Only a handful of MSMEs may gain from 5% cut in corporate tax

PUNE: The 5 per cent relief in company tax, as announced in the Budget, will benefit just a handful of micro, small and medium enterprises (MSMEs) around the nation.
The company tax is levied at the revenue of an organization after taking into deductions corresponding to depreciation and other operational expenses. The income tax knowledge presentations that many corporations display higher expense and pay no tax.

Depending on this knowledge 3 scenarios emerge:

SCENARIO 1: BASED ON REGISTRATION DATA ON UDYOG AADHAAR PORTAL

Udyog Aadhaar enrolment mechanism replaced all other sorts of on-line and offline registrations from September 2015. Till now, over 35,000 MSMEs have registered themselves in the Pune district. Across state, over 3,80,000 MSMEs have registered .

Going by this, the announcement is prone to benefit at most only about 1,000 MSMEs in the district with a turnover of Rs 50-250 crore (3 per cent of general enterprises). Across the state, only about 12,000 MSMEs stand to benefit from the tax price cut, supplied they're paying any taxes presently. The available knowledge presentations that no longer they all are paying any tax.

Udyog Aadhaar portal seeks to capture details like the company’s Aadhaar quantity (mandatorily connected to Permanent Account Number), national trade classification code, previous registration details, if any and investments, amongst others.

An respectable in the district industries centre mentioned despite the fact that the registration is “voluntary” many MSMEs are registering themselves because it gives them protection in cases of non-payments and cheating by their buyers.

SCENARIO 2: BASED ON ACTUAL TAX PAYMENTS, SO FAR

The above may turn-out to be an overestimate, if one reads between the lines of finance minister Arun Jaitley’s Budget speech.

The FM mentioned after the most recent choice, only 7,000 or simply 1 per cent of the corporations with a turnover of over Rs 250 crore will pay taxes at 30 per cent. Also, he mentioned, that the final yr’s finances incentive had coated 96 per cent of the universe – all the ones whose annual turnover used to be lower than Rs 50 crore.

That leaves a mere 19,000 corporations national in the bracket of Rs 50-250 crore.

“It is so tough to get an estimate at the number of MSMEs and the employment they provide. There are not any accurate statistics. Therefore, we are getting increasingly corporations to register themselves,” Giriraj Singh, minister of state, MSMEs, mentioned.


The tax division’s knowledge presentations that only about 7,00,000 enterprises around the nation pay taxes, while the Udyog Aadhaar registration presentations that there are over 41 lakh registered enterprises in the nation.


SCENARIO 3: WHAT COULD HAVE BEEN?


To get a sense of the number of unregistered enterprises, one has to rely on National Sample Survey Organisation knowledge. According to it, there are about 5.8 crore enterprises in the nation, which offer employment to about 12 crore folks. If even part of them register themselves, the tax collections would leap manifold.


Only a handful of MSMEs may gain from 5% cut in corporate tax Only a handful of MSMEs may gain from 5% cut in corporate tax Reviewed by kailash soni on February 15, 2018 Rating: 5
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