Amit Mitra urges FM to call GST Council meeting to address overregulation

The West Bengal government on Friday wrote to Union Finance Minister Nirmala Sitharaman urging her to call a special meeting of the GST Council to address cases of massive overregulation and the current state of the MSMEs that have registered under the GST regime.

Dr Amit Mitra, the principal chief advisor to West Bengal Chief Minister Mamata Banerjee as well to the finance department, said in a letter to Sitharaman that the "labyrinthine regulatory structures have engulfed MSMEs in particular, dragging them to an abyss".

"I urge you to call a special and exclusive meeting of the GST Council to address the case of massive overregulation and the current state of the MSMEs who have dared to register under the GST regime in their quest to become formal," Mitra wrote in the three-page letter.

The former state finance minister's call for the special meeting came a day before the 49th GST Council meeting is scheduled to take place on Saturday in New Delhi. The meeting will be held two months after it was organised on December 17, 2022

"As we have moved from one GST council meeting to the next, with the 49th meeting to take place soon, at each meeting we have added layers and layers of rules, notifications, forms, amendments to laws etc. These labyrinthine regulatory structures have engulfed MSMEs in particular, dragging them to an abyss," the letter read.

He also alleged that the GST regime now has become the exact opposite of what Prime Minister Narendra Modi told chief secretaries last month that states must act proactively towards formalisation of MSMEs.

"What is happening on the ground in the PM's own regime vis-a-vis GST is that, MSMEs are on the verge of becoming informal again as they are unable to cope with the punitive regulatory structure, complicated compliances, and potential penalties of high order."

He also wrote about his apprehensions that inequality of wealth which is pervading the country today will also enter the GST regime.

"Only large companies which can afford to engage top Accounting Firms will remain in the GST system, while the middle and smaller businesses will slowly exit in whatever manner they can, under the fear of penalties and harassment," Mitra wrote in the letter.

"When the genuine MSMEs are struggling to cope with the maze of regulations, a few unethical entities have opened proper companies, conducting fake transactions, and drawn Input Tax Credit. Such fraud has been confirmed by Nandan Nilekani's presentation to GST Council and subsequent answers in the Parliament by your own ministers of state," he added.