With a large number of small businesses and MSMEs still struggling to get back to normalcy due to the ongoing pandemic, the Union Budget 2022-23 assumes great significance to them. 

The finance ministry itself asked the trade bodies from the industry for the recommendations on the taxation. Based on their suggestions and the expectations from industry experts, below are some important reforms, policy changes and other measures that the finance government is likely to announce during the current budget. 

Budget 2022: Live Updates

Budget 2022 Expectations For Small Businesses

• Online Business Without GST Registration: Small online businesses with an annual turnover of less than INR 40 lakh are expected to be exempted from GST registration. This would encourage most self-employed women, artisans and other home-based businesses to sell their products online.

• Reduce Compliance to Ease Business: Simplifying GST compliance requirements and others like licencing, audit, loans, etc., is expected to encourage small businesses to go online and contribute to the country’s digital economy. 

• Better Infrastructure to Support e-Commerce: Facilitating better infrastructure in terms of roads, highways, railways, shipping ports, cold storage, warehousing, which form a critical part of the e-commerce supply chain, would help e-tailers serve more customers and also encourage more people to start an e-Commerce business.  

• Other Expectations
  • Reduction in taxes considering the increasing petrol and diesel prices.
  • Tax SOPs for mergers and acquisitions in the retail and service industries.
  • Improving digital infrastructure to encourage small online businesses. 
  • State-wide incubators to encourage innovation.
  • Incentives and support for inventory management. 
  • Budget allocation for digital literacy, cultural employment, and the linguistic ability for small businesses and direct to consumer (DTC) companies. 

Budget 2022 Expectations For SME’s and MSMEs

• GST Rationalization: The GST on manufacturing for MSMEs is expected to be revised from 18% to 12% to help small manufacturers sell their products at competitive prices.

• Tax Benefit on R&D: The tax advantage on research and development is expected to be returned to its previous 200% from 150%.  

• Resolve Delayed Payments: Despite the launch of MSME SAMADHAAN – Delayed Payment Monitoring System in 2017, the issue of delayed payments is still troubling the MSME sector. The Budget 22-23, is expected to implement measures that would expedite the process. 

• Easy Access to Capital: More capital availability would help MSMEs cope-up from the loss incurred during the pandemic situation. Fast tracking the Fund of Funds scheme, restructuring the loans, moratorium, and providing special incentives are some of the expected measures to ease the access to capital. 

• Other Expectations
  • Extension of Emergency Credit Guarantee Scheme for six more months.
  • Empowering bank credit managers with the discretion of relaxing the credit norms for 3-6 months.
  • Appointing baning ombudsman to address the issues like credit rejection from the bank managers. 
  • Amendment of the Insolvency and Bankruptcy Code (IBC) for better recovery of dues from MSMEs.
  • Incentives for using digital banking practices.
  • Paper-less approvals
  • Bringing down the cost of raw material.
  • Strengthening export infrastructure. 

Budget 2022 Expectations For Start-Ups

• Special Financing Schemes: To support the start-up ecosystem some specially formulated financing schemes are the need of the hour. 

• Framework to Regulate Crypto Currency Start-ups: A directional clarity on the framework to regulate the usage of crypto currencies and the associated start-ups.

• Rationalising taxes on Consumer Durables: The consumer durables sector is expecting more products to be brought under the 18% slab. It is also looking forward for  some incentives and promoting R&D. 

• Tax Incentives for Women-led Firms: Standard deduction and ease of access to capital are the expectations of women-led start-ups. 

• Effective implementation of National Logistics Policy is one of the major demands of logistics start-ups.

• Fashion start-ups are looking for reduced GST on readymade garments, easier compliance, and simplified taxation process. 

• Digital lending start-ups expect the government to develop digital infrastructure and to provide tax incentives to MSMEs. 

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