Government to reduce the turnover threshold for TReDS

The Ministry of MSMEs has decided to reduce the turnover limit of businesses to get onboard with the Trade Receivables Exchange Discounting Scheme or TReDS. TReDS is a platform for managing and settling trade invoices of MSMEs. Currently, only businesses having a minimum turnover of Rs. 500 crores can get onboard with TReDS. The Ministry is looking forward to reducing the turnover limit to Rs. 250 crores, so that even MSME can benefit from TReDS. Also, the reduced limit will bring more public and private enterprises on the TReDS platform.

The New MSME Definition

The Indian Government has modified the definition of MSMEs under the Atmanirbhar Package announced in the year 2020 to increase the number of enterprises eligible for being classified as micro, small and medium enterprises. For this purpose, the threshold limits of investment and turnovers of MSMEs have been raised higher and have been extended to both goods-based and service-based businesses. According to the new definition, businesses that can be qualified as MSMEs cannot have a turnover of more than Rs. 250 crores. The new definition has been effective from 1st July, 2022.

New turnover threshold to include MSMEs

One of the most important purposes of reducing the threshold of turnover for TReDS from Rs. 500 crores to Rs. 250 crores is that the newer threshold shall enable MSMEs to get onboard with the TReDS platform and avail the tonnes of benefits it has to offer. Besides including MSMEs, the lowered threshold shall also enable various small businesses, corporates, and public sector enterprises to avail the benefits of TReDS platform. Additionally, it shall also widen the scope of the TReD scheme.

A Parliamentary panel researching the effects of Covid-19 on MSMEs recommended in its report delivered to the Rajya Sabha in December 2021, that the registration should be made compulsory for all CPSEs having a turnover of more than Rs 250 crores rather than Rs 500 crores as it would broaden the scope of TReDS.

In this context, Ishita Ganguly Tripathy, Additional Development Commissioner, Ministry of MSME, said

“We request them to not just onboard TReDS but also actively transact as only then can their issue (delayed payments for MSMEs) be resolved. We request them to not just onboard TReDS but also actively transact as only then can the issue (delayed payments for MSMEs) be resolved.”

On a related note, the Indian Government in August 2021 allowed non-banking financial companies to enroll on TReDS platform for discounting the invoices of MSMEs. The purpose of this decision was to ensure liquidity for MSMEs and corporates on the TReDS platform as well.