Small businesses wooed ahead of 2019 elections
As the country gears up for the 2019general elections, the government has announced several schemes to woo small businesses, the growth-driver of the Indian economy.
Rolling out financial support measures for small entities including debt restructuring and changes in taxation rules, the government is leaving no stone unturned to gain favour of this vital segment of the economy.
Let’s see the various initiatives announced by the poll-bound government to attract the attention of small entities.
1. Doubling of GST exemption limit
In what could bring major relief to small and mid-sized businesses (SMEs), the governmenthas announced doubling of the exemption threshold under GST to Rs. 40 lakh from the earlier Rs. 20 lakh, effective from 1st April 2019. The decision was taken at the 32nd GST Council Meet.
In other words, businesses with an annual turnover of up to Rs.40 lakhs are exempted from paying taxes under GST. The move could potentially benefit 2 million SMEs and ease the burden of GST compliance. It’s to be noted that since the introduction of GST, the nitty-gritty involved in the process has been a cause of concern for most SMEs. Most SMEs complained of their taxes going up post implementation of GST.
2. Increase in the threshold limit of composition scheme
In yet another major decision taken by the government, the threshold limit of the composition scheme under the GST regime has been increased from the earlier Rs. 1 crore to Rs. 1.5 crore. Under this scheme, traders and manufacturers can pay taxes at a concessional rate of 1%.
Also, those under composition scheme needto pay taxes quarterly and not on a monthly basis, unlike a regular taxpayer. So, while earlier an increase in turnover of Rs. 1 crore made businesses ineligible to register under composition scheme, now they get a little more flexibility.
3. One-time restructuring of debt
Access to finance has been a long-standing problem for SMEs in the country. Though several financial institutions offer customised SME loans, SMEs find it difficult to repay the loan, leading them to be classified as non-performing assets and fall in the distressed category.
Once a loan falls under the distressed category, it becomes further difficult for SMEs to access funds when required. With the Reserve Bank of India (RBI) announcing new rules allowing banks one-time restructuring of existing debt up to Rs. 25 crores for firms which have defaulted on payment, SMEs can heave a sigh of relief. The deadline set for restructuring is 31st March 2020.
Experts believe that though these measures are announced keeping in mind the upcoming elections, expected to be closely contested, they are bound to offerSMEs relief fromthe aftereffects of demonetisation and events leading to widening of current account deficit and increase in oil prices among others.
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