Budget 2023-24: Thrust on Ease of Doing Business, MSMEs; PAN common identifier

In her Budget speech on Wednesday (February 1) Finance Minister Nirmala Sitharaman made a slew of announcements for the corporate sector that will enhance the ease-of-doing business, give an additional impetus to Micro, Small and Medium Enterprises (MSMEs) and encourage start-ups in the post-pandemic era.

Trust based governance for Ease of Doing Business

Sitharaman said, to enhance the ease of doing business, the government will remove over 39,000 compliances and decriminalise over 3,400 legal provisions.

The government has also introduced the Jan Vishwas Bill to amend 42 central acts to “further trust-based governance,” she added. Besides decriminalising minor offences, the Bill aims to rationalise monetary penalties, depending on the gravity of the offence, to strengthen a trust-based governance to facilitate ease of doing business, Minister for Commerce and Industry Piyush Goyal had said while tabling the Bill in Parliament last December.

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PAN mandatory for all businesses

Sitharaman said PAN or Permanent Account Number will be used as a common identifier for all government agencies to facilitate Ease of Doing Business.

National Data Governance policy

The central government will also introduce a National Data Governance policy to simplify the KYC process while anonymizing individual data, the finance minister said.

“It will enable access to anonymous data. The KYC process will be simplified and will be adaptive to a sense of risk-based, rather than one-size-fits-all. Financial sector regulators will also be encouraged to have KYC system fully amenable to the needs of Digital India,” she said.

Start-ups and the academia would also be encouraged to take up research and innovation under the National Data Governance Policy.

Relief for MSMEs

In a major relief for MSMEs, Sitharaman announced that enterprises which have failed to execute contracts during the COVID-19 period will be refunded 95 per cent of the amount relating to bid or performance security by the government or government undertakings as part of the ‘Vivad Se Vishwas’ scheme.

The minister said revamped credit guarantee scheme for MSMEs to take effect from April 1, 2023 through infusion of ₹9,000 crore in the corpus. The scheme would enable additional collateral-free guaranteed credit of ₹2 lakh crore and also reduce the cost of the credit by about 1 per cent, she said.

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In a bid to give an additional fillip to MSMEs, the government will also allow tax deduction for expenditure incurred on payments made to MSMEs. The same, however, will only be applicable if the payment is actually made in order to support MSMEs in timely receipt of payments.

The government also plans to launch a unified Skill India Digital platform to enable “demand-based formal skilling, linking with employers including MSMEs, and facilitating access to entrepreneurship schemes.”

Sitharaman said Entity DigiLocker would also be set up for MSMEs, large businesses and charitable trusts to store and share documents online securely. DigiLocker is a digitised online service provided by the Ministry of Electronics and Information Technology which provides cloud space for Aadhaar holders to access documents like driving licence, vehicle registration, academic mark sheets etc in digital formats from the issuers of these certificates.

IT benefits for start-ups

The Budget also proposes to extend income tax benefits to start-ups incorporated till March 2024.

Sitharaman said the government proposes to increase the benefit of carrying forward losses for start-ups to 10 years.

“I propose to extend the date of incorporation for income tax benefits to start-ups from March 31, 2023, to March 31, 2024. I further propose to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to 10 years,” she announced.

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That apart, sugar cooperatives can claim payments prior to 2016-17 made to sugarcane farmers as expenditure. The decision would give sugar cooperatives a relief of almost ₹10,000 crore, the minister said.

New cooperatives that commence manufacturing activity till March 2024 would also attract a lower tax rate of 15 per cent, she added.

Lab-grown diamonds

To promote domestic manufacturing, she said the government proposed to reduce basic customs duty on seeds used in the manufacturing of lab-grown diamonds.

That apart, the government would provide a higher limit of ₹2 lakh per member for cash deposits and loans by Primary Agricultural Credit Societies.