Credit Guarantee, Taxation and 'Vivad Se Vishwas' Are Top Attractions for MSMEs in Budget 2023

MSME sector is considered the backbone of the Indian economy and contributes nearly accounts for 27% of the country’s GDP. It primarily works for the development of people from backward and rural areas. As per the official data as of 31st April 2022, there are presently more than 6.33 crore MSMEs that employ approx. 11.10 people across the nation.

Union Budget 2023 has proposed several measures to support Micro, Small, and Medium Enterprises (MSMEs) in India. Some of the key highlights include:

1. Credit Guarantee Enhancement Corporation: A new institution has been proposed to provide credit guarantee for MSMEs and enhance their access to credit.
2. Emergency Credit Line Guarantee Scheme (ECLGS 3.0): The government has extended the ECLGS scheme to cover MSMEs affected by the second wave of COVID-19.
3. E-Market Linkage for MSMEs: The government has proposed to set up an e-market linkage for MSMEs to enable them to reach a wider market and increase their sales.
4. MSME facilitation centers: The government has proposed to set up MSME facilitation centers across the country to provide end-to-end support to MSMEs.
5. Technology Upgradation: The government has proposed to allocate funds for technology upgradation and modernization of MSMEs.
6. MSME Export Promotion Scheme: A new scheme has been proposed to promote exports by MSMEs and increase their competitiveness in the global market.
7. National Recruitment Agency: The government has proposed to set up a National Recruitment Agency to simplify the recruitment process for MSMEs.

Also Read: What MSMEs Got in Union Budget 2023-24

CA Deepak Maheshwari, Co-Founder of Jindigi Live

In order to help MSMEs understand this year's Union Budget 2023-24 with more clarity, we at SMEStreet spoken to experts. One such expert, Mr. Deepak Maheshwari, Investment Banker, Strategic Advisor and Co-Founder of Jindagilive shared an overview of key takeaways of the latest Union Budget 2023 from the MSME sector. Mr Maheshwari is also part of the SMEStreet League of Mentors and on time-to-time basis, he share his opinions and observations on contemporary issues related to the MSMEs of India.

According to Mr Maheshwari, "The government has proposed to spend a record Rs. 22,138 crore on allocations aimed at micro, small, and medium enterprises (MSMEs) ministry in the Budget 2023-24, giving a boost to employment in the country and achieving the target of 5 trillion economy."

He also explained some of the major steps taken by the Govt. to strengthen MSME sector:

1. Credit Guarantee for MSMEs : . It is announced that the revamped scheme will take effect  from 1st April 2023 through infusion of 9,000 crore in the corpus. This will enable additional collateral-free guaranteed credit of 2 lakh crore. Further, the cost of the credit will be reduced by about 1 per cent.
2. Increasing threshold limits for presumptive taxation schemes. : In order to ease compliance and to promote non-cash transactions, the threshold limits for presumptive scheme of taxation for eligible businesses from 2 crore to 3 crore and for specified professions from 50 lakh to 75 lakh, subject to amount or aggregate of the amounts received during the year, in cash, does not exceed five per cent of the total gross receipts/turnover.
3. Vivad se Vishwas I – Relief for MSMEs: In cases of failure by MSMEs to execute contracts during the Covid period, 95 per cent of the forfeited amount relating to bid or performance security will be returned to them by government and government undertakings. This will provide relief to MSMEs.
4. Expense to be allowed only if paid: Section 43B of Income tax act amended to improve working capital of MSME, as per amended provisions the deduction of expense will be only allowed if any payment due to micro or small enterprise (as per MSME act) is made in time.
5. Entity DigiLocker: An Entity DigiLocker will be set up for use by MSMEs, large business and charitable trusts. This will be towards storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks and other business entities.

"All these will add muscle to the MSME sector in helping drive next level of growth," concluded Mr Maheshwari.