Suggestions
for the Union Budget 2020-21
Focus on
Manufacturing MSMEs;
 |
| Industries should bloom like flowers |
We have the potential to overtake China if we trust our MSME
sector more than now and provide long-lasting solutions.
Manufacturing Micro enterprises with specific focus on agro
based industries and rural enterprises, which are unique and provide maximum
employment need to be separated from Small and Medium enterprises and the
existing MSME Act needs to be amended accordingly. All micro enterprises in
future may be encouraged to be set up in clusters only with suitable
infrastructure and marketing facilities. They should be enabled for scaling up
and the required support system should come from the Entrepreneur Development Centres (EDCs), proposed to be
co-located at the DICs. The DIC officials’ performance should be evaluated basing
on the number of micro enterprises scaling up to small enterprises. Although
this comes under the State domain, the Amended MSMED Act should provide for
this appropriately.
The SMEs may be defined based on sales turnover and
employment to incentivise them to join the formal sector and achieve GST
compliance.
2. All the incentives from the government and other agencies
to the MSMEs need to be linked to the employment they provide to people
directly.
3. All the subsidies and other payments by the governments
and their bodies to MSMEs must be paid within 45 days from the due date. Any
delay beyond this and up to 90 days should attract penal interest rate at twice
the RBI repo rate. Delay beyond 90 days should be treated as criminal
violation. Since the purchase and sale is a contract between the buyer and
seller, Indian Contract Act should be amended appropriately, simultaneously.
4. An Independent Evaluation Office on the lines of IMF
may be set up as independent agency under Ministry of MSME/Finance/NITI
Aayog to evaluate the policies, programmes, implementation and payments to
MSMEs and submit a report to the Government for action and placing before the
Parliament at the beginning of the Year.
5. SIDBI has had limited impact. The role and
responsibilities of SIDBI may be re-examined by a High Level Committee.
Fiscal Incentives:
¡ 2% to 5% of Income Tax / GST for up
to every 10 in Micro & to every 25 persons employed in small evidenced by
self-certified muster roll and corresponding increase in the expenditure on
wages and salaries in the annual P&L statement.
¡ Micro: 1. No Cess on GST; 2. First 5 Years waive
income tax for manufacturing enterprises
¡ Small: First 3 years for firms graduating from Micro
exempt income tax; No corporate tax
¡ Small to Medium Enterprises: First 3 years 2% less than the
usual Corporate tax for large enterprises;
¡ Medium to Large Enterprises: First 2 years < 2% of the usual
corporate tax applicable to the Corporates
¡ Technology: Micro to Small:
transition with new or imported technologies – Duty to be exempted.
¡ Small to Medium: Duty to be 2% less
than for large.
There
should be no levy of Cess on export duties to enable the SMEs to be major
contributors to export markets.
Banks and
NBFCs helping revival of MSMEs:
Income Tax
reduction of 1% if the institution revives 100 enterprises in a year –
demonstrated by the increase in capacity utilization by 40% in six months from
the date of revival for 80 percent of units revived.
Manufacturing
Micro and Small Enterprises post revival earnings of up to Rs.5cr should be
exempt from income tax.
With inputs
from Dr. Subbaiah Singala, General Manager, CAB, Pune whose views are also
personal.
