R P Gupta, Industralist.
Credit: Special Arrangement
Finance Minister Nirmala Sitharaman will present the 8th consecutive Union Budget on February 1, 2025. Reports suggest that the government is mulling over cutting income tax for those who are earning up to Rs 15 lakh a year in February's budget, in turn providing relief to the middle class.
The MSME sector have pinned high hopes on the Union Budget FY 2025-26 documents and are keeping their fingers crossed regarding their expectations from the government's most important financial document of the year.
"As per national sample-survey in 2015-16, total MSME were 6.33 crores, mostly Small and Micro units. Among MSME, the share of Manufacturing, Trade and other Service was about 31per cent, 36 per cenr & 33 per cent., respectively.
After introducing GST in 2017, the growth of MSME has been sluggish rather negligible. In developing phase of any Nation, the role of MSME is crucial for generating jobs. However, their production cost is higher and they face problems in marketing due to poor brand image. Hence, they need policy and fiscal support for healthy growth," said RP Gupta, an industrialist and author of the book 'Turn Around India'.
"Credit-guarantee scheme (CGS) by center is excellent support for availing liberal bank-credit. But, due to tax-hazards, majority of SME-units are not registered and could not avail bank-credit. Hence, both Central and State governments must extend GST exemption somewhat similar to Excise exemption to SME units prior to GST regime and also simplify GST compliances.
Since 2003, manufacturing SME-units (excluding medium scale) were availing Excise exemption on the initial turnover of Rs.1.5 Crores. That amounts to Rs.22.5 lakhs per annum considering average excise-rate as 15%. By this, SME units were able to compete with large-units and survive," Gupta noted.
"Considering inflation in last two decades, such benefit should be increased to Rs.45-50 lakhs per annum by reimbursing net CGST payable after availing input-tax credit. For non-manufacturing SME units the benefits may be limited to Rs.8-10 lakhs/annum. Existing scheme of GST- exemption on the sale of Rs.40 lakhs may continue for micro-units with an option to switch over to new scheme. States may also be pursued similar scheme for SGST, may be with reduced limit depending upon their fiscal affordability.
However, for fiscal prudence, its net impact on the budget may be estimated and some tweaking of scheme may be done. For example, instead reimbursing 100 per cent net GST payable, it may be reduced to 75% without changing overall limit as suggested.
Currently, about 85-90 per cent SME-units are not within the tax-net by not registering. By simplification of GST laws and with aforesaid benefits, SME-units will gradually come under tax-net and pay some tax after crossing exemption limits. Many of them might graduate to medium-scale and contribute to GDP and tax revenue besides providing more jobs.
I firmly believe, this will be right antidote to many problems to which our Nation is facing now. More so, gradually, participation in economic activities shall increase and universal cash subsidy shall reduce. Developing self-dependency is obviously better option by generating job- opportunities," said Gupta.
Union Budget 2025 | Nirmala Sitharaman, who continues to be Finance Minister, will present her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', reports suggest there might be a tax relief for those making up to Rs 15 lakh per year. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.