Easing MSME Compliance with Jan Vishwas Bill 2.0

The Jan Vishwas Bill 2.0, announced in the Union Budget 2025-26 by Finance Minister Nirmala Sitharaman, marks a significant step toward easing the regulatory burden on India’s 6.5 crore Micro, Small, and Medium Enterprises (MSMEs). Aimed at enhancing the ease of doing business, this legislation builds on the success of the Jan Vishwas (Amendment of Provisions) Act, 2023, which decriminalised over 180 legal provisions across 42 central acts. The new bill proposes to decriminalise more than 100 additional provisions, with a particular focus on reducing penalties for MSMEs, which are vital to India’s economy, contributing significantly to GDP and exports.

A key provision under consideration in the Jan Vishwas Bill 2.0 is the amendment of Section 27 of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006. This section currently imposes penalties ranging from ₹1,000 to ₹10,000 for non-disclosure of critical business information to state or central governments. For instance, MSMEs failing to furnish required information face a ₹1,000 fine, while repeat violations can attract penalties up to ₹10,000. Additionally, buyers (often larger businesses) who fail to report unpaid principal amounts and interest in their annual accounts risk a ₹10,000 penalty. These minor infractions, though procedural, can strain the limited resources of MSMEs, many of which operate as sole proprietorships or partnerships without dedicated compliance teams.

The proposed decriminalisation of these penalties aims to alleviate the compliance burden, allowing MSMEs to focus on growth and innovation rather than navigating complex regulatory requirements. By replacing criminal penalties with civil or administrative measures, the bill seeks to foster a business-friendly environment, reducing the fear of legal repercussions for small enterprises.

The Jan Vishwas Bill 2.0 aligns with India’s broader goal of simplifying its regulatory framework to attract investment and boost economic growth. MSMEs, which often lack the capital to maintain robust compliance systems, face challenges due to complex procedures and delays in formal registration. Industry bodies like the India SME Forum, representing 97,000 MSMEs, emphasise that easing these burdens is critical for enhancing competitiveness. The decriminalisation of minor penalties is expected to save valuable capital, enabling small businesses to invest in expansion and innovation.

Moreover, the bill reflects a shift toward trust-based governance, as highlighted by Finance Minister Sitharaman during a post-budget webinar. By reducing legal risks, the government aims to create a predictable and transparent regulatory framework, which could enhance India’s position in global ease-of-doing-business rankings. However, effective implementation remains crucial to ensure that these reforms balance regulatory oversight with business freedom while maintaining protections for stakeholders.

In conclusion, the Jan Vishwas Bill 2.0’s focus on scrapping minor MSME penalties under the MSMED Act is a progressive move to empower small businesses. By reducing compliance costs and legal fears, the bill paves the way for a more vibrant MSME sector, driving economic growth and positioning India as a global business hub.