Union Budget 2023: Budgetary Allocation and Highlights for MSMEs
07 February, 2023
Since coming to power in 2014, the Narendra Modi Government has laid strong emphasis on creating a self-sufficient economy. The “Make in India” programme is a result of this effort. The Finance Ministry under the Modi Government has been making sustained efforts to provide the necessary infrastructure and tools to start-ups, and Small and Medium enterprises. In the Union Budget 2023, FM Nirmala Sitharaman announced several measures to help strengthen the MSME sector. Here is a breakdown of the budget highlights for MSMEs.
General Allocation for MSMEs:
The FM has proposed to spend a substantial amount – a record ₹22,138 crore on allocations aimed to MSMEs as part of the announcement for budget for MSME in 2023. Stating that the MSME sector is a “growth engine”, and among the biggest employers in India, she mentioned that this high allocation will boost employment in the country.
Funding CGTMSE:
As of 1 April 2023, the Finance Ministry plans to infuse ₹9,000 crore into the Credit Guarantee Fund Trust for Micro and Small Enterprises Credit Guarantee Scheme. The ministry will also provide additional collateral-free credit of ₹2 lakh crore to MSMEs, while reducing the credit cost by 1%. This funding also includes the changes made to the Credit Guarantee Scheme in December 2022.
Changes In Presumptive Taxation Rules:
The FM has expanded the turnover limit for micro units for presumptive taxation from ₹2 crore in the last fiscal year to ₹3 crore. She has also revised the turnover limit for certain professionals from ₹50 lakh last year to ₹75 lakh this financial year. The caveat while enabling micro units and professionals for presumptive taxation is that their cash receipts should not extend over 5% of their total receipts. Additionally, the FM stated that under presumptive taxation, individuals and businesses are no longer required to maintain account books or get their account audited.
Deduction on Expenses incurred on payments:
While speaking about the presumptive taxation rules, the FM further proposed to deduct the expenses incurred on payments received from buyers, if such payments are directly made to MSMEs. To enable MSMEs to receive timely receipt of payments from buyers, the FM announced that buyers may not claim deductions unless they pay the MSMEs first. This mandate by the FM, is intended to force buyers to make timely payments and clear the pending dues owed to small business.
Returning 95% forfeited performance bank guarantee amount (Vivad Se Vishwas-I):
During the MSME Budget 2023, the FM also stated that MSME suppliers who were unable to fulfil contracts during the Coronavirus pandemic will get 95% of their forfeited amount back from the government and the government undertakings with which they were working. The FM announced this relief measure under the Vivad Se Vishwas-I voluntary initiative, which was launched in 2020 to resolve pending direct tax disputes. This move will benefit MSMEs who do not have access to institutional financing.
Contractual dispute settlement (Vivad Se Vishwas-II):
Under the Vivad se Vishwas II scheme, all commercial disputes involving the government or government undertakings will be settled through a “voluntary settlement scheme,” containing standardised terms. The settlements will be graded according to the pendency of the dispute.
Last-mile connectivity:
About 100 transport infrastructure projects have been identified in the Union Budget, that will help sectors like coal, fertilizer, food grain, steel and shipping. These projects, amounting to ₹75,000 crore, will be funded in part by private players to the tune of ₹15,000 crore.
Tier-I and Tier-II cities to get infra boost:
The government has earmarked ₹10,000 crore for the creation of the Urban Infrastructure Development Fund (UIDF), which will empower small cities to set up the infrastructure necessary for maintaining adequate sanitation and hygiene. The government aims to makes these cities more sustainable and cleaner through this move.
Plans to support artisans:
To enable traditional artisans to improve the scale, quality and reach of products and integrate them with the value chain of MSME, the FM has announced an assistance packaged named PM Vishwakarma Kaushal Samman. Stating that the products created by the art and handicraft industry represents the “true spirit of Atmanirbhar Bharat”, the government, through this scheme will provide financial support along with advanced skill training, efficient green technologies, and knowledge of modern digital techniques designed to benefit artisans from economically weaker sections.
DigiLocker for MSMEs and Skilling:
Besides the above-mentioned budget provisions for MSMEs, the FM has proposed to set up an “Entity DigiLocker” that MSMEs, large businesses and charitable trusts can utilise to store and share documents online with financial authorities, regulators and banks. Also, to expand India’s digital ecosystem further, the Finance Ministry will launch a unified skill India digital platform to facilitate demand-based formal skill training and access to entrepreneurship schemes.
Indirect tax revision for green energy push:
The FM also doubled the budget of FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles) scheme 2, giving it a bit of a boost. The customs duty levied on lithium-ion batteries has been slashed from 21% to 13%, to facilitate the procurement of the necessary goods & machinery required to manufacture EVs in India. While this is a short-term relief, a long-term plan is still well awaited.
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Click here to learn more about Key Budget Highlights 2023.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
