GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

*****

Notification No. 01/2010 – Service Tax

New Delhi, the 19^TH February 2010

G.S.R.    (E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely :-  

1. Short title and commencement.- (1) These rules may be called the Service Tax (Amendment) Rules, 2010.

     (2) They shall come into force on the 1^st day of April, 2010.

2. In the Service Tax Rules 1994 (hereinafter referred to as the said rules), in rule 6, in sub-rule (2), for the proviso, the following proviso, shall be substituted, namely:-

“Provided that where an assessee has paid a total service tax of rupees ten lakh or more including the amount paid by utilisation of CENVAT credit, in the preceding financial year, he shall deposit the service tax liable to be paid by him electronically, through internet banking.”

3. In the said rules, in rule 7, after sub-rule (2), the following proviso shall be inserted, namely:-

“Provided that where an assessee has paid a total service tax of rupees ten lakh or more including the amount paid by utilisation of CENVAT credit, in the preceding financial year, he shall file the return electronically”.

[F. No. 137/13/2010 - CX.4]

(Madan Mohan)

Under Secretary to Government of India

Note.-  The principal rules were published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), dated the 28^th June, 1994 vide notification No. 2/94-Service Tax, dated the 28th June, 1994, [G.S.R. 546(E), dated the 28th June, 1994] and were last amended by notification No. 17/2006-Service Tax, dated 25^th April, 2006, [G.S.R. 247 (E), dated the 25^th April, 2006, and vide notification No. 10/2009 - Service Tax, dated the 17^th March 2009, [G.S.R. 171 (E), dated the 17^th March, 2009].

Let me, at the outset, say that though overall it is a progressive budget with clear focus on infrastructure, agriculture and inclusiveness, it does not mean much for the MSME sector.

For the micro, small and medium enterprises, although there has been an apparent increase of approximately Rs. 800 crore, some of the major announcements which were expected in the budget were sorely missing. It was expected that the MSMEs would atleast get a 50% reservation out of the total quota of 40% reservation of the priority sector lending. Internationally, in most of the developed/ developing countries, MSMEs get between 40% and 60% of the banking loans, whereas in India, it languishes between 8 – 10%. This is the biggest reason for MSMEs to not be able to grow, turn sick, or resort to taking money from the parallel economy at much higher rates.

There seems to be a lack of this understanding despite the fact that the government has announced that a high-level national council will be formed to oversee the implementation of the recommendations of Prime Minister’s Task Force on the MSME sector. It is also very sad to see that while a small or medium farmer, who is also a businessman is extended huge benefits, the unorganized and micro enterprises in the country do not get the same treatment, though they may be needing the support more than that farmer.

The credit support program of the MSME Ministry, which runs the Credit Guarantee Fund Scheme, has got an additional budget of about Rs. 73 crore i.e. the planned expenditure under this program has gone up from Rs. 99.12 crore to Rs. 172.75 crore. Through this scheme, the guarantee cover is provided for collateral-free credit facility, extended by Member Lending Institutions (MLIs), to the new as well as existing small enterprises on loans of upto Rs. 1 crore. While the objective is laudable, the fact remains that MLIs really have no compulsion or incentive to extend this facility to the needy small entrepreneurs, because in reality, the Credit Guarantee Trust doesn’t move fast enough to settle the issues related to the bad-debts, if any.

The allocation to ‘Quality of technology support institutions and programs’ has been raised from Rs. 251.64 crore to Rs. 333.50 crore. This, according to me, may not be at all enough to upgrade the tool-rooms and technical institutions of the 24 very important institutions and 4 programs that run under this scheme, namely Credit Linked Capital Subsidy Scheme, ISO Reimbursement Scheme, Schemes of National Manufacturing Competitiveness Program and Vertical Shaft Brick Kiln technology. The conditions of the various tool rooms and technology centres actually have to be seen to be believed. If machines have come, there are no specialists to operate them; and if machines & specialists both are present, then there are no funds to run these centres. Hence, the very purpose of the existence of these centres is defeated.

It is also surprising that the National Commission on the Enterprises in the unorganized and informal sector has zero allocation in this year’s budget, though till last year, it had a Rs. 1 crore budget. The Rajiv Gandhi Udyami Mitra Yojna, which provides handholding assistance to designated nodal agencies, namely Udyami Mitras, for providing handholding support to first-generation entrepreneus in dealing with various procedural and legal hurdles, has got an allocation of just Rs. 7 crore.

MSME Cluster Development Program, under which, special emphasis has been given to comprehensive development of clusters, including infrastructural development has seen an increase of about Rs 25 crore taking the total expenditure to Rs. 50.50 crore. But for a country of our size, this may be spread too thin and too wide to really have any major impact

The special scheme recommended by PM’s Task Force has got an allocation of just Rs. 1 crore in this year’s budget. It has a massive agenda for immediate action to provide relief and incentives to MSMEs accompanied by institutional changes and detailing of programs in a time-bound manner. In addition to this, it also has suggested setting up of appropriate legal and regulatory structures to create a conducive environment for entrepreneurship and growth of MSMEs. It also has a task of setting up a special fund exclusively for micro-enterprises, and introduction of public procurement policy, which mandates government and PSUs to reach a target of 20% purchases from MSMEs. How all this can be achieved with an organization backed by Rs. 1 crore budget for the whole of 2010-11 is almost impossible for me to understand.

There have been some major additions of about Rs. 1300 crore in Khadi and Coir Board Industries but like last year, and the year before, both these sectors have spent 20-25% lesser than the budget that was allocated to them.

Some other initiatives which have been taken overall but will affect the SME sector positively are:

• Extension of packing credit interest subvention of 2% for another year.
• Raising of Audit requirement limit from Rs. 40 lakh to Rs. 60 lakh, and for professionals from Rs. 10 lakh to Rs. 15 lakh.
• Exemption from capital gains on conversion from general partnership to limited liability partnership.
• A one-time grant of Rs. 200 crore to Tirupur Textile Sector.
• Government initiative to give more banking licenses and extend banking service for the under-banked and un-banked segments of the society.
• Agreement signed with ADB for US$ 150 mn to implement Khadi Udyog Reform.
• Doubling of corpus of micro-finance development and equity fund from Rs. 200 crore to Rs. 400 crore.
• Allocation of Rs. 1000 crore to the National Social Security Fund for the employees of the unorganized sector.

Despite some sporadic initiatives visible here or there in this budget, there clearly seems to be a lack of a coherent approach towards a sustained development of the MSMEs. Let’s hope that there will be more focus, which will come up in the future for the hidden jewels of India, who have always got more lip-service than real support from the powers that be.

By Rajeev Karwal,

Founder Director & CEO,

Milagrow Business & Knowledge Solutions

A one-stop destination for MSMEs

Also the change in the taxation slabs, which will largely impact the individuals as well as the businesses has come in as a good news. The total savings due to the change in slabs would be almost Rs. 55000. But that’s not all. This will be supplemented with the savings due to the reduction in the surcharge from the existing 10% to 7.50% However on the other side, the government has increased the MAT from the current 15% to 18%. Along with this, the government has pushed the tax-payers to comply with the timely payments of their income-taxes.

More to follow…

The finance minister has not left the corporate tax structure untouched. He proposes to reduce the surcharge on the income of companies from 10% to 7.5%. However, he has also proposed for the Minimum Alternate Tax to increase from 15% to 18%.

For delayed tax payments interest grows up from 12% to 18% which is very steep indeed but will not impact those who pay their taxes on time.

New Limits for individual taxation proposed by the finance minister

Previous slabs for comparison purposes

Audit requirements limits are also proposed to be changed.

From the industry cluster, Tirupur in Tamil Nadu has been awarded a one time assistance of Rs 200 crore, specifically for hosiery industry
Banking Services for the under banked or unbanked…By 2012 Govt to cover every population cluster through new methods and technology
Total of Rs. 35000 crore allocated for education sector
Emphasizes the importance of MSMEs in employment, exports and GDP of India.

Allocation for MSME sector 1794 cr to over 2400 crore.

A high level council to be set up to implement the recommendations of the PM task force on MSME sector.

Govt. to add Rs. 1000 to each NPS account opened during 2010-11.

1% interest subvention on Housing loan of upto Rs 10 lakhs for houses less than Rs. 20 lakhs extended for 2010-11.

Micro Finance Development and Equity fund corpus being doubled from 200 crore to Rs 400 crore

National Social Security Fund for unorganized sector with corpus of Rs 1000 crore.

1. High GDP Growth to 9 % and move to double budget

2. To make development more inclusive, food security

3. Bottleneck of public delivery system, and weakness of the administrative system

We came across this great article at Pluggd.in. It is very apt.

SME Market in India is too big to be ignored. And while Indian entrepreneurs are chasing the big enterprise market (and consumer segment), here are a few data points for SME opportunity
• India has the second largest population of small and medium businesses (SMBs) among BRIC countries and the US.
• SMEs in India contribute to more than 40% of the total Industrial Output (35% of it is exported).
• SMEs Provides employment to 75% of India’s workforce.
• In Karnataka alone, there are more than 750 Large to Medium Enterprises with investments of more than 60,000 Crores and employing 4,00,000 people.
• In comparison, there are more than 3,80,000 SMEs with investments of just about 10,000 Crores while employing 22,00,000 people!
SME – Opportunities for Small Players
The challenges that the SMEs face today seem to be primarily in the area of ICT and to quote specifically, ERP. The SMEs lament that when ever they approached the usual ERP firms, the first question they were faced with was that of their turn-over (they are quoted ERP package rates based on their turnover!).
Further, most do not even qualify to be served by these firms since they don’t measure up in terms of turn-over. Most of the practitioners wanted more simple solutions which could be used by the SME work-force, that is largely rural, with education levels being at most at Diploma levels, (in exceptional cases Engineering).
• Only 12% of the SMEs use Computers and 90% for Word Processing – The terms used today was “Typewriter”.
• One of the most startling take away was that in the last 55 years, the India SME manufacturing sector has clocked a steady GDP of 15% to 18%. No geo-political reason, economic downturns nor Policy changes etc seems to have affected this.
• And to put this in perspective, the Indian IT companies are happy if they are 1% or 2% higher than the nation’s GDP!
• SME’s spending on IT is only 30 percent of India’s total IT spending
Have the technology startups considered this space as an opportunity? Do you think the Indian SME presents an opportunity for Technology Startups to deliver smaller and much palatable solutions, which fit both the pocket and the background of the SMEs?

—-

Recently I again came across a popular saying… “One should learn from one’s own mistakes..!!” But to leverage the learning opportunities, one has to also learn from others’ mistakes. 

As I prepare myself to take the training sessions for open source software, I felt it would be a great opportunity to learn the DOs and DON’Ts from the other training sessions that I have attended. Of course the learning process never ends and knowledge only increases when shared. So I share what I learnt in the recent past about Training Sessions.

Before the session 

• Prepare the presentation in advance and go through it thoroughly: In one of the sessions, after I went inside the room, I found the instructor making changes in the slides that were to be presented. The first impression that I got was – “The instructor has not prepared himself. It is probably the first time he is presenting these slides.”

• Never assume that your audience knows all basics: It generally happens that instructors choose to skip the basics. However, there is a possibility that the audience may not know the basic terms and features. So, even when it is an advanced training session, it is very important to quickly revisit the basics as it would ensure that everyone is on the same platform.  

Start of the session

• Introduce yourselves, your organization and your session suitably: A proper introduction will ensure that the audience understands you and your organization well. The agenda of the session should also be presented to the audience so that they understand the structure and flow of the session.

• Relate yourself with audience: A training session cannot be effective if the trainer doesn’t associate himself with the audience. It is very important for a trainer to understand the objective – “Why are the people sitting for this session..??”

• Respect your audience: Nobody is perfect, neither are you. It is a very high possibility that your audience may know more than you about certain aspects of your topic. Even the best preparation cannot ensure a zero probability of the above case. Therefore, the trainer should never be egoistic about knowledge and should respect his audience.

• Never mention the weaknesses at the beginning: Even if it is a good practice to share the positive and negative points about the topic of your presentation, the trainer should ensure that the negative points are not kept at the beginning of the session. They should be always shared at the end so that the audience doesn’t lose interest during the session.

During the session

• Follow timelines strictly: The trainer should follow the structure/ agenda of the presentation in accordance with the laid out timeline. This enables the audience to structure their own thought process and also to manage their time, thereby focusing on the content.

• Mobile phones should be on switch-off/ silent mode: Even as it is a part of professional etiquettes to put the mobiles on switch off/ silent mode, it is all the more important for the trainer to do the same. In case there is a very important call, which has to be attended in midst of the session, the trainer should seek an apology and move outside the room to take the call.

• Never talk negative about a particular community/ country/ religion: During the session, the trainer should never talk anything negative about any section of the human-society. In one of the sessions I attended, the trainer said in a negative tone – “You know the mentality of the Indian consumers is that they always want this…” Now even without judging the correctness of the statement, in my mind, I built an impression that the trainer didn’t respect the Indian Consumer segment.

• No informal talks; slangs should not be used: Even if the trainer is highly enthusiastic and passionate about a certain point and wants to state it with more assertiveness, he should not do so using slangs or informal talks. There are always better and professional ways to do the same which are more welcome and appreciated by all kinds of audience. Nobody appreciates informal talks/ slangs.

• Always welcome questions and never get panicked: When a question is put across to the trainer, it should be perceived as a good sign because it proves that the audience is paying attention to the content of the session. The trainer should always welcome questions in a humble manner. There may be situations when the answer to the question is not known. These questions should be parked and the query should be resolved during the breaks or after the session.

• Long questions should be parked to be answered offline: Long questions generally are a result of one’s tendency to enter into an argument. This puts an impact on the structure of the overall presentation and therefore, should be avoided. To handle such individuals, the trainer should take up their queries during the breaks or at the end of the session.

• Listen to the question patiently before trying to answer: Some trainers show an anxiety to answer specific questions and many a times, don’t even listen to the complete question. This not only creates a possibility that the query is not resolved satisfactorily (as the trainer would not even know the complete question), but also conveys a negative attitude on the part of the trainer by communicating disrespect towards the audience.

• Talk more about the product/ service rather than credentials/ customers: Although it is always better to quote examples and refer to cases during the session, they should never overcast the actual content. Case-studies and examples should always be used to support a point and not as individual points themselves.

• Be careful while giving live demos: Live demos of the product/ service sometimes make it easier for the audience to understand. However, they also pose certain risks. Any mistakes/ failures during the live demo will create a highly negative impact. Besides this, live demos also have a tendency to take the discussion on a tangent, thereby hampering the original structure of the presentation. If possible, live demos should be given at the end of the session. 

After the session

• Seek feedback from the audience: A genuine feedback provides an opportunity for the trainer to improve on the content and delivery for the future. It also helps judge the effectiveness of the session.

• Resolve the questions that were left unanswered: All the queries that were kept for the end of the session should be resolved to the satisfaction of the audience. Any follow up required after the session should be done immediately and should not be procrastinated.

In December 2009, Milagrow launched the SME Portal. It is commonly referred as “One Stop Destination” in terms of unique service offerings to the SME sector. Given its unique nature, Milagrow SME Portal is getting members from across the country, and from different segments such as industry, institutes, individuals and so on.

Portal offerings are best in class, lowest in cost – business & knowledge solutions to the small businesses.  An organisation takes the membership of SME Portal for 1 year, it can gain tremendous benefits in various departments & also save lakhs of rupees per annum.

IT solutions provides almost zero cost solutions where an SME would not on only get access to more than fifteen free & open source software but also get monthly trainings to these softwares at a reduced cost.

Recruitment has never been easy but with HR services, the recruitment has not only become an easy and managed option but also a very cost effective solution. A member of the Portal gets 10 vacancies listing per year (saving approx. Rs. 1.2 Lac) and brand visibility on the Portal.

A small business can raise Debt funding, Private Equity funding and funding required in Mergers & Acquisitions with the help of Milagrow and its Financial Partner.

Milagrow to reach out to the SME manufacturers has partnered with an organisation which has years of experience in implementing MOST technology for productivity improvement in the manufacturing sector.

The knowledge division has risen above all by providing daily advice to SMEs, legal tips and monthly Retail, CDIT & MSME Newsletters. The research database also includes Case Studies, Research Studies, White Papers & Articles across the industry.

The portal members also benefit from our unique business diagnostic clinic titled Venture Doctors as well as online events such as webinars.

The SME Portal has made its way to reach out to thousands of small businesses from all spheres and provide them solutions to help them grow in an ethical, sustainable and profitable manner.