Mr. Jaitley touched on the forward-looking points for small businesses in the budget announcement today. As expected, this budget focuses heavily on improving credit options for MSMEs and promoting the Digital and Start-up India campaigns.
1. Tax Incentive for Micro, small and medium enterprises
In the case of domestic companies, the rate of income-tax shall be 25% of the total income where the total turnover or gross receipts of previous year 2016-2017 does not exceed two hundred and fifty crore rupees and in all other cases the rate of income-tax shall be 30% of the total income. In the case of companies other than domestic companies, the rate of tax will continue to be the same as that specified for assessment year 2018-2019.
Benefit of this reduced rate of 25% also to companies who have reported turnover up to `250 crore in the financial year 2016-17. This will benefit the entire class of micro, small and medium enterprises which accounts for almost 99% of companies filing their tax returns. The estimate of revenue forgone due to this measure is `7,000 crores during the financial year 2018-19.
2. Rs. 3794 crore to MSME Sector for giving credit support, capital and interest subsidy and innovations.
As per finance minister in budget Speech, Massive formalization of the businesses of MSMEs is taking place in the country after demonetization and introduction of GST. This is generating enormous financial information database of MSMEs’ businesses and finances. This big data base will be used for improving financing of MSMEs’ capital requirement, including working capital.
3. Online loan sanctioning and linked them with GSTN
It is also proposed to onboard public sector banks and corporates on Trade Electronic Receivable Discounting System (TReDS) platform and link this with GSTN. Online loan sanctioning facility for MSMEs will be revamped for prompt decision making by the banks. This will enable larger financing of MSMEs and also considerably ease cash flow challenges faced by them in order to reduce tax burden on MSMEs and to create larger number of jobs.
4. Use of Fin tech companies for MSMEs Loans
Use of Fintech in financing space will help growth of MSMEs. A group in the Ministry of Finance is examining the policy and institutional development measures needed for creating right environment for Fintech companies to grow in India.
5. Target of lending 3 lakh crores in FY 2018-19 under MUDRA Yojna
MUDRA Yojana launched in April, 2015 has led to sanction of 4.6 lakh crore in credit from 10.38 crore MUDRA loans. 76% of loan accounts are of women and more than 50% belong to SCs, STs and OBCs. It is proposed to set a target of `3 lakh crore for lending under MUDRA for 2018-19 after having successfully exceeded the targets in all previous years.
Further Non-Bank Finance Companies (NBFCs) stepped up in financing to MSMEs after demonetization. NBFCs can be very powerful vehicle for delivering loans under MUDRA. Refinancing policy and eligibility criteria set by MUDRA will be reviewed for better refinancing of NBFCs.
6. Outlay of Rs. 7148 crore for the Textile sector in 18-19
The Government had approved a comprehensive textile sector package of `6000 crore in 2016 to boost the apparel and made-up segments. Government now proposes to provide an outlay of Rs, 7148 crore for the textile sector in 2018-19.
Further Ministry will leverage the India Infrastructure Finance Corporation Limited (IIFCL) to help finance major infrastructure projects, including investments in educational and health infrastructure, on strategic and larger societal benefit considerations.
7. Building the “Startup India” Program
Startups in the country, rejoice! The government is all set to strengthen the investment and VC sector in the country to help startups grow. The finance minister said they will be “building a very robust alternative investment regime in the country and rolling out a taxation regime designed for the special nature of the VCFs and the angel investors.”