[Budget 2020] Budget aims to give boost to MSME sector with number of proposals

MSMEs turnover threshold for audit increased 5 times to Rs 5 crore, proposes Rs 1000 crore for MSME funds, increase customs duties on labour-intensive products like footwear, furniture, etc
[Budget 2020] Budget aims to give boost to MSME sector with number of proposals
Mumbai 
 
In order to reduce the compliance burden on small retailers, traders, shop keepers who comprise the Medium, Small and Micro Enterprise (MSME) sector, the Union Budget proposed to raise by five times the turnover threshold for audit from the existing Rs. 1 crore to Rs 5 crore. While presenting the Union Budget 2020-21 in Parliament Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman said that in order to boost less cash economy, the increased limit shall apply only to those businesses which carry out less than 5 per cent of their business transactions in cash. Currently, businesses having turnover of more than Rs 1 crore are required to get their books of accounts audited by an accountant.
 
Budget proposes Rs 1000 crore for MSME funds belong to sectors like Pharma, auto components, etc. This will be anchored by Exim Bank and Sidbi.
 
FM has announced that subordinate debt for entrepreneurs of MSMEs will be provided and will be treated as quasi-equity. More than 5 lakh MSME benefited from debt restructuring last year. Government has asked RBI to consider extending window of debt structuring by one year to March 2021 for this purpose. 
 
According to CRISIL, subordinate debt for MSMEs a big positive as 70 percent debt needs of MSMEs is for working capital. 
 
Further, to give boost to MSMEs in the manufacturing of labour-intensive sectors like footwear and furniture, the Budget has announced steps to increase customs duties on these items to reduce imports. 
 
Finance Minister Nirmala Sitharaman said, “National Infrastructure Pipeline involves 6,500 projects. NSDC will help skill development in the infrastructure sector. Making MSMEs competitive will be our goal. A total of 9,000 km of economic corridor will be set up. Chennai-Bengaluru expressway will also be started. Delhi-Mumbai Expressway will be completed by 2023.”
 
In order to give a boost to the start-up ecosystem, the Union Budget has proposed to ease the burden of taxation on the employees by deferring the tax payment on ESOPs by five years or till they leave the company or when they sell their shares, whichever is earlier.
 
The Finance Minister said that Start-ups have emerged as engines of growth for Indian economy. Over the past year, the Government has taken several measures to handhold them and support their growth. During their formative years, Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain highly talented employees. ESOP is a significant component of compensation for these employees. Currently, ESOPs are taxable as perquisites at the time of exercise. This leads to cash-flow problem for the employees who do not sell the shares immediately and continue to hold the same for the long-term.
 
Further, an eligible Start-up having turnover upto Rs 25 crores is allowed deduction of 100 per cent of its profits for three consecutive assessment years out of seven years if the total turnover does not exceed Rs 25 crores. In order to extend this benefit to larger start-ups, the Budget has proposed to extend the turnover limit from existing Rs 25 crores to Rs 100 crores. Moreover considering the fact that in the initial years, a start-up may not have adequate profit to avail this deduction, the Budget proposes to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years.
 
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