MSMEs Need Outlays for Technology Upgrades to Aid in Green Transition

MSMEs Need Outlays for Technology Upgrades to Aid in Green Transition

Sub: Eco

Sec: National Income

Union Minister for MSMEs has identified six pillars crucial for the growth of the Micro, Small, and Medium Enterprises (MSME) sector:

• Formalization and Access to Credit: Ensuring MSMEs have access to necessary financial resources.
• Increased Market Access and E-commerce Adoption: Facilitating broader market reach through digital platforms.
• Higher Productivity through Modern Technology: Encouraging the adoption of advanced technologies.
• Enhanced Skill Levels and Digitalization in the Service Sector: Improving skills and digital capabilities.
• Support to Khadi, Village, and Coir Industry: Promoting traditional industries on a global scale.
• Empowerment of Women and Artisans: Fostering enterprise creation among these groups.

Budget Priorities

• The upcoming budget should balance growth, curb inflation, generate employment, support MSMEs, and promote the ease of doing business.
• Infrastructure development, particularly in industrial clusters, is critical for sustainable economic growth.

Export Growth and Employment

• Exports have grown with a CAGR of 8.5% over the past six years, from $478 billion in FY18 to $778 billion in FY24.
• The goal is to reach $2 trillion in exports by FY30, requiring a CAGR of 14.4%.
• Supporting MSMEs is vital as they are key employment generators and crucial for sustaining and growing the economy.

Recommendations for MSMEs

• NPA Timeline Extension: Extend the NPA recognition period from 90 to 180 days to provide relief to struggling MSMEs.
• Credit Guarantee Scheme Revamp: Revise the scheme for micro and small enterprises in the manufacturing sector to better support these businesses.
• Interest Equalisation Scheme: Extend this export-supporting scheme for five years.
• Sector-Specific Support: Extend the RoDTEP and ROSCTL schemes for the textile and garment sector, predominantly MSMEs, for another five years.
• Emergency Credit Line Guarantee Scheme: Reintroduce this scheme for MSME exporters for another two years to support export activities.
• Payment Timeline Extension: Extend the payment timeline for MSME job work to 120 days from 45 days to ease fund flow issues.
• PLI Scheme Adjustments: Lower the investment limit to ₹25 crore and the turnover limit to ₹70 crore under the PLI scheme for the textile and garment sector to help MSMEs upgrade technology and compete internationally.

Green Transition and R&D

• Climate Change Adaptation:
• Allocate more soft funds for MSMEs to aid in green transition efforts and fuel growth with sustainable resources.
• Research and Development:
  • Increase the weighted tax deduction under Section 35(2AB) to 300%.
  • Extend R&D benefits under Section 35(2AB) to LLPs, partnership firms, and proprietary firms to encourage innovation within MSMEs.

Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP)

The Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) is a key initiative aimed at supporting Indian exporters. It became operational on January 1, 2021, replacing the Merchandise Exports from India Scheme (MEIS) following a World Trade Organization (WTO) ruling that deemed MEIS non-compliant with WTO regulations due to its provision of export subsidies across a wide range of goods.

• Objective:
  • The primary objective of RoDTEP is to provide comprehensive support to exporters by remitting duties and taxes incurred during the production and distribution of exported products. It covers taxes, duties, and levies at central, state, and local levels that are not refunded through other mechanisms.
• Rebate Mechanism:
  • The rebate is based on a percentage of the FOB (Freight On Board) value of exports.
  • It is issued in the form of transferable duty credit/electronic scrip (e-scrip), with details maintained in a digital ledger by the Central Board of Indirect Taxes and Customs (CBIC).
• Validity and Extension:
  • Initially notified until September 30, 2023, the RoDTEP scheme has been extended until June 30, 2024, with the same rates applicable to existing export items.
• Implementation and Management:
  • The RoDTEP Committee operates within the Department of Revenue and is responsible for reviewing and recommending ceiling rates for different export sectors.
• Financial Allocation:
  • For the financial year 2023-24, the Indian Government has allocated Rs. 15,070 crores to support the RoDTEP scheme.
• Stakeholder Engagement:
  • The RoDTEP Committee engages with Export Promotion Councils (EPCs) and Chambers of Commerce to ensure the scheme meets the needs of exporters and addresses sector-specific concerns.

Rebate of State and Central Taxes and Levies (RoSCTL) Scheme

The Rebate of State and Central Taxes and Levies (RoSCTL) Scheme is designed to reimburse all embedded State and Central Taxes/Levies for the export of manufactured goods and garments. This scheme has succeeded the previous Rebate of State Levies (RoSL) Scheme, extending benefits to include both state and central taxes and levies.

• Objective:
  • To compensate for State and Central Taxes and Levies in addition to the Duty Drawback Scheme on the export of apparel/garments and made-ups by providing a rebate.
• Rebate Form:
  • The rebate under the scheme is provided in the form of duty credit scrips.
• Issuance of Scrips:
  • These scrips are issued electronically through the Customs system.
• Usage of Scrips:
  • Duty credit scrips can be used for the payment of Basic Customs Duty on the import of goods.
  • These scrips are freely transferable.
  • The duty credit available in an e-scrip must be transferred in its entirety at one time; partial transfers are not permitted.
• Validity of E-Scrips:
  • E-scrips are valid for one year from their creation date, and this period remains unchanged even if the e-scrip is transferred.

Implementing Agency

• The scheme has been notified by the Ministry of Textiles.
• It is implemented by the Department of Revenue.