Inputs
for Budget 2012 & 2013: Some of the recommendations
emerged from Consultative Workshop of Indian MSME Stake
Holders organized by WASME titled “Inputs for Budget
2012 & Review of MSME Development Act, 2006”
November 19, 2011
Inputs
for Budget 2012 & Review of MSME Development Act, 2006,
Consultative workshop of Indian MSME stake holders organized
by WASME sought inputs from MSME stakeholders on budget
formulation.
Participants: Experts such as tax consultants, Chartered
Accountants, MSME practitioners, MSME associations, Entrepreneurs,
trade and commerce associations participated. All the speakers
called for providing importance to MSME sector in the budget
2012. It was observed that in the Income Tax Act, 1961,
the concept, ‘Small and Medium Enterprise’,
is not defined.
Following are some of the observations & recommendations
emerged
• Experts called for the need for a specific tax design
for MSMEs, for example: Tax incentives for “retained
earnings by MSMEs so as to encourage self-finance.
•
Special offices for smaller enterprise tax payers so as
to facilitate their assessments;
•
Incentive for venture capital funds for their investments
in MSMEs.
•
Special MSME focused Stock Exchange.
•
It was noted that there is a need for an attitudinal change
from the side of the bankers so that they should sanction
more loans under credit guarantee scheme. ( Mr. T P Mishra
of Bank of Baroda observed)
•
Limited Period Provision & facilitate growth and expansion
of micro, small and medium enterprises: In order to ensure
that the MSMEs grow from micro to small; small to medium
and medium to large enterprises and contribute to economic
development, there should be limited period provision for
MSME sector. An MSME need to be allowed tax incentive for
a limited period of time only may be 5 to 7 years, some
of the experts noted.
•
With regard to delayed payment, the concerned PSU or large
unit should credit interest and same should be shown in
unpaid liabilities in their balance sheets.
•
EARNEST MONEY & SECURITY DEPOSITS: There is a provision
that MSME units registered with NSIC are exempted from Earnest
Money and Security Deposits against Govt. & PSU tenders
but some departments on the pretention of critical or safety
items still insist for the same making the MSME units totally
uncompetitive. There should be a provision to stop such
practices.
•
INTREST RATES: The MSME units should be provided term loans
and Working Capital at lesser rates of interest so as to
make them more competitive.
•
SECRICE TAX LIABLITY: In certain cases MSME units have to
pay service tax even if the same has been charged and deposited
by the service provider. The service tax liability should
be on the service provider only and if it is paid by them
and charged from MSME it should not be compelled to make
the payment again.
•
RATE OF EXCISE DUTY: There was a concession of 40 basis
points for small scale units till 2008 which was abolished
resulting in making the MSME uncompetitive. Though exemption
in Excise duty is there up to certain level, the MSME can
not avail that as the Buyers desire MODVAT invoices.
•
Investment limit in plant and machinery for manufacturing
concern and cost of equipment limit in Service concern be
enhanced keeping in view of the inflationary trend of present
scenario.
•
Higher DE ratio and low current ratio for SME enterprises
be accepted in view of their low equity level as most of
the entrepreneurs are of first generation.
• Govt. must provide Excise , VAT, concession to the
SME entrepreneurs during project implementation period as
well as during first two years of commercial productions.
•
Interest subvention is to be provided to SME entrepreneurs
at par with Agricultural Sectors as the sustainability of
the economy depend on growth of the tertiary sector.
• Free ECGC guarantee be provided to the SME entrepreneurs
engaged in exports especially to the categories where investment
in plant and machinery is low.
•
Banks must be given target to achieve under SSI sectors
including private and foreign banks.
• Receivables upto 120 days be considered as good
debts keeping in view the slow realization of debtors.
•
Relaxing norms of provisioning in recasting of loans granted
to SMEs.
• The concept of linking pricing of loan granted to
SME sectors be avoided to ensure uniform rate of interest
by the banks to this sector under regulatory definition.
The rate of interest is to be regulated as per investment
criteria under Plant and machinery and cost of equipment
as the case may be.
•
No insistence to the SME entrepreneurs for third party products.
• Govt. and CGTSME should jointly provide guarantee
to entrepreneurs engaged in manufacturing and processing
under the sector to the extent of 90% for those proposals
sanctioned through committee approach and sponsored to the
bank branch as decided by the committee comprising of bank
officials, DIC based on the near proximity, desire of the
entrepreneur.
•
Rehabilitation of sick units be provided on priority and
new schemes be devised to nurse those units.
• Government should come forward to support ICT adoption
in MSMEs, since that would enhance MSME competitiveness.
This may be done through a model of cooperation between
Large Enterprises and Small Enterprises by using the possibilities
of cloud computing. The cloud computing model through which
MSMEs could adopt various ICT applications at their enterprise
level need to be supported by the government.
•
Dissemination of market information: Information is the
most powerful tool available to any business. Information
about consumer preferences, market information, production
trends, technological advances etc are crucial to any business.
Larger businesses have the resources to access such information
where as small businesses are mostly in the dark. DICs can
be strengthened to provide such services as well.
• Building Networking Infrastructure and Cultural
Capital: In the global market context, it is important for
Indian MSMEs to have sufficient cultural capital and networking
infrastructure. Budget must make adequate provision to create
an event and exhibition infrastructure across the country,
to begin within each districts/blocks.
•
Data base of MSME Retail Sector: There is a need for building
up a proper data base of retail enterprises in the country.
• Comprehensive domestic retail policy: Absence of
a comprehensive retail trade policy makes the entire retail
operations direction-less. Though policies/ laws exist,
they are on different aspects and are administered by different
agencies/authorities. In order to address these issues there
is a need to have separate department or ministry to look
after the interests of micro, small and medium sized retailers
as well as the informal retail trade enterprises. Special
capacity building, up-gradation schemes for retail sector
need to be designed.
•
Waste Management and Recycling Industry: This sector has
lot of potential to generate jobs. In order to promote Waste
Management and Recycling Industry, incentives should be
given to all such environmental entrepreneurship, such as
subsidies, low interest loans & tax exemptions to promote
them. Budget may provide & create special funds for
promoting waste management MSMEs. Waste management and municipal
solid waste management companies should be given industry
status.
• Rural Business Incubators: In order to promote and
create new businesses, it is important to create rural business
incubators in the block level throughout the country as
Local Government Initiative.
•
Participants also highlighted the need for frequently updating
circulars issued by MSME ministry and making them available
in its website and communicating them appropriately. And
there is a need of improved information dissemination about
schemes and incentives at ground level.
