Common Tax Concerns Of Small Scale Enterprises

common-taxSmall scale industries are emerging at a rapid pace .These also have a major role in the economic development of any country. In Indian context, small scale industries account for the employment generation to about 30% of population. These small scale and cottage industries receive government subsidies & tax benefits so that the rural & semi urban population is duly employed and in a position to self serve.

Problems Faced By Small Scale Industries

For a small sized entrepreneur, there are a lots of obstacles that are required to be tackled, gradually to move one step forward each time. Below are some of the common problems that are obvious for a small scale enterprises:

  • Insufficient funds
  • Limited human resources.
  • Comparatively scarce market condition knowledge.
  • Strong competition from the established firms.
  • Sluggish Management portfolio.
  • Lack of taxation experts who can guide them how to optimize the taxes.
  • Strengthening their equity base so as to sustain at the time of recession.
  • Extreme taxation norms.

Which Type of Taxes Are Imposed Upon Small Scale Industries

Every country has its own taxation norms. Taxes broadly are categorized as Direct Taxes and Indirect Taxes. Direct tax is directly imposed upon earning. Be it an individual or an organization. Examples include Income tax, and corporate tax. Whereas the Indirect taxes are imposed upon the customers while purchasing commodities. Examples include VAT (Value Added Tax), GST (Goods and Service Tax), etc. Below are some of the common taxation norms that a small and medium entrepreneur faces initially.

  • In case of domestic company, taxes are levied upon any capital inflow in India.
  • The indigenous company is supposed to give an additional tax called dividend tax.
  • For non-resident companies, tax is imposed upon all the capital flow coming inside the local.
  • Service tax is imposed upon the industries which have their annual turnover above 4 lac/ annum. However this tax is exempted  to the organizations below 4lac turnover, SEZ
  • Property Tax , Capital Gain tax etc

Because of limited capital flow, most of the small scale industries function in the informal economy which is not a positive aspect for the economic development. Also, apart of the central taxes, certain local body taxes may also be levied there that get sometimes problematic.  The small enterprises shall try to take the benefits of the privileges offered to them and reduce the  taxation risks so as to keep work process smooth.