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Enable Service SMEs to Retain Employees: IAMAI

By Staff
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The Internet and Mobile Association of India (IAMAI) have said that Government should enable small and medium enterprises (SMEs) in the service sector so that they can continue to retain employees while giving maximum cash salaries to them, while the economy slowly begins to recover.

The SMEs are one of the largest employers in India, each employing anywhere between 50-1000 employees and drives the service sector. For a developing nation like India, where the labour is abundant and capital is scarce, the SMEs are a major source of employment for millions of people.

 

Considering the current health crisis and lockdown many of these companies may have to resort to salary cuts, which will have a larger impact on the employees. In order to mitigate the impact, IAMAI suggests that TDS, EPF and ESIC should be postponed for six months. The sector is managing the employees and workforce without any continuous revenue stream and uncertainty about the future.

According to IAMAI, these steps will reduce the burden on the corporates and at the same time take care of the immediate cash requirement of the employees.

IAMAI has suggested considering the postponement of deduction of tax at source (TDS). As per sec 192 of the Income Tax Act, an employer is responsible for deducting tax at source from the income paid to the employee, on an average rate of tax applicable to the employee during the financial year.

On these lines, organizations deduct the applicable tax from the employee's salary every month. IAMAI has suggested that this deduction of tax from the salary be postponed for a period of six months. The deduction can be resumed once the cashflow becomes regular and consistent. This will help the workforce to use the entire salary without any deductions in this uncertain period.

Secondly, IAMAI has suggested that for an interim period of six months till the demand and business is regular and cashflow needs to be managed, the contribution to the EPF by both the employer and the employee be put on hold. The employees and the employers both contribute 12% each of the employee's salary (basic + dearness allowance) to the EPF under Employees' Provident Fund and Miscellaneous Act, 1952.

Thirdly, the, employees and employer's contribution to the Employee State Insurance Corporation Scheme be put on hold for the next six months.

 

While the plea to continue payrolls even during such downtime is well appreciated by the industry, the businesses are bound to face some critical cash flow crunches which too needs to be given due consideration. A critical cash lock-in for Indian businesses including the digital sector is the pending tax returns/Input tax credit with the exchequer.

The tax return credits in some cases are pending for the last couple of fiscals. Such pending dues create operational challenges for small businesses and start-ups, especially during such crises. Releasing these pending dues is a critical requirement to ensure these businesses remain afloat and are not forced to lay-off employees.

Enable Service SMEs to Retain Employees: IAMAI

IAMAI thus appeals to the authorities to speed up tax returns for businesses and corporates at the earliest.

Read more about: telecom
Story first published: Wednesday, April 22, 2020, 8:12 [IST]
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