Archive · 13 Nov 2025
MSMEs Seek Eased Compliance, NPA Window Extension in Pre-Budget Talks
Small businesses in India met with the Finance Minister to suggest ways to make it easier for them to operate.
They asked for more time, 180 days instead of 90, to pay back loans before they are considered 'bad loans' (NPAs).
This is because they often wait a long time to get paid by their customers.
They also want to change old rules about turning their companies into a different type of business (LLP), asking for much higher limits than the current ones.
For growing companies, they asked to remove a special tax on profits shared with owners (dividend tax) for many businesses.
They also mentioned that the current tax system (GST) is causing problems for them with how taxes are set up for different goods.
MSMEs requested the Non-Performing Asset (NPA) recognition period be extended from 90 to 180 days.
They asked to increase the limit for tax-free conversion of private companies to LLPs from Rs 60 lakh/Rs 5 crore to Rs 50 crore for turnover and assets.
MSMEs proposed removing dividend tax for firms with turnover up to Rs 1,000 crore to encourage entrepreneurship.
Problems with the inverted duty structure under GST 2.0 were highlighted by MSME players.
A one-time amnesty for tax-free conversions was also proposed by the MSME representatives.
- Who
- MSME representatives, Union Finance Minister Nirmala Sitharaman, and finance ministry officials
- What
- A pre-Budget meeting where MSMEs proposed changes to NPA rules, conversion limits, dividend tax, and addressed GST issues.
- When
- Wednesday (prior to the Union Budget 2026-27), with specific mention of the NPA rule proposed for extended periods.
- Where
- New Delhi (implied by finance ministry meeting location)
- Why
- To provide inputs for the upcoming Union Budget 2026-27 and seek relief for the MSME sector.
MSME Sector Concerns & Proposals
Government Considerations & Current Regulations
NPA Recognition Period
MSME Sector Concerns & Proposals
MSME players are asking for the Non-Performing Asset (NPA) recognition period to be extended from 90 days to 180 days due to long payment cycles and supply-chain disruptions.
Government Considerations & Current Regulations
Currently, loans are classified as NPAs after 90 days, a standard rule the government is being asked to revise.
Private Company to LLP Conversion Limit
MSME Sector Concerns & Proposals
MSMEs want the limit for tax-free conversion of private companies into LLPs to be raised from Rs 60 lakh turnover or Rs 5 crore in assets (set in 2009) to Rs 50 crore for both turnover and assets.
Government Considerations & Current Regulations
The current limit for tax-free conversion of private companies to LLPs is Rs 60 lakh turnover or Rs 5 crore in assets.
Dividend Tax Burden
MSME Sector Concerns & Proposals
Small and growing companies propose the removal of dividend tax for firms with turnover up to Rs 1,000 crore, arguing that the combined corporate income tax and dividend tax discourages entrepreneurship.
Government Considerations & Current Regulations
Dividend tax is currently applicable, and its combined effect with corporate income tax is seen as a deterrent by entrepreneurs.
GST Inverted Duty Structure
MSME Sector Concerns & Proposals
MSMEs have highlighted issues caused by the inverted duty structure under the GST system following the merger of slabs under GST 2.0.
Government Considerations & Current Regulations
The GST system, including GST 2.0, has specific structures that are reportedly causing problems for MSMEs due to duty inversions.
- Event
- Pre-Budget meeting for Union Budget 2026-27
- Attendees
- Finance Minister Nirmala Sitharaman, finance ministry officials, MSME representatives
- NPA Rule Change Proposed
- Extend recognition period from 90 days to 180 days
- Private to LLP Conversion Limit Proposed
- Increase from Rs 60 lakh turnover/Rs 5 crore assets to Rs 50 crore turnover/Rs 50 crore assets
- Dividend Tax Proposal
- Removal for firms with turnover up to Rs 1,000 crore
- GST Issue Raised
- Problems caused by inverted duty structure under GST 2.0
Sources
FM Meets Stakeholders Of MSME Sector For Pre-Budget Consultations
Budget 2026: Nirmala Sitharaman holds pre-budget meeting with MSME sector - Check what’s on the agenda - Economy News
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Government approves Export Promotion Mission with outlay of Rs 25,060 crore for six years
Cabinet approves Rs 25,060 crore Export Promotion Mission to boost India’s global trade competitiveness
Union Cabinet Approves ₹25,060-Crore Export Promotion Mission To Boost India’s Global Trade
Union Cabinet greenlights Rs 25,060 crore Export Promotion Mission to bolster Indian exporters
Assocham calls for urgent easing of compliance burden for MSMEs to unlock growth
MSME sector seeks easier finance, tech support, more market access in pre-budget meeting with finance minister
MSMEs seek loan moratorium for units affected by US tariffs, faster payments from buyers at pre-Budget meet
FM Sitharaman Chairs Pre-Budget Talks With MSME Sector
