Traders plan to approach the finance ministry over relaxing the unrealistic conditions placed in the Union budget to get the benefit of a higher turnover threshold for audit.
At present, under section 44AB of the Income Tax Act, businessmen are required to get their accounts audited if the total sales, turnover or gross receipts is more than Rs 1 crore in a year.
“In order to reduce the compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector, I propose to raise by five times the turnover threshold for audit from the existing Rs 1 crore to Rs 5 crore,” Union finance minister Nirmala Sitharaman said on Saturday.
But there is a condition. “In order to boost less cash economy, I propose that the increased limit shall apply only to those businesses which carry out less than 5 per cent of their business transactions in cash,” said Sitharaman.
Moreover, the aggregate of all payments made, including the amount incurred for expenditure in cash, does not exceed 5 per cent.
Cash transactions
According to traders, for a small business, even with the advent of digital payments, cash transactions constitute a majority of the total business at any point. So, a 5 per cent limit will leave out most of the small businesses from availing themselves the benefit of a higher turnover threshold.
“We welcome the move to increase the threshold turnover for audit to Rs 5 crore. But we are planning to write to the finance minister in a few days to reconsider this condition. A 5 per cent limit is not acceptable,” said Rabi Shankar Roy, general secretary of the Bengal chapter of Confederation of All India Traders.
“In the backdrop of demonetisation and GST, increasing the threshold for exemption from tax audit to Rs 5 crore is a welcome step. However, the condition that less than 5 per cent of the business transactions should be in cash may pose practical challenges to small retailers in availing the benefit,” said Paresh Parekh, tax leader, consumer products and retail, EY India.
“The plan of the government is to encourage more digital transactions. But, setting a 5 per cent limit is very small. They should have set a higher limit, at least 50 per cent,” said tax advocate Narayan Jain.