14-Mar-2022 | Union Budget
The Hon’ble Finance Minister on 2
February 2022 announced Union Budget 2022. This year’s budget is a
growth-oriented budget that focuses mainly on long-term growth and boosting
economy with a strong emphasis on domestic manufacturing, digitization, rural
upliftment, planned urbanization, upliftment of MSME segment.
Economy:
The economy is expected to grow at 9.2 percent in
Financial Year (‘FY’) 2022, followed by 8-8.5 per cent grown in FY 2023. Rapid
pace of vaccination and long-term benefits of supply-side reforms in the
pipeline will aid growth in FY 2023. The increasing trend of inflation in
recent months, mainly on account of increased fuel and power prices,
slow-witted growth in consumption may be an area of concern for Indian
Government. Despite these challenges, India is looking to remain one of the
fastest growing economies in the world.
Key Announcements for MSME:
The Union budget 2022 offers several benefits for
MSME sector by targeting critical factors such as cost of raw material and
input, access to credit; supporting infrastructure and skill development; facilitating
ease of doing business, etc. Some of the notable budgetary announcement and
incentives which have direct impact on MSME sector is summarised below:
Category 1 – Access to Credit
Category 2 – Optimising input cost:
Category 3 - Infrastructure:
Category 3 – Skilling
• The National Skill Qualification Framework (NSQF)
will be aligned with dynamic industry needs. It is a positive initiative to
bridge gap of skilled human resources within the MSME sector. This will also
promote continuous skilling avenues, sustainability.
Category 4- Digital Services for MSME
Sector
Category 5 – Ease of Doing Business
• To reduce indirect costs for suppliers and work
contractors, the use of surety bonds as a substitute for bank guarantees will
be made acceptable in government procurements. This will provide flexibility to
MSME sector in applying for infra and public projects.
Category 6 – Direct Tax
• There is no change in tax slab rate for
individual and HUF. The Corporate tax rate also remains unchanged.
• The surcharge rate on all long-term capital gain
(LTCG) has been proposed to be capped at 15 percent. Earlier this benefit was
available only in respect of LTCG arising from the transfer of listed equity
shares, equity-oriented mutual funds and units of business trust. Now this will
benefit even in cases of sale of immovable properties, off-market sale of
shares, etc. This will directly benefit to individual/proprietors having
taxable income above 2 crores.
• Tax exemption granted on COVID-19 related medical
expenditure as well as financial assistance provided in case of death caused by
COVID-19.
• The period of incorporation of start-ups
(eligible for tax holiday) has been extended by a year to 31 March 2024. Period
of commencement of manufacturing or production by eligible new manufacturing
domestic companies for 15% tax rate has also been extended by a year to 31
March 2024.
• The Finance Act 2021 introduced provisions for
higher rate of TDS / TCS for a specified person i.e. non-filers of tax return
for two years. This period of two years has been reduced to one year in current
budget. Now payer will have to be more cautious about the return filing status
of payee while making payment of various transactions such as work contract,
professional fees, technical fees, commission and brokerage, etc.
• Effective 1 April 2022, an updated return of
income can be filed in case any income has been missed to be reported in
original return of income.
Category 6 – Indirect Tax (GST)
• Restrictions on availment of credit of ITC (on
the basis of auto-generated GSTR-2B) increased. Now before utilizing ITC, all
additional restriction needs to be checked.
• Statutory time limit for availing ITC and issuing
credit note extended to 30 November from the current time limit of 30
September.
• The department shall cancel the GST registration
on non-filing of return. Timelines and conditions prescribed for composition
dealers and other category dealers.
Conclusion
The Government has continued its support to MSME
sector with measures announced in the Budget.