Budget 2021: A Review on How it will Impact Businesses

By Tanuja A Akkannavar Monday, 01 February 2021

All industries were devastated by the COVID-19 pandemic, but it is the Micro Small and Medium Enterprises (MSME) sector that is said to have borne the full brunt of the pandemic. The MSME sector has faced a major liquidity and supply crisis, scarcity of labour and non-payment of dues as a result of the pandemic-induced lockdown.

FM Nirmala Sitharaman began her speech on the Union Budget 2021 at 11 am on Monday and among big-ticket initiatives, in light of the pandemic, FM proposed a Rs 64,180-crore Aatmanirbhar Swastha Bharat scheme. In the Union Budget 2021-22, the Finance Minister Nirmala Sitharaman made a provision of Rs 15,700 crore for the Ministry of Micro, Small and Medium Enterprises (MSME) sector.

"We have taken a number of steps to support the MSME sector in this budget. I have provided Rs 15,700 crore more than double the previous year," Sitharaman said while presenting the Union budget. In order to further promote credit flow for the Scheduled Caste and Scheduled Tribes and women under the Stand Up India scheme, the Finance proposed to reduce the margin money requirement from only 25 percent to 15 percent and also to include loans for activities in allied agriculture activities.

Under the Aatmanirbhar Bharat Abhiyan package, the government has announced an Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs to ease the suffering caused by the lockdown. Until the month of October, the system was valid. The ECLGS was later extended by Finance Minister Sitharaman until November 2020 and extended further until March 21, 2021. "Aim of providing relief to metal recyclers, mainly MSMEs, I am exempting tax on steel scrap for a period up to March 31, 2022. Further, I am also renouncing ADD and CVD on certain steel products," Finance Minister said while delivering the budget. 

The budget has declared the removal of exemptions for imports of some types of leather, as they are produced domestically in terms of quality and quantity, to enable exporters of footwear, leather and handicraft products that are mainly manufactured by MSMEs. The sales tax on copper scrap was lowered to 2.5 percent from 5 percent for copper recyclers. Nylon chains of polyester and other artificial fabrics have been developed for MSMEs in the textile industry as part of the rationalization of duties on raw materials.

The Finance Minister announced the development of a special debt resolution system for MSMEs. The NCLT structure will also be improved, including the introduction of the e-Courts system, to settle cases faster, she said.

Some industry experts here elaborate on their feedback on the 2021 Union Budget –

1. Amit Gupta, Managing Director, SAG Infotech
"I am neutral or slightly ok with this 2021 Budget announcement. Relaxations like senior citizens of above 75years not required to file an income tax return with pension income are appreciable. Also, now the government has increased the limit of auditing in the case digitized transactions from 5 crores to 10 crores is impactful for those who were in the bracket. The reduction of the assessment time period from 6 years to 3 years will drastically lower the paper handling so it is far better now from the previous rule.

Nothing much has been introduced in the taxation industry but we have gathered strength from the previous budget so there is not much issue, however, some of the clients from healthcare & infrastructure have told us that they are happy as of now and we have equally responded to them. It is to be seen the impact of Budget in the coming days for a clear picture ahead."

2. Surabhi Goel, CEO - Aditya Birla World Academy, Aditya Birla Education Academy, The Aditya Birla Integrated School
“The measures announced by the finance minister in today’s union budget 2021 focuses on two important aspects – one is the continuous upskilling of India’s youth and also providing education for all. We are in-line with the announcement as Aditya Birla Education Academy is at the forefront of creating various programs that help the educators of the country upskill themselves. Finance minister Niramala Sitharaman has set aside funds worth 3000 crores with an aim to create an opportunity for Millenials of India to upskill themselves. The budget also provided an impetus on establishing a National Research Foundation by allocating Rs 50,000 crore thereby qualitatively strengthening the education system through the National Education Policy. At Aditya Birla World Academy and The Aditya Birla Integrated School, the focus has always been on creating a cohesive learning environment for the students even though the online medium over the course of last year. We aim to make the students future-ready by imparting practical learning along with theory-based sessions. We believe that the measures announced by the government will further boost in augmenting the education sector of the country.”

3. Rajesh Uttamchandani, Director, Syska Group
“Finance Minister Nirmala Sitharaman stated that for a 5-trillion-dollar economy, our manufacturing sector has to grow in double digits on a sustained basis. We welcome the measures exercised by the honourable Prime Minister Shri Modi Ji and his government in the Union Budget towards boosting electronic manufacturing in the country. The government led by Modi Ji has pledged an infusion of Rs 1.97 lakh crore on various PLI schemes over the next 5 years, starting this fiscal. This is in addition to the Rs 40,951 crore towards the PLI scheme to help expand and boost exports. Today, India’s manufacturing industry has tremendous potential to place the country on the global manufacturing map, simultaneously boosting several employment opportunities to India’s youth. Our manufacturing companies need to become an integral part of global supply chains. With a budget of Rs 15,700 crore, which is more than two times that of the previous year, this will help strengthen the MSME sector in terms of product development, technology adoption, strengthening of infrastructure and more. As a company, Syska has always been aligned with the vision of Atmanirbhar Bharat promoting sustainability through our products and creating new job opportunities. The budget has a positive, expansionary approach towards the manufacturing sector, which is reflected through the incentives and strengthening of the PLI schemes provided by the government."

4. Kishan Jain, Director at Gold medal Electricals
“The Union Budget 2021 has provided massive opportunities for companies looking to set up manufacturing facilities in the country. Given our current economic situation across the globe caused by the pandemic, the Finance Minister’s decision to infuse INR 1.97 lakh crore towards various PLI scheme is laudable in addition to the Rs 40,951 crore towards the PLI scheme to help expand and boost exports. As correctly stated by FM Nirmala Sitharaman, our manufacturing companies need to become an integral part of the global supply chain. Further, the provision of INR15, 700 cr towards the MSME sector, will provide a further fillip to the Government’s flagship Make in India initiative. As a company, Gold medal Electricals has always been at the forefront of introducing innovative and sustainable solutions that make our planet not only smarter but also sustainable for generations to come and support government’s vision of Atmanirbhar Bharat.”

5. Niraj Hutheesing, Founder and Managing Director, Cygnet Infotech
“We welcome the measures announced by the government of India in the Union Budget 2021. Significant capital expenditure in infrastructure and health care sectors will be a big asset for India. Promotion of digitization at large, and digital transactions particularly, is another positive aspect of the budget. There has been the political will to take a big deficit for the next year. Simplifying the tax regime is another important aspect of this Budget. To ease compliance, the Finance Minister has increased the tax audit limit from ₹5 crore to ₹10 crores for the companies that conduct most of their business through digital modes. Additionally, the government is also planning to take steps to reduce inverted duty structures in GST and has proposed to review over 400 old exemptions in indirect taxes and will begin extensive consultation from October 2021. The budget also provided impetus on one of the most hard-pressing issues, namely tax evasion cases. The use of digital technologies such as automation solutions and data analytics tools can help in removing anomalies in the GST tax infrastructure and make it transparent to a great extent. All the measures announced today will further enable companies such as Cygnet Infotech to develop technology solutions for businesses to help them adhere to the taxation norm.”

6. Siddharth Goenka, MD, Octave Hotels & Founder, Aiosell Technologies
"While we welcome progressive moves like faceless Income Tax Dispute Resolution & reduction of Assessment time period, one of the biggest missing links has been special consideration for hospitality industry post covid crisis. Even though hospitality & tourism are big economic multipliers and generate up to 8% of employment, they have been severely hit from covid related lockdowns & restrictions. Temporary relief in both direct & indirect taxes for a few years could have been provided with the industry the boost it needs to recover from this unprecedented crisis."

7. Dr. Keshab Panda, CEO & MD, L&T Technology Services
“The move to provide greater impetus to India’s manufacturing sector with an outlay of almost Rs 2 trillion over the next five years is indeed a welcome move. We are hopeful, this will pave the way for enhanced adoption of digital engineering capabilities by domestic players, especially in the Industry 4.0 segment, to give them a global edge. With patents and innovations being at the core of our proposition as a pure-play engineering services provider, it was encouraging to know that Innovation and R&D were classified under the six pillars of focus for this year’s union budget. Unlike last year where explicit mention to initiatives such as National Mission on Quantum Computing and Technology were announced, one would have hoped that this year’s budget would have made provision for further focus.”

8. Shalini Raj, Founder, Journey Weavers
“When the Union Budget 2021 was announced today, we were in for a surprise as we feel that it is not aligned with the travel, tourism, and hospitality industry. We are of the view that the government has completely neglected these sectors while drafting and implementing the budget. This has happened even though these industries contribute about 25 percent of the GDP of India. The sectors were severely hit due to COVID-19. Hence, we had huge expectations and were seeking temporary relief in both direct & indirect taxes for the next few years. Now, it feels as if we have been stranded to survive on our own without any support from the Government. This exclusion of these sectors is indeed a major step and will definitely have an impact on the livelihood of small travel agencies.”

The proposals for the Union Budget 2021-22 are focused on six pillars: health and well-being, physical and financial resources and infrastructure, sustainable growth for India's ambitions to revitalize human capital, innovation and research and development, minimum governance and maximum governance. 

While presenting the budget, Sitharaman said, this time the budget has followed a contraction in the economy just three times, unlike previously, the situation is due to a global pandemic Budget-2021 provides the economy with every opportunity to catch the pace and expand sustainably.

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