Budget 2023-24 addresses the financial constraints of the MSME sectorIt is said that the MSME sector is the engine of growth in modern India. That is the reason that every government, in recent times, has tried to address the problems of this sector. Several policies have also been implemented for the development of this sector.Budget 2023-24 has also allocated funds for some very important aspects of the MSME sector. These include special allocations for credit guarantee for the MSME sector, enabling more small and micro units for presumptive taxation, solving timely payment issues and for release of funds that were fortified in the government accounts during Covid 19 period crisis.Status Quo of the MSMEThe Budget announcements for the MSME sector is important for the Indian economy as this sector contributes around 30% of the national GDP and employs 11 crore people, exports 40% of the total export.However, the sector faces several problems as well, the most serious of them being highly inadequate cheap credit. About 60% of the credit the sector takes is from the informal sector which is both costly and not guaranteed. Most of the MSME units cannot access modern technology and efficient manpower and hence are unable to reap the benefits of productivity. The size of most of these units are small and hence they cannot reap scale advantage. MSME in Budget 2023-24 Kishore Kumar BiswasAnnouncement of the BudgetBudget 2023 proposes to infuse ` 9,000 crore into the credit scheme to increase institutional credit availability for the sector. This will lead to an increase of ` 2 lakh crore more collateral free guaranteed credits for the sector. The MSMEs will get this fund at a rate which is lower than the present rate and hence the cost of funds will be lower for the units who can utilise this scheme.Secondly, the finance minister has announced to raise turnover limit by 50% to claim presumptive taxation gains. This will benefit business units and many professionals. For MSME units, annual turnover has been raised up to` 3 crore and to `75 lakh for professionals. But this can be utilised by those whose cash transaction is not more than 5% of all the transactions.What is the Presumptive Taxation Scheme? It was introduced in order to make tax filing simple for small businessmen and professionals. In this scheme, the taxpayer is not required to maintain detailed accounts.Taxpayers’ income is calculated presumptively. Under this scheme a sum equal to 6% or 8% of the gross receipts or turnover is considered as profits and only the higher sum is taxed.Another important announcement pertains to the payment issues of the sector – trying to address the problem of timely payment to the MMSE units by the buyers. The Budget has announced that deducting expenditures on payments made by the buyers can be done only when payments are made by them. This means a buyer cannot close business accounts without first paying the MSMEs.Biswanath Bhattacharya, President, the Federation of Small and Medium Industries (FOSMI), said, “As of now, there is a rule that payments to the MSMEs are to be made within 45 days after receiving the goods by the buyers. But in many cases, it is not obeyed and MSME suppliers cannot complain to the statutory authorities fearing cancellation of further orders. We hope in the coming day, the payment problems of the MSME units may be eased to an extent. This is a welcome decision of the government.”The ‘Vivad se Bishwas’ Scheme, which seeks to give some financial relief to MSMEs, is also worth mentioning. In this scheme, the MSME suppliers unable to execute contracts during the Covid 19 pandemic will receive 95% of their forfeited amounts back from the government. So many MSME units will get a fair amount of their payments which were stuck with the PSUs. This will increase cash flow which will aid the sector.On this issue, Hitangshu Guha, President, FACSI, said, “The units which will get a refund in this scheme will be highly benefited. A section of them can reopen the units or the running units will utilize the fund for their betterment. But it will take time to get back the money.” He also said that there were a lot of good announcements in the Budget but their proper implementation holds the key. He also stated that many clauses of the MSME Act of 2006 should be amended for the smooth running of the MSME sector.
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