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SEMINAR /CONFERENCE

Join the Udaipur branch of CIRC of ICAI for a seminar on Micro, Small and Medium Enterprises in India. Learn about the classification, promotion measures, and more. Contact CA P.P. Singh for details.

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SEMINAR /CONFERENCE

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  1. SEMINAR /CONFERENCE Topic : Micro,SmallandMediumEnterprisesinIndia Date – 16th March 2019 Organised by : Udaipurbranch of CIRC of ICAI CA PP SINGH B.SC(H), FCA, CS Author of the Book – DNA of TDS & TCS /DNA of GST with Pleading & Practice , GST certification course From ICAI New Delhi Contact No. +91-9711521060, 9871229590 cappsingh@gmail.com

  2. CA P.P Singh B.Sc (Hons)., FCA, CS GST certification course by ICAI • Post-qualification experience of around 19 years in the field of direct & indirect tax particularly income tax, service tax and VAT as well as sales tax and GST. • Experience of handling the matters of indirect taxes particularly GST, service tax, DVAT, CST, Central Excise and other related matters. • Authored the book The DNA of TDS&TCS (including withholding tax, advance tax and equalisation levy) & DNA of GST with pleading & practice • Background material on GST for empowerment of girl students ICAI, New Delhi • Corporate trainer and guest Faculty with Indian Institute of Management(IIM), NIFMS, Faridabad(Institute of Minister Finance),ICAI New Delhi and ICSI, New Delhi and other trade association.

  3. Micro,SmallandMediumEnterprisesinIndia Anoverview

  4. Index of discussion points • Basic objective • Classification • Measures for promotion, development and enhancement of competitiveness of MSME • Delayed payments to micro and small enterprises • Reporting requirement • Other miscellaneous matters.

  5. THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 • An Act to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto

  6. Whattheyactuallyare? • ThecommonlyusedcriteriaattheinternationalleveltodefineSMEsarethenumberofemployees,totalnetassets,sales/Turnover andinvestment. • TheEuropeanUnionmakesageneraldistinctionbetweenself-employment,micro,smallandmediumsizedbusinessesbasedonthecriteria of no of employee

  7. Classification - no of employee 0 2-9 10-49 50-249 • Self-employed • Microbusiness • Smallbusiness • Medium-sizebusiness

  8. IntheIndia,micro,smallandmediumenterprisesareclassified on the basis of – • investmentinplantandmachinery(formanufacturingenterprise)and • investmentinequipmentsforenterprisesprovidingorrenderingservices.

  9. Criteriafor manufacturing enterprise-[S-7(1)(a)] • Microenterprise-investment in plant and machinerydoesnotexceed₹25lakh. • Smallenterprise-morethan ₹25lakhsbutdoenotexceed ₹5crores. • Mediumenterprise-morethan₹ 5 croresbutnotupto10crores.

  10. Exclusion of certain plant and machinery while calculating above limit.[explanation 1] • in calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.

  11. Incaseofservice enterprise-[s-7(1)(b)] • microenterprise-investment in equipment upto₹10lakh. • smallenterprise-morethan₹10lakhbutnotexceeding₹2crore. • mediumenterprise-morethan₹2croresbutnot exceeding ₹5crores.

  12. THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT (AMENDMENT) BILL, 2018 • To change the classification based on turnover • To empower Central Government to vary, the turnover limits, by notification which shall not exceed thrice the limits specified in section 7(1) for the purpose of development of micro, small and medium enterprises.

  13. STATEMENT OF OBJECTS AND REASONS- for change in basis of classification criteria • Over a period of time, it has been felt necessary to change the criteria for the classification in order to align it with the need of current times and changing business ecosystem. • In the course of consultation with various stakeholders, it has been noted that the criterion of investment in plant and machinery or equipment entails physical verification having associated transaction costs. It also incentivises the tendency in the promoters of the enterprises to keep the investment size small in a particular business entity in order to retain the benefits associated with micro or small enterprises category. • While evaluating various alternatives, it has been considered appropriate that if the annual turnover is taken as a criterion for classification, the information available with goods and services tax network and other sources can be used for determination of the category of the enterprises. • Overall, the turnover based classification will promote the ease of doing business and will put in place a non-discretionary, transparent and objective classification system.

  14. New proposed classification (i) a micro enterprise, where the annual turnover does not exceed ₹ 5 crore (ii) a small enterprise, where the annual turnover is more than ₹ 5 crore but does not exceed ₹ 75 crore ; (iii) a medium enterprise, where the annual turnover is more than ₹ 75 crore but does not exceed ₹250 crore .

  15. Benefits of the proposed new change in Bill • Uniformity of Classification – same basis for manufacturing as well as service • Power of the government to change limits- section 7 will empower government change the turnover limit • Expansion of the MSME Definition- more enterprise will be covered as increased investments will no longer remove them from the MSME category. • Boost to Modernisation- The ease of industries to freely invest, without being removed from the MSME category, will be a boost to modernization of many small enterprises • Ease in Classification- Instead of the previous system of physical verification of transaction costs, in the new classification based on annual turnover of enterprise can be obtained easily and increases the transparency and accountability in the classification process. • Long-term Planning- bill has a built in mechanism for increasing the limits for annual turnover, thereby allowing the government to allow more industries to be included within the scope of the Act, without the need for a long-drawn amendment process.

  16. Shortcomings of the Bill • Enterprise having small investments but high turnover shall be Excluded from SME and their benefits available for Public Procurement Policies may be withdrawn. • Employment-based classification not considered

  17. ImportanceoftheMSMEsector • Thecontributionofmicro,smallandmediumenterprises(MSME)sectortomanufacturingoutput,employmentandexportsofthecountryisquitesignificant. • It provides 80% of jobs in industry with just 20% of investment. • It contributes around 31% to nation’s GDP and • 45% and 34% share of the overall export and manufacturing output, • Therearemorethan8000products,rangingfromtraditionaltohigh-techitems,whicharebeingmanufacturedbytheIndianMSMEs.

  18. PERFORMANCEAND CONTRIBUTIONOFMSMEs. 34% of manufacturing output 31% to nation’s GDP 45%export MSMEs 80%Employment

  19. SpecificpolicymeasuresinitiatedforboostingMSMES- • Reservationofitemsforexclusivemanufacturinginsmallsector. • Preferentialcreditsupportmeasures. • Fiscalconcessions. • Infrastructuraldevelopmentlikedevelopmentofindustrialestates,testinglabs,commonfacilitycentres. • Entrepreneurshipdevelopment

  20. Salientfeatures of MSME Act • Industryreplacedbyenterprisewhichincludeserviceenterprisesalso. • Ambit of sector enlarged medium enterprises. • ConstitutionofMSMEBoard. • Simplificationofregistration procedure. • Progressivecreditsupport. • Penaltyfordelayedpayments. • Provisionforexitpolicy.

  21. Meaning of enterprise[S-2(e)] • “enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (55 of 1951) or engaged in providing or rendering of any service or services;

  22. InstitutionalSupportStructure forMSMEsinIndia AtFederalLevel AtStateLevel MinistryofMSMEs SmallIndustries Development Organisation (SIDO) NationalSmall Industries Corporation(NSIC) Khadi&VillageIndustries Commission(KVIC) CoirBoard Entrepreneurship Development Institutions(EDIs) Directorateof Industries DistrictIndustries Centres StateFinance Corporation StateIndustrial Development Corporation Technical Consultancy Organisations Entrepreneurship Development Institutions MSMEs Others Industry Associations NGOs Banks/Financial Institutions

  23. MAJORSCHEMESFOR MSME’sSUPPORT

  24. Credit facilities[S-10] • The policies and practices in respect of credit to the micro, small and medium enterprises shall be progressive and such as may be specified in the guidelines or instructions issued by the Reserve Bank, from time to time, to ensure timely and smooth flow of credit to such enterprises, minimise the incidence of sickness among and enhance the competitiveness of such enterprises.

  25. CreditSupport PublicsectorbanksadvisedtodoubletheflowofcredittoMSMEswithin5years(20%annualgrowth) Aminimumof40%ofbankcreditearmarkedforprioritysectorlendingwhichincludesloanstoMSEs SpecialisedSMEBankbranchesinindustrialclustersforsmoothflowofcredittoMSMEs OneTimeSettlement(OTS)schemeforsettlingNPAsofMSMEs

  26. TechnologicalSupport • CreditLinkedCapitalSubsidySchemeforTechnologyUpgradation –Schememeanttoimprovequalityofproductsbytechnology upgradation. InvestmentuptoINR10million (US$.250,000)eligibleforsupportwithsubsidyupto15%on investment. –

  27. Contd. • TestingCentresforQualityCertification • ToolRoomsandTrainingCentresforskillupgradation • IncentiveschemeforobtainingISOCertificationbyMSEs

  28. MarketingAssistanceandExportPromotion Supportforparticipationintradefairsandexhibitions–nationalaswellasinternational. Trainingprogrammesonpackagingforexports. PurchasepreferenceinGovernmentprocurement. MarketDevelopmentAssistanceSchemeforpublicity,marketstudiesandadoptionofmodernmarketpractices

  29. Procurement preference policy[S-11] • For facilitating promotion and development of micro and small enterprises, the Central Government or the State Government may, by order notify from time to time, preference policies in respect of procurement of goods and services, produced and provided by micro and small enterprises, by its Ministries or departments, as the case may be, or its aided institutions and public sector enterprises.

  30. Purchase Preference (GFR -Rule 153) • MSME Policy • 358 reserved items • 25% procurement through MSE if they quote within L1+15% and match price of L1 • By providing a notification, Government may • Make mandatory procurement of any goods or services from any category of bidders. • Make preference to bidders for promoting locally manufactured goods.

  31. ORDER dated 9th November, 2018amendments to the Public Procurement Policy for the Micro and Small Enterprises (MSEs) Order, 2012 • "4A. Special provision for Micro and Small Enterprise owned by women. Out of the total annual procurement from Micro and Small Enterprises, 3 % from within the 25 % target shall be earmarked for procurement from Micro and Small Enterprises owned by women.

  32. Bid security/EMD [GFR Rule R-170] • No EMD from Micro and Small Enterprises (MSEs) as defined in MSE Procurement Policy issued by Department of Micro, Small and Medium Enterprises (MSME) or are registered with the Central Purchase Organisation or the concerned Ministry or Department. • Bid Security (also known as Earnest Money) is to be obtained from the bidders The bidders should be asked to furnish bid security along with their bids. Amount of bid security should ordinarily range between 2% to 5% of the estimated value of the goods to be procured.

  33. ClusterDevelopmentProgramme • ClusterformationhasbeenconsideredimportantforMSMEdevelopment.Aclustermaybedefinedasalocalagglomerationofenterprises(mainlySMEs,butoftenalsoncludingsomelargeenterprises),whichareproducingandsellingarangeofrelatedandcomplementaryproductsandservices

  34. InternationalCooperationProgramme • ProvidesexposuretoMSMEstothelatesttechnologies,manufacturingpracticesprevalentintheirfieldsindifferentcountries. • Encouragestheirparticipationininternationalexhibitionsforexports.

  35. International Cooperation (IC) • IC scheme provides financial assistance by way of reimbursement of airfare, space rent, freight charges, advertisement & publicity charges and entry/registration fee on reimbursement basis in case of participation in international exhibitions/trade fairs.

  36. Activity covered under above scheme a) Visit of MSME delegations to other countries in international exhibitions/ trade fairs, conferences/ summits/workshops etc. for exploring new areas of technology infusion/upgradation, joint ventures, improving market of MSMEs products, etc. b) Participation of MSME delegations in international exhibitions, trade fairs and buyer-seller meets in foreign countries. c) Holding international conferences/summits/workshops/seminars relating to MSME sector to be organized in India by the Industry Associations/ Government organizations. d) Holding/organising mega international exhibition or fair and international conferences/seminars/workshops, Joint Committee Meetings/Joint Working Group Meetings/Government to Government bilateral meetings with outer countries in India by Ministry of MSME or organizations under it. e) Sending a delegation of the Ministry of MSME to an International Exhibition/Fairs/Conference in foreign countries.

  37. Where application to be made? Applications for financial assistance can be sent in the prescribed form to the Director (International Cooperation), Ministry of MSME, UdyogBhawan, New Delhi -110011. To whom contact ? Director (IC), M/o MSMEPh: 23063198, Fax: 23061756 Email : gs.perni@nic.in

  38. Other conditions-IC • The applicant organization should be suitably registered under the relevant Act (i.e. companies under the Companies Act, Societies under the Societies Act, etc.) with the primary objective of promotion and development of MSME. • The applicant organisation must be engaged in MSME development such activities for at least in last 3 years and have a good track record. • The applicant organization should have regular audited accounts for the past 3 years. • Eventsmust have significant international importance. • Financial assistance to one organisation would normally be restricted to two events in a financial year. The Screening Committee may, however, recommend relaxation of this condition for reasons to be recorded.

  39. Special Marketing Assistance Scheme (SMAS)-to the SC/ST enterprises • Ministry of Micro, Small & Medium Enterprises, through National Small Industries Corporation (NSIC), a Public Sector Enterprise of the Ministry, has been providing marketing support to the SC/ST enterprises for enhancement of competitiveness and marketability of their products by way of the following type of events: • Organizing Visit to International Exhibitions/Trade Fairs/Seminars Abroad • Participation in International Exhibitions/Trade Fairs Abroad • Organizing Visit to Domestic Exhibitions/Trade Fairs • Participation in Domestic Exhibitions/Trade Fairs • Vendor Development Programmes • Organizing Workshops/Seminars/Awareness Campaigns

  40. main features of Special Marketing Assistance scheme SC/ST Enterprise • SC/ST units must be registered in the MSME Data Bank • Maximum size of the booth/stall in the exhibition/trade fair should be 3mx3m. • Reimbursement under SMAS for maximum of 2 (two) international events and 4 (four) domestic events in a financial year, irrespective of the number of units they own. • Minimum participation of 5 SC/ST Enterprises for visit to International Exhibitions/Trade Fairs/Seminars abroad is essential. There is no minimum number of units prescribed for participation in international exhibitions/trade fairs abroad. • In case of participation of 5 or more SC/ST enterprises in international events abroad, 1 representative from NSIC may accompany. However, in case of participation of more than 10 SC/ST enterprises, one more representative from NSIC/Ministry of MSME may be considered. The duty allowance for such officials shall be as per their entitlement.• The SC/ST units may apply to NSSH through field offices of NSIC under SMAS at least a month in advance for domestic events and two months for international events.• The proposals under SMAS shall be processed at NSSH and placed before the Screening Committee at NSIC for MAS and based upon its recommendation, the approval may be provided by CMD-NSIC. In exceptional cases of deviations, the proposals shall be sent for approval of Administrative Ministry. • All other terms & conditions, and eligibility criteria laid down in the guidelines of International Cooperation scheme of Ministry of MSME, shall be applicable to SMAS.• The Scheme of SMAS shall be monitored and funded by the Ministry of MSME under National SC/ST Hub scheme.

  41. DELAYED PAYMENTS TO MICRO AND SMALL ENTERPRISES –DISINCENTIVE[Chapter-V]

  42. TIME LIMIT FOR PAYMENT TO SME[S-15] • the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, • period agreed upon between the supplier and the buyer in writing shall not exceed 45 days from the day of acceptance or the day of deemed acceptance. • where there is no agreement in this behalf, before the appointed day

  43. Meaning of appointed day[S-2(b) • “appointed day” means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

  44. Meaning of day of acceptance [acceptance[Expl. Below S-2(b)]] (i) “the day of acceptance” means,— (a) the day of the actual delivery of goods or the rendering of services; or (b) where any objection is made in writing by the buyer regarding acceptance of goods or services within 15 days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;

  45. day of deemed acceptance[Expl. Below S-2(b)] • “the day of deemed acceptance” means, where no objection is made in writing by the buyer regarding acceptance of goods or services within 15 days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services

  46. Consequence of failure to make payment within time period-interest [S-16] • Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at 3 times of the bank rate notified by the Reserve Bank

  47. Recovery of amount due[S-17] For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the amount with interest thereon as provided under section 16.

  48. MSME SAMADHAAN- Delayed Payments to Micro and Small Enterprises • State Governments to establish Micro and Small Enterprise Facilitation Council (MSEFC) for settlement of disputes on getting references/filing on Delayed payments. (Section 20 and 21) • MSEFC of the State after examining the case filed by MSE unit will issue directions to the buyer unit for payment of due amount along with interest, • Any Micro or small enterprise having valid Udyog Aadhar(UAM) can apply. • MSME SamadhaanPortal - Ease of filing application under MSEFC, an Initiative from Ministry of MSME, Govt. of India • Every reference made to MSEFC shall be decided within a period of 90 days from the date of making such a reference as per provisions laid in the Act. • If the Appellant (not being the supplier) wants to file an appeal, no application for setting aside any decree or award by the MSEFC shall be entertained by any court unless the appellant (not being supplier) has deposited with it, the 75% of the award amount. (Section 19)

  49. Interest not to be allowed as deduction from income[S-23] • Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961), the amount of interest payable or paid by any buyer, under or in accordance with the provisions of this Act, shall not, for the purposes of computation of income under the Income-tax Act, 1961, be allowed as deduction.

  50. Reporting requirement if audit under any law- Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely:— (i)the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year; (ii) the amount of interest paid by the buyer in terms of section 16, along with the amount of the payment made to the supplier beyond the appointed day during each accounting year; (iii) the amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act; (iv) the amount of interest accrued and remaining unpaid at the end of each accounting year; and (v) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under section 23.

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