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Inclusion of traders, retailers as MSMEs to improve ease of doing business

MSMEs are complementary to large scale industries such as ancillary units and this sector contributes enormously to the socio-economic development of the country. Wholesale traders and retailers getting MSME tag will be of great benefit to them.

 

The Micro, Small and Medium Enterprises (MSME) sector in India has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades.

It not only plays a crucial role in providing large scale employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas and in reducing regional imbalances, assuring more equitable distribution of national income and wealth.
 

MSMEs are complementary to large scale industries such as ancillary units and this sector contributes enormously to the socio-economic development of the country.

MSME Act

The Micro; Small and Medium Enterprises Development (MSMED) Act was notified in 2006 by the MSME Ministry to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector.

 

The Minister of MSME and Road Transport had announced the inclusion of Retail and Wholesale traders as Micro, Small and Medium Enterprise (MSMEs). This move by the Government is expected to benefit over 2.5 crore retail and wholesale traders in a positive way..


In 2020, the Government of India had launched Atma Nirbhar Bharat Abhiyan (ABA) and also changed the MSMEs classification by inserting composite criteria of both investment and annual turnover. Also, the distinction between the manufacturing and the services sectors under the MSME definition was removed in year 2020.The following is the current MSMEs classification, where the investment or annual turnover are to be considered for deciding an MSMEs:

v Micro enterprises-where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
 

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v Small enterprises-where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and

v Medium enterprise- where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees

If any enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.

Thereby it can be said that wef July 1, 2020 above limits would be equally applicable for every entity in the service sector, so as to establish the eligibility criteria under MSMEs laws.

Inclusion of traders, retailers in MSMEs

Earlier in the year 2017, the Government had removed retail and wholesale traders from the MSMEs category. Thereby the existing definition of MSMEs covers only Manufacturing and Service Sector enterprises. Government of India received many requests and representations to include more services provided by wholesales & retailers under the regime of MSMEs to give support to their businesses, especially during the pandemic crisis.

The Ministry of MSME wide Office Memorandum dated- July 2, 2021 had issued an order to include retail and wholesale trade as MSME. This will enable them to harness the benefit of priority sector lending, and they will now be able to register on the Udyam Registration Portal. To be specific, now from 02.07.2021follwing additional services are being added to this list eligible for MSME:

v Wholesale and retail trade and repairs for services related to motor vehicle and motorcycles

v Wholesale trade except of services related to motor vehicles and motorcycles

v Retail Trade Except of services related to Motor Vehicles and motorcycles

MSME tag benefits

This move to include more services in MSMEs would be of great benefit to wholesalers and retailers, few of which are listed below:

ü Benefit from various schemes issued by Government of India in order to help them to access to the funds available and manage the pandemic situation & financials crisis such as:

v Cap of Rs. 500 crores of loan outstanding removed.

v 100 % guarantee cover on loans up to Rs. 2 crores.

v ECLGS scheme expansion.

v Benefits of RBI restructuring.

ü The Udyam portal is a free, paperless online and instant registration portal for MSME and now retail & wholesale traders can register on it and can become eligible for many more benefits available to MSME Sector like-

v Concessional loan rate by bank.

v Concession in Electricity bills

v Exemption in direct tax & indirect tax laws.

v Various COVID-19 relaxations related to business and taxation.

ü To take benefits of Emergency Credit Line Guarantee Scheme (ELCGS), the total budget has now been increased to INR 4.5 lakhs crore by Finance Ministry on June 28, 2021 to provide relief to MSMEs affected by the second wave of COVID-19.

ü More than 400 old customs duty exemptions granted this year.

ü Nationalised exemptions on import of duty free items as an incentive to exporters of garments, leather & handicraft items. Most of these are manufactured by MSMEs entities.

ü Reduced compliance burden and limit increased for tax audits from INR 5 crores to INR 10 crores.

Such benefits would definitely help the registered Wholesale & Retail traders to stand up in the Indian Economy during the COID-19 Pandemic crisis situation & now they will be governed by MSME’s regulations issued by MSME Ministry for MSMEs.

Conclusion

COVID-19 pandemic affected traders will now be able to restore their businesses by obtaining necessary finances from the banks which were earlier denied by the Banks which will boost the Indian Economy in a positive way.

Taking into consideration the situation of COVID-19 in India, MSME Ministry should increase the limit of Annual turnover & Investments so that more service providers can get registered as MSMEs and can get relief with loss in second COVID-19 wave & expected upcoming waves.