Jaitley’s MSME sops to benefit only few

Although the intent behind extending benefit of corporate tax rate to a wider base of MSMEs, as this would leave them with higher investible surplus and this in turn will help in creating more jobs, the announcement is likely to benefit few.

Union Minister for Finance and Corporate Affairs Arun Jaitley has proposed a reduced rate of 25% to companies that have reported turnover up to Rs 250 crores in the financial year 2016-17.

The FM claimed that this will benefit the entire class of Micro, Small and Medium Enterprises which accounts for almost 99% of companies filing their tax returns.

However, this may fall short of completely alleviating the problems of the sector as experts said that most of the small and micro enterprises are proprietorships and partnerships whereas the budgetary move applies only to companies, reports ET.

"Even though the step is welcome and will definitely benefit the sector, most small and micro enterprises are based on the business structure of proprietorships and partnerships which are not covered in the announcement," Jitendra Gupta, president, Laghu Udyog Bharti, an all India association of micro and small industries in India told ET.

Jaitley said that the estimated foregone revenue for the financial year 2018-19 due to this measure is Rs 7,000 crore. Out of the 7 lakh companies filing returns, only 7000 companies filing returns of income with a turnover above Rs 250 crore will remain in the 30% tax slab, he added.

The Finance Minister recalled that in the Union Budget 2017, he had announced the reduction of corporate tax rate to 25% for companies whose turnover was less than Rs 50 crores in financial year 2015-16. This had benefitted 96% of the total companies filing tax returns.