Govt’s high-level panel proposes major compliance relief for MSMEs

In what could mark one of the biggest overhauls of India’s small business regulatory framework, a high-level government panel has proposed a series of measures to ease compliance, reduce costs, and unlock credit for micro, small and medium enterprises (MSMEs), sources told CNBC-TV18.

The committee, chaired by Rajiv Gauba, a full-time member of NITI Aayog and former Cabinet Secretary, was constituted after Prime Minister Narendra Modi’s call in his Independence Day address to launch a “next-generation reform” agenda.

According to officials aware of the discussions, the panel has recommended expanding the Credit Guarantee Scheme to include medium enterprises—a move aimed at widening access to collateral-free loans and supporting scale-up investments, particularly in manufacturing.

In a significant shift in regulatory approach, the committee has proposed that first-time compliance lapses by micro and small enterprises be met with warnings instead of monetary penalties. According to sources, the idea is to decriminalise minor procedural lapses and create an enabling environment rather than a punitive one.

The panel has also suggested reducing penalty interest on delayed tax payments to ease working capital pressures faced by smaller businesses.

In another key recommendation, the panel has proposed scrapping the mandatory Corporate Social Responsibility (CSR) requirement for MSMEs, noting that many smaller firms face high compliance costs and limited capacity to undertake CSR projects.

Further, the committee has recommended raising the audit exemption threshold—suggesting that firms with turnover under ₹1 crore a year be exempt from mandatory audits, in line with the broader ease-of-doing-business agenda.

Sources said the proposals are part of a comprehensive review aimed at aligning MSME regulations with India’s broader growth and employment goals. These changes are designed to simplify operations for smaller firms, encourage formalisation, and improve credit flow.

If accepted, the proposals could be included in a larger reform package expected to be taken up by the government in the coming months.