Among the various interesting budget proposals introduced by the Finance Minister 2nd February 2017 in parliament, certain key considerations were given to the Micro, Small and Medium Enterprises (MSME) sector.
With the use of analytics, the Finance Minister made an interesting observation that the effective tax rate of MSME is much higher than that of larger companies. This,in spite of the fact that these companies contribute immensely towards economic growth and employment generation. To give a big boost to the MSMEs to thrive in a competitive environment, Mr. Jaitley has proposed to reduce the tax rate of MSMEs reporting turnover of less than ₹50 crore to 25% from the existing 30%. He also made an assertion that this benefit covers 96% of the total companies in India that are filing tax returns.
Also, in a drive to promote digital way of doing business, a lower rate of 6% from the existing 8% has been proposed to small companies having turnover less than ₹2 crore to the extent their sale proceeds are realised through banking channels. Similarly, the threshold for mandatory tax audit compliance has been raised to ₹2 crore, which would ease the compliance burden.
All of these measures suggest that with Budget 2017, the government has sought to reward those honest and compliant tax payers – whether the common man or MSMEs – to ensure inclusive growth and development.
Source: The Hindu