The Removal of Paper Traders from MSME Status causing various difficulties: FPTA

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News about the removal of Paper Traders from MSME network and reaction of association over this matter.

“The Removal of Paper Traders from MSME Status causing various difficulties”: FPTA

India is expected to emerge as one of the leading economy in the world over the next decade. The Micro, Small & Medium Enterprises (MSME) segment is expected to play a significant role in the emergence of the Indian economy. “The development of this segment is extremely critical to meet the national imperatives of financial inclusion and generation of significant levels of employment across urban, urban and rural areas across the country. MSME can be the backbone for the existing and future high growth businesses with both domestic and foreign companies investing in the 'Make in India' initiative and make significant impact in the area of indigenisation.” said by Mr. B.R. Rao (in Picture), Vice President of Federation of Paper Traders Association (FPTA) to The Pulp and Paper Times. 

“In June 2017, Govt. of India has given an amendment to the MSME role. All the paper traders have been removed from MSME status under chapter no. 46. All traders those are doing service activities will not be entitled for MSME status. It is creating lots of implication on all type of traders. Traders will not get interest concession on Bank loan up to 0.5 to 0.1 percent.  Also we will be not entitled to get concession on Flight and Rail travel as well the Income Tax benefits that Govt gives to MSME.” Mr. Rao explained the problem.       

In July 2018, The Micro, Small and Medium Enterprises Development (Amendment) Bill introduced in Lok Sabha by Union Minister Giriraj Singh, provides for change in the criterion of classification of MSMEs from the existing 'investment in plant and machinery or equipment' to 'annual turnover' of the enterprise. A small enterprise is proposed to be defined as a unit with turnover of more than Rs 5 crore and up to Rs 75 crore and a medium enterprise with annual turnover of more than Rs 75 crore but not more than Rs 250 crore.

At present Micro units are those who employ plant and machinery of up to rupees 25 lakh, whereas for Small Scale Enterprises this limit is Rs 5 crores and Medium Industries Rs 10 crores.

Criticising the proposed legislation, Swadeshi Jagran Manch (SJM) co-convener Ashwani Mahajan said this change in definition of micro, small and medium enterprises would incentivise small manufacturers to shun their industries and become importers or traders.

“We will be taking up this issue to the Government, using our full strength to make Centre understand the need of paper traders. We will work in this direction with other trade bodies also.” Mr. Rao said.  

In a big push for the Centre's Make In India mission, the Union Ministry of Micro, Small and Medium Enterprises has registered over 48 lakh MSMEs during past three years since September 2015. The Ministry said that through its Udyog Aadhaar portal for registration of MSMEs, it has seen registration of 48,39,549 MSMEs in last three years.

Of these, about 10 per cent or 4,86,080 MSMEs were registered from Gujarat and 97,998 MSMEs were from Jharkhand. Minister of State (Independent Charge) for Micro, Small and Medium Enterprises Giriraj Singh provided the information in Rajya Sabha on July 18, in a reply to question by Parimal Nathwani in the Upper House.

However FICCI has welcomed the Central Government's decision to change the criteria of classification of Micro, Small and Medium Enterprises from "Investment in Plant & Machinery and equipment" to "Annual Turnover". The decision will scrap the long-pending MSME Amendment Bill 2015 in Lok Sabha under which it was proposed to increase the upper ceiling of investment in Plant & Machinery and equipment.

FICCI has been long advocating the need to have annual turnover based definition for MSMEs as it will bring them in alignment with universal definition and hence easier to create business linkages with global counterparts. "Turnover based criteria also helps bring alignment in definition across sectors and will create a level playing field," said Mr. Rashesh Shah, President, FICCI.

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