"The government has brought in the service tax through the back door to tax the small scale industries despite a Supreme Court judgement in 1999 that the imposition of service tax was always on the person rendering service who alone could be regarded as an assessee and not the customer," LUB president Balwant Rai Gupta said.

Asking the government to either abolish the service tax or make the service provider collect and pay it, Rai said, "If our demands are not met, we would definitely go to the Supreme Court again and also undertake nationwide agitation."

Rai also reiterated the demand for doubling the basic exemption limit for SSIs to Rs 2 crore (Rs 20 million) from Rs 1 crore (Rs 10 million) as "the input costs have almost doubled".

Stating that poor credit flow in the sector continued to hamper its growth, he added "It has declined to 11 per cent in 2004 from 17 per cent in 1999."

He also favoured raising the limit of Rs 1 lakh prescribed for recovery of loan under the Securitisation Act to Rs 1 crore.