Budget 2019 – 10 things for startups, MSMEs and women entrepreneurs

Budget 2019 - 10 things for startups, MSMEs and women entrepreneurs

 

The Union Budget 2019 was presented by FM Nirmala Sitharaman yesterday. The Economic Survey 2018-19 heavily emphasized the need to encourage young firms to boost job creation, the startups and MSME sectors. The Union Budget seemed to tag along those lines as well.

 

Here are 10 major things that startups, MSMEs and women entrepreneurs should know about:

 

 

1. On Financial Aid – 

i) Under the interest subvention scheme, Rs 350 crore allocation has been made for 2% interest subvention to all GST registered MSMEs in the current year on all fresh and incremental loans. 

ii) Loan of Rs 1 crore for MSMEs being cleared within 59 minutes through an online portal. 

2. On Digitization and boosting job creation –

i) Government also plans to open a payment portal for MSMEs. Investment in MSMEs will receive a big boost through the portal if the delays in payments to SMEs and MSMEs are eliminated. 

ii) Sitharaman proposed be start an exclusive TV channel for startups under Doordarshan bouquet to provide a platform for startups to disseminate information in the industry. 

iii)  BHIM, UPI, Aadhaar Pay, NEFT, RTGS can be used to promote less cash economy. Business establishments with annual turnover of Rs 50 crore will have to use these modes of payments with no charges or merchant discount rates will be imposed on customers or merchants. RBI and banks will absorb these costs.

3) On Ease of Living

 

Small retailers with an annual turnover of less than Rs 1.5 crore will get pension benefit under the Pradhaan Mantri Man Dhan Yojna. More than 3 crore shop owners will benefit for the scheme. 

 

4) On Angel Tax

 

i) The startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation of share premium. A mechanism of e-verification will be put in place and with this, the funds raised by startups will not require any tax scrutiny. 

 

5) On Direct Taxation

 

i) Faceless income tax assessment in electronic mode involving no human interface to be launched this year in a phased manner, to reduce taxpayer harassment. 

ii) The Finance Minister also announced that special arrangements will be made by CBDT for pending reviews and cases related to Startups. 

iii)The threshold limit for reduced tax rate of 25% in case of domestic companies has been increased from Rs. 250 crores to Rs. 400 crores. Thus, a domestic company whose total turnover or the gross receipt in the previous year 2017-2018 does not exceed Rs. 400 crore shall be taxable at the rate of 25%.

 

6) On GST


i) A Proviso has been inserted to clarify that interest for late payment of tax shall be levied only on that portion of tax which has been paid by debiting the electronic cash ledger. Earlier there was a confusion among taxpayers on this issue whether such interest would be charged on gross tax liability or only on net tax liability. However, there is one exception to this rule wherein interest shall be levied on gross tax liability. Where returns are filed subsequent to initiation of any proceedings under GST Act, the interest shall be levied on the gross tax liability.

ii) Every registered person shall authenticate, or furnish proof of possession of Aadhaar number. If an Aadhaar number is not assigned to the registered person, such person shall be offered an alternate and viable means of identification. In case of failure to undergo authentication or furnish proof of possession of Aadhaar number or furnish alternate and viable means of identification, registration allotted to such person shall be deemed to be invalid.

 iii) Now a registered person can transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger to the electronic cash ledger for Integrated Tax, Central Tax, State Tax, Union Territory Tax or Cess through a new form PMT-09 subject to the conditions and restrictions prescribed under GST Act. Such transfer shall be deemed to be a refund from the electronic cash ledger.

iv) The value of exempt supply of services provided by way of extending deposits, loans or advances (where consideration is received in form of interest or discount) shall not be considered for determining turnover under Composition Scheme.

v) Simplified return forms to be implemented soon. Composition registered dealers are required to pay tax quarterly and file return on annual basis.

 

vi)The Legacy Dispute Resolution Scheme has been proposed to resolve old tax issues.

 
 

7) On Labor Laws

 
 
The government proposing to streamline multiple labour laws into a set of ‘four labour codes’.

8) On FDI


Local sourcing norms to be eased for single-brand retail FDI. 100% FDI will be permitted for insurance intermediary.

 

 

9) On Women Entrepreneurship

 

i) To further encourage women entrepreneurship, Women SHG Interest Subvention Programme to be expanded to all districts in India.  

 

ii) Every verified woman SHG member having a Jan Dhan account, an overdraft of Rs 5m000 will be allowed. One woman in every SHG shall be made eligible for a loan of Rs 1 lakh under MUDRA scheme.

10) On Skill Development 

 

i) The move to set-up around 80 ‘livelihood business incubators’ and 20 tech business incubators is commendable as it will boost entrepreneurship besides upskilling the workforce.

 

 

 
 

Our Observation:

 
 
1. The Budget is not heavy on sops or lofty numbers. Rather, it seemed to present a balanced consideration on major essential facets like infrastructure,education, research and development. Special focus has been given to new age, tech oriented businesses. Focus on the still nascent / under utilized sectors like Big Data, AI, robotics, solar power indicates an intent to push India towards the global scalability index. 

 
On the other hand, we have also seen focus on making standard of living easier for the common public and small businesses. Measures like the ones mentioned above will indeed help a lot of small businesses. 

 
2. Further incentivising the digital infrastructure is a move to appreciate. Since the time the Government has brought in the Digital India initiative, we have seen a massive and steady decrease in cash based transactions. So much so that today, even the roadside temporary counters have Paytm, Phonepe, etc as their payment partners. This Budget takes these measures forward. 

 
Measures like TDS on cash withdrawal will surely help.The limit has been kept at Rs. 1 crore in a year. This has been done to keep small and medium scale businesses out of this TDS net. However, this might just be the loophole as well.
 
 
 
3. The move on Angel tax is also a welcome one. So is the e-assessement and expedited assesment. The labor law getting consolidated into four labor codes. All of these are definitely strong positive recommendations and paves the way towards the ease of doing business in India.

 
4.  The move towards the interest subvention scheme seems to be generally feasible. However, this facility shall be applicable only to the  “GST registered” MESMEs. This seems to be rather disappointing. Small startups, who are in actual need of availing these subsidies might not be able to avail this incentive. 

 
Overall, this Budget seems to be a positive one for the startups and MSME sector, especially the tech oriented ones.

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