Panel suggests reforms to make life easy for small enterprises

NEW DELHI: The high-level committee headed by NITI Aayog member Rajiv Gauba has recommended at least 17 reforms, aimed at easing regulatory and financial pressure on Micro, Small and Medium Enterprises (MSMEs). The key recommendations cover credit access, compliance under the Companies Act, tax procedures, payment dispute resolution and CSR donations. The measures expected to significantly improve the business environment for small enterprises. The panel has provided the timelines for implementing the reforms, which are being examined by ministries and departments.For improving access to credit, the panel has proposed expanding the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to include manufacturing medium enterprises. It has also urged extending credit guarantee cover to receivables on the Trade Receivables Discounting System (TReDS) to ensure faster payments.To deal with the problem of MSMEs struggling to operate, for govt entities delaying payment of arbitration award or challenging such orders, the committee has recommended strengthening the provision of mandatory pre-appeal deposit of 75% arbitral award value under the MSME Development Act. It has said the law should be amended to mandate pre-deposit enforcement through actual deposit and authorise partial release of payment of at least 50% due to micro and small enterprise suppliers after six months. Appointment of a sole arbitrator has also been suggested to accelerate dispute resolution.The panel has recommended exemption of all micro and small companies from the mandatory Corporate Social Responsibility (CSR) obligations under the Companies Act. It has suggested amendments of the provision, which currently lays down the applicability criteria for CSR obligations based on net worth, turnover and net profit thresholds. The committee has also recommended reducing the number of mandatory board meetings of MSMEs from two per year to one per year. Similarly, the panel has favoured removing the mandate for auditor appointment for companies with turnover of less than Rs 1 crore. It has also recommended raising the tax audit exemption limit for companies, with more than 5% cash receipts to Rs 2 crore from Rs 1 crore.