CBDT to share depreciation, turnover info of small firms with MSME ministry

The Central Board of Direct Taxes has signed a memorandum of understanding in this regard with the Ministry of Micro, Small and Medium Enterprises

The income-tax department will start sharing data on depreciation, sales and gross turnover of micro, small and medium enterprises (MSMEs) as reported in their ITRs with the Union MSME ministry.

The Central Board of Direct Taxes (CBDT) on Monday signed a memorandum of understanding (MoU) in this regard with the Union MSME ministry. "The MoU will facilitate seamless sharing of certain Income-tax Return (ITR)-related information by the Income Tax Department to Ministry of MSME. This data will enable Ministry of MSME to check and classify enterprises in Micro, Small and Medium categories...," the CBDT said in a statement.

The CBDT in an order date July 14 had directed Principal Director General of Income Tax (Systems) to share information with the MSME Ministry.

Section 138 of Income Tax Act empowers income tax authorities to share information/ details of its taxpayers with other government agencies, as may be notified.

The information to be shared include depreciation on plant and machinery as reported in ITR3, 5 and 6, sales/gross receipts of business as reported in ITR-3, 5 and 6; and gross turnover/gross receipts as reported in ITR-4.

"To facilitate the process of furnishing information, Principal Director General of Income-tax (Systems) would enter into a Memorandum of Understanding ('MoU') with Notified Authority of Ministry of MSME, Government of India which inter-alia would include the mode of transfer of data. Maintenance of confidentiality, mechanism for safe preservation of data, weeding out after usage etc," the CBDT order dated July 14 had said.

The timeline for furnishing information will also be decided by Principal Director General of Income-tax (Systems) in consultation with the concerned Ministry and included in the said MoU, the order added.

The CBDT statement said that the MoU will come into force from the date it is signed.

Nangia & Co LLP Partner Shailesh Kumar said that last month the government notified new criteria for qualifying as MSME, based on investment in plant, machinery and turnover.

"Vide present order read with Notification no 48 of 2020 issued by the CBDT, nodal authorities are appointed in both Ministry of MSME as well as in Income Tax department, so that information required by Ministry of MSME regarding investment/ turnover of an entity for declaring it as qualifying MSME can be obtained directly from Income tax department," he said.

This exchange of information will ensure that only those entities will qualify as MSME under new rules, which have prescribed investment in plant & machinery and turnover as reported in their ITR, Kumar added.

After 14 years since the MSME Development Act came into existence in 2006, a revision in MSME definition was announced in the Aatmanirbhar Bharat package on May 13.

As per the revised definition, an enterprise is micro where the investment in plant and machinery or equipment does not exceed Rs 1 crore and turnover does not cross Rs 5 crore.

A small enterprise is the one where the investment in plant and machinery or equipment does not exceed Rs 10 crore and turnover is not over Rs 50 crore.

For medium enterprise, as per the new classification, the investment in plant and machinery or equipment should not exceed Rs 50 crore and turnover should be below Rs 250 crore.