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.
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.
The Government has continued its support to MSME sector with measures announced in the Budget.