Finance Minister Nirmala Sitharaman presented the Union Budget 2020 in Parliament on Feb 1, 2020 and announced several schemes and measures for the benefit of micro, small and medium enterprises (MSMEs). She stated that the MSME sector is of utmost significance to keep the economy running smoothly.
Measures for MSMEs:
- Audit turnover threshold increased to ₹5 Cr
- National Logistics Policy to be implemented
- ₹900 Cr debt-funding for MSMEs allocated
- App-based invoice financing loans product to be launched
- ₹2.83 lakh crores allocated for agro and allied sectors
- Nirvik Scheme announced for higher insurance cover for exports and tax disbursement
- Intellectual property creation and protection process to be streamlined
Increased audit threshold: The turnover threshold for audit has been increased from the ₹1 to ₹5 crores for small retailers and traders who form the majority of the MSME sector. This is applicable only to those businesses who carry out less than 5% of their transactions in cash in order to encourage a less cash economy.
National Logistics Policy: The soon-to-be-launched National Logistics Policy will aim to create a single window e-logistics market to make MSMEs more competitive. This scheme will have a four-year implementation period with a budget of ₹1480 crore.
Debt funding and GST: Sitharaman asked banks to extend restructuring MSME NPAs till March 2021. She mentioned that over five lakh MSMEs have benefitted from debt restructuring and allocated ₹900 crore debt-funding to the MSME sector in this Union Budget. With respect to GST, a simplified return format is being introduced from April 2020 onwards.
App-based invoice finance: To avoid issues of delay in payments and substantial cash flow mismatches for the MSMEs, amendments to the Factoring Regulation Act 2011 were proposed. As per this, NBFCs will be able to offer invoice financing to MSMEs through Trade Receivables Discounting System (TReDS) via an app.
Agro and allied sectors: ₹2.83 lakh crores were allocated for agro and allied sectors including irrigation, rural development, and Panchayati Raj in the Union Budget 2020. Close to 35 lakh farmers will be helped by setting up of solar pumps in order to make their barren lands productive. The finance minister also committed an additional 152 million metric tonnes of warehousing facilities.
Nirvik Scheme for exporters: The Nirvik Scheme is designed to provide higher insurance cover, reduce the premium for small exporters, and to simplify the procedure for claim settlements. This scheme will also facilitate export tax disbursement which will make loans easily accessible for exporters. Under this scheme, the insurance guaranteed could cover up to 90% of the principal and interest of loans, along with pre- and post-shipment credit.
Digital platform for Intellectual Property Rights (IPR): For seamless application and capture of Intellectual Property Rights (IPR), a digital platform will be setup. As per the Finance Minister, it will help solve the complexities, and contribute to modernisation in the field of intellectual property.