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Budget 2020 – How Does it Contribute to the Growth of SMEs?

Budget 2020 – How Does it Contribute to the Growth of SMEs?

With the announcement of the 2020 budget, lots of opportunities and development areas have been presented to the Indian SME/MSME sector. 

Let’s find out how and where the budget can be leveraged for exponential growth. 

Key Highlights:

  •  Extension of invoice financing to MSMEs through TReDs. 
  • A scheme to provide Subordinate debt for entrepreneurs of MSMEs CORPORATE TAX RATE CUT.
  • Scheme anchored by EXIM Bank and SIDBI to handhold MSMEs in export markets.
  • The turnover threshold for the audit of MSMEs to be increased from Rs 1 crore to Rs 5 crore for those businesses which carry out less than 5% of their business in cash.

Benefits for SMEs:

Hike on custom duty on 300 items:

Basic customs on over 300 items across sectors including furniture, chemicals, rubber, coated paper, and paper boards have been increased in a bid to protect the labour intensive MSME sector.

MSME Compliance Burden Reduced:

  1. In order to reduce the compliance burden on small retailers, traders and the MSME sector, the auditing threshold has been raised by 5-times from INR 1 Cr in turnover to INR 5 Cr. This would be applicable only to those MSMEs that transact less than 5% in cash.
  2. This will also help encourage businesses to boost their online presence, making it easier for businesses to adopt digital GST return filing, e-way bills and improve efficiency in logistics and manufacturing.

App-Based Invoicing Platform For MSMEs To Ease Compliance:

Nirmala Sitharaman quoted 

“App-based invoice financing platform for MSMEs will be launched.”

  1. The global digital payments market is expected to touch $10.07 Trillion by 2026.
  2. In such a scenario, digitized invoice financing is a crucial move. The introduction of technologies like blockchain, AI and ML at the backend, can reduce the load of compliance for MSMEs.

Procurement of goods and services from E-Marketplace:

  1. The government has made it mandatory for all the departments and ministries to source goods and services from its e-marketplace
  2. GeM is moving ahead for creating a unified procurement system in the country for providing a single platform for the procurement of goods, services, and works. It also has a great opportunity for MSMEs. It is proposed to take its turnover to Rs three lakh crores.
  3. Concessional corporate tax rate of 15 percent to new domestic companies in the manufacturing and power sector. The portal provides a wide range of products from office stationery to vehicles. Automobiles, computers and office furniture are currently the top product categories.
  4. Services, including transportation, logistics, waste management, webcasting and analytical, among others, are listed on the portal

Industry Wise Opportunities:

Energy Sector:

  1. Govt will help 20 lakh farmers for setting up solar pumps
  2. Rs 22,000 crore allocated to power and renewable energy
  3. Govt will help 15 lakh farmers to set up solar sets

Agriculture Sector:

  1. Supporting states to focus on one product for one district so as to make way for Horticulture to gain momentum. 
  2. Financing on Negotiable Warehousing Receipts to be integrated with e- National Agricultural Market
  3. Milk processing capacity will be doubled to 108 tonnes from 53 tonnes by 2025.
  4. MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) to be used to develop fodder farm

Medical Sector:

Nominal health cess on import of medical equipment to be introduced to encourage the domestic industry and generate resources for health services.

Manufacturing Sector:

Nirmala Sitharaman said

“Our Government will promote the manufacturing of electronics by setting up a new scheme that incentivizes mobile manufacturing, electronic equipment, and semiconductor packaging”

Logistics Sector:

  1. A national logistics policy will be released soon which will set up a single-window e-logistics market and focus on employment generation and making MSMEs competitive.
  2. It will also create a single-window e-logistics market and focus on the generation of employment, MSMEs (Micro, Small and Medium Enterprises) competitive
  3. Viability gap funding to be provided for setting up warehouses.

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