A snapshot of budget announcements for

MSMEs, Exports, Start-ups & Innovation


1. SUBORDINATE DEBT: Working capital credit remains a major issue for the MSMEs. Hence this scheme to provide subordinate debt for MSMEs, to be provided by banks to be treated as quasi-equity and would be fully guaranteed through CGTMSE.

2. RESTRUCTURING: More than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year. The restructuring window was to end on March 31, 2020, now proposed to be extended till March 31, 2021.

3. INVOICE FINANCING: An app-based invoice financing loans product will be launched. This will remove the problem of delayed payments and consequential cash flows mismatches for the MSMEs.

4. GeM: Government e-Marketplace (GeM) is moving ahead for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works. 3.24 lakh vendors are already on this platform. It’s proposed to take its turnover to 3lakh crores. Rs. 27,300 Cr allocated for development and promotion of Industry and Commerce for the year 2020-21.

5. FACTORING: Necessary amendments planned in Factor Regulation Act 2011. This will enable NBFCs to extend invoice financing to the MSMEs through TReDS, thereby enhancing their economic and financial sustainability.


6. RECEIVABLE INSURANCE: To achieve higher export credit disbursement, a new scheme, NIRVIK is being launched, which provides for higher insurance coverage (up to 90%), reduction in premium (0.80%) for small exporters and simplified claim settlements.

7. DUTY REFUND: It is proposed to digitally refund to exporters, duties and taxes levied at the Central, State and local levels, such as electricity duties and VAT on fuel used for transportation, which are not getting exempted or refunded under any other existing mechanism. This Scheme for return of duties and taxes on exported products will be launched this year.

8. TECHNOLOGY UPGRADATION: Many mid-size companies are successful domestically but not in export markets. For selected sectors such as pharmaceuticals, auto components and others, we propose to extend handholding support – for technology upgradations, R&D, business strategy etc. A scheme of Rs. 1000 crore will be anchored by EXIM Bank together with SIDBI.


9. EMPLOYEE STOCK OPTION – Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain highly talented employees. Currently, ESOPs are taxable as perquisites at the time of exercise. This leads to cash-flow problem for the employees who do not sell the shares immediately. In order to give a boost to the start-up ecosystem, taxation on the employees will be by deferring the tax payment by five years or till they leave the company or when they sell their shares, whichever is earliest.

10. TAX HOLIDAY: Presently, an eligible Start-up having turnover up to 25 crores is allowed deduction of 100% of its the profits for three consecutive assessment years out of seven years if the total turnover does not exceed 25 crore rupees. The limit is now increased from existing Rs. 25 crore to Rs. 100 crores and period of eligibility for claim of deduction has been extended from existing 7 years to 10 years.


11. IPRexpand the base for knowledge-driven enterprises

i. A digital platform would be promoted that would facilitate seamless application and capture of IPRs. Also, in an Institute of Excellence, a Centre would be established that would work on the complexity and innovation in the field of Intellectual Property.

ii. Knowledge Translation Clusters would be set up across different technology sectors including new and emerging areas.

iii. For designing, fabrication and validation of proof of concept, and further scaling up Technology Clusters, harbouring such as test beds and small scale manufacturing facilities would be established.

iv. Mapping of India’s genetic landscape is critical for next generation medicine, agriculture and for bio-diversity management. To support this development, two new national level Science Schemes, to create a comprehensive database shall be initiated.

v. The government proposes to provide early life funding, including a seed fund to support ideation and development of early stage Start-ups.

12. IMPORT SUBSTITUTION: Labour intensive sectors in MSME are critical for employment generation. Cheap and low-quality imports are an impediment to their growth. Special attention has been taken to put measured restraint on import of those items which are being produced by our MSMEs with better quality. Keeping in view the need of this sector, customs duty is being raised as detailed below for creating a level playing field for MSME and promoting MAKE IN INDIA:

i. Level playing field for domestic producers: Customs duty is being increased on the following goods:

S.N. Category of goods Rate of Duty
From To
1. Household goods and appliances 10% 20%
2. Electrical Appliances 10% 20%
3. Footwear

Parts of footwear





4. Furniture goods 20% 25%
5. Stationery items 10% 20%
6. Toys 20% 60%
7. Machinery

a. Specified goods used in high voltage power transmission project

5% 7.5%
b. Railway carriage fans 7.5% 10%
c. Compressors of refrigerators and air conditioners 10% 12.5%
d.  Commercial freezers 7.5% 15%
e. Welding and plasma cutting machine 7.5% 10%
f. Rotary tillers/weeder 2.5% 7.5%

ii. Changes in Customs duty to promote MAKE IN INDIA under Phased Manufacturing Programme (PMP) for Electric Vehicles and Cellular Mobile Phones:

a. Changes in customs duty under Phased Manufacturing Programme for Electric Vehicles Rate of Duty
From To
1. Completely Built Units of Bus and Trucks (with effect from 01.04.2020) 25% 40%
2. Semi Knocked Down (SKD) units of bus, trucks and two wheelers (with effect from 01.04.2020) 15% 25%
3. Semi Knocked Down (SKD) units of passenger vehicles and three wheelers (with effect from 01.04.2020) 15% 30%
4. Completely Knocked Down (CKD) units of passenger vehicles, three wheelers, two wheelers, bus and trucks (with effect from 01.04.2020) 10% 15%
b. Changes in customs duty under Phased Manufacturing Programme for Cellular Mobile Phones
1. PCBA of Mobile phones (with effect from 01.04.2020) 10% 20%
2. Vibrator/Ringer of Mobile phones (with effect from 01.04.2020) Nil 10%
3. Display Panel and Touch Assembly (with effect from 01.10.2020) Nil 10%

 iii. Changes in Customs duty to promote MAKE IN INDIA in Electronics sector:

S. N Specific Items Rate of Duty
From To
1. Motors like Single Phase AC motors, Stepper motors, Wiper Motors etc. 7.5% 10%
2. Specified chargers and power adapters Applicable Rate 20%
3. Fingerprint readers for use in cellular mobile phones Nil 15%
4. Earphones and headphones Applicable Rate 15%


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Qualification: CA in Practice
Location: PUNE, Maharashtra, IN
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January 2021