Budget 2019 expectations: MSMEs demand capital gain exemption for industrial investment

Pointing problems in the expansion of business and lack of proper availability of the credit line for micro and small-sized entrepreneurs (MSMEs), Indian MSMEs have demanded from the Narendra Modi-led government at the centre to exempt MSMEs from capital gains for those sold out properties whose money they are investing in their firm. It would make investment in the MSME sector as smooth and hassle-free as it has been for the SMEs and other industrial sectors in India.

Speaking on the matter, Rajeev Chawla, Chairman, IamSMEofIndia said, "As collateral-free loans for the MSMEs are very difficult and it requires a lot of paperwork and time which an entrepreneur of the MSME size can't afford. Majority of the MSME owners are opting to sell out their property to generate fund for their firm. But, if they do that they will have to pay heavy capital gain tax which is not the case if they buy a property against property."

Chawla said that MSMEs and SMEs are the major job-creating sector and hence if their above-mentioned demand is met, MSMEs would flourish at a faster rate, helping the government to meet the demand on the job opportunity front.

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"For last few years, NBFCs have been major credit line providers to the MSMEs and post IL&FS crisis, credit line for the MSMEs from the NBFCs have almost dried up, hence if their demand is met in the coming budget (even though it would be a vote on account), it would be a huge relief for the MSME sector throughout India," said Chawla. 

Chawla also said that the Ministry for SMEs and MSMEs have scrapped various subsidies meant for the MSMEs. If the government decides to continue these subsidies again in this budget then it would be icing on the cake for micro small sized entrepreneurs.

Amit Aggarwal, Director, Priyanshu Agrotech Private Limited — an MSME based in Delhi-NCR — said, "Ever since our loans from the NBFC have dried up, it has become difficult for us to sustain our business. If the government decides to allow RBI to give a collateral-free credit line to MSMEs along with capital gain exemption which they are already providing to businessmen of other sectors, life would become easy for the MSMEs on pan India level."