Ease of doing business for MSMEs: Laghu Udyog Bharati (LBU), a collective of around 40,000 small businesses in the country, has requested finance minister Nirmala Sitharaman to reserve “manufacturing and marketing of traditional, conventional and low-technology products of mass consumption” for MSMEs. In a virtual pre-budget consultation meeting with Sitharaman, LBU said manufacturing of such products, consumed across geographies, is going into the hands of big corporates. “Hence, reservation in specific areas is a must for the sustenance of MSMEs where big businesses may not add any significant value.”
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LBU’s All India Joint Treasurer Om Prakash Gupta, who attended the pre-budget consultation meeting on November 21, told FE Aspire, “There are items for masses such as bread, atta, bun, lassi packaging, rusks, various stationary items, and more which can be manufactured by SMEs instead of big corporates who now manufacture in-house. There are many such low-technology items in every sector which should be made by SMEs only.”
The association also suggested extending the NPA classification period to 180 days from 90 days for MSMEs as the working cycle of enterprises in many cases extends much beyond the 90-day period. According to the mandate by the Reserve Bank of India (RBI), loans can be classified as NPAs if they are overdue by more than 90 days. MSMEs, which struggle to receive timely payments from their buyers, end up defaulting on loans in multiple cases. This has been one of the reasons for reluctance among banks to provide affordable credit to MSMEs.
“We are saying that at least do it for MSMEs with credit facility up to Rs 2 crore,” said Gupta.
LBU also asked for making laws related to paying MSMEs within 45 days of goods purchased effective including levying interest on such delays by buyers. “Despite the government’s guidelines, payments are still not happening. The government should deep dive into it in order to make regulations effective,” said Gupta.
Among other suggestions by LBU to the government were:
- Allocation of funds for setting up industrial clusters on a lease rental model for small businesses on well-connected routes, highways, and ports.
- Non-compliances relating to the Companies Act 2013 dating back beyond five years should be considered closed for the MSME sector.
- Compliance requirements for SMEs should be in a single simple form as opposed to multiple filings except in the event of any change such as a director, capital increase etc. where specific filings may be required.
- Capital Gains Tax arising from the sale of capital asset should be exempted if reinvested in repayment of institutional loan or to purchase industrial land or plant and machinery.
- 18 per cent interest rate for late payment of GST is too high for small taxpayers, manufacturers and other traders. Hence, it should be reduced to 12 per cent per annum.
