The change in the definition of MSME now allows a larger pool of enterprises to get the benefits of the MSME Act 2006 and pandemic-induced reforms. Comment (200 Words)
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IAS Parliament 3 years
KEY POINTS
· MSMEs have been inordinately affected by the Covid-induced lockdown, transport disruptions, severance of supply chains, social distancing measures owing to their dominant presence in economic sectors like retail, trading and services.
· This disruptive effect has been compounded due to their limited financial resources and borrowing capacity. The government has introduced a slew of legislative, regulatory and financial measures to support the MSME sector amidst this unprecedented crisis unleashed by the pandemic.
· The 2018-19 Economic Survey clearly established that MSMEs that grow not only create greater profits for their promoters but also contribute to job creation and productivity in the economy.
· As a basic step, we need a clear definition of what enterprise can be specified as an MSME. The definition of micro and small enterprises differs widely across countries and reflects the specific business environment and socio-cultural aspects in which they operate.
· Under the new definition, an enterprise qualifies as an MSME depending upon the broadened thresholds of amount of investment made with respect to (i) plant and machinery in case it undertakes manufacturing; or (ii) equipment in case it provides services (see Graphic). In addition to this existing investment conditionality, a new criterion for turnover has been introduced.
· The expanded ambit of the MSME Act has now allowed the larger pool of enterprises to get the benefits of the Act as well as of the reforms introduced by the government for the MSME sector during the pandemic, without any additional tax liability. It is likely to improve the ease of doing business in operation for MSMEs, and in the process make it easier for them to attract investments and create more jobs.
· The Wages Bill was enacted last year and the other three codes have been passed by the legislature. This is another step which will go a long way in promoting ‘ease of doing business’ and instil investor confidence in the MSME sector as it intends to reduce the burden of compliance of labour regulations.
aswin 4 years
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Harsh 4 years
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