MSME SECTOR IN UNION BUDGET 2005-06


  • MSME turnover eligibility limit for availing General MSME Excise Exemption enhanced from Rs. 3 crore to Rs. 4 crore. Further MSME units will now have only two options: either full exemption on the first clearance of Rs.1 crore or normal duty on the first clearances of Rs. 1 crore with CENVAT credit.



  • 108 items de-reserved which include 30 textile products including hosiery.



  • Small service providers having gross annual turnover less than Rs. 4 lakh have been exempted from purview of service tax.



  • Service tax on business auxiliary service has been exempted for persons producing/ processing goods, from the inputs received from a manufacturer and sending the resultant product to the same manufacturer for further manufacture of final products, which are cleared on payment of excise duty.



  • A provision of Rs. 173 crore made for promotion of MSME Schemes.



  • SME growth fund to be created by SIDBI with a corpus of Rs. 500 crore to provide equity support to small and medium units in knowledge based industries such as Pharma, Biotechnology and IT Sectors.



  • The Small and Medium Enterprises Development Bill to be introduced during the current session of the Parliament.



  • As proposed by the National Commission on Enterprises in the Unorganised/Informal Sector, pilot projects for creation of “growth poles” applying the Provision of Urban Amenities in Rural Areas (PURA) principles will be taken up in 2005-06 to expand production and employment in the unorganized enterprises around existing clusters of industrial activities and services as well as encourage the formation of new clusters.



  • The target for Credit Linking of Self-Help Groups (SHGs) enhanced from 2 lakhs SHGs to 2.5 lakh SHGs.



  • Micro Finance Institutions (MFIs), which seek to provide Small Scale credit and other financial service to low income households and small informal business to be promoted in a big way.



  • Rs. 100 crore Micro Finance Development Fund to be re-designated as Micro Finance Development Equity Fund and the corpus will be enhanced to Rs. 200 crore.



  • RBI to open a window to enable qualified NGOs engaged in micro finance activities to use the External Commercial Borrowing (ECB) window.



  • In order to revive the manufacturing sector, particularly small and medium enterprises and to enable them to adjust to the competitive pressure caused by the liberalisation and modernization of tariff rates a new scheme called Manufacturing Competitive Programme to be launched to strengthen operations and sharpen competitiveness. The design of the scheme will be worked out by the National Manufacturing Competitiveness Council.



  • Cluster development approach is to be adopted for production and marketing of handloom products.



  • Peak rate of customs duty for non-agricultural products reduced from 20% to 15%.



  • The customs duty on selected capital goods and parts reduced to 10% in some cases and to 5% in some others.



  • Customs duty on seven specified machinery for leather and footwear industry reduced from 20% to 5%.



  • Customs duty on nine specified machinery used in pharmaceutical and biotechnology sector reduced to 5%.



  • For primary and secondary metals customs duty reduced from 15% to 10%.



  • Industrial raw materials such as catalysts, refractory raw materials, basic plastic materials, molasses and industrial ethyl alcohol-key inputs to manufacture, will have reduced customs duty of 10%. On lead, customs duty is reduced to 10%.



  • Customs duty on coking coal is reduced from 15% to 5%.



  • 4% Countervailing Duty (CVD) imposed on the imports of Information Technology Agreement (ITA) bound items and their inputs that attract ‘nil’ duty.



  • Excise duty reduced from 16% to 8% on Imitation Jewellery.



  • 8% excise duty imposed on Mosaic Tiles.



  • Surcharge of Re.1 per kg on tea abolished.



  • Excise duty of Rs.1 per kg on refined edible oils and Rs. 1.25 per kg on Vanaspati withdrawn.



  • Excise duty reduced from 16% to 12% on matches made in mechanized and semi-mechanised sectors.



  • Excise duty on Iron & Steel restored to the normal level of 16%.



  • An Advisory Committee to be set up to advise the government on the extent of abatement for excise duty and service tax.



Related Links:

Union Budget
Financial Express
Hindustan Times
Times of India
Business Standard