Budget should exempt MSME from ESI & PF for first 2 years: KASSIA

Bengaluru, Jul 9 (KNN)  Ahead of the Union Budget 2014-15 to be presented in Parliament tomorrow, industry association KASSIA has said that the new budget should amend the definition of factory in small scale industry so as to make it more entrepreneur-friendly, enhance productivity and simplify labour laws, if it is serious about enhancing job creation.  It should also exempt MSMEs from ESI and PF for the first two years.
 
Outlining the expectations of the State’s MSME sector, the Karnataka Small Scale Industries Association (KASSIA) in a press release also called for considering VAT and service tax as mutually exclusive and not levy both the taxes in case of composite transactions involving supply of both goods and service.
 
“In cases where goods and services come into play, the present practice is to levy both VAT and service tax on the same transaction and on the same value by treating a transaction as both supply of goods and supply of services. But this actually goes against the spirit of the Constitution of India,” explained President, KASSIA, Chidananda M Rajamane.
 
“The Constitution mandates that the taxes have to be imposed on the respective value of supply of goods and services in work contracts involving a bundled supply of goods and services. The FM should therefore set right this anomaly and consider VAT and service tax as mutually exclusive,” he added.
 
Some of the other suggestions made for inclusion in the Budget are:
 

• Split the MSMED Act into two to cover Micro & Small Scale Industries up to Rs 5 cr investment and Medium Scale Enterprises in investment range of Rs 5-10 cr separately.
• To prevent delayed payments to MSMEs which is locking up working capital, special powers should be given to the Facilitation Councils to attach the bank accounts or properties of defaulting purchaser under revenue recovery proceedings.
• Exempt the MSMEs from ESI and PF coverage for the first 2 years of the employee recruited since most of the employees are untrained, unskilled and a lot of money is spent on training and developing their work skills, and also, to insulate the MSME unit from high attrition rate of employees.
• Enhance the ceiling limit of the CLCSS Scheme to Rs 2 crore and extend the time limit for submitting applications from 3 months to 6 months.
• Announce a new Insurance cover for MSME entrepreneurs to protect them against various kinds of risks such as uncertainty of market stability, credit release, skill availability, input price fluctuation, export fluctuation, power availability etc.
• Cover all loans to MSME sector up to Rs 2 crore under CGTMSE and charge concessional interest rate for the small scale industry at 2 per cent below PLR.
• Announce a separate central excise policy under which a single tariff will be levied on all MSME products so as to simplify procedures, and minimize administrative hassles.
• Enhance exemption limit for central excise from Rs 1.5 crore to Rs 5 crore in view of the vast changes in the industrial landscape.
• New guidelines to be framed for reimbursing accumulated excise dues similar to VAT reimbursement.
• Permit setting off service tax inputs against central excise outputs for MSME.  (KNN/ES)