‘Crippling regulatory delays, high compliance costs hurting MSMEs’
New Delhi: Critical barriers, including crippling regulatory delays, high compliance costs and a lack of effective single window systems, are holding back MSMEs from realising their potential, industry lobby Assocham said on Thursday.
Citing its report titled “Ease of Doing Business in the Indian States,” the industry lobby called for accelerated, state-driven reforms to empower micro, small, and medium enterprises (MSMEs).
The report outlines the major regulatory and infrastructural bottlenecks that continue to hinder business operations across key Indian states. These include cumbersome and overlapping approval processes; GST-related hurdles, including complex registration procedures, refund delays, and frequent ITC disputes; logistics and infrastructure bottlenecks - including e-way bill inefficiencies, , and unreliable electricity supply in states such as West Bengal and Odisha, which cause delays and production losses.
Moreover, company law and BIS rules burden MSMEs with complex compliance, exit, and certification delays, while unclear FSSAI norms (especially for biotech products) add further regulatory uncertainty, according to the report.
It emphasizes that digitized and time-bound single window systems can be a game-changer in improving the investment climate across states.
It calls for their urgent implementation in states like West Bengal, Odisha, and Andhra Pradesh, where the current systems are fragmented and often function as “multiple windows” replacing them with streamlined processes that have fixed approval timelines and clear accountability.
Beyond state-level systems, the report proposes a major overhaul of the national compliance architecture for small businesses. A key recommendation is the introduction of a single, consolidated annual MSME compliance form that combines multiple filings, such as AOC-4, MGT-7A, DIR-3 KYC, MSME Form-I, and DPT-3. It also suggests moving registered MSMEs under the Companies Act to biennial or triennial filing cycles to ease the administrative burden significantly.
The report advocates for a graded penalty structure and exemptions from mandatory audits for smaller enterprises.
It identifies legal and regulatory challenges that cut across the national business ecosystem.
The report highlights a range of regulatory and infrastructural issues encountered in Odisha, West Bengal, Maharashtra, Haryana, Andhra Pradesh, Telangana, Kerala, Tamil Nadu, Punjab, Himachal Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttarakhand, Gujarat & Dadra and Nagar Haveli, Goa, J&K, and Madhya Pradesh.
It highlights sector-specific issues in land, building & construction, labour, environment, trade, taxation, and utilities, among others.
The report calls for aligning central and state-level reforms to accelerate economic growth and incorporates actionable recommendations from industry stakeholders. It recommends streamlined approvals, GST reforms, time-bound land-use conversion, flexible labour laws, and rationalisation of company-related regulations.
The report calls for infrastructure improvements and standardisation of processes, a simplified e-way bill regime, dedicated logistics hubs, and upgraded electricity distribution with structured industry feedback.
