Indian Union Budget 2021-22 | Ease of Doing Business for MSMEs: It is unquestionable that in the Union Budget 2021–2022, Finance Minister Nirmala Sitharaman has made a genuine effort to invigorate the slumping economy by thrusting on important areas of growth such as infrastructure, affordable housing, healthcare, agriculture, and MSMEs. The FM announced several measures that would positively impact startups and MSMEs. The first is an increase in capital expenditure for the sector from Rs 15,700 crore as compared to Rs 7,572 crore. It reaffirms the government’s commitment to financial reforms, enhancing ease of performing organization, and rising infrastructure spending. However, it would have been worthwhile to see the government addressing the very important concerns of the MSME sector like poor access to collateral-no cost loans, providing strength to State Finance Corporations, and guaranteeing the provide of raw components at a affordable price.
The other measures which would influence the startups and MSMEs are to minimize the compliance burden on smaller firms as the Finance Minister proposed to decriminalize particular offenses beneath Limited Liability Partnership (LLP) and enhanced turnover limit for smaller corporations beneath the Companies Act 2013. In order to increase tax administration, the Finance Minister has announced a faceless Dispute Resolution Panel, adopting the faceless approach in Income Tax Appellate Tribunal and the rising turnover limit for audit exemption to Rs. 10 crores. Not reopening of situations of more than 3 years, exemption from TDS, Streamlining Double Taxation and advance Tax technique.
However, what is lacking in the spending budget is a particular emphasis on the implementation of the One District One Product scheme and the Emergency Credit Guarantee Scheme for MSMEs. The enhance in the customs duty on particular merchandise from the sectors like Chemical metal, plastic, solar cells, and other people will definitely assistance the ‘Make In India’ initiative, but more requirements to be completed to avoid illegal import practices like beneath-invoicing.
Moreover, to be a aspect of the international provide worth chain, the MSMEs in India have to have to adopt international excellent requirements so that its merchandise and services are acceptable in the international industry. Therefore, the government should really strengthen regional infrastructure for testing and certification of merchandise and services so that MSMEs do not incur extra charges in acquiring their merchandise tested in foreign markets.
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In the spending budget, we had been expecting that the government would announce the setting up of internationally recognized lab and testing facilities for several sectors in India. Also, the government should really conduct a voluntary certification programme for MSMEs, so that they are encouraged to adopt international requirements. E-commerce is emerging as a easy platform for MSMEs to attain buyers in distant geography. However, the introduction of TDS on e-commerce sellers with gross merchandise sales of above Rs 5 lakh can block the liquidity of SME sellers on digital platforms and can prove counterproductive for the sector.
For the startups, to market the setting up of more one-individual corporations (OPC), the finance minister announced the easing of norms by minimizing the residency limit for non-resident Indians from the earlier 182 days to 120 days. Earlier only Indian residents had been eligible to set up one-individual corporations. This move is anticipated to market the setting up of more get started-up corporations in India and create employment possibilities. Also, these get started-ups would also be permitted to convert into a diverse kind of enterprise without having considerably restriction. The government with an objective to incentivize investment in the get started-ups also proposed an extension of eligibility of claiming tax holidays along with capital gains exemption for investing in get started-ups till March 31, 2021.
Earlier, by means of the Startup India Scheme launched by the government aimed at the generation of employment and wealth creation. On 16 January 2021, the Prime Minister announced the launch of the ‘Startup India Seed Fund’ worth Rs 1,000 cr to assistance startups and assistance tips from budding entrepreneurs. This was to guarantee that the startups did not encounter any capital deficiency. Recognizing the part of incubators in boosting startups Atal Incubation Centre under Niti Aayog was established to cover some charges. It was meant for students, researchers, and newly located organizations. The government believes self-reliant India attempts to stand on 5 pillars – economy, infrastructure, tech-driven technique, vibrant demography, and demand and in the spending budget, it is aimed at that, with results or without having it, only the future can inform.
Deepak Sood is the Secretary General of Assocham. Views expressed are the author’s personal.