Union Minister for Finance and Corporate Affairs Nirmala Sitharaman proposed to continue the financial sector reforms and innovative use of technology, which have led to financial inclusion at scale, better and faster service delivery, ease of access to credit and participation in financial markets. While presenting the Union Budget 2023-24 in Parliament on Wednesday, she put forth the format of this reform.
Sitharaman announced that the revamped credit guarantee scheme for MSMEs, proposed in the previous Budget, will take effect from 1st April 2023 through the infusion of ₹ 9000 crore in the corpus. She said this will enable additional collateral-free guaranteed credit of ₹ 2 lakh crore. Further, the cost of credit will be reduced by about 1%.
Giving significant relief to MSMEs, the Finance Minister proposed that in cases of failure by MSMEs to execute contracts during the Covid period, 95 per cent of the forfeited amount relating to bid or performance security, will be returned to them by government and government undertakings.
To settle contractual disputes of government and government undertakings, wherein arbitral award is under challenge in a court, a voluntary settlement scheme with standardized terms will be introduced. This will be done by offering graded settlement terms depending on pendency level of the dispute.
Stating that MSMEs are growth engines of our economy, the Finance Minister said that micro-enterprises with turnover up to ₹2 crore and certain professionals with a turnover of up to ₹50 lakh can avail the benefit of presumptive taxation. She proposed to provide enhanced limits of ₹3 crore and ₹75 lahks respectively to the taxpayers, whose cash receipts are no more than 5 per cent. Moreover, to support MSMEs in timely receipt of payments, she further proposed to allow a deduction for expenditure incurred on payments made to them only when payment is actually made.
The minister said, ‘Entrepreneurship is vital for a country’s economic development. We have taken a number of measures for start-ups and they have borne results. India is now the third largest ecosystem for start-ups globally, and ranks second in innovation quality among middle-income countries. I propose to extend the date of incorporation for income tax benefits to start-ups from 31.03.23 to 31.3.24. I further propose to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years.”
The minister also announced setting up of a National Financial Information Registry to serve as the central repository of financial and ancillary information. This will facilitate efficient flow of credit, promote financial inclusion, and foster financial stability. She added that a new legislative framework will govern this credit public infrastructure and be designed in consultation with the RBI.
To enhance business activities in GIFT IFSC, Budget 2023-24 proposes a slew of initiatives like delegating powers under SEZ Act to IFSCA to avoid dual regulation, single window IT system for registration and regulatory approval, permitting acquisition financing by IFSC banking units of foreign banks, establishing subsidiary of EXIM Bank for trade re-financing, recognizing offshore derivative instruments as valid contracts.
In order to meet the needs of Amrit Kaal and to facilitate optimum regulation in the financial sector, the Finance Minister proposed to incorporate public consultation, as necessary and feasible to the process of regulation-making and issuing subsidiary directions. Sitharaman added that financial sector regulators will be requested to comprehensively review existing regulations to simplify, ease and reduce cost of compliance.