struggling micro, small and medium enterprises (MSME) sector.  

Facing a severe liquidity crisis since demonetisation in 2016, the MSME sector had repeatedly made several demands. The most important among these had been quick clearance of all GST refunds, said a senior official of the Federation of Indian Micro and Small & Medium Enterprises.

Finance Minister Nirmala Sitharaman on Friday announced all pending dues shall be cleared within 30 days. In the future, all such dues — officially estimated to be about Rs 7,000 crore — would be cleared within 60 days of application, she added.


Banks will also have to return all documents within 15 days of a loan closure, helping borrowers whose mortgaged assets are tied up.

“Funds allocated already in the Budget may be spent faster as well. Based on the pace at which implementation of these announcements takes place, we could expect a modest boost to growth in the second half of the FY20,” said Aditi Nayar, principal economist at ICRA.

The severe liquidity crisis plaguing the MSME sector was also one of the major reasons for the government’s decision to release Rs 70,000 crore of additional lending to public sector banks. The additional liquidity will provide a Rs 5 trillion worth of total lending. This is expected to benefit small businesses, apart from retailers and exporters, MSME Minister Nitin Gadkari said on Friday.


“The additional liquidity provision to banks and non-banking financing companies are extremely positive. We had been suggesting action on delayed payments to unlock funds and we are glad that this has been strongly addressed,” said Chandrajit Banerjee, director general, CII.

The government will also update the definition of MSMEs, allowing a single definition for taxation, investment and other business purposes. The new definition may be revealed within 15 days through an amendment to the MSME Act, Gadkari added.

In February 2018, the government had approved the proposal to redefine MSMEs based on their annual revenue, replacing the earlier definition that relied on self-declared investment on plant and machinery. 


As of now, businesses with revenue up to Rs 5 crore are called a micro enterprises, those with sales between Rs 5 crore and Rs 75 crore are deemed as small, and those with revenue up to Rs 250 crore are classified as medium-sized enterprises.

Gadkari added the government was aiming to bring more small business into the official GST framework. Of the 60 million businesses currently registered on the GST platform, an estimated 12.5 million are MSMEs, a senior MSME Ministry official, said.



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