The Union Budget 2026 is a major win for India’s small and medium enterprises. With a focus on liquidity, digital compliance, and local manufacturing, the government is clearing the path for SMEs to scale faster and with less paperwork.
Key highlights of the Union Budget 2026 for the SME sector
1. Direct Financial Support & Credit Access
The government is tackling the credit gap head-on with new funding mechanisms:
- SME Growth Fund: A dedicated Rs. 10,000 crore fund has been launched to provide risk capital to growing businesses.
- Mandatory TReDS: To solve the problem of delayed payments, TReDS (Trade Receivables Discounting System) is now mandatory for all government procurement, ensuring SMEs get paid on time.
- Self-Reliant India (SRI) Fund: A fresh infusion of funds ensures continued equity support for scalable MSMEs.
2. GST & Customs Reforms
Tax compliance is becoming more business-friendly.
- Easier Post-Supply Discounts: You no longer need complex invoice-level linking to offer discounts. Credit notes can now be issued with simple ITC reversals.
- 90% Refund Claims: For businesses with an inverted duty structure, the government will now provisionally sanction 90% of GST refunds, giving a massive liquidity boost.
- Fast-Track Clearances: For SMEs dealing in food, drugs, or plant products, a new priority digital window starts in April 2026 to reduce port delays.
3. Overhauling MAT
The Minimum Alternate Tax (MAT) has undergone its most significant change in years. For SMEs, this is a prompt to simplify their tax structure.
- Rate Reduction: The MAT rate has been cut from 15% to 14%.
- MAT as a Final Tax: From April 1, 2026, MAT is no longer an advance tax credit. It is now a terminal tax, meaning you cannot accumulate new MAT credits to use in future years.
- Move to New Regime: If you stay in the Old Tax Regime, your existing MAT credits may lapse. However, if you switch to the New Tax Regime, you can use your old credits to offset up to 25% of your tax liability each year.
4. Digitalisation: Less Paperwork, More Speed
Say goodbye to manual follow-ups for tax certificates.
- Electronic Nil TDS Certificates: Starting April 2026, applying for Lower or Nil TDS certificates will be 100% digital with automated approvals.
- Customs Integrated System (CIS): A unified digital window will be rolled out over the next two years to make cross-border trade seamless for small exporters.
5. Manufacturing & Infrastructure Plug-in
If you are looking to set up or expand a factory, the “Plug-and-Play” model is your best friend.
- Mega Textile & Chemical Parks: Move into pre-equipped clusters where you can simply “plug in” and start production, saving massive upfront capital costs.
- Cluster Modernisation: 200 legacy industrial clusters are being upgraded with better tech and infrastructure to help local units compete globally.
Also Read : India-EU FTA and Its Impact on Indian Businesses
Conclusion
Union Budget 2026 shifts the burden of compliance away from the SME and puts more capital back into their hands. Whether it is the lower MAT rate or the new SME Growth Fund, the message is clear: Scale up, and the government will simplify the path.
