The budget proposal to offer tax exemptions for small businesses with turnover of up to Rs 2 crore, twice the previous limit, will encourage them to expand and do business fairly, said experts.

When SMEs expand production, they fall off the tax exemption bracket which is a major deterrent for growth, said Ajay Sahai, Director-General of the Federation of Indian Export Organisations. “The increased exemption limit … will enable them to not only increase production, but also invest in modern technologies so as to become more competitive in the market.“

According to him, Small and Medium Enterprises (SMEs) in India are currently in a tough spot due to increasing imports from countries like China.

Anil Bhardwaj, Secretary-General of FISME, said the decision will benefit a large number of SMEs, especially retailers and shop keepers. “It will encourage people to do business fairly, declare actual business turnover and profit, thereby becoming more bankable,” said Bhardwaj.

While unveiling his budget for fiscal 2016-17, Finance Minister Arun Jaitley said 33 lakh small businesses avail of tax benefits under this scheme at present.

Sahai said the government should aim to revise this provision after three years, depending its performance during the period.

Source: The Economic Times