Effective April 1, 2015, the government has decided to opt for a uniform presumptive income of Rs 7,500 per truck per month, replacing the current practice of offering two slabs for presumptive income - Rs 5,000 per truck per month for heavy goods vehicles and Rs 4,500 for all other goods vehicles.
Considering the erosion in the real values of the amount of specified presumptive income due to inflation over the years and also in order to simplify this presumptive taxation scheme, it is proposed to provide for a uniform amount of presumptive income of Rs 7,500 for every month (or part of a month) for all types of goods carriage without any distinction between HGV and vehicle other than HGV, the explanatory memorandum to the Budget said. It added, This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years.
Presumptive tax is a form of assessing tax liability using indirect methods such as income reconstruction or by applying base-line taxation across the entire tax base. Such methods, where the government pre-defines a tax rate, helps small business owners save on compliance costs of paperwork, and are thought to help reduce tax avoidance.
Pallav Pradyumn Narang, partner with Delhi-based chartered accountant firm Arkay & Arkay said that the increase in taxes will be detrimental for small logistics companies, but can be absorbed because of the high margins in the business. Most small truckers pay income tax as individuals, rather than corporate tax. So if someone with 10 trucks had an annual taxable income of Rs 6 lakh earlier, that would go up to Rs 9 lakh now. Thus, the presumptive tax for them would increase from Rs 50,000 to Rs 1.05 lakh, he said.
The increase in presumptive tax will impact small business owners, most of whom operate goods LCVs like the Tata Ace, Mahindra Maxximo, or the Ashok Leyland Dost for intra-city transport. Bigger logistics firms like Siddhi Vinayak Logistics or Jaipur Golden, who operate large fleets of heavy trucks, will not be affected as they have to pay taxes on actuals. LCV sales have been down for a year and a half already in April-June FY15 sales fell 19% to 90,770 units, while in FY14 LCV volumes were down almost 18% to 4.32 lakh units.