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Taxation of Small Scale Industries

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The concept of Small Scale Industry is not very much wider. In case of SSI everything stays in fixed proportions. The ratio of investment in fixed assets in machinery and plant stays mostly on rent or lease and the entire cost do not exceed more than Rs.1 Crore. However the limitation of this amount depends on the policies of the government and varied time to time. The best thing about these kinds of SSI’s is that the entrepreneurs need not to get a license from the state or central government and can be set up in any part of the country. In a simple way we can say that taking registration is not compulsory at all for SSI’s.  But the thing is that to avail different kinds of Government assistance and financial aids you need to take registration from the State Directorate of from the Commissioner of Industries or from DIC’s. These types of financial aids are generally given by the Department of Industries. This type of registration can help them to take medium and long term based loans from any commercial banks or from Financial Corporations. One can take machinery on hire –purchase basis from well-known National Small Industries.  To take assistance of special schemes these SSI’s needed this type of registration. This type of registration can provide you assistance of the credit guarantee scheme, ISO-9000 certification reimbursement, Capital subsidy, low custom duty and many other advantages given by the State Government.

  • The Ministry which works on behalf of Micro, Medium and small enterprises perform like a nodal agency just to grow up these SSIs inside the country. The related ministry is liable to implement such kind of policies and different types of programmers just to promote these SSIs and to enhance competition among them and they get assistance from many other public sector enterprises like:
  • SIDO stands for Small Industry Development Organizations is considered the apex body is basically in helping the government to regulate such kinds of policies and schemes and projects.
  • NSIC that is the National Small Industries Corporation Ltd. Was initially established to promote, aiding and encouraging the growth rate of SSI inside the country with minute focus on its commercial aspects.
  • The respected ministry has created three Institutes for National Entrepreneurship Development and their primary concern is to develop training modules, research and providing training to enhance development in the SSI sector and these three institutes are:
    • NISIET (National Institutes of Small Industry Extension Training) in Hyderabad. 
    • NIESBUD stands for National Institute of Entrepreneurship and Small Business Development, established in NOIDA
    • IIE that is known as Indian Institute of Entrepreneurship set-up  at Guwahati
    • NCEUS is known as the National Commission for Enterprises in the Unorganized Sector basically constituted with the need to focus on the problems of any enterprises and  one to suggest they relevant  measures to get rid of all such problems.
    • SIDBI this organization don’t require any recognition, it stands for Small Industries Development Bank of India basically an apex institution just for financing all Small Scale Institutions with the help of several credit schemes.

Small Scale Industries are playing a vital role and especially in the country like India.  It actually provides a significant role in the economic growth of the country.  SSIs are playing a very important role and contributing all sectors of Indian economy be it Industrial production, a kind of creation and employment of entrepreneurial base and at last to exports of the country too. These types of small scale industries generally offer a very simple and effective method of widening the foundation of any private enterprise.  If any type of development occurs in small industries, then they offer a very effective way of getting broad based ownership of any industry. To give importance to this sector government has put emphasized in the development of this particular sector and highlighted the basic requirement of the SSI sector. The government has intentionally focused on the growth of this kind of enterprises and created relevant policies to help the people who belong to this sector. This is the biggest cause who the government has done so many things for SSIs and initiated so many promotional schemes and policies. Out of available many the fiscal incentive is the most desired under SSI schemes and provide tax concessions and direct and indirect tax exemption that are livable of the production.

This came into existence in the financial year 2005-06 and now a SSIs can easily put his claim under section 8-IB that comes under the income tax act:

If any SSI unit is carried by a company then deduction of 30% will be applicable for the very first 10 years. In the same way if that unit is possessed by any co-operative society than 25% will be applicable for the same 10 years.

In the same way if the SSI unit is owned by any individual that the deduction amount will be nearly 25% for the same 10 years.

Just after fulfillment of all these below mentioned conditions one SSI unit can get a tax exemption:

  • It should be owned, controlled and subsidiary of any industrial undertakings. They are not restricted to any kind of rules and regulations and can manufacture any types of goods and fully permitted to do so. They should start their business in between 1st April 1991 and 31st march 2002. They must utilize efficiency of 10 workers in their manufacturing unit and must aid with power.
  • Any kind of tax exemption is fully permitted for the assessment year from which company has started manufacturing items.

SSI is needed to deposit excise duty under the provision of the Central Excise Tariff Act, 1985 (5 of 1986). But the excise concession amount is dependable on its annual turnover not on its registration. It has been reported that this kind of SSI units doesn’t produce more than Rs. 4 crores which makes them eligible for taking  any type of  concessions. On regular interval Government of India provides concession to all SSIs and gives them full exemption. Government also offers concession on excise duty and sometimes these types of concessions are based on slab-wise distribution. So here presenting list of concessions:

Those SSIs units who are producing goods more than Rs. 100 Lakhs are fully exempted from any kind of payment of excise duties.

  • Those who have a turnover of more than Rs 60 Lakhs annually need not to capture a different room for storing all finished products.
  • They are also not supposed to maintain any type of records that may be daily stock accounts or any other. They just need to maintain a record for themselves.
  • There is a provision of exemption for goods that are produced by SSI units for home consumption or just export to countries like Nepal and Bhutan.

The choice of taking concessions and exemptions:

SSI Scheme (in absence of CENVAT):

Those who come under the slab of Rs 100-300 lakhs need to pay normal duty and can get full exemption up to the value of turnover and can be cleared Rs.100 lakhs.  All the units that come under 8/2003-CE can put his request to avail this scheme. It provides an exemption for basic and special excise duty. But the manufacturer is free not to avail this opportunity. This facility can be taken for one long financial year.

SSI Scheme (along with CENVAT):

These types of units can take Cenvat credit on all its revenue. Any individual  unit needs to pay 60% as normal duty and after that if he goes for the clearance of Rs 100-300 lakhs then they need to pay the normal rate. The producer can avail this thing at any point of time but actually depends on the condition of concession. The manufacturer only needs to send a letter to the Assistant Commissioner of Central Excise along with a copy to its Superintendent and need to give all details: (a) he need to project his name and address (b) he need to disclose factory locations (c) complete detail of inputs (d) date of SSI exemption notification (No.9/2003-CE) (e) values of clearances of particular goods.

Values particularly for clearance that don’t come under the SSI concession list are:

The complete clearance of the particular goods that are being used by the manufacturer to produce the output.

The information of strips of plastics that are used inside the factory for manufacturing goods.

The goods that are used for captive consumption in these SSI units

Clearance of materials that are exempt under notification

Procedural concessions to SSI:

  • Quarterly Return: SSI units that can avail concession are not required to submit ER-1 Return. They need to deposit Quarterly ER-1.
  • These SSI units are supposed to submit pay duty by 15th of that respective month along with this they need to pay duty amount by 15th of the month. They are also required to submit pay duty t the end of the month.
  • Export pattern for SSI: SSI units are not covered under provisions of excise they need to follow simplified procedures for export their goods as they need not to prepare ARE-1 Form, etc.

If any audit parties or excise inspectors or any officer need to visit the site then they need to take permission from Assistant Commissioner to fulfill that specific purpose. Apart from this they need to fulfill visitors book that are generally maintained by a person of the unit. Audit functionality is allowed once in two or five years.



 
 
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