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    Inclusivity Officials
    Feb 28 th, 2018
    Browse By Business Needs-Browse by History-Learning About Taxes and Credits-Learning About Taxes and Credits No Comments

    Taxation benefits and exemptions of MSME/SSI for Entrepreneurs

    According to the MSME Website and information. a company in which the investment in Plant and machinery (P & M ) is under one (1) crore rupee is termed as a Small Scale Industry (SSI). The structure of an SSI can be in any form ie. Sole proprietorship, LLP, LLC, Single person, Pvt. Ltd etc.

    Although it is not mandatory to register a SSI through any state or central Govt. agency, it is always beneficial to do so. There are lots of exemptions and benefits provided to MSMEs by State and the private Government which can only be availed once registered with any affiliated government body. Small scale entrepreneurs should register themselves with State Directorate / DIC / Commissioner of Industries.

    This makes them eligible for availing

    1. Financial assistance from Department of Industries banks,
    2. Department of Industries,
    3. Loans from state finance corporations
    4. Loans from Public sector banks
    5. Machinery on hire purchase from NSIC
    6. Schemes & promotions of SSI ( Credit Guarantee scheme, Capitals subsidy, Custom duty benefits, tax benefits
    7. ISO reimbursement
    8. State specific schemes
    9. Ministry specific schemes

    There are various agencies and organization started by the Government to promote MSME industry. These are the bodies responsible for promoting MSME entrepreneurship in India. Each one is mentioned with a detail about the vertical it operates in.

    Agencies associated with small scale industries

    1.       The Ministry of Micro, Small and Medium Enterprises acts as the nodal agency for growth and development of SSIs in the country. The ministry formulates and implements policies and programmes in order to promote small scale industries and enhance their competitiveness. It is assisted by various public sector enterprises like:-

    2.       Small Industry Development Organisation (SIDO) is the apex body for assisting the Government in formulating and overseeing the implementation of its policies and programmes/projects/schemes.

    3.       National Small Industries Corporation Ltd (NSIC) was established by the Government with a view to promoting, aiding and fostering the growth of SSI in the country, with focus on commercial aspects of their operation.

    The Ministry has established three National Entrepreneurship Development Institutes which are engaged in development of training modules, undertaking research and training and providing consultancy services for entrepreneurship development in the SSI sector.

    These are:-

    1.       National Institute of Small Industry Extension Training (NISIET) at Hyderabad,

    2.       National Institute of Entrepreneurship and Small Business Development (NIESBUD) at NOIDA

    3.       Indian Institute of Entrepreneurship (IIE) at Guwahati

    4.       The National Commission for Enterprises in the Unorganised Sector (NCEUS) has been constituted with the mandate to examine the problems of enterprises in the unorganised sector and suggest measures to overcome them.

    5.       Small Industries Development Bank of India (SIDBI) acts as apex institution for financing SSIs through various credit schemes.

    India has emerged as one of the major power in India. The significant advantage which India has in the form of growing economy needs to be supported through development of Small Scale  Industries. India as a technology loving country should encourage the promotion of SME sector in India, which marks a major shift in promoting India as a Manufacturing nation. With the use of modern Industry, entrepreneurship and technological innovation, soon India will position itself as a major manufacturing hub.

    To promote India as a manufacturing hub, the development of small scale industries as it happened is Europe & England has to take place. This can be done through promotion of entrepreneurship through policy implementation. The environment has to be made favorable and the processes easy for entrepreneurship to flourish in India. Seeing to that the Government has provided highest preference to the MSME sector. There are different ways in which Govt. provides support to Small scale industries as mentioned above. But one of the most important forms of Policy favor the Government has done is in the form of Tax concessions and exemptions of direct and indirect taxes on Small scale Industries.

    The benefits/exemptions are as follows.

    a)      If SSI unit is owned by a company, the deduction available is 30% for first 10 years. If SSI unit is owned by a co-operative society, the deduction available is 25% for first 10 years.

    b)      If any other person owns SSI unit,the deduction to be claimed is 25% for first 10 years.

    c)       SSI unit can avail this tax exemption after fulfilling following conditions:

    • They should not be subsidiary of, or owned or controlled by other industrial undertakings.
    • They should not be formed as a result of splitting up or reconstruction of any industrial undertaking/business.
    • SSI units can manufacture any nature or type of goods, which they are permitted to do so.
    • They should have commenced business between 1st April 1991 and 31st March 2002.
    • They should employ atleast 10 workers in a manufacturing process carried out with aid of power or atleast 20 workers without aid of power.

    This tax exemption from total income is allowed from the assessment year in which the unit begins to manufacture goods.

    d)      Small Scale Industries are subjected to excise duties under the Central Excise Tariff Act,1985(5 of 1986). The eligibility for excise concessions for SSIs has been based on annual turnover rather than SSI registration. SSI units having turnover less than Rs. 4 crores are only eligible for concessions. Government of India has provided various concessions to SSIs by granting full exemption from payment of central excise duty on a specified output and thereafter slab-wise concessions. Thus concessions in this regard are:-

    e)      SSI units producing goods upto Rs. 100 lakhs are exempted from payment of excise duties.

    f)       SSI units having turnover less than Rs. 60 lakhs per annum need not have a separate storeroom for storing finished products.

    g)      They are not required to maintain any statutory records such as daily stock accounts, etc. Their own records are adequate.

    h)      SSI exemption is available for goods for home consumption as well as goods exported to Nepal and Bhutan.

    Choice of streams of concessions/exemptions:-

    1. SSI Scheme (without CENVAT) :- Units can avail full exemption up to turnover or value of clearance of Rs. 100 lakhs and pay normal duty thereafter in the slab-rate of Rs. 100-300 lakhs. This option can be exercised automatically. Such SSI units can avail Cenvat credit on inputs only after reaching turnover of Rs. 100 lakhs. This scheme is applicable to all those units mentioned under SSI exemption notification no.8/2003-CE .This notification grants exemption in respect of basic excise duty and special excise duty. The manufacturer may opt for not availing exemption contained in this notification and instead pay normal rate of duty on the clearances. But once the option is exercised, it shall continue till the financial year ends.
    2. SSI Scheme(with CENVAT) :- Units can avail Cenvat credit on inputs on all its turnover. Upto the value of clearance of Rs. 100 lakhs,units have to pay 60% of normal duty and thereafter for value of clearance of Rs.100-300 lakhs,they have to pay normal rate of duty .’Assessable value’ is used to calculate limit of 100 and 300 lakhs which is equal to wholesale price at factory gate,exclusive of taxes .

    A manufacturer can opt this option any time determining his eligibility for concession and the concessional rate of duty. While exercising this option, the manufacturer should inform in writing to the Assistant Commissioner of Central Excise with a copy to its Superintendent giving following details:

    1. Name and address of manufacturer.
    2. Location/locations of factory/factories.
    3. Description of inputs used in manufacture of specified goods and its description thereafter.
    4. Date from which option under SSI exemption notification (No.9/2003-CE) has been exercised.
    5. Aggregate values of clearances of specified goods(excluding the value of clearances not covered under SSI exemption notification)till the date of exercising the option.

    Not availed under SSI concessions

    Value of clearances which are not eligible for SSI concessions, that is, not covered under SSI exemption notification are as follows:-

    1. Clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods
    2. Clearances of strips of plastics used within the factory of production for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene
    3. Clearances of goods manufactured by SSI unit with the brand name or trade name of another person(unless goods are manufactured in rural areas)
    4. Clearances of goods manufactured by SSI unit for captive consumption.

    Clearances of goods exempted under any other notification.

    Procedural concessions to SSI:-

    1. Quarterly Return:-SSI units availing concessions need not submit monthly ER-1 Return. They only have to submit quarterly ER-1 return by 20th of the following month. SSI units have to pay duty by 15th of following month. They also have to pay duty in March by end of the month each year.
    2. Export procedures for SSI :- SSI units not covered under excise provisions have to follow simplified export procedures such as they do not have to prepare ARE-1 Form, etc.