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Union Budget 2018: 5% Corporate Tax Relief for SMEs

By: Admin In: Business Last Updated: 2018-02-08

Budget 2018 for SMES

The Union Budget for the financial year 2018-19 was presented on 1st February by the honorable Finance Minister Mr. Arun Jaitley. This would be the last budget announced by the NDA Government in their five-year tenure. The Indian populace was eagerly waiting for this budget announcement to see how Mr. Jaitley would likely be ending his inning. While many promises made in Budget 2014 like eradication of black money apparently seemed unfulfilled, but the government’s promises to fight poverty and provide better infrastructure facilities look like a near reality after five years. This year, the key focus of the budget was less on black money or poverty and more on changing the current tax regime. A major tax relief, especially for those in the corporate sector has been a talk of the town post budget speech.

The budget 2018-19 might be a turning point for the corporate sector. There were several announcements to create transparency in the corporate taxation. Major changes have been announced in the corporate taxation rules in this year’s budget report. And the small, medium and micro companies would be the one benefitting from this change. The bigger corporation might have to stick with the earlier high taxation system itself while the SMEs would enjoy low taxation. The MSMEs aka the micro, small and medium-sized enterprises are set to enjoy the tax-relief that the Budget 2018-19 has brought on platter.

The New Provision in Tax System
The new provision in tax system states that the companies that have an annual turnover of less than INR 250 crores would now have to pay just 25% tax. This is opposed to the erstwhile 30% tax that these companies had to pay before this provision was ruled out. This means that the companies who had an annual turnover accounting to less than INR 250 crores in the year 2017 would have to pay a corporate tax of 25% in the financial year 2019. This would benefit more than 20% of the total companies in India. Stats say that out of the 4,721 companies listed in India around 963 companies had an annual turnover of less than INR 250 crores and would benefit from the same. All these 963 companies would be the major gainers from this tax relief that Mr. Arun Jaitley has announced in Budget 2018-19.

One of the main reasons why the government has proposed this tax relief is to encourage budding entrepreneurs to start their business in India. Apart from encouragement to the budding entrepreneurs, a new amendment in Union Budget states that the benefits from the tax relief would go to the startups incorporated up to 1st April. Another reason to slash down the corporate tax was that the entire world is rationalizing the corporate tax after US President Donald Trump cut the corporate tax from 35% to just 21%.

Mr. Arun Jaitley, Finance Minister said, “The corporate tax cut will account for 99% of the enterprises filing returns, which will further help create more employment opportunities and stir investments.”. The small and medium scale enterprises have been the engine of growth for many countries, creating job and powering economic growth. They are the dominant job creation machines and would trigger India’s economy and continue the country’s development. The financial constraints have restrained the growth of the SMEs and this tax relief would be a great way unshackle these constraints and help them grow without any financial inhibitions.

Owing to the digitization in India, many B2B portals have set up and these B2B portals are offering huge benefits to these SMEs. Now when the micro, small, and medium scale enterprises have lesser worries about the taxes, they can invest more in scaling their business and contributing to country’s economic growth.

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