The MSME in India is a harried lot. First, it was the economic recession, and then came the biggest threat of all – the Covid-19 first wave. It raged on for months and then when things started looking up a bit, then came the second Covid-19 wave. It has hit everyone hard. With global caution of a third wave coming soon, where will our economy end up, when will it start and move up? There is no perfect answer – is it 18 months? 30 months? Don’t know really!. Today, tomorrow and the next months are certainly dark days for the MSME. With the whole MSME sector, who are the major contributors of direct and indirect taxes, struggling for survival, during these hard times, the least one can request the GOI is to instruct the respective tax departments not to harass by issuing notices of heavy demands or opening the doors to appeals.
While the department is entitled to verify documents or demand tax if there is an undisclosed income, this traumatic may not be ideal for MSME to search and produce documents when their very survival is at stake. One hears of many MSMEs dying due to the pandemic closing their entire revenues. Our sincere request is to let the documents be verified, submitted and time of more than one year be given for producing further evidence or proof as the present pandemic does not allow free movement of people due to safety issues and documents sent by mail are not fully comprehended by the department staff due to various reasons as India is still not fully online. All these needs time.
We would like to illustrate one major issue that the MSME are facing with respect to service tax.
The cases which are closed under the Service Tax act 2 or 4 years before by collecting documents, explanations, hearings etc are again issued notices and show-cause notices when it was already represented previously. The service tax department does not issue any orders for the closed cases. When queried, they say that they issue a notice if there is a demand, and to quote “otherwise don’t worry, we have closed with the note sheet without liability.” These note sheets are not given to the MSMEs concerned as it is an internal document. How do MSMEs rectify it after three years when the case is reopened.
The proof of papers earlier submitted and its acknowledgment are not accepted by the service tax department stating that the note sheet is not closed. Is it the responsibility of the trade fraternity to close the note sheet, which is an internal document? Further, notices are issued in time-barred cases too, stating the reason ofevasion of taxes, which is already reflected in 26AS.
We wonder how 26AS and IT returns form the evidence for tax evasion as already respective taxes as applicable are paid by the concerned party. How can it justify as evasion when the facts are derived from the filed returns of the concerned party. The MSME feel that the time lapses are covered by issuing notices of evasion of taxes with no justification under the law.
We request CBDT to safeguard MSME’s interests by making it mandatory order of nil payments or sharing of note sheet, whichever is permissible so that ambiguity does not arise. Further, we also request the cases to be closed when called for within a stipulated period. Once the period is over, it should be presumed as the case is closed if there is no demand or orders within the deadline period.
Also, wherever notices are issued for all the cases which have been earlier decided, instruct the department not to pursue it based on the acknowledgment and details provided by the trade earlier as new notice as it is not completed well within the previous period.
For the current period notices, request CBDT to instruct the service tax department not to pass orders till the situation improves for personal hearing and conclude only after personal hearing of show-cause notice/final orders/demand. If required if there is a time limit for the department, suitable legislation can be made to extend the time for the conclusion of assessments.
This will help the department also to cope the stress of completing and stress of working during pandemic times.
This is a sincere entreaty on behalf of all MSME consultants and we also request industrial associations and federations to take it up with the appropriate authorities for the benefit of MSME. MSMEs let us join hands in this hour of crisis. United we are, united we can make it. Let us support our government during this crisis period.