Announcing the Union Budget for 2017, Finance Minister Arun Jaitley said MSMEs having revenues less than Rs 50 crore have been given a cut in corporate tax rate to 25 %, from 30% earlier. Also, for the businesses that have turnover up to Rs 2 crore, under section 44AD of the Income Tax Act, income would be presumed to be 6% of the total turnover of the assessee, instead of 8% only if gross receipts are received through digital means.
This is expected to lead to less cash and transparency as well as help in broad basing the tax base. According to Loantap CEO, Satyam Kumar, presumptive tax reduction from 8% to 6% for firms up to Rs. 2 crore turnover will bring even more transparency in MSME sector.
“These are welcome moves for MSME sector as they do not only get relief from burden of taxation, but also such initiative will encourage SME players to adopt digital means of doing business,” said Power2SME, Founder and CEO, R Narayan.
Kumar says large corporates by sheer amount of investment commitment have been garnering various subsidies and rebates, including preferential land allotment. “So instead of addressing corporate tax in general, government has specifically addressed MSME by lowering corporate tax to 25%. A steep 5% reduction is a big boost to SME segment and a direct incentive,” says Kumar.
Narayan added that continuing to keep the spirit of manufacturing alive; FM announced the increase in allocations towards schemes like Modified Special Incentive Package Scheme (M-SIPS) and Electronic Development Fund (EDF) to Rs 745 crore in 2017-18. “Aimed at making India a global manufacturing hub, these initiatives will encourage the existing electronic players and also make the space lucrative for new players,” said Narayan.
For Samtel Avionics, MD and CEO, Puneet Kaura the Government stance for conserving the interest of MSMEs is commendable. The new and reduced tax regime will help SMEs to boost their capability to invest in R & D and develop further technical competencies, which will go a long way in increasing their competitiveness on a global scale. This will also further help in creation of jobs across sectors as MSMEs are the largest employers in the country.
Been a good year
IndiaMART.com, Founder and CEO, Dinesh Agarwal has a long experience of dealing with SMEs and he says it is a good year for the sector, which is India’s backbone, given the direct and indirect reforms announced in the Budget.
Widening the ambit, Agarwal says the five special tourism zones announced in the Budget will enhance MSME development and schemes for employment in textile, transport, agriculture, and leather will bolster the sectors. Along with that ease of doing business for SMEs will thrive, with push for infra in digital economy, Aadhaar-enabled payment systems, m-wallets and digital payments.
“To increase digital payments acceptance cash purchase and payments for revenue and capital expenditure limited to Rs 10000 for businesses, is a very good move. Even for individual or personal consumption a limit of Rs 3 lakh has been imposed on cash. Both measures will help generate more transparency and thus, more revenue in times to come. I would call this move to be even better than demonetization,” says Agarwal.
While MSMEs will benefit with the initiatives announced in Budget 2017-18, Narayan, however, says expectations of the sector were high that the government will announce measures that could have addressed long existing challenge of the players with regards to delayed payments.
“As per a recent study, some of the biggest enterprises in India collectively owe Rs. 10,000 crore to MSME against the supplies made by small units and if paid dully, this will hugely impact business operations of small units,” said Narayan.
Source: The Economic Times