What It Means When a Company’s eFiling Status Is “Active” But Inoperative
July 26, 2022
Table of contents
- Compliance Challenges Faced by Small and Medium Enterprises in India
- Multiple and Frequent Filing Requirements
- Limited Awareness of Changing Regulations
- Cost of Professional Services
- GST Complexity
- Lack of Digital Infrastructure
- Difficulty Accessing Credit Due to Poor Compliance
- Customs and Foreign Trade Documentation
- Solutions and Recommendations
- Final Thoughts
Compliance Challenges Faced by Small and Medium Enterprises in India
Small and Medium Enterprises (SMEs) are the backbone of the Indian economy, contributing significantly to employment, innovation, and exports. However, despite their crucial role, SMEs often struggle with one major area—regulatory compliance.
Companies like CONSOCIATE IMPEX PRIVATE LIMITED, registered as a Private Limited entity, must navigate a web of laws, deadlines, and formalities to stay compliant. For smaller firms with limited resources, this can be overwhelming.
In this article, we explore the most common compliance challenges faced by SMEs in India and how they can overcome them.
Multiple and Frequent Filing Requirements
SMEs must comply with several regulatory requirements throughout the year, such as:
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Annual ROC filings (e.g., MGT-7 and AOC-4)
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GST returns (monthly, quarterly, and annually)
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TDS returns
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Income tax filings
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Periodic audits and board meetings
Missing any of these filings can result in hefty penalties and legal complications. Unfortunately, many small companies lack dedicated compliance teams to handle this consistently.
Limited Awareness of Changing Regulations
Laws in India change frequently—be it in taxation, labor codes, export-import procedures, or environmental standards. SMEs often operate with outdated knowledge or incorrect assumptions, leading to unintentional violations.
For example, failing to update directors’ KYC or not conducting a mandatory Annual General Meeting (AGM) can lead to notices and compliance lapses, even if the company isn’t actively trading.
Cost of Professional Services
Chartered Accountants, Company Secretaries, and legal advisors are essential for smooth compliance—but hiring them can be expensive for a startup or small company. As a result, many SMEs try to handle filings in-house, increasing the risk of errors or non-compliance.
GST Complexity
The Goods and Services Tax (GST) is particularly challenging:
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Multiple return types (GSTR-1, GSTR-3B, etc.)
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State-wise registration for businesses operating across India
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Constant changes in rates and input credit rules
Late fees, interest, and blocked ITC (Input Tax Credit) are common headaches for SMEs not fully equipped to manage GST compliance.
Lack of Digital Infrastructure
While the government has digitalized many processes, SMEs often lag behind in adopting tools or software needed for efficient compliance. Manual processes and paperwork lead to delays, errors, and loss of critical data.
Difficulty Accessing Credit Due to Poor Compliance
Banks and investors evaluate a company’s compliance history before offering loans or funding. SMEs with gaps in ROC filings, financial statements, or tax returns may be denied credit or receive higher interest rates due to perceived risk.
Customs and Foreign Trade Documentation
For companies like CONSOCIATE IMPEX PRIVATE LIMITED that are involved in international trade, maintaining proper documentation for Import Export Code (IEC), shipping bills, and customs clearance is critical. Missing or incorrect documents can result in shipment delays and penalties.
Solutions and Recommendations
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Hire a Compliance Consultant: Even on a part-time basis, a consultant can help avoid costly mistakes.
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Use Accounting and Compliance Software: Tools like Tally, Zoho, or ClearTax can automate filings and reduce human error.
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Regular Training and Updates: Stay informed through government portals (like MCA, GSTN) and trade associations.
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Outsource Non-Core Functions: Many compliance tasks can be outsourced affordably to experienced professionals or agencies.
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Plan Ahead: Maintain a compliance calendar to track important dates and deadlines.
Final Thoughts
Compliance doesn’t need to be a burden. With the right tools and a proactive approach, even small enterprises can maintain full compliance and build a trustworthy reputation in the marketplace.
Gordon Marten
CEO @ MARTENS Ltd.
At CONSOCIATE IMPEX PRIVATE LIMITED, we understand the importance of staying legally sound while focusing on growth. Whether you're just starting or already trading globally, make compliance a cornerstone of your business strategy.
