India’s union budget has set up many benefits in the Annual budget of 2021 for the startups and MSMEs to boost their growth. They have proposed giving an extension in the eligibility criteria of claiming tax holidays and provided capital gains exemption for investment in startups valid up to March 31, 2022.
After the Covid-19 situation, to boost businesses and industry Finance Minister Nirmala Sitharaman announced a handful of measures. These measures were the game-changing reforms that many small companies and startups sought to grow back in the pre-Covid era.
In the first digital budget announcement, the finance minister mainly served the startups by easing the way of carrying out business. They also relaxed the norm for setting up a new business, facilitating the insolvency process, and incentivizing funding startups.
List of budget benefits
Here are some of the budget benefits that the finance minister Sitharaman offered to MSMEs and startups in the budget 2021:
Custom Duty slashed
The custom duty includes the tax that you have to pay on goods that the company transports across the international borders. The government uses this collection to regulate the movement of goods, safeguard domestic industries and raise revenue.
This year the government has uniformly reduced the customs duty to 7.5 percent on long, flat, and semis products of alloy, non-alloy, and stainless steel. As a result, the MSMEs and other small industries have enjoyed a recent jump in steel and iron prices. Moreover, the minister has also exempted its duty to pay on steel crap valid up to March 31, 2022. This exemption has provided relief to many metal recyclers, which mostly came under MSMEs.
Sitharaman also proposed increasing the duty from 10 to 15 percent on plastic builder wares and steel screws to benefit MSMEs.
Budget allocation is the maximum amount of funding a business willing to spend on a particular program or expenditure line. It is the limit that an employee cannot cross to charge an expense to a specific item. In simple words, it is the expense associated with buying product or service resources.
The budget allocation set by Sitharaman this year is Rs 15,700 crores for the MSME sector, which is more than double the budget of the previous year, which was Rs 7,572 crore.
Incentivizing OPC startups
Starting a business for the first time can be challenging, so it becomes necessary to provide an incentive to boost their growth. Government launches various schemes to provide incentives to encourage micro, small and medium enterprises.
However, this year, to benefit a one-person company, the minister has announced no restriction on paid-up capital and turnover for OPCs. They are free to grow without any limit. Moreover, they are allowed to convert into any other form of the company whenever they like. Apart from this, an Indian citizen’s residency limit to set up OPCs is reduced from 182 days to 120 days. Now the NRIs can also incorporate OPCs in India.
Insolvency resolution process
Insolvency is the condition when a business is unable to pay its debt even after its maturity. There is a whole lot of process that the company has to follow to resolve a conflict, claim or dispute at the time of insolvency. Usually, the process takes a lot of time.
But to ensure the faster resolution of the problem, the finance minister announced that they would strengthen NCLT or the National Company Law Tribunal framework. Moreover, they will introduce alternative debt resolution methods, establish an e-court system, and special set-up framework for MSMEs.