It is expected that the upcoming Union Budget 2012-13 can be a game-changer with the speed at which it revives the growth momentum of the Indian economy. The industry is keeping a close eye on the tone of this important policy statement for the country’s economy.
MSMEs are the growth engines of many economies world over so as for the Indian economy. Both industry and the government decision makers have understood the potential of MSMEs in the Indian economy.
Calling MSME segment as the dynamic segment of Indian economy, the Confederation of Indian Industries (CII) accords a high priority to the development of MSMEs. Based on the inputs received from the MSME members, from across the country, CII has collated and compiled key issues that need to be addressed, while formulating the Union Budget 2012-13.
Gurpal Singh, Principal Advisor & Head MSMEs, Confederation of Indian Industry (CII) said: “We have submitted 16 point recommendations for the honorable finance minister’s considerations. All these recommendations are designed in order to address the issues faced by the Indian MSMEs.”
The first point of this list talk about mitigating the problem arising out of delayed payments to the MSMEs, While adding to this, Gurpal Singh said, “We need to give more powers to the facilitation councils, established to address the issue of delayed payments, across all states, as per the MSMED Act 2006. It should be mandatory for the payment of interest for payment beyond 45 days as per the MSMED Act from Government departments, PSUs and Large Industry. It should also be mandatory that treatment of payment of dues to MSE’s beyond 45 days as income in the books of PSU’s and Large Industry.”
The second point in the CII agenda is focused on to achieve synergies between the Large, Medium and the Small industry and facilitate the implementation of the Public Procurement Policy.
Singh also highlighted the third point of his recommendations agenda, and said, “Government can look at phasing out of the tax benefits under Sec. 10A & 10 B of the Income Tax Act, popularly known as STPI scheme.”
Further elaborating this point he added: “Tax benefits under Sec. 10A & 10 B of the Income Tax Act, popularly known as STPI scheme are getting over because of sunset clause. This will adversely affect over 5,000 small software and IT services companies in the country. The Department of IT has already taken up the issue with the Ministry of Finance. Since mainly SME companies are being affected it would be appropriate if the MSME Ministry also takes it up strongly.”
In addition to this it is also recommended by CII that the upcoming budget should also enhance or raise the threshold for Service Tax Exemption. “The threshold for Service Tax Exemption is very low and needs to be revised from present INR10 lakh to at least INR25 lakh. This will provide relief to a large number of small companies in the Services Sector,” said Singh.
Underlining his recommendations for the budget, Dinesh Agarwal, founder and CEO of IndiaMART.com, said: "The time is ripe to support and equip the SME segment to establish a strong foothold in domestic and international markets. Many believe that credit crunch is the biggest worry for MSMEs. However, they overlook the fact that higher and multiple taxes, and compliance with multiple departments are the key challenges for them due to their small set ups and thin management.
“We request the Finance Minister to simplify and unify taxation for MSMEs in this year’s Union Budget. Also, consolidation of multiple departments will help address issue of compliance. It will help MSMEs rise above pertinent issues of conforming to several norms and lengthy, time-consuming paper-work.”
Agarwal added: “The delay in GST implementation has marred hopes of many MSMEs. They fear that now it may get rolled out in a much complicated form, not in its original shape. To tackle this, a pragmatic approach towards faster implementation of GST is required.”
On the other hand, Agarwal praises the government’s efforts for bringing effective policies that have helped build ‘communication infrastructure’ in the last 15 years.
He said: “What is now required is better and low-cost broadband services across the country, especially in tier-II and tier-III cities. This would allow MSMEs to utilize enormous business opportunities present online. Strong steps are required from our government to free MSMEs from the credit crunch worry too. Execution of priority sector lending policies for MSMEs demands rigorous approach. Also, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) needs to widen its ambit and cover more MSMEs which can avail collateral free financing. This will help entrepreneurs to overcome financial hurdles while setting up their projects or scaling up.”
In order to encourage MSMEs to achieve higher export figures, Agarwal also mentioned: “We also look forward to extension of facilities (such as Zero Duty Export Promotion Capital Goods (EPCG), Status Holder Incentives, among others for exporters under Foreign Trade Policy till March, 2014 instead of the current time line i.e. March 31, 2012.”