The
Chartered Accountants in public practice spread across India are generally
categorised as Small and Medium Practitioners (SMP). As per ICAI statistics,
almost 97% of the CA firms in India are sole proprietorships or partnership
firms with up to five partners. This category forms the backbone of the
profession in India catering to a vast number of entities.
The
ICAI’s Ethical Standards Board in a recent decision has clarified that ‘A CA
firm may register itself on Udyog Aadhar, a web portal of the Ministry of
Micro, Small and Medium Enterprises’. Accordingly, the SMP CA firms can avail
the various benefits available to the MSME units by registering themselves
under ‘UDYAM’ (earlier Udyog Aadhar).
The
Micro, Small and Medium Enterprises Development (MSMED) Act was notified in
2006 to address policy and practical issues affecting MSMEs as well as the
coverage and investment ceiling of the sector.
Many CAs
do not register as MSMEs due to lack of familiarity with the various benefits
and support made available by the government for the sector. The authors have
attempted to summarise in this article the key benefits available to SMPs.
CLASSIFICATION OF MICRO, SMALL & MEDIUM ENTERPRISES
The
revised classification of MSME’s applicable w.e.f. 1st July, 2020
for Manufacturing and Service Enterprises is as follows:
|
|
Micro
|
Small
|
Medium
|
|
Investment in Plant & Machinery (for manufacturing entities) or
Equipment (for service entities) not more than
|
Rs. 1
crore
|
Rs. 10
crores
|
Rs. 50
crores
|
|
|
AND
|
|
Annual turnover not more than
|
Rs. 5 crores
|
Rs. 50 crores
|
Rs. 250 crores
|
REGISTRATION OF MSME (UDYAM)
Registration
under the MSME Act, 2006 will be called Udyam
Registration w.e.f. 1st July, 2020 and a dedicated web portal has
been made available for registration at the following web address:
https://udyamregistration.gov.in.
The
following are important features of the new registration process:
* The
MSME registration process is fully online, paperless and based on
self-declaration.
* No
documents or proofs are required to be uploaded for registering as an MSME.
* No fees
are payable for registration.
* Aadhaar
number is mandatory for obtaining Udyam Registration (Aadhaar of
proprietor / partner / karta / authorised signatory).
* PAN and
GSTIN are mandatory for Udyam Registration from 1st April, 2021.
* PAN and
GST-linked details on investment and turnover of enterprises will be taken
automatically from government data bases.
*
Registration of entities not having either PAN or GSTIN will be cancelled
w.e.f. 1st April, 2021.
* A
registration certificate will be issued which will have a dynamic QR Code from
which the details about the enterprise can be accessed.
* All
existing enterprises registered under EM–Part-II or Udyog Aadhar shall register
again on the Udyam Registration portal on or after 1st July,
2020. All enterprises registered till 30th June, 2020 shall be
reclassified in accordance with this Notification.
* The
existing enterprises registered prior to 30th June, 2020 and not
having registered under Udyam shall continue to be valid only for the
period up to 31st March, 2021.
KEY BENEFITS FOR SMPs UNDER THE MSMED ACT AND OTHER STATUTES
1.
Protection against delayed payments to Micro & Small Enterprises (MSEs)
The MSMED
Act, 2006 gives protection to MSME-registered entities against delay in
payments from buyers. Further, the MSME’s have right of interest on delayed payment through
conciliation and arbitration and settlement of disputes to be done in minimum
time.
- If any micro or small
enterprise that has MSME registration supplies any goods or services, then
the buyer is required to make payment on or before the date agreed upon
between the buyer and the micro or small enterprise.
- In case there is
no payment date on the agreement, then the buyer is required to make
payment within 15 days of acceptance of goods or services.
- Further, in any case,
a payment due to a micro or small enterprise cannot exceed 45 days from
the day of acceptance or the day of deemed acceptance.
- In case of failure by
the buyer to make payment on time, the buyer is required to pay compound
interest with monthly interest rests to the supplier on that amount from
the agreed date of payment or 15 days of acceptance of goods or services.
- The penal
interest chargeable for delayed payment to an MSME enterprise is three
times the bank rate notified by the Reserve Bank of India. Such
interest is also not a tax-deductible expense under the Income-tax Act.
- Further, as mentioned
in section 22 of the MSMED Act, 2006, where any buyer is required to get
his annual accounts audited under any law for the time being in force,
such buyer shall furnish additional information in his annual statement of
accounts regarding the outstanding principal and interest payable to MSME
enterprises.
MSME
units can access the MSME SAMADHAAN portal
(https://samadhaan.msme.gov.in/) for prompt settlement of any disputes relating
to delay in payment or interest.
2. Credit Guarantee Scheme for Micro & Small
Enterprises (CGTMSE)
- Credit guarantee for
loans up to Rs. 2 crores, without collateral and third-party guarantee.
- New and existing Micro
and Small Enterprises engaged in manufacturing or service activity are
eligible borrowers under this scheme.
- Borrowers need to
conduct a market analysis and prepare a business plan containing relevant
information, such as business model, promoter profile, projected
financials, etc. and submit the loan application which is sanctioned as
per the bank’s policy. After the loan is sanctioned, the bank applies to
the CGTMSE authority and obtains the guarantee cover.
- Guarantee coverage
ranges from 85% (Micro Enterprise up to Rs. 5 lakhs) to 75% (others).
- 50% coverage is for
retail activity.
Detailed
information and application can be obtained from https://www.cgtmse.in/
3.
Interest Subvention Scheme for MSMEs – 2018
- 2% interest subvention
on fresh or incremental loans, maximum up to Rs. 1 crore, to MSMEs.
- This interest relief
will be calculated at two percentage points per annum (2% p.a.), on outstanding
balance from time to time from the date of disbursal / drawl or the date
of notification of this scheme, whichever is later, on the incremental or
fresh amount of working capital sanctioned or incremental or new term loan
disbursed by eligible institutions.
- Incremental / fresh
term loan or incremental / fresh working capital extended from 2nd
November, 2018 by any scheduled commercial banks, NBFCs, RRBs, UCBs
(scheduled and non-scheduled) and DCCBs would be covered under the scheme.
- SIDBI shall act as a
nodal agency for the purpose of channelling of interest subvention to the
various lending institutions through their nodal office.
- MSMEs already availing
interest subvention under any of the schemes of the State / Central
government are not eligible under the scheme.
Detailed
information about the scheme can be obtained from: https://rbidocs.rbi.org.in/rdocs/notification/PDFs/125ISCUR72A9B5ADE83345F9A47410967A83ED27.PDF
Detailed
information and application can be obtained from
https://sidbi.in/files/circulars/ISS-for-MSMEs,-2018—Circular-and FAQs.pdf
4.
Emergency Credit Line Guarantee Scheme – Atmanirbhar Bharat Mission 2020
The
Emergency Credit Line Guarantee Scheme, worth Rs. 3 lakh crores, was launched
as part of the Atmanirbhar Bharat Mission on 20th May, 2020. The
scheme provides credit relief to MSMEs facing hardships due to coronavirus
pandemic-triggered lockdowns.
In a
pragmatic mid-scheme assessment, the government on 1st August, 2020
has expanded the eligibility criteria for the Emergency Credit Line Guarantee
Scheme (ECLGS) beyond MSMEs to include ‘individuals who take loans for business
purpose’. With the eligibility expansion, Chartered Accountants, who
have taken loans for their professional needs, will be eligible for credit
under the special credit guarantee scheme which was earlier aimed to benefit
medium and small enterprises.
KEY FEATURES
- All MSME borrower
accounts with outstanding credit of up to Rs. 25 crores as on 29th
February, 2020 which were less than or equal to 60 days past due as on
that date, i.e., regular, SMA 0 and SMA 1 accounts, and with an annual
turnover of up to Rs. 100 crores, would be eligible for Guaranteed
Emergency Credit Line (GECL) funding under the scheme.
- The amount of funding
shall be either in the form of additional working capital term loans (in
case of banks and FIs), or additional term loans (in case of NBFCs).
- Funding would be up to
20% of their entire outstanding credit up to Rs. 25 crores as on 29th
February, 2020.
- The entire funding
shall be provided with a 100% credit guarantee.
- Tenor of loan under
the scheme shall be four years with moratorium period of one year on the
principal amount.
- No guarantee fee shall
be charged.
- Interest rates under
the scheme shall be capped at 9.25% for banks and FIs, and at 14% for
NBFCs.
5. Trade Receivables
Discounting System (TReDS)
- TReDS is a digital
platform for MSMEs to auction / discount their trade receivables at
competitive rates through online bidding by financiers.
- The system, which is
accessible online through three exchanges, was launched to ensure that
suppliers are credited their due receivables in a timely manner.
- The system is
initiated when a transaction is conducted between the supplier and buyer.
- The receivable is
logged into the system by the supplier.
- Receivables are funded
by financiers through a bidding process.
- Only the supplier is
able to view all the bids placed by different financiers. When the
supplier selects the best bid, the amount is received within two to three
business days from the financier.
- On the regular due date,
the due amount is debited from the buyer and transferred to the financier.
- The objective is to
address the critical needs of MSMEs:
(i)
Promptly finance trade receivables, and (ii) Financing trade receivables based
on buyers’ credit rating.
TReDS has
been licensed to three exchanges:
(1)
Receivables Exchange of India Ltd. (RXIL): A joint venture between
Small Industries Development Bank of India (SIDBI) and National Stock Exchange
of India Limited (NSE).
https://www.rxil.in/AboutTreds/Treds
(2) Invoicemart: Promoted by A TReDS Ltd.
(a joint venture between Axis Bank and mjunction services).
https://www.invoicemart.com
(3) M1Xchange: Promoted by Mynd Solutions
Private Limited
M1xchange:
https://www.m1xchange.com/treds.php
Detailed
information available at: https://rbidocs.rbi.org.in/rdocs/Content/PDFs/TREDSG031214.pdf
6. Public
Procurement Policy from MSME
- The Public Procurement
Policy for Micro and Small Enterprises (MSME) Order, 2012 has mandated every
Central Ministry / Department / PSU to procure minimum 25% of the annual
value of goods or services and certain reserved items from Micro and Small
Enterprises.
- No fees for procuring
tender document or furnishing earnest money; and, in certain cases, price
adjustment also permissible for MSEs to the extent of 15% to match lowest
bid in tender.
- The MSME SAMBANDH is
the Public Procurement Portal launched by the Central Government for the
MSMEs to monitor the implementation of the public procurement from MSEs by
Central Public Sector Enterprises (sambandh.msme.gov.in).
7.
Reimbursement of ISO Certification
- All registered Micro
and Small Industries can avail an exemption of all expenses incurred for
obtaining ISO 9000, ISO 14001 and HACCP certifications.
- It includes 75%
of the certification expenses up to a maximum of Rs. 75,000 to each unit
as one-time reimbursement.
- Scheme applicable only
to those MSEs which have acquired Quality Management Systems (QMS) / ISO
9001 and / or Environment Management Systems (EMS) / ISO14001 and / or
Food Safety Systems (HACCP) Certification.
For more
information:
https://www.startupindia.gov.in/content/sih/en/government-schemes/reimbursement_iso_standards.html
- 8. Service Exports
from India Scheme (SEIS)
- To facilitate growth
in export of services so as to create a powerful and unique ‘Served from
India Scheme’ brand, instantly recognised and respected the world over.
- Under this scheme, all
Indian Service Providers having free foreign exchange earning of at least
US $15,000 in the preceding year can claim the Duty Credit Scrip.
- For Individual Service
Providers and sole proprietorships, such minimum net free foreign exchange
earnings criterion would be US $10,000 in the preceding financial year.
- This Duty Credit Scrip
is equivalent to 3% – 7% of ‘NET’ free foreign exchange earned during the
previous financial year.
- The Duty Credit Scrips
and goods imported against them shall be freely transferable.
- The services of SMPs
are covered under the category – Professional Services – Legal Services,
Accounting, Auditing and Bookkeeping Services and Taxation Services.
- Free foreign exchange
earned through International Credit Cards and other instruments as
permitted by RBI for rendering of service are also taken into account for
computation of Duty Credit Scrip.
- Import Export Code
(IEC) is mandatory at the time of rendering service for claiming benefits.
For more
information: https://dgft.gov.in/CP/
9.
Reduced IPR Filing Fee
- The Department of
Electronics and Information Technology (DeiTY) has launched a scheme
entitled ‘Support for International Patent Protection in E&IT
(SIP-EIT)’ to provide financial support to MSMEs and Technology Startup
units for international patent filing.
- The reimbursement
limit has been set to the maximum of Rs. 15 lakhs per invention or 50% of
the total charges incurred in filing and processing of a patent
application, whichever is lesser.
For
details refer: http://www.ict-ipr.in/sipeit/SIPEITForm
CONCLUSION
The
Micro, Small & Medium Enterprises (MSME) is one of the top priority sectors
for the present Government of India and it is providing all the support and
assistance needed for the development of the sector. The Small and Medium
Chartered Accountant Practitioners (SMPs) are the most popular source of advice
and support to MSMEs.
Among
other MSMEs, the SMPs are also in need of credit and technical support for
growth and development. The delayed recovery of outstanding dues from clients
leads to working capital issues and a major roadblock for the growth of small
CA firms. The lockdown due to the Covid-19 pandemic has further reduced the
inflow of client funds and resulted in a cash crunch. The various schemes as
discussed above will come as a great guidance to the practising Chartered
Accountancy firms in these difficult times.
