The much awaited Union Budget Report announced on 1st February, 2017 brought with it both new & modified policies and tax reforms that can prove to be extremely beneficial for the Indian SME (Small & Medium Enterprises) sector in the long run. Despite being heavily focused on the rural and the agriculture sectors, the budget report also contains several policies that can help many small businesses upgrade their capabilities, and compete at par with established companies.
While there are several factors that still need to be considered before these policies are executed, the new budget certainly proves that the Indian Government is undertaking all efforts necessary to provide comprehensive infrastructure to help the SME sector grow.
Let us explore the various provisions/benefits for small businesses according to the latest union budget report:
Income Tax benefits
Being one of the most anticipated expectation from the 2017 union budget, the relaxation in income tax for MSMEs received positive feedback from most industries. The benefit comes in the form of 5 per cent tax reduction from the current income tax applicable rate of 30 per cent on companies that have an annual turnover of up to INR 50 Crore. The revised 25 per cent tax will benefit close to 96 per cent, i.e. approximately 6.67 lakh businesses across India. This also suggests that the government will be forgoing up to INR 72,000 Crore in tax revenues with this tax reduction in order to help small businesses grow, which is quite praiseworthy.
Implementation of the GST Bill
The 2017 union budget managed to answer some key points regarding the much anticipated Goods & Services Tax (GST) bill, which if implemented, can create a uniform taxation system by eliminating multiplicity of taxes. In the latest budget, the GST council has finalized on recommendations with the consensus of all those involved. They are expected to put forth their final decision on the new taxation system across all industries by 1st April, 2017.