New Delhi: The MSME ministry has asked the finance ministry to resolve the double-taxation issue faced by private equity investors, who want to invest in the sector, which contributes about 8% to the economy, an official said.
The micro, small and medium enterprise (MSME) ministry has said that private equity 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 said.
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.
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.
The planning commission has also formed a Working Group on MSMEs growth. The group is working to resolve problems like credit and institutional finance to the unorganized sector.
In the organized sector, there are 26 million units, which provide employment to almost 60 million people. The sector contributes 40% in the country’s total exports.