The interim budget of the outgoing government was presented on 1st Feb 2019. This being the last budget of the ruling party was expected to be populist in nature. However, experts say that this budget was balanced and tried to offer something to all sectors and classes of population.
Micro, Small and Medium Enterprises (MSME) sector is the most vibrant and dynamic sector promising high growth potential for the Indian economy. It is estimated that there are 51 million MSME units in the country that provide employment to about 117 million people across various sectors. Their workforce is said to constitute about 40% of the workforce.
The MSME share to the total Gross Domestic Product (GDP) is about 37% and they also contribute to 43% of exports based on the data maintained by the Ministry of Commerce.
Hence, policy decisions regarding taxes, interest rates and the general trend of economic affairs in the country matter a lot for the sector.
We bring to you more on proposals of the budget that would have an impact on the SME and the MSME sectors.
GST Registered MSMEs To Get Interest Rebate
GST was implemented countrywide on 1st July 2017. The government has taken many steps to ease the procedural and implementation difficulties faced by the small businesses in following the regime. Additionally, many steps have also been taken to ensure that businesses register themselves with the GST so as to ensure more and more businesses come under the tax net and provide transparency to the consumers.
This budget had one such point aiming to increase registration and provide relief. The Finance Minister announced that those traders and MSMEs registered under GST will get a rebate of 2% on interest for an incremental loan of Rs 1 crore.
The Govt said that it will refund the amount spent on this subvention scheme by the banks. To this effect, Rs 350 crore has been earmarked under "Interest Subvention Scheme for Incremental Credit to MSMEs."
Increased Sourcing From SMEs By Govt Enterprises
The requirement of sourcing from SMEs by Govt enterprises has been increased in the recent budget. The requirement now stands at 25% and it is also mandated that 3% of this sourcing is from women-owned SMEs.
This move should give a good boost to the SMEs and also garner employment opportunities.
Impact On The Real Estate Sector
Benefits Under Section 80-IBA To Be Extended For One More Year
For making more homes available under affordable housing, the benefits under Section 80-IBA of the Income Tax Act are being extended for one more year, i.e. to the housing projects approved till 31st March 2020. Deduction of 100% of profits derived from development of affordable housing projects approved on or after 1st June 2016 is available under this act, subject to fulfillment of specified conditions.
Levy Of Tax On Unsold Inventory
Earlier, there was tax levied on unsold inventory at developers' end after the end of one year starting from the end of which the project was completed. However, with the interim budget, the term is being extended to 2 years.
This provides much-needed succor to the developers who have been stuck with unsold units of real estate due to the slump in the real estate market.
Recent GST Developments
Exemption Limit For GST Hiked From Rs 20 Lakhs To Rs 40 Lakhs
Recently the GST council announced a hike in limit for filing GST from Rs 20 Lakhs to Rs 40 Lakhs bringing in major relief to SMEs. A trader with annual aggregate turnover till Rs 40 Lakhs will be exempt from GST registration for all states except the North Eastern States.
Small businesses usually find it difficult to meet the requirements of filing and other procedures associated with GST. So, this scheme will provide them a relief from the procedures associated with the GST.
GST Composition Scheme For Turnover Of Rs 1 Crore And Above
The GST Composition scheme under which the businesses are allowed to pay 1% tax based on its turnover has been extended to businesses with turnover of Rs 1 crore as against Rs 1.5 crore earlier.
Businesses opting for the composition scheme would need to file just one tax return annually but pay taxes once every quarter. Also, free accounting and billing software is also proposed to be made available to small businesses up to Rs. 1.5 crore turnover.