The MSME sector has high expectations from the Union Budget 2019. The budget is all set to be presented in the Lok Sabha on Friday, the 5th of July, 2019 at 11:00 AM.
MSMEs saw a disappointing turnout in the Interim budget that was presented in March. With the new Union Budget July 2019, there are high hopes to see better incentives and cheaper finance from the Government.
Difference between Interim Budget and Union Budget July 2019?
Since 2019 was an election year in India, the ruling Government announced an interim budget. An interim budget is presented when the current Government when there are general elections taking place in the country. The new Government presents the full union budget, post the elections.
A union budget is a complete annual budget and will include the financial report card from last year. It also includes income and expenses for the next financial year through taxes and welfare measures for regional and national sections.
Have previous Government incentives worked for MSMEs?
MSMEs are facing financial woes with low provisions allocated for the industry in the interim budget this year. Factors that contributed to this are:
- Delay in receiving GST refunds
- Unfavourable forex policies
- Ending trade privileges for Indian MSMEs
Due to this, there is an urgent demand to provide cheaper finance and better reforms in the upcoming Union budget 2019. Previous Government initiated schemes such as the 59-minute loan scheme for MSMEs have met with success, but it was limited. According to Animesh Saxena, President, Federation of Indian Micro Small & Medium Enterprises (FISME), this was due to the lack of easy financial access for many small businesses.
The introduction of GST also saw a roller coaster ride for MSMEs. GST incentives in the past few years allowed some small businesses concessions and benefits. The Government increased the GST registration limit from 20 lakhs to 40 lakhs for small businesses. However, timely access to finance and hefty implications of GST are proving difficult for the MSME sector to cope with.
What do MSMEs want from Budget July 2019?
The MSME sector generated 1.35 – 1.49 crore new jobs over the past four years, despite the sudden introduction of demonetisation and GST. With the foresight of financial battles rising post the interim budget 2019, The FISME proposed re-introducing cheaper finance incentives for MSMEs and introducing better tax reforms. Other expectations from MSMEs included:
- Lowering interest cost to 4-% to allow more businesses to enter the market.
- Reduce tax rates for firms with an annual turnover of up to INR 25 crores.
- Extend concession of 25% rate to all taxpayers – All corporate taxpayers receive a concessional rate of 25% if their turnover is INR 250 Cr or less. The current tax rates discriminate MSMEs and favour corporates. MSMEs want the government to consider offering a concessional tax rate of 25% to all taxpayers.
- Extend incentives on exports: MSMEs contribute to over 40% of the country’s exports. MSME exporters are deprived of key income tax concessions. With the Budget 2019, Government can re-introduce provisions to incentivise exporters who set up new units.
- Reducing Compliance Burden in GST: GST requires heavy compliance from businesses. There is a monthly, quarterly and yearly return for small taxpayers too. With the new budget, MSMEs expect GST Compliance burden to reduce.
For the MSME sector, the primary goal is to find easy access to finance. ” With the Union Budget, it is important to work towards creating a special package for the MSME sector,” said Chandrakant Salunkhe, founder and President, SME Chamber of India.
There are ways for new small businesses to find financial assistance through different loan schemes by the Government. Take a look at some of the business loans the government is giving to small businesses looking for financial aid.
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