Taxation benefits to ssi ,various incentives &subsidies, social responsibilities of Business

GROUP MEMBERS

THASNI M K

VISHNU M S

VEENA M

VIDHYA E SURENDRAN

INTRODUCTIONA small scale industry (SSI) is an industrial undertaking in

which the investment in fixed assets in plant & machinery, whether held on ownership term or on lease or hire purchase, does not exceed Rs.1Crore. However, this investment limit is varied by the Government from time to time.

In a developing country like India, Small Scale Industries play a significant role in economic development of the country.

CONT…They are a vital segment of Indian economy in terms of their

contribution towards country's industrial production, exports, employment and creation of an entrepreneurial base.

These industries by and large represent a stage in economic transition from traditional to modern technology.

Small industry plays a very important role in widening the base of entrepreneurship. The development of small industries offers an easy and effective means of achieving broad based ownership of industry, the diffusion of enterprise and initiative in the industrial field.

CONT…Given their importance, the Government policy framework right from

the First plan has highlighted the need for the development of SSI sector keeping in view its strategic importance in the overall economic development of India. Accordingly, the policy support from the Government towards Small Scale Industries has tended to be conducive and favourable to the development of small entrepreneurial class. Government accords the highest preference to development of SSI by framing and implementing suitable policies and promotional schemes.

The most important promotional policy of the Government for the SSI's is fiscal incentives in the form of tax concessions and exemptions of direct or indirect taxes leviable on production or profits.

Taxation BENEFITS TO SSI In order to increase investment in small scale and ancillary industries

and to discourage speculative investments in productive activities , Government has provided a number of taxation benefits to SSI units.

Taxation benefits relate to Income Tax , excise duty , Sales tax , Electricity duty , and Octroi.

Taxation benefits available to small scale industries are enumerated as follows:Tax Holiday

Exempted fro the payment of Income tax under section 80J of the act on their profits upto 6% (7.5 % for companies) from the total income of the units in the assessment years in which the unit began manufacutre.This benefits is available upto 5 years from the commencement of production.

CONT…Small scale units should satisfy the following conditions for the of tax benefit eligibility of Tax Benefit.They should not have been formed by the splitting or

reconstruction of an existing unit.They should employ 10 or more wore workers

without power .Development Rebate:In respect of new plant or machinery other than office appliance or road transport vehicles of a small unit , which is wholly used for the purpose of production , the SSI unit is eligible for development rebate under section 33 , in addition to normal depreciation.

It is given as follows:

1. In the case of plant and machinery ,35% of the actual cost , if it were installed before 1st April 1970 , and 25% of such cost if it were installed after 31st March 1970.

2. Where the plant and machinery was installed after 31st March 1967, being an asset representing expenditure of a capital nature on scientific research related to the business carried on by a unit, development rebate is given at the specified rates.

Rehabilitation Allowance: This is granted to small scale units, under section 33B,whose business is discontinued due to:

i) Riot or civil disturbanceii) Flood, typhoon, hurriance ,cyclone, earthquake or other natuaral calamities.iii) Accidental fire or explosion.iv) Action by an enemy.

The reestablished ,reconstructed or revived unit is allowed a deduction of a sum by way of rehabilitation allowance ,equivalent to 60% of the amount of the deduction allowable the unit.

CONT…

Investment allowance:

a) The investment allowance was introduced in 1976 in place of depreciation allowance. One of the most valuable tax concessions offered to SSI units under the Income Tax is the investment allowance .One of the most important allowance granted under section 32A.It is allowed at the rate of 25% of the cost of acquisition of new plant or machinery installed. The investment allowance is available for the articles or things except certain low priority items specified in the 11th schedule. However SSI units are eligible for the allowance irrespective o whether they are used for the purpose of business or construction , manufacture or production of low priority items listed in the 11th schedule.

CONT…

Publication Books

A SSI engaged in the business of publication of book is entitled to claim deduction of a sum equal to 20% of the profits and gains derived from such business under section 80OQQ of the act.’Books” for the purpose of this section do not include newspapers, journals , magazines , diaries , brouchures , pamphlets, and other publication of similar nature.

Excise Concession

The small scale units with the turnover upto Rs.3 crores are entitled to concession in excise duty as per General SSI exemption scheme. SSI units having turnover upto 1 crore need not get registration for Central excise purpose and pay duty.

Income tax Exemptions for SSIs

SSI units operating in 53 backward district in the country are entitled to 100% income tax exemptions.(Idukki and Wayanad included in the list.

MEASURES FOR PROMOTION ANDDEVELOPMENT OF SSIs

1. RESERVATION POLICY

Reservation of items for exclusive manufacture in SSI sector has been

one of the important policy measures for promoting and protecting this

sector against competition from medium/large/ multinational

companies.

2. GOVERNMENT'S PURCHASE PREFERENCE POLICY FOR SSI

PRODUCTS

Government stores purchase programme was initiated to assist

small-scale industries in obtaining a fair share of the total purchases

made by the Government and its departments. ( railway and defense)

2. GOVERNMENT'S PURCHASE PREFERENCE POLICY FOR

SSI PRODUCTS

Government stores purchase programme was initiated to

assist small-scale industries in obtaining a fair share of the total

purchases made by the Government and its departments. ( railway

and defense)

3. GOVERNMENT'S PRICE PREFERENCE POLICY FORMARKETING SSI PRODUCTS

a) Price preference up to 15% in case of selected items.

b) No registration fee.

c) A consortium to channelize and identify markets for the

products of SSIs both in

India and abroad.

d) Availability of Tender Sets free of cost.

e) Price preference up to 15% over the lowest quotation of the

large scale units (on merits)

4. TECHNICAL ASSISTANCENational small Industries Corporation Ltd (NSIC) offers SSI

units the following support and services through its Technical Services Centre.

a) Technology audits and benchmarking.

b) Technology needs assessment.

c) Technology sourcing.

d) Application of new techniques.

e) Technology acquisition.

f) Material testing facilities through accredited laboratories

g) Product design including Computer Aided Designs.

h) Common facility support in machining.

5. RESERVATION POLICY

Reservation of items for exclusive manufacture in SSI sector

has been one of the important policy measures for

promoting and protecting this sector against competition

from medium/large/ multinational companies

INCENTIVES AND SUBSIDIES IN KERALA

Within the broader framework set by the various industrial policy resolutions and the five year plans the Govt. of Kerala has formulated its own industrial policy. Besides Central subsidies and Incentive schemes it has offered a number of subsidies , concessions and exemptions for the development of industries in Kerala. The various incentives and subsidies are discussed below:

1.Seed Capital Assistance/ Margin Money Loan:Seed Capital Assistance Objecive - is to assist deserving entrepreneurs in setting up small

scale industrial units by way of providing soft loans to raise the required equity insisted by the financial institutions.

Only newly registered SSI units are eligible for this scheme.

Preference is given to micro sectors units owned by technocrats , women , handicapped persons , ex – service men and person belonging to Scheduled casts/Tribes. Government co- operative societies and public limited companies are not eligible.

CONT…Margin Money loan It is given for both term loan and working capital loan. It is limited to 20% of the coat of project or the total

working capital requirement or 50% of the margin stipulated by financial institution either for term loan or working capital loan, whichever is less.

The maximum limit of margin money loan is Rs .250000. The interest rate is 9% p.a. It is repaid in 16 installment.

2.Margin Money Loan to NRKs To assist the technically qualified no – resident Keralites

to start industrial units in Kerala in the field in which they have acquired technical know- how.

The maximum limit of MML is Rs. 5 lakh to 50% of the margin stipulated by the financial institutions.

CONT..3. Marketing Scheme and/ Incentive Marketing Intended to provide finance to organization for making

SSI products of the state particularly in the area of setting up of show rooms , expenditure towards installing improved packaging machineries ,quality Certification expenditure. Expenditure towards marketing consultancy services etc.15 % margin money loan of working capital and 15 % investment subsidy of fixed capital investment are given below.

NGOs industrial cluster consortium , cooperative societies and individuals are eligible to avail the assistance under the scheme.

CONT..4.Technology Development Fund Scheme To encourage small – scale units to upgrade the level of technology or

to use modern technology to increase productivity / increase quality of product by providing Credit Capital Subsidy @ of 12 % of loan amount sanctioned and disbursed by financial institution.

5. Feasibility Reports – Know-how The cost of the project report and technical know – how is subsidized

to the extent of 100% for NRDC and 50% from other approved sources upto maximum limit of Rs. 10000.

6.Incentive for Bar – coding Financial assistance to small scale industries for registration for bar coding

under market Development Assistant provided by the DIC. All categories of Ssi units who have adopted Bar code on or after 1.1. 2000

are eligible to get financial assistance of Rs. 15000.

CONT..7.State Investment Subsidya.) An investment subsidy of 10% , subject to a limit of Rs.5 lakh will be payable on the fixed capital investment of all industrial units set up in the state except industries included in the negative list and notified from time to time by Government.

b.)The investment subsidy to thrust sector will be 15% of fixed capital investment subject to ceiling of 15 lakhs. The thrust sectors are rubber based industries , information technology , agro based including food processing , light engineering , bio – technology , and 100 % export oriented units.

c.)An additional investment subsidy of 5 % of the value of fixed capital investment subject to ceiling of Rs. 1 lakh will be payable for tiny and SSI units established by SC / ST Women PH and Ex-service entrepreneurs or IT based industries.

CONT..d.)Industrial units which install equipment for renewable source of energy shall be eligible for an additional investment subsidy of 15 %subject to a maximum of % lakh.

e.)An additional subsidy of 10% subject to a maximum of Rs .20000 will be provided for installation of pollution Control devises in diesel generators.

f.)An investment subsidy @ 25% on fixed capital investment limited to Rs. 25 lakh is also given to each cluster consortium.

g.)An investment subsidy of 20% on fixed capital investment subject to a maximum of Rs. 25lakhs .

SOCIAL RESPONSIBILITYAn ethical theory that an entity, be it an organization or

individual , has an obligation to act to benefit society at large.

Is a duty every individual or organization has to perform so as to maintain a balance between the economy and the ecosystem.

A trade-off always exists between economic development, in the material sense, and the welfare of the society and environment.

Sustaining the equilibrium between the two- society & company

It pertains not only to business organizations but also to everyone whose any action impacts the environment.

This responsibility can be passive, by avoiding engaging in socially harmful acts, or active, by performing activities that directly advance social goals.

Social responsibility entails developing

businesses with a positive relationship to the

society which they operate in.

According to the International Organization for

Standardization (ISO), this relationship to the

society and environment in which they operate is

"a critical factor in their ability to continue to

operate effectively. It is also increasingly being

used as a measure of their overall performance."

What are all the responsibilities

Towards community:

1. Make the best possible or efficient use of the society’s resources. 2. Provide maximum possible employment opportunities3. Keep the environment healthy and free from all types of pollution4. Contribute to the upliftment of the weaker sections of the society5. Refrain from indulging in anti-social and unethical practices.

Towards Customers :1. Regular supply of right quality of goods , at right time and

place

2. Charge reasonable prices

3. Prompt, adequate and continuous service

4. Prompt redressal of customers grievances

5. True and fair advertisements

6. Avoid unfair and unethical practices

7.Abide laws of the land

8. Pay taxes honestly in time

9. Avoid corrupting public servants

10. Encourage fair trade practices

To share holders:

1. Fair return on investment2. Safety of investment3. Steady appreciation of investment

4. Towards Employees

1. Fair wages, salaries2.Good and safe working conditions3. Adequate service benefits4. Recognition to employees, their contribution etc.

In India, some facts of social responsibilities are :1. Contribution towards economic development of backward regions and weaker sections of the society and to recognize and respect social values, business ethics and cultural heritage.

2. Cooperate with Government in solving problems like communalism, illiteracy, over population, concentration of income, wealth etc.

3. Make the country economically self-reliant through export promotion and import substitution.

4. Make the best of use of national resources

5. Protect national environment

CONCLUSIONSmall Scale Industry sector has emerged as India’s engine

of growth in the New Millennium. The SSI sector accounts for nearly 40 per cent of value added in the manufacturing sector and 34 per cent of total exports from the country. Through 95 percent of industrial units in the country, the sector provides employment to about 20 million persons.

The Government has recognized its importance for the economy and its intention towards promotion of SSIs is reflected in various Industrial policy Resolutions right from the year 1948. The primary objective of the Small Scale Industrial Policy during the nineties was to impart more vitality and growth-impetus to the sector to enable it to contribute its mite fully to the economy, particularly in terms of growth of output, employment and exports. The sector has been substantially delicensed. Further efforts would be made to deregulate and debureaucratise the sector with a view to remove all fetters on its growth potential, reposing greater faith in small and young entrepreneurs. All statutes, regulations and procedures were reviewed and modified, wherever necessary, to ensure that their operations did not militate against the interests of the small and village enterprises.

Cont.Government is aware of the challenges faced by SSIs and has been trying to improve their competitiveness through various measures. These consist of the following:a) Tax concessions have been provided to SSIs to

promote investment in this sectorand also to grant relief to small entrepreneurs.b) Technological facilities have been increased. c) In order to facilitate adequate flow of credit

efforts have been done.d) Measures have also been taken to improve

infrastructure facilities and promotemarketing of products.

REFERENCE

Gupta & Srinivasan, Entreprenuership Development In India, Sulthan Chand & son Publication,Ed.2005.

Vasant Desai ,Management of small scale industry, Himalaya Publications, Mumbai, Ed.2003.

Datey V.S. (2001), Taxmann’s Practice Manual to small Scale Industries, Taxmann Allied Services (P) Limited.

Panda, S.C., Entrepreneurship Development, New Delhi, Anmol Publications.

QUESTIONS……………..........?