Union Budget 2021: Key highlights for the MSME sector

The Union Finance Minister, Nirmala Sitharaman, on Monday 1st February announced the Union Budget 2021. We have listed down the key highlights from the announcement that will impact the MSME sector.

Key Highlights for the MSME sector:  

  • A proposed capital expenditure of ₹15,700 crores was announced for the Micro, Small and Medium Enterprises (MSME) sector in the Union Budget 2021-22.   
  • Reduction in Customs Duty on semis, flat and long products of non-alloy, alloy, stainless steels, copper recyclers.  
  • Duty on steel scrap has been exempted until 31st March, 2022. ADD and CVD has been revoked for certain steel products.  
  • To rationalize duty on raw materials, nylon chain has been made par to polyester and other artificial fabrics.  
  • Duty on steel screws and plastic builder wares has been increased from 10 to 15 percent.  
  • To promote exporters of garments, leather and handicraft items that are primarily made by MSMEs, the budget has announced the withdrawal of exemptions on imports of some types of leathers, as they are manufactured domestically in quality and quantity.  
  • The creation of a special framework for debt resolution for MSMEs was announced. To get faster resolution on cases, the NCLT framework will also be strengthened, including implementation of the e-Courts system.  
  • NBFCs to be allowed to extend invoice financing to MSMEs to enhance their economic and financial stability. 
  • The last day for incorporating a start-up eligible for claiming tax holiday is extended to March 31, 2022. 
  • Capital gains tax exemption (arising on sale of the residential property) available upon investing in eligible start-ups is extended up to March 31, 2022.  

Nadia Sood, our CEO & Co-Founder, shared her views on the Union Budget.  

“The reduction of paid-up capital requirements for businesses to incorporate, the ability of non-resident Indians to incorporate all are good steps forward for India to improve its start-up scene. What will be important, however, is how the deployment of the additional Rs. 15,700 Crore is deployed to ensure existing MSMEs, which make up the largest contribution of India’s GDP, are supported in their recovery from COVID-19. Particularly in terms of financial infrastructure, the rapid implementation of OCEN will be critical to India’s recovery, which will also depend on MSMEs’ ability to secure debt quickly and at reasonable rates.”  

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