Centre worked with states, UTs to improve Ease of Doing Business for MSMEs

When questioned in the about the government’s awareness about small businesses being forced to close due to high compliance burden, Minister of State for Commerce Som Prakash, informed the monsoon session of the parliament currently underway that more than 33,000 compliances have been “simplified, rationalised, digitised or decriminalised” by ministries or departments in the Centre, states and union territories.

These efforts were taken to improve the ease of doing business for MSMEs in “government to business interfaces”, the MoS said, according to a report in The Financial Express. 

An example of the changed scenario is a significant announcement made by the GST Council earlier this month, when it decided to waive off compulsory registration for small businesses with turnover of less than INR 20 Lakh (applicable for businesses without interstate taxable supply) want to engage in online commerce, says a report in CNBC TV-18. 

Additionally, in another boon to the MSME sector, the GST Council also agreed to extend the exemption of INR 40 Lakh for interstate sellers and the threshold of INR 1.5 Crores for online sellers under the composition scheme, the report says. 

Industry experts who spoke to CNBC TV-18 welcomed this much-awaited move, as they felt it reduced the imbalance in opportunities between online and offline stores and would enable a variety of small businesses across the country a chance to formalise through digitisation. In a win-win situation, the move would also contribute to increased revenue for state and central governments.

According to data from the Department of Promotion of Internal Trade of September 2021, 22,000 while compliance requirements were reduced, 13,000 were simplified and 1200 were digitised. While 103 provisions were decriminalised, 327 compliances were done away with as they were no longer relevant, the Financial Express report says.

There is, however, still a long way to go, as an MSME having more than 150 employees has to spend anywhere between INR 10-18 Lakh on meeting as many as 900 compliances, a joint report by think tank Observer Research Foundation and Team Lease, ominously titled ‘Jailed for Doing Business in India’, has revealed, as per the Financial Express report.

A collaborative, extensive report on enhancing ease of doing business for MSMEs released earlier this year by the PHD Chamber of Commerce and Industry and Delhi School of Economics, called ‘Ease of Doing Business for MSMEs in India: Percolating EODB Reforms at Factory Level’ outlined several measures to create a friendly business environment for MSMEs, such as:

1. Implementation of one-time registration and licence, rather than yearly renewal, as is the current practice now.
2. Provision of single window clearance for approval by merging 25-30 departments.
3. Time-bound litigation for GST and other laws.
4. Abolishment of reservation for local labour.
5. Simplified banking procedures and land acquisition rules.
6. Decriminalisation of minor offences.
7. Steady supply of power and gas.
8. Improvement in inspector-business relationship - rather than be a tensed one, the inspector should function as “enabler, motivator and guide”.
9. Inclusion of several more sectors under the MSME-friendly PLI scheme.
10. Ensure that states implement Fixed Term Employment announced by the Government of India. In 2019, the Labour Ministry had proposed that fixed term employment, or contract driven jobs should be on par with permanent work.