Ease of doing business for MSMEs: The first full year without any major Covid impact – 2022 was also the year of multiple policy measures announced by the government to either extend the benefits of its existing initiatives aimed at helping the MSME sector to recover or launch some new ones. While the global economy faced a number of challenges such as economic slowdown, inflation, geopolitical tensions, supply chain constraints, rising interest rates, and more (many of which would perhaps continue next year as well) that impacted small businesses, there were steps undertaken by the government to offset that impact. Here are the 10 key announcements by the government in 2022 that directly or indirectly catered to MSMEs:
ECLGS extension: The first big announcement for MSMEs in 2022 came in the budget as the government extended its Emergency Credit Line Guarantee Scheme (ECLGS) till March 2023 from March 2022 along with an enhanced guarantee cover by Rs 50,000 crore to take the total limit of the scheme to Rs 5 lakh crore from Rs 4.5 lakh earlier. It also covered domestic airlines in the cash-strapped civil aviation sector. To further support domestic airlines, the government in October announced enhancing the credit limit to Rs 1,500 crore or 100 per cent of fund-based or non-fund-based loan outstanding of airlines, whichever is lower than the earlier Rs 400 crore.
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Draft National MSME Policy: In February, the MSME Ministry came out with the long-awaited draft of the National Policy for MSMEs proposing multiple measures to promote competitiveness, technology upgradation, cluster and infrastructure development, procurement of MSME products and dedicated credit support. While India doesn’t have an MSME policy till date, efforts have been underway since around 2015 when the One Member Committee under the chairmanship of former Cabinet Secretary Dr Prabhat Kumar was constituted by the Ministry of MSME to help in formulating the policy.
PMEGP extension: In May, the government announced the extension of its scheme for employment generation PMEGP over the 15th Finance Commission Cycle from 2021-22 to 2025-26 with an outlay of Rs 13,554.42 crore. In addition, multiple modifications were also made such as increasing the maximum financial assistance offered from the existing Rs 25 lakh to Rs 50 lakh to entrepreneurs for setting up new manufacturing units and from the existing Rs 10 lakh to Rs 20 lakh for new service units.
RAMP launch: The launch of the Rs 6,062.45-crore World Bank-assisted central government’s Raising and Accelerating MSME Performance (RAMP) scheme for Covid-hit MSMEs for five years by PM Narendra Modi in June was another major development after it was announced back in 2020. In a statement in June 2021, the World Bank had said that RAMP targets improvement in the performance of 5.55 lakh MSMEs. The MSME Ministry had also set up a committee for the scheme headed by the ministry’s Secretary BB Swain.
Udyog Aadhaar license expiry: The Udyog Aadhaar Memorandum (UAM) registrations ceased to be a valid license for MSMEs on June 30, 2022. The UAM was replaced by Udyam registration on July 1, 2020, for MSMEs looking to avail of various schemes by the MSME ministry. The government had originally announced UAM validity till March 31, 2021, and extended it till December 31, 2021, before giving it the final extension till June this year.
Services procurement from MSEs: In order to expand the scope of public procurement for micro and small enterprises, the MSME ministry in October added multiple services and also increased the number of goods to the existing list of 358 items reserved for purchase from MSEs exclusively. The revised draft list of 469 items also invited suggestions from various stakeholders. The additional 111 items included 16 services such as architectural and engineering consultancy, operation of canteens, housekeeping services, etc., while the goods category added agricultural tools, bags, sanitary ware, paints, paper, and other items.
Non-tax benefits extension: In October, the MSME ministry announced allowing the Udyam-registered MSMEs to continue avail non-tax benefits for three years, instead of earlier one year, in case of upward graduation in their category and consequent reclassification, for instance growing from a micro enterprise to a small enterprise or a small enterprise to a medium business. Non-tax benefits include benefits of various schemes of the government, including public procurement policy, delayed payments, etc.
GSTN inclusion in AA network: The RBI’s decision in November to include the Goods and Services Tax Network (GSTN) as the latest Financial Information Provider (FIP) under the Account Aggregator (AA) framework was hailed by MSMEs as a major push to further ease access to bank credit by MSMEs. The consent-based information of MSMEs collected by AAs from FIPs included MSMEs’ bank or NBFC deposits, SIPs, government securities, equity shares, bonds, mutual funds, insurance policies, exchange-traded funds (ETFs), debentures, etc., and shared with Financial Information Users (FIUs) for use cases such as credit disbursement.
CGTMSE revamp – Probably among the biggest announcements concerning micro and small units came in late November and early December when the government overhauled its credit guarantee scheme under CGTMSE. The changes made included, first, extending the scheme to women and SC-ST entrepreneurs, MSEs certified with the Zero Defect and Zero Effect (ZED) scheme, and MSEs based in aspirational districts in the country; second, adding microfinance institutions to the list of member lending institutions in lending to new enterprises with credit guarantee cover; third, reducing the annual guarantee fee (AGF) for lenders by 10 per cent in order to encourage them to enhance credit flow to MSEs; and fourth, bringing retail and wholesale trade by MSEs at par with other segments or activities eligible for credit guarantee cover under the scheme.
GST Act amendment: In order to encourage unregistered e-commerce sellers under GST Act, the GST Council in December approved the amendments in the GST Act and GST Rules. The guideline, which will come into effect on October 1, 2023, allowed sellers supplying goods with a turnover of up to Rs 40 lakh and services with a turnover of up to Rs 20 lakh to make intra-state supply without GST registration. The waiver also applied to e-commerce sellers with turnover up to Rs 1.5 crore registered under the GST composition scheme.
