Union Budget 2023: Rs 9000 crore outlay to MSMEs to help ease working capital issues

• ByStartupStory     |    February 2, 2023

Union Budget 2023 has announced measures that are expected to provide relief to MSMEs which were one of the worst affected due to the pandemic. The credit guarantee scheme for MSMEs will be extended with an infusion of Rs 9000 crore. This will allow for an additional 2 lakh crore of guaranteed collateral-free credit to MSMEs, while the cost of credit will be reduced by one per cent. Also, in instances when MSMEs failed to execute contracts during the Covid period, 95 per cent of the forfeited amount relating to big or performance security will be returned to the MSMEs by the government and government undertakings.

The government has proposed to spend a record Rs 22,318 crore on allocations aimed at MSMEs in the budget. The budget has also proposed to enhance the limit for presumptive taxation for MSMEs to Rs 3 crore provided their cash receipts are less than their total turnover or gross receipts. Further, it has been proposed that income tax deduction is allowed only on ‘actual payment’ of the sum payable by the assesses to MSMEs.

Hailing the move, Chirag Taneja, Cofounder of Gokwik said, “The MSMEs account for a whopping 30% of India’s GDP, and their growth is imperial for the country to become a $5 trillion economy by 2027. The 2023 Union Budget has taken cognizance of this aspect and has come up with some suitable measures to provide the much-needed impetus to boost the battered segment due to the Covid pandemic. These initiatives would help bring more MSMEs under the formal and organized economy and digitize them. As an e-commerce enabler, we work with hundreds of such small businesses and brands that have the potential to become prominent players supplying to the world while operating out of a small Indian town. Many of these MSMEs sell online; thus, simplifying input tax credits for e-commerce suppliers will ensure they have enough working capital to run their day-to-day operations and increase efficiencies.”

The 2020 Covid induced pandemic had adversely impacted the financial health of over 80% small and micro businesses, as per various industry reports. However, India’s MSME sector that employs over 110 million seems to have posted a smart recovery from the pandemic as India continues to growth faster than all other nations despite an economic crisis caused by inflation and wars.

As per the recent Economic Survey, the MSME sector paid goods and services tax (GST) exceeding the pre-pandemic level in FY20.

Follow Startup Story