With the upsurge of radical economic policies by the Modi Government in 2016, the Budget 2017 brought a wave of great relief to individuals, home buyers and developers, farmers, and most importantly to micro, small and medium enterprises (MSMEs).
MSMEs have always been a matter of critical consideration for the government as they play an essential role in accelerating the economic activities, by supplying auxiliaries to existing industrial players and at the same time, a reliable source of income to society’s low income strata. To that effect, the government has extended various support incentives to MSMEs, benefits of which can be obtained after MSME registration under MSMED Act. Any of the following can register as MSME:
- Proprietary Concern
- Partnership Firms
- Limited Liability Partnership
- Private Limited Companies
- Public Limited Companies
However, the registration is subject to following Investment Limits:
Hence, registration makes one eligible to simpler regulations, promotional incentives and tax relaxations.
Popular Examples of MSMEs in India are:
A look on what Union Budget 2017 proposes for MSMEs:
CHANGES INTRODUCED BY THE BUDGET:
- Lower tax rate to apply.
In order to give the Micro Small and Medium Enterprises a breather, the FM proposed to reduce the Income Tax for the companies with an annual turnover of up to Rs 50 core to 25% from prior tax rate of 30%.
- Changes in respect of presumptive income.
There has been reduction in rate of presumptive tax rate from 8% to 6% for companies adopting non-cash means for transacting turnover. In addition, there has also been simultaneous increase in ambit of beneficial companies to those having annual turnover upto Rs. 2 crores as compared to previous cap limit of Rs. 1 crores (in case of presumptive income).
- Enlarged Credit.
Besides this favourable action, the lending target for banks was extended to 2.44 trillion in the union budget 2017, which makes getting loans easier. It is to be noted that Dalits, Tribals, Backward classes, Minorities and Women will be given priority for loan sanctions.
- This gives the MSMEs a reduction of 5% from the current applicable rate of 30% and
will benefit 96 percent (6.67 lakhs) of companies in India at the expense of the government forgoing Rs 7,200 core of revenue. The concession will give a platform for MSMEs to become more competitive vis-a-vis larger companies and will also enable firms to migrate to a company’s format.
- The changes with regard to presumptive income will provide great incentive to Small and Medium companies to step towards the trend of Digitisation and have larger market access.
- Easy credit availability will help boost MSMEs development, contribution in overall economic growth and also, provide for greater investment with employment generation.
In all, it has been a kick-start for MSMEs, with conducive economic environment.