The Union Budget of 2015 has given a fillip to SMEs and startups in India and on the whole has been received positively by the industry.
Carrying forward the government’s ‘Make in India’ initiative and their commitment to boosting the SMEs, Rs 20,000 crore has been allocated to the SME sector through MUDRA (Micro Units Development Refinance Agency) Bank. The Finance Minister has also allocated Rs 1000 crore for support to startups. He has reconfirmed his promise to set up an expert committee for legislation on single-window clearance.
What the budget offers SMEs
- It has been proposed to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crore, and credit guarantee corpus of 3,000 crore, which will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana. Priority will be given to SC/ST/OBC enterprises in lending.
- Permanent Establishment (PE) norm is to be modified to encourage fund managers to relocate to India. General Anti Avoidance Rule (GAAR) will be deferred by two years. It will apply to investments made on or after 01-04-2017, when implemented.
- In order to encourage young entrepreneurs, rate of income tax on royalty and fees for technical services will be reduced to 10% from the previous 25%.
- To minimise the impact of duty evasion, basic custom duty on certain inputs, raw materials, intermediates and components in 22 items is proposed to be reduced. All goods except populated printed circuit boards for use in manufacture of ITA bound items are to be exempted from SAD.
Implications of the budget for investments & startups
- The government is creating a means called SETU (Self-Employment and Talent Utilisation) that will support all aspects of startup businesses, and other self-employment activities, particularly in technology-driven areas. Rs. 1,000 crore has been initially earmarked for the purpose in NITI Aayog.
- In order to promote investment in the country, a Public Debt Management Agency (PDMA) will be set up to bring both India’s external borrowings and domestic debt under one ambit. The Finance Minister has proposed to merge the Forwards Markets Commission with SEBI to strengthen regulation of commodity forward markets and reduce wild speculation. He added that enabling legislation, amending the Government Securities Act and the RBI Act is proposed in the 2015 Finance Bill.
- Foreign investments will be allowed in Alternate Investment Funds. In order to catalyze investments from the Indian Private Sector in South East Asia, a Project Development Company will set up manufacturing hubs in Myanmar, Cambodia, Vietnam and Laos.
Gartner, an information technology research and advisory firm has described this budget as, “Pragmatic, growth-oriented, and SME-friendly.” However, the merit of the budget lies not in its proposals but rather in the implementation of the announcements. The industry is optimistic and has its fingers crossed that this budget will deliver in full measure all that it has promised.
Do share your views on Budget 2015 and your thoughts on how it will impact your industry.
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