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Category Archives: Taxation and Statues

Harnessing the power of Forgiveness to Bring Harmony to your life.

In this world, we keep having conflict and disputes with our surrounding people day in day out.

The Boss will put the blame on subordinates for not completing the work in time, and doing the work carelessly.

The Subordinates will blame the boss, for wrong decisions, lack of resources, tons of workload and low salaries.

The Son will blame the father for not giving him sufficient exposure in the childhood or for not affording admission in a good B-School, which could have changed his fortune,

while the parents will blame the kids, for being arrogant, disobedient, and never putting efforts on studies.

Normally, we tend to find the fault in the other person, for the lack of success and accomplishments, which we deserve, but could not reach to.

These negative thoughts, which keep coming to our head, repeatedly, occupy the most part of our thought process, which often lead to a bad relationship with the concerned people. We tend to make the notions for people and keep thinking about the shortcomings.

What is the result of these negative thoughts?

1.   Our energy drains out in generating the counter arguments, proving ourselves right.

2.   The Actual quarrel would have lasted for a few minutes, but we tend to give hours after that thinking about the same. No constructive thinking happens in this time.

3.   We stop taking the responsibility of the failure on self, and try to put the blame on someone else, thus lacking that extra mile, which we ought to go, to get the success to our court.

4.   Our energy is blocked resulting in more negativity and in turn attracting more failure to self.

What ought to be done:

Finding goodness in something, is a habit to be developed. Never ever it can be a situation, that the other person, might not have done a good deed to you. Finding that one deed of goodness, will not only relieve you from the mind blockage, but will give you positive boost to accomplish better things, which otherwise were getting lost in nurturing the negative feelings.

Have we ever thought, with an open mind, what good that person has done to us.

Did the Subordinate never recognise, that the boss, having identified your capabilities, only did choose you for the team, which several others were aspiring to be in. And how many times, has he suppressed the wrong doings, of yours, and taught you of the better way of doing the things.

Did the Boss ever remember that the subordinate has given his family time, working late on the project, which he was faced to do, due to lack of resources and other competent team members or paucity of time.

Did the kids, ever remember, his parents curtailing their needs, and compromising their dreams, to give a decent education and living to the kids, or the worries, which have gone, while the exams were going on and the mental support the parents have given, in the time of need.

Did the parents ever recognise the difference in the environment and circumstances, which have changed, since they themselves were kids. Or the satisfaction and love, they have got, from having those wonderful kids, and what their social status and position had been, had they no kids at all.

Let us free ourselves, from the negative feelings and blockage of energy, which is stopping our progress, and let us strive for a world, full of positivity, where everyone is your supporter and helping you grow and flourish. Whenever, you feel negativity rising head, in your thoughts, let us start thinking, consciously, about the good deeds or favours, that other person has done for us.

And for all the past ill feelings, which are still alive, in our minds, draining all our energy, stopping our progress, today is the day, to get free from all of these.

Today, on this auspicious day of Shamavani, let us all remember all our family, friends and acquaintances, with which we have been fighting or having the ill feelings, and let us ask from them, forgiveness, to free themselves and ourselves, from those blockages of energy.

Let us recite the following verses which Lord Mahaveer has taught to his followers:

खामेमि सव्व जीवे, सव्वे जीवा खमंतु मे,

मित्ती मे सव्व-भूएसु, वेरं मज्झ न केणइ

Meaning,

I forgive all living beings, may all souls forgive me, I am in friendly terms with all, I have no animosity toward any soul. May all my faults be dissolved.

CA. Alok Jain

The new taxation norms in ULIPs will be applicable from February 1, 2021.

Budget 2021 proposed to limit exemptions on proceeds from unit-linked insurance plans that have so far allowed large investors to receive tax-free returns. The government proposed to amend the clause in the Income Tax Act pertaining to taxation of proceeds from ULIPs, according to the Finance Bill, 2021. For ULIPs taken on or after Feb. 1, the maturity proceeds of policies with an annual premium of more than RS 2.5 Lakh will have to pay tax on proceeds.

ULIPs combine life insurance and investments into equity and debt. In the event of the policy holder’s demise, either the sum assured or proceeds of the investments, whichever is higher, is  paid out  to nominee. The amount paid to nominee will continue to be free from taxes.

Under the existing provisions, all proceeds from ULIPs are tax free, irrespective of the amount paid by the individual.

“Instances have come to the notice where high new worth individuals are claiming exemption under this clause by investing in ULIP with high premium”, According to the memorandum explained in the Finance Bill. Allowing this exemption in policies with large premiums, the memorandum said, defeated the legislative intent of the clause, which is aimed at providing benefit to small and genuine cases of life insurances.

ULIP gained prominence after the introduction of capital gains tax on investments in equity and equity linked instruments in Budget 2018. Long term capital gain tax of 10% was levied on the returns on such investments held for more than one year.

“Investments into ULIPs became lucrative as a result of reintroduction of capital gains tax on equity linked products”. This cap on exemptions bring parity between ULIP and long term investments into equity mutual funds.

BUDGET HIGHLIGHTS 2021-2022.

Finance Minister (FM) Nirmala Sitharaman has presented the Union Budget 2021 of India on the 1st of February, 2021. Here are the key Highlights from Budget 2021:

  • Our FM starts the budget2021 announcement by mentioning the challenges during the pandemic and the vision of the Pradhan Mantri Garib Kalyan Yojana.
  • FM says that India has two COVID19 vaccines made available and two more will be made accessible soon.
  • FM reiterated that the government is fully prepared to support the economy’s reset.
  • FM says the Budget2021 is based on 6 pillars. Starting with healthcare & wellbeing:
    • Spending’s been increased
    • New scheme with an outlay of Rs.64K crore to be spread over 6 yrs
    • The above is in addition to the National Health Mission
    • Support to rural & urban health centres
  • FM announces the Jal Jeevan Mission with an outlay of 2.87 lakh crores aiming to provide full-fledged water supply to all urban local bodies with household tap connections.
  • The FM proposed Rs1.41 lakh crores over a period of 5 Years for the Urban Swacch Bharath 2.0.
  • An amount of Rs.1.47 lakh crores, over a 5-year-period, from 2021 has been assigned for initiatives such as wastewater treatment, reduction in plastic waster, reduction in pollution and the like.
  • The Scrapping Policy has been announced in the Budget2021. The voluntary vehicle scrapping policy aims to remove inefficient vehicles so as to reduce vehicular pollution and oil import bills.
  • FM proposes an amount of Rs.35000 crore to manufacture and make accessible the COVID19 vaccine.
  • 2nd Pillar of Budget2021: Focus on physical, financial capital and infrastructure
    • FM proposes an amount of Rs. 1.97 lakh crores, over 5 years, starting this FY to nurture global manufacturing champions and increase jobs for the youth
    • FM has proposed a mega-investment textile park to be launched along with 7more textile parks to be established over the next 3 years.
  • The FM proposes to set up a Development Financial Institution with an amount of Rs.5 lakh crores
  • FM states that the Budget2021 will focus on the NHAI operational toll roads, airports in tier-2 and 3 cities, and sports stadiums
  • The capital expenditure for the year 2021-22 will be 5.54 lakh crore with a 34.5% Y-o-Y growth rate.
  • Our FM announced that more than Rs.2 lakh crores will be allocated for capital expenditure in the states and other autonomous bodies.
  • FM announced that till date, a measure of 3,800 km highway-stretch has already been constructed and an additional km will be constructed under Bharat Mala project.
  • The FM proposed the following National Highway budget for the below states:
    • Tamil Nadu: 3500km @Rs. 1.03 lakh crores
    • Kerala: 1100km @Rs.65,000 crores
    • West Bengal: 675km @Rs.25,000 crores
  • Also, National highway project of around 19,000 crores is in progress in Assam. Overall, the FM proposes a total of Rs.1,18,101 lakh crore for Ministry of Road Transport and Highways.
  • An Infra-National Rail plan to prepare a future rail system in India by 2030 has been proposed to bring down logistics cost.
  • The next few phases of metro projects will be taken up in Metro cities. Also in line are the ‘Metro Lite’ & ‘Metro New’ concepts for tier 1& 2 cities.
  • The FM proposed to extend Ujjwala Scheme up to 1 crore beneficiaries from the existing 8 crore beneficiaries.
  • The FM proposes to focus on the various allied laws of the securities market to be merged to the Securities Market Code.
  • FM announced that the #SEBI will be notified to regulate the setting up and arrangement of the commodity market system.
  • FM grants Rs.1,000 crores to the Solar Energy Corporation of India for the growth of the Solar Energy Sector.
  • FM proposed to amend the Insurance Act to introduce additional FDI to insurance companies from the existing 49% to 74%.
  • FM announces that a new Asset Reconstruction Company is to be set up to provide resolution to stressed assets in PSUs.
  • The FM proposed to amend the DICGC Act, 1961 to streamline its provision where the depositors of the bank can get easy access to deposits through insurance in the case of a stressed bank.
  • The FM announced that de-criminalization under the Companies Act, 2013 is complete and now the decriminalization of LLP Act, 2008 will be in force.
  • Our FM modified the definition of small companies: companies with a paid-up capital not exceeding 2cr & a turnover not exceeding 20cr are to be considered small companies. Over 2 lakh+ companies benefit from this provision.
  • For Startups and Innovators, the FM announced that the OPC can be incorporated without a limit for turnover or paid-up capital. This also allows NRIs to incorporate OPC in India.
  • Our FM proposes a special framework for MSME.
  • The FM announced that MCA 21 V3.0 to be introduced with additional modules for e-scrutiny and e-adjudication.
  • FM stated that the IPO of the LIC will be carried out in FY 2021-22. Also, for the disinvestment strategy, two PSUs and 1 insurance company will be considered.
  • The FM informed that the 15th Finance Commission’s recommendation is to rationalize and reduce centrally sponsored schemes.
  • Pillar 3 of the Budget2021: Inclusive development for aspirational India
  • In the Agriculture sector, the MSP regime has undergone a change to provide 1.5 times the product cost across all commodities.
  • The total amount paid to wheat farmers was doubled in 2019-20 when compared to 203-14.
  • The FM announced that agricultural credit will be increased to 16.5 lac crore.
  • The FM proposed to enhance the scope of the ‘Operation Green Scheme’ to include 22 perishable crops, and 1.68 crore farmers have registered. Also, 1,000 mundis to be integrated under the said scheme.
  • The FM stated that the government will take up the development of fishing harbors and fish landing centers along the banks of rivers and waterways.
  • The FM announced that the ‘1 nation-1 ration card’ plan has been implemented by 32 States and UTs. Migrant workers benefit from this scheme as they can claim ration from anywhere in the country.
  • The total fiscal deficit is pegged at 9.5 % of GDP and it is funded through govt borrowing. An additional 80,000 crore is needed to ensure our economy is given the needed push.
  • The borrowings from the market for next year will be at 12 lakh crores.
  • FM announced that the senior citizens who get only pension and interest on income are not required to file ITR.
  • Reopening of assessment:
    • In normal cases: the time limit has been reduced to 3 years from 6 years.
    • In serious tax evasion cases: can be reopened till 10 years, only when concealment of income is more than 50 lakh.
  • FM announced that the ‘Faceless dispute resolution committee and mechanism’ is set up to reduce litigations for small taxpayers. Any taxpayer with taxable income up to 50 lakh and disputed income up to 10 lakh can approach the committee.
  • FM proposed a faceless Income Tax Appellate Tribunal (ITAT) for providing online resolution.
  • The ‘tax audit limit’ under Section 44AB has been increased from Rs.10 crores to Rs.5 crores where 95% of business transactions are done in digital mode.
  • The FM announced that the ‘advance tax liability’ on dividend income shall rise only after the declaration or payment of dividend.
  • The FM announced that the deduction under section 80EEA is to be extended to loans taken up to 31st March 2022.
  • FM announced that the affordable housing projects can avail tax holiday until 31 March 2022.
  • FM announces tax incentives for the IFSC and tax holiday for aircraft leasing and rental companies.
  • FM announces the pre-filled ITR in Budget2021: Salary, Tax Payments, TDS are already pre-filled. Capital Gains, dividend incomes, and interest income will now be pre-filled.
  • FM states that in case the PF amount was deducted but not deposited by the employer, it will not be allowed as a deduction for the employer.
  • FM announces that the deduction under section 80IAC will be extended upto 31st March 2021.
  • Under Indirect Taxation, the FM proposes to review 400 old exemptions this year through extensive consultations. After which a revised customs duty structure will be introduced.
  • The FM has rationalized customs duty on copper, textile, gold and silver.
  • The FM raised customs duty on solar inverters from 5% to 20% and solar lanterns from 5% to 15%.
  • The FM proposed to withdraw exemption on import of leather as they are domestically produced.
  • The FM proposes ‘Turant Customs’ initiative for faceless, paperless, and contactless customs measures.
  • The FM concluded the Budget2021 and the house has been adjourned after getting the consent for the Finance Bill, 2021.

 

TCS on Foreign Remittance through LRS for money sent abroad

 

What is LRS

LRS stands for Liberalized Remittance Scheme, by which Reserve Bank of India has allowed resident individuals to remit up to $250,000 per financial year to pay expenses related to travelling, medical treatment, studying, gifts and donations, maintenance of close relatives, among other things.

Besides, the remitted amount can also be invested in shares, debt instruments, and to buy immovable properties abroad. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.

However, LRS does not allow buying and selling of foreign exchange abroad, or purchase of lottery tickets or sweepstakes, proscribed magazines and so on.

What are the newly inserted Provisions of TCS under LRS

Finance ministry has introduced certain new provisions for tax Collection at Source (TCS), which were to be implemented w.e.f. April 1st, 2020, which due to COVID 19 situations were deferred for implementation. These provisions are now made applicable from October 1, 2020.

Why Government has introduced TCS provisions in LRS

Government is increasing the tax base by expanding the provisions of Tax Deducted at Source and Tax Collected at Source. By this manner, the government is able to get the information related to Financial Transactions from the source Data, which otherwise would have been very difficult to capture. Going forward, the provisions of TDS and TCS will expand more and more, so that more people can be brought to the tax net.

What are the various tax rates and Conditions for remittance under LRS

The remittances under the LRS will now attract TCS @ 5% on amount in excess of Rs 7 lakhs in a financial year. However, the rates for the TCS in case of remittance for repayment of Education loan or for Remittance to Foreign Tour Operators is at different Rates.  If the PAN Number is not provided to the collecting agency, the rate of TCS will be 10%.

We can understand the provisions of TCS by the following example:

If a person remits Rs. 10 lacs under LRS, then Bank will collect from him Rs. 15000/- in addition to the amount to be remitted and remittance charges. Though Bank charges GST on the remittance charges, but GST will not be applicable on the TCS amount.

Conditions for remittance to Foreign Tour Operator

For remittances to Foreign Tour Operators, the rate of TCS would remain the same at 5%, however, the basic exemption of 7 lacs will not be there and TCS will be collected, even if the amount is remitted below 7 lacs.

Conditions for remittance for Education Loan

For remittances for the purpose of pursuing education through a loan obtained from any financial institute, rate of TCS shall be 0.5 per cent on the amount exceeding Rs 7 lakhs.

Are there any conditions, under which the TCS can be avoided?

No, though the government has given the provision of approaching Income tax officer, to obtain a lower rate certificate for TCS in some other cases, there seems to be no such option given for TCS under LRS. Thus TCS will have to be done in all the cases and there seems to be no way out escaping this liability.

How to get the amount refunded, for the TCS done

The collector will issue a certificate for the TCS done and also the same will get reflected in your Tax Statement under Form 26AS, which is available online on income tax portal in Individual Login. This amount can be adjusted against any tax payable for the year, and if there is no tax payable, the amount will be refunded by the government.  However, if the Return of Income is not filed by the person concerned, then this amount will not get refunded.

Budget 2018 Highlights

Budget Highlights 2018

 Direct Tax:

No change in Tax Rate. All persons including individuals, HUF, Firms and Companies to pay same tax . However Education cess is being increased from 3 to 4 % to be known as Education and Health cess.
However  for Domestic Companies having total turnover or  gross receipts  not exceeding  Rs 250 crores in Financial year 2016-17 shall be liable to pay tax at 25% as against present ceiling of Rs 50 crore in Financial year 2015-16.
Long term Capital gain exemption under section 10(38) in respect of listed STT paid shares being withdrawn.

However capital gain up to 31.1.2018 shall not be taxed as cost of acquisition will be taken as Fair Market Value as on 31.1.2018.

Tax on STT paid long term capital Gain on listed stocks / Equity Oriented Mutual Fund will be 10% under Section 112A. Further such tax will be liable for TDS. Further, Distribution of dividend by equity oriented mutual fund is to be taxed at 10%

Standard Deduction of Rs 40,000 for salaried employees. However benefit of transport allowance of Rs 19,200 and Medical Reimbursement  of Rs 15,000 under Section 17(2) are being withdrawn. Thus net benefit to salaries class only Rs 5,800
Rs 50,000 additional benefit to senior citizens for investment in mediclaim u/s 80D.

Critical illness expenditure based tax exemption increased to Rs 1 lakh per year for senior citizens u/s 80DDB.

Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5%  of sale consideration in variation vis a vis stamp duty value. On account of location, disadvantage etc.

Provision of section 40(ia) and 40A(3) and 40A(3A)are being made applicable to Charitable Trust. Hence expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a).

To mandate that in order to avail benefit of any deduction under Chapter VIA-C, the persons have to file return within due date specified under section 139(1) of the Act.

Agriculture Commodity Derivates income /loss  also not to be considered as speculative under section 43(5).

Income Computation and Disclosure Standards(ICDS) being given statutory backing in view of decision of Delhi High Court decision.
Marked to market loss computed as per ICDS to be allowed under section 36.

Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA.

Construction Contract income to be computed on percentage completion method as per ICDS.

Valuation of Inventory including Securities  to be as per ICDS.
Interest on compensation, enhanced compensation. Claim or enhancement claim and subsidy, incentives to be taxed in the year of receipt only as per new Section 145B.

Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion.

54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. Further period of holding being increased from 3 years to 5 years.

PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs 2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.

All companies irrespective of income to file return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact weather it has tax liability of Rs 3,000 or not.

To roll out the E-assessment across the country, which will transform the age-old assessment procedure of the income tax department and the manner in which they interact with taxpayers and other stakeholders.

No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A.

Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution of tax @ 30%.

Penalty for non filing financial return as required under section 285BA being increased to Rs 500 per day.

 

Indirect Tax:

CHANGE IN RATE STRUCTURE OF CUSTOM DUTY

S.no. Particular Existing Custom Duty Proposed Custom Duty(Budget 2018)
1 Cellular mobile phones 15% 20%
2 Specified parts and accessoriesof cellular mobile phones 7.5%/10% 15%
3 Cashew nuts in shell 5% 2.5%
4 Television 10% 15%
5 Solar tempered glass or solartempered [anti-reflective coated]

glass for manufacture of solar

cells /panels/modules

 5% Nil
6 Silk Fabrics 10% 20%
7 Footwear 10% 20%
8 Imitation Jewellery 15% 20%
9 Smart watches/wearable devices  10% 20%
10 LCD/LED/OLED panels andother parts of LCD/LED/OLED

TVs

 7.5%/10% 15%
11 Abolition of Education Cess andSecondary and Higher

Education Cess on imported

Goods

 3% of the aggregate duties of Customs[2% + 1%] Nil
12 Levy of Social WelfareSurcharge on imported goods

—

 10% of the aggregate duties of customs

 

CHANGE IN RATE STRUCTURE OF EXCISE DUTY

S.no. Particular Existing Excise Duty Proposed Excise Duty (Budget 2018)
1 Levy of Road and Infrastructure Cess on motor spirit commonly known as petrol and high speed diesel oil

—

 Rs. 8 per Litre
2 Abolition of Additional Duty of Excise [Road Cess] on motor spirit commonly known as petrol and high speed diesel oil Rs. 6 per Litre Nil
3 Basic excise duty on :(i)                 Unbranded Petrol

(ii)               Branded petrol

(iii)             Unbranded diesel

(iv)              Branded diesel

 Rs. 6.48 per litre

Rs. 7.66 per litre

Rs. 8.33 per litre

Rs. 10.69 per litre

 Rs. 4.48 per litre

Rs. 5.66 per litre

Rs. 6.33 per litre

Rs. 8.69 per litre
4 Infrastructure Cess on petrol and diesel manufactured in and cleared from 4 specified refineries located in the North-East

—

 Rs. 4 per litre

 

  • Ø To change the name of Central Board of Excise and Customs [CBEC] to Central Board of Indirect Taxes and Customs (CBIC).

 

 

 

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Ease of Doing Business – New SPICe Forms for Company Incorporation

register-limited-companySimplified Proforma for Incorporating Company Electronically (SPICe)-Though sounds spicy but Government hidden initiative is to make the whole incorporation process Short and Sweet

Growth and expansion are key goals for most business owners and entrepreneurs. Whenever any business owner wishes to establish its footprints in India, the first and the foremost thing required for him is to get the legal status for his business which is recognized in the local laws. The most popular, recognized and safe way to expand and establish a business in India is through incorporating a Company under the Companies Act, 2013. In past years incorporating a Company was a big deal and challenge as the process was very complicated and time consuming. The need was felt from a long time to make the process simplified and less time consuming.

Appreciable steps are being taken by the Ministry of Corporate Affairs (MCA) which also includes modification in existing rules of incorporation of the Company and making the process simplified. As a part of initiative the Ministry has introduced a new E-form known as SPICE which stands for Simplified Proforma for Incorporating Company Electronically. All the other existing forms for incorporating a Company in India were ruled out after incorporating the new rules and after introduction of SPICE. The main highlight of Form SPICE is e-Form SPICe (INC-32) deals with the single application for Reservation of Name, Incorporation of a new Company, application for allotment of Director Identification number (DIN) and application for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).For the first time PAN and TAN allotment has been integrated with the process of company incorporation.

MCA introduced first SPICe form with the provisions for filing eMOA and eAOA. While incorporating a company, preparation of Memorandum of Association and Articles of Association takes significant time. To simplify this and standardize the charters of all companies registered in India, the SPICe form with eMOA and eAOA was launched. As a part of digital India and green initiative the requirement of having the physical copy of MOA and AOA is abolished and now the Company is mandatorily required to file the copies of its MOA and AOA electronically in the E-Form INC- 33 and INC-34 respectively.

Another main highlight of SPICE is that the Company need not have to apply separately for PAN and TAN and SPICE itself comprises the application for PAN and Tan which the Company has to mandatorily opt for. This saves the time and cost on the part of Company as well as on the part of professionals for making the separate application.

Once all the requirements are fulfilled and the documents as mandated are properly filed with Ministry, the incorporation along with the PAN and TAN of the Company can be completed within 2-3 days or less.

Advantages of SPICE Form:

  • Time and Cost is saved for making the separate applications
  • Single window for Company Incorporation along with the DIN,PAN, TAN, Reservation of Name.
  • A major step move towards digital India and minimum involvement of paperwork.
  • Speed up the process of obtaining necessary approvals.
  • Out of the 190 countries in the list, India Ranks 130 overall in the World Bank Ease of Doing Business Report and ranks 155 in terms of starting a business.

Mandatory to file e-Form INC-32–    

This form available on MCA w.e.f. 03.10.2016.Ministry has moved toward with notification dated 29thDecember, 2016 by this notification Companies can be incorporated only by following forms:

  •  One Person Company = INC-32 (SPICe )
  •  Private Limited Company (with7 or less than 7 subscribers) = INC-32 (SPICe )
  •  Public Limited Company (with7 or less than 7 subscribers) = INC-32 (SPICe )
  •  Section 8 Company(with7 or less than 7 subscribers) = INC-32 (SPICe )
  •  Producer Company (with7 or less than 7 subscribers) = INC-32 (SPICe )
  •  Producer Company (with more than 7 subscribers) = INC-7
  • Company with foreign Subscribers (up to 7) = INC-32 (SPICe )

Attachment in SPICe -e (INC-32) form:

  • e-MOA & e-AOA required to be file as linked form.
  • INC-9 Affidavit and declaration by first subscriber(s) and director(s) (on duly authorized Stamp Papers).
  • DIR-2 declaration from first Directors along with Copy of Proof of Identity and residential address.
  • NOC from the owner of the property.
  • Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts);
  • Copy of the utility bills (not older than two months)
  • Declaration from the director non acceptance of Deposit. (on duly authorized Stamp Papers).
  • In case of subscribers/ Director does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers
  • E- 49A and 49B will be file on MCA website (filed form will be generate by the SRN of INC-33)

By introduction of SPICE form, doing business in India has become very easy and promotion of startups is the main motive of this initiative. Not only the startups are encouraged but the foreign investors are also attracted to establish their place of business in India without following the tedious and time consuming process of filing number of applications and getting their approval.

The main objective of launching this e-format proforma SPICe is to provide speedy incorporation related services within stipulated timeframe, uniformity in application of rules and eradicating discretion, to be in line with international best practices.

Compiled by: CS Akhtar Hussain

FAQs on GST

GST

 

Frequently Asked Questions (FAQs) on Goods and Services Tax (GST)

Following are the answers to the various frequently asked questions relating to GST: Question 1.What is GST? How does it work?

Answer: GST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Question 2. What are the benefits of GST?

Answer:The benefits of GST can be summarized as under: ·

For business and industry

o Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

o Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

o Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

o Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

o Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

· For Central and State Governments

o Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

o Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

o Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

· For the consumer

o Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

o Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

Question 3. Which taxes at the Centre and State level are being subsumed into GST?

Answer: At the Central level, the following taxes are being subsumed:

a. Central Excise Duty,

b. Additional Excise Duty,

c. Service Tax,

d. Additional Customs Duty commonly known as Countervailing Duty, and e. Special Additional Duty of Customs.

At the State level, the following taxes are being subsumed:

a. Subsuming of State Value Added Tax/Sales Tax,

b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),

c. Octroi and Entry tax,

d. Purchase Tax,

e. Luxury tax, and

f. Taxes on lottery, betting and gambling.

Question 4. What are the major chronological events that have led to the introduction of GST?

Answer: GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:

a.     In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.

b.     A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.

c.      Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).

d.    Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.

e.     In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.

f.     In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.

g.    Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.

h.    This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.

i.    The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:- (a) Committee on Place of Supply Rules and Revenue Neutral Rates;

(b) Committee on dual control, threshold and exemptions;

(c) Committee on IGST and GST on imports.

j.    The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.

k.   The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.

l.    The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013.Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.

m.   The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.

n.   In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.

o.   Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Bill was introduced in the Lok  Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.

Question 5.How would GST be administered in India?

Answer:Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

Question 6.How would a particular transaction of goods and services be taxed simultaneously under Central GST  (CGST) and State GST (SGST)?

Answer :The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.

A diagrammatic representation of the working of the Dual GST model within a State is

shown in Figure 1 below.

website1

Question 7.Will cross utilization of credits between goods and services be allowed under GST regime?

Answer :Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.

Question 8.How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

Answer:In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

A diagrammatic representation of the working of the IGST model for inter-State 

transactions is shown in

 website2

Question 9.How will IT be used for the implementation of GST?

Answer:For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.

GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.

There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.

Question 10.How will imports be taxed under GST?

Answer :The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per  explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

Question 11.What are the major features of the Constitution (122nd Amendment) Bill, 2014?

Answer :The salient features of the Bill are as follows:

g.    Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;

h.   Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs;

i.   Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury  tax, and Taxes on lottery, betting and gambling;

j.   Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;

k.  Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;

l.  GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;

m.  Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;

n.   Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.

Question 12.What are the major features of the proposed registration procedures under GST?

Answer:The major features of the proposed registration procedures under GST are as follows:

i. Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.

ii. New dealers: Single application to be filed online for registration under GST.

iii. The registration number will be PAN based and will serve the purpose for Centre and State.

iv. Unified application to both tax authorities.

v. Each dealer to be given unique ID GSTIN.

vi. Deemed approval within three days. vii. Post registration verification in risk based cases only.

Question 13.What are the major features of the proposed returns filing procedures under GST?

Answer:The major features of the proposed returns filing procedures under GST are as follows:

a. Common return would serve the purpose of both Centre and State Government.

b. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.

c. Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.

d. Filing of returns shall be completely online. All taxes can also be paid online.

Question 14.What are the major features of the proposed payment procedures under GST?

Answer:The major features of the proposed payments procedures under GST are as follows:

i. Electronic payment process- no generation of paper at any stage

ii. Single point interface for challan generation- GSTN iii. Ease of payment – payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and through cheque/cash at the bank

iv. Common challan form with auto-population features

v. Use of single challan and single payment instrument

vi. Common set of authorized banks

vii. Common Accounting Codes *****

Tax benefits for export of software – CBDT’s latest clarifications

softwareTax benefits for export of software – CBDT’s latest clarifications

In this article the author has examined the contents of the CBDT’s circular giving clarifications on various issues which relate to sections 10A, 10AA & 10B of the I.T. Act, 1961. According to the author, the circular has clarity, on the issue of tax benefits for the export of software.

Introduction

1. Fast developments in the field of information technologies, including in the field of softwares, have made their impact, inter alia, on taxation aspects. There had been a growing realization that the Indian businesses should get tuned to the new culture of working of I.T. Softwares, which has by now assumed the status of an Industry.

Software development (also known as application development, software design, designing software, software application development, enterprise application development or platform development) is the development of a software product. The term ‘software development’ may be used to refer to the activity of computer programming, which is the process of writing and maintaining the source code, but in a broader sense of the term it includes all that is involved between the conception of the desired software through to the final manifestation of the software, ideally in a planned and structured manner. Therefore, software development may include research, new development, prototyping, modification, re-use, re-engineering, maintenance or other activities that result in software products [http://en.wikipedia.org].

2. Software in the context of the Income-tax Act, 1961 (the Act)

2.1 Under section 10A – Section 10A provides for exemption of income, inter alia, for the export of computer software, which has been defined in the Explanation 2 to section 10A as under:-

“(i)

 ‘computer software’ means –

 

(a)

 any computer programme recorded on any disc, tape, perforated media or other information storage device; or

(b)

 any customized electronic data or any product or service of similar nature, as may be notified by the Board,

 

which is transmitted or exported from India to any place outside India by any means”.
Explanation 2 to section 10A, clarifying the position regarding onsite services reads as under:-
“For the removal of doubts, it is hereby declared that the profits and gains derived from onsite development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India”.

2.2 Under section 10AA – It is a special provision in respect of newly established units in Special Economic Zones (SEZs) conferring tax benefits on such undertakings, including on export of computer software. Explanation 2 to this section clarifies the position regarding export of such software in regard to on the spot services as follows:-

Explanation 2 – For the removal of doubts, it is hereby clarified that the profits and gains derived from onsite development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.

This Explanation clearly says that onsite development outside India would constitute export and profits therefrom will be entitled to the benefit of section 10AA.

2.3 Under section 10B – This section of the Act is titled ‘Special provision in respect of newly established 100 per cent EOU. The definition of computer software in this section is the same as in section 10A (supra) and the Explanation 3 to this section likewise clarifies the position in regard to on the spot development of computer software thus:-

Explanation 3 – For the removal of doubts, it is hereby declared that the profits and gains derived from onsite development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.

CBDT’s Circular No. 01/2013, dated 17th January, 2013

3. The circular clarifies the position regarding export of computer software in the context of sections 10A, 10AA & 10B.

The relevant aspects from this circular are discussed in the later paragraphs.

The foregoing discussion shows that there was no confusion regarding grant of tax benefits under sections 10A, 10AA & 10B concerning receipts relating to onsite development of computer software outside India. However, to put the matter beyond doubt, the position has been clarified in replies to queries 4(a) & (b) in following few paras :-

4. Queries

4. (a) Whether onsite development of computer software qualifies as an export activity for tax benefits under sections 10A, 10AA & 10B of the I.T. Act, 1961?

4. (b) Whether receipts from deputation of technical manpower for such onsite software development abroad at the client’s place are eligible for deduction under sections 10A, 10AA & 10B?

5. Detailed replies to above two queries

Reply to query at Sl. No. 4.(a) – CBDT had earlier issued a circular (Circular No. 694, dated 23-11-94), which provided that a unit should not be denied tax holiday under section 10A or 10B on the ground that the computer software was prepared onsite, as long as it was a product of the unit, i.e., it was produced by the unit. However, certain doubts appear to have arisen following the insertion of theExplanation 3 to sections 10A & 10B (vide Finance Act, 2001) and Explanation 2 to section 10AA (vide Special Economic Zones Act, 2005) providing that ‘the profits and gains derived from onsite development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India, and a clarification has been sought on the impact of the Explanation on the tax benefits as compared to the situation that existed prior to the amendments.

The matter has been examined in details. In view of the position of law, as it stands now, it is clarified that the software developed abroad at a client’s place would be eligible for benefits under the respective provisions, because it would amount to deemed export and tax benefits would not be denied merely on this ground. However, since the benefits under these provisions can be availed of only by the units or undertakings set-up under specified schemes in India, it is necessary that there must exist a direct and intimate nexus or connection of development of software done abroad with the eligible units set-up in India and such development of software should be pursuant to a contract between the client and the eligible unit. To this extent, Circular No. 694, dated 23-11-1994 stands further clarified.

Reply to Query at Sl. No. 4.(b) – The clarification given reads as follows:-

It has also been brought to notice that it is a common practice in the software industry to depute technical manpower abroad (at the client’s place) for software development activities (like upgradation, testing, maintenance, modification, trouble shooting, etc.), which often require frequent interaction with the clients located outside India. Due to the peculiar nature of the software development work, it has been suggested that such deputation of technical manpower abroad should not be considered as detrimental to the benefits of the exemption under sections 10A, 10AA & 10B merely because such activities are rendered outside the eligible units/undertakings.

The matter has been examined in details. Explanation 3 to sections 10A & 10B and Explanation 2 to section 10AA clearly declare that profits and gains derived from services for development of software outside India would also be deemed as profits derived from export. It is, therefore, clarified that profits earned as a result of deployment of technical manpower at the client’s place abroad, specifically for the software development work pursuant to a contract between the client and the eligible unit should not be denied benefits under sections 10A, 10AA and 10B, provided such deputation of manpower is for the development of such software and all the prescribed conditions are fulfilled.

6. Queries on other related issues :

6.1 Query – Whether it is necessary to have separate master service agreement (MSA) for each work contract and to what extent it is relevant?

6.1-1 Reply to Query at Sl. No. 6.1 – As per the practice prevalent in the software development industry, generally two types of agreements are entered into between the Indian software developer and the foreign client. Master Services Agreement (MSA) is an initial general agreement between a foreign client and the Indian software developer, setting out the broad and general terms and conditions of business under the umbrella of which specific and individual Statement of Works (SOW) are formed. These SOWs, in fact, enumerate the specific scope and nature of the particular task or project that has to be rendered by a particular unit under the overall ambit of the MSA. Clarification has been sought whether more than one SOW can be executed under the ambit of a particular MSA and whether SOW should be given precedence over MSA?

The matter has been examined. It is clarified that the tax benefits under sections 10A, 10AA and 10B would not be denied merely on the ground that a separate and specific MSA does not exist for each SOW. The SOW would normally prevail over the MSA in determining the eligibility for tax benefits, unless the Assessing Officer is able to establish that there has been splitting up or reconstruction of an existing business or non-fulfilment of any other prescribed condition.

6.2 Query – Whether Research & Development (R&D) activities pertaining to software development would be covered under the definition of computer software stipulated under Explanation 2 to sections 10A and 10B?

6.2-1 Reply to query at Sl. No. 6.2 – The definition of computer software stipulated under Explanation 2 to sections 10A & 10B includes ‘any customized electronic data or any product or service of similar nature, as may be notified by the Board..’. The CBDT had already issued Notification No. 890(E), dated 26-9-2000 specifying such items. The notification includes engineering and design but does not specifically include R&D activities related to software development in respect of which clarification has been sought.

After examining the matter, it is clarified that the services covered by the aforesaid notification, in particular the engineering and design do have the inbuilt elements of R&D. However, for the sake of clarity, it is reiterated that any R&D activity embedded in the engineering and design would also be covered under the said notification for the purpose of Explanation 2 to the above provisions.

6.3 Query – Whether tax benefits under sections 10A, 10AA & 10B would continue to remain available in case of a slump sale of a unit/undertaking?

6.3-1 Reply to query at Sl. No. 6.3 – The vital factors in determining the above issue would be the facts such as how a slump sale is made and what is its nature? It will also be important to ensure that the slump sale would not result into any splitting-up or reconstruction of existing business. These are factual issues requiring verification of facts. It is, however, clarified that on the sole ground of change in ownership of an undertaking, the claim of exemption cannot be denied to an otherwise eligible undertaking and the tax holiday can be availed of for the unexpired period at the applicable rates for the remaining years, subject to fulfilment of prescribed conditions.

6.4 Query – Whether it is necessary to maintain separate books of account by an assessee in respect of its eligible units claiming tax benefits under sections 10A & 10B?

6.4-1 Reply to query at Sl. No. 6.4 – Since there is no requirement, in law, to maintain separate books of account, the same cannot be insisted upon. However, since the deductions under these sections are available only to the eligible units, the Assessing Officer may call for such details or information pertaining to different units to verify the claim and quantum of exemption, if so required.

6.5 Query – Whether tax benefits under section 10AA can be enjoyed by an eligible SEZ unit consequent to its transfer to another SEZ?

6.5-1 Reply to query at Sl. No. 6.5 – This issue relates to cases where an eligible SEZ unit is shifted from one SEZ to another SEZ on account of commercial exigencies. This shifting is permissible under Instruction No. 59 (F.No. C-4/2/2010-SEZ) issued by the Deptt. of Commerce (SEZ Division), provided approval from the Board of Approvals (BoA) has been obtained. Doubts have been raised whether such shifting of an eligible unit would deprive the unit/undertaking of tax benefits, provided there is no splitting-up or reconstruction of an existing business?

The matter has been examined and it is clarified that the tax holiday should not be denied merely on the ground of physical relocation of an eligible SEZ unit from one SEZ to another in accordance with Instruction No. 59 of the Deptt. of Commerce (referred to above), if all the prescribed conditions are satisfied under the I.T. Act, 1961. It is further clarified that the unit so relocated will be eligible to avail of the tax benefit for the unexpired period at the rates applicable to such years.

6.6 Query – Whether new units/undertakings set up in the same location where there is an existing eligible undertaking would amount to expansion of the existing unit/undertaking.

6.6-1 Reply to query at Sl. No. 6.6 – Whether setting-up of a new unit/undertaking in a location (covered by section 10A, 10AA or 10B), where an eligible unit is already existing, would amount to expansion of already existing unit is a matter of fact requiring examination and verification. However, it is clarified that setting-up of such a fresh unit in itself would not make the unit ineligible for tax benefits, as long as the unit is set-up after obtaining necessary approvals from the competent authorities, provided it has not been formed by splitting-up or reconstruction of an existing business and it fulfils all other conditions prescribed in the relevant provisions of the law.

Concluding comments

7. The circular clarifies a number of queries concerning computer softwares. As far as onsite development out of India is concerned, the position was quite clear even before the issue of circular. However, the circular brings clarity and certainty in the matter.

The clarifications given on other aspects too are welcome to give us a clear-cut position of the relevant law.

 

Source : www.taxmann.com

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New Disclosure requirements under tax audit with new Form No. 3CD

tax-auditNew Disclosure requirements under tax audit with new Form No. 3CD

The CBDT has notified Income-tax (7th amendment) Rules, 2014 which substitutes the existing Form No. 3CD with a new form. The new Form 3CD prescribes certain new reporting clauses and substitutes some existing clauses with new ones. The new form requires tax auditor to furnish more and detailed information in the new form for tax audit report.

Unlike old form 3CD which required auditor to report only those inadmissible payments which were debited to Profit and loss account, the new Form 3CD requires reporting of all disallowable payments even if they are not debited to profit and loss account.

With the substitution of Form No. 3CD, reporting in the new form would be a time taking job for the Chartered Accountants. Here is the list of additional reporting requirements as prescribed in the new Form No. 3CD:

(1) Registration number in case of indirect tax liability:
Assessees liable to pay indirect taxes (like excise duty, service tax, sales tax, customs duty, etc.) shall furnish their registration number or any other identification number allotted to them[clause 4 of Part A].
(2) Relevant clauses of section 44AB:
The relevant clauses of section 44AB shall be reported under which audit has been conducted[clause 8 of Part A].
(3) Location at which books of account are kept:
New Form seeks details of the address at which books of account of assessee have been kept[clause 11(b) of Part B].
(4) Nature of documents examined by the auditor:
The auditor is required to specify the nature of documents examined by him in the course of tax audit[clause 11(c) of Part B].
(5) Change in method of accounting/stock valuation:
A tabular format is specified for reporting of financial impact of changes in method of accounting and method of stock valuation[clause 13 and clause 14 of Part B].
(6) Transfer of land/building for less than stamp duty value:
Details of land or building transferred by assessee for less than stamp duty value (under section 43CA or under section 50C) shall be reported in new Form 3CD [clause 17 of Part B].
(7) Deduction allowable under Sections 32AC/35AD/35CCC/35D:
Deductions allowable under sections 32AC, 35AD, 35CCC and 35DDD are also required to be reported in revised Form No. 3CD[clause 19 of Part B].
(8) Disallowances:
Old Form3CD required reporting of inadmissible payments only when they were debited to Profit and loss account. However, the new Form 3CD requires reporting of following disallowable payments, even if they are not debited to profit and loss account[clause 21 of Part B]:
(i) Disallowance for TDS default under Section 40(a)
(ii) Disallowance for cash payments under section 40A(3)
(iii) Disallowance for provision for gratuity under section 40A(7)
(iv) Disallowance under Section 40A(9)
(v) Particulars of any liability of a contingent nature
(vi) Amount of deduction inadmissible under section 14A
(vii) Interest inadmissible under the proviso to section 36(1)(iii)
(9) Deemed income under Section 32AC:
Section 32AC of the Act provides for investment allowance of 15% for investment in plant and machinery. New form provides for reporting of deemed income which results from sale or transfer of new asset, (if asset was acquired and installed by the assessee for the purpose of claiming deductions under Section 32AC) within a period of five years from the date of its installation[clause 24 of Part B].
(10) Receipt of unlisted shares:
A new clause is inserted in the Form 3CD which requires reporting of all unlisted shares which were received by assessee either for inadequate consideration or without consideration in view of section 56(2)(viia)[clause 28 of Part B].
(11) Issue of shares above fair market value:
A new clause is inserted in the Form 3CD which requires reporting of all transactions of issue of shares where consideration received by assessee exceeds its fair market value in view of section 56(2)(viib)[clause 29 of Part B].
(12) Speculation losses:
New Form No. 3CD provides for reporting of losses from speculation business as referred to in Section 73[clause 32(c) of Part B].
(13) Losses from business specified under section 35AD:
Assessee shall furnish details of losses incurred as referred to in Section 73A in respect of specified businesses mentioned in Section 35AD[clause 32(d) of Part B].
(14) Reporting of deductions claimed under Sections 10A and 10AA:
If any deduction has been claimed by assessee under Sections 10A and 10AA then it shall be reported in new Form No. 3CD[clause 33 of Part B].
(15) Compliance with TCS provisions:
Old Form 3CD required reporting on compliance with TDS provisions only. However, New Form No. 3CD requires reporting on compliance with TCS provisions as well[clause 34(a) of Part B].
(16) Filing of TDS/TCS statements:
The tax auditor shall report on the compliance by the assessee with the provision of furnishing of TDS or TCS statement within prescribed time[clause 34(b) of Part B].
(17) Assessee-in-default:
If assessee is deemed as an assessee-in-default and he is liable to pay interest under Section 201(1A) or 206C(7), the tax auditor shall furnish the TAN of assessee, interest payable and interest actually paid[clause 34(c) of Part B].
(18) Dividend Distribution Tax:
Revised Form No. 3CD requires reporting of following reductions as referred to in clause (i) and clause (ii) of Section 115-O(1A)[clause 36 of Part B]:
i) Dividend received by domestic company from its subsidiary, and
ii) The amount of dividend paid to any person for or on behalf of the New Pension System Trust referred to in Section 10(44).
(19) Audits:
(i) Cost audit: Old Form No. 3CD required reporting only when statutory cost audit was carried out under Section 233A of the Companies Act, 1956. However, the revised Form No. 3CD specifies reporting requirement even when cost audit has been carried out voluntarily. The requirement of attachment of copy of cost audit report along with Form has been substituted with reporting of qualifications in cost audit report[clause 37 of Part B].
(ii) Cost Audit under Central Excise Act: The requirement of attachment of copy of cost audit report along with Form has been substituted with reporting of qualifications in cost audit report [clause 38 of Part B].
(iii) Special Audit under Service Tax: If any service-tax audit is carried out in relation to valuation of taxable services, the tax auditor shall report any qualifications made in relation to valuation of taxable services[clause 39 of Part B].
(20) Ratios:
Unlike old form which required reporting of certain ratios pertaining to current year only, the new Form requires reporting of ratios of preceding financial year as well. Further, total turnover is to be reported for the previous year as well as for preceding financial year[clause 40 of Part B].
(21) Demand raised or refund issued:
The new Form seeks details of demand raised or refund issued under any tax laws (other than Income Tax Act, 1961 and Wealth Tax Act, 1957) along with details of relevant proceedings[clause 41 of Part B].

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