What Small Business Enterprises Expect from the Finance Minister This Annual Budget?
With the annual budget just around the corner, there are expectations galore from the finance minister Mr. Arun Jaitely. Everyone from personal tax payer to the business enterprise, large corporate and various industrial chambers are all looking at various reforms that the new budget would hold. With the Prime Minister talking about skill development and promotion of small industries in the country, the Indian small and medium enterprise (SME) sector is hoping that the upcoming annual budget may introduce some game changing reforms for them. Here is a look at what most small business companies across various sectors expect from their finance minister this budget session.
Low Interest Rates for Business Loans:
Getting easier access to business loans remains one of the top priorities of the Indian SME sector for a long time. While the Reserve Bank of India has issued various guidelines to banks making it mandatory to offer collateral free loans to SMEs and other small business entities, banks are usually reluctant to offer such loans. Even loans backed by the Credit Guarantee Fund Trust for Micro and Small Enterprises are not available freely. Banks seek collateral security for most business loans charging a higher interest rate.
Various industry bodies including FICCI and other industrial chambers of commerce have been urging the finance ministry to cut rep rates in the past which would allow lower interest rates for loans. Indian SMEs not only face still completion from other rival nations like China and Bangladesh, the lack of availability of easy credit on low interest rates acts like a flesh in the thorn of SME growth. While the MSME ministry has been on the same page as SMEs acknowledging the fact that SME loans need to be more proactive and easily available, it remains to be seen how many reforms the finance minister can accommodate in the upcoming annual budget.
Startup Taxation Reforms:
A few years ago startup companies in India were witnessing a lot of investor interest. From angel investors to venture capitalists just about everyone was looking to invest in the next big company based out of India. The technology based companies were the biggest beneficiary of this boom until the government initiated a law restricting the issuance of equity shares for a premium without a tax cut. Ever since the indirect tax has been initiated startup companies have been witnessing a lack of investment from investors.
The removal of such indirect taxes can go a long way in making sure Indian startup companies receive both domestic as well as international funding. The SME sector as a whole is looking forward to some tax amendments in the annual budget that would cut out any such indirect taxes for investors putting in their funds for any startup companies promoting the SME sector as a whole.
Tax Free Window for Specific Sectors:
Indian SME sector is facing stiff global competition today than ever before in history. Smaller nations like Sri Lanka and Bangladesh are giving tough competition to Indian SMEs across sectors especially in manufacturing, technology and service sectors. The availability of cheap labor, tax windows and cheap raw materials in such countries make sure that they are able to produce and sell goods at a lower price compared to Indian SMEs.
Indian SMEs are hoping for a tax concession including a tax free window for medium to long term in various sectors that are witnessing a direct competition from such smaller nations. While the government has issued such tax rebates for companies operating from various special economic zones or industrial parks, a pan Indian tax free window for specific sectors is a need of the hour.
Removal of VAT Grievances: If there is one issue that each small business enterprise as well as traders and small shop keepers would like the finance minister to address, it is the system of value added tax or VAT. Different states have different VAT rates making it difficult for Indian SMEs to have a consistent price for their products across India.
The growing competition means that SMEs are often forced to make use of underhand methods like under billing to compensate for the high VAT rates. There has also been a lot of fear induced by various agencies in the hearts and minds of Indian SMEs due in the name of VAT raids which are largely seen as harassment tools of state governments for various sectors. Indian SMEs would hope that the finance minister could bite the bullet on implementation of Goods and service tax (GST) brining a same tax regime across India for various products benefitting the consumers as well as SMEs.
What they expect from the Government:
Says Vipul Jain, CEO, Advancells:
“We have very high hopes from the budget 2015. It is a known fact that the Prime Minister is a strong advocate of new cutting edge medical treatments like stem cell therapies. His meeting with the Japanese stem cells pioneer Mr. Shinaya Yamanka during his trip to Japan in August 2014 only einforces this fact. We hope that this government will give a much needed push to the medical research industry in the country. Making research grants available to credible private players, without the burden of bureaucracy would top my list. Another aspect where urgent attention of the government is sought is the ease and pace at which therapies under research can be bought to the main stream market so that they can be beneficial the common man“
Says B.Jayashankar, Founder and Director, KNEWCLEUS:
“While the present Government is attempting several reforms as far as the education sector is concerned, still a lot needs to be done. The sector has come to terms with the fact that information technology is an enabler of social inclusivity, by the sheer truth that it can bring information to the masses, educate them and make them live a life of quality. Technology is an indispensible aspect in fostering education and our society is waking up to this fact. The One-Laptop-Per-Child was the initial fuel that needs to be further triggered in today’s day and age. My wish list from the budget ’15 will be to request the Government to allow for tax free purchases of Laptops, tablets and computers by registered schools. This, I believe will go a long way in making quality education more accessible and it will also play a huge role in empowering the underprivileged children in our society.”
Says Amol Naikawadi, Joint Managing Director, Indus Health Plus:
“The sectorial allocation for health needs should be increased from current 1.69% of GDP to at least 7 percent of GDP which would be in line with other developing economies of the world. However the current government has given indications to reduce public spending on healthcare. A reduction in sectorial spending from current 1.69 percent of GDP to 1.29 percent is not advisable and will affect several public health assurance spendings like RSBY, Arogya Shree schemes etc.
Says Subhash Agarwal, Managing Director, Cheers Devices:
India has emerged as one of the fastest-growing mobile phone markets. The government has to be in sync with the industry to help and grow the same. This requires an overall good budget and monetary policy to boost IT and telecom industry. For the Indian mobile market, our expectation from Budget 2015 is that the government should make policies to do something to encourage small business holders. This will help us to participate willingly with the "Make in India" project.
Also there is a need of hundreds of components to make a device. This is only possible when all the small and big industrialists come together and join their hearts to succeed with Make in India. We also expect the same for the e-commerce segment as they have a huge role to play for our sales and overall marketing. This will help the overall market and economy to raise double the figures.
Says Rajiv Nath: Forum Coordinator, AIMED and Jt. MD, Hindustan Syringes & Medical Devices:
“Medical device industry is identified as one of the Top five key sectors to promote domestic manufacturing and reduce import dependency as per Prime Minister’s vision of ‘Make in India’. The Indian medical device industry is suffering due to lopsided taxation regime which increased country’s import dependency to a perilous level of 70% in this critical sector and up to 90% in electronic medical devices. The lopsided taxation structure also closure of many domestic medical device manufacturing units with many manufacturers simply turning importers just to remain in business. We expect a reversal / Rationalization of skewed and lopsided inverted duty structure, blanket ban on 100% FDI in brown field projects and 100% FDI only in Green Field Projects. The government should ensure 70% turnover from manufacturing by 100% FDI Units of Medical devices from their Indian Manufacturing units to avoid misuse of 100% FDI by MNC’s. We also expect increase of basic custom duty on medical devices from NIL (or 5%) to at least 10%. There is a need for re-imposition of SAD of 4% on import of medical devices”.