ISLAMABAD: The Technical Advisory Sub-Committee of the ECC headed by Prime Minister’s Advisor on Finance and Revenue, Shaukat Tarin, has reportedly blocked approval of Small and Medium Enterprises (SMEs) Policy, 2021 at the ECC level, well informed sources told Business Recorder.
The ECC, sources said, deliberated the case threadbare on November 15, 2021, prior to the formal approval of the ECC the very same day.
The Ministry of Industries and Production informed the ECC that few additions would be made in the current policy by adding IT and IT enabled services in the domain of the SME.
ECC Chairman Omar Ayub observed that policy was a very good start. “However, two broad elements are required to be added in the policy. Firstly, revamping of SMEDA should be one of the priorities by bringing in members from the private sector.
It should be a lead organization for promotion of the SMEs. Secondly, financing of SMEs from the formal sector is very low. At present, only 170,000 of 5.2 million SMEs are given loans by the formal sector. It should be increased to three million loans in the next few years.”
The meeting was informed that the Technical Advisory sub-Committee of the ECC deliberated on the case in its meeting held on November 15, 2021, and suggested certain amendments.
After discussion, the ECC constituted a committee consisting of Minister for Industries & Production, Adviser to the Prime Minister on Finance and Revenue, Minister for Economic Affairs Division, Governor State Bank of Pakistan, Secretary Finance Division and Secretary Ministry of Industries & Production to review the proposed SME policy and submit the final policy draft before the ECC for consideration.
The Federal Cabinet, in its meeting held on November 23, 2021, ratified the decision of the ECC taken on November 15, 2021.
According to the draft SME policy which will be altered after consultation with the committee constituted by the ECC, the MoI&P has proposed extensive incentives both for men and women entrepreneurs and tax reduction between 67 percent to 83 percent whereas minimum turnover tax will be 0.25 percent and 0.5 percent or flat tax rate of 7.5 per cent and 15 per cent.
There will be presumptive regime without any audit and sans harassment, online and simple tax filing, inclusion of IT and ITES, and gradual reduction in withholding tax with corresponding increase in formalization, sales/income Tax receipts.
The annual turnover for category-I SMEs has been proposed at Rs100 million while in category-II annual sales turnover will be between Rs100 million to Rs250 million.
The banks will fix credit line of Rs60 billion under SME Asaan Finance Scheme (SAAF) for collateral free lending. Each SME will get loans upto Rs10 million, with three year tenure.
The number of borrowers will be approximately 30,000, while credit risk guarantee will be 40-60 per cent. The government will also extend a subsidy of Rs25 billion.
The sources said collateral free financing for SMEs will be based on size, sector, geography and gender. The new SME policy has proposed 19,584 plots for SMEs, of which 1,380 plots will be allocated in National Industrial Parks, in KP 5,675 plots, Punjab 11,892 and in Balochistan 637 plots.
For women entrepreneur development, 25 percent tax reduction in tax liability for income from business whereas banking will be based on equality policy for financial inclusion of women. Women specific business incubation will be established along with display facilities with business development support programmes.
Four measures have been proposed for market access: (i) for local market access, option of bid declaration in lieu of bid security; (ii) facilitation for SMEs access to international markets; (iii) preservation in public procurement for SMEs; and (iv) export readiness, and E-Tijarat programme.
Copyright Business Recorder, 2021