Over 14,000 LLPs fate in limbo: MCA bars them from manufacturing & allied services

The Ministry of Corporate Affairs (MCA) has put a question mark over 14,646 Limited Liability Partnerships (LLPs) carrying out manufacturing activity through a recent clarification.

The ministry has said that LLPs can't carry out manufacturing and allied services. While it allowed LLPs to carry out trade, profession, services, and occupation under the LLP Act 2008, it has excluded manufacturing and allied services.

The clarification has created confusion among LLPs.

Entrackr reached out to CAs and experts in the domain to decode the government's intention behind the move.

Government, through this, may now look to keep a tab on LLPs as they are the ones who have to meet fewer compliances in comparison to business under the companies act, said Raman Gupta, a senior Chartered Accountant in Deloitte.

However, the absence of a proper notification in this regard makes things more uncertain.

Until the government issues a proper notification to LLPs doing manufacturing and allied services, nothing should be assumed. There needs to be a clarification on exclusion until then it is considered inclusive by businesses, said Gaurav Ahuja, who is a Finance Manager in business and management consultancy firm.

The recent clarification seems more to be a message for new manufacturing businesses seeking registration as LLPs, added Ahuja.

Last week, the Institute of Company Secretaries of India, quoted by Bloomberg report, also presented a similar view on it.

Interestingly, the government in its monthly report put out data on economic sector-wise classification of LLPs till December last year. The MCA’s reports for the first two months of this year did not disclose information on LLPs.