Truck fleet operators across the country are unhappy with the government's decision...
Truck fleet operators across the country are unhappy with the government’s decision to impose a tax deducted at source (TDS) of 2% (of what is charged customers) on them and have requested the finance ministry to rollback the measure announced in the Union Budget 2015-16.
Truck fleet operators, who play a crucial role in transporting goods to far-flung areas across the country, say that imposition of TDS will create further complications in running the business as their cash flows will come under stress.
A letter, dated March 19, written by the All India Motor Transport Congress (AIMTC) to the finance ministry, cites factors such as the low operating profit margins (around 4-6%), increased input costs, and lack of financing as the principal reasons behind their decision to oppose the imposition of TDS. FE has a copy of the letter in its possession.
“The working capital is raised at a higher cost of about 12% and margins in the transport business are getting hair thin, while payments by clients are abnormally delayed,” AIMTC said in its letter. “Deduction of TDS will further squeeze their (truck operators’) cash flow as refunds are blocked by 2-3 years.”
Finance minister Arun Jaitley proposed to levy tax deduction at source for firms plying, hiring, leasing and owning more than 10 trucks.
According to Naveen Kumar Gupta, AIMTC’s secrertary general, 85% of all truck fleet operations in the country is carried out by small fleet owners who are not educated and operate on small margins.
“Most of the small truck owners work on a margin of 4-6% and deduction of a 2% TDS will make the transport business unsustainable. There is no established way of getting finance for our business and imposition of TDS will constrict cash flow as well,” Gupta said.
Vivek Arya, managing director of Rhenus Logistics, a Mumbai-based fleet owner, said that imposition of TDS will also impact operators like himself as it may not be possible to pass on the tax burden to the customers and increase rentals at a time when there isn’t enough demand.