Industry has welcomed the move of finance minister to levy taxes from defaulters belonging to the small scale enterprises through the new voluntary compliance encouragement scheme stressing that it is a better way to collect taxes while giving fair chance for the tax evaders. The Confederation of Indian Pharmaceutical Industry (CIPI) pointed out that this announcement is bound to help a lot of SSE's in getting back on track without evading taxes further and have urged all its members to utilise this opportunity.
The confederation stressed that it is a chance defaulting pharma companies should utilise, to safeguard their companies interest so as to avoid future legal hassles and losses they may face by way of penalty and high interest rate etc.
As per the announcement made by the FM during the union budget, the defaulters can make use of the scheme by filing a declaration of service tax due since 1/10/2007 by making the payment in one or two instalments before the notified dates. In that case, they would be exempted from paying any interest, along with getting a waiver in the penalty and other consequences as well.
It is understood that over 3000 pharma companies across the country are yet to make payments of their services taxes which puts almost 50 to 60 per cent of the companies in the bracket of defaulters. However, experts feel that though a temporary solution, this announcement will not be able to address the underlying issue why the SSE's where unable to pay the taxes in the first place.
CIPI, a body representing the interest of the small scale pharma companies stressed that while it is a problem that needs to be addressed, active consideration should also be put on finding the reasons behind problem as well. According to T S Jaishankar, chairman of CIPI, it is high time for the government to re consider the decision on levying heavy taxes from the small scale pharma companies.
“Today the SMEs hardly have any incentives to boost their business, a situation which is further complicated by the burden of various taxes they have to pay. Under this pressing circumstances some companies are forced to avoid from filing their taxes unwillingly. Government needs to analyse the situation more thoroughly to find the root cause to the problems by identifying those companies and understanding their issues by offering them more incentives and tax wavers,” he suggested.
He further stressed that keeping the interest of the industry, it would be appropriate if the government would slash the payable tax by 30 to 40 per cent for better compliance.