Applicability of GST to Mutual Society

 Applicability of GST to Mutual Society  Applicability of GST to Mutual Society
Jul 302019
 

Applicability of GST to Mutual Society

Meaning and purpose of Mutual Society:

The term mutual society has not been defined in the GST Act. In common parlance a mutual society implies  that  the contributors and  the recipients are one and the same. Such societies are not normally subjected to tax on the principle that a person cannot make a profit from himself.

Concept and Mechanism:

The important aspects to understand in this regard are:

Mutuality is a principle and it can be found in any organisation, it simply implies that a group of persons contribute for their own purposes.

The Supreme Court clearly provides that there must be  no  scope of profiteering by the contributors from a fund made by them which could only be expended or returned to themselves.

A licensed club where there are both membership fees and, where prices charged for club services are greater than their cost, additional contributions. It is these kinds of prices and/or additional contributions which constitute mutual income.

Services of a mutual society to its member which are subject to GST:

GST is levied on the event of a ‘supply’, the issue is whether an association can be supplying services to its own members. Under Section. 7(1) for the purposes of GST, the expression “supply” includes–

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal  made or agreed to be made for a consideration by  a person in  the course or furtherance of business.

(c) the activities specified in Schedule  I,  made  or  agreed  to  be  made without a consideration’

Therefore the following conditions must be fulfilled:

  • There must be supply of goods or services or both for a
  • And such supply must be in the course or furtherance of  business

The term ‘business’ is defined u/s 2(17)(e) and which is relevant in this regard reads as under:

‘(17) “business” includes––

(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the  facilities or  benefits to  its members’

From the above definition it is clear that the term “business” includes services by a mutual society of facilities or benefits to its members. Hence if the transaction between an association and its members satisfies the other condition that it  is  a supply of goods or services for a consideration, then the same will be taxed.

Collection of Fees/subscription from the members against which there are no direct facility/benefit to the members can be subject to GST:

The term ‘Business’ is defined under section 2(17)(e) and it includes provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to    its members. However, the Maharashtra Advance Ruling Authority in   the case of Lions Club of Kothrud Pune Charitable Trust, vide its order No.GST-ARA-15/2018-19/B-71, Mumbai 25/07/2018 has  held  that there is no GST liability for the amount collected by  individual Lions club and Lions District as these collections are for the convenience of Lion members and pooled together only for paying Meeting expenses and communication expenses.

In other words any services provided by the mutual society in  the  normal course to all the members is not treated as facility or benefit for the purposes of section 2(17)(e).

In the light of the above we need to distinguish supply  between  a mutual society and its members into two categories;

  • services which are available to the members in the normal course, for example security services in housing society,
  • services which are in the nature of benefit or facility which may or may not be availed by the members, for example restaurant or accommodation facility offered by a club to its member which may not be uniformly availed by all the members

Start ups – regulatory environment 

 Start ups – regulatory environment   Start ups regulatory environment 
Jul 292019
 

Start ups – regulatory environment

Meaning of term Start Up:

An entity shall be considered as start up upto 10 years (if it is incorporated as Private Limited company, Partnership Firm or LLP) from the date of its incorporation / registration:

  1. If its turnover for any of the financial years has not exceeded Rs 100 Crore and
  2. It is working toward innovation, development or improvement of products or processes or services or it is scalable business model with a high potential of employment generation or wealth creation.

Registration of start up:

  1. Make an online application over the mobile app or portal set up by DIPP.
  2. Application to be accompanied with
    1. Copy of certificate of incorporation (COI) or recognition
    2. Write up about the nature of business highlighting how it is working towards innovation etc

Relief and exemptions:

a) Income tax act:

Eligible start up carrying eligible business as explained under Explanation to Section 80-IC of income tax act may obtained certificate for the purpose of said section by making an application in prescribed Form – I to the inter Ministerial Board.

Obtaining license under section 80-IC of the income tax act allows assessee in computing total income a deduction of an amount equal to 100% of profits and gain derived from such business  for a consecutive three assessment years out of 7 years from the date of incorporation of start up.

Under section 56(2)(viiib) if a company receives any consideration for issue of shares which exceeds its FMV of such shares, such excess consideration is taxable in the hands of recipient. The start up are eligible for availing exemption from such provision if;-

  1. It is recognized by DPIIT and
  2. Aggregate amount of paid up capital and share premium of the start up after issue or proposed issue of shares does not exceeds Rs 25 crors.

b) Company Act:

The definition of start up is included in the act itself for the first time to give exemption to private company.

Various compliances exempted for start ups are as below:

  1. Cash flow statement (CFS) need not to be included in financial statement
  2. Annual return can be signed by company secretary and in case where there is non by the director of the company
  3. Prohibition related to acceptance of deposit from public are not applicable for start up
  4. Requirement as to board meetings etc are eased for start up
  5. Requirement as to minimum capital is done away
  6. Incorporation of company is simplified to a great extent
  7. Affixing common seal is made optional
  8. Strat up incorporated after 31st December 2017 need not to file INC-22A

c) Labour laws:

Start up are allowed to self certify various compliance of labor laws.

For first year of incorporation start up are exempted from any inspection from inspector. For 2nd year and 3rd year they can be inspected only after credible and verifiable information is available in writing.

Interchangeability of PAN and Aadhaar

 Interchangeability of PAN and Aadhaar  PAN and Aadhaar
Jul 252019
 

Interchangeability of PAN and Aadhaar

Existing sub-section (1) of section 139A of the Act, inter alia, provides that every person specified therein, who has not been allotted a PAN, shall apply to the Assessing Officer for allotment of PAN.

It has been observed that in many cases persons entering into high value transactions, such as purchase of foreign currency or huge withdrawal from the banks, do not possess a PAN.

In order to keep an audit trail of such transactions, for widening and deepening of the tax base, it is proposed to insert a new clause (vii) in the aforesaid sub-section so as to provide that –

Every person, who intends to enter into certain prescribed transactions and has not been alloted a PAN, shall also apply for allotment of a PAN.

To ensure ease of compliance, it is also proposed to provide for inter-changeability of PAN with the Aadhaar number.

Accordingly the provisions of section 139A are proposed to be amended so as to provide that,-

  • every person who is required to furnish or intimate or quote his PAN under the Act, and who, has not been allotted a PAN but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar number in lieu of PAN, and such person shall be allotted a PAN in the prescribed manner;
  • every person who has been allotted a PAN, and who has linked his Aadhaar number under section 139AA, may furnish or intimate or quote his Aadhaar number in lieu of a PAN.

Section 139A, inter alia, provides that every person, receiving a document relating to a transaction for which PAN is required to be quoted shall ensure that the PAN has been duly quoted therein. It is proposed to provide that every person receiving such documents shall also ensure that the PAN or the Aadhaar number, as the case may be, has been duly quoted.

A new sub-section (6A) is also proposed to be inserted to ensure quoting of PAN or Aadhaar number for entering into prescribed transactions and authontication thereof in the prescribed manner.

Duty is also proposed to be cast upon the person receiving any document relating to such transactions, through newly proposed sub-section (6B), to ensure that PAN or Aadhaar number, as the case may be, is duly quoted, and authenticated.

In order to ensure proper compliance of the provisions relating to quoting and authentication of PAN or Aadhaar, the penalty provision contained in section 272B is proposed to be amended suitably.

These amendments will take effect from 1st September, 2019.

Thus, the amendment proposed are given below:

Clause 40:

In section 139A of the Income-tax Act, with effect from the 1st day of September, 2019,––

(ii) after sub-section (5D), the following sub-section shall be inserted, namely:––

“(5E) Notwithstanding anything contained in this Act, every person who is required to furnish or intimate or quote his permanent account number under this Act, and who,––

(a) has not been allotted a permanent account number but possesses the Aadhaar number, may furnish or intimate or quote his Aadhaar number in lieu of the permanent account number, and such person shall be allotted a permanent account number in such manner as may be prescribed;

(b) has been allotted a permanent account number, and who has intimated his Aadhaar number in accordance with provisions of sub-section (2) of section 139AA, may furnish or intimate or quote his Aadhaar number in lieu of the permanent account number.”;

(iii) in sub-section (6), for the words “the General Index Register Number”, the words “the General Index Register Number or the Aadhaar number, as the case may be,” shall be substituted;

(iv) after sub-section (6), the following sub-sections shall be inserted, namely:––

“(6A) Every person entering into such transaction, as may be prescribed, shall quote his permanent account number or Aadhaar number, as the case may be, in the documents pertaining to such transactions and also authenticate such permanent account number or Aadhaar number, in such manner as may be prescribed.

(6B) Every person receiving any document relating to the transactions referred to in sub-section (6A), shall ensure that permanent account number or Aadhaar number, as the case may be, has been duly quoted in such document and also ensure that such permanent account number or Aadhaar number is so authenticated.”;

(v) in sub-section (8), in clauses (b) and (f), for the words “the General Index Register Number”, the words “the General Index Register Number or the Aadhaar number, as the case may be,” shall be substituted;

(vi) in the Explanation, for clause (a), the following clauses shall be substituted, namely:–– ‘(a) “Aadhaar number” shall have the meaning assigned to it in clause (a) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016; (aa) “Assessing Officer” includes an income-tax authority who is assigned the duty of allotting permanent account numbers; (ab) “authentication” means the process by which the permanent account number or Aadhaar number alongwith demographic information or biometric information of an individual is submitted to the income-tax authority or such other authority or agency as may be prescribed for its verification and such authority or agency verifies the correctness, or the lack thereof, on the basis of information available with it;’.

(2A) If a person, who is required to quote his permanent account number or Aadhaar number, as the case may be, in documents referred to in sub-section (6A) of section 139A or authenticate such number in accordance with the provisions of the said sub-section, fails to do so, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees for each such default.

FAQ on declaration of dividend by companies

 FAQ on declaration of dividend by companies  FAQ on declaration of dividend by companies
Jul 242019
 

FAQ on declaration of dividend by companies

Q: Is it mandatory for a company to declare dividend?

A: No, it is not mandatory for a company to declare dividend.

Q: In case a company declares dividend, what shall be the last date of payment of dividend?

A: The dividend warrants shall be dispatched by the company-

  • in case of Interim Dividend- within 30 days of declaration of dividend in the Board Meeting; and
  • in case of final dividend – within 30 days of its approval in the AGM.

In case of ECS transfers for distribution of dividend, the transfer shall be made within 30 days of declaration of dividend.

Q: Can a company which has inadequate profits or  has  incurred loss in the immediately preceding financial year declare final dividend out of the accumulated profits of the previous financial years? Also, is there any restriction on the rate of dividend?

A: As per the second proviso to Section 123(1) of the CA, 2013, a Company which has inadequate profit or has incurred loss in the immediately preceding financial year may declare dividend out of the accumulated profits of the company.

However, as per Rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014, the rate of dividend shall not exceed the average of the rates at which dividend was declared by the company in the immediately preceding three financial years.

If a company has not declared dividend in any of the preceding three financial years, the restriction on the rate of dividend would not be applicable.

Q: Can Board of Directors declare final dividend for the financial year?

A: The Board can only recommend the final dividend to the shareholders of the Company for declaration at the AGM.

Q: Can dividend be declared to certain class of shareholders only?

A: Dividend can be paid to any class of shareholders, but separate resolution for declaration of dividend to each class of shares  is required to be passed at the meeting of the Board or shareholders, as the case may be.

Q: Can dividend be paid to certain shareholders of the same class?

A: Dividend once declared has to be paid to all the shareholders in a particular class.

Q: Can a shareholder whose shares have been transferred to IEPF claim back his shares?

A: As per proviso to Section 124(6) of the CA, 2013 claimant of shares  shall be entitled to claim the transferred shares from IEPF and the procedure for that would be specified in the IEPF Rules.

Q: When is unpaid/unclaimed dividend transferred to Unpaid Dividend Account?

A: As per Section 124(1) of the CA, 2013, dividend declared by the company which remains unpaid/ unclaimed for a period of 30  days from the date of declaration shall be transferred to Unpaid Dividend Account within 7 days from the date of expiry of the said period of 30 days.

Due Date of Filing of Income Tax Return for Asst. Year 2019-20 has been extended from 31 July 2019 to 31 August 2019

 Due Date of Filing of Income Tax Return for Asst. Year 2019-20 has been extended from 31 July 2019 to 31 August 2019  Income Tax
Jul 242019
 

Due date of Filing of Income Tax Return for Asst. Year 2019-20 has been extended from 31 July 2019 to 31 August 2019 in respect of certain categories of tax payers who were liable to file their returns  by 31st July 2019.

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Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals

 Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals  Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals
Jul 182019
 

Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals

Proposals under Finance Bills 2019:

Clause 46. After section 194LD of the Income-tax Act, the following sections shall be inserted with effect from the 1st day of September, 2019, namely:–– ‘

194M. (1) Any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract or by way of fees for professional services during the financial year, shall, at the time of credit of such sum or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent. of such sum as income -tax thereon:

Provided that no such deduction under this section shall be made if such sum or, as the case may be, aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees.

(2) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation.––

For the purposes of this section,––

(a) “contract” shall have the meaning assigned to it in clause (iii) of the Explanation to section 194C;

(b) “professional services” shall have the meaning assigned to it in clause (a) of the Explanation to section 194J;

(c) “work” shall have the meaning assigned to it in clause (iv) of the Explanation to section 194C

At present there is no liability on an individual or Hindu undivided family (HUF) to deduct tax at source on any payment made to a resident contractor or professional when it is for personal use. Further, if the individual or HUF is carrying on business or profession which is not subjected to audit, there is no obligation to deduct tax at source on such payment to a resident, even if the payment is for the purpose of business or profession.

Due to this exemption, substantial amount by way of payments made by individuals or HUFs in respect of contractual work or for professional service is escaping the levy of TDS, leaving a loophole for possible tax evasion.

To plug this loophole, it is proposed to insert a new section 194M in the Act to provide for levy of TDS at the rate of five per cent. on the sum, or the aggregate of sums, paid or credited in a year on account of contractual work or professional fees by an individual or a Hindu undivided family, not required to deduct tax at source under section 194C and 194J of the Act, if such sum, or aggregate of such sums, exceeds fifty lakh rupees in a year.

However, in order to reduce the compliance burden, it is proposed that such individuals or HUFs shall be able to deposit the tax deducted using their Permanent Account Number (PAN) and shall not be required to obtain Tax deduction Account Number (TAN).

This amendment will take effect from 1st September, 2019. [Clause 46]

Effect of proposal:

Thus, from Sept 2019 onwards departments have widen to scope of TDS deduction and included the personal expenses of individual and HUFs under the ambit of TDS deduction. Thus, there are less chances of hiding of income on the part of contractors and professionals.

Budget 2019 Highlights

 Budget 2019 Highlights  Budget 2019 Highlights
Jul 152019
 

Budget 2019 Highlights

Vision for the decade

  1. Vision statement:
    1. Building physical and social infrastructure;
    2. Digital India reaching every sector of the economy;
    3. Pollution free India with green Mother Earth and Blue Skies;
    4. Make in India with particular emphasis on MSMEs, Start-ups, defence manufacturing, automobiles, electronics, fabs and batteries, and medical devices;
    5. Water, water management, clean Rivers;
    6. Blue Economy;
    7. Space programmes,       Gaganyan,     Chandrayan      and Satellite programmes;
    8. Self-sufficiency and export of food-grains, pulses, oilseeds, fruits and vegetables;
    9. Healthy society – Ayushman Bharat, well-nourished women & children. Safety of citizens;
    10. Team India with Jan Bhagidari. Minimum Government Maximum Governance.

5 Trillion Dollar Economy

  1. Connectivity is the lifeblood of an economy. The Government has given a massive push to all forms of physical connectivity through :
    1. Pradhan Mantri Gram Sadak Yojana,
    2. industrial corridors,
    3. dedicated freight corridors,
    4. Bhartamala and Sagarmala projects,
    5. Jal Marg Vikas and
    6. UDAN Schemes.

These initiatives will improve logistics tremendously, reducing the cost of transportation and increasing the competitiveness of domestically produced goods.

  1. As the world’s third largest domestic aviation market, the time is ripe for India to enter into aircraft financing and leasing activities from Indian shores. Government will implement the essential elements of the regulatory roadmap for making India a hub for such activities.
  1. Government will adopt suitable policy interventions to create a congenial atmosphere for the development of MRO in the county.
  1. During 2019, about 210 kms metro lines have been operationalized. With this, 657 kms of Metro Rail network has become operational across the country.
  1. The National Common Mobility Card (NCMC) standards, will enable people to pay multiple kinds of transport charges, including metro services and toll tax, across the country. This inter-operable transport card runs on RuPay card and would allow the holders to pay for their bus travel, toll taxes, parking charges, retail shopping and even withdraw money.
  1. The main objective of the FAME Scheme is to encourage faster adoption of Electric vehicles by way of offering upfront incentive on purchase of Electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles.
  1. The Government will carry out a comprehensive restructuring of National Highway Programme to ensure that the National Highway Grid of desirable length and capacity is created using financeable model.
  1. As part of the Jal Marg Vikas Project for enhancing the navigational capacity of Ganga, a multi modal terminal at Varanasi has become functional in November 2018 and two more such terminals at Sahibganj and Haldia and a navigational lock at Farakka would be completed in 2019-20. This will make movement of freight, passenger cheaper and reduce our import bill.
  1. It is proposed to use Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.
  1. To take connectivity infrastructure to the next level, we will build on the successful model in ensuring power connectivity – One Nation, One Grid – that has ensured power availability to states at affordable rates.
  1. It is proposed that several reform measures would be taken up to promote rental housing. Current Rental Laws are archaic as they do not address the relationship between the Lessor and the Lessee realistically and fairly. A Model Tenancy Law will also be finalized and circulated to the States.
  1. Under the Interest Subvention Scheme for MSMEs, 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.
  1. Government will create a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself.
  1. Encouraged by the overwhelming response, the Government of India has decided to extend the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than 5 crore under a new Scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme. Enrolment into the Scheme will be kept simple requiring only Aadhaar and a bank account and rest will be on self-declaration.
  2. A number of measures are proposed to enhance the sources of capital for infrastructure financing:
  • A Credit Guarantee Enhancement Corporation for which regulations have been notified by the RBI, will be set up in 2019- 20.
  • An action plan to deepen the market for long term bonds including for deepening markets for corporate bond repos, credit default swaps etc., with specific focus on infrastructure sector, will be put in
  • It is proposed to permit investments made by FIIs/FPIs in debt securities issued by Infrastructure Debt Fund – Non-Bank Finance Companies (IDF-NBFCs) to be transferred/sold to any domestic investor within the specified lock-in
  1. Corporate Debt markets are crucial for the infrastructure sector. Given the need to further deepen bond markets, a number of measures are proposed to be taken up:-
  • To deepen the Corporate tri-party repo market in Corporate Debt securities, Government will work with regulators RBI/SEBI to enable stock exchanges to allow AA rated bonds as
  • User-friendliness of trading platforms for corporate bonds will be reviewed, including issues arising out of capping of International Securities Identification Number (ISIN).
  1. It is right time to consider increasing minimum public shareholding in the listed companies. I have asked SEBI to consider raising the current threshold of 25% to 35%.
  1. It is proposed to rationalize and streamline the existing Know Your Customer (KYC) norms for FPIs to make it more investor friendly without compromising the integrity of cross-border capital flows.
  1. It is propose to initiate steps towards creating an electronic fund raising platform – a social stock exchange – under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund.
  1. It is propose to consolidate the gains in order to make India a more attractive FDI destination:

a. The Government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stake holders.
b. 100% Foreign Direct Investment (FDI) will be permitted for insurance
c. Local sourcing norms will be eased for FDI in Single Brand Retail

  1. In order to become part of the global financial system to mobilise global savings, government is contemplating organizing an annual Global Investors Meet in India, using National Infrastructure Investment Fund (NIIF) as the anchor, to get all three sets of global players-top industrialists/corporate honchos, top pension/insurance/sovereign wealth funds and top digital technology/venture funds.
  1. It is propose to increase the statutory limit for FPI investment in a company from 24% to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs.
  1. It is proposed to merge the NRI-Portfolio Investment Scheme Route with the Foreign Portfolio Investment Route.

 

  1. India has emerged as a major space power with the technology and ability to launch satellites and other space products at globally low cost. A Public Sector Enterprise viz. New Space India Limited (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the Research & Development carried out by ISRO. The Company will spearhead commercialization of various space products:
    1. Production of launch vehicles,
    2. transfer of technologies and
    3. Marketing of space products.

Grameen Bharat/Rural India

  1. By 2022, every single rural family, except those who are unwilling to take the connection will have an electricity and a clean cooking facility.
  1. Under Pradhan Mantri Awas Yojana – Gramin (PMAY-G) during 2019-20 to 2021-22, 1.95 crore houses are proposed to be provided to the eligible beneficiaries.
  1. Fishing and fishermen communities through a focused Scheme –
    1. the Pradhan Mantri Matsya Sampada Yojana (PMMSY) –

the Department of Fisheries will establish a robust fisheries management framework.

  1. ‘Scheme of Fund for Upgradation and Regeneration of Traditional Industries’ (SFURTI) aims to set up more Common Facility Centres (CFCs) to facilitate cluster based development to make the traditional industries more productive, profitable and capable for generating sustained employment opportunities.
  1. We will support private entrepreneurships in driving value-addition to farmers’ produce from the field and for those from allied activities, like Bamboo and timber from the hedges and for generating renewable energy.
  2. We also hope to form 10,000 new Farmer Producer Organizations, to ensure economies of scale for farmers over the next five years.
  1. Ensuring India’s water security and providing access to safe and adequate drinking water to all Indians is a priority of the Government.
    a. Constitution of the Jal Shakti Mantralaya – integrating the Ministry of Water Resources, River Development and Ganga Rejuvenation and Ministry of Drinking Water and Sanitation.
  1. Swachh Bharat Abhiyan has touched the very conscience of the nation besides bringing enormous health and environmental benefits. It is propose to expand the Swachh Bharat Mission to undertake sustainable solid waste management in every village.
  1. To bridge rural-urban digital divide, Bharat-Net is targeting internet connectivity in local bodies in every Panchayat in the country.

Shahree Bharat/Urban India

  1. It is propose to enhance the metro- railway initiatives by encouraging more PPP initiatives and ensuring completion of sanctioned works, while supporting Transit Oriented Development (TOD) to ensure commercial activity around transit hubs.

Youth

  1. The Government will bring in a New National Education Policy to transform India’s higher education system to one of the global best education systems.
  1. We propose to establish a National Research Foundation (NRF) to fund, coordinate and promote research in the country. NRF will ensure that the overall research eco-system in the country is strengthened with focus on identified thrust areas relevant to our national priorities and towards basic science without duplication of effort and expenditure.
  1. To prepare our youth to also take up jobs overseas, we will increase focus on skill sets needed abroad including language training. We will also lay focus on new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country, and offer much higher remuneration.
  1. The Government is proposing to streamline multiple labour laws into a set of four labour codes.
  1. We propose to start a television programme within the DD bouquet of channels exclusively for start-ups.
  1. The Stand Up India Scheme has made human dignity and self- esteem go up. “Kayakave Kailasa”. The Ministry of Petroleum & Natural Gas has enabled SC/ST entrepreneurs in providing Bulk LPG Transportation. The synthesis between stand up and start up with commercial banks playing the catalyst has brought this transformational change.

Ease of Living

  1. The Pradhan Mantri Shram Yogi Maandhan Scheme aims at providing 3,000 per month as pension on attaining the age of 60 to crores of workers in unorganized and informal sectors.
  1. It is proposed to promote the use of solar stoves and battery chargers in the country.
  1. To make railway travel a pleasant and satisfying experience for the common citizen, we will launch a massive programme of railway station modernization this year.

Naari Tu Narayani/Women

  1. It is propose to expand the Women SHG interest subvention programme to all districts. Furthermore, for every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.

India’s Soft Power

  1. It is propose to consider issuing Aadhaar Card for Non-Resident Indians with Indian Passports after their arrival in India without waiting for 180 days.
  1. It is propose to launch a Mission which will integrate our traditional artisans and their creative products with global markets. Wherever necessary we shall obtain patents and geographical indicators for them. With this aim, for the first time in this August House, I declare that we will launch a mission of linking creative industry with the economy and wherever it requires protecting Intellectual Property rights taking it to the National and International Market front.

Banking and Financial Sector

  1. NBFCs which do public placement of debt have to maintain a Debenture Redemption Reserve (DRR) and in addition, a special reserve as required by RBI, has also to be maintained.
  2. To bring more participants, especially NBFCs, not registered as NBFCs-Factor, on the TReDS platform, amendment in the Factoring Regulation Act, 2011 is necessary and steps will be taken to allow all NBFCs to directly participate on the TReDS platform.
  1. Regulation authority over the housing finance sector is shifted from NHB to RBI. Necessary proposals have been placed in the Finance Bill.
  1. New series of coins of One Rupee, Two Rupees, Five Rupees, Ten Rupees and Twenty Rupees, easily identifiable to the visually impaired, were released by the Hon’ble Prime Minister on 7th March, 2019. These new coins will be made available for public use shortly.

Amendments proposed in budget 2019

 Amendments proposed in budget 2019  Amendments proposed in budget 2019
Jul 132019
 

Amendments proposed in budget 2019

The major amendments proposed in budget 2019 with impact on future assessments are listed below:

Issue Before Budget 2019 After Budget 2019 Impact Analysis
TDS by certain individuals or HUF for payment made to contractor and professionals Not available An individual or HUF have to deduct tax at source (TDS) on payments made to a resident contractor or professional @ 5% when it is for personal use if the annual payment made to a contractor or individual exceeds Rs 50 lakh.

 

Such person deducting tax under this section shall deposit TDS on his PAN number.

 

It is also proposed to enable filing of application for issue of certificate for nil or lower rate of TDS.

 This will capture data about income of professionals and contractor in detailed manner and in organized manner.

 

 

Thus, this initiative will unearth the undeclared income and batter serve the contractors and professionals as their ITR 4 is completely pre-filled with values of all major services provided by them.
Consideration for TDS on immovable property Only basic value is consider for TDS deduction and charges incidental to purchase of property is not consider. Consideration shall include other charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance fee, advance fee or any other charges of similar nature which are incidental to the purchase of immovable  property Now whatever payments being made for or for the purpose of purchase of immovable property will considered for TDS deduction.
Gifts made to non-residents Gifts made by a resident to another resident are liable for income tax subject to some exemptions Gift of any sum of money, or property situated in India, by a person resident in India to a person outside India (not being a gift otherwise exempt), on or after 5th day of July 2019, shall be deemed to accrue or arise in India. Now from July onwards same treatment will be given to gifts whether made to resident or non residents. This will also save tax evasion in case of transaction pertaining to non residents.
Compulsory filing of return Filing of return is compulsory only if income exceeds specified limit. Now filing compulsory for persons:

1.     who have deposited more than Rs. 1 crore in a current account in a year, or

2.     who have expended more than Rs. 2 lakh on foreign travel or

3.     who have expended more than Rs. 1 lakh on electricity consumption in a year or

4.     who fulfils the prescribed conditions,

5.     A person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains.

This will ensure that persons who enter into high value transactions also furnish return of income.

 This will further broaden the tax base for the government.
Interchangeability of PAN and Aadhaar Not available The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI).

 

It is also proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN under the Act.

 Now tax work is not depend only on PAN card.

 

Even if a person having only Aadhaar card he can do tax related work easily with his Aadhaar number.
Quoting of PAN/Aadhaar Provision for quoting pan is there but Aadhaar is there Quoting and authentication of PAN/Aadhaar shall be mandatory for certain prescribed transactions.

 

The person receiving relevant documents shall ensure correct quoting and authentication of PAN/Aadhaar for the prescribed transactions.

 

To ensure compliance of these provisions it is also proposed to amend the relevant penalty provisions.

 To track high value transaction
Consequences of not linking Aadhaar with PAN The Act provides for making PAN invalid if it is not linked with Aadhaar within a notified date. Now onwards if a person  fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner after the date notified for the said linking. Past transactions carried out through such pan are saved and traceable.
Widening the scope of SFT Currently very limited person needs to file statement of financial transaction Widen the scope of furnishing of statement of financial transactions (SFT) by mandating furnishing of statement by the prescribed persons other than those who are currently furnishing the same.

 

It is also proposed to remove the current threshold of Rs. 50,000 for application of the provisions requiring furnishing of information,

 

For ensuring the accuracy of the information furnished, a suitable amendment to the relevant penalty provisions is also proposed.

 All these provision will help in pre filing of return and also further computer based processing of return under section 143 shall be the final assessment in case of small value returns.
Payment by other electronic modes There are various provisions in the Act which prohibit cash transactions and allow or encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account. it is proposed to amend these provisions to also allow payment or receipt through other prescribed electronic modes. This will promote online transaction.
TDS on cash withdrawal from banks No such provision it is proposed to provide for tax deduction at source at the rate of 2% on cash withdrawal by a person in excess of Rs. 1 crore in a year from his bank account.

 

Some business models, where large cash withdrawal is a necessity, are proposed to be exempted.

 

It is also proposed that the Central Government may notify the persons to whom these provisions shall not be applicable in consultation with the Reserve Bank of India.

 A step forward to less cash economy.
Facilities for low-cost electronic payments A business enterprise whose annual turnover exceeds Rs. 50 crore shall provide facility for prescribed low cost electronic modes of payment.

 

For ensuring compliance, a suitable penalty provision is also proposed to be inserted in the Act.

 This will facilitate low cost electronic mode of payment against goods and services.

 

Income tax Incentives in Budget 2019

 Income tax Incentives in Budget 2019  Budget 2019
Jul 102019
 

Income tax Incentives in Budget 2019

As you all are aware that budget for financial year 2019-20 is presented is presented in lok sabha on 5th July 2019 with the words “Mr. Speaker Sir, I rise to present the budget for the year 2019-2020……” The budget is yat to get pass in Rajya Sabha and nod from honorable president from India. Even though here an attempt is being made to analyze the various types of incentives proposed in the budget which shall be effective from next assessment year.

Tax incentive to Purpose Detailed analysis of tax incentives
International Financial Services Centre (IFSC) To promote the development of world class financial infrastructure 1.    It is proposed to provide for 100% deduction of profits for 10 consecutive years out of 15 years from the year of commencement.

2.    Tax exemptions for interest received by a non-resident in respect of monies lent to a unit located in IFSC.

3.    The benefit to non resident is proposed to be extended to a Category-III Alternative Investment Fund (AIF) in IFSC of which all the unit holders are non-residents, subject to certain other conditions.

4.    It is also proposed to notify other securities which shall be eligible for capital gains exemptions if traded on a recognised stock exchange in IFSC by a specified person.

5.    It is proposed to extend benefit of exemption from DDT even on distribution out of accumulated profit which has been accumulated by the unit after 1st April, 2017 from operations in IFSC.

6.    There would be no additional tax on distribution of any amount, on or after 1st September, 2019, by a specified Mutual Fund out of its income derived from transactions made on a recognised stock exchange located in any IFSC.

7.    It is proposed to allow deduction under section 80LA to a non-resident for the purpose of computing tax liability in respect of income of the nature of interest, dividend etc. referred to in section 115A.
Non-banking Financial Companies (NBFCs) Unlike others interest income on bad or doubtful debts of NBFCs are taxed on accrual basis. it is proposed that interest on bad or doubtful debts in the case of deposit-taking NBFC and systemically important non deposit-taking NBFC shall be charged to tax on receipt basis.

 

It is also proposed to provide that deduction of such interest shall be allowed to the payer on actual payment.
Start – ups Condition of carry forward of losses is relaxed  1.   Carry forward eligible start – ups losses even on satisfaction of any one of the two conditions, i.e. continuity of 51% shareholding/voting power or continuity of 100% of original shareholders.

2.   the benefit shall be available for sale of residential property on or before 31st March, 2021 on the pretext on investment of net consideration in equity shares of eligible start – ups.

3.   The condition of minimum holding of 50% of share capital or voting rights in the start-up is proposed to be relaxed to 25%.

4.   The condition restricting transfer of new asset being computer or computer software is also proposed to be relaxed from the current 5 years to 3 years.
Resolution of distressed companies Facilitate resolution Conditions of continuity of shareholding for carry forward and set off of losses shall not apply to such companies.

 

For the purposes of computation of Minimum Alternate Tax (MAT) liability of such companies, the aggregate of brought forward losses and unabsorbed depreciation shall also be allowed as deduction.
Exemption from deeming of fair market value of shares Facilitate resolution through the approved schemes Where the parties to the transactions do not have control over the determination of price, it is proposed to empower the Board to prescribe transactions for which the provisions relating to deeming of fair market value of shares shall not be applied for computation of capital gains and deemed gift under section 50CA and section 56(2)(x).
Rupee-denominated Bond (RDB) To contain the current account deficit and augment the foreign exchange inflow The Government had issued a press release on 17th September, 2018 exempting interest income of non-resident from RDB issued by a company or a business trust, outside India, during the period 17th September, 2018 to 31st March, 2019. It is proposed to incorporate this tax incentive in the Income-tax Act.
offshore funds To facilitate location of fund managers of offshore funds in India Conditions relating to the remuneration of fund manager and the time limit for building up of corpus, are proposed to be rationalised so as to facilitate setting up of fund management activity in India with respect to such offshore funds.
Category-II AIF Presently, the investment made by Category-I AIF is exempted from the applicability of the provisions of section 56(2)(viib) of the Income-tax Act. It is proposed to extend this exemption to Category-II AIF as well.
Electric vehicle Incentivise purchase of electric vehicle Deduction of an amount upto Rs. 1,50,000 for interest paid on loan taken for purchase of electric vehicle. The loan is required to be taken on or before 31st March, 2023.
Real estate Incentivise purchase of affordable house Deduction upto Rs. 1,50,000 for interest paid on loan taken for purchase of residential house having value upto Rs. 45 lakh. This shall be in addition to the existing interest deduction of Rs. 2 lakh.

It is proposed to increase the limit of carpet area from 30 square meters to 60 square meters in Metropolitan regions and from 60 square meters to 90 square meters in non- metropolitan regions.

It is also proposed to provide the limit on  cost of the house at Rs. 45 lakh in line with the definition in the GST Acts.
National Pension System (NPS) subscribers (i)               increase the limit of exemption from current 40% to 60% of payment on final withdrawal from NPS;

(ii)             allow deduction for employer’s contribution upto 14% of salary from current 10%, in case of Central Government employee;

(iii)          allow deduction under section 80C for contribution made to Tier II NPS account by Central Government employees.
Listed companies Discourage the practice of avoiding Dividend  Distribution Tax (DDT) through buy back of shares by listed companies it is proposed to provide that listed companies shall also be liable to pay additional tax at 20% in case of buy back of share, as is the case currently for unlisted companies.
Trust A trust or institution complies with local  laws that are material for the purposes of achieving its objects it is proposed to provide for cancellation of registration of the trust or institution under the Act for violation of such provision of any other law, where an order holding that such violation has occurred is either not contested or has become final.

It is proposed to provide that at the time of registration it shall also be examined whether there has been any such violation by the trust or institution seeking registration.

Sale for Audit under GST

 Sale for Audit under GST  Sale for Audit under GST
Jul 082019
 

Sale for Audit under GST

Q 1. What is the turnover that should be reckoned to determine the applicability of audit under GST?

Ans. Section 35(5) commences with the expression “every registered person whose turnover during a financial year exceeds the prescribed limit” whereas

the relevant Rule 80(3) uses the expression “every registered person whose aggregate turnover during a financial year exceeds two crore rupees”.

It must be noted that the word turnover has not been defined whereas the expressions “aggregate turnover” has been defined. One may note that the expression “turnover in State or turnover in Union territory” is also defined. In this backdrop the following understanding is relevant:

  1. Aggregate turnover is PAN based while turnover in a State/ UT is similarly worded except to the extent that turnover in a State/ UT is limited to a State;
  2. It is therefore, reasonable to interpret that the word turnover used in section 35(5) ought to be understood as aggregate turnover (PAN level).

For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant section 35(5) uses the expression financial year; Therefore, in the absence of clarification from Government and to avoid any cases of default, it is reasonable to reckon the turnover limit prescribed for audit i.e., Rs. 2 crores for the whole of the financial year which would also include the first quarter of the financial year 2017-18.

Please also note that where the expression aggregate turnover (PAN level) is considered, please consider the taxable value under section 15 and not the amount as accounted in the books of accounts. E.g. do not ignore taxable value of stock transfers while examining this threshold limit.

Q 2. Should the supply of alcohol for human consumption be included in determining the threshold limit of Rs. 2 crore by a person registered under GST?

Ans. The definition of aggregate turnover includes exempt turnover.

Exempt turnover is defined under CGST Act to mean supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act and includes non-taxable supply.

Non-taxable supply is defined under section 2(78) of CGST Act to mean a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act.

Section 9(1) of CGST/ SGST Act and section 7(1) and 5(1) of UTGST and IGST Act respectively exclude alcoholic liquor for human consumption from the levy/ charge of GST. Hence, it becomes clear that alcoholic liquor for human consumption forms part of exempt turnover. Since aggregate turnover includes exempt turnover, value of alcoholic liquor for human consumption is to be included while computing threshold limit of Rs. 2 crore.

Q 3. Will the term ‘aggregate turnover’ includes stock transfers/ cross charges effected between branches located in two different States?

Ans. Section 2(6) of CGST/ SGST Act defines aggregate turnover to include ‘inter-State supplies of person having same PAN’. Thus, stock transfers/ cross charges of services provided from a branch located in one State to a branch located in another State will be included in the aggregate turnover of the branch supplying the goods/ services.

Q 4. Will the term ‘aggregate turnover’ includes stock transfers effected within the State having same GSTIN for determining the threshold limit?

Ans. The term ‘aggregate turnover’ shall not include stock transfers effected within the same State having single GSTIN for the purpose of determining the threshold limit. However, where more than one GSTINs has been taken for branches located in the same State, then such branch transfers shall be included for computing threshold limit of Rs.2 crore to identify applicability of this audit requirement.

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