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 the economy with a strong emphasis on domestic manufacturing, digitization, rural upliftment, planned urbanisation, upliftment of MSME segment.
The economy is expected to grow at 9.2 percent in Financial Year (‘FY’) 2022, followed by 8-8.5% 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 the Indian Government. Despite these challenges, India is looking to remain one of the fastest growing economies in the world.
The Union budget 2022 offers several benefits for the 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:
Enhancing Emergency Credit Line Guarantee Scheme (ECLGS): On 13 May 20202 the ECLGS scheme was announced by the Finance Ministry to help MSMEs cope up with pandemic losses. The said benefit has been extended up to March 31, 2022 in the previous budget. The ECLGS scheme has been further extended to March 2023 and its guaranteed cover has been enhanced from INR 50 thousand crore to INR 5 lakh crore. Apart from the above, the additional amount is also being earmarked exclusively for the hospitality related sector.
Revamping the Credit Guarantee Scheme: The Credit Guarantee Trust for Micro Small Enterprises Scheme (CGTMSE) shall be revamped with the required infusion of funds. This will facilitate additional credit of Rs.2 lakh crore for MSEs and expand employment opportunities.
RAMP Programme: Smt. Nirmala Sitaraman announced that Raising and Accelerating MSME Performance (RAMP) Programme is to be rolled out with an estimated outlay of Rs.6 thousand crore over 5 years. This will help the MSME sector become more resilient, competitive and efficient. The said programme will unlock the liquidity issues for the MSME sector.
Increasing MSME Competitiveness: In order to protect MSME and make them more competitive the import tariffs on inputs have been proposed to be reduced, simultaneously, it has also been proposed to increase tariffs on the import of end products. Further it has also been announced to reduce tariffs including customs duty and exemptions on input such as steel scrap, a 7% duty on finished goods have been announced. Further, the import tariffs for industries like textiles, leather products, and handicrafts were also reduced. Apart from the above, the custom duty exemption on steel scrap has been further extended for a year. This will provide relief to MSME steel producers.
GatiShakti Infrastructure: The Hon’ble Finance Minister announced PM GatiShakti approach driven by seven engines, namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistic Infrastructure. The touchstone of Gatishakti will be investments in multi-modal logistics parks and cargo terminals. This will facilitate domestic as well as global market connectivity. This is a welcome step of the Indian Government which will bring down the cost of logistics for the MSME sector and increase export competitiveness in terms of export.
The National Skill Qualification Framework (NSQF) will be aligned with dynamic industry needs. It is a positive initiative to bridge the gap of skilled human resources within the MSME sector. This will also promote continuous skilling avenues, sustainability.
It was announced that Udyam, e-Shram, National Career Service (NCS) and Atma Nirbhar Skilled Employee Employer Mapping (ASEEM) portals will be interlinked. Their scope will be widened. They will now perform as portals with live, organic databases, providing G2C, B2C, and B2B services. These services will relate to credit facilitation, skilling, and recruitment to formalise the economy and improve entrepreneurial opportunities for all including MSME sector.
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 the MSME sector in applying for infra and public projects.
There is no change in tax slab rate for individuals 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 individuals/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 the current budget. Now the payer will have to be more cautious about the return filing status of the 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 the original return of income.
Restrictions on availability of credit of ITC (on the basis of auto-generated GSTR-2B) increased. Now before utilising ITC, all additional restrictions need 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 the MSME sector with measures announced in the Budget.