The Finance Minister, Nirmala Sitharaman, will present the Budget 2023-24 on 1 February 2023. The Budget provides many incentives and benefits to the industrial sector every year. Here are some of the expectations of the industries and the Micro, Small and Medium Enterprises (MSMEs) from the Budget 2023.
Regulation on Cryptocurrencies
There are no regulatory practices surrounding cryptocurrencies. Capital gains on digital assets are taxed at a flat 30%, with no deductions or set-off allowed. However, there is confusion and little regulation regarding their trade. Thus, Budget 2023 may introduce regulatory laws for cryptos.
Expansion of the PLI Scheme
The Product-Linked Incentive (PLI) scheme has the potential to take India’s exports to a new height while diversifying exports. The government may enhance the PLI exposure and expand them to potential upcoming industries for boosting exports. The existing PLI schemes are limited to corporates and large companies in specified sectors. There is an expectation that the Budget 2023 may extend the PLI schemes to identified sectors and MSMEs in manufacturing to boost exports.
Tax Incentives for Industry
There is an expectation of a tax incentive on capital or operational expenditure for expanding and using new-age technology applications like Artificial intelligence (AI), Internet of Things (IoT), Machine Learning (ML), etc. The ASSOCHAM suggestion to reduce interest for late payment of GST from the current rate of 18% to 12% is expected to be in the Budget.
Implement National Logistics Policy (NLP)
There is an expectation of implementing the National Logistics Policy (NLP) in this Budget. The NLP will ease bottlenecks and reduce costs. India’s logistics cost is around 14% of its GDP. The government should decrease the logistics cost to 8-10% of the GDP to bring it to par with other developing countries. There is an expectation that the Budget will focus on cost management in the logistics industry.
Simplification of Advance Pricing Agreement and Safe Harbour Rules
In the Budget 2023, the government may simplify mechanisms like the Advance Pricing Agreement (APA) and Safe Harbour Rules (SHR) for ease of business. The government should provide fixed timelines for the closure of APA since it would help to enhance the bandwidth of APA teams. NASSCOM mentions that safe harbour margins are only notified for companies with a turnover of up to Rs.200 crore. Thus, very limited companies are able to opt for SHR.
The NASSCOM has asked the government to review the SHR and notify safe harbour margins for entities with a turnover up to Rs.1,000 crore, rationalise the safe harbour markups as per the available benchmarks and increase the applicability threshold. A safe harbour is a legal provision to eliminate or sidestep regulatory or legal liability in certain situations, provided they meet the specified conditions.
Mechanism to Adopt Labour Codes
Despite the approval of the four new Labour Codes by the Parliament in 2020, many state governments are yet to adopt them. The Union Government may push the State Governments to implement the Labour Codes soon. Thus, the industry expects a simplified mechanism for adopting new Labour Codes in FY 2023-24.
Measures to Boost Imports and Exports
The auto sector and textile industry are expecting measures to boost exports from the Budget of 2023. Manufacturing industries need support in terms of insurance, access to finance and a regularised import policy for critical components such as engines, batteries, flight control electronics and motors, which are still not available under Make in India.
Boost to EV Vehicles
The automobile sector expects that the Budget will provide more allocation for Electric Vehicles (EVs) since auto manufacturers are coming up with EVs in their portfolios. The industry has sought subsidiaries to purchase EVs to encourage electric mobility.
Benefits to MSMEs
The MSMEs are expecting an easier line of credit which is one of their essential requirements since their working capital gets choked because of challenges in the supply chain and delayed payments. There is an expectation that the Budget 2023 may revamp the Credit Guarantee Scheme for Micro and Small Enterprises. The government may also announce a full-fledged integration of e-Shram, Udyam, National Career Service and ASEEM portals in the Budget.
For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in
I am an Advocate by profession. I interpret laws and put them in simple words. I love to explore and try new things in life.
