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To provide an enabling environment for small and medium enterprises (SMEs), which contribute around 40 per cent of industry output, Budget 2013-14 should completely roll back alternate minimum tax (AMT), CII has said.
In a pre-Budget presentation, the Confederation of Indian Industry (CII) said under Section 115JB of the Income-Tax Act, at present AMT at the rate of 18.5 per cent is being imposed on all forms of business organisations, such as partnership firms and sole proprietorships, among others. The new levy is an extension of minimum alternate tax, which was introduced to bring zero tax paying companies/ corporates under the tax net. But, the AMT proposes to tax small entities at the same rate as large companies, except for an exemption of initial income/gains of Rs 20 lakh, affecting their commercial viability, the CII said.
In case a complete roll-back of AMT was not possible for proprietary or partnership concerns, then there was a strong case for removing AMT in tax-exempted States, CII said.
Chandrajit Banerjee, Director-General, CII, said “the imposition of AMT would be extremely hard for SMEs, a bulk of which (97 per cent) fall under the category of partnership/proprietary firms. Such enterprises already face numerous challenges in terms of finance, infrastructure, input costs, inadequate skills, etc.”
He said the imposition of AMT at the specified rate would further erode their competitiveness and act as a deterrent to investment and affect the viability of small businesses.
No doubt, there is a provision in the Budget to exempt enterprises from AMT provided their adjusted total income does not exceed Rs 20 lakh. But, according to CII, “this limit is highly inadequate and would be insufficient for firms that are planning an expansion and modernisation of their units.”
CII said levies such as these would force these units to remain small and not graduate into large units and affect business sentiments, without adding much to revenue or expansion of tax base.
Further, CII was of the view that payment of advance tax by SMEs should be made flexible with the option to pay advance tax during the following quarter. This would help ease the burden on SMEs, that are already facing payment problems due to factors such as penalties and high interest rates, it added.
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