Faced with the challenge of sustaining competitiveness against the new odds like lack of market demand both in domestic and export market, non payment by customers, rise in dollar rate, lack of demand for capital goods and higher interest rates, the small scale industries in the state have asked the state government to make radical changes in the taxation policy and rationalisation of tax structure in the budget for 2008-09.

The Karnataka Small Scale Industries Association (Kassia), which has spearheaded the cause of SMEs in the state, has urged the state chief minister B S Yeddyurappa, who is also holding the finance portfolio to merge all kinds of taxes like VAT, entry tax, profession tax into one single tax so as to reduce complexity.

Micro and small units should be given provision to make VAT payment only once in a quarter as the payment is recovered only after 90 days. This facility was available prior to VAT regime, Kassia president Arvind N Burji said in a pre-budget memorandum submitted to the state government.

SMEs have been reeling under pressure from rising cost of production because of skewed supply and demand of skilled labor and access to competitively priced public services- infrastructure, finance, electricity among others, he said.

Kassia has also pleaded for fixing a flat rate of 4 per cent value added tax for all products of micro and small enterprises irrespective of the product category and inspection of VAT records be restricted to three preceding years. It has also suggested that in respect of 100 per cent export units, zero VAT concept be applied.

It has urged for deferment of property tax for one year in view of the recession.

and exemption of stamp duty in respect of loans and credit deeds executed on term loan working capital from banks and financial institutions for execution of lease cum sale deed by KIADB and KSSIDC in respect of industrial land allotted.

Kassia has also demanded setting up of state level high power body for micro, small and medium enterprises in order to coordinate the activities of MSME in the state on the lines of MSME Board at the Central level.

Among other demands placed by Kassia include reservation of items to be purchased from SSIs by all government departments, waiver of earnest money deposit, free supply of tender documents.

In order to develop industries in north Karnataka region, the state government should set up a professional body to develop a blue print for industrialisation. It has also called for conducting a comprehensive industrial potential survey of the entire North Karnataka Region, particularly in the field of non-engineering, chemical, horticulture.