Budget 2021: MSME sector expects extension of interest subvention scheme with enhanced coverage

23-01-2021

The Micro, Small and Medium Enterprises (MSME) sector has been the biggest victims of the the nation-wide lockdown announces to contain the spread of the Covid-19 pandemic. The MSMEs industry suffered a triple whammy due to the lockdowns as demand was hit, supply chain was disrupted and labour shortage due to the reverse migration among its laborers. While the sector is still trying to recover from the impact of lockdown, it also needs financial assistance from the government. The 2% interest subvention scheme for the MSME on loans must be extended with enhanced coverage of 3-4% to the extent of Rs 3 crore, suggests Mr Vikash Agarwal, President, Indian Chamber of Commerce (ICC). The 2% interest subvention scheme for MSMEs 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 1 crore lakh, which industry body Indian Chamber of Commerce expects to be extended to Rs 3 crore in the upcoming Budget 2021. According to ICC the MSME sector employs around 120 million individuals. 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. Also, MSMEs receive funding assistance under the Credit Guarantee Fund for Micro and SmalI Enterprise Scheme of the central government wherein they receive a collateral-free loan. "Several MSME bodies are expecting that the collateral-free loan limit should be enhanced by the government to Rs 5 Cr. for micro-units, Rs. 15 Cr. for small businesses, and Rs 35 Cr. for medium businesses. Also, a tax incentive to boost the adoption of technology in the MSME sector is much anticipated," said Pitam Goel, Founder Partner, VPTP & Co.