SME Times News Bureau | 23 Aug, 2019
In a major relief to micro, small and medium
enterprises (MSMEs), Finance Minister Nirmala Sitharaman on Friday announced a
slew of measures for the sector.
Sitharaman announced that all pending GST refunds
due to MSMEs will be paid within 30 days.
At present, MSMEs, which are considered as the
backbone of the economy and one of the largest employment generators in the
country, have been impacted by a consumption slowdown and liquidity
In addition, Sitharaman also announced that public
sector banks will issue an improved one-time settlement (OTS) policy based on
"check box" approach to benefit MSME borrowers in settling their
On the loan front, announcements were made regarding the facility for MSMEs to
track loan applications online.
Apart from fiscal and reform measures, the government has also decided to soon
shift to a single definition for MSMEs.
Similarly, in a major relief to registered
startups, Sitharaman on Friday announced the withdrawal of the "angel
tax" provision for them and their investors.
Angel tax refers to income tax payable on capital raised by unlisted firms by
issuing shares where the share price is considered in excess of the fair market
value. The excess realisation is treated as income, and hence taxable under
Section 56 (2) (viib) of the Income Tax Act.
The government had earlier exempted companies tagged as startups by Department
of Promotion of Industry and Internal Trade (DPIIT). However, many companies
which were yet to be considered startups were under IT scrutiny.
"To mitigate genuine difficulties of startups and their investors said
that registered startups, it has been decided that section 56 (2) (viib) of the
Income Tax Act shall not be applicable to a startup registered with
DPIIT," the Minister said.
The government has also decided to set up a dedicated sell under Member of
Central Board of Direct Taxes (CBDT) for addressing the problems of startups.
"A startup having any income tax issue can approach the cell for quick
resolution of the same," Sitharaman said.
Industry hailed the government decision, terming it good development.
"Exempting startups from the application of the 'angel tax' is a good
development. Previously the government has provided this exemption only for
investment below a threshold and where only accredited investors were involved.
It appears now that the exemption would be cast wider and will cover all
'registered' startups," said Rohinton Sidhwa, Partner, Deloitte India.