2 Feb 2017, 13:07 — 6 min read
The budget presented yesterday by the Finance Minister Arun Jaitley was one with many firsts. The budget date was advanced from March to February 1 to enable effective implementation of schemes. Also, for the first time since 1924, the Railways Budget was merged with the General Budget. Stock markets reacted favourably to the budget which was expansive in scope and included some special initiatives to assist startups and SMEs.
Overall impressions of the budget
On the whole, the budget was received favourably by SMEs across the nation. Sambhav Karnawat, founder of e-commerce jewellery portal, Jewelove opined, “Overall this has been a good budget, showcasing the commitment of the government to incentivise growth & protect honest tax payers.”
Following the demonetisation initiative, the economy and businesses in particular had experienced a slow-down. To an extent, the budget was able to revive industry confidence in the economy and this was evident from the Sensex rising to 486 points, the highest ever on budget day. Manoj Kabre, Vice President of precision engineering firm, Indo-MIM, shared, “The budget has been encouraging given the precarious situation that the industry is going through. Although there are not great reformatory steps taken for the industry as a whole; the budget does show some silver lining in terms of the economy going strong in days to come. More important is that it insulates us from something negative.”
Chartered Accountant, Srinivasan Venkatraman, partner at V Sankar Aiyar & Co commented, “It’s a fiscally prudent budget, with good measures to promote agriculture, rural demand and boost infrastructure development.”
Analysing the impact of the budget on SMEs, Andre Lobo, CEO of cloud-based HR solution, WorkPro Technologies shared, “From an SME and startup standpoint, there were some useful advances in terms of tax incentives & benefits. However, SMEs and startups have to reach profitability to avail of them. Only then does the Budget 2017 directly help them. In the meanwhile, SMEs will still have to figure out how to secure their funding and take advantages of the opportunities in an ever more digital market."
Positive initiatives for SMEs
The finance minister proposed a significant cut in the tax rate for firms with revenues less than Rs.50 crore. SMEs are instrumental in providing a significant amount of employment and dominate the economic landscape of the country. The hope is that this initiative will make the environment more conducive to startups and small businesses and make Indian companies more competitive vis-a-vis their international counterparts.
Sambhav Karnawat opined, “The reduction of income tax for MSMEs with revenues below Rs.50 crores is a very positive move. It will promote corporatisation & incentivise people to go into a corporate structure from proprietorship & partnership firms.”
Additionally, Manoj Kabre believes that this budget involves initiatives that are good for the economy. He said. “The budget has a higher allocation of funds for infrastructure, railways, boost to startups and skill development.”
Positive initiatives according to Srinivasan Venkatraman were, “The abolishing of the FIPB (Foreign Investment Promotion Board) and amending the law to clarify that transactions of FPIs are outside the net of indirect transfers.”
Hindrances to business
Mayank Bhangadia, the CEO and co-founder of Roposo had a contrarian view on tax cuts. He said, “The 5% corporate tax reduction is not relevant to most startups that have not yet begun generating as much revenue. Government should now start thinking about how to reduce startups’ real cost in the early years.”
Srinivasan Venkatraman bemoaned that, “No incentive was given to promote private sector investment. Taxing long term capital on equity shares sold on stock exchanges that are purchased after October 2004 and in which no Securities Transaction Tax was paid is also a hindrance to business.”
Manoj Kabre was disappointed about the lack of a tax breaks for larger companies. He opined, “No reduction in corporate tax for larger firms could be a factor that may be a hindrance to business growth.”
Andre Lobo believes that more could have been done in the realm of digital payments. He said, “I would have loved to have seen the FM do something more for digital payments. Invoicing and collecting money is a huge problem for startups and SMEs alike. Tax benefits to customers who pay through channels like NEFT or digital payments platforms would be a huge boon to startups who will benefit from reduce collection costs and quicker collections of outstandings."
Watch this video for a quick snapshot of Budget highlights for SMEs, startups and businesses.
Disclaimer: The views and opinions expressed in this article are those of the SMEs interviewed and do not necessarily reflect the views, official policy or position of GlobalLinker.
Posted byGlobalLinker Staff
We are a team of experienced industry professionals committed to sharing our knowledge and skills with small & medium enterprises.
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