Presented on 1st February 2023, the Union Budget 2023-24 proposes the following benefits for the MSME lot.
Budget 2023 for MSMEs
Relief for MSMEs – Vivad se Vishwas I
To provide relief to MSMEs that have failed to execute contracts during the COVID period, the government has decided to return 95% of the forfeited amount related to bid or performance security. Accordingly, the MSMEs will receive the amount directly from the government or government undertakings.
E-commerce for Micro Enterprises
It has been proposed that section 10 and section 122 of the CGST Act will be amended to enable unregistered suppliers and composition taxpayers to make intra-state supply of goods through ECommerce Operators (ECOs), subject to certain conditions.
PM Matsya Sampada Yojana
To encourage fisheries, the budget has proposed a new sub-scheme with an investment of INR 6,000 crore. This will help fish vendors, fishermen, and micro & small enterprises involved in fisheries. It further improves value chain efficiencies and expands the market.
The government will set up an Entity DigiLocker for MSMEs, charitable trusts, and large businesses. The DigiLocker allows them to store documents online securely and share them with various authorities, business entities, regulators, and banks, whenever necessary.
Credit Guarantee for MSMEs
As proposed in the previous budget, the credit guarantee scheme for MSMEs will be revamped during this fiscal. The updated scheme will come into effect from 1st April 2023. The scheme infuses INR 9,000 crores in the corpus enabling an additional collateral-free credit of INR 2 lakh crores. The cost of credit is also reduced by about 1%.
Presumptive Taxation for MSMEs
MSMEs with turnover up to INR 2 crores can avail the benefit of presumptive taxation. The current budget proposes to provide enhanced limits of Rs.3 crore to MSMEs. To further support the timely receipt of payments, it allows the deduction for expenditure incurred on payments made to them only when payment is actually made.
Budget 2023-24 for Start-Ups
- Agriculture Accelerator Fund
To encourage agristartups by young entrepreneurs in rural areas, an Agriculture accelerator fund has been proposed. It will encourage the development of innovative and affordable solutions to address the challenges faced by farmers and modern technologies to transform agricultural practices to increase productivity and profitability.
- Extended Date of Incorporation
The date of incorporation for start-ups extended from 31st March 2023 to 31st March 2024 to provide income tax benefits. Further, carry forward of losses on change of shareholding has been extended from 7 years of incorporating the start up to 10 years.
Revision of Customs Duty on Certain Goods
To promote exports, boost domestic manufacturing, enhance domestic value addition, and encourage green energy, the budget 2023-24 proposes the revision of indirect taxes as below.
- The number of basic customs duty rates on certain goods has been reduced to 13 from 21. This will affect the custom duty, cess, and surcharge on toys, automobiles, bicycles, and naphtha, to mention a few.
- Excise duty on compressed bio gas contained in blended compressed natural gas is exempted.
- Customs duty is exempted on import of capital goods and machinery used in the manufacture of lithium-ion cells for electric vehicle batteries.
- Customs duty on import of parts of mobile phones like camera lens has been reduced.
- Customs duty on certain parts of open cells of TV panels decreased to 2.5%.
- Customs duty on electric kitchen chimney increased from 7.5% to 15%
- Basic customs duty on denatured ethyl alcohol has been exempted.
- Basic customs duty on acid grade fluorspar has been reduced to 2.5% from 5%. And on crude glycerin it has been reduced to 2.5% from 7%.
- Customs duty on key inputs for domestic manufacturing of shrimp feed has been reduced.
Budget 2022 Highlights: for SMEs and MSMEs
Budget 2022 For MSMEs – More Credit Availability, Focus on Skill Improvement
- MSMEs, UDYAM, e-Shram, NSS, ASEEM websites will be interlinked. They now cover live organic data providing G2C, B2C, and B2B services.
- The services provided by the websites will be related to credit facilitation, skilling and recruitment with an aim to further formalise and enhance entrepreneurial opportunities for all.
- The Emergency Credit Line Guarantee Scheme (ECLGS) has provided additional credit to more than 130 lakh MSMEs to mitigate the adverse impact of the pandemic.
- Considering some MSMEs, like hospitality and related services, that are yet to regain their pre-pandemic level of business, the ECG and ECLGS will be extended up to March 2023. Its cover will be expanded by INR 50,000 Cr to a total cover of INR 5 lakh Cr. The additional amount will be reserved exclusively for hospitality and related services sectors.
- The Credit Guarantee Trust for MSMEs, the CGTMSME scheme, will be funded with the required amount to facilitate additional credit of INR 2 lakh Cr for MSMEs and to expand employment opportunities.
- The Racing and Accelerating MSME Performance, RAMP program, with an outlay of INR 6,000 Cr over 5 years will be rolled out to help the MSME sector to become more efficient, competitive and resilient.
- Skill improvement programs in partnership with industry will be reoriented to promote continuous skilling avenues, sustainability and employability. The national skill qualification framework will be aligned with dynamic industry needs.
Logistics and Infrastructure Development to Support SMBs and MSMEs
- PM Gati Shakthi Master Plan is a transformative approach for economic growth and development. It is driven by 7 engines
- Mass transport
- Waterways and
- Logistics infrastructure
Development projects of all these engines will be announced soon and the same will lead to huge employment and entrepreneur opportunities for all, especially for youth.
The scope of the master plan will also provide economic transformation, seamless multimodal transport and logistics efficiency.
- Railways will develop new products and efficient logistics services for small and medium enterprises (SMEs) and small farmers.
- Besides taking the lead in the integration of postal and railways networks to provide seamless solutions for the movement of parcels.
- ‘One Station, One Product’ concept will be popularised to help local businesses and supply chains.
- In the next 3 years, 100 PM Gati Shakthi cargo terminals for multimodal logistics facilities will be developed.
Incentives for Start-ups
- Eligible start-ups established before 31st March 2022 had been provided with a tax incentive for 3 consecutive years out of the 10 years from incorporation. In view of the pandemic, the period of incorporation of the eligible start-ups is extended by one more year up to 31st March 2023 to provide such tax incentives.
Incentives for Newly Established Manufacturing Companies
- To establish a globally competitive business environment for certain domestic companies, a concessional tax regime of 15% was introduced for newly established domestic manufacturing companies. The current budget extends the last date for commencement of manufacturing or production by one more year i.e., from 31st March 2023 to 31st March 2024.
Customs Duty Reduction for MSMEs, Electronics, Gems, and Chemicals
- For MSMSes
- Customs duty on umbrellas has been increased to 20%, while the exemption to parts of umbrellas is being withdrawn
- Duty exemption has been rationalised on agricultural tools manufactured in India
- Duty exemption given to steel scrap has been extended for another year to provide relief to MSMEs secondary steel producers.
- Certain anti-dumping and CBD on stainless steel and coated steel flat products, bars of alloy steel has been revoked considering prevailing high prices of metals.
- To incentivise exports, exemptions are provided on items such as embellishment, trimmings, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes, that may be needed by bonafide exporters of handicrafts, textiles, leather garments, leather footwear, and other goods.
- Electronics: To facilitate domestic manufacturing of high growth electronic items like wearable devices, hearing devices, and electronic smart meters, customs duty concessions are given to parts of transformers of mobile chargers and camera lenses of mobile camera modules and certain other such items.
- Gems and jewellery: Customs duty on cut and polished diamonds and gemstones is reduced to 5%. Simply sawn diamond would attract no customs duty. By June 2022 a simplified regulatory framework shall be implemented to facilitate the export of jewellery through online portals.
To dis-incentivise the import of undervalued imitation jewellery, the customs duty of at least INR 400 per kg is imposed on its import.
- Chemicals: Customs duty on certain critical chemicals like methanol, acetic acid, heavy pet stocks for petroleum refining are being reduced. On the other hand, customs duty on sodium cyanide has been raised as the chemics has adequate capacity in the domestic market.