• Jul
  • 18
  • 2013

SME Sector Requires CAs support

Selvaraj Selvakumar

When I checked with a business man about “How is your business” he replied, “we are working for TNVAT, CST, Excise duty, Service Tax, ESI, EPF, Professional Tax, TDS, Advance tax, Minimum Alternate Tax, Assessment, Tax Audits, Statutory Audits etc, in addition to when we find time we do business”. That was fun. Practically the SME sector being affected by the bundle of direct and indirect laws and tedious compliance procedures. Many SME sector entrepreneurs quit their business task as there is no proper guidance to them. In my opinion the SME sector is the area where practicing CAs needs put their efforts to support and make them grow better in all respect as they suffer from financial difficulties but may have good business potential.  

As said by Dr.A.P.J. Abdjul Kalam as ICAI- building in Nations; it is the one of the social responsibility of CAs to set the economic growth of India by contributing suitably to small and medium sectors also. It is true that 80% of the wealth of the nation is being held by 20% of the population, but it this scenario continued the 80% to 100% gap also grabbed by the said 20% over a period of time. It is not the healthy economic growth. I am not against the said 20% population but I believe that the SME sector to be supported by CAs in practice to increase the said 20% populations to grow to next level. Today doing business from the core is the mystery as it involves many difficulties vested with the conduct of the business.

To put it simply, when sales turnover exceeds Rs.10 lakhs in the state, the dealers required to get him registered under state VAT authorities. Consequently, he has to collect and remit the VAT after adjusting Input Credits if any. Further even if a single CST sale made by him, it is mandatory in Tamilnadu to register with Commercial taxes along with TNVAT registration. Consequent to these registrations, the dealer is required to file monthly returns online to the VAT authorities. Filing of return online is another task to the dealer he has to appoint some consultant at lower price who will do the filing up-to his knowledge whether right or wrong he does not bother, when problem crops up he become fly by night contractors.  On top of it, the TNVAT also prescribed audit under this act, when turnover of the dealer in a financial year exceeds Rs.100 lakhs. It prescribed that audit report in Form WW to be filed on or before 31st October subsequent to the financial year in which the turnover exceeded the limit. Hence it is must that the dealer has to maintain books in such a way that it can be audited under TNVAT by the CAs and provide appropriate audit report in which he certifies whether returns filed are in line with books maintained and complied with State VAT. When a single flaw in the system goes wrong the dealer has to face the consequences.

Besides, when service turnover exceeds 9 lakhs during the financial year, he has to register himself with service tax authorities.  When the turnover exceeds Rs10 lakhs, it is required to collect and pay service tax on accrual basis @ 12.36%. Whether you receive the service tax component from party or not, you are duty bound to pay the service tax out of packet and it is up to you to collect it from your client. If you failed to collect and if it became bad debts then nothing can be done. No refund/no adjustments. It will cut your pocket. If not paid the service tax, 200% to 300% of tax sought to be evaded by mistake can be levied as penalty in addition to interest at 18% per annum. Further when it comes to file service tax return the law is stating that file half yearly return but no proper infrastructure is made available till date. Under service tax, one Finance Act 1994, several amendments, many folds of revision, mega exemption, reverse charge, place of provisions of rules, declared service, negative list, point of taxation and so on. Mind boggling to the business people to understand even it is difficult for the department to conclude because of the litigations expected to crop up.

Another indirect tax on the card is Central Excise Duty, subject to small scale industries exemption of Rs.150 lakhs, Assessee are required to comply with central excise act and charge 12.36% on assessable value and it can be adjusted with input tax credits as per CENVAT credit rules. Penal consequences are many in excise law for defaulters. A new entrepreneur cannot afford to understand many things which are inherent in it. Here the CAs helps are required in many folds. CENVAT credits which must be understood in proper manner otherwise, consequences will be a lot.

Further when an entrepreneur has 10 or more employees it is their duty to register with employees provident fund act and contribute to their service @ 12% of profit. Similarly employees state insurance @ 4.75%.

As you may aware when turnover of the business exceeds Rs.100 lakhs the income-tax law wants the Assessee to audit u/s 44AB of the Act, which in turn requires answering to the income tax law in a single report of tax audit and many of the provisions of the act not known by the assesses. If not audited penal provisions are there to take effect followed by procedures.

Spending by cash in excess of Rs.20,000 (Rs.30,000 special cases) are not allowed as expenses under income-tax law subject to Rule 6DD. In many situations the assesses are forced to do it by cash, which are genuine and in which case they require supports as to how to do it within the four corners of law.  Similarly, when cash loan taken in excess of Rs.20,000 which violates section 269SS, which attracts 100% penalty. What to do when money required doing the business? Without proper guidance assesses are putting their self into corners and end up in paying penalties out of their tax paid profit. There he requires proper guidance.

Another burden to the business is TDS, it is tedious when you are not updated yourself with respect to the e-world/Internet world. There are so many methods and means to file returns today. You need to select the one which gives you comfort. It is a process where one needs to deduct tax under many sections and pay the same to the government and file e-TDS returns online. On uploading returns with even very negligible mistakes will warrant notices to the Assessee and they end up in paying taxes along with interest at the cost of technology including waste of time and energy

And so on….. We can list down the issues further….

Above all I must acknowledge that the entrepreneur/Assessee/client must co-operate and follow the guidance of the advisers/CAs to make them perfect and fit into the today’s business world. Further, the advisors/CAs needs to support SME sector to make them grow in such a way that the obey all the laws and regulations in India in a proper manner.  Let us support SME sector with great level so as to make them great success in the competitive market.

There author is a Chennai based chartered accountant, he can be reached at gsvselvakumar@gmail.com


17 Responses to “SME Sector Requires CAs support”

  1. AK Bhargava, Katni says:

    Dear CA Selvaraj Selvakumar ji,

    Thanks for Nice Article which depicts the plight of SME sector businessmen who with meager profit some how are operating their business yet facing hard competition.

    No coming to core issue raised as a matter of concern and true practical problems being encountered by these SME class particularly statutory compliance which department wise or number wise are almost same as are designed for big business houses/corporates.

    CA/Tax practitioner associations should understand these difficulties and come forward in a manner that these complications are confined to them relaxing the SME class business men at a reasonable service charge under ONE ROOF.

    Thanks again.

    AK Bhargava

  2. T.N.Panja says:

    Dear. Mr RahulNadkarni,

    Pls try to accept that CAs do not have adequate knowledge over Management accountancy.They are regarded as audit professionals.Moreover your pass% is around 20%.In fy 12-13 25000 fresh CAs has been added in that dull career .Fresh CAs are not getting jobs.In years to come CMA will dominate your community.

  3. Rahul Nadkarni says:

    Dear T.N.Panja.. please do not infuriate CAs. They are partners in Nation buliding.. They are only exclusivily trained and knowledgable to carry out such task. Cost Accountants does not have such qualities. As I suggest if any Cost Accountant want into their area he has to pass the most toughest exam on planet conducted by ICAI. This is the opinion of most CAs towards CWAs as I observed the commnents of CAs in other strings of this forum. :)

  4. M.Kannappan says:

    FINE ARTICLE. INTRODUCTION OF GST WILL ELIMINATE EXCISE, VAT AND SERVICE TAX COMPLIANCE, IF IAM RIGHT.THUS, 3 WILL BECOME 1.GOOD.
    When we remit TDS, we give the PAN and TAN numbers of both the parties.With such developments in IT technology, why not they programme in such a manner that all the data made available shall be made use of automatically, so as to avoid e-filing. Form 26 AS which shows the summary of tax credits into the Assessee account also shall take the data while making tax payment, without the need of seperate e-filing of TDS.Similarly e-filing could be avoided for Excise duty and Service tax.
    Mr.P.Chidambaram, is a person who has versatile knowledge and gives due regard for opinions and suggestions.He is more aminable for reforms and simplifications.He alone can address these painful problems of SMEs.

  5. KN.Muthiah says:

    Excellent article.Iam more than 60 years old and not exposed much to Information technology.Iam learning now.Compliance to various efiling requirements is taxing.Iam loosing interest in my business.Iam unable to close them also.The penalty for delayed filing thoughbyou might have paid your taxes is too high even upto Rs.20000 per quarter.The governance is too poor and with intention to increase tax receipts, all these kind of regulations are imposed. The only viable alternate is to introduce GST at the earliest so that many other taxation could be avoided.Impose GST at 30% or even more at the point of manufacturing itself and remove many other taxes and weed out corruption at grass root levels and minimise the burden of small enterprises.The GST introduction will only be a good solution.

  6. patel says:

    Dear now a days each business man has updated with new technology and CA should not think or worry about that as now a days best accountant can do all these thing in normal charge. CA should constrate only in his practice only.

  7. Anil Jain says:

    The write up is good and an eye opener for many. so many compliances are resulting in highter cost to end user.

  8. Mohit Saluja says:

    Nice Article. Thanks

  9. JYOTSNA says:

    TO MAHESH PODDAR
    Vat Audit limit though varies in various states like in punjab it is 50 lacs and in other states different figure but it is always below statutory limit of 100 lacs

  10. Mihir says:

    Whiile I agree with the observations of the author, I feel that he has failed to address the real issue.

    It is the CAs who have if not suggested complicated procedures to MCA, then have done nothing to simplify them. They make things complicated & never fight for the enterprises.

    Consider this: While Anna Hazare took on to the streets, CAs went to support them. But when the Traders in Mumbai protested against the L.B.T., no CA went to support them.

    CAs have dis-served the nations as much as our Netas. Time to think…!

  11. Datta says:

    Good article.

  12. vn kulkarni says:

    I ENTIRELY AGREE WITH THE AUTHOR.THE SMEs ARE SO BURDENED THAT THEY HARDLY FIND TIME TO DO GENUINE BUSINESS.THEIR VALUABLE TIME IS SPENT IN ATTENDING EXCICE ,INCOME TAX,SALES TAX,LABOUR OFFICES.
    I THINK DUE TO THIS THERE IS TENDENCY TO EVADE TAX,WHICH IN TURN HELPS THE BABUS TO ENCASH THE OPPOURNITY.THIS MUST STOP.LET CAs PLAY POSITIVE ROLE.

  13. MAHESH PODDAR says:

    AS OF IN MAHARASTHRA VAT AUDIT LIMIT IS STILL RS.60LAKHS.

    SO IN TUNOVER OF RS. 60 LKAKHS one have to maintain all accounts as per requirement. so double standarad as in income tax 100 lakhs and in maharasthra vat audit 60 lakhs

  14. S l deshpande says:

    Sir, you exactly describe our situation,govt.just sucking money from us on the contrary big and medium industries also sucking us .

  15. bhavin says:

    good

  16. T.N.Panja says:

    SME sector urgently need support of CMA ie Cost and Management Accountant.CA’s are financial auditors, they are not Management Accountant

  17. Raghunath T L says:

    Nice Article Mr. Selvaraj Selvakumar. Your view are very realistic and their is a need for proper guidance and support for the overall growth of the SME Sector

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