India SME Forum calls for GST parity, uniform enforcement and fair competition across India’s e-commerce ecosystem
Bengaluru : India SME Forum (ISF), India’s largest not-for-profit organisation for Micro, Small and Medium Enterprises (MSMEs), today called for greater GST parity, predictable compliance systems, faster liquidity support, and uniform enforcement standards across India’s rapidly expanding e-commerce ecosystem. Referring to the recent ruling by the West Bengal Appellate Authority for Advance Ruling (WBAAAR), ISF said the decision marks an important development for GST enforcement, platform accountability, and the broader principle of competitive neutrality within digital commerce.
The Forum noted that the Government’s approval of ECLGS 5.0 remains a timely and important intervention amid continuing geopolitical uncertainty, global supply chain disruptions, rising logistics costs, inflationary pressures, and weakening global demand affecting MSMEs and exporters across sectors. India SME Forum stated that while credit support remains critical for sustaining MSME operations, protecting jobs, and maintaining investments, structural liquidity challenges and inconsistencies within the GST framework continue to place significant pressure on small businesses.
According to ISF, GST policy must uphold the principle of competitive neutrality, where no participant in the value chain derives an unfair advantage through interpretational arbitrage or regulatory asymmetry.
The Forum noted that the recent WBAAAR ruling reinforces a critical principle, that substance must prevail over form. If an activity operationally functions as a courier or integrated logistics service, its tax treatment should reflect its economic reality rather than contractual structuring or documentation practices.
India SME Forum observed that MSMEs and small online sellers already pay GST transparently across every operational layer, including platform commissions, warehousing, packaging, advertising, payment gateway charges, logistics, and returns management.
In contrast, smaller enterprises typically do not possess access to sophisticated tax structuring mechanisms, large legal teams, advance ruling strategies across multiple jurisdictions, or the ability to absorb prolonged litigation cycles. As a result, MSMEs often become among the most compliant participants within the ecosystem while simultaneously carrying a disproportionate compliance burden.
The Structural Challenge Facing Small Sellers
ISF highlighted key structural concerns impacting MSME competitiveness:
• MSMEs continue to bear GST costs across all supply chain activities including logistics, packaging, warehousing, returns and platform-linked expenses.
• Any interpretation or structuring that creates materially lower indirect tax burdens for dominant digital intermediaries, while similar ecosystem costs remain fully taxable for MSMEs, raises legitimate concerns around market fairness.
• Inverted Duty Structures (IDS) continue to create liquidity stress where MSMEs pay higher GST on inputs and services than on finished products, leading to blocked Input Tax Credits and working capital constraints.
• Delayed refunds and locked credits further intensify financial pressure for smaller enterprises operating on thin margins.
ISF stated that the WBAAAR ruling sends an important signal that tax classifications must reflect actual operational conduct, exemptions cannot be engineered through definitional interpretation alone, and regulatory systems should not inadvertently favour scale over fairness. The Forum further stated that India’s digital commerce ecosystem can achieve sustainable growth only when taxation remains neutral, compliance predictable, and market conditions equitable for enterprises of every size.
India SME Forum also highlighted the need for greater regulatory consistency and noted that where substantial questions arise regarding classification practices with broader market implications, there may be merit in broader review mechanisms by GST authorities and the issuance of clearer interpretational guidance. The Forum maintained that policy action should remain transparent, non-discriminatory, legally grounded, and focused on creating future compliance certainty for the entire ecosystem. From an MSME perspective, the larger concern is not targeted enforcement against individual companies but ensuring that no structural tax interpretation evolves into a competitive advantage available only to the largest participants in digital commerce.
Key Recommendations by ISF:
• Immediate clarification and uniform enforcement of GST provisions across e-commerce logistics models
• Harmonised GST interpretation across states to ensure consistency
• Greater transparency around logistics charges and embedded service taxation structures
• Expansion of refund eligibility under Section 54(3) to include input services and capital goods
• Faster and fully automated GST refund processing for MSMEs
• Rationalisation of inverted duty structures affecting small sellers and exporters
• Simplification of GST compliance requirements for MSMEs operating across states and digital marketplaces
Speaking on the occasion, Vinod Kumar, President, India SME Forum, stated: “India’s MSMEs have demonstrated extraordinary resilience through multiple global disruptions over recent years. While the Government has taken important steps to support the sector through credit access, formalisation and digital infrastructure initiatives, the next phase of reforms should focus on creating a level playing field. MSMEs operate under rising logistics costs, platform dependency, return burdens and working capital constraints. Taxation frameworks must remain neutral, compliance should be predictable, and no structural interpretation should create unintended competitive advantages. Sustainable growth of India’s digital economy will depend on fairness, transparency and equal opportunity for enterprises of all sizes.”
India SME Forum expressed confidence that continued dialogue between industry, Government, regulators and digital platforms will help create a stronger, more equitable and globally competitive MSME ecosystem for India.
