IAMAI urges govt to postpone TDS deduction, EPF contribution for service sector SMEs

IAMAI noted that SMEs are one of the largest employers in India, each employing anywhere between 50-1,000 employees, and drive the service sector.

Industry body IAMAI on Tuesday urged the government to postpone TDS deduction and put on hold EPF contribution by employers and employees of small and medium enterprises (SMEs) in the service sector for six months so that these companies can retain employees while giving maximum cash salaries to them.

The Internet and Mobile Association of India (IAMAI) noted that SMEs are one of the largest employers in India, each employing anywhere between 50-1,000 employees, and drive the service sector.

For a developing nation like India, where the labour is abundant and capital is scarce, SMEs are a major source of employment for millions of people, it said in a release.

"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," IAMAI said.

The sector is managing the employees and workforce without any continuous revenue stream and uncertainty about the future, the industry body said.

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

It suggested that deduction of tax from the salary be postponed for a period of six months.

"The deduction can be resumed once the cash flow becomes regular and consistent. This will help the workforce to use the entire salary without any deductions in this uncertain period," it explained.

The industry association, which counts among its members names such as Google, Facebook, Indiamart, Paisabazaar, and others, also suggested that contribution to EPF by the employer and employee be put on hold for an interim period of six months till the demand and business is regular and cash flow is managed.

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

IAMAI said 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," it said.

Releasing these pending dues is a critical requirement to ensure these businesses remain afloat and are not forced to lay-off employees and therefore, the appeal to the authorities is to speed up tax returns for businesses and corporates at the earliest, IAMAI added.

The association requested the government to enable and restructure the laws and acts which help in reducing the costs and result in minimum outflows for corporates with respect to employees cost.

This also will help the employees with maximum inflow of money to survive these bad times, it said.

Edited by Saheli Sen Gupta