Colossal documentation to be preserved for extended periods of time
For a factory making in India, enormous amounts of different documents have to be preserved for many numbers of years. For the SME sector, this is not an easy task.
During assessment, audit, scrutiny, inspections and so on, the assessing authority needs to ask generic questions for the period in question. Therefore what is being sought is not known, throwing open more books of records and all sorts of documentation which may be pertinent to the specific department’s query or not. Over and above the huge amount of documentation mandated to be maintained, this system of verification or checking by various departments eats into the bandwidth of the business.
For example Form ‘C’ which is issued by a buyer, of the goods manufactured by the SME being inspected, needs to be produced to the Assessing Officer. Even Form ‘C’ pertaining to transactions made six years back! Form ‘C’ pertains to concessional rate of tax enjoyed by the purchaser of goods manufactured by the SME under scrutiny. Despite a routine assessment having been made by the Audit Department of the VAT office before the scrutiny has been called for, six years after the transaction, original Form ‘C’ or Audit Report has to be produced when called for scrutiny. Even if the Audit Department has duly noted that, the audit conducted a year after the transaction, it has been found to be satisfactory or that an amount of xyz had found to be due and the same has been discharged by the manufacturer along with interest and penalty, ‘C’ Form or Audit Report has to be produced. Bang! A notice with interest and penalty for six years is slapped. It usually works out to the alleged due multiplied by two. And the department can attach the bank account of the business. Say the business is shut down, taxes still follow you. Mind it!!!
While the logic behind why the purchaser of the goods is not held responsible for the concessional rate of taxes enjoyed at the time of purchase and why the liability is to be fixed on the manufacturer is a subject that need to be revisited. Preserving documentation for such extended periods of time is not a healthy environment for making in India.
Anyone who has visited exhibitions in China in the past ten years or so and filling up the registration forms at the time of entry is likely to receive almost daily updated on new products being released in China. It is the result of getting into a mailing list. The offers have clear description, contain images, loading capacity for shipment and offer price. The Chinese have turned this method of marketing into a fine art. They do it with consistency. The prices of many such products being offered have been going up steadily, steeply and consistently in the past year. The reasons for the same including cost of labor, debts China carries huge investments in infrastructure which China will need maybe 25 years later and so on are well known to the world. This gives make in India an edge. And make in India will happen even though it is tough. Certain reviews are called for and perhaps the people making in India along with domain experts such as Tax Consultants, CAs and other related parties could express experiences and help in bringing about reforms that could make, make in India, a joy.