MSME ministry to solve PE players' taxation issues

NEW DELHI, INDIA: The Ministry of Micro, Small and Medium Enterprises (MSME) has asked the Finance Ministry to resolve the double-taxation issue faced by private equity (PE) investors, who want to invest in the sector, according to a news agency report.

The MSME Ministry has said that PE players, like angel investors, are facing the problem of double-taxation in India. “We have taken up the issue of double-taxation faced by angel investors with Ministry of Finance...these investors pay taxes as an owner and also as a equity holder,” an official is quoted by the report.

Angel investors are affluent individuals who provide the capital for a business start-up in exchange of convertible debt or ownership equity. In general, these investors are usually reluctant to invest in MSMEs due to the high risks involved in this sector.

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The MSME Ministry is also working with the Planning Commission on the need to provide different routes of easy credit to these units during the 12th Plan period. These units face major challenges like lack of equity, risk capital and poor access to timely and affordable loans.

“The ministry is trying to bridge gaps and attract funds from these investors, as small-scale units are not in their radar,” an official said.

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The Planning Commission has also formed a Working Group on MSMEs' growth for the Twelfth Five Year Plan (2012-17) was constituted by the Planning Commission. It is under the chairmanship secretary, MSME, with 46 members and 11 sub-groups to deal with various issues of MSME sector including khadi, village and coir sectors.

The Working Group is requested by the Planning Commission to submit its report by August 30, MSME Minister Virbhadra Singh had recently said.