EEPC India recommends a 25% Income Tax Slab for MSMEs in Budget Proposal

In a pre-budget meeting with Finance Minister Nirmala Sitharaman in New Delhi, Apex engineering exports promotion body EEPC India proposed introducing a 25% income tax slab for MSME manufacturing units that are partnerships, LLPs, or sole proprietorships, with the condition that the additional 10% saved be reinvested in the company.

This will provide MSMEs with an extra 10% buffer for expansion/working capital enhancement while also improving their liquidity. This will also provide jobs as MSME units expand. Increased financing under the Market Access Initiative (MAI) Scheme has also been proposed to support trade promotion initiatives.

Increasing the entire MAI funds allocation to Rs 1,200 crores would enable MSMEs to participate in international trade events and engage with their global peers.

“Allocating specific funds for capacity-building programs targeting prospective exporters in interior districts and rural areas would enable them to enter international markets,” explained Pankaj Chadha, chairman of EEPC India.

To assist MSMEs in shifting to sustainable energy practices, EEPC India has proposed implementing a policy that allows 100% depreciation on investments in solar power generation by MSMEs, comparable to earlier incentives offered for wind power generation. This will encourage MSMEs to reduce their carbon impact and cut energy expenditures.

Among other recommendations, EEPC India has proposed establishing a transparent and effective method to ensure that MSMEs have access to steel at a reasonable price, while balancing the interests of both producers and consumers.

“The imposition of a safeguard duty on certain steel imports may raise the landed cost of steel, resulting in higher domestic prices.” Steel accounts for 60% of MSMEs’ production costs, leaving them exposed to global competition and employment losses. While steel producers have promised to offer steel at export parity pricing, MSMEs sometimes buy through intermediaries such as agents or distributors,” Chadha explained.

EEPC India has also suggested increasing the quota under the Interest Equalization Scheme (IES) to Rs.10 crores in order to provide more meaningful financial support to MSME exporters, in line with previous restrictions and the expanding needs of the exporting sector.