Government should adopt two-lane approach on tax compliance to support small firms

Small enterprises should be spared from investigation and penalties, say experts

“Government of India should adopt a two-lane highway approach to indirect tax compliance to improve ease of doing business for small enterprises. The government has already adopted this two-lane approach for direct taxation, under which large firms can fulfill their compliance through self-certification, while small firms are assisted with pre-filled income tax returns. Such a two-lane approach should be extended to indirect tax compliance as well. Under this, small exporters and importers, who have limited financial resources to hire experts, should be assisted by Turant Suvidha Kendras on tax filing procedures. Also, the customs authority should spare small taxpayers from investigation or levy of penalty for non-compliance and the government may allow large companies to comply with tax procedures through self-certification,” said Mr. Himanshu Tewari, Partner, Trade and Customs, KPMG Assurance and Consulting Services LLP at an interactive webinar on “Implications of Union Budget 2021-22” organised by World Trade Center Mumbai and All India Association of Industries (AIAI).

Mr. Tewari welcomed progressive amendments in Customs Act to allow importers /exporters to rectify their returns without seeking permission from officers and releasing new HS tariff codes 2022 that will be applicable from January 2022 well in advance. World Customs Organisation has released the seventh edition of the HS Code for classification of globally tradeable goods and the latest edition will be adopted by 211 countries from January 2022. With the Union Budget amending Customs Act to include the latest edition of HS Code, well in advance, the industry will have enough time to incorporate the same in their tax documents.

Speaking at the webinar, Mr. M.S. Mani, Partner, Deloitte India remarked that the key budget proposals are reformist and progressive. The budget has addressed some of the long neglected issues and it will improve ease of doing business substantially. Some of the progressive steps taken by the government to improve ease of trading are: the proposed introduction of new customs portal to serve as one stop interface between customs authority and industry, rationalization of customs duty exemptions and rollout of new customs duty rate from October 2021. He also welcomed the revised deadline for filing of Bill of Entry to reduce congestion in ports.

Ms. Aditi Nayar, Principal Economist - ICRA Limited said the government’s 26% increase in capital expenditure for the next year from the revised estimate for the current year and its renewed thrust on infrastructure augurs well for employment generation and demand.

In his remarks, Mr. Firoze B. Andhyarujina, Senior Advocate, High Court Mumbai informed that the budget has carried out 79 amendments in Income Tax Act and has taken decisive steps to reduce disputes and litigation. Specifically, he welcomed the constitution of Dispute Resolution Committee to reduce litigation for small tax payers. He opined that the government’s move to include capital gains, dividend income and interest income in the pre-filled tax returns will improve ease of filing taxes for small tax payers.

Earlier in his welcome remarks, Mr. Vijay Kalantri, President, All India Association of Industries said, “Since 1991, every successive government has introduced reforms in its annual budget for India to be part of the global village. The COVID-19 crisis has proven that India can be self-reliant in manufacturing of vaccines, PPEs, masks, sanitizers etc. The Government should, therefore, promote industries and act as a facilitator for business enterprises through capacity building and implementation of various reforms announced under the Atmanirbhar Bharat programme.”

Mr. Kalantri welcomed the increase in customs duty on certain products to discourage imports and promote local manufacturing. At the same time, he also suggested the government to take steps to reduce cost of raw materials for local MSMEs. He said, “The government should persuade local manufacturers of steel and other raw materials to supply these items to MSMEs at international prices so that local MSMEs can be globally competitive.”

Capt. Somesh Batra, Vice Chairman, MVIRDC World Trade Center Mumbai proposed vote of thanks for the event.

The webinar was attended by representatives of MSMEs, consular corps, financial institutions and academia.