1. The budget 2017-18 has small but significant provisions for Ministry of Micro, Small & Medium Enterprises (MSMEs) and startups as well.
  2. To give a big boost to the MSMEs to thrive in a competitive environment, Mr. Jaitley has proposed to reduce the tax rate of MSMEs reporting turnover of less than 50 crore to 25% from the existing 30%.
  3. This will benefit 96 percent (6.67 lakh) of companies in India at the expense of the government forgoing Rs 7,200 crore of revenue.
  4. The concession, will give a platform for MSMEs to become more competitive vis-a-vis larger companies and will also enable firms to migrate to a company’s format.
  5. Also, in a drive to promote digital way of doing business, a lower rate of 6% from the existing 8% has been proposed to small companies having turnover less than 2 crore to the extent their sale proceeds are realised through banking channels.
  6. Similarly, the threshold for mandatory tax audit compliance has been raised to 2 crore, which would ease the compliance burden.startup
  7. Finance Minister has increased the period of profit-linked deductions available to the startups to seven years from the current five years.
  8. However, the tax breaks is still only available on the profits made by startups for three years. Notably, this tax sop is only available to those startups which are recognised by the DIPP (Department of Industrial Policy & Promotion).
  9. FM Arun Jaitley has allowed the companies to carry forward their MAT to 15 years from the present period of five years.
  10. Minimum alternate tax (MAT) is the tax on book profits or profits earned by the company as per statutory books maintained by the company under the companies act.
  11. At times, despite book profits (as recorded in the accounts), the companies have no tax liabilities due to the various exemptions and rebates offered by the government. Such companies are called Zero Tax companies.
  12. Hence to tax companies like this which earns profits as per books and is not liable to pay tax, such provisions are created and is calculated as 18.5% of book profits.
  13. MAT paid can be carried forward and used for payment of any further tax liability arising in the future years as long as minimum amount of tax as per MAT is paid.
  14. If tax payable on taxable income fall below MAT it could be taken as a credit in the year when taxable income exceeds book profits under sec 115JAA upto ten succeeding assessment years.
  15. MSMEs and startups are the nurseries for future corporates and therefore they must be nurtured carefully which has been tried by the FM.