Curious about the Union Budget 2024 of India and how this budget has plans to assist the MSMEs this year around?The Finance Minister delivered the Budget 2024 speech in Parliament today and here are multiple reforms for MSMEs. These announcements are designed to promote the development of this sector and enhance the credit facility of the owners of small businesses.

Special attention to MSMEs

The finance minister remarked that in the country’s Budget laid out sessions were made for “Special focus to MSMEs by devising a package including financial and technical assistance to MSMEs to augment their capacities to compete with international companies.

MSMEs and significant GST and corporate tax changes

Corporate tax rates and GST rules remain the same under Union Budget 2024. Finance minister has announced a minor change to the claiming of Input Tax Credit and a few other tax-related measures:

• The government has thus reduced the burden of claiming Input Tax Credit (ITC) by increasing the time limit for the claim. New subsections (5) and (6) are proposed to be added to Section 16 of the CGST Act to extend the time limit to avail input tax credit.

. 

• For the intimation, it is to be noted that for the invoices or debit notes issued for 2017-18, 2018-19, 2019-20, and 2020-21, businesses can claim the Input Tax Credit in any return filed up to 30th November 2021. 

• Also, the period within which businesses can pay their balances in full to enjoy a reduced penalty fee is set to be extended from 30 days to 60 days.

Other significant MSME measures in union Budget 2024

Let us have a look at the key highlights of this package rolled out for the MSME sector:

• Credit Guarantee Scheme for MSMEs

Credit availability to the MSMEs, which is the greatest concern of the government, has been addressed in the Union budget of 2024 by introducing reform in the credit guarantee scheme. MSMEs are thus helped to purchase machinery and equipment on credit under this scheme without having to offer a collateral or a third party guarantee.

Self-financing guarantee fund recommended by the government of India to avail this benefit the applicants will have the right to claim up to ₹100 Crore. Proposals for loans which are greater than ₹100 Crore can be considered but the MSMEs will have to pay a one time guarantee fee and an on reducing balance annual guarantee fee.

• New credit assessment model

A new model for assessment of credit extended to MSMEs by the public sector banks was suggested, thus doing away with the requirement of outsourcing it. The credit assessment of the model of MSMEs will now alternate its criteria based on an online presence of MSMEs in the economy instead of assets and turnovers.

• Credit support during the stress period

The government mentioned that likely due to the events related to Covid, a new mechanism would be framed to deploy credit support for MSMEs during a stress period. If there are any defaulting MSMEs which experience bankruptcy for the factors that cannot be controlled, the credit support will be given in order to help out such enterprises from shifting into the NPA link age. As for credit availability, one will be provided through a guarantee from a governmental promoted fund.

• Increased MUDRA loan limit

MUDRA loan or the PMMY scheme was launched to offer micro loans of up to ₹10 Lakh without requiring any collateral for non-corporate, non-farm MSMEs. Budget 2024 has increased this loan limit to ₹20 Lakh for those who have availed and successfully repaid loans under the Tarun category (There are three loan categories under the MUDRA loan scheme: Schemes are further divided in to Shishu (upto ₹50000), Kishor (₹50000 to ₹ 5 lakh) and Tarun (₹5 lakh to ₹20 lakh).

• New SIDBI branches

SIDBI , the Small Industries Development Bank of India will open fresh doors to capture the various new clusters that have to be covered for the development of every major micro and small enterprise in the country within the next 3 years, with direct credit delivery. Union budget 2024 has disclosed that 24 new branches are planned for opening this year and the reach of SIDBIs will spread up to 168 of the 242 identified large MSMEs clusters.

• Boosting MSME sales in international markets

The government has wisely planned to open up the e-commerce export models in PPP which will facilitate exporting products of MSMEs and other traditional artisans. Thus, these export hubs will enable an integrated showing of the regulatory and logistics that will surround exports and exportation services.

For the current financial year, the laid-down policies of the MSMEs can consider components of easy credit access and extending the time limit for claiming ITC. Furthermore, there are many amendments and insertions to the CGST Act under contemplation, therefore one should await changes to the act.