Technology for MSMEs: Simplified Proforma for Incorporating a Company Electronically Plus (SPICe+) web form inaugurated by the Ministry of External Affairs on Monday may increase the compliance burden for startups and micro-enterprises instead of reducing it, according to experts. While the new form offering 10 different services (in its Part B) is likely to help business save time and cost in incorporating a business but the mandatory registration for Employees’ Provident Fund Organisation (EPFO) and Employees’ State Insurance Corporation (ESIC) may be a roadblock for businesses with less than 20 or 10 employees. Currently, the EPF scheme is applicable for businesses with 20 or more employees while ESI scheme is for businesses with 10 or more headcount.
“This is a problem because lots of startups and micro-enterprises work with less than 10 people during the early years of their journey. This will add to their compliance work. Once they are registered with EPFO and ESIC, the two organisations will start sending businesses notices that their returns are not coming. This will lead to unnecessary disputes and harassment. Social security should be kept away from this,” Animesh Saxena, President, FISME told Financial Express Online.
According to the MSME Ministry’s FY19 annual report, out of 6,33,88,000 crore MSMEs in India, 99.46 per cent — 6,30,52,000 crore are micro-businesses while out of 11.09 crore employment in the sector, 10.76 crore belonged to micro-enterprises. “These businesses may not require ESIC and EPFO having less than 10 employees. This (mandatory registration with EPFO and ESIC) is not done and will increase the compliance burden. Everything that the government does, it ends up doing for the large businesses,” Rajiv Chawla, Chairman of MSME association — IamSMEofIndia told Financial Express Online.
Instead of making it mandatory, the government could have kept the registration for EPF and ESI schemes optional for businesses which run with less than 10 employees. Categories such as textiles where a small unit operates with a limited number of looms, or a micro business manufacturing components on CNC machines for large businesses in sectors such as auto etc. or a startup offering online consultancy or design services with less than 10 team members will have to now register for the two schemes.
“The business should have been given the option to register now or later. The inspection of these organisations takes place in a two-three years gap. Non-compliance will lead to penalty and interest on startups and micro-businesses,” said Saxena. Apart from the two mandatory registrations, the new SPICe+ form, which replaced the existing electronic SPICe form, will provide for incorporation, DIN allotment, issue of PAN, TAN, Profession Tax registration (for Maharashtra based new registrations), mandatory opening of company’s bank account, and allotment of GSTIN.