Trump trade tariffs: MCA planning to ease compliance burden for MSMEs

As part of a broader strategy to shield domestic industry from US tariffs, the Ministry of Corporate Affairs (MCA) is planning to ease compliance reforms for medium, small and micro enterprises (MSMEs), according to official sources.

 

“We are looking at it very seriously and taking inputs from the MSME ministry as well,” a government source said.

 

The MCA may also consider amendments to the existing Companies Act for simpler certification processes for MSMEs and doing away with certain compliances for such companies, sources said. Some of the measures which were recommended in the expert committee report regarding Company Law in 2022 included reducing fines and penalties which are designed keeping larger companies in mind. 

 

Suggestions made by the Federation of Indian MSMEs (FISME) include exemption for unlisted companies up to a turnover of ₹1,000 crore from mandatory Corporate Social Responsibility (CSR) obligation to provide them with greater flexibility in their board structure and reduce their compliance costs.

 

The MSME body has sought relaxation in the requirement to appoint independent and women directors, which it says can be costly and time-consuming for unlisted companies, especially those with limited resources.

 

With a global environment marked by trade tensions and geopolitical volatility, the government is expected to look for ways to support domestic industries.

 

“Direct assistance to MSMEs and assistance through processes - both are important since macro-economy may not be impacted much by tariffs, but MSMEs will face some challenges and require support from the government,” said Madan Sabnavis, chief economist, Bank of Baroda.

 

Sabnavis said that help with administrative hassles may not give direct support to MSMEs, but would still bring ease of doing business for the sector.

 

Experts said that the government should allow self-certification or deemed acceptance for various procedures under Companies Act, instead of demanding a host of documents from MSMEs.

 

“They could do risk profiling and have automated acceptance for smaller companies. Departments across governments often ask for the same data and if there was better sharing of information between ministries, it would also ease compliance burden on MSMEs,” an industry expert, who did not wish to be named said.

 

According to the Ministry of Statistics & Programme Implementation, MSME contribution to the country’s GDP was marginally lower in 2023-24 to 31.1 per cent, compared to 31.3 per cent in the previous year.

 

Under the present Companies Act, MSMEs are granted certain exemptions. For instance, the requirement that the cash flow statement should be part of the financial statement has been made optional. Small companies are not required to rotate auditors and disclosures, such as auditor’s report on internal financial controls do not apply to MSMEs.

 

Small companies are also exempt from requirements of pre-certification of forms by professionals. All companies with authorised capital up to ₹15 lakh or with up to 20 members where no share capital is applicable are charged zero fees for incorporation.

 

MCA has already made special provisions for MSMEs in the Insolvency and Bankruptcy Code through measures such as the Pre-Packaged Insolvency Resolution Process for fast track resolution of cases. The Code has also exempted MSMEs from the provisions of Section 29 A, which bars the promoter and related parties from participating in the resolution process. 

Easing processes

 

The MCA may consider amendments to the Companies Act for simpler certification processes for MSMEs

Experts say self-certification for procedures under Companies Act should be allowed

Federation of Indian MSMEs seeks exemption for unlisted firms up to turnover of ₹1,000 cr from CSR norm