Thursday, March 11, 2010

Highlights of MSME in Budget

MSME sector increased by 33.78 percent from Rs.1794 crore to Rs. 2400 crore.Micro, Small and Medium Enterprises' (MSMEs) share in Gross Domestic Product constantly on rise, said Dinsha J. Patel Minister of State Independent Charge for MSMEs, in a written reply in the Lok Sabha on Tuesday.Patel said, "According to the last available data, the micro and small enterprise (MSE) sector shares 7.20 percent in the GDP in the year 2006-07." The MSME sector has acquired a prominent place in the growth of the economy of the country. This sector has continuously contributed significantly in the gross domestic product (GDP), industrial production, employment generation and export, he added.

According to the latest report of Prime minister's Task Force on MSMEs, the sector contributes 8 percent of the country's GDP, 45 percent of the manufactured output and 40 percent of its exports. The MSMEs provide employment to about 60 million persons through 26 million enterprises. The labor to capital ratio in MSMEs and overall growth in the MSME sector is much higher than the large industries. The geographical distribution of the MSMEs is also more even.

The share of micro and small enterprise (MSE) sector in the GDP of the country during, 2004-05, 2005-06 and 2006-07 (latest available) is as per the table given below:Year Share of MSE sector in GDP (Percentage)2004-05 5.84%, 2005-06 5.83%
2006-07*7.20% *This includes medium enterprises in the sector after the enactment of micro, small and medium enterprise development (MSMED) Act, 2006.

Under the Micro, Small and Medium Enterprises Development Act (MSMED), 2006 the filing of Memorandum (Registration) by Entrepreneurs intending to establish a Micro, Small or Medium Enterprise is discretionary and not mandatory. As such, the number of Micro, Small and Medium Enterprises, functioning in the country as per Quick Results of 4th All India Census, in the registered and unregistered category are 15.52 lakh (5.94%) and 245.48 lakh (94.06%) respectively.

Highlights of Budget:

* Extension of existing interest subvention of 2 percent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.
* High Level Council on Micro and Small Enterprises to monitor the implementation of the recommendations of High-Level Task Force constituted by Prime Minister.
* The corpus for Micro-Finance Development and Equity Fund doubled to Rs. 400 crore in 2010-11.
* National Social Security Fund for unorganized sector workers to be set up with an initial allocation of Rs. 1000 crore. This fund will support schemes for weavers, toddy tappers, rickshaw pullers, bidi workers etc.
* Limits for turnover over which accounts need to be audited enhanced to Rs. 60 lakh for businesses and to Rs. 15 lakh for professions.
* Limit of turnover for the purse of presumptive taxation of small businesses enhanced to Rs. 60 lakh.
* To facilitate the conversion of small companies into Limited Liability Partnerships, transfer of assets as a result of such conversion not to be subject to capital gains tax.
* To ease the cash flow position for small-scale manufacturers, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single installment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly basis.
* Reduction in central excise duty on corrugated boxes and cartons from 8 percent to 4 percent.
* Enhancement of weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research from 125 percent to 175 percent.

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