RBI Recommends Tax Benefits For Digital Payments; Govt. Redefines MSME Sector!
The new redefinitions of the MSME sector will make it easier for GST officials to verify the claims of sales data filed by enterprises.
In a major decision, Govt. of India has decided to redefine entire MSME Sector, based on revenues. This will help better categorization of small, medium and large companies, and better flow of funds from the Govt.
Besides, a high powered Reserve Bank of India panel has strongly recommended a special tax incentive program, which would be based on digital payments.
MSME: New Definitions Created
As after-effects of GST regime is slowly trickling in, Union Cabinet has approved a proposal to redefine small, micro and medium enterprises, based on their annual revenues.
As per the new definition, here are the classification:
- Revenues till Rs 5 Crore: Micro Enterprise
- Revenues between Rs 5 crore and Rs 75 crore: Small Enterprise
- Revenues more than Rs 75 crore but less than Rs 250 crore: Medium Enterprise
This redefinition of MSME Sector has been done with the purpose of making it easier for GST officials to verify the claims of sales data, as entered/filed in the GST Portal; besides removing unnecessary inspections and enabling ease of doing business.
In a statement, Finance Ministry said,
“Taking turnover as a criterion can be pegged with reliable figures available, e.g., in GST Network and other methods of ascertaining, which will help in having non-discretionary, transparent and objective criteria and will eliminate the need for inspections, make the classification system progressive and evolutionary,”
RBI Panel: Let’s Give Tax Benefits For Digital Payments!
Meanwhile, a panel from RBI has strongly suggested to the Govt. to enable more tax benefits for the businesses, if they receive more payments via digital mode.
The committee was an ‘inter-regulatory working group on fintech and digital banking’ and was chaired by Sudarshan Sen, who is the executive director, RBI.
The committee in their report said that if a certain portion of all payments is received digitally by a business, then a tax rebate can be announced.
The report said,
“Given that the fintech companies are in their infancy but are growing at a rapid pace, the government may consider introducing tax subsidies for merchants that accept a certain proportion of their business revenues from the use of digital payments as opposed to cash,”
The committee has also proposed a stronger, and more flexible data protection laws in the country, as the existing provisions under Information Technology Act, 2000 are not adequate. The committee has acknowledged the fact that fintech niche is growing at a rapid pace, and RBI, and Govt. has to develop a deeper understanding of the nuances of the trade, in order to ensure that maximum benefits are derived from it.
Earlier, Govt. had proposed a flat 2% tax rebate on GST, for digital payments, but then the regulations weren’t finalized.
We will keep you updated.