As February 1 draws closer, stakeholders in the MSME ecosystem have been voicing their Budget 2024 demands to Finance Minister Nirmala Sitharaman to support the growth of small businesses. Among the key asks is streamlining Goods and Services Tax (GST) and enabling more credit access to businesses. Here are some of the key recommendations by MSME voices to the government:
Streamline GST
Traders’ body has proposed the establishment of GST coordination committees at the district level for streamlined problem-solving and increased GST network, leading to enhanced revenue for both central and state governments. It also called for the creation of a special income tax slab for businesses similar to that for companies. Supporting the Prime Minister’s vision of “One Nation, One Tax,” they proposed the introduction of a single license for businesses. The body also urged for the immediate announcement of e-commerce policy and the implementation of the National Retail Trade Policy.
More liquidity for MSMEs
Industry expert: There is a pressing need to have programs similar to ECLGS, to assist MSMEs and ease their liquidity position. Since MSMEs usually operate on thin margins and stretched working capital, such schemes facilitate lower interest rates due to credit guarantee and reduce the interest burden. In the realm of global outreach, facilitating cross-border trade finance is imperative to achieve India’s ambitious export targets set at $2 trillion by 2030. Necessary amendments are required, especially to the Negotiable Instruments Act, which will allow MSMEs to access formal and affordable credit using digital negotiable instruments.
Reduced Compliance
Another Industry expert: Measures such as simplified regulatory procedures and reduced compliance burdens can empower startups and MSMEs, promoting a more agile and competitive landscape. Access to affordable credit remains a cornerstone for these entities; thus, the budget should consider incentivized lending rates, credit guarantee schemes, and increased funding channels to enhance financial resilience. Targeted tax incentives for research and development activities can further stimulate innovation within these sectors.
Extending support to MFIs, SFBs
Another Industry expert: In 2024, we expect the upcoming budget to further drive financial inclusion by increasing the credit corpus for MSMEs. This involves extending support to microfinance institutions (MFIs) and small finance banks (SFBs), that help them meet their financing needs. To reach enterprises in remote corners of the country, we foresee incentives for fintechs that provide lending solutions beyond Tier 2 & 3 cities. We expect the budget to further scale centres of excellence for AI innovation as well as increase investments in supercomputing to drive the growth of home-grown AI solutions.
Support in hiring women workforce
Another Industry expert: India has the maximum participation from the MSME sector and is the real powerhouse for increasing women participation in the workforce. However, if they are hiring women workforce, they need support towards maternity benefits as subsidy, as this has notably become an additional burden for MSMEs and discourages the government agenda to create more opportunities for women in the workforce for MSMEs. Also, the segments to create formalization in domestic workers need a government impetus to drive the change. One of the suggested ways will be to incentivize taxpayers through tax rebates for individuals who are contributing to formal employment through social security, and minimum wages towards domestic workers in their homes.