The Budget 2023-24 is being presented by the union minister of finance Nirmala Sitharaman.
Meanwhile, myriads of memoranda have been presented to the ministry or are in the process of being presented to the Finance Ministry.
According to an ET report, “The broader focus of the budget will be to promote growth with a focus on local manufacturing and exports”.
Expectations from budget 2023-2024
Of course, the Ministry will evaluate them considering the government’s priorities and the state of the economy at home and abroad.
However, as someone who is keen to understand the matters pertaining to the financial requirements of MSMEs, I would like to talk about the expectations of MSMEs from Union Budget 2023-24.
Key Takeaways
- Directives to implement four labor codes
- Relaxation in tax
- Reform in banking and finance in terms of ratings
- Introduce a long-term sustainable model for MSMEs
- Decriminalize and reduce the costs of doing business
- Focus on building an inclusive and varied tourism industry
- Device innovative ways of financing and adopting green energy
Directives to implement four labor codes:
India has the potential to be the manufacturing hub of the world. If the government takes adequate measures to incentivize the manufacturing sector in some way, this dream can be realized.
As a formative measure, the central government can guide the state governments in implementing the four labor codes. Manufacturing and the service economy can both greatly benefit from a relaxation in the corporate tax rate.
If there is good news on either of these fronts, it will certainly help the markets. We anticipate that the FM will incentivize fintech start-ups, especially those using AI.
Relaxation in tax:
To make sure banking service is accessible to people living in the hinterlands we need technology, security, trust, and the necessary Government support.
That is why Budget-2023 should offer some tax benefits on the total expenditure incurred by fintech on the Financial Inclusion Initiative. If the GST is subsidized, even by a little amount, it will greatly facilitate the distribution of banking services and government benefits to the general public.
Also, this will encourage businesses working toward financial inclusion to come up with game-changing technologies that give people in underserved areas easier access to banking.
Reform in banking and finance in terms of ratings
According to Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), credit rating agencies need to employ a different model for MSMEs than the ones that are used for large industries. Otherwise, no MSMEs will get an investment grade rating. Bhardwaj also suggests that a committee must be formed to resolve the issue related to credit rating.
Despite all banks signing a code not to charge pre-payment charges, banks are still charging 2 to 4 percent penalties. He also feels the issue related to prepayment penalties should be addressed in this budget.
Introduce a long-term sustainable model for MSMEs
Due to the current economic turmoil, small and medium-sized businesses (SMEs) are looking for quick relief from rising commodity prices and disruptions in their supply of raw materials.
The Emergency Credit Line Guarantee Scheme (ECLGS) is the type of program that helps small and medium-sized enterprises (SMEs) weather difficult economic times and satisfy their growing, urgent need for money.
With the government possibly refocusing on the Made in India label and import substitution, SMEs will be in a stronger position to expand and thrive.
More foreign direct investment (FDI) is needed to help MSMEs grow economically, hence new rules need to be put in place to encourage this.
Many micro, small, and medium-sized enterprises (MSMEs) would benefit from seeing their income tax rates lowered in a similar fashion to the way that corporations have seen theirs lowered.
Due to the lengthy application process, only a small number of micro, small, and medium-sized enterprises (MSMEs) have been able to take advantage of the recently introduced TReDS (Trade Receivables Discounting System). As a result, there are hopes that the TReDS facility will soon be expanded to cover a larger number of MSMEs and to include certain concessions.
Payment delays halt the flow of money to the MSMEs sector, so there must be a way to settle payments faster and make it easier for MSMEs to obtain lines of credit.
Decriminalize and reduce the costs of doing business
We expect the FM to pay attention to decriminalization and lowering business costs. Businesses can benefit from raising the threshold for violations of the Goods and Services Tax (GST) Law from Rs 5 crore to Rs 20 crore.
These measures would go a long way toward reassuring business owners that their expansion plans are safe from legal repercussions.
Saket Dalmia, President, PHD Chamber of Commerce and Industry also expects the budget to work towards substantial reductions in the costs of doing business. This would include a reduction in the cost of capital, power, logistics, and of land, and labor.
More importantly, in his view, operating expenses shouldn’t exceed those of the world’s top three manufacturing nations (China, the United States, and Japan).
Focus on building an inclusive and varied tourism industry
Dalmia feels that concept-driven tourism, which makes use of India’s cultural and natural legacies, is key to making the industry more accessible and diverse. This includes, for instance, promoting the more than 200 tropical islands that are a part of our country and attracting pilgrims to visit the 12 jyotirlingas.
He explained that GST and VAT are not charged in the majority of countries where people travel for vacation. We propose that the 18% GST be removed from tourism infrastructure and facilities.
Device innovative ways of financing and adopting green energy
In this area, there needs to be a special committee set up to look into new, focused ways to finance and use green energy to get around the long waiting time.
The taxes on biofuels should be brought to 0. This is a key step for the rapid expansion in the production of biofuels and is also needed for energy security.