With the government expected to soon kick off consultations with industry bodies for Union Budget 2022, GST rationalisation and cut in compliance burden are some of the top expectations of the MSMEs.
The Finance Ministry has sought suggestions on taxation from industry and trade bodies as a precursor to Budget 2022-23.
Every year, the Budget is keenly followed and this year will be no different. While the recovery continues from two Covid shocks, the small business sector has been severely hit due to the pandemic.
Reduction in compliance
Speaking to Moneycontrol, Ramamurthy – member, All India Council of Association of MSMEs (AICA), which represents 170 MSME associations across the country, said that the ease of doing business for small entities must be improved and compliance burden in every aspect, be it GST, loans, licensing or audit must be reduced and statutory compliance should be minimal.
Vinod Kumar, president of India SME Forum, said,
“Compliance needs to drop drastically. Countries around the world have primarily eased compliance for enterprises which are under a million dollars. So we need to figure out how do we reduce compliance whether it is GST or income tax. “
Both Kumar and Ramamurthy noted that the compliance burden on small businesses can affect productivity and can be time-consuming. It should not be on par with that of larger corporates, they said.
“Already the prices of the raw materials are very high and not controlled so the government should at least rationalise the GST on manufacturing for micro and small enterprises. GST for manufacturing should be brought down to 12 percent from 18 percent,” said Ramamurthy.
Sharing a similar sentiment, Kumar said, “We are in a situation wherein on certain products, GST is the same whether you buy it from a Rs 50 lakh company or from a Rs 500 crore turnover company. So while the government is asking us to buy from small manufacturers, how will they be cost effective or competitive?”
He further observed that while GST should be present for every trade and product, the GST structure needs to be rationalised for small businesses.
Ashok Saigal, Co-chairman of CII’s (Confederation of Indian Industry) National MSME Council and MD of Frontier Technologies, a small-scale manufacturing company, said the tax benefit on R&D expenditure must be restored as the government is pushing for technological upgradation, technological development and adaption in the small business sector.
“Earlier there was a weighted benefit. If you spent say, Rs 100 for R&D, you will get a tax benefit of more than Rs.100,” he said.
Till 2016-17, the benefit was 200 percent, in 2017 it was reduced to 150 percent. This was valid till April 1, 2020, so we are requesting that this should be restored to 200 percent, he added.
he other expectation is on the long term capital gains on the sale of industrial property.
Saigal pointed out that when one sells a residential property, long term capital gains do not apply. However, when a company sells an industrial compound and moves to larger premises, it has to pay capital gains tax which reduces the funds available for investing and curtails the growth potential of MSMEs.
SOURCE: Money Control