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MSMEs also face Tax Terrorism; forced to deposit higher Advance Tax

Updated: Mar 14, 2019 05:53:00am

New Delhi, Mar 14 (KNN) Every year, March brings another headache for MSMEs: adhoc demand for higher Tax by Income Tax officials to fulfil their targets.

The Commissioners of Income Tax would start sending informal summons to MSMEs to know how much Tax they are paying.

“It is so irritating to be summoned by IT officials and told how much Advance Tax should I deposit this year irrespective of my sales or profit”, told one MSME entrepreneur based in NCR.    

“Why should I be answerable to them if my sales dropped or I earned less profit in a particular year.. it is nothing short of Tax terrorism”, he fumed.

Owner of another MSME in Lucknow says that the problem is even graver in non-Metros where MSMEs are major Tax payers and that is why easy prey for squeezing more Tax.

The pressure tactics that Tax officials employ is through Tax consultants and Chartered Accountants who are told to send in the ‘Directors’.

‘While official summons are not served, the meeting is quite intimidating’, says a recent victim of such harassment.  

Mohandas Pai wrote in a leading business daily recently that ‘unrealistic target setting’ is the main reason of ‘Tax terrorism’.

The brunt of this target chasing by IT officials is born by hapless MSMEs who cannot withstand the pressure of IT officials and end up paying more tax than due and then claim refunds.

This also results in high incidence of litigation.

According to The Economic Times the corporate tax under dispute for more than one year but less than two years increased by 44%, from Rs 1.44 lakh crore in 2014-15 to Rs 2.08 lakh crore in 2016-17.

Tax experts are of opinion that the policy of target setting by Tax officials and then hounding tax payers is a relic of past.

In a highly data centric regime like GST with advanced tools big data analytics available to IT officials, there is absolutely no need for  forcing people for depositing higher Advance Tax.

Finance Minister Arun Jaitley in his Budget 2016 speech had termed litigation as a ‘scourge’ for a tax-friendly regime.  It is time he walked the talk by sending a clear signal to the officials at ground. (KNN Bureau)


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