FISME seeks safeguards for bona fide MSMEs after SC GST ruling
New Delhi, Aug 13 (TNT): The Federation of Indian Micro and Small & Medium Enterprises (FISME) on Thursday urged the Finance Ministry and GST Council to introduce legislative safeguards for bona fide taxpayers following the Supreme Court’s recent judgment upholding Section 16(2)(c) of the CGST Act.
The provision permits denial of Input Tax Credit (ITC) where a supplier has failed to deposit the tax.
In a release, FISME said the ruling had narrowed the judicial route to relief for genuine taxpayers affected by supplier defaults and called for legislative and administrative reforms to ensure that businesses were not penalised for defaults beyond their control.
The industry body said GST was entering its tenth year, with registered taxpayers increasing from 66.5 lakh in 2017 to over 1.65 crore as of May 2026. Gross GST collections also increased from Rs 7.4 lakh crore in 2017-18 to over Rs 22.27 lakh crore in FY 2025-26, while July 2026 collections stood at Rs 2.11 lakh crore, up 15.4 per cent year-on-year.
FISME Secretary General Anil Bhardwaj said the next phase of GST reforms should make compliance simpler, predictable and less burdensome, particularly for MSMEs.
The organisation said its recommendations were aimed at reducing compliance costs, improving certainty, unlocking working capital and strengthening voluntary compliance without relaxing tax obligations.
FISME proposed three immediate reforms, including a statutory Safe Harbour for bona fide taxpayers possessing valid tax invoices, proof of receipt of goods or services and banking-channel payment, provided there was no evidence of fraud.
Under the proposed mechanism, such taxpayers should not be denied ITC solely because of a supplier’s default, with recovery instead pursued against the defaulting supplier, it said.
It also sought a time-bound GST refund mechanism with automatic payment of interest on delayed refunds to prevent working capital from being locked up, particularly for MSMEs and exporters.
For simplifying compliance, FISME called for faster implementation of the One PAN-One Administration framework, predictable technology rollouts with adequate transition periods and sandbox testing, mandatory pre-notice reconciliation, faceless adjudication and measures to reduce avoidable litigation.
FISME said the proposed reforms would help MSMEs focus on investment, employment generation and business growth while preserving the integrity of the GST framework and tax enforcement.
The federation represents MSME associations across India and works on policy advocacy, research, competitiveness, market access and ease of doing business.
TNT KS
