The government had revised the MSME definition last year as part of the steps taken to help businesses recover from the Covid impact. (Photo source: IE)
Ease of Doing Business for MSMEs: Small companies won’t have to prepare cash flow statements and shall provide details of only the aggregate amount of remuneration drawn by directors in their annual return instead of what directors and key managerial personnel drew from April 1. The benefits are a “direct consequence of the revised definition,” the Corporate Affairs Ministry said on Wednesday. Commerce Minister Nirmala Sitharaman in her budget speech on Monday had proposed to revise the definition of small companies under the Companies Act, 2013 by increasing the threshold for paid-up capital from Rs 50 lakh to Rs 2 crore and for turnover from Rs 2 crore to Rs 20 crore. The revision will come into force in the coming financial year.
Among other benefits for small companies included mandatory rotation of auditor will not be required, the auditor won’t have to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report, businesses will have to hold only two board meetings annually, company secretary (CS) will be allowed to sign the annual return of the company and in the absence of a CS, a single director will be able to sign the same. The revision of the definition will also lead to lesser penalties and filing fees for small companies, the ministry said in a statement.
“Raising the threshold for the qualification of small companies will enable more companies to take benefit of lesser compliance such as fewer number of mandatory board meetings, rotation of statutory auditors, exemption from the preparation of cash flow statements, etc. thereby facilitating ease of doing business in India,” Anish Shah, Associate Partner – Transaction Tax, BDO India had told Financial Express Online.
Importantly, the government had revised the MSME definition last year as part of the steps taken to help businesses recover from the Covid impact. For micro-enterprises, the limit for investment and turnover was increased to Rs 1 crore and Rs 5 crore respectively while for small enterprises, the investment and turnover limit was increased from Rs 1 crore and Rs 5 crore respectively to Rs 10 crore and Rs 50 crore. Similarly, for medium enterprises, the limit for investment was increased to Rs 50 crore and for turnover, the limit was increased to Rs 250 crore.