Micro, Small, and Medium Enterprises(MSMEs) are one of the significant contributors to India's Economy. They provide maximum employment next to agriculture and account for 96% of companies filing tax returns. However, despite that, the segment has been facing multiple challenges like the high cost of credit, compliances related to GST, tough competition from big entities, insufficiency of funds, etc.
As per the Economic Survey tabled before The Union Budget 2018, it was found that The MSME sector faces a major problem in terms of getting adequate credit for the expansion of business activities. The data on credit disbursed by banks showed that out of total outstanding credit of Rs. 26041 billion as in November 2017, 82.6% of the amount was lent to large enterprises. The MSME received only 17.4% of the total credit outstanding.'
However, with the 2019 Union Budget to be tabled soon, there are high chances that the scenario for the segment might improve soon. Let's have a look at the expectation of the MSMEs from the Union Budget 2019:
1. Reduction in the tax rate
To promote the startup initiative and MSME growth, tax incentives like exemptions on income from funding activities for the first few years may be provided to the investor community. This would help channelize private investment, generate employment, and revive the economic growth rate.
2. Easy availability of loans
As per the latest data on credit disbursement, the MSME received only 17.4% of the total credit outstanding.' However, after facing massive corporate loan defaults, banks have started looking at MSMEs as their potential customers. RBI's decision to permit a one-time restructuring of MSME loans that have defaulted, but are not non-performing as on 1st January, has received a positive response from the small business owners. The segment is expecting the Finance Minister to launch policies in the Union Budget 2019, which would help them in easy and timely availability of funds.
3. Export Development Funds
The Federation of India Exporters Association (FIEO) has demanded the Export Development Fund with a corpus of 0.5% of export value for Micro, Small and Medium Enterprises (MSMEs). The body said, 'For MSME exporters, marketing and showcasing of their products require substantial expenditure. The current support extended through the various scheme is grossly inadequate. We require an export development fund with a corpus of 0.5% of the export value so that MSMEs aggressively participates in international exhibitions and trade shows.' FIEO demanded tax deduction on R&D investments, cut in corporate tax, reducing customs duty on capital goods which are not produced in the country, and higher budgetary allocations for the Department of Commerce.
4. Tax holiday
The MSMEs sector will be highly benefited if the government announces a tax holiday for the segment like the startups in the Union Budget 2019. MSMEs are hopeful of getting more lenient tax breaks in the upcoming budget. However, if the government announces a tax break for the MSMEs sector, it will be confined to a certain limit.
5. Reduction in GST
The implementation of GST had an adverse effect on the segment. The government, in its Union Budget 2019, could consider reducing the GST rates to a great extent. The procedural compliances of GST still seem to be a significant hurdle in the growth of MSMEs.
6. Simplifying Regulatory Framework
To help MSMEs grow, the government should ease the process of doing business. Exit route should also be simplified. Lately, MOCA is seen to be over-regulating, making small and medium enterprises shun equity markets. There is a need for extending regulatory reprieve for MSMEs to enter the stock market.
BUSY has always endeavored to simplify the compliance hassle, especially for MSME and continues to do so with its software designed especially for the MSME needs.
When asked about their thoughts on the expectations of MSME the Co-founder and Director of BUSY, Mr. Rajesh Gupta stated,
'Although after the implementation of GST and the Digital Revolution, MSMEs have become more organized and have gained better visibility globally, GST Reporting has always been a considerable challenge for them. So from this Budget, I am expecting to see a more simplified and relaxed GST Taxation and Reporting Structure for MSMEs.'
The Union Budget 2019-20 is tabled for the 5th of July, and we hope to see some encouraging reforms for the MSME sector that helps to boost the growth of these industries. These were some of the expectations that we have commonly received from the MSMEs throughout, if you have anything specific, please share it with us in the comment section below.
BUSY, Business Accounting Software is a complete Business Management Software for SMBs which covers all aspects of a business entity including Accounting, Inventory, Invoicing, GST, TDS/TCS, Payroll and a lot more.
Tags :Union Budget