Budget 2021: Interest Subvention Scheme For MSMEs Must Be Extended, Says Industry Body

Budget 2021: The two percent interest subvention scheme for micro, small and medium enterprises (MSMEs) on loans must be extended with enhanced coverage of three-four per cent to the extent of Rs 300 lakh, suggests Mr Vikash Agarwal, President, Indian Chamber of Commerce (ICC). The two percent interest subvention scheme for micro, small and medium enterprises on loans was extended till March 31 with few business friendly provisions. The coverage of the scheme is limited to all term loans and working capital to the extent of Rs 100 lakh, which industry body Indian Chamber of Commerce expects to be extended to Rs 300 lakh in the upcoming Budget 2021. (Also Read: Budget 2021: Cap On Emoluments Must Be Raised To ₹ 50,000 Under Section 80JJAA )

The micro, small and medium enterprises sector employs around 120 million individuals according to the Indian Chamber of Commerce. The expansion of the sector will open further job employment opportunities in the country. Since a key agenda of the interest subvention scheme for MSMEs is to get them on-board the goods and services tax (GST) scope, the relaxation will attract more MSMEs on board. Additionally, once on-board the GST platform, these units will become eligible to take part in any future aid pertaining to GST slabs.

According to the Indian Chamber of Commerce, consequent to the reduction of corporate tax rates, the differential between personal and corporate tax rates has widened. The highest marginal rate for individuals has gone upto 42.74 per cent against the normal corporate tax rate of 25 per cent. Due to this, personal taxation has become complicated as there are different rates of taxes depending upon the source of income. Additionally, different rates of surcharge are applicable depending upon the total income and capital gains element in the total income both under the old and new tax regime.

Mr Vikash Agarwal suggested that the tax structure for individuals must be simplified as it will also help in improving the compliance. He also added it is necessary to reduce the personal tax rates for individuals so that there is a degree of equity and fairness in relation to structuring decisions. The dividend income is currently taxable in the hands of the resident assessee at the respective slab rates, whilst the same is subjected to tax for non-residents at the rate of 20 per cent or at lower rate. The Indian Chamber of Commerce suggests that the taxability on dividend income should be capped at the rate of 15 per cent for resident assesses as well.