The budget should focus on rural development, MSMEs, Auto News, ET Auto

The government should guarantee a specific allocation to MSMEs under the PLI program and accelerate the fund-of-funds program to stimulate the use of private sector capacities and boost rural consumption.

The Union budget for 2022 is expected to focus on reviving the financial sector – the backbone of the economy – focusing on rural development and MSMEs to increase livelihood opportunities and provide safety nets.

Small businesses have faced challenges such as the shipping container crisis, coal shortage and rising commodity prices. Given concerns about growth and employment, it is relevant to help MSMEs develop their operations. Measures such as the extension of the ECLGS, the relaxation of tax and audit compliances, the relaunch of the CLSS for technological upgrading, increased skills development and greater ease of doing business will support the small business ecosystem.

In addition, the government should guarantee a specific allocation to MSMEs under the PLI program and accelerate the fund-of-funds program to stimulate the use of private sector capacities and boost rural consumption.

The MSME sector is also eyeing policy announcements that boost credit. These include an increase in working capital limits, “operating creditor” status under IBC procedures, the inclusion of medium-sized enterprises in public procurement policy, and the removal of prepayment and foreclosure penalties on medium-sized business loans.

2021 has also been a challenging year for the automotive and auto accessories industry, which has faced periodic COVID-related lockdowns, chip shortages, rising cost of ownership and weak demand. rural. The 2022 budget will likely focus on technology-driven developments, tax incentives for the travel and trade industry, increased domestic component manufacturing, and funding for research and development in the manufacturing of batteries for electric vehicles.

Some budget announcements that will help stimulate demand for commercial vehicles include streamlining GST for automotive components, standardizing GST on margin for used vehicles, reducing GST on two-wheelers, an upward revision of RoDTEP (remission of duties and taxes on export products) rates, stimulate exports and infrastructure spending.

For the electric vehicle segment, the government may consider export subsidies, the correction of the inverted duty structure and environment-friendly policies like the subsidy program – FAME (Faster Adoption and Manufacturing of Electric Vehicle) , to give impetus to the ecosystem of electric mobility. .

The NBFC sector is eagerly awaiting the harmonization of tax and collection regulations with those of banks and the TDS exemption for interest payments on loans. Depository NBFCs should be empowered to offer bank-like guarantees under the DICGC, which will help strengthen their liability pipeline.

Here are the expectations of the NBFC sector for the 2022 budget:

  • Financial support to NBFCs: A mechanism for refinancing or financing NBFCs is needed to help maintain liquidity and promote financial inclusion, with a focus on MSMEs and small businesses under lending to priority sectors.
  • Differentiated treatment of retail and MSME loans: Retail and small business loans should be treated differently from large corporate loans in terms of asset classification and overall exposure, in order to boost retail and MSME lending.
  • Guarantee under the DICGC: Depository NBFCs should be empowered to offer similar guarantees to banks under the DICGC that will strengthen their liability pipeline.
  • Collection standards under co-loan model: NBFCs do not have the option to initiate collection proceedings under SARFESI for bad debts up to INR 20 lakh, granted under the co-lending model. This discourages banks from partnering with NBFCs and delays the effective use of the model.
  • Guarantee for MSME credit restructuring: Since MSME security and guarantee remain generally in use, it is difficult to raise more capital during loan restructuring. Government guarantee coverage for additional restructuring security will support faster resolution of troubled accounts.
  • Easing the Tax Burden for MSMEs: Reducing the TDS for MSMEs while accelerating GST refunds will go a long way in reducing the tax burden and helping MSMEs maintain strong cash flow and secure loans. In addition, streamlining the GST to ensure a uniform tax band on manufacturing for MSMEs will help control and maintain commodity prices.
  • Promoting e-commerce disruption: e-commerce has disrupted traditional distribution models, and it’s important to support the industry and innovation-driven start-ups. Streamlining approvals and compliance to make it easier to do business, faster technology adoption, removal of mandatory GST registration below an income threshold, incubation programs and l Automation by traditional retailers will support the growth of small businesses that use this medium to sell their goods and services. .
  • Commodity Transaction Tax Waiver: Volumes on gold exchanges plummeted after the Commodity Transaction Tax was imposed. Exemption from this tax will support the industry, aided by initiatives such as the bullion index, options contracts, delivery centers, warehouses and the recently announced International Bullion Exchange.
  • Priority status for gold lending and electric vehicles: About a third of NBFC’s gold lending is for small businesses, traders and traders. The restoration of priority sector lending status for NBFC eligible gold loans will improve the availability of low cost gold loans. Additionally, extending priority status to EV loans will help create a robust ecosystem, increase affordability, drive the EV market, and promote environmentally friendly products.
  • Reduction of corporate tax for all companies: the corporate tax rate of 25% – for private companies with a turnover not exceeding INR 400 million – should be extended to all companies LLP, owners and in partnership, as they represent the bulk of the automotive dealership community. This will help them free up capital to tackle the challenges the industry is currently facing.
  • Vehicle Depreciation Tax Benefit: Personal income tax rebates for vehicle depreciation will provide an incentive to file returns and support demand, particularly for the two-wheeler, personal segment. In addition, the reintroduction of the depreciation scheme for company-owned vehicles will also contribute to demand.

In summary, FM is constrained by the budget deficit but needs to find the right balance and revive the bottom of the pyramid and small businesses, which have been most impacted due to the pandemic. Growth is still well below pre-pandemic levels and a pragmatic budget is the need of the hour.

Read also :

There are, in fact, reasons for this – poll-linked states have a good share of MSMEs and the government wouldn’t take a chance on letting the opposition label it “anti-poor, anti-small traders”.

Tax cuts with a uniform GST rate, export incentives, boosting R&D efforts, building national chip-building capabilities, and investing in infrastructure development and promoting electric vehicle ecosystem are some of the important issues the industry wants Finance Minister Nirmala Sitharaman to address. in the Union budget for 2022-23 on 1 February 2021.

About Keneth T. Graves

Check Also

Rural Development Loan Program Serves as Alternative Path to American Dream of Homeownership | Company

Country the United States of AmericaUS Virgin IslandsU.S. Minor Outlying IslandsCanadaMexico, United Mexican StatesBahamas, Commonwealth …