by Rajen KumarIndia's Manufacturing Muddle
What holds Indias manufacturing sector at the back foot? Why the sector has failed to emerge from the shadow of a strong service sector which has recorded a creditable growth in the...
Special ReportsJan 2014
The 11th edition of the Doing Business Report compares business regulations for small and medium size domestic enterprises in 189 economies. This is a copublication of...
Government Schemes for SMEs
The Scheme would cover the following activities:
• Deputation of MSME business delegations to other countries for exploring new areas of technology infusion/upgradation, facilitating joint ventures, improving market of MSMEs products, foreign collaborations, etc.
• Participation by Indian MSMEs in international exhibitions, trade fairs and buyer-seller meets in foreign countries as well as in India, in which there is international participation.
• Holding international conferences and seminars on topics and themes of interest to the MSME.
Till date, the government's development strategy for Micro, Small and Medium Enterprises (SMEs) has primarily evolved around Protective Discrimination (industrial reservation), Integration with Large Scale Industries (ancillarisation) and Institutional support. However, to increase cost competitiveness of SMEs in domestic and export markets, there is an urgent need to shape tax policies specific to this sector, especially Indirect taxes. Some issues ailing SMEs are discussed here.
Currently, the turnover limits for exemption from Central Excise duty and Service tax are mere Rs 15 million and Rs 0.8 million respectively. Considering that Government has more than doubled the investment criteria for SMEs in recent years, there is a clear need to accordingly revise the exemption turnover limit upward. Also, scrapping the cumbersome compliance requirements for exempted units would reduce administrative costs for SMEs and Government alike. The Government should also have a re-look at the rules prohibiting job-workers producing branded goods from claiming the small-scale exemption.
In view of the significant share of SMEs in India's exports, our Foreign Trade Policy should preferably include SME-specific export promotion schemes.
However, in reality, many current benefits for exporters are also out of reach for SMEs; key deterrent being the entry norms that prescribe high turnover or investment criteria (e.g. EOU scheme requires minimum investment of Rs 10 million, served from India scheme requires minimum export revenues of Rs 1 million). With indirect taxes contributing 20-30 per cent of price of goods and services, there is serious need for rationalisation and reforms to ensure that the SME growth story continues.
The authors are with WealthTree Partners, a cross border advisory firm. They can be reached at email@example.com or firstname.lastname@example.org.
- Winner of appreciation award for promoting SMEs in India.
- 1st ever Indian magazine to penetrate tier II, III cities & the rural belt.
- Industry Partnerships include CII, FICCI, ASSOCHAM, PHDCC, AIMA, ITPO, SME Network, Federation of Indian Micro Small Enterprises (FISME)
- Official Magazine Partners for several national & international MSME events.
The Last Word
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