Union Budget 2018: In the Budget presentation in the Parliament, Finance Minister Arun Jaitley announced a corporate tax cut to 25% for MSMEs. “I propose to extend benefit the benefit of lower tax rate of 25 percent to companies with a reported turnover of Rs 250 crore,” the finance minister said. The finance minister added that the revenue foregone for FY 18-19 is estimated to be Rs 7,000 crore. Interestingly, analysts and market observes were quick to say that FM met India Inc’s demand, and cuts corporate tax rate to 25% for MSMEs. The finance minister observed that MSMEs account for the maximum percentage of taxpayers among corporates.
Watch video: Union Budget 2018: People Attending The Budget Session In Chandigarh
Finance Minister Arun Jaitley observed that there has been a mass formalization of MSMEs after structural reforms of GST and demonetization. The government had earlier announced GST with the aim to help move small-scale businesses from the unorganised to organised sector. FM Arun Jaitley also announced that the government is committed to the cause of improving the start-up ecosystem in the country. The Finance Minister said that he the government will take up various reforms for VCs and angel investors, and also promote a robust alternative investment regime in the country.
The MSMEs will also get an extra hand-holding post Union Budget 2018. The Finance Minister also announced Rs 3,794 crore for MSMEs and employment credit support. Further, Arun Jaitley said that the government proposes to allocate 56,620 crore for providing credit to small scale businesses. The government will also announce measures to tacle the NPA problem in MSMEs. I porpose to set up a target of Rs 3 lakh crore under MUDRA scheme, he said.
Also read: Know how Arun Jaitley’s Budget 2018 will impact your tax liability with this Income Tax Calculator
A recent survey conducted by Deloitte said that more half of the professionals expected a 5% cut in corporate tax to 25 per cent in the budget 2019. Notably, India Inc was vociferously putting forward its demand of lower corporate tax rate, which was promised by Arun Jaitley in his first full year Budget.
Earlier, a report by HDFC Securities had pointed out that Finance Minister Arun Jaitley could cut the corporate tax rate. “On the corporate level Corporate tax rate may be cut to 25% for companies with annual sales of upto Rs.200 crore (vs Rs.50 crore earlier) (Realistically, a step-down in the corporate tax rate may be introduced only in conjunction with paring of exemptions, to maintain revenue neutrality),” the note said adding that corporate tax rate on insurance companies may be hiked gradually from the current 12.5%+SC over few years to match with the normal corporate tax rate.