New Government Reforms for Startups and MSMEs: Implications for Finance and Compliance

third-largest ecosystem for startup companies on the planet.

Although this is quite promising for micro, small, and medium enterprises (MSMEs), a number of challenges await those who wish to fulfil a budding business venture. We are not only referring to the sheer amount of competition, but also to governmental regulations that have been moderately confusing in the past.

Thankfully, recent reforms will help to shed additional light on the matter. Let's take a look at how more transparent legislation is set to benefit startup organisations.

Broadening the Footprint of Indian Businesses

One of the most profound changes that is slated to impact current Indian business models is associated with the trading community. It is now possible for publicly registered firms to become listed on foreign securities exchanges. Why is this a crucial step forward?

One observation is associated with sheer visibility. Companies that enjoy a presence on a reputable shares trading platform will experience a greater amount of exposure, further boosting their brand reputation. Let us also remember that this is an excellent way to attract outside investors, providing an additional means to access liquid capital.

Clearer Registration Processes

Many Indian MSMEs found the initial registration process daunting at best. Determining the types of forms required, adhering to cutoff deadlines, and appreciating numerous tax implications were a handful of areas that were hardly straightforward. The Indian government has made it a point to simplify this process.

A new centralised online application form known as the SPICe+ streamlines the ways in which startup ventures can adhere to compliance requirements. Owners are provided with a means to provide important information, such as:

• The name of the business
• Their permanent account number (PAN)
• The tax deduction account number
• The Employee's Provident Fund Organisation (EPFO) registration
• The director identification number
• Tax identification

The main takeaway point here is that stakeholders will no longer be forced to deal with disparate resources when supplying pertinent information. Not only does this dramatically simplify regulatory concerns, but it decreases the chances that mistakes will be made.

Reduced Capital Obligations

While incorporating an Indian business can represent a time-consuming task, another concern that many owners would have faced in the past involved specific fees that needed to be paid in advance. The government understands that firms operating with a limited amount of capital may not be able to accommodate such demands. Furthermore, some businesses were forced to avoid incorporation entirely; resulting in less-than-transparent operational practices.

Another amendment that has come to pass is associated with the fee structure. Companies valued at less than Rs. 15 lakh will no longer be obligated to pay any type of incorporation fee. Note that this also applies to organizations of up to 20 members that do not hold any type of share capital. Simply stated, expediting the incorporation process should open up the doors for countless new enterprises throughout India.

The Central Processing Scheme

This next change is particularly relevant for filing income taxes. The government has now fully automated an online portal known as the Central Processing Centre (CPC). The intention here is to provide business owners with a user-friendly means to submit various electronic forms (including tax documentation).

This is also in compliance with the stipulations previously set forth within the Companies Act 2013. Although it is still possible to seek the help of a third-party accountant, the Central Processing Centre represents a hands-on means to keep track of tax obligations, and to obtain any additional documentation that may be necessary.

Help When it is Needed the Most

Anyone who is mildly familiar with investing is likely to be aware of advanced trading platforms such as MetaTrader 5. What has made the MT5 download so popular? Notwithstanding the ability to access the latest technical indicators, this is a very user-friendly system. Help is always available, and novices can quickly learn the basics. Thankfully, the Indian government seems to have taken a similar approach with the help of two online resources:

• The Startup India Portal
• The National Single Window System (NSWS)

For instance, the self-certification process now offers a highly intuitive edge. It is also possible to access various handbooks and tutorials; a critical advantage for startup owners who may still be uncertain about the finer points of registering, and incorporating their organization. Note that a number of regional startup workshops for those who want to obtain additional hands-on guidance are available.

A Focus on Future Growth

What can we deduce from the observations outlined above? It is clear to see that India has begun to pay a considerable amount of attention to its startup business community. The government fully appreciates that this ecosystem could become a powerhouse in the near future; providing a means for the nation to enjoy an even greater presence upon the global economic stage. Let's also remember that compliance changes are likely to make India become a highly attractive region for foreign enterprises that wish to relocate their ongoing operations.

It will be interesting to see how these regulatory changes impact the current MSME community, and if owners will take full advantage of the possibilities.