Credit and finance for MSMEs: Micro, small and medium enterprises (MSMEs) suppliers unable to execute contracts during the Covid pandemic will get 95 per cent of their forfeited amount back by the government and government undertakings they were working with, according to the budget announcement made by finance minister Nirmala Sitharaman on Wednesday. The relief measure announced was under the government’s Vivad se Vishwas scheme, a voluntary initiative for resolving pending direct tax disputes amicably with the taxpayers.
In her speech, Sitharaman said, “in cases of failure by MSMEs to execute contracts during the Covid period, 95 per cent of the forfeited amount relating to bid or performance security, will be returned to them by government and government undertakings. This will provide relief to MSMEs.”
Also read: Budget 2023: FM Sitharaman revamps credit guarantee scheme with Rs 9,000 crore in corpus for MSMEs
Welcoming the government’s decision, Adarsh Sharma, Managing Director at consulting firm Primus Partners told FE Aspire that this comes as a huge relief for MSMEs, especially for those which don’t have access to institutional financing and have their capital blocked as bid fee or performance guarantee to secure government and undertaking tenders. The freed-up capital will now be ploughed back into their cash flows.”
MSME association FISME added that this will support a large number of MSME suppliers to the government who were inflicted with penalties or whose bank guarantees were forfeited as the world was adversely affected during Covid.
Also read: Budget 2023: Now micro enterprises with up to Rs 3 cr turnover can opt for presumptive taxation
Sitharaman also announced that a voluntary settlement scheme with standardized terms will be introduced under the Vivad Se Vishwas scheme to settle contractual disputes of government and government undertakings, wherein the arbitral award is under challenge in a court. This will be done by offering graded settlement terms depending on the pendency level of the dispute, she added.
Meanwhile, among other measures for small businesses, Sitharaman enhanced the turnover limits to be eligible for presumptive taxation. Now micro enterprises with a turnover up to Rs 3 crore from earlier Rs 2 crore and certain professionals with a turnover up to Rs 75 lakh from earlier Rs 50 lakh will be eligible to be taxed presumptively provided their cash receipts are not more than 5 per cent of total receipts.
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