2024 seemed to be a transformative year for MSMEs in India, marked by key reforms and initiatives aimed at addressing long-standing challenges and fostering growth. The MSME sector witnessed significant developments in 2024 to address delayed payments, enhance support, and boost entrepreneurship. Despite significant government interventions, MSMEs in India continued to face several challenges underscoring the complexities of operating in a dynamic economic landscape.
Inflation and increased input costs continued to pose significant hurdles, as many MSMEs lacked the pricing power to transfer these costs to customers. Moreover, geopolitical tensions and global economic uncertainties led to supply chain interruptions, particularly for MSMEs dependent on imported raw materials or export markets.
As MSMEs step into 2025 with hope for a better ecosystem, here’s a quick look at key announcements by the government for small businesses in 2024:
Revised Section 43B of Income Tax Act
To address the delayed payments issue faced by small businesses, the government introduced new clause h under Section 43B of the Income Tax Act in April this year to allow expenses to buyers on invoices from micro and small enterprises only if paid within 45 days (where agreement exists) and within 15 days if there is no agreement in the year of actual payment instead of the year when it was incurred as an expense.
The move is aimed at helping micro and small enterprises (MSEs) grappling with the issue of delayed payments, cash flow and the risk of businesses getting closed due to financial constraints.
New MSME Minister
Former Chief Minister of Bihar Jitan Ram Manjhi was sworn in as the new MSME Minister in June under the NDA government led by Prime Minister Narendra Modi. The Dalit face of NDA, Manjhi, 79, and the leader of the Hindustani Awam Morcha (HAM) was Bihar CM between 2014 and 2015 for a short period of 10 months.
Manjhi won the Gaya seat in Bihar in the 2024 Lok Sabha elections by 101812 votes against Rashtriya Janata Dal’s Kumar Sarvjeet.
TEAM scheme launched
In June this year, the MSME Ministry had launched a new Trade Enablement & Marketing (TEAM) scheme with an outlay of Rs 277.35 crore for three years (2024-27) to boost e-commerce access for micro and small enterprises via the government’s open e-commerce network Open Network for Digital Commerce (ONDC).
The scheme aims to support Udyam-registered MSEs with catalogue development and onboarding on ONDC along with account management support. According to the ministry, 5 lakh MSEs are expected to benefit from the scheme in three years, 50 per cent of which would be women-owned enterprises.
Revised form for delayed payments
Companies delaying payments by more than 45 days to micro and small enterprises (MSEs) for goods or services purchased from them are now required to provide additional information in a revised MSME form 1, according to a July 15 notification by the Ministry of Corporate Affairs.
The half-yearly form introduced by the government in January 2019 earlier required buyers to share information on the amount due, date from which it is due and the reason for the delay under the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019.
The revised form also asks for the amount paid within 45 days through the invoice discounting platform TReDS or other payment mode, amount paid after 45 days, amount outstanding for 45 days or less and amount outstanding for over 45 days other than the reason for the delay in payment or outstanding amount and name and PAN of the MSE supplier.
Reduced GeM transaction charges
The government’s e-commerce portal Government eMarketplace (GeM) in August reduced the transaction charges levied on sellers to particularly benefit micro and small sellers in the GeM seller base. The portal announced zero per cent transaction charges for all orders valued up to Rs 10 lakh from the earlier limit of Rs 5 lakh.
For orders above Rs 10 lakh and up to Rs 10 crore, the portal reduced the transaction charges to 0.30 per cent of the order value from 0.45 per cent earlier. For orders above Rs 10 crore, the transaction charges were capped at maximum Rs 3 lakh, reducing it by 95 per cent from earlier capping at Rs 72.5 lakh.
Enhanced coverage under CGTMSE for women entrepreneurs
To support women entrepreneurship, the MSME Ministry in September said women-owned micro and small enterprises (MSEs) will get higher credit guarantee coverage under the collateral-free loan scheme CGTMSE. According to a press statement, the MSME Minister Jitan Ram Majhi said the scheme would include enhanced credit guarantees for women-owned MSME, with a guarantee coverage of 90 per cent and benefit 27 lakh women entrepreneurs.
The scheme was extended to women-owned MSEs in December 2022.
Extension of Interest Equalisation Scheme
The Directorate General of Foreign Trade (DGFT) in October extended the interest equalisation scheme (IES) for pre-and-post shipment rupee export credit for three months from September 30 to December 31, 2024, to support exporters. The extension applicable for MSME manufacturing exporters was effective with the additional condition that fiscal benefits of each MSME, on aggregate, will be restricted to Rs 50 lakhs for FY 2024-25 till December 2024.
Moreover, MSME manufacturer exporters who have already availed equalisation benefits of Rs 50 lakhs or more in 2024-25 till September 30 were not eligible for any further benefit in the extended period.
Increased Khadi wages
Khadi and Village Industries Commission (KVIC), under the MSME Ministry, in October implemented increased wages for Khadi artisans. Spinners who spin yarn on the charkha will get a 25 per cent increase in their wages while weavers who work on the loom will receive a 7 per cent hike.
Spinners who previously earned Rs 10 per hank would now receive Rs 12.50, an increase of Rs 2.50 per hank. The previous increase was in April 2023, when wages were raised from Rs 7.50 to Rs 10 per hank.
Enhanced Mudra limit
The Finance Ministry notified the increase in Mudra loan limit to Rs 20 lakh from Rs 10 lakh, following the announcement made in the Budget. The hike implemented in October created a new category Tarun Plus for loans above Rs 10 lakh and up to Rs 20 lakh for entrepreneurs who have repaid their loans under the Tarun category.
Mudra loans including the new Tarun Plus category are provided under the Credit Guarantee Fund for Micro Units (CGFMU). The scheme earlier enabled credit under three categories only: ‘Shishu’ for loans up to Rs 50,000, ‘Kishore’ for loans up to Rs 5 lakh and ‘Tarun’ for credit up to Rs 10 lakh.
TReDS turnover threshold
Businesses with more than Rs 250 crore turnover, from earlier Rs 500 crore, and all central public sector enterprises (CPSEs) are now required to onboard the invoice discounting platform TReDS by the Reserve Bank of India (RBI). According to a notification by the MSME Ministry in November, the onboarding process on the TReDS platform, which includes RXIL, M1xchange, Invoicemart, and C2treds, is to be completed by the end of this financial year.
The move is expected to see the onboarding of 22 more central public sector enterprises (CPSEs) and 7,000 more companies on TReDS.
SEBI Regulations for SME IPOs
Market regulator Securities and Exchange Board of India (SEBI) in December announced tightened regulations for small and medium enterprise (SME) IPOs amid investor frenzy and to address concerns around misuse of funds.
Among the new guidelines, SEBI approved mandating an operating profit of Rs 1 crore in two out of three years, and a phased release of promoter lock-in over 1-2 years. Moreover, the offer for sale (OFS) should not exceed 20 per cent of the total issue size and the amount of general corporate purpose to be capped at 15 per cent.