New Delhi, Feb 1 (KNN) Encouraging small entrepreneurs take digital route for doing business, Finance Minister Arun Jaitley proposed presumptive income tax for small and medium tax payers with turnover upto Rs 2 crore will be reduced to 6% in respect of turnover which is received by non-cash means.

According to experts, the move is likely to put some burden on the small companies with turnover of less that Rs 2 crore as they will have to start maintaining separate accounts from cash and non-cash incomes. But at the same time, it will save their 2% from the presumptive income tax.

During his Budget Speech in Parliament today, Jaitley proposed that “the presumptive income tax for small and medium tax payers whose turn-over is up to Rs 2 crore will be reduced from the present 8% of their turnover which is counted as presumptive income to 6% in respect of turnover which is received by non-cash means.”

This benefit will be applicable for transactions undertaken in the current year also, he added.

Opining on this, Debashis Bandhopadhyay, Senior MSME Policy Expert, said, “The tax rebate to small Companies is a highly welcome step.  MSME bodies including FISME, the leader in MSME policy facilitation, is advocating for quite some time to make a comfortable niche for MSMEs in the Companies Act, so that more MSMEs go for corporatisation. Restructuring corporate tax rates like Income tax slabs for individuals was a valid demand of the sector. With the budget announcement, majority of the ‘small’ Companies will get a big respite.

Jaitley also announced 5 per cent reduction in corporate tax rate from MSMEs with less than Rs 5 crore turnovers, a move which has been widely welcomed by the sector.

Bandhopadhyay said, “The MSME Companies were also looking for other non-tax reforms in the Company law like exemption from compulsory independent directors, on Board and cost audit of operations irrespective of the size of the Company. Hope Mr. Jaitley will budge next time.”

The Budget also proposes to exempt BCD, Excise/CV duty and SAD on miniaturised POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners.

In a move that would benefit the MSME companies, Jaitley also proposed to exempt parts and components for manufacture of such devices, so as to encourage domestic manufacturing of these devices.

Jaitley stressed that increased digital transactions will enable MSMEs access formal credit.

He said that the Government will encourage Small Industries Development Bank of India (SIDBI) to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.

Giving his expert views, Bandhopadhyay, Policy Director with FISME, said, “The intension expressed by the Finance Minister to facilitate formal credit to MSMEs is commendable. However, he could have been more specific in defining his package.  Majority of the micro enterprises are financed by the private lenders and so called ‘Chit Funds’. Will they be made eligible for refinancing by the SIDBI? Another source of finance for marginal businesses is the micro finance institutions. Will they be made eligible for SIDBI refinance? Will SIDBI come out of it’s ‘absolutely no risk’ mind set to liberalised funding? The sector will wait for further announcements.”

To spur digitization, the Finance Minister assured the House that the Government will consider and work with various stakeholders for early implementation of the interim recommendations of the Committee of Chief Ministers on digital transactions.

Further, he said that the Government is considering the option of amending the Negotiable Instruments Act to ensure that the payees of dishonoured cheques are able to realise the payments.

The move will have huge impact on trade credit and working capital availability. 

Furthermore, Jaitley said transactions above Rs 3 lakh will no longer be permitted in cash.

The move is aimed at giving a push to Digital Economy and weed-out corruption and black money.

The MSME sector, which was hit badly during demonetization due to cash crunch, has been demanding for handholding support from the government to help them switch to Digital Means. (KNN Bureau)