>SMALL BUSINESSES FACE COMPLIANCE, ACCOUNTING WORRIES
Firms say authorities may misuse power to harass genuine taxpayers
Micro, small and medium enterprises (MSME) are trying to assess the full extent of the goods and services tax (GST) regime over their businesses, as some crucial rules of operation are still unclear.
Though the government has unveiled GST rates of a significant number of items, a majority of companies in the sector are worried about the new accounting and taxation norms that have been opposed by industry and are being discussed. These include a decision to reduce the tax exemption limit for small-scale industry units from ~1.5 crore to ~20 lakh, as well as to phase out central value added tax (VAT) credit from September.
“We are in talks with the government on a number of these rules which need to be finalised soon, especially as compliance norms are getting much stricter and the majority of the sector is coming under the taxation umbrella for the first time,” Om Prakash Mittal, national president of MSME network Laghu Udyog Bharti, said.
Currently, the government recognises micro enterprises as those with less than ~25 lakh investment in plant and machinery. Small and medium enterprises are those with investments less than ~5 crore and ~10 crore, respectively.
MSMEs have opposed the introduction of taxation on stock transfers, claiming that would stretch their working capital even further. Greater harassment from tax officials on infractions is also a prime concern for companies.
“Mistakes are bound to be made in the transition period, with so many companies dealing with the system for the first time and the government should take that into account,” Sanjay Bhatia, head of Ficci’s MSME council, said.
Companies have said the monetary threshold for tax authorities to arrest for an offence should be brought down to ~50 lakh from ~1 crore. “There are apprehensions based on experience that authorities may misuse their power and harass genuine taxpayers. There is a high possibility that authorities may adopt arm-twisting tactics to extract undue advantage,” a Ficci consultation note to the government said.
With the administration of the reformed tax structure being divided among the central GST authorities, companies have complained that intrastate transactions would have to deal with two sets of assessment and enforcement agencies.
Currently, the govt recognises micro enterprises as those with less than ~25 lakh investment in plant and machinery