Aug 282018

Tax audit limit under income tax act

Meaning of Tax Audit:

44AB. Every person,—

  1. Carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or
  2. carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or
  3. carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AEor section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
  4. carrying on the profession shall, if the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADAand he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
  5. carrying on the business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

The audit conducted as above is commonly known as TAX AUDIT.

Since requirement as to audit is depend upon total sales, turnover or gorss receipt and hence here an attempt is being made to understand these term.

Meaning to terms turnover as commonly understood:

The aggregate amount for which sales are effected or services rendered by an enterprise. The term `gross turnover’ and `net turnover’ (or `gross sales’ and `net sales’) are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts.

Inclusion and exclusion in sales value / Gross receipts:

Value of Turnover
Inclusion in turnover value Exclusion from turnover value
(a)   Scrap sales

(b)   Sale of By products

(c)   Sale of securities held as stock in trade

(d)   Cash discounts not included in invoices

(e)   Commission on sale

(f)    Indirect taxes included in sales price

(g)   Packing, freight and forwarding etc. included in sales price

(h)   Brokerage income in case of share broker

(i)    In case speculation – Aggregate of both positive and negative differences arising from the difference between purchase and sale transactions

(j)    In case of agency business – commission earned by agent

(a)    Indirect taxes – Like GST

(b)    In case of composition suppliers sales attributable to GST shall be excluded.

(c)    Sale of fixed assets

(d)    Sale of investment property

(k)   Sale of securities held as investment

(e)    Discount allowed in invoice

(f)     Turnover discount

(g)    Packing, freight and forwarding etc. mentioned separately in the invoice

(h)    Sales return

(i)     Price adjustment

(j)     Special rebate

Value of Gross receipts
Inclusion in Gross receipts Exclusion from Gross Receipts
Gross receipts in case of profession would include all receipts arising from carrying on of the profession Re-imbursement of expenses if collected separately either in advance or otherwise, should not form part of the “gross receipts”.

Aug 272018

Review of GST Input Tax Credit Claim

Why there is need for review of ITC claim:

Since the rules for claiming ITC are neo for everyone including tax consultants and hence it can be understood that there could be:

  • Errors of understanding,
  • System errors and
  • Transactional mistakes

Thus, for every taxable person there is last chance to ensure total reconciliation and proper availment is carryout before filing September 2018 return.

Special focus point in review of ITC claim:

  • Transaction not entered in accounting records at all:
    1. Stock transfers to different states
    2. Agent principle supply
    3. Supply to related party without consideration / inadequate consideration
    4. Liability under reverse charge
    5. Identification of Barter activities
    6. In the same line identification of non-monetary consideration in any exchange transaction, which leads to revision of valuation

Since no records for above transaction is available in normal book of accounts and accounting trail and hence special focus must be adopted on these transaction to avoid under booking and under payment of liability.

  • Review of ITC on transaction entered in books of accounts:
    1. Procurement policy to ensure that vendor had paid taxes on invoice
    2. Invoice must have properly indicated and value of taxes paid
    3. All major inputs, capital goods and services needs to be review to ensure that anything on which credit have been taken is not blocked under the act
    4. Ensure source of procurement must be from registered vendor
    5. Whether ITC is taken only after receipt of goods and /or services
    6. Whether GST liability under RCM is actually paid to avoid payment of irrevocable interest.
    7. Ensure that the tax paid on purchases returns on GST invoice is equal to credit on inputs
    8. In case of capitalization of expenses ensure whether ineligible credits exist or eligible credits are not availed
    9. Confirm whether all vendor payments being made within 180 days: There is a time limit for payment to vendors within 180- days. If it exceeds, ITC needs to be reversed with interest, however an amendment for without interest reversal has been proposed for amendment in the CGST Bill. On payment to the vendor is made, the credit can be claimed back.
    10. Review the discount given / taken and debit notes and credit notes
    11. ITC credit is not available for personal transactions
    12. Review of various returns filed under GST such as GSTR 1 and GSTR 3B and identification of differences in ITC if any, between GSTR 3B and GSTR 2A.
    13. Reivew of ratios like credit availed and utilised to total GST, ITC/ Total purchases and expenses

The above are few focus areas of ITC review which must be done before the end of every financial year to ensure that any wrong credit availed must be reversed to avoid future legal tangle.

Aug 232018

Key features of New GST Quarterly Returns

  1. Quarterly filing and monthly payments:

It is proposed to provide facility for filing of quarterly return to small taxpayers, who had a turnover upto Rs. 5 Cr. in the last financial year.

  1. Meaning of turnover for filing of return:

Turnover of the taxpayer shall be calculated based on the reported turnover in the last year i.e. 2017-18, annualized for the full year.

It shall be possible for the taxpayer to check on the common portal whether he falls in the category of a small taxpayer.

A newly registered taxpayer shall be classified on the basis of self-declaration of the estimated turnover.

However, they would still need to pay their taxes on monthly basis and avail input tax credit on self-declaration basis to pay the monthly taxes.

  1. Quarterly or monthly return:

Option for filing monthly or quarterly return shall be taken from these small taxpayers at the beginning of the year and generally thereafter they would continue to file the return during the year as per the option selected.

During the course of the year option to change from monthly to quarterly or vice-versa shall be allowed only once and at the beginning of any quarter.

  1. Options in quarterly return:

Small taxpayers having turnover upto Rs. 5 Cr. would have option to file one of three forms, namely –

  1. Quarterly return,
  2. Sahaj or
  3. Sugam

Quarterly return shall be akin to the monthly except that it has been simplified and shall not have the compliance requirement in relation to –

  • Missing and pending invoices as small taxpayers do not use these procedures in their inventory
  • Supplies such as non-GST supply, exempted supply etc as they do not create any liability.
  • The details of input tax credit on capital goods credit shall also not be required to be filled.

This information shall be required to be filled in the Annual Return. Small taxpayers who would like to facility of missing and pending invoice may file monthly return.

  1. Quarterly Return:

Option to create profile in the quarterly return shall also be available.

Sahaj and Sugam are predetermined profiles of the quarterly return.

  1. Sahaj and Sugam Returns:

Small taxpayers often have purchases only from the domestic market and sales in the domestic market i.e B2B purchases locally and supplies either as B2C or B2B+B2C.

They constitute a very large part of the tax base and therefore two simplified quarterly returns are proposed for them respectively.

They have been named as “Sahaj” (only B2C outward supplies) and “Sugam” (both B2B and B2C outward supplies).

  1. Uploading of invoices:

The recipients from these small taxpayers would need uploaded invoice for availing input tax credit and therefore the small taxpayers would be given facility to continuously upload invoices in the normal course.

The invoices uploaded by 10th of the following month would be available as input tax credit to the recipient in the next month as is the case in case of purchases from large taxpayers.

  1. Payment declaration form for payment of monthly taxes:

These small taxpayers would continue to pay taxes on monthly basis and in the first and second month of every quarter, they would use a payment declaration form to make the payment.

In the payment declaration form, self-assessed liability and input tax credit on self-declared basis shall be declared.

To assist in tax payment and availing input tax credit, necessary liability arising out of uploaded invoices of outward liability and input tax credit flowing from viewing facility would be shown to the taxpayer.

The payment declaration form shall only allow full payment of the liability arising out of uploaded invoices.

Late payment of tax liability including that in first and second month of the quarter shall attract interest liability.

  1. Lower compliance cost:

The benefit of this simplification would be that the compliance cost for small taxpayers would come down as payment declaration form is not a return and minor errors in the same would not lead to initiation of any legal action.

  1. Pending and missing invoices:

Small businesses have only a few supplies to receive and therefore they track their purchases well and may not need credit on missing invoices. Therefore quarterly return shall not have the compliance requirement of missing and pending invoices as small businesses do not use these procedures in their inventory management.

Aug 202018

GST :Key features of Monthly Returns


GST Council in its 27th meeting held on 4th May, 2018 had approved the basic principles of GST return design. Now in its 28th meeting held on 21st July, 2018, GST Council approved the key features and new format of the GST returns. Here is an attempt to explain the basic features of new GST return forms:

All taxpayers excluding a few exceptions like

  1. small taxpayers,
  2. composition dealer,
  3. Input Service Distributor (ISD),
  4. Non resident registered person,
  5. persons liable to deduct tax at source under section 51 of CGST Act, 2017,
  6. persons liable to collect tax at source under section 52 of CGST Act, 2017,

shall file one monthly return instead of 2 returns being filed before.

  1. Monthly Return and due-date:

Return filing dates shall be spread over based on the turnover of the taxpayer which shall be calculated based on the reported turnover in the last year i.e. 2017-18, annualized for the full year.

It shall be possible for the taxpayer to check on the common portal whether he falls in the category of a small taxpayer.

A newly registered taxpayer shall be classified on the basis of self-declaration of the estimated turnover. The due date for filing of return by a large taxpayer shall be 20th of the next month.

  1. Small taxpayers:

Taxpayers who have a turnover up to Rs. 5 Cr. in the last financial year shall be considered small calculated in the manner explained in para 1 above.

These small taxpayers shall have facility to file quarterly return with monthly payment of taxes on self-declaration basis.

However, the facility would be optional and small taxpayer can also file monthly return like a large taxpayer.

  1. Continuous uploading and viewing:

There would be facility for continuous uploading of invoices by the supplier anytime during the month.

The uploaded invoice shall be continuously visible to the recipient.

Only uploaded invoice would be a valid document for availing input tax credit.

Invoices uploaded by the supplier by 10th of succeeding month shall be auto-populated in the liability table of the main return of the supplier.

The screen where it shall be visible to the recipient is hereafter called “viewing facility” (shown as “inward annexure” in the return document).

After the due date for the filing of return is over, the recipient shall also be able to see the return filing status of the supplier and thus be aware whether the tax liability on purchases made by him has been discharged by the supplier or not.

Viewing facility shall also show the trade name of the supplier.

  1. Due date for uploading invoices and action to be taken by the recipient:

Invoices uploaded by the supplier by 10th of the next month shall be posted continuously in the viewing facility of the recipient.

Taxes payable on the above invoices which can be availed as input tax credit shall be posted in the relevant field of the ITC table of the return of the recipient by 11th of the next month.

These invoices shall be available for availing input tax credit in the return filed by the recipient.

Invoices uploaded after 10th of next month by the supplier shall get posted in the relevant field of the return of the subsequent month of the recipient though viewing shall be continuous.

But both the invoices would be accounted towards the liability payable by the supplier in his return of the tax period of April.

Therefore, after the 11th of the next month the recipient shall be able to accept, reject or keep pending a particular invoice but the maximum limit of eligible input tax credit will be based on the invoices uploaded by the supplier upto 10th of the subsequent month.

In the transition phase of six months after the new system of return is implemented, the recipient would be able to avail input tax credit on self-declaration basis even on the invoices not uploaded by the supplier by 10th of the next month or thereafter using the facility of availing input tax credit on missing invoices.

  1. Invoice uploaded but return not filed:

It shall be treated as self-admitted liability by the supplier and recovery proceedings shall be initiated against him after allowing for a reasonable time for filing of the return and payment of tax.

  1. Unidirectional Flow of document:

Only the invoices or debit notes uploaded by the supplier on the common portal shall be the valid document for availing input tax credit by the recipient.

Invoices or debit notes which have not been uploaded by the supplier and on which recipient has availed input tax credit shall be hereafter called “missing invoices”.

Recovery from recipient: Where credit is availed on missing invoices by the recipient and such missing invoices are not uploaded by the supplier within the prescribed time period, input tax credit availed in relation to such invoices or debit notes shall be recovered from the recipient.

  1. Missing invoice reporting:

Missing invoices shall be reported by the supplier in the main return for any tax period with interest or penalty as applicable.

Reporting of missing invoices by recipient can be delayed up to two tax periods to allow recipient to follow up and get the missing invoice uploaded from the supplier.

  1. Payment of tax:

Liability declared in the return shall be discharged in full at the time of filing of the return by the supplier as is being done at present in the present return FORM GSTR 3B.

  1. Default in payment of tax by supplier:

There shall not be any automatic reversal of input tax credit at the recipient’s end where tax has not been paid by the supplier.

In case of default in payment of tax by the supplier, recovery shall be first made from the supplier and in some exceptional circumstances recovery of input tax credit from the recipient shall be made through a due process of service of notice and issue of order.

  1. Locking of invoices:

Locking of invoices means acceptance of entering into the transaction in the invoice.

Facility for locking of invoice by the recipient before filing of the return by him shall be available.

Deemed locking of invoices shall be presumed on the uploaded invoices which are either not rejected or kept pending by the recipient.

On filing of the return by recipient, all invoices shall deemed to be accepted except invoices kept pending or rejected.

  1. Pending invoices:

Pending invoices means such invoices which have been uploaded by the supplier but for which one of the three situations exist –

  • first, the supply has not been received by the recipient,
  • second, where the recipient is of the view that the invoice needs amendment,
  • third, where recipient is not able to decide whether to take input tax credit for the time being.

Pending invoices shall be reported by the recipient and no input tax credit shall be availed by the recipient on such pending invoices.

To reduce the number of pending invoices which needs to be reported, a simplification in the procedure for availing input tax credit shall be carried.

Where the goods or services have been received by the recipient before filing of a return and invoice for the same has been uploaded by the supplier upto the due date i.e 10th of the next month, input tax credit for the same can be availed by the recipient in the return.

A pending invoice can be rejected by the recipient at a later date when he is able to decide on either of the three situations mentioned above.

  1. Unlocking of invoices: A wrongly locked invoice shall be unlocked online by the recipient himself.
  2. Amendment of invoices: Amendment of an invoice may be carried out by the supplier. Amendment is invoices are allowed when:
    • where input tax credit has not been availed and
    • the invoice has not been reported as locked by the recipient.

Once an invoice is locked by the recipient, no amendment of the same shall be allowed.

  • Credit note or debit note for the same can still be issued by the supplier to change value, rate of tax, quantity or the tax payable. IT facility would ensure that:
    • where a credit note is issued on an invoice which is kept pending, then both the credit note and the original invoice shall be linked in the system for availing credit so that excess credit is not taken by the recipient;
    • where a credit note is issued on an invoice on which credit has already been availed e. the invoice is locked, the reduction in liability of supplier shall be subject to reduction in input tax credit of the recipient.
  1. Return format: The main return shall have two main tables, one for reporting supplies on which tax liability arises and one for availing input tax credit.
  2. Payment of multiple liability: Liability in the return arising out of invoices of different dates shall be summarized period However, one payment for the total tax liability on all tax invoices shall be allowed to be made. Interest shall be calculated on invoices reported late.
  3. Amendment return: To address the problem of human error e. wrong entries being made in the return, there would be a facility for filing of amendment return. Two amendment returns for each tax period within the time period specified in section 39(9) will be allowed to fill. Amendment of entries which flow from the annexure of the main return shall be allowed only with the amendment of the details filed in the annexure.
  4. Amendment of missing invoices: Amendment of missing invoices reported later by the supplier shall be carried out through the amendment return of the relevant tax period to which the invoice pertains.

It would be advisable to report all the invoices and then avail the facility for amending return so that invoices reported late can also be amended through the amendment return.

  1. Amendment of details other than that of invoice: All user entries of input tax credit table in the main return would be allowed to be amended. Change in the closing balance of the input tax credit shall be affected based on the declaration in the amendment return of the taxpayer. Thus, the opening and closing balances of intervening month(s) shall not get
  2. Payment due to amended liability: Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayer. Input tax credit, if available in the electronic credit ledger can also be used for payment of the liability in the amendment
  3. Negative Liability: Negative liability arising from the amendment return shall be carried forward as negative liability in the regular return of the next tax
  4. Higher late fee for amendment return: For change in liability of more than 10% through an amendment return, a higher late fee may be prescribed to ensure that reporting is appropriate in the regular
Aug 162018

Significance of business codes in ITR forms

CBDT has changed nature of business codes for income tax return forms from A.Y. 18-19. Before filing of Income tax return, correct business sector along with correct business code has to be selected.

Most of us select business codes recklessly without considering our actual nature and do’s of business. Here is an article mentioning the significance of business codes in self assessment process:

  1. For considering eligibility for presumptive computation: The benefit of presumptive computation of income is available only in case of specified nature of business. In case the selected business codes does not fall in the specified business codes an intimation u/s 143 will sent to wrong computation of income. The only remedy available to you is to file revised return or apply to rectification of return,
  2. The facility of special computation of income is eligible for following class of business:
    1. Special provision for deduction in the case of trade, professional or similar association
    2. Special provision for computing profits or gains of business on presumptive basis
    3. Special provision for computing profits or gains of profession on presumptive basis
    4. Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages
    5. Special provisions for computing profits and gains of retail business (Not applicable from 01.04.2011)
    6. Special provision for computing profits and gains of shipping business in the case of non-residents
    7. Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils
    8. Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents
    9. Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects… and so on
  3. Few deductions are available only in case of assessee if he is engaged in specified nature of business. The eligibility for these deduction shall be considered based on business coders entered by assessee. For example: Section 35ABA and 35ABB: Expenditure for obtaining right to use spectrum for telecommunication service and Expenditure for obtaining licence to operate telecommunication services. Relevant business code 12006
  4. Allowance for tea development account, coffee development account and rubber development account etc are available if along with other conditions correct relevant business codes are mentioned in ITR forms. 01001 etc

This is worth to mention here that one assessee might be engaged in two or more nature of business with single PAN, business registration and GST registration. Thus, allowance / benefit of more than one business codes under income might be available to single PAN holder and single premises registration.

Further, simply change in business code does not imply a change in nature of business or profession. However, it may be an indication of change in nature of business. Change in nature of business is a wide term and would imply a change in nature, timing and extent of doing business. Change in nature of business would have a direct impact on profitability of business but change in business code have impact on eligibility of an allowance.

Aug 122018

Place of supply for E way bills

Inter-State movement or inter-State supply are two distinct terms to be recognized. By the fiction in section 7 of IGST Act, several transactions are imputed to be inter-State supplies, as for example, mentioned below:

  1. Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.
  2. When the supplier is located in India and the place of supply is outside India;
  3. To or by a Special Economic Zone developer or a Special Economic Zone unit;
  4. In the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

Movements for the purposes of E-way bills:

For the limited purposes of EWB, the actual movement alone determines whether it is inter-State movement (attracting Central EWB) or intra-State movement (attracting State/UT EWB).

EWB is required whether the movement of goods is pursuant to supply or not and pursuant to supply of goods or of services or inward supply from an unregistered person.

Case studies:

Case 1: Goods imported from China arrive at Mumbai port.

These goods are transported from Mumbai port (situated in Maharashtra state) to factory in Pune (situated in Maharashtra state).

This is an inter-State supply from China to Pune, but it is an intra-State movement from Mumbai to Pune. State-EWB will BE REQUIRED for this movement.

Case 2: Goods are sold from Lucknow (situated in UP state) by Supplier to Customer in Delhi with instructions for these goods to be delivered to job-worker in Noida (situated in UP state).

This is an inter-State supply from Lucknow to Delhi for the purposes of taxation but an intra-State movement within UP. State-EWB will BE REQUIRED for this movement.

Case 3: Goods installed in basement of building being sold to Landlord on termination of lease agreement.

EWB will NOT BE REQUIRED as there is ‘no movement’ in this supply.

Case 4: Contractor carrying portable crane to customer site, both located in same State, is intra-State movement.

EWB will NOT BE REQUIRED for this movement.

Case 5: Laptop carried by employee from Delhi to Bangalore for company work, this movement is not supply but is incidental to ‘services of employee to employer’ under schedule III.

EWB will NOT BE REQUIRED for this movement.

However, contract-staff carrying company-laptop not excluded from EWB requirement. Thus, if same laptop is being carried by contractual staff E-way bill would have been required.

Case 6: LPG cylinders transported from dealership to bottling plant of Oil Company, is ‘excluded’ from requirement.

EWB will NOT BE REQUIRED for this movement.

However, EWB will be required for movement of cylinders supplied by fabricator to Oil Company.

Aug 112018

Effects of amendment in section 138 of negotiable instrument act

Roadmap of amendment till date:

Year Bill No Short Title Date of introduction Passed in LS Passed in Rs Referred to / Report presented by committee Notification no Synopsis
2017 28 The Negotiable Instruments (Amendment) Bill, 2017


2nd Jan 20118 23rd July 2018    


Yet to come  

Use of negotiable instruments i.e. cheques:

A   negotiable instrument like most commonly used, cheque is acceptable mode of payment in lieu of payment in money and it is negotiable. However, by the fall of moral standards these cheque started losing their credibility by not being honoured. And an action in the court for collection of the proceeds of cheque is defeating its very purpose.

Before amendment situations:

Central government is receiving representation from public that delay tactics are being adopted by drawer of cheque because as of now there is ease in filing appeal and then obtaining stay on proceedings. This cause injustice to the payee who have to spent lot of money, time and resources for realizing his money back

Objects of amendment:

It is proposed to amend the said act with a view of address:

  • The issue of undue delay in final resolution of cheque dishonour of cases
  • To relief to payees of dishonoured cheques
  • To discourage frivolous and unnecessary litigation which would save time and money.
  • Strengthen the credibility of cheque.

Effect of amendments:

Section 138 of instrument act – “where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.”

Now after insertion of section 143A and 148 provisions are made for interim relief to the payee as explained below:

  1. Payment by the drawer of the dishonoured cheque to the payee thereof of interim compensation of an amount not exceeding 20% of the value of the instrument, during the pendency of proceedings for the offence of dishonour under Section 138 of the Act-
    1. in a summary trial or a summons case, where the drawer pleads not guilty to the accusation made in the complaint; and
    2. in any other case, upon framing of charge
  2. The said interim compensation has to be paid within a period of 60 days from the date on which the order to that effect is made.
  3. The interim compensation so paid by drawer shall be deductible upon final conviction.
  4. The so called interim compensation is recoverable by way of attachment and sale of any immovable property or as an arrears of land revenue from movable or immovable property.
  5. However, if drawer is freed the payee is liable to pay back compensation so received with interest @ bank rate prevailing at the beginning of financial year.
  6. In case of appeal against the conviction under section 138 the appellate court may order to deposit a minimum of 20% of the fine or compensation so awarded by the trail
  7. During the pendency of appeal the appellate court may direct the release the amount so deposited to the complainant.

Aug 102018

Recommendation of 28th Meeting of GST council

As you are aware that GST council is a group of sate and central finance ministry recommending major amendments is GST laws and all amendments in GST laws are have to be in line with these recommendations. On 21st July 2018 it held its 28th meeting and recommended as detailed below:

Composition suppliers:

  1. Upper limit of turnover for opting for composition scheme to be raised from Rs. 1 crore to Rs. 1.5 crore. Henceforth, supplies having turnover upto 1.5 crore can apply for composition scheme and existing suppliers can opt for composition scheme from next financial year.
  2. Composition dealers to be allowed to supply services (other than restaurant services), for upto a value not exceeding 10% of turnover in the preceding financial year, or Rs. 5 lakhs, whichever is higher. Thus, supplies of any service upto Rs 5 lakh or 10% of turnover is allowed from the day notification to come.

Levy of GST on reverse charge mechanism:

Levy of GST on reverse charge mechanism on receipt of supplies from unregistered suppliers, to be applicable to:

  • only specified goods
  • in case of certain notified classes of registered persons,
  • on the recommendations of the GST Council.

Thus, universal application of section 9(4) is now removed.

No tax is payable on following supplies:

  1. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India;
  2. Supply of warehoused goods to any person before clearance for home consumption; and
  3. Supply of goods in case of high sea sales.

Now Input Tax Credit (ITC) is made available in case of following supplies:

  1. Most of the activities or transactions specified in Schedule III;
  2. Motor vehicles for transportation of persons having seating capacity of more than thirteen (including driver), vessels and aircraft;
  3. Motor vehicles for transportation of money for or by a banking company or financial institution;
  4. Services of general insurance, repair and maintenance in respect of motor vehicles, vessels and aircraft on which credit is available; and
  5. Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force.

Reversal of ITC in case supplier fails  to pay amount due within 180 days:

The input tax credit availed by the recipient will be reversed, but liability to pay interest is being done away with.

Consolidated credit / debit notes:

Registered persons may issue consolidated credit/debit notes in respect of multiple invoices issued in a Financial Year

Export of services:

Supply of services to qualify as exports, even if payment is received in Indian Rupees, where permitted by the RBI.

GST rates reduction on items:

  1. 28% to 18%
  • Paints and varnishes (including enamels and lacquers)
  • Glaziers’ putty, grafting putty, resin cements
  • Refrigerators, freezers and other refrigerating or freezing equipment including water cooler, milk coolers, refrigerating equipment for leather industry, ice cream freezer etc.
  • Washing machines.
  • Lithium-ion batteries
  • Vacuum cleaners
  • Domestic electrical appliances such as food grinders and mixers & food or vegetable juice extractor, shaver, hair clippers etc
  • Storage water heaters and immersion heaters, hair dryers,  hand dryers, electric smoothing irons etc
  • Televisions upto the size of 68 cm
  • Special purpose motor vehicles. e.g., crane lorries, fire fighting vehicle, concrete mixer lorries, spraying lorries
  • Works trucks [self-propelled, not fitted with lifting or handling equipment] of the type used in factories, warehouses, dock areas or airports for short transport of goods.
  • Trailers and semi-trailers.
  • Miscellaneous articles such as scent sprays and similar toilet sprays, powder-puffs and pads for the application of cosmetics or toilet preparations.
  1. 28% to 12%
  • Fuel Cell Vehicle. Further, Compensation cess shall also be exempted on fuel cell vehicle.
  1. Refund of accumulated credit on account of inverted duty structure to fabric manufacturers:

Fabrics attract GST at the rate of 5% subject to the condition that refund of accumulated ITC on account of inversion will not be allowed. However, considering the difficulty faced by the Fabric sector on account of this condition, the GST Council has recommended for allowing refund to fabrics on account of inverted duty structure. The refund of accumulated ITC shall be allowed only with the prospective effect on the purchases made after the notification is issued.

III. GST rates have been recommended to be brought down from,-

  1. 18%12%/5% to Nil:
  • Stone/Marble/Wood Deities
  • Rakhi [other than that of precious or semi-precious material of chapter 71]
  • Sanitary Napkins,
  • Coir pith compost
  • Sal Leaves siali leaves and their products and Sabai Rope
  • PhoolBhariJhadoo [Raw material for Jhadoo]
  • Khali dona.
  • Circulation and commemorative coins, sold by Security Printing and Minting Corporation of India Ltd [SPMCIL] to Ministry of Finance.
  1. 12% to 5%:
  • Chenille fabrics and other fabrics under heading 5801
  • Handloom dari
  • Phosphoric acid (fertilizer grade only).
  • Knitted cap/topi having retail sale value not exceeding Rs 1000
  1. 18% to 12%:
  • Bamboo flooring
  • Brass Kerosene Pressure Stove.
  • Hand Operated Rubber Roller
  • Zip and Slide Fasteners
  1. 18% to 5%:
  • Ethanol for sale to Oil Marketing Companies for blending with fuel
  • Solid bio fuel pellets
  1. Rate change made in respect of footwear
  • 5% GST is being extended to footwear having a retail sale price up to Rs. 1000 per pair
  • Footwear having a retail sale price exceeding Rs. 1000 per pair will continue to attract 18%


Aug 092018

Section 44AD on presumptive income:

Section 44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession” :

(4) Where an eligible assessee declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1).

(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

Thus, as per the above provision in case for person having eligible business and having turnover upto two crore rupees declaring profit @ 8% shall be liable to keep books of accounts.

Disclosures in ITR 4:

As regards financial particulars of the business, ITR 4 for A.Y.2017-18 sought only information relating to amount of a) total sundry debtors, (b) total sundry creditors, (c) total stock-in-trade and (d) cash balance.

The new ITR 4 for A.Y.2018-19, in addition to sundry creditors, seeks details of partners/ members own capital, secured and unsecured loans, advances and other liabilities. The total capital and liabilities would be the sum of the figures of the above assets.

Likewise, in addition to the three items of assets which are required to be disclosed in ITR 4 for A.Y.2017-18, ITR 4 for A.Y.2018-19 seeks details of balance with banks, loans and advances and other assets. The total assets would be the sum of the figures of the above assets.


E11 Partners/ Members own capital E11  
E12 Secured loans E12  
E13 Unsecured loans E13  
E14 Advances E14  
E15 Sundry creditors E15  
E16 Other liabilities E16  
E17 Total capital and liabilities (E11+E12+E13+E14+E15+E16) E17  
E18 Fixed assets E18  
E19 Inventories E19  
E20 Sundry debtors E20  
E21 Balance with banks E21  
E22 Cash-in-hand E22  
E23 Loans and advances E23  
E24 Other assets E24  
E25 Total assets (E18+E19+E20+E21+E22+E23+E24) E25  
NOTE ► Please refer to instructions for filling out this schedule    
(E15, E19, E20, E22 are mandatory and others if available)    

Explanation F to section 139(9):

However Explanation (f) to section 139(9) mandates reporting of only turnover/ gross receipts, gross profit, expenses, net profit, total debtors, creditors, stock in trade and cash balance as at the end of financial year, for the return to treated as valid return of income. The same is reproduced as below:

For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :—

(f)  where regular books of account are not maintained by the assessee, the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year.

Thus, a return shall not be regarded as defective in case complete balance sheet is not given in the return but amounts of turnover / gross receipts, gross profits, expense and net profit, sundry debtors, sundry creditors and cash balance is provided for as explained above.


Thus , in case assessee is filing ITR 4 it is not necessary to disclosed particulars of balance sheet.

Aug 022018

Tax payable on purchase from an unregistered dealer

In GST if you are a registered dealer and you are purchasing goods from a unregistered dealer in that case registered dealer have to pay GST (Goods and Service Tax or tax) and selling unregistered dealer is not liable to pay tax.

Under section 9(4) registered dealer will have to pay tax at the time of purchasing the goods from an unregistered dealer and this is commonly known as reverse application of tax or RCM.

For example, there is a large company and the company is registered with GSTN and this company is purchasing goods from an unregistered person  for example, petty expenses like tea etc. from the tea vendor or office stationary for an office then register company is only liable to pay tax on that petty expense

How to make payment of taxes in case of RCM (Reverse charge mechanism):

The payment of taxes can be made under GST out of two types of ledger:

  1. Electronic Credit ledger: This ledger gets credit with the taxable supplies received by the registered taxable person each time purchase tax invoice are updated by registered dealer.
  2. Electronic Cash ledger: This ledger gets credits with the taxes paid in cash / banking channel through challan.

Registered person purchasing goods from unregistered person can not pay tax under RCM using credit ledger. He have to pay RCM liability in cash and immediately take ITC of such taxes paid if the procurement so made is eligible for input tax credit.


Unregistered dealer cannot make invoice (means tax invoice). However, he can pass on the commercial invoice to registered dealer.

On receipt of goods registered person shall make another invoice (tax invoice) based on commercial invoice issued by registered dealer as if he himself is supplying good to him. This means in such special case it shall be presumed that such registered supplier supplies goods / services to himself.

Blockage of working capital:

There is a time limit of one month approximately for availing ITC of GST paid in cash under reverse charge mechanism. Thus, there is blockage of working capital to that extent.


A big relief is given by government to the assessee. There is a limit of Rs. 5000 per day per unregistered supplier for applicability of RCM. Thus, this is big relief to small tea vendors and dhaba walas which supplies in small quantities valuing rupees five thousand or less.

However, once the limit of five thousand is crossed for any unregistered vendor GST would be payable on total value including rupees five thousand for supplies made from that particular vendor.

Another relief is given by government is that the tax liability under RCM for supplies made from unregistered dealer is now suspended till sept., 2018 as of now.