Faceless but Not Fearless: When MSMEs Struggle Against GST Demand

Bhagya Lakshmi
Aug 4
3 min read

In a landmark move, the Telangana High Court recently granted relief to National Remote Sensing Centre (NRSC)—a government agency under ISRO—by staying a ₹12+ crore GST demand and allowing a partial 10% deposit, citing the absence of a functional GST Appellate Tribunal.

If a well-funded government agency isn’t in a position to pay or defend itself, it begs a chilling question:

What hope do India’s 6.3 crore MSMEs have?

🔍 The Ground Reality for MSMEs

These are not isolated incidents. They represent a systemic stress test—and MSMEs are failing not by fault, but by design.

🧵 Case 1: The Frozen Account

Name: Aakruti Garments (Ahmedabad)Issue: Received a GST demand of ₹8.4 lakh for an “ITC mismatch” due to vendor’s cancelled registration.

Facts:

Had proper invoice, payment record, and goods receipt.
Vendor registration was cancelled retrospectively, unknown to them.
The department froze their current account.
No tribunal to appeal.
Their working capital cycle was destroyed—production halted for 3 weeks.

“We paid GST honestly, and now we’re being punished for someone else’s default.”

🧵 Case 2: The Construction Startup That Got Crushed

Name: BuildLine Projects (Hyderabad)

Issue: Received ₹18 lakh GST demand for “wrong classification of service” from SAC 9987 to 9954.

Facts:

Filed returns accurately based on previous assessments.
Department said they should have classified differently.
No prior notice, directly received SCN and order.
Appeal possible, but only after 10% payment (₹1.8 lakh).
They had less than ₹60,000 in their account.
Had to borrow from relatives to avoid default.

“We didn't even get a chance to explain—just one PDF and one demand. That’s it.”

🧵 Case 3: The Tech Consultant Who Gave Up

Name: Zenterra Tech (Bengaluru)

Issue: ₹2.2 lakh demand for “non-matching” GSTR-1 and 3B

Facts:

The mismatch was due to a portal glitch where a B2B invoice was auto-populated as B2C.
Technical glitch acknowledged in grievance but not resolved.
Filed appeal but stuck since no tribunal exists.
After 4 months of waiting, and one notice for bank attachment, the founder shut operations and went abroad.

“The business is dead, not because we failed, but because the system failed us.”

🧵 Case 4: The Silent Retailers

Unnamed chain of local Kirana stores (Tier 2 Andhra Pradesh)

Received SCNs for not reflecting turnover from cash-based UPI sales,

even though tax was paid.

No one to fight.

No CA on record. No appeal filed. Notices ignored. Penalty growing.

🧵 Case 5: The Women Entrepreneur’s Loss

EcoWeaves (Delhi NCR) – Handloom e-commerce startupGST

demand: ₹6 lakh for “unmatched 2B vs. GSTR-3B”

→ Founder had just 2 team members.

→ Couldn’t afford to hire a lawyer.

→ Order confirmed by default.

→ She’s now back to freelancing.

😔 These Are Just A Few.

For every visible case, there are hundreds that go unheard:

Street vendors paying GST through Amazon or Swiggy but facing mismatch notices
Artisans and craft sellers stuck in a maze of portal errors
Micro-exporters penalized for LUT mismatches even after refund sanctioned
Small service firms whose ITC is rejected because their vendor’s GSTR-1 wasn’t filed on time

Most of them don’t even understand what “Section 16(2)(aa)” means, let alone how to defend themselves against it.

⚖️ Justice Exists, But the Path Is Closed

The writ jurisdiction of High Courts remains the only window—but it’s a window very few MSMEs can reach.

And without the GST Tribunal, the system is operating with its entire appellate mechanism missing.

💡 What Needs to Change?

✅ Set up GST Appellate Tribunal immediately

✅ Offer financial threshold waivers for micro businesses

✅ Set up state-level ombudsman panels for small taxpayer disputes

✅ Defer coercive recovery if appeal is filed and pending

✅ Launch a GST Grievance Redressal App with real-time tracking

📣 Final Words

“Ease of Doing Business” should not be limited to top 100 companies.It should start with those who have no CFO, no legal team, no buffer capital — just trust in the system.

Let’s speak up, document these stories, and push for reform — because silence now will cost us our entrepreneurial future.