Considering the tough times being faced by engineering exporters in the wake of the slowdown in key markets, the government may put cash in the hands of businesses especially MSMEs by way of tax exemption and lower rates in the upcoming Budget, said EEPC India Chairman Mr. Arun Kumar Garodia on expectations from Budget.
He said that the support under the Emergency Credit Line Guarantee Scheme (ECLGS) in the wake of the Covid pandemic was essentially loans and hence a liability that has to be repaid.
"In such a situation, more tax exemption or lower taxation can put more money into the hands of the MSMEs to service their liabilities and for technical upgradation," said Mr. Garodia.
He noted that engineering exports had recorded a year-on-year decline for six straight months to December 2022 amid a global economic activity slowdown.
"Engineering exports slumped nearly 12% year-on-year to US$ 9.08 billion in December 2022 as compared to US$ 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," the EEPC India Chairman said.
In order to support the engineering sector, Mr. Garodia suggested bringing down the corporate tax rate from the current 30% to 15% for LLP and Partnership firms that are registered as MSMEs with the Ministry of MSME.
He also proposed direct tax exemption on investments done under the Production Linked Incentive Scheme (PLI) and Weighted tax deductions of up to 150% on costs incurred due to export promotion in other countries.
For interest subvention, Mr. Garodia said that the scheme should consider the difference in Dollar interest via vis Rupee interest.
"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 said. ----------------------------