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Last updated: 07 Feb, 2017  

msme-THMB-2010.jpg Budget 2017: Positive for MSMEs

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Bikky Khosla | 07 Feb, 2017
Arun Jaitley last week presented his fourth Union Budget. Expectations were high and so were the challenges, and it was indeed a tough task for the Finance Minister to play a balancing act between growth stimulus and fiscal consolidation. The Budget places a lot of emphasis on agriculture, rural economy, social sector investments and infrastructure, but it is not at the cost of fiscal prudence. There is no attempt to resort to blatant populism, but needs of the poor and the underprivileged are taken care of. Key reform measures, including revamping of political funding and phasing out of  FIPB, are also proposed. Overall, Jaitley has managed to hit a fine balance to a fair degree.

As far as the MSME sector is concerned, it is a big relief to see the Budget coming up with several sops for the sector. One of the major announcements is reduction of corporate tax from 30 percent to 25 percent for those units whose annual turnover is less than Rs 50 crore. According to available data, out of 6.94 lakh companies filing returns, 6.67 lakh companies fall under this category and it means 96 percent of the companies will get the benefit. This is a welcome decision that will help MSMEs become competitive compared to large companies, which, according to an estimate, pay an effective tax rate of 24 percent due to various subsidies and rebates, including preferential land allotment they enjoy.

Another important benefit doled out to the sector is the cutting down of the presumptive tax from 8 percent to 6 percent for units with turnover up to Rs 2 crore. This step is expected, besides easing the burden of taxation, to add transparency in the sector, encouraging SMEs to adopt digital means of doing business. In addition, start-ups will also benefit as the Budget proposes that they will have to pay taxes for three out of seven years (up from five last year), only if they make profits. In addition, it is encouraging that lending target under MUDRA is proposed to be doubled from the 2015-16 target to Rs 2.44 lakh crore.

Not everything sits well with many, however. Despite welcoming the reduction in corporate tax rate, some SMEs feel that the number of beneficiaries will be limited as many small firms run either as proprietorship or partnership firms. Some others lament the lack of specific support schemes and allocations for the sector to fight the demonetisation shocks. It is also quite rightly pointed out that the Budget has nothing to push employment generation in the sector. Similarly, with no incentives offered to MSMEs to invest in plant and machinery, the Budget hardly encourages capital investments. No attention is paid either for revival of the sick MSME units.

I invite your opinions.
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Vipin gandhi | Thu Feb 9 12:28:36 2017
MSME can not merely survive on Income tax benefit. In make in India all Indian small medium or big corporate including Govt companies should compulsorily buy their 50% requirement from MSME even if their offer is 5% higher than imported goods from China.Major MSME either going sick or not performing well because they can not compete the Chinese dumping policy. MSME can not survive without the marketing support from Govt.

Is reduction of presumptive tax applicable to PVT. ltd companies also
Harish Kumar | Thu Feb 9 01:32:24 2017
We are running a pvt ltd company. Is the cutting down of the presumptive tax from 8 percent to 6 percent for units with turnover up to Rs 2 crore applicable to pvt ltd companies also. 

export travel
Ali Asgar | Wed Feb 8 13:10:13 2017
Though directly not related to above subject, for SMEs who wish to extend their business in ease of visa processing to various countries needs major support from Govt. the current relaxation in visa norms to visit India is quite welcome for the large industries and corporates who welcome visitors regularly, however, for SMEs outside travel is required to attract business. this requires multiple visas. reciprocation of visa processing from the countries given online visa facility is what govt should seek to facilitate travel. further, a two passport facility can be extended by amending certain rules. However, to ensure avoidance of misuse careful scrutiny as well as guarantee mechanism can benefit SMEs to a large extent. European travelers take great deal of benefit out of two passport policy wherein one passport is used for travel and other is for visa processing.

Steps for rootingout the Black money generating transactional behaviour.
K V Raman | Wed Feb 8 11:30:22 2017
On the whole this budget is welcome step towards the Right direction though wantings still prevail. MSME's need support for Plant & machinery buying .Most of MSME's need working capital support too without security but under Mortgage of invoiced values .It is ok for getting under GST if it exceeds Rs20 Lakhs INR turnover -but GST invoice either need to be controlled by a Government Governance or GST invoices are to be attached to one page Form to be genrated online ..otherwise the " CASH generation would recommence and honest willing to pay Tax MSME unit's product would be never be competitive in the market.Black money cannot be wiped out unless the route of black money generation is CLEANSED & Disciplined .If this is not done -once again -the necessity for Demonetization would crop up. India has maximum Rules ..The implementations need to get better ..Tax on medical limits,introduction of benefits for capital investments ,Loans interest waiver for an higher limit..could have gone in a better way .. Kudos FM..after post independence ..this is the first Time the governance has done it different and for better on the whole and let us cheer ..Better late than Never for right and better intended Budget.. My request is how would the government monitor on the Right implementation of the budgetary effects../ GOD BLESS INDIA FOR A BETTER CORRUPTION FREE GOVERNANCE AS OUR HONORABLE PM SAID THAT INDIAN CITIZENS DESERVE BETTER GOVERNANCE..SALUTE TO YOU MR PM..

Budget 2017
Anand Pole | Wed Feb 8 08:46:21 2017
Finance minister has tried to balance effect of Demonetization, As rightly said, 1)Nothing on Employment enhancement 2)Nothing on capital investment 3) Research and Development promotion w/o this incentive Make in India will be discouraged, 4) Tax rates up to 5 lacks should have been 5%, MSME definitely will grow, Most Important is whether implementation will be done by Govt. Officials, How Govt. decide to monitor budgetary effects planned

Salaried class people are not considered in the budget
Rakesh Makhija | Wed Feb 8 08:23:03 2017
Tax on perquisites like medical allowance, loans interest is not considered. Rs.15000/- limit for medical is too short and tax on claiming LTC limit should be increased

Tax rate of 25%
Gopakumar Ponoth, email | Wed Feb 8 08:14:05 2017
I am the managing partner of a hospital together with other 3 partners. Our annual turn over is less than 50 crores. Are we entitled to pay income tax at 25% rate? Currently we are paying 30% together with other add ons. Kindly advice.

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