According to Arun Kumar Garodia, chairman of the Engineering Exports Promotion Council (EEPC) India, the government may look to increase cash in the hands of businesses, especially MSMEs, by way of tax exemption and lower rates in the upcoming Union Budget given the decline in India’s engineering exporters as a result of the slowdown in key markets.
According to him, the assistance given under the Emergency Credit Line Guarantee Scheme (ECLGS) in the wake of the epidemic was basically a loan, creating an obligation that must be returned.
“In such a situation, more tax exemption or lower taxation can put more money into the hands of the Micro, Small and Medium Enterprise (MSMEs) to service their liabilities and for technical upgradation,” Garodia articulated.
“Engineering exports slumped nearly 12% year-on-year to $9.08 billion in December 2022 as compared to $10.30 billion in the same month a year ago. Given that the world economy is projected to slow down in 2023, global trade would be hit badly. Many global agencies have predicted a very bleak scenario. This could make the situation quite tough for engineering exporters,” he stated.
Garodia has also called for lowering the corporate tax rate for LLPs and partnership enterprises that are registered as MSMEs from the existing 30% to 15%.
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Additionally, he suggested weighted tax deductions of up to 150% on expenses paid as a result of export promotion in other nations, as well as direct tax exemption on investments made under the Production Linked Incentive Scheme (PLI).
“The current dollar rate of interest is 6% while for the MSMEs the Re-rate of interest is 11-12% so an interest subvention rate of 5% is necessary to offset the higher interest rates paid by MSME units,” he counted.
