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Govt mulls revision of SME definition, to look at easing compliance cost in GST for SMEs

The government is working towards redefining entities that would get classified as Micro, Small and Medium (MSME) units. In a bid to align policies to the best practices followed in other countries, KK Jalan, secretary, MSME said that the central government is looking to revise the definition of MSME.

“Today, the definition considers only the capital employed. We are now looking at other factors like turnover and number of people employed,” he said, on sidelines of an event conducted by the Indo American Chamber of Commerce on Wednesday.

The MSME Act 2006 defines MSMEs, classifying them under two types — manufacturing and service enterprises. For both classes, it is the investment in plant, machiney and equipment that goes into classifying an enterprise into micro, small or medium enterprise. “A group of secretaries recently filed a proposal to consider other aspects as well. While we are considering turnover and employment generation, we also feel that there must be some sector specific classification criteria. Each sector has a different requirement of plant and machinery, labour and we must consider that too,” he said.

Highlighting the pain points of MSMEs in India, Jalan said GST and its associated compliances are a concern. “GST compliances will be the same whether it is a MSME or a large MNC. While it may not hurt a large company, it could be difficult for a small enterprise to handle all these compliances,” he said. Stating that the central and state governments are taking cognizance of the cost of compliance involved, he added that they would be looking at measures to ease compliance for smaller entities once GST kicks in.

Talking about increasing bilateral relationship with the US and its benefits to MSMEs, he said there are talks of an Indo US SME forum to be set up under the World Trade Organisation. He added that while this could increase synergies between Indian and US SMEs, the government was concerned about non tariff barriers being imposed for sectors like textile.

Source: Times of India

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