Eager to know what the Union Budget 2024 of India has in store for MSMEs this year around? The Finance Minister presented Budget 2024 in Parliament today and has rolled out a host of reforms for MSMEs. These announcements seek to boost the growth of the sector and improve the credit facility available to small business owners.
Special attention to MSMEs
The finance minister said that the Budget provided “special attention to MSMEs by formulating a package covering financial, technological support to MSMEs” to improve their growth and help them compete with global enterprises.
Major GST and corporate tax reforms for MSMEs
Corporate tax rates and GST rules remain the same under Union Budget 2024. Finance minister has announced a minor change to the claiming of Input Tax Credit and a few other tax-related measures:
- The government has found a way to ease the pain of claiming Input Tax Credit (ITC) by extending the time limit for the claim. New sub-sections (5) and (6) are being introduced under Section 16 of the CGST Act to relax the time limit to avail input tax credit.
- For invoices or debit notes issued for 2017- 18, 2018-19, 2019-20, and 2020-21, businesses can claim Input Tax Credit in any return filed up to the 30th day of November 2021.
- The time limit for businesses to take advantage of the reduced penalty for unpaid tax balances is being increased from 30 to 60 days.
Other important MSME reforms in Union Budget 2024
Let us have a look at the key highlights of this package rolled out for the MSME sector:
- Credit Guarantee Scheme for MSMEs
The government has shown a keen interest in easing credit access to MSMEs by bringing reforms to the credit guarantee scheme under the Union budget 2024. This scheme allows MSMEs to purchase machinery and equipment on credit without submitting collateral or a third-party guarantee.
The government of India has proposed a self-financing guarantee fund that will provide coverage up to ₹100 Crore per applicant under this scheme. Loan applications can be for amounts larger than ₹100 Crore, but MSMEs will have to pay an upfront guarantee fee and an annual guarantee fee on the reducing loan balance.
- New credit assessment model
A new assessment model for MSME credit by public sector banks was proposed, eliminating the need for external assessment. The credit assessment model of MSMEs will now base its criteria on the digital footprint of MSMEs in the economy rather than assets and turnover criteria.
- Credit support during the stress period
Possibly inspired by events during the pandemic, the government mentioned that a new mechanism would be designed to extend credit support to MSMEs during a stress period. If any MSMEs face bankruptcy situations for “reasons beyond their control,” credit support will be extended to prevent these enterprises from entering the NPA category. Credit availability will be ensured through a guarantee from a government-promoted fund.
- Increased MUDRA loan limit
MUDRA loan or the PMMY scheme was introduced to provide collateral-free micro loans of up to ₹10 Lakh to non-corporate, non-farm MSMEs. Budget 2024 has increased this loan limit to ₹20 Lakh for those who have availed and successfully repaid loans under the Tarun category (There are three loan categories under the MUDRA loan scheme: Shishu—loans up to ₹50000, Kishor—loans from ₹50000 to ₹5 Lakh, and Tarun—loans from ₹5 Lakh to ₹20 Lakh).
- New SIDBI branches
SIDBI (Small Industries Development Bank of India) will open new branches to expand its reach to support all major MSME clusters within 3 years and provide direct credit to small businesses in the country. Union budget 2024 has announced the opening of 24 new branches is scheduled this year, and the service coverage of SIDBIs will expand to 168 out of 242 major MSME clusters.
- Boosting MSME sales in international markets
The government has decided to set up e-commerce export hubs in public-private partnership mode to enable MSMEs and traditional artisans to sell their products in international markets. These export hubs will showcase a seamless regulatory and logistics framework to promote trade and export-related services under one roof.
This financial year, MSMEs can look at easy credit access and relaxations in the time limit for claiming ITC. Also, keep an eye out for changes to the CGST Act, as several amendments and insertions are in consideration.
