Complex rules a hurdle for MSMEs, says Gauba Panel; Gives 38-pt agenda
The other three departments are environmental regulations, Food Safety and Standards Authority of India (FSSAI) and Bureau of Indian Standards (BIS).
The panel called for the removal of mandatory corporate social responsibility (CSR) requirements and penalty reductions for MSMEs. It also suggested the elimination of FSSAI’s “licensing and auditing regulation” as well as rationalization of the complex regime of multiple BIS standards into a simple twin scheme.
The high-level committee on non-financial regulations, led by Niti Aayog member Rajiv Gauba, formed after Prime Minister Narendra Modi’s call for major reforms on Independence Day, said even a small MSME unit is bogged down by over 1,400 compliances annually and has to keep up with over 40 regulatory changes a day.
Recommendations for FSSAI and BIS
Aiming for a more modern “trust-based” regulatory framework, the committee makes its initial recommendations aimed at reducing the burden of deregulation and compliance.
ET reported on major environmental deregulation moves on October 20. Below is a list of the committee’s recommendations in three other areas.
MSMEs: Definitions, Disputes, Credit flow
By November 30: Revise the definition of ‘small company’ to be consistent with the MSME Development Act, 2006, to include within its ambit all businesses with a turnover of ₹100 crore (from ₹40 crore) and paid-up capital of ₹10 crore (from ₹4 crore).
By December 31: Exempt MSMEs from all mandatory CSR requirements (at least 2% of average net profit of the previous three years) and other CSR-related regulatory obligations. There is a need to amend Article 135 of the Companies Act, 2013.
By December 31: Reducing board meeting requirements for small companies from twice a year to once a year. Event-based applications only, rather than annual director applications. There is no mandatory auditor for small companies with turnover below ₹1 crore. Changes that need to be made in the laws.
Until 31 October: Reduction of the high penalty interest for late tax payments by micro-enterprises with a small number of staff from 18% to 12%. Reduce heavy penalties for minor errors to a maximum of ₹5,000 instead of ₹25,000.
As of December 31: Simplification of GST returns includes filing annual returns instead of quarterly for all micro businesses with turnover up to ₹10 crore and making quarterly returns mandatory instead of monthly for small businesses with turnover above ₹100 crore.
By March 31, 2026: Increase the GST exemption limit for traders in goods to Rs 1 crore from the current Rs 40 lakh; for others, increase it from ₹20 lakh to ₹50 lakh.
By 31 October: Proposed to increase e-commerce exports with DPIIT clarifying and easing 100% FDI rules (Press Note 2) so that e-commerce exports are not considered part of the inventory-based prohibited category.
By December 31: Amend MSME laws to introduce sole mediator and sole arbitrator for faster resolution of payment disputes. Introduce online decision-making, expand MSME facilitation councils, mandate pre-deposit sanction through actual deposits and ensure release of 50% of deferred payments.
By 30 November: Extend the credit guarantee trust for micro and small enterprises to medium-sized enterprises through a separate structure. Increase the maximum guarantee threshold from ₹10 crore to ₹50 crore per borrower.
By March 31, 2026: Increase the tax audit threshold for micro-entities with cash income above 5% from ₹1 billion to ₹2 billion.
