Category: Miscellaneous

PROVISIONS OF CASH TRANSACTIONS UNDER INCOME TAX ACT, 1961 APPLICABLE FOR FY 2017-18

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DISALLOWANCE OF DEPRECIATION UNDER SECTION 32 AND CAPITAL EXPENDITURE UNDER SECTION 35AD ON CASH PAYMENT

(I) SECTION 32
The Finance Bill, 2017 has proposed that where an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments are made to a person in a day, otherwise than by an account-payee cheque drawn on a bank or account-payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost of such an asset, meaning thereby that no depreciation is allowable on capital expenditure in cash exceeding Rs. 10,000/-. Amendment would also affect calculation of capital gain.
(II) SECTION 35AD
The Finance Bill, 2017 has proposed to amend section 35AD of the Act to provide that any expenditure in respect of which payment or aggregate of payments are made to a person in a day, otherwise than by an account-payee cheque drawn on a bank or an account-payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, no deduction shall be allowed in respect of such an expenditure.
MEASURES TO DISCOURAGE CASH TRANSACTIONS

(III) SECTION 40A(3) & 40A(3A)
No deduction is allowed for cash payments exceeding Rs.20,000/- for an expenditure or an allowance claimed under business head. In case of payment made for plying, hiring or leasing goods carriages, the limit stands enhanced to Rs. 35,000/-. No Disallowance under section 40A(3) and 40A(3A) is made in such cases under such circumstances as prescribed under Rule 6DD of the Income Tax Rules, 1962, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. The Finance Bill, 2017 has proposed to reduce the limit of cash payment from present of Rs. 20,000/- to Rs. 10,000/-.

(IV) SECTION 80D
No deduction u/s 80D is allowable if paid in cash other than preventive health check-up expenditure.

RESTRICTING CASH DONATIONS

(V) SECTION 80G
Deduction in respect of donation exceeding Rs.10,000/- is allowable where such sum is paid by any mode other than cash. The Finance Bill, 2017 has proposed this limit of allowability from present of Rs. 10,000/- to Rs. 2,000/-
(VI) SECTION 80GGA
Deduction in respect of donation for scientific research or rural development exceeding Rs. 10,000/- is allowable where such sum is paid by any mode other than cash.
(VII) SECTION 80GGB
Deduction in respect of contribution given by companies to political parties is allowable where such sum is paid by any mode other than cash.
(VIII) SECTION 80GGC
Deduction in respect of contribution given by any person to political parties is allowable where such sum is paid by any mode other than cash.
(IX) SECTION 68
Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Here any sum includes cash also.
Income chargeable under this section would attract higher taxation u/s 115BBE at the rate of 60 per cent along with Surcharge of 25% of Tax. Penalty is also leviable at the rate of 10%.
If assessee himself declares the income in his return u/s 115BBE no penalty is leviable.
(X) SECTION 69
Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. Here money includes cash also.
Income chargeable under this section would attract higher taxation u/s 115BBE at the rate of 60 per cent along with Surcharge at 25% of Tax. Penalty is also leviable at the rate of 10%.
If assessee himself declares the income in his return u/s 115BBE no penalty is leviable.
(XI) SECTION 115BBC
If an assessee, being a person in receipt of income on behalf of any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via) or any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) of clause (23C) of section 10 or any trust or institution referred to in section 11, receives any income by way of any anonymous donation then it would be chargeable at the rate of thirty per cent on the aggregate of anonymous donations received in excess of the higher of the following, namely:—
(A) five per cent of the total donations received by the assessee; or
(B) one lakh rupees, and
This section is not applicable to any anonymous donation received by—
          (a)
any trust or institution created or established wholly for religious purposes;
(b)
any trust or institution created or established wholly for religious and charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution.
Here “anonymous donation” means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. This includes cash donation also.
(XII) SECTION 269SS
No person can take or accept any loan or deposit or any specified sum of Rs.20,000/- or more from any other person otherwise than by an account-payee cheque or account-payee bank draft or use of electronic clearing system through a bank account.
This provision is not applicable to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by:—
(a)
the Government;
(b)
any banking company, post office savings bank or co-operative bank;
(c)
any corporation established by a Central, State or Provincial Act;
(d)
any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);
(e)
such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
Further, the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.
Here specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.
Non-compliance of this provision would attract equal penalty u/s 271D
(XIII) SECTION 269ST
Finance Bill, 2017 has proposed to insert section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more,—
(a)
in aggregate from a person in a day;
(b)
in respect of a single transaction; or
(c)
in respect of transactions relating to one event or occasion from a person, otherwise than by an account-payee cheque or account-payee bank draft or use of electronic clearing system through a bank account. It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office savings bank or co-operative bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply.
Non-compliance of this provision would attract equal penalty u/s 271DA
(XIV) SECTION 269T
No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person can repay any loan or deposit made with it or any specified advance received by it for sum of Rs.20,000/- or moreotherwise than by an account payee-cheque or account-payee bank draft drawn in the name of the person who has made the loan or deposit or paid the specified advance, or by use of electronic clearing system through a bank account.
This section is not applicable to repayment of any loan or deposit or specified advance taken or accepted from—
(i)
Government;
(ii)
any banking company, post office savings bank or co-operative bank;
(iii)
any corporation established by a Central, State or Provincial Act;
(iv)
any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(v)
such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.
Here “specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place
Non-compliance of this provision would attract equal penalty u/s 271E
(XV) SECTION 206C(1D)
Any person, being a seller, who receives any amount in cash as consideration for sale of bullion, shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equal to one per cent of sale consideration as income-tax, if such consideration for bullion exceeds two hundred thousand rupees. This provision was extended w.e.f. 01/06/2016 to cover any other goods or services exceeding Rs.2 Lakh, if received in cash, except where TDS has been deducted.
(XVI) RULE 114E
This rule has been amended to get information related to financial transactions through cash and by other modes in excess of threshold specified in provisions through AIR covering large number of assessee’s as well as non-assessees.
The statement of financial transaction is required to be furnished under sub-section (1) of section 285BA of the Act in respect of a financial year in Form No. 61A
The statement is required to be furnished by every person mentioned in column (3) of the Table below in respect of all the transactions of the nature and value specified in the corresponding entry in column (2) of the said Table in accordance with the provisions of sub-rule (3)-(Hereunder only transaction related to cash is being given for ready reference) Serial number is being given according to original rule.
Sl. No
Nature and value of transaction:-
Class of persons (reporting person):-
1
(a)
Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to ten lakh rupees or more in a financial year.
(b)
Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by the Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).
(c)
Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to fifty lakh rupees or more in a financial year, in or from one or more current accounts of a person.
A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
2
Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.
(i)
A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
(ii)
Post Master General10 as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).
4
Payments made by any person of an amount aggregating to—
one lakh rupees or more in cash against bills raised in respect of one or more credit cards issued to that person, in a financial year.
A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.
11
Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)
Any person who is liable for audit under section 44AB of the Act.
12
Cash deposits during the period 09thNovember, 2016 to 30thDecember, 2016 aggregating to—
(i)
twelve lakh fifty thousand rupees or more, in one or more current account of a person; or
(ii)
two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.
(i)
A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
(ii)
Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).]
13
Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12.
(i)
A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
(ii)
Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).]
The reporting person mentioned in the Table other than the person at Sl. No. 11 is required , while aggregating the amounts for determining the threshold amount for reporting in respect of any person as specified in the Table,—
(a)
take into account all the accounts of the same nature as specified in column (2) of the said Table maintained in respect of that person during the financial year;
(b)
aggregate all the transactions of the same nature as specified in column (2) of the said Table recorded in respect of that person during the financial year;
(c)
attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;
(d)
apply the threshold limit separately to deposits and withdrawals in respect of transaction specified in item (c) under column (2), against Sl. No. 1 of the said Table
(XVII) RESTRICTION THROUGH WITHDRAWAL OF BENEFITS
In order to discourage the cash transactions and to bring transparency in the source of funding to political parties , Finance Bill,2017 has proposed to amend the provisions of section 13A to provide for additional conditions for availing the benefit that no donations of Rs.2000/- or more is received otherwise than by an account-payee cheque drawn on a bank or an account-payee bank draft or use of electronic clearing system through a bank account or through electoral bonds.
(XVIII) RESTRICTION THROUGH PROVIDING FOR INCENTIVIZING NON-CASH TRANSACTIONS

Finance Bill,2017 has proposed to amend section 44AD of the Act to reduce the existing rate of deemed total income of eight per cent. to six per cent in respect of the amount of such total turnover or gross receipts received by an account-payee cheque or account-payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year. This would be another way to discourage cash transaction through lower rate of net profit on transaction other than cash mode.

GST Knowledge Point

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GST Knowledge Point 08 Feb 2017

GST Point 1.During inspection of goods, Invoice Reference No. generated on uploading Invoice on GST Portal can be used in place of Invoice
within 30 days.

GST Point 2.Serial no of invoices issued during a tax period to be provided in GSTR-1(Return of Outward Supplies) filed electronically at  GST Common Portal.

GST Point 3. Address of buyer, place of delivery & state mandatory even for Unregistered person  in every Tax Invoice of Rs. 50,000 or more. 

GST Point 4. In case of Export of goods, Refund can be applied after delivery of export manifest or export report at Customs before departure of conveyance.

GST Point 5. Inter-state supply of less than Rs 50,000 where address of buyer is not available in records of supplier, shall be treated as Intra-state supply.

Bipul Kumar
Business Consultant
Mob. 9560084833
email : businesssosimple@gmail.com

Tax rates: Assessment Year 2018-19 (FY 2017-18)

Posted on by Business So Simple in Miscellaneous



Individual Male



  • Up to Rs. 2,50,000Nil
  • Rs. 2,50,001 to Rs. 5,00,0005%
  • Rs. 5,00,001 to Rs. 10,00,00020%
  • Above Rs. 10,00,00030%

  • *Surcharge: 10% if total income exceeds Rs. 50 lacs and 15% if total income exceeds Rs. 1 Crore

  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge

  • * Relief u/s 87A up to Rs. 2,500 for resident individuals having total income of up to Rs. 3,50,000



Individual Female



  • Up to Rs. 2,50,000Nil
  • Rs. 2,50,001 to Rs. 5,00,0005%
  • Rs. 5,00,001 to Rs. 10,00,00020%
  • Above Rs. 10,00,00030%

  • *Surcharge: 10% if total income exceeds Rs. 50 lacs and 15% if total income exceeds Rs. 1 Crore

  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge

  • * Relief u/s 87A up to Rs. 2,500 for resident individuals having total income of up to Rs. 3,50,000



Senior Citizen


  • Up to Rs. 3,00,000Nil
  • Rs. 3,00,001 to Rs. 5,00,0005%
  • Rs. 5,00,001 to Rs. 10,00,00020%
  • Above Rs. 10,00,00030%

  • * Surcharge: 10% if total income exceeds Rs. 50 lacs and 15% if total income exceeds Rs. 1 Crore

  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge

  • * Relief u/s 87A up to Rs. 2,500 for resident individuals having total income of up to Rs. 3,50,000




Super Senior Citizen

  • Up to Rs. 5,00,000Nil
  • Rs. 5,00,001 to Rs. 10,00,00020%
  • Above Rs. 10,00,00030%
  • * Surcharge: 10% if total income exceeds Rs. 50 lacs and 15% if total income exceeds Rs. 1 Crore
  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge






Domestic Company


  • Tax Rate 30%**
  • MAT18.5%

  • * Surcharge: 7% if total income exceeds Rs. 1 Crore and 12% if total income exceeds Rs. 10 Crores

  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge

  • ** Tax Rate is 25% if turnover or gross receipt of the company in the previous year 2015-16 doesn’t exceed Rs. 50 crore



Foreign Company



  • Tax Rate40%

  • * Surcharge: 2% if total income exceeds Rs. 1 Crore and 5% if total income exceeds Rs. 10 Crores

  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge



Partnership Firm




  • Tax Rate30%

  • * Surcharge at 12% if total income exceeds Rs. 1 Crore.

  • * Education cess and Secondary & Higher Education cess at 3% of Income Tax & Surcharge.









Capital Gains Taxation for AY 2018-19 (Union Budget 2017-18)

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Capital Gains Taxationfor AY 2018-19 (FY 2017-18)

1.        Shifting of base year

The Budget has proposed to shift the base year for the purpose of indexation from year beginning April 1, 1981 to April 1, 2001. This implies that for the purpose of computing indexation benefit, the cost of acquisition of any property purchased before April 1, 2001 will be deemed to be higher of actual cost or the fair market value as on April 1, 2001.
Cost of inflation index (‘CII’) notified for the purpose of computing the capital gains has shown a fourfold increase from the year 1981 to 2001, whereas there has been a fivefold increase in the rate of inflation over the same period. This has led to lower indexed cost of acquisition, increasing the tax liability. Shifting of base year will help reduce this gap. This will also mitigate the difficulties of tax payers in computing the capital gains due to non-availability of information regarding the fair market value in the old base year beginning April 1, 1981.

Cost of index for FY 2001-02: 426
2.     Holding period of immovable property(Reduced from 36 months to 24 Months)

At present, in order to avail the indexation benefit and the concessional tax rate of 20% on transfer of a long-term capital asset, certain assets are required to be held for a period of more than 36 months. With a view to promote investment in the real estate sector, the Budget proposes to reduce the holding period for immovable property from 36 months to 24 months.
3.   Investment of Long term Capital Gains

The current tax provisions provide for exemption of long term capital gains to the extent of INR 50 lakhs from tax, if the taxpayer invests the whole or any part of capital gains in National Highway Authority of India or Rural Electrification Corporation Limited bonds within the specified time. In order to stimulate investment and growth in other sectors through funding, the Budget proposes to extend this incentive to other Central Government notified bonds redeemable after 3 years. Though the tax payer will have options for investing in different bonds, the investment limit of INR 50 lakhs has not been altered.
4.   Capital gains arising in Joint Development Agreements (‘JDA’)

The taxability of capital gains arising on transfer of title to the land from the land owner to the developer in a JDA has always been a contentious issue. From the perspective of land owner, taxability of capital gain arises once the land is transferred for ascertained consideration. To address the satisfaction of the term ‘transfer’, the definition was widened to include ‘transfer’ as contemplated under provisions of Transfer of Property Act. However, there was no prescription for ascertainment of the consideration. This situation led to litigation as the consideration was received by the land owner only over the duration of the project. The timing difference resulted in undue burden of paying high capital gains tax for land owners without having the funds to do so.
In order to reduce the burden on land owners being individuals or HUFs, the Budget proposes to consider the transfer as taking place in the year in which the development of the project is completed and taxing the capital gains in the year in which the certificate of completion is issued. The fair value of consideration for such transfer shall be deemed to be the aggregate of the stamp duty value as on the date of issue of the completion certificate and the consideration received in cash. Tax withholding at 10% is also proposed on the cash consideration payable to the land owner.
Though the proposed provisions intend to provide certainty, practical aspects such as part transfer of rights, do leave scope for anxieties and litigation.
5.   Exemption under Section 10(38) of the Act

It has been proposed to restrict the exemption available on sale of listed shares, only to such shares which have suffered STT on purchase. The exceptions to this provision are as follows:
  –  Shares purchase before October 1, 2004
  –  Other shares to be notified by the Central Government, which are indicated:
   •  Shares acquired in IPO
   •  Shares acquired in FPO
   •  Shares issued as bonus or right shares, etc.

Though this provision has been introduced as an anti-abuse measure, it is important to note that the instances of sham transactions on any stock exchange are far and few. Further, the notification outlining the acquisition of shares not liable to these restrictions, should specifically include shares issued as part of ESOPs and shares acquired before the listing of the company.

6.   Conversion of Preference shares to Equity shares to be tax neutral

The Budget proposes to amend section 47 of the Act, stating that conversion of preference shares of a company to equity shares will not be treated as transfer. The absence of this provision had raised concerns as conversion of debentures into equity was specifically not treated as transfer. This is therefore a welcome move and should provide certainty going forward. Having said so, though this provision is proposed to be prospective, it is likely that the tax payer may contend that this amendment is clarificatory and should not adversely impact conversion in past.

Tax Rates for Assessment Year 2018-19

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Tax Rates Assessment Year 2018-19


1. In case of an Individual(resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person

Taxable income
Tax Rate
Up to Rs. 2,50,000
Nil
Rs. 2,50,000 to Rs. 5,00,000
5%
Rs. 5,00,000 to Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Less: Rebate under Section 87A [see Note]
Add: Surcharge and Education Cess [see Note]
2. In case of a resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year

Taxable income
Tax Rate
Up to Rs. 3,00,000
Nil
Rs. 3,00,000 – Rs. 5,00,000
5%
Rs. 5,00,000 – Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Less: Rebate under Section 87A [see Note]
Add: Surcharge and Education Cess [see Note]
3. In case of a resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year

Taxable income
Tax Rate
Up to Rs. 5,00,000
Nil
Rs. 5,00,000 – Rs. 10,00,000
20%
Above Rs. 10,00,000
30%
Add: Surcharge and Education Cess [see Note]
Note:
 a)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 10% of such tax, where total income exceeds fifty lakh rupees but not exceeding one crore rupees and at the rate of 15% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
 (i)  Where income exceeds fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees.
(ii)  Where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
 b)  Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
 c)  Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
 d)  Rebate under Section 87A: The rebate is available to a resident individual if his total income does not exceed Rs. 3,50,000. The amount of rebate shall be 100% of income-tax or Rs. 2,500, whichever is less.
4. Partnership Firm

A partnership firm (including LLP) is taxable at 30%.
Add:
 a)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
 b)  Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
 c)  Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
5. Local Authority

A local authority is taxable at 30%.
Add:
 a)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
 b)  Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
 c)  Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
6. Domestic Company

A domestic company is taxable at 30%. However, tax rate is 25%where total turnover or the gross receipt in the previous year 2015-16 does not exceed fifty crore rupees.
Add:
 e)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
(iii) Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
(iv) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
 f)  Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
 g)  Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
7. Foreign Company

Nature of Income~Tax Rate
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government
50%
Any other income
40%
Add:
 a)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 5% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:
 (i)  Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
(ii)  Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
 b)  Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
 c)  Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
8. Co-operative Society

Taxable income
Tax Rate
Up to Rs. 10,000
10%
Rs. 10,000 to Rs. 20,000
20%
Above Rs. 20,000
30%
Add:
 a)  Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
 b)  Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
 c)  Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

GST Updates (12 January 2017)

Posted on by Business So Simple in Miscellaneous



1. Pending issues on GST will be resolved in few weeks: Arun Jaitley

January 12, 2017

Press Information Bureau Government of India Ministry of Finance
On demonetization, Finance Minister Shri Arun Jaitley says that difficult decisions initially pass through difficult phases as historic decisions have temporary pain attached to them. Stressing the implementation of GST, FM says that most of the issues have been resolved; few critical issues are left which will be resolved in the next few weeks.
The Union Finance Minister Shri Arun Jaitley reiterated the advantage of taking bold and courageous decisions to transform Indian economy. He said difficult decisions initially pass through difficult phases as historic decisions have temporary pain attached to them. Speaking about demonetization, Shri Jaitley said that India needs bold decisions as it is time now to clean up the table and demonetization is going to have an impact over the course of our present and future lives. Shri Jaitley was addressing a seminar on ‘GST: The game changer for Indian economy’ on the second day of vibrant Gujarat Global Investors Summit at Mahatma Mandir in Gandhinagar today.
Stressing the implementation of GST, FM said that most of the issues have been resolved; few critical issues are left which will be resolved in the next few weeks. He further added that GST Council is deliberative democracy in action and the impact of both GST and demonetization will be felt this year.
FM said, when GST merges all the taxes and makes India into one entity, it’s an advantage to the assesse. Once the GST is implemented, the combination of a more digitized economy with a more efficient tax system will make India better. The Minister said that People want transparency. So, government is emphasizing on bringing transparency and elimination of discretion and Indian economy has opened up significantly in the last two years.
About the Summit, Shri Jaitley said it has been branded as Vibrant Gujarat but it has become foremost economic conclave. It showcases both Indian economy and progress of Gujarat.
Shri Vijay Rupani, Chief Minister of Gujarat, Shri Nitin Patel, Dy. Chief Minister of Gujarat, Dr. Hasmukh Adhia, Revenue Secretary, Govt. of India, Shri Amarjeet Sohi, Minister of Infrastructure & Communities, Government of Canada were also present on the occasion.

2.GST Launch: Excise, Service Tax Payers Being Moved To GST Platform
January 11, 2017
Several state ministers, like West Bengal finance minister Amit Mitra, and others have expressed doubt over the centre’s ability to meet the 1 April deadline for rolling out the goods and services tax (GST). Among the concerns raised are the notion that GST roll-out will come as a second blow to the country, after demonetisation, and the compensation for states, especially in the wake of the recent cash crunch, is still up for debate.
However, the Union government seems firm on its resolve to meet the 1 April deadline. On Monday (9 January), the centre started the migration of existing central excise and service tax assessees to the GST platform. As part of the requirement is a valid income tax permanent account number (PAN). The finance ministry release said,
Once the existing registered Taxpayers (both Central Excise as well as Service Tax) login to CBEC’s web portal http://www.aces.gov.in, a facility will be given in a secure manner to access the provisional login ID and password given by Goods and Services Tax Network (GSTN).
The Central Board of Excise & Customs (CBEC) is sending emails and recorded telephonic messages to all registered central excise and service tax assessees requesting them to migrate to GST. The migration has to be done as early as possible, said the release, and latest by 31 January 2017. Source – http://swarajyamag.com [10-01-2017]


3.Hopeful of resolving issues to roll out GST from April 1: Arun Jaitley
January 11, 2017
Hopeful of resolving issues to roll out GST from April 1: Arun Jaitley
Finance Minister Arun Jaitley today reiterated that the Centre is still aiming to roll out the Goods and Services Tax (GST) regime from April 1 if all pending issues are sorted out.
GST, which is to subsume most of central and state taxes like excise, service tax and VAT, needs to roll out by latest September 16, 2017, he said.
This because, under the Constitutional Amendment passed by Parliament for the GST implementation, some of the existing levies would expire after September 16.
Jaitley said the government was aiming to implement the new sales tax from April this year. “We would want it to be implemented from April if all issues are resolved.”
“There is a provision for GST implementation because constitutional amendment has been passed. So it’s Constitutional necessity that before September 16 it should be rolled out,” he said on the sidelines of the Vibrant Gujarat Global Summit here.
GST, or a national sales tax, will replace a jumble of levies to create one of the world’s biggest single market. A single tax will make it easier to do business in the world’s seventh-largest economy as also help combat evasion, boost revenue for the government.
But the rollout is struck because of differences between the Centre and states over control and administration of the tax as also on how the states that face revenue shortfall because of the GST rollout would need to be compensated.
Jaitley is hoping to resolve the issue of dual control of tax payers at the next meeting of the GST Council on January 16.
“We would want it to be implemented from April if all issues are resolved. But implementing before September 16 is a necessity,” he said.
The Finance Minister said the digitisation that got a leg up post demonetisation of old 500 and 1,000 rupee notes, together with GST will lead to expansion of formal economy and boost growth.
“The two steps together will lead to a larger economy and a cleaner GDP. I am hopeful that we will see the two this year,” he said. Source- http://economictimes.indiatimes.com [11-01-2016]

4.GST effect: Exemptions likely to be pruned
January 11, 2017

While the introduction of Goods and Service Tax (GST) law would be at the top of the priority list of the government, the time lag before implementation of GST provides an opportunity to align the current tax system to the proposed GST to enable a smooth transition.
Under GST, the list of items enjoying exemption is likely to be pruned. Exemptions under GST is expected to be extended predominantly to the ‘merit’ goods. Thus, withdrawal of some of the exemptions ahead of the introduction of GST could be on the cards. Presently, the exemption list under Value Added Tax (VAT) laws is more restricted when compared to the one provided for excise. Thus, we may see curtailment of excise duty exemptions on some of the products.
Under the current tax system, non-creditable Central Sales Tax (CST) levied at the rate of 2% created a distortion in the supply chain. The gradual phasing out of CST was always the plan. As we move closer towards GST, it is also possible that the rate of CST is brought down to 1%.
With the intention of developing the backward areas, the government comes up with area-based exemptions. However, sometimes, such exemptions lead to an economic distortion. It is anticipated that under GST, such exemptions could be converted to refund schemes wherein units would be first required to deposit the tax and subsequently claim a refund. Commercially, such changes can have a significant impact on the overall business decisions. It would be worthwhile if some direction in this regard is provided.
To keep a check on the parallel economy, there has been impetus to adopt cashless transactions. The government may consider extending the tax exemption on service charge levied by the bank to transactions over Rs 2,000. The industry has been waiting for GST. Providing a concrete roadmap and a definitive date for its introduction will do well to the business sentiments. Source – http://www.dnaindia.com [11-01-2017]

5. No Traders Identification Number to be cancelled forcefully
January 10, 2017
Commercial tax department (CTD) would not forcefully cancel Traders Identification Number (TIN) of those merchants forcefully, who are unwilling to migrate to Goods and Services Tax (GST) portal. CTD would withdraw a circular issued in this regard and release an amended one on Tuesday.
This assurance was given by additional commissioner of CTD Rajesh Bahuguna to a visiting delegation of over 50 members of Commercial Tax Practitioners’ Association (CTPA) and MP Tax Law Bar Association (MPTLBA) here on Monday. An e-mail on January 4 from CTD commissioner’s office had instructed all circle heads to initiate action of cancellation of TIN of traders unwilling to migrate to GST portal. Aim behind the action was to force traders to GST portal to seek temporary enrollment of GST, the date of whose implementation is not yet confirmed. The main aim was to ensure that MP topped the list of states in numbers of GST enrolment from the current second position in the country.
After meeting Bahuguna, secretary of CTPA Kedar Heda told Free Press that they had convinced him that through help and efforts of traders and tax consultants MP could succeed in over 80 per cent traders’ migration to GST. Bahuguna said the circular might have been released by mistaken. He said, “Our aim is to cancel TIN of those traders only whose last two years’ return filing is nil.” He would release a seprate circular on Tuesday to all circle heads instructing them to refrain from taking such action against genuine traders.
However, a written receipt would be taken from traders who do not wish to migrate to GST portal. Their TIN would be continued until VAT Act comes into force.
The January 4 mail said, ‘We have been able to achieve GST data migration for 80 per cent of the dealers, who have been shared provisional ID. However, for remaining dealers we are still find it challenge to ensure compliance. Therefore you are requested to take action to cancel all such dealers who have not filled returns for FY 2015-16 or FY 2016-17, not paid any tax for FY 2015-16 or FY 2016-17 and not taken any step for GST migration i.e. user name enrolment or form submission.” In the mail it was requested to field officers, ‘to identify all such dealers and after due notice, proceed for cancellation of such dealers.’  Source – http://www.freepressjournal.in [10-01-2017]

6.Excise, service taxpayers to migrate to GST portal by January 31
January 10, 2017
Keen to ensure roll out of goods and services tax from April 1, 2017, the Central Board of Excise and Customs (CBEC) has begun migration of its existing excise duty and service tax assesses to the new regime.
“All existing central excise/service tax assesses are requested to migrate as early as possible, latest by 31st January, 2017,” a CBEC statement said on Monday.
Once the existing registered taxpayers (both Central Excise as well as Service Tax) login to CBEC’s Web Portal http://www.aces.gov.in, a facility will be given in a secure manner to access the provisional login ID and password given by Goods and Services Tax Network (GSTN), it said.
Thereafter, using the same, they can log in to GST Portal (www.gst.gov.in) to fill the required fields and submit scanned documents.
However, if they have already initiated the process of migration to GST as a Value Added Tax assessee under state commercial tax department, they will not need to re-register.
Permanent Account Number is mandatory for migration to GST and if an existing excise duty or service tax registration does not have one then it has to be obtained from the income tax department. Registration details will have to updated on the ACES portal, it said.
CBEC has started 24X7 help desk to help assesses. The board is also sending Emails/recorded telephonic messages to all registered assesses. Source – http://economictimes.indiatimes.com [09-01-2017]


Migration of Service Tax registrants under GST

Posted on by Business So Simple in Miscellaneous


Regarding migration to GST, part data on provisional IDs of Central Excise registrants has been received from GSTN and made available through ACES website. The remaining provisional IDs of Central Excise registrants and the Service Tax registrants are still awaited from GSTN and would be made available shortly.

As per discussion with Service tax helpdesk, they will start sending provisional ID for GST migration from 22 Jan 2017. 

Income Tax Updates (31 Dec 2016 to 07 Jan 2017)

Posted on by Business So Simple in Miscellaneous



1. Blackmoney: India tweaks protocol to shed secrecy tag

January 7, 2017
To bolster capabilities of agencies probing foreign black money cases, India has begun the process of adding a new clause in its international tax treaties that will allow sharing of exchanged data between the multiple law enforcement departments, removing the rider of confidentiality that hampers the investigation. The new clause is being inserted in the Double Taxation Avoidance Agreements (DTAA) so that the data once obtained by the Central Board of Direct Taxes (CBDT), the nodal department for tax information exchange, could be shared with sister agencies like CBI, Enforcement Directorate, the Directorate of Revenue Intelligence and others for probe under money laundering, corruption, Customs and excise duty evasion and other laws. A revised DTAA, with the new clause, was signed here on Friday between India and Kazakhstan by CBDT Chairman Sushil Chandra and Kazakhstan Ambassador to India Bulat Sarsenbayev. – http://www.business-standard.com [7-1-2017]




2. Tax recovery from Swedish majors in payment dispute put on hold

January 7, 2017

The Central Board of Direct Taxes (CBDT) has suspended recovery of tax from Swedish companies whose disputes are being resolved through the Mutual Agreement Procedure (MAP) route, a move that will help in mitigating the hardship faced by such firms operating in India.
According to the CBDT guidance note, the tax demand will be kept in abeyance for two years if the Swedish companies furnish a bank guarantee of the disputed amount to the income tax authorities in India. Around a dozen large Swedish companies including H&M, Volvo, Oriflame Holding, are operating in India and several of them are locked in disputes with I-T authorities.
“Considering the hardship faced by the taxpayers during the pendency of MAP, as well as for efficient management of collection of revenue, the competent authorities of India and Sweden have signed a memorandum of understanding (MoU) regarding suspension of collection of taxes during the pendency of MAP,” the CBDT instruction said.
Under the MoU, the collection of outstanding taxes, in case of a taxpayer whose case is pending in MAP, would be kept in abeyance for a period of two years (extendable to a maximum period of five years through mutual agreement between the Competent Authorities of India and Sweden) subject to furnishing of a bank guarantee of an amount equal to the amount of tax under dispute and interest accruing thereon, it added.
Nangia & Co Managing Partner Rakesh Nangia said the instruction is a welcome move and will provide relief to Swedish companies doing business in India facing tax litigation with I-T authorities. “This instruction is intended to promote alternate dispute resolution measures. The interest of revenue has been duly safeguarded by providing that the Swedish company shall furnish a bank guarantee for the disputed tax demand,” Nangia said.
CBDT also said for an Indian resident taxpayer, the provisions of the MoU shall apply to MAP cases involving transfer pricing adjustments.
MAP is a process under which, tax dispute of a non-resident is resolved by mutual discussion between competent authorities of two countries.
MAP is generally a lengthy process and during pendency of such proceedings, Indian tax authorities generally ask such non-residents/ foreign companies to pay entire amount or a substantial portion of disputed tax demand.
This creates a financial burden on such foreign companies, if ultimately their income is decided to be not taxable in India by the Competent Authorities, experts said.
Bilateral trade between Sweden and India was $2.5 billion in 2015 and both countries have set an ambitious target of touching $5 billion by 2017. – http://www.business-standard.com [7-1-2017

3. Kazakhstan Tax Treaty Amended
January 7, 2017
India has amended its tax treaty with Kazakhstan, incorporating a special provision to ensure only genuine investors from the two countries take advantage of the agreement.
“The protocol inserts a Limitation of Benefits Article (LoB), to provide a main purpose test to prevent misuse of the double taxation avoidance convention and to allow application of domestic law and measures against tax avoidance or evasion,“ the CBDT said. – http://www.economictimes.indiatimes.com [7-1-2017]

4.Tax Relief for Swedish Firms

January 7, 2017
India has allowed Swedish companies relief from tax payments for upto five years if they have applied for settlement of their tax disputes through the mutual agreement procedure (MAP).The move could benefit Ikea, Volvo and Ericsson.
The Central Board of Direct Taxes has issued an instruction following an agreement with the Swedish government in this regard. This makes Sweden the fifth country to have this facility in India after the US, Denmark and South Korea.
“During the pendency of MAP, recovery of tax demand could lead to potential hardship for taxpayers as tax demand is yet to attain finality,“ CBDT said. – http://www.economictimes.indiatimes.com [7-1-2017]

5. CBDT seeks detailed info in AIR to catch money laundering post-
demonetization (Notification dated 06 January 2017)


6. CBDT issues circular for ‘TDS on Salary’ for AY 2017-18 (CIRCULAR 
NO. 01/2017 dated 02 Jan 2017)

7.Law on Taxing Indirect Transfer of Shares Likely to be Amended
January 6, 2017
Days after issuing a clarification on taxing indirect transfer of shares which sparked concerns among foreign investors, the government may be looking at amending the regulation, two persons in the know told ET.
“The government has received representations from many foreign investors. The government could take a relook at amending the law around taxing indirect transfer of shares,“ a senior tax official close to the development said.
Many foreign portfolio investors (FPIs), their custodians, private equity and venture capital funds reached out to Central Board of Direct Taxes (CBDT) and market regulator SEBI with their concerns.
“I have myself read one of the representations and while it may be too early to say what the amendment could be, the government can amend the regulations,“ he added. Many industry trackers expect the amendment to be announced in the upcoming budget. The tax officer, however, refused to comment on whether this could happen.
Investors who have reached out to CBDT and SEBI have sought some leeway in the original regulation that came to be in 2012 after the government amended the tax law while CBDT issued its clarification in late December. The government had introduced indirect transfer of share provision after the Vodafone controversy over retrospective taxes.
“This could adversely impact the returns of many investors including sovereign and wealth funds who invest into India dedicated funds and has become a worry for them. Many FPIs, banks and private investors have either made their representations to the government or are in the process of doing so. At a time when there are already many regulatory and tax changes affecting FPIs including on the Mauritius and Singapore treaty change, P Notes and GAAR, the new controversy around the indirect transfer of shares could be a dampener,“ said Rajesh H Gandhi, partner, Deloitte Haskins & Sells.
As per indirect transfer of shares regulation if shares of an Indian company held by a fund constitute more than 50% of its total assets and value exceeds ` . 10 crore, the transaction would be taxed in India.
While the government’s clarification in December was just based on the existing law, it spooked many FPIs who fear increase in tax demand going ahead.
Industry trackers say one of the biggest concerns for foreign investors is the threshold of ownership on which transactions will be taxable. As per the clarification, taxability applies to situations of transfer of any interest exceeding 5% in the overseas entity.
“If one looks at what the transfer at offshore level was intended to address, it was clearly for a situation where a significant shareholding at offshore level was effectively leading to transferring a significant holding in India; a 5% threshold at offshore level does not seem at all reasonable or be considered as meeting the original intent. One wishes this issue is addressed very quickly. Consistent representations have been made for the last two years,“ said Ketan Dalal, senior tax partner, PwC.
Many FPIs are worried as they see constant realignment of shareholding in their funds as investors exit, enter or change positions. The threshold of 5% could mean their tax liabilities going up tremendously. ET had on January 5 written that FPIs are seeking a threshold of 26% to trigger indirect transfer provisions.
FPIs have been also seeking relaxation in some of the compliance regulations under the framework. As per current regulations some companies whose shares are traded by FPIs will have to report every transaction to tax authorities. This not only increases compliance burden for FPIs but also Indian companies. This could discourage overseas investors to take significant exposure to India.
Many FPIs also worry that they could see returns from India getting impacted. Investors in FPIs can face 10%20% tax on long-term capital gains and tax of 30%-40% on short-term capital gains as per the current law, say industry trackers. – http://www.economictimes.indiatimes.com [6-1-2017]


8. Centre Confident of Keeping Budget Date

January 6, 2017
The Centre is “confident“ that, despite a joint Opposition petition to the Election Commission on postponing the budget, the annual fiscal policy exercise will be held on February 1 as scheduled.
EC announced the poll schedule for five states including politically crucial Uttar Pradesh on Thursday, and Opposition leaders have met EC, arguing for postponing the budget on the grounds that it can influence voters.
But several officials in the Prime Minister’s Office and the finance ministry ET spoke to said EC as well as states had been sounded out far earlier about the budget being brought forward. And that a national budget and national economic policy can’t be adjusted to state poll schedules. These officials spoke off record.
The finance ministry is going about the budget-making business as per schedule, officials said. One official said: “The government can present the budget… That is the prerogative of the government…and these are assembly polls,“ said a senior government official.
Another official said election announcements only impose a code of conduct, and that code does not say all economic decision has to come to a standstill. “Only the code of conduct given by EC has to be followed, meaning that no scheme or any sop specific to the state going for elections can be unveiled in the budget,“ he said.
“Things are different if the budget clashes with the general election -state elections are perpetually on in this country and a major central government policy document cannot be delayed because of it,“ a PMO functionary said.
He pointed out that Prime Minister Narendra Modi, in an October 26, 2016, meeting, had told all state chief secretaries that the budget was being advanced “by about a month“ to ensure spending starts from April 1. “All states were told to prep one their state budgets to bring them in tandem with the Central budget and there was an in principle agreement on the same for smooth coordination between state and central budgets. This means all political parties were aware as well…….the present protest is an afterthought,“ another PMO official said.
He also said EC was also sounded out on the possibility of the budget being advanced by almost a month to early February and that there was no objection from the commission.
A finance ministry official said the government had started mulling the idea of an early bud get as early as August 2016. The logic was to complete the entire process by March 31 so that spending can start from the first day of the new fiscal, April 1.
He also said a whole set of events followed from that decision, and everyone was aware of the budget schedule.
On September 21 last year, the union cabinet had endorsed the finance ministry’s plan for advancing the budget by a month. The budget circular, kick-starting the budget process, was issued a day later.
In keeping with that schedule, the finance ministry had announced on November 29 last year that North Block will be out of bounds for the media from December 1 till the budget day. – http://www.economictimes.indiatimes.com [6-1-2017]


9. Pension watchdog for tax parity between NPS and EPF
January 6, 2017
The pension regulator has sought tax parity between the National Pension System (NPS) and the Employees’ Provident Fund (EPF) in the coming Union Budget. Hemant Contractor, chairman of the Pension Fund Regulatory and Development Fund Authority (PFRDA), made this suggestion at a meeting on Thursday with the finance minister and officials. He was here in connection with the first meeting after demonetisation of high-value currency notes of the Financial Stability and Development Council (FSDC). Coming out of the meeting, Contractor said he’d made a case for EEE-status (meaning, exemption at all three stages of investment, accretion and withdrawal) for NPS, as against the present EET regime (exemption for the first two stages but taxation at withdrawal. EPF and the Public Provident Fund (PPF) are both having the EEE status; the maturity amount is not taxed at withdrawal either.
In the current year’s Budget, Finance Minister Arun Jaitley had made withdrawals from NPS on maturity tax-free up to 40 per cent of the total corpus; the balance 60 per cent continued to be taxable. “Our emphasis was more on increasing the pension coverage. The EEE benefit for NPS was the major demand. We have digitised a lot of our facilities,” said Contractor. The government is yet to amend the EPF Act to enable subscribers in the fund to shift to NPS, as was promised by Jaitley in the Budget for 2015-16. The amendment is stuck on a labour ministry demand that NPS subscribers be also allowed to shift to EPF, where there is presently a tax advantage.
At the outset, it seems NPS gives better returns even in debt instruments. For example, the EPF gave 8.69 per cent average annual return for the five years till 2016-17, while NPS gave a little over 13 per cent in the case of any of its schemes — equity, government debt or corporate debt. However, this is because of different accounting methods adopted by EPF and NPS. The former follows what is called the hold to maturity and accrual based accounting norm; NPS uses a market valuation norm. For instance, if NPS and EPF buy a government security at a coupon rate of 6.5 per cent annually for 15 years, EPF will declare 6.5 per cent interest after the first year; NPS will take into account the decrease in interest rates. If because of the latter the securities turn five per cent more attractive, it would add this to the coupon rate and say the return is 11.5 per cent.
However, both NPS and EPF have to hold the security till maturity. So, for a subscriber, the security would actually give the same return. However, equity gives an added advantage to NPS. While government staffers may opt for an investment plan where 50 per cent could be invested in equity, private sector employers may choose one where 75 per cent could be used for equity. In EPF, only up to 10 per cent of the incremental fund could be invested in exchange-traded funds. U K Sinha, chairman of the Securities and Exchange Board of India also gave suggestions for the equity markets. He did not elaborate on what he’d suggested. “A number of issues and areas were discussed…The market is being well regulated, I don’t see any specific risk at this stage,” he said.
A day after asserting that tax revenues for the current financial year would exceed the Budget Estimate, the finance ministry painted a rosy picture of the macro economy after demonetisation. Chairing the FSDC meeting, Jaitley said the world economy was fragile but India appeared much better placed, with improvement in its macro fundamentals. He said the government’s measures to eliminate the shadow economy and tax evasion were expected to have a positive impact on both Gross Domestic Product and fiscal consolidation in the long run. Among other financial sector regulators, Reserve Bank (RBI) governor Urjit Patel and insurance sector regulator T S Vijayan attended the meeting. FSDC also reviewed the present status of non-performing assets in banks and measures taken by the government and RBI to address the issue. Arvind Subramanian, the chief economic advisor, made a presentation on the state of the economy.  – http://www.business-standard.com[06-01-2017]

10.  Disclosure of candidates’ income source be made must: EC to SC
January 6, 2017

The Election Commission has told the Supreme Court that it must be made mandatory for the candidates to disclose their sources of income along with that of their spouse and dependents at the time of filing nomination to bring transparency in the election process. The poll panel also sought amendment in the Representation of the People Act to make sure that a candidate is disqualified not only when he has an existing contract with the government but also when any member of his family has a similar financial agreement. In an affidavit before the apex court, the EC said it is necessary for “healthier democracy” that voters get to know the sources of income of aspiring candidates and family members.
Under the current law, a candidate is required to disclose details of assets and liabilities for self, spouse and three dependents in Form 26 while filing nomination paper but not the source of income. “The existing format of the poll affidavit does not give any information in respect of the sources of income of the candidate and his family members to enable the electors to form an informed choice as to whether the increase of the income of the candidate from the previous election is reasonable or not,” the commission said.
The submission came in response to a PIL filed by NGO Lok Prahri seeking the court’s direction to amend the Representation of the People Act to make it mandatory for candidates to disclose the sources of their income and that of their family members. The NGO has also sought a direction to the Centre to bring an amendment in the law to disqualify a lawmaker if he has a share or interest in a firm that enters into a business contract with the government or a public company. “The increasing role of money power in elections is too well known and is one of the maladies which sometimes reduces the process of election into a mere farce by placing some privileged candidates with financial resources in a distinctly advantageous position as compared to other candidates. “The result of such an election cannot reflect the true choice of the people. The system also sometimes deprives qualified and able persons the prerogative to represent masses,” the panel said.
The commission also told the court that the law should be amended to provide punishment of a two-year jail term to candidates for filing a false affidavit, enhancing it from the present six-month period. The panel also suggested that a provision should be made for disqualification of an elected representative in the event that his family member or any of the companies associated with him having business interest in government.  – http://www.business-standard.com[06-01-2017]

11. Govt Can’t Unveil Schemes for Poll-bound States in Budget
January 5, 2017

The government can go ahead with presenting the Union budget on February 1 even though elections will be held in five states over the next two months. The government will need to follow the Model Code of Conduct and not announce any scheme or incentive for the poll-bound states, a government official told ET. “Election code of conduct will have to be followed and there cannot be any announcement specific to the states that are going to polls,“ the official said.
The government is likely to present a merged general and railway budget on February 1 in line with a plan to complete the process before the new financial year starts on April 1so that spending starts immediately. Under the current timeline, spending starts almost after the first quarter of the financial year is over.
The Election Commission, while announcing the poll schedule for Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur, said it will review the decision to present the budget on February 1. Polls in some of these states start on February 4. The Model Code of Conduct comes into force with the announcement of the schedule.
Political parties, including the Congress, the Left parties and the Samajwadi Party, have asked the Commission not to allow the Central government to present the budget as scheduled because sops that could be announced may influence voters.
“The Commission has received one representation sent by some political parties,“ Chief Election Commissioner Nasim Zaidi said.
“This representation is with regards to presentation of the budget. The Commission is examining this representation and in due course of time will take a call on this.“
Asked about this demand of political parties, finance minister Arun Jaitley said: “This is a constitutional requirement…There is no tradition like that.“
He said if demonetisation was not so popular, political parties shouldn’t be worried. He said the object of an early budget is so that spending can start from April 1. – http://www.economictimes.indiatimes.com [5-1-2017]

12. Tax kitty to exceed Budget estimate, says Jaitley

January 5, 2017
While some states have complained of declining tax revenues due to demonetisation, the Centre is hopeful of exceeding its Budget Estimates (BE) for 2016-17 in both direct and indirect tax collections. It has reiterated the decision to advance the Budget presentation date to February 1, despite objections. “We will end this year with higher revenues for both direct and indirect taxes compared to the estimates,” said Finance Minister Arun Jaitley after the Goods and Services Tax Council meeting and pre-Budget consultation with state counterparts.
The states raised concern over declining revenues and sought relaxation in the Fiscal Responsibility and Budget Management (FRBM) limit, beside central support to revive labour-intensive industries. To a query, Jaitley said the Reserve Bank (RBI) would remove the current restrictions on cash withdrawal after assessing the situation. He ruled out a change in the conditions barring anyone other than non-resident Indians (NRIs) and those returning from abroad from depositing the junked notes in select central bank branches. “Actions are taken in phases and so are relaxations,” he said on when the cash withdrawal restrictions could be ended. Collection Indirect tax collections — central excise, service tax, customs — were up 26.2% in the April-November period (first eight months of this financial year) at Rs 5.52 lakh crore, as against the full year’s target of 10.8%.
Excise duty collections rose 43.5% in the first eight months (April-November) of 2016-17 to Rs 2.43 lakh crore, against the BE of 12.15% rise. Service tax collections made the kitty richer by 25.7% at Rs 1.6 lakh crore in the eight months, against the 10% projected in the BE. Customs collections rose by 5.6% at Rs 1.48 lakh crore in the first eight months; the BE had projected 9.78% more in FY17. Till December 19, the net increase in direct taxes was 13.6% after factoring in the refunds, already higher than the Budget target of 12.5%. Growth in corporate tax collection was 8.75% till December 19, against the BE’s 9.04% for the full year. Personal income tax yielded 23.9% more till December 19, against a BE rise of 18.1%. FRBM Most states pressed for relaxation in FRBM legal limits. Jharkhand sought it by one percentage point, as did Andhra, from the current year’s fiscal deficit limit of three% of GSDP.
Delhi finance minister Manish Sisodia said his revenue fell 24% last month. However, Haryana (where the Bharatiya Janata Party also rules, as at the Centre) said tax revenues remained steady, “the same as last year, rather better. There has been no visible adverse impact of demonetisation”, said Abhimanyu, finance minister.Budget To a query regarding opposition parties demanding postponing of the Budget presentation date due to the coming state elections, Jaitley said, “They say the popularity of demonetisation is very low. Then, why are they worried about the Budget?” He said the reason behind advancing the presentation date is that actual expenditure must start from April 1, when the financial year begins.
To someone asking if the Budget for 2012-13 had not been postponed due to state elections, he said, “This is not a tradition every time. Immediately before the Lok Sabha elections, an interim Budget is presented. This is a constitutional necessity.”Chief Election Commissioner Nasim Zaidi said various political parties had represented on the February 1 presentation of the Union Budget, while the poll campaign was still on in five states. “The Commission is examining this representation,” he told reporters. The Congress, Left parties and Samajwadi Party are among those which have written to the EC. Congress spokesperson Ajoy Kumar said the Centre should present a vote-on-account and a full Budget later.
Communist Party of India (Marxist) chief Sitaram Yechury said an ‘early Budget’ was a bad idea, as full data would be there only for the financial year’s first two quarters. The Economic Survey coverage would be likewise. Such a Budget-making exercise was bound to lead to “looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies”.Tamil Nadu seeks revival of Nokia unit The government of Tamil Nadu on Friday sought the Centre’s support for revival of Nokia Corp’s erstwhile factory in Chennai, during the pre-Budget consultation with the Centre.”In (the Centre’s) Make in India (programme), they need to adopt this and support this transition,” state education minister K Pandia Rajan said after the meeting. Foxconn is learnt to be in talks with Nokia to revive the unit, seeking a prior waiver on tax liabilities and resolution of legal issues concerning the factory. “For the Nokia-Foxconn deal to go through, the central government needs to unfreeze the assets. It has a key role in this,” the minister said.  – http://www.business-standard.com[05-01-2017]

13.  I-T Dept Asks Tax Sleuths to Resolve Disputes in 30 Days
January 4, 2017
In what could come as a good news for taxpayers in the new year, the income-tax department has asked its officials to resolve their grievances, within 30 days time.
The department’s new wing called the ‘Directorate of Tax Payer Services’ has asked all the regional heads of the I-T to ensure that “ there are no grievances aged more than 30 days pending at any level” pertaining to complaints of refunds, PAN issues and other Income Tax-related subjects.
In a communication, the directorate has also underlined the fact that Prime Minister Narendra Modi during his review meetings in this regard has “stressed upon adhering to the timeline of 30 days for the redressal of a particular grievance”.
“one of the major reasons for delay in the grievance redressal is failure to identify competent officer to redress the grievance and lack of knowledge of recent circulars or instructions,” the communication said, adding if the person (tax official) dealing with the grievance identifies the competent I-T authority, “ a lot of time can be saved”.
The directorate has also directed the taxman that in case the grievance does not pertain to the authority directed by the CBDT, it “should be transferred back in not more than five days time.”
The directorate, nodal wing for all taxpayer grievances pan-India, has suggested that the official handling the grievance should give “due attention to the grievance at hand” and ensure action without any delay. – http://www.economictimes.indiatimes.com [4-1-2017]

14. Taxation won’t Come in the Way of Foxconn-Nokia Deal, says Official

January 4, 2017

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India’s taxation regime will f not come in the way of Taiwanese device maker Foxconn Technology’s plans to i take over Finnish mobile company t Nokia’s closed manufacturing facility in TamilNadu’s Sriperumbudur, a top government official said.
“Tax is not an overriding factor here t (Foxconn-Nokia deal) while India’s c talent pool plays a critical role,“ Ministry of Electronics and IT (MeitY) secretary Aruna Sundararajan said.“In my view, taxation is not going to be a l deciding factor.“ t Foxconn, the world’s top contract manu(facturer, and Nokia have been discussing plans to revive the latter’s shuttered manufacturing unit located barely 40 km from Chennai, but any deal hinges on i clarity around whether tax sops will continue even after implementation of the goods and service tax regime. In addition, c Foxconn has made it clear that it won’t bear the tax liability, which was slapped on Nokia, which led to the factory being frozen and subsequently closing down.
Sundararajan said there are enough incentives for companies to manufacture in India and the government will ensure taxation issues aren’t a hurdle.“In the long term, productivity and relevant skill sets, including ready availability of technical workers, makes a difference and there is a natural inclination from multinationals to make a manufacturing presence in India,“ she said.
Sundararajan said the companies willing to start production in the country typically look at return on investment (RoI), which India offers. MeitY’s top official believes that Nokia, which had set up the Sriperumbudur manufacturing unit in 2006, was among the top companies in terms of productivity with the lowest production cost in the world back then, and it makes a compelling case for other companies too to come and make in India. – http://www.economictimes.indiatimes.com [4-1-2017]

15. Startups Brace for Legal War with I-T

January 4, 2017
Startups that have been ordered to pay tax despite valuations being marked down in recent funding rounds are challenging the demands, complaining that the move runs counter to the government’s campaign to encourage entrepreneurial spirit.
With startup fever having waned over the past year or so amid concerns over profitability and competition, valuations have declined sharply. Last month, the tax department challenged such reductions at about 100 startups and issued orders seeking 33% tax at the elevated levels that prevailed earlier.
Some startups have moved the income-tax tribunal against the notices while others have approached their advisers and could seek legal recourse in the coming days.
Lets Recycle, an Ahmedabad based and Aavishkaar Ventures-backed waste management startup, was among those to get the tax demand and has challenged it at the Income-Tax Appellate Tribunal. “Entrepreneurs don’t understand I-T notices as they have to struggle daily to improvise business processes,“ said Lets Recycle founder Sandeep Patel. “When I-T (income tax) acts this way, investors will be sceptical to invest, entrepreneurship will never be born and startups will never become (large) enterprises.“ He said his startup directly or indirectly employs 1,650 waste pickers, among them 200 from the weaker sections of the society.
Prime Minister Narendra Modi launched the Startup India programme in January last year as part of a campaign to create a conducive ecosystem for such companies to boost job creation.
The tax demand has been made for the assessment years 2013-14 and 201415 under Section 56(2)(vii)(b) of the Income-Tax Act, 1961. Experts said the Section was actually introduced to curb money laundering and was being wrongly aimed at genuine investment in startups.
ET reported on June 2 that startups with marked-down valuations may face tax notices. The Central Board of Direct Taxes (CBDT) subsequently issued a notification exempting government-registered startups on June 14.
“As feared, the tax officers have started challenging all investments prior to this amendment,“ said Amit Maheshwari, partner, Ashok Maheshwary and Associates LLP. “Tax officers have challenged the valuation methodology , assumptions and projections duly certified by merchant bankers or chartered accountants and this could be the ground on which this would be challenged by the startups.“
While some startups weren’t inclined to seek legal recourse, their investors are said to be nudging them to do so, said experts. According to people aware of the matter, SAIF Partners, a venture capital fund, is seeking legal opinion after some of the startups in which it has invested faced tax demands. An email sent to SAIF Partners and an SMS to CEO Ravi Adusumalli did not elicit any response.
Other investors are also likely to push companies to challenge the tax demands.
Those that have been sent notices will have to pay by March end or challenge the demand.
The tax department’s move appears to be antithetical to the government’s encouragement for startups.
“The government had allowed three years’ tax break for startups and you are defying your own Prime Minister’s verdict on startups,“ said Sumit Mehrra, CEO, Green Umbrella Investment Advisory, and an angel investor. “The whole logic is defeated when you are taxing a startup on perceived valuation. Taxing actual profit or gain is practical; taxing on notional gain will be obviously challenged by the startups.“
In some cases, startups are looking to set off losses against the tax demand. However, this could trigger a new set of problems for the startups, experts said.
“Setting off of accumulated tax losses could lead to the tax demand on perceived overvaluation in many cases and the startups may still be penalised for concealment of income,“ said Maheshwari. – http://www.economictimes.indiatimes.com [4-1-2017]

16.  Interest Rate on Small Savings Plans Unchanged
January 3, 2017
The government has kept the interest rate on small savings schemes such as PPF and Kisan Vikas Patra unchanged for the January-March quarter, going against the expectations that the rates will be cut. Investments in the popular public provident fund (PPF) scheme will continue to fetch an annual interest rate of 8%, the same as 5-year National Savings Certificate, the finance ministry said in a notification. With banks cutting the fixed deposit rates following surge in deposits due to demonetisation, the interest differential with small savings schemes will widen making the latter more attractive.
Small savings rates are revised every quarter based on the movement in yields on government securities in secondary market. Kisan Vikas Patra (KVP) investments will continue to yield 7.7% per annum and matu re in 112 months. Sukanya Samriddhi Account Scheme, scheme for the girl child, will continue to give out 8.5% annually while it will be the same as 8.5% for the 5-year Senior Citizens Savings Scheme.
A savings deposit will fetch 4%, same as earlier while term deposits of 1-5 years will offer 77.8% that will be paid quarterly .The 5-year recurring deposit will continue to earn 7.3%. Most banks are offering less than 7% annual return on their deposits. The differential will keep small savings schemes attractive, but that should not worry banks flush with deposits due to the demonetisation.  – http://www.economics-times.com[03-01-2017]

17.  Startups Likely to Get Tax Benefits in Union Budget
January 2, 2017
Prime Minister Narendra Modi’s key Startup India programme may get a boost in the upcoming budget with the industry department drawing up a list of tax concessions on employee stock options, unlisted securities and convertible instruments. The union budget is expected to be announced on February 1.
The push comes amid concerns that the startup movement in India was losing steam and there hasn’t been a significant improvement in ease of doing business. The Department of Industrial Policy and Promotion (DIPP) has proposed that ESOPs for startups be taxed at the time of sale, when they have greater liquidity to pay taxes and the instruments get a fair valuation.
DIPP has also said that the period of long-term capital gains for unlisted securities be reduced from the current limit of 24 months, keeping in mind that investing in startups is risky and subject to a higher rate of tax. “We are trying to address various tax and regulatory issues which the startups are facing currently, hoping that the budget will address some of these issues,“ a senior government official said, requesting anonymity.
Industry agrees with the need for incentives.
“Startups move away from India because of the current tax regime. Some of these changes are simply hygiene factors and not concessions to help startups stay and floua,“ said Sharad rish in India,“ said Sharad Sharma, cofounder of think tank iSPIRIT.
The long-pending demand of increasing the tax holiday period for startups to seven years from three years has also been forwarded to the finance ministry by DIPP.
The tax holiday was announced to help startups meet cash constraints and limited avenues of finances available in their early days. DIPP is also in the process of finalising guidelines for a credit guarantee fund scheme to increase the availability of finance for startups.
The Startup Action Plan announced by Prime Minister Modi in January 2016 said a credit guarantee mechanism through the National Credit Guarantee Trust Company or the Small Industries Development Bank of India (Sidbi) would get funding of Rs. 500 crore annually for the next four years.
The government had announced several incentives for startups at the launch of the Startup India Action Plan such as a three-year income tax holiday subject to non-distribution of dividends and capital gains tax exemption for investments in newly formed manufacturing micro, small and medium enterprises by individuals. Only companies registered after April 2016 can apply for the tax benefits. DIPP also announced a tatkal service for startups for filing patents.
Under the faster clearance route, application fees for individuals and startups have been kept at Rs. 8,000 while for companies, it could be as much as Rs. 60,000. – http://www.economictimes.indiatimes.com [2-1-2017]

18. Raise I-T Exemption Cap to Rs 5 L’
January 2, 2017
Finance Minister Arun Jaitley should double the basic income tax exemption limit to Rs. 5 lakh per year and raise the ceiling for claiming deduction under Section 80C to Rs. 2.50 lakh, according to a survey by tax consultant Deloitte.
Almost all respondents want the I-T exemption limit to be raised substantially while 58% of the respondents were in favour of raising it to Rs. 5 lakh.
“It will place more money in the hands of consumers resulting in increase in demand pick-up. Also, the increase in the slab limit will kick-start savings which will ultimately lead to increase in investment in the system,“ stated a Pre-budget Expectations Survey Report by Deloitte.
It said that 71% respondents want the limit of the Section 80C to be increased to Rs. 2.50 lakh, from Rs. 1.50 lakh. “Given the increase in income levels and inflation, the existing limit is low. Increase in limit will help channelise household savings into productive avenues such as insurance, provident fund, equity and the like which will in fully exempted.
Currently, NPS is subject to income tax under the EET (Exempt Exempt Tax) regime-withdrawals from NPS are taxed to the extent of 60%.
However, this is not in parity with other pension schemes such as provident fund, which is under the EEE regime. “The government has positioned NPS as an alternative to PF. Therefore, to bring parity and incentivise employees to be part of NPS, it must be brought under the EEE regime,“ the report added.
According to the Deloitte survey, the government has set an ambitious target to boost infrastructure spending and is in need of long-term funds.“Hence, it is an apt time to reintroduce deduction for investment in long term infrastructure bonds as it will provide additional avenue for individuals to make investment and save taxes,“ the survey suggested.
This is expected to provide funds to bankroll various infrastructure projects. A majority of the respondents indicated that the deduction for investment in infrastructure bonds should be introduced with a limit of Rs. 50,000. – http://www.economictimes.indiatimes.com [2-1-2017]

19. India, Singapore revise tax treaty
December 31, 2016
The government signed a pact with its Singapore counterpart on Friday, amending their decade-old tax treaty, gaining taxation rights over capital gains. This is the third double taxation avoidance agreement (DTAA) amended so far this financial year with a zero or low tax jurisdiction. The other two were with Mauritius and Cyprus. According to tax consultants, Mauritius would be the most attractive source of investments into India for debt funds and Singapore for equity investments. Mirroring the revised IndiaMauritius DTAA, the government has some grandfathering provisions (having the old rule continuing to apply for some existing situations, with the new one for all future cases) and a two-year transition benefit to investments from Singapore. The revised pact will take effect from April 1, 2017. For two years from that date, capital gains tax will be imposed at 50 per cent of the prevailing domestic rate. The short-term rate is 15 per cent at present. The full rate will apply from April 1, 2019.
“2016 has been historic, with all three tax treaties amended… The treaties were misused to round-trip domestic black money and bring it back to India through these routes. There has been a significant battle by India against black money. It is a happy coincidence that by amending these treaties, there has been a burial to the black money route that existed,” said Finance Minister Arun Jaitley on the revised DTAA. Mauritius and Singapore are the top two sources for foreign direct investment to India, about half of the total direct flow. Total FDI from Mauritius over the past decade and a half is USD 95.9 billion. That from Singapore is USD 45.8 bn The concessional rate of 50 per cent would be subject to fulfilment of conditions of Limitation of Benefit (LOB), an expenditure of at least Rs. 50 lakh in Singapore in the previous financial year. It is Rs.27 lakh in the case of Mauritius.
“The Singapore route was widely used for treaty shopping. Investors were used to create shell companies, claiming it to be a resident of Singapore. This loophole has been plugged, to cover for revenue loss and black money via this route,” said Rakesh Bhargava, Director, Taxmann. The rate of withholding tax on interest for Singapore has been retained at 15 per cent, as against 7.5 per cent in the case of Mauritius, making the latter a preferred source of investment into India by debt funds.  – http://www.business-standard.com[31-12-2016]

20.Easwar panel submits 2nd report on I-T laws


December 31, 2016

16 Views
Justice R V Easwar, who heads a high-level committee on simplification of income tax laws, on Friday submitted his second report to Finance Minister Arun Jaitley. To simplify the provisions of the Income-tax Act, 1961, a Committee under the chairmanship of Justice Easwar was constituted on October 27, 2015. The Committee was entrusted with the broad objectives of studying and identifying the provisions/phrases in the I-T Act that result in litigation due to misinter pretations.   – http://www.business-standard.com[31-12-2016]






GST Updates (06 Jan 2017)

Posted on by Business So Simple in Miscellaneous



Tax refund to exporters under GST within seven days


January 6, 2017

Tax refund to exporters under GST within seven days:Commerce Min

Exporters have been demanding ab-initio exemption from payment of taxes under the Goods and Services Tax (GST) regime arguing that delay in refunds often takes months and also results in blocking the orking capital. They also stated that exports need to be encouraged view of the global slowdown.

The Department of Revenue has promised to refund tax claims of exporters within seven days under the new GST regime, thus addressing a major concern of the sector, Commerce and Industry Minister Nirmala Sitharaman said.

The minister also said that exporters would get interest on the refund if it is delayed beyond two weeks.

Exporters have been demanding ab-initio exemption from payment of taxes under the Goods and Services Tax (GST) regime arguing that delay in refunds often takes months and also results in blocking the working capital. They also stated that exports need to be encouraged in view of the global slowdown.

The minister recently raised the issues of exporters in the GST Council meeting.

The concern of the exporters was that the refund should not take too long, she told reporters after chairing the meeting of the Council for Trade Development and Promotion here today.

In today’s meeting, the exporters were assured “that on 90 per cent of the amount (of refund), within seven days, the refund will be made and if there is an undue delay, interest will be paid on the amount due,” Sitharaman said.

Elaborating on the issue, Commerce Secretary Rita Teaotia said the Department of Commerce has been taking up this matter with the Department of Revenue (DoR).

“GST clearly provides that the taxes must be paid and that the refund will be provided. So since the regime is so structured, in order to see that there is minimum pain to the exporters, what the DoR has committed that 90 per cent of the refund will be made within seven days. Delays beyond that would invite interest payment,” she said.

She said the remaining 10 per cent will be subject to whatever verification revenue department is required to do.

“This assurance satisfies the exporters,” she added.

Revenue department will work on the details to ensure that exporters do not suffer because of delay in refund.

Teaotia said exporters will get interest if the refund is delayed beyond two weeks.

“The issue about interest payment, what that amount would be and whether it would kick in after two weeks…that detail DoR would decide,” the Commerce Secretary said.

Further, the secretary said that on the issues related to tax treatment of SEZs under GST, the Department of Commerce has made representations before the GST Council.
“We are looking for favourable consideration of our submissions,” she said.

The Commerce and Industry Ministry has recently suggested to the GST Council to exempt leather and plantations sector from the GST ambit. Source – http://www.moneycontrol.com [05-01-2016]

With GST delayed, Budget-making just got tougher

January 6, 2017

The inevitable delay in implementing the national goods and services tax (GST), earlier targeted for April 1, will ensure the Budget-making process is much more complicated for the finance ministry.

The Centre will have to account for the presently applicable indirect taxes for that part of 2017-18 when GST will not apply.

Earlier, when GST was expected to apply from April 1, when the new financial year begins, Finance Minister Arun Jaitley’s Budget speech was expected to be completely different from previous editions. Part B, the taxation proposals, was to only have announcements related to direct taxes and customs duties.

While that could still be the case, planners will have to factor in the revenues from the current indirect taxes for budget estimates for the first half of the year at least. And then from GST, now expected to be rolled out on or after September 1.

On Wednesday, the long impasse over division of administrative turf between Centre and states persisted, as did the issues of higher compensation due to demonetisation and the definition of coastal states, at the latest GST Council meeting. Indicating a rollout of the new indirect tax regime is difficult not only from April 1 but also from July 1.

“Budget calculations will be complicated, with uncertainty surrounding the GST rollout date and the rates. The estimates might largely be based on assumptions. The government could look at setting up a contingency fund to overcome any mismatch in revenue estimates and actuals. It might do the calculations by assuming July 1 as the rollout date,” said Pratik Jain, leader-indirect tax at consultancy PwC. “They will have to take an estimated date for the rollout. In that case, they will project indirect tax collection at 75 per cent of the GST revenues estimated for the full financial year. They already have projections for service tax and excise duty and must have done some homework on classification of items,” said Bipin Sapra, partner at consultancy EY.

The sense is that Jaitley’s speech will stick to the earlier proposed script and not give indirect tax proposals. This means the usual announcements of levies on cigarettes, high-end cars and other luxury items, ‘white’ goods such as air conditioners, etc, and service tax exemptions, will not be a part of the Budget speech. It remains to be seen. Source – http://www.business-standard.com [06-01-2017]

GST: Jaitley pushes for consensus

January 6, 2017

The Centre on Wednesday said that it will wait for consensus to emerge on GST laws and will not push for a decision by vote despite the threat of a delay in rolling out the new tax regime from April.

“I have consciously avoided voting and we have decided on issues based on consensus, often after a long discussion. The GST Council is a federal institution and a delicate one,” finance minister Arun Jaitley said after the body comprising states and the Centre failed to finalise the draft laws once again. Jaitley said that given that the precedent from earlier meetings would be cited in future decision-making, GST Council was trying to decide on all issues by consensus.

Two major issues -the proposed levy of tax on sale in the high-seas and dual control over entities with annual turnover of less than Rs 1.5 crore -have held up the finalisation of the draft laws. The laws need to be cleared by the state legislatures and Parliament before GST can be rolled out and industry is demanding time to prepare itself for the new tax regime.

As a result, the possibility of rolling out GST from April seems remote and state FMs are talking about a delay with Kerala finance minister Thomas Issac suggesting that implementation may not take place before September, which is the Constitutional deadline. “I am not very optimistic about GST rolling out in June or July.It is better to move to GST after all the preparations are done. To my understanding, it will be implemented September on wards,” he told reporters. While West Bengal finance minister Amit Mitra did not indicate a date, he said that a number of steps had to be taken, including software upgradation by companies. Jaitley too acknowledged that it was a race against time.”We know the difficulties, we are moving against time,” he said, adding that the GST Council would try to clinch a deal at its next meeting on January 16. Source -http://timesofindia.indiatimes.com [05-01-2017]

Possibility of GST rollout moves further to September: Thomas Issac

January 5, 2017
Possibility of GST rollout moves further to September: Thomas Issac

The possibility of roll out of the Goods and Services Tax (GST) has moved further to September as a new issue has cropped up – the states’ demand for an increased share in the new indirect tax collections, Kerala Finance Minister Thomas Issac said on Wednesday.

“I am not very optimistic about GST rolling in June or July. It is better to move to GST after all the preparations are done. To my understanding it will be implemented September onwards,” Isaac told reporters here after the two-day GST Council meet came to end.

Ruling out the April 1 implementation of GST, after the Day 1 of the Council meet, Issac on Tuesday had told reporters that the rollout of the GST may only be possible by June-July.

The Kerala Finance Minister on Wednesday said that the state GST(sGST) can be passed in the state’s respective budget sesssions or special sessions can be convened, which will make rollout possibile by September onwards.

Raising new issues between the Centre and the states, Issac said that the Council members discussed the four tax slabs under the GST and the states felt that the states and Centre share in the taxes should be 60:40 and not 50:50.

“Four different GST rates have been fixed. Highest bracket is 28 per cent. It is taken for granted that Centre and state share in it will be 50:50.

“Over the years, states’ rights have been curtailed. This presents a historic opportunity to correct the states’ share to 60 per cent and Centre’s share would be at 40 percent. The states today (on Wednesday) supported this understanding,” Issac added.

Four tax rates of 5 percent, 12 percent, 18 per cent and 28 per cent have been decided under the GST regime. These apart, another category of tax between 40 per cent and 65 per cent will be imposed on luxury goods like high-end cars, panmasala, aerated drinks and tobacco products.

With the states now demanding increased share in the indirect tax collections, the crisis of GST rollout has deepened as the other issues of dual control or cross empowerment, which deals with assessee’s jurisdiction and the issue of area of state jurisdiction under integrated GST (iGST) have already created an impasse in the Council.

A number of states are firm that dealers and service providers below Rs 1.5-crore turnover should be entirely under the state’s control.

“We haven’t been able to even touch the dual control issue, which is fundamental to this process,” West Bengal Finance Minister Amit Mitra had told reporters here on Tuesday.

The GST Council meetings which were progressing well have been impacted after demonetisation dented the states’ revenues by 30-40 per cent.

Mitra had said that states’ tax revenues have fallen around 30-40 per cent owing to the depressive impact of the November 8 demonetisation measure, which has complicated the issue of compensation to states for future losses arising from the GST implementation.

Noting that the compensation fund would, therefore, require to have a much larger corpus of around Rs 80,000-90,000 crore, as compared to the current plan of Rs 55,000 crore, Mitra had also said that the GST Council will now take a call about the Centre taking responsibility for fully compensating states for the loss of revenue. Source -http://economictimes.indiatimes.com [04-01-2017]


GST receipt estimates will not be part of Budget Estimates

January 6, 2017

As the April 1 deadline for the implementation of the proposed Goods and Services Tax (GST) looks increasingly out of reach, the Ministry of Finance is likely to continue with its tradition of giving estimates for excise and service tax in the upcoming Budget for 2017-18 (April-March). Estimates for GST receipts for the next financial year will become a part of the revised estimates, not Budget estimates for 2017-18, officials in the know said.

“With uncertainty over April 1 deadline for GST, we will continue with giving estimates for excise and service tax in 2017-18 Budget. Earlier, when the dummy exercise of Budget was being undertaken, we had kept a separate column for GST estimate but now with the matter stuck in GST Council, we will continue with the existing system of estimates for indirect taxes,” a government official said.

The government is constitutionally mandated – as per the Constitution (One Hundred and First Amendment) Act, 2016 passed by Parliament last year – to roll out the indirect tax regime by September 16 this year. Finance minister Arun Jaitley has said that being a transactional tax, GST can be rolled out anytime between April 1-September 16, though the government wants to implement it as early as possible.

“It would be difficult to give indirect tax estimates with breakup (excise and services tax) for half year and then GST estimate for second half. The government has to bring in GST by September, then the estimates for GST will become part of revised estimates than Budget estimates for 2017-18,” another official aware of the developments said.

Usually, the finance ministry begins its pre-Budget meetings by October-end for determining the revised estimates for the ongoing financial year and estimates for the next financial year.

This week, in its eighth meeting, the GST Council was unable to thrash out a consensus over the crucial issue of dual control and definition of territory regarding high sea sales within 12 nautical miles in offshore area of coastal states. Most states, including BJP-ruled Gujarat, have ruled out the April 1 deadline and are expecting GST to be rolled out only after June.

The government is already lagging on the initial timeline for GST having already missed the initial target of Winter Session for passage of supporting legislations for GST. The Centre had initially intended to get the three bills relating to GST—Central GST (CGST) bill, Integrated GST (IGST) bill and the the bill for compensating states for revenue losses—passed in the Winter Session of Parliament.

If the states and the Centre are able to build a consensus on the pending issues in the next meeting of GST Council on January 16, the bills are likely to be brought up for passage in the Budget Session by the Centre. Subsequently, states will have to pass the state GST (SGST) bill, a mirror image of the CGST bill, in their respective assemblies.

The resolution of dual control, which pertains to division of administrative control over tax assessees between the Centre and the states, will be crucial for timely implementation of GST. States have been demanding exclusive control over tax assessees with annual turnover below Rs 1.5 crore, but Centre has not relented so far on this demand and the issue has been pending with the GST Council since its second meeting in September.

According to the updated figures shared by the Centre with the states, the likely taxpayer base in GST would be 107 lakhs, out of which states account for 67 per cent (71.7 lakhs) and Centre is estimated to account for 33 per cent (35.3 lakhs). There are around 81.4 lakh VAT dealers, out of which active dealers are 66.5 lakhs. For service tax, there are 38 lakhs assessees, out of which 26 lakhs are active assessees, while there are around 4,00,000 assessees for excise. Around 4,00,000 taxpayers are common to the Centre and the states. Source – http://indianexpress.com [06-1-2017]

Mitra walks out of pre-Budget meet, cites ‘financial emergency’

January 5, 2017

A day after his party’s leader in Lok Sabha, Sudip Bandyopadhyay, was arrested by CBI, West Bengal Finance Minister Amit Mitra today staged an angry walkout from a pre-Budget meeting saying there was ‘financial emergency and ‘political environment of fear’ in the country.

Mr. Mitra, who was in full attendance at the two-day meeting of the GST Council chaired by Mr. Jaitley that ended today, said the Union Budget had become a “meaningless” exercise after Prime Minister Narendra Modi, in his address to the nation on new year’s eve, made announcements similar to a Budget presentation.

He said that before walking out, he made the Union Finance Minister, who had called the meeting, hear the expectations of States on his fourth budget to be presented on February 1 and also make him aware of the “financial emergency” imposed by demonetisation and the job losses it has led to.

“I wanted the Finance Minister to hear the reality on the ground, the financial emergency in the country, the political environment of fear all around,” he told reporters after emerging from the meeting.

Mr. Bandyopadhyay was arrested by the CBI in Kolkata yesterday in connection with the Rose Valley chit fund scam — a move that promoted West Bengal Chief Minister Mamata Banerjee to allege that Prime Minister Narendra Modi was using central agencies like the CBI, Enforcement Directorate and Income Tax department against his political rivals who were raising their voice against demonetisation.

The Trinamool Congress, he said, is today demonstrating against “the political emergency that seems to have happened at every nook and corner on every matter.”

Mr. Mitra also said currency demonetiation has led to closure of small industries and left hundreds jobless across the country, including the BJP-ruled States.

While the leather industry in West Bengal has completely collapsed, closure of 12 lakh powerlooms in Maharashtra had led to workers returning to their native places in Bihar, Uttar Pradesh and Telangana. Source – http://www.thehindu.com [04-01-2017]


Arun Jaitley hopes to resolve dual control issue in next GST Council meet

January 5, 2017

Arun Jaitley hopes to resolve dual control issue in next GST Council meet

Admitting that the Goods and Services Tax (GST) Council was racing against time on the government’s implementation target of April 1, Finance Minister Arun Jaitley on Wednesday said it is hoping to resolve the vexed issues of Integrated GST (iGST) and dual control over assessees in its next meeting on January 16.

“We know the difficulties, we are moving against time. Dual control is a complex issue. We started a discussion that was inconclusive. We have decided to meet on January 16 to untie the knots in this issue,” Jaitley told reporters here after the two-day GST Council meet.

“We will be meeting to conclude the discussion on the gaps in draft laws. The gaps are on two issues. The first pertains to the definition of the word territory (in iGST) and the second is on dual control and cross empowerment,” he said.

Even after eight meetings of the GST Council, the deadlock continues between the Centre and the states on the vexed issue of “cross empowerment”, or dual control of assessees. The question of who will exercise control over GST assessees — the Centre or the states — remains critical.

The states want exclusive control on businesses with turnover below Rs 1.5 crore (the current threshold for central excise), including the service taxpayers.

The impact of demonetisation on states’ tax revenues was brought up at the GST Council meeting and Jaitley said that the states presented their estimates of December revenue figures based on collections made in November, the month of the demonetisation announcement.

“A number of state finance ministers gave details of how revenue has actually increased in their states during this period. We’ve asked for detailed data in this regard,” Jaitley said.

To a query on the impact of the November 8 demonetisation of high-value currency, Jaitley said that excepting the next quarter of the fiscal, the demonetisation-led process of “integrating the informal economy into the formal one” will actually result in higher revenues.

“My assessment is that with the integration of the informal into the larger economy, the revenue of states, unless very badly administered, will increase,” the union Finance Minister said.

“We will end this year with higher revenues…in both direct and indirect taxes we’ll exceed the budget estimates,” he added. Source – http://economictimes.indiatimes.com [04-01-2017]