Micro, small and medium enterprise sector enormously contribute to the GDP of the country. The sector is characterised by low investment requirement, operational flexibility, location wise mobility, and import substitution.
Over the years, the small scale sector in India has progressed from the production of simple consumer goods to the manufacture of many sophisticated and precision products like electronics control systems, micro wave components, electro medical equipments, etc.
The process of economic liberalisation and market reforms has further exposed these enterprises to increasing levels of domestic and global competition.
The MSME sector contributes significantly to the manufacturing output, employment and exports of the country. In terms of value it accounts for 45 per cent of the manufacturing output and 40 per cent of the total exports of the country.
But still it perpetually struggles to survive due to lack of financial resources. The main inability is from of cash, which is vital for machinery upgradation and for constant review.
Federation of Indian Micro and Small & Medium Enterprises (FISME) in its memorandum for the Union Budget (2012-13) focuses only on two important aspects, access to institutional finance and enabling regime of direct and indirect taxes.
FISME has suggested to actively promote NBFC's as they can act as vital intermediary financial institutions for micro and small enterprises
To encourage start ups, lending capacity and to attract funds they propose to promote more of Venture capitalists, Large SME dedicated banks, Securitisation and SME exchanges/ platforms
For the need of capital formation it recommends tax break to be given based on the ratio between employment to capital invested so that new jobs will be encouraged
It proposes that profit ploughed by the Small Scale and Micro Industries into business could also be exempted from levy of Income Tax
In order to encourage SME's to move into company format they suggest implementing slab wise taxes in line with individual and proprietorship firms and also wants TDS to be allowed to be carried forward year to year
They also imply that Interest on late payment to MSME's due under MSMED Act to be mandatorily disclosed in tax audit report and the amount allowed as expenses
They propose to simplify the rules for refund of excise duty as they feel that refund of excise duty paid is a difficult process and this step will do fair to the duty payer
Electricity, being the biggest raw material for many sectors, they recommend service tax to be levied on electricity, as it will help in bringing down the cost of electricity
They suggest bringing GST as a value added tax through which a common market will come into being, distortions due to tax concessions including location based will be eliminated and tax regime will get simplified and rationalised
