EEPC Demands Benefit of Lower Corporate Tax be Extended to LLPs, Proprietary Firms

The benefit of lower corporate tax should be extended to Limited Liability Partnership (LLPs) and proprietary firms as it will make funds available with large number of MSMEs thus speeding up private investment cycle which is instrumental to boost growth and jobs, EEPC India has suggested to the government as part of its pre-Budget recommendation.

Elaborating on the proposal, EEPC India Chairman Mr Mahesh Desai said that lower corporate tax was aimed at providing industry with higher investible surplus which in turn will create more jobs.

"But based on the Indian industry structure, about 84% of the small businesses are being denied the benefit. If the tax cut is to kick start an investment cycle by leaving more money at the hand of the business entities, then firms and LLPs should also get the benefit as they constitute the majority of the pie and is required for the upliftment/growth of MSMEs," he said.

In order to promote growth and investment, a new provision had been inserted from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22% and new domestic company incorporated on or after 1st October 2019 making fresh investment in manufacturing, at the rate of 15% subject to condition that they will not avail any exemption/incentive.

The effective tax rate for these companies shall be 25.17% and 17.01% inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax.

"As Limited liability partnerships, partnership firms and sole proprietorship firms are denied the benefit of a lower corporate tax, it is suggested to extend the benefit to them," said Mr Desai.

He noted that the move would indirectly support the growth in exports.

The EEPC India Chairman noted that the engineering goods sector along with other segments had been badly affected by the second wave and given the comments of public health experts and policy makers it seems that a third wave may not be a far-fetched possibility.

Given the scenario it is not feasible for a small unit to project revenues and profits for the whole year and pay corresponding installment of Advance Income Tax.

"If the unit does not make these payments, they are liable to pay interest and penalty at onerous rates. Hence, it is our humble request that small taxpayers with a total Income Tax liability of Rs 50 lakh be exempted from paying interest and penalty under Section 234 A/B/C of the Income Tax Act for AY 22-23," Mr Desai said.