The recently concluded Budget 2019-20 brought in a wave of relaxations and immense support from the government for the MSME (Micro, Small, and Medium Enterprises) sector of India. Many of the talking points from the 32nd GST Council Meeting were brought into effect by the Finance Minister Piyush Goyal while presenting the interim budget for Financial Year 2019-20 in an attempt to boost the MSME sector.
Here are Some Key Takeaways for MSMEs from Budget 2019-20:
1. 2% Interest subvention for loans up to INR1 crore
Micro, small, and medium enterprises may now avail interest subvention for loans up to INR 1 crore. Earlier, the government had announced a quick loan facility for small businesses wherein they could avail a loan of up to INR 1 crore within 59 minutes! The move has been deemed a much-needed catalyst for this important sector. The only prerequisite to getting this 2% interest rebate is the business should be registered under the Goods and Service Tax (GST).
2. Government procurement from MSMEs increased to 25% from 18%
Mr. Goyal announced that the government will increase the share of its procurement from MSMEs through Government eMarketplace (GeM) to 25%, including 3% from women-led MSMEs. This is a good jump from the previous year’s figure of 18%. GeM was launched a few years ago and is being upgraded so as to make it a one-stop shop for all SMEs. Small businesses get an open market opportunity to sell their products, and their focus remains on domestic trade and business. Till date, GeM has registered transactions of over 17.5 thousand crores that has led to savings to the tune of 35-28%. 3% sourcing from MSMEs run by women is a great way to encourage women entrepreneurs who are currently small but growing in number.
3. Businesses with annual turnover of less than INR 5 cr allowed to file quarterly returns
From the financial year 2019-20, businesses with an annual turnover of less than INR 5 crores (that comprise over 90% of the GST payers) will be allowed to file their GST returns quarterly. Also, the tax rate for companies with turnover of up to 250 crores has been reduced to 25%. It may be noted that these companies make up for almost 99% of all the companies in the country. This is also applicable to new manufacturing companies without any turnover limits.
4. GST exemption for small traders
Small traders, service providers, and manufacturers are exempted from registering under GST if their annual turnover is less than INR 40 lakhs (20 lakhs for special states). Earlier, traders with an annual turnover of INR 20 lakhs (10 lakhs in case of special states) were required to register. This was discussed in the last GST Council Meeting and has been put into effect as per government directives.
5. GST composition schemes for small service providers
The service sector accounts for 55% of the Indian GDP, but it wasn’t covered under the composition scheme earlier. From the coming financial year, small service providers will be allowed to opt for composition scheme and pay GST at the rate of 6% instead of 18%, if their annual turnover is less than INR 50 lakhs.
These are some of the steps taken to help the MSMEs that faced challenges since 2016 with demonetisation, the introduction of GST and the ongoing crisis in the non-banking-financial-company sector.