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 [email protected]