The committee, calling the current legislation “complex and scattered,” has proposed a revamped framework
Mumbai: A Reserve Bank of India constituted expert committee on micro, small and medium enterprises (MSMEs) has proposed a simplified framework of laws under an MSME
code and the complete overhaul of existing provisions.
The committee, calling the current legislation “complex and scattered,” has proposed a revamped framework which would be based on “policy and transparency system”, according to the panel report made public by RBI on Tuesday.
“…In the changed circumstances, it is imperative that the thrust of this important legislation (MSME Act 2006) should be focused more on market facilitation and promoting ease of doing business for MSMEs,” it said in the report.
“Accordingly, the legislation may be reimagined as a comprehensive and holistic MSME code having a provision for sunset on plethora of complex laws scattered all over the legislative framework. Under this new law, the territorial jurisdiction based and arbitrary inspection system may be substituted with a policy based and transparent inspection system.”
The committee highlighted that since the drafting of the MSME Act in 2006, the economy has gone through drastic changes presenting new challenges to the MSME sector which the current legislation is not designed to handle.
“For instance, the services sector has gained greater importance within GDP. MSMEs in services have increased in number and range of activities, formalisation of MSMEs has increased, value chains have become longer, payment systems have become electronic, alternative data is being used for lending decisions and so on,” according to the report. Furthermore, developments such as NCLT which came much after the original MSMED Act was passed in 2006 should be accommodated in the new law, as per the committee.
via MSME: Simpler set of laws soon for MSME sector – The Economic Times