MEANING , TIME AND VALUE OF TAXABLE SUPPLY

 

Meaning and Scope of Supply
Q 1. What is the taxable event under GST?

 

Ans. The taxable event under GST shall be the supply of goods or services or both made for consideration in the course or furtherance of business. The taxable events under the existing indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the taxable event known as ‘supply’.

 

Q 2. What is the scope of ‘supply’ under the GST law?

 

Ans. The term ‘supply’ is wide in its import covers all forms of supply of goods or services or both that includes sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. It also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.

 

Q 3. What is a taxable supply?

 

Ans. A ‘taxable supply’ means a supply of goods or services or both which is chargeable to goods and services tax under the GST Act.

 

Q 4. What are the necessary elements that constitute supply under CGST/SGST Act?

 

Ans. In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.- (i) t h e a c t i v i t y i n v o l v e s supply of goods or services or both; (ii) the supply is for a consideration unless otherwise specifically provided for; (iii) the supply is made in the course or furtherance of business; (iv) t h e supply is made in the taxable territory; (v) the supply is a taxable supply; and (vi) t h e supply is made by a taxable person.

 

Q 5. Can a transaction in which any one or more of the above criteria is not fulfilled, be still considered as supply under GST?

 

Ans. Yes. Under certain circumstances such as import of services for a consideration whether or not in the course or furtherance of business (Section 3(1) (b)) or supplies made without consideration, specified under Schedule-I of CGST /SGST Act, where one or more ingredients specified in answer to question no.4 are not satisfied, it shall still be treated as supply for levy of GST.

 

Q 6. Import of Goods is conspicuous by its absence in Section 3. Why?

 

Ans. Import of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty under the Customs Tariff Act, 1975.

 

Q 7. Are self-supplies taxable under GST?

 

Ans. Inter-state self-supplies such as stock transfers, branch transfers or consignment sales shall be taxable under IGST even though such transactions may not involve payment of consideration. Every supplier is liable to register under the GST law in the State or Union territory from where he makes a taxable supply of goods or services or both in terms of Section 22 of the model GST law. However, intra-state self-supplies are not taxable subject to not opting for registration as business vertical.

 

Q 8. Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?

 

Ans. Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II (1) (b). In some cases, possession may be transferred immediately but title may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.

 

Q 9. What do you mean by “supply made in the course or furtherance of business”?

 

Ans. “Business” is defined under Section 2(17) include any trade, commerce, manufacture, profession, vocation etc. whether or not undertaken for a pecuniary benefit. Business also includes any activity or transaction which is incidental or ancillary to the aforementioned listed activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or any local authority in which they are engaged as public authority shall also be construed as business. From the above, it may be noted that any activity undertaken included in the definition for furtherance or promoting of a business could constitute a supply under GST law.

 

Q 10. An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST Act? Give reasons for the answer.

 

Ans. No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

 

Q 11. A dealer of air-conditioners p e r m a n e n t l y transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?

 

Ans. Yes. As per Sl. No.1 of Schedule-I, permanent transfer or disposal of business assets where input tax credit has been availed on such assets shall constitute a supply under GST even where no consideration is involved.

 

Q 12. Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?

 

Ans. Yes. Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of CGST/SGST Act. Q 13. What are the different types of supplies under the GST law? Ans. (i) Taxable and exempt supplies. (ii) Inter-State and Intra-State supplies, (iii) Composite and mixed supplies and (iv) Zero rated supplies. Q

 

  1. What are inter-state supplies and intra-state supplies?

 

Ans. Inter-state and intra-state supplies have specifically been defined in Section 7(1), 7(2) and 8(1), 8(2) of the IGST Act respectively. Broadly, where the location of the supplier and the place of supply are in same state it will be intrastate and where it is in different states it will be inter-state supplies.

 

Q 15. Whether transfer of right to use goods will be treated as supply of goods or supply of service? Why?

 

Ans. Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of CGST/SGST Act.

 

Q 16. Whether Works contracts and Catering services will be treated as supply of goods or supply of services? Why?

 

Ans. Works contracts and catering servicesshall be treated as supply of services as both are specified under Sl. No. 6 (a) and (b) in Schedule-II of the model GST law.

 

Q 17. Whether supply of software would be treated as supply of goods or supply of services under GST law?

 

Ans. Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software shall be treated as supply of services as listed in Sl. No. 5 (2)(d) of Schedule –II of the model GST law.

 

Q 18. Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of services? Why?

 

Ans. Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.

 

Q 19. What is a Composite Supply under CGST/ SGST/UTGST Act?

 

Ans. Composite Supply means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. For example, where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply. Q

 

  1. How will tax liability on a composite supply be determined under GST?

 

Ans. A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.

 

Q 21. What is a mixed supply?

 

Ans. Mixed Supply means two or more individual supplies of goods or services or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. For example, a supply of package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juice when supplied for a single price is a mixed supply. Each of these items can be supplied separately and it is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

 

Q 22. How will tax liability on a mixed supply be determined under GST?

 

Ans. A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.

 

Q 23. Are there any activities which are treated as neither a supply of goods nor a supply of services?

 

Ans. Yes. Schedule-III of the model GST law lists certain activities such as (i) services by an employee to

the employer in the course of or in relation to his employment, (ii) services by any Court or Tribunal established under any law, (iii) functions performed by members of Parliament, State Legislatures, members of the local authorities, Constitutional functionaries (iv) services of funeral, burial, crematorium or mortuary and (v) sale of land and (vi), actionable claims other than lottery, betting and gambling shall be treated neither a supply of goods or supply of services.

 

Q 24. What is meant by zero rated supply under GST?

 

Ans. Zero rated supply means export of goods and/or services or supply of goods and/or services to a SEZ developer or a SEZ Unit.

 

Q 25. Will import of services without consideration be taxable under GST?

 

Ans. As a general principle, import of services without consideration will not be considered as supply under GST in terms of Section 3. However, import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business, even without consideration will be treated as supply in terms of Sl. No.4 of Schedule I. **** 5. Time of Supply

 

 

Some FAQs on Time of Supply

 

Q 1. What is time of supply?

 

Ans. The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made. The CGST/SGST Act provides separate time of supply for goods and services.

 

Q 2. When does the liability to pay GST arise in respect of supply of goods and Services?

 

Ans. Section12 & 13 of the CGST/SGST Act provides for time of supply of goods. The time of supply of goods shall be the earlier of the following namely, (i) the date of issue of invoice by the supplier or the last date on which he is required under Section 31, to issue the invoice with respect to the supply; or (ii) the date on which the supplier receives the payment with respect to the supply.

 

 

Q 3. What is time of supply in case of supply of vouchers in respect of goods and services?

 

Ans. The time of supply of voucher in respect of goods and services shall be; a) the date of issue of voucher, if the supply is identifiable at that point; or b) the date of redemption of voucher in all other cases.

 

Q 4. Where it is not possible to determine the time of supply in terms of sub-section 2, 3, 4of Section 12 or that of Section 13 of CGST/SGST Act, how will time of supply be determined?

 

Ans. There is a residual entry in Section 12(5) as well as 13 (5) which says that if periodical return has to be filed, then the due date of filing of such periodical return shall be the time of supply. In other cases, it will be the date on which the CGST/SGST/IGST is actually paid.

 

Q 5. What does “date of receipt of payment” mean?

 

Ans. It is the earliest of the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account.

 

Q 6. Suppose, part advance payment is made or invoice issued is for part payment, whether the time of supply will cover the full supply?

 

Ans. No. The supply shall be deemed to have been made to the extent it is covered by the invoice or the part payment.

 

Q 7. What is the time of supply of goods in case of tax payable under reverse charge?

 

Ans. The time of supply will be the earliest of the following dates: a) date of receipt of goods; or b) date on which payment is made; or c) the date immediately following 30 days from the date of issue of invoice by the supplier.

 

Q 8. What is the time of supply of service in case of tax payable under reverse charge?

 

Ans. The time of supply will be the earlier of the following dates: a) date on which payment is made; or b) the date immediately following sixty days from the date of issue of invoice by the supplier.

 

Q 9. What is the time of supply applicable with regard to addition in the value by way of interest, late fee or penalty or any delayed payment of consideration?

 

Ans. The time of supply with regard to an addition in value on account of interest, late fee or penalty or delayed consideration shall be the date on which the supplier received such additional consideration.

 

Q 10. Is there any change in time of supply, where supply is completed prior to or after change in rate of tax?

 

Ans. Yes. In such cases provisions of Section 14 will apply.

 

Q 11. What is the time of supply, where supply is completed prior to change in rate of tax?

 

Ans. In such cases time of supply will be (i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or (ii) where the invoice has been issued prior to change in rate of tax but the payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or (iii) where the payment is received before the change in rate of tax, but the invoice for the same has been issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;

 

Q 12. What is the time of supply, where supply is completed after to change in rate of tax?

 

Ans. In such cases time of supply will be (i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or (ii) where the invoice has been issued and the payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or (iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice

 

Q 13. Let’s say there was increase in tax rate from 18% to 20% w.e.f.1.6.2017. What is the tax rate applicable when services provided and invoice issued before change in rate in April 2017, but payment received after change in rate in June2017?

 

Ans. The old rate of 18% shall be applicable as services are provided prior to 1.6.2017.

 

Q 14. Let’s say there was increase in tax rate from 18% to 20% w.e.f. 1.6.2017. What is the tax rate applicable when goods are supplied and invoice issued after change in rate in June 2017, but full advance payment was already received in April 2017?

 

Ans. The new rate of 20% shall be applicable as goods are supplied and invoice issued after 1.6.2017

 

Q 15. What is the time period within which invoice has to be issued for supply of Goods?

 

Ans. As per Section 31 of CGST/SGST Act a registered taxable person shall issue a tax invoice showing description, quantity and value of goods, tax charged thereon and other prescribed particulars, before or at the time of (a) removal of goods for supply to the recipient, where supply involves movement of goods or (b) delivery of goods or making available thereof to the recipient in other cases.

 

Q 16. What is the time period within which invoice has to be issued for supply of Services?

 

Ans. As per Section 31 of CGST/SGST Act a registered taxable person shall, before or after the provision of service, but within a period prescribed in this behalf, issue a tax invoice showing description, value of goods, tax payable thereon and other prescribed particulars.

 

Q 17. What is the time period within which invoice has to be issued in a case involving continuous supply of goods?

 

Ans. In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

 

Q 18. What is the time period within which invoice has to be issued in a case involving continuous supply of services?

 

Ans. In case of continuous supply of services, (a) where the due date of payment is ascertainable from the contract, the invoice shall be issued before or after the payment is liable to be made by the recipient but within a period prescribed in this behalf whether or not any payment has been received by the supplier of the service; (b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or after each such time when the supplier of service receives the payment but within a period prescribed in this behalf; (c) where the payment is linked to the completion of an event, the invoice shall be issued before or after the time of completion of that event but within a period prescribed in this behalf.

 

Q 19. What is the time period within which invoice has to be issued where the goods being sent or taken on approval for sale?

 

Ans. The invoice in respect of goods sent or taken on approval for sale or return shall be issued before or at the time of supply or six months from the date of approval, whichever is earlier. 6. Valuation in GST

 

 

 

 

 

VALUE OF TAXABLE SUPPLY

 

 

Q 1. What is the value of taxable supply to be adopted for the levy of GST?

 

Ans. The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’ which is the price paid or payable, when the parties are not related and price is the sole consideration. Section 15 of the CGST/SGST Act further elaborates various inclusions and exclusions from the ambit of transaction value. For example, the transaction value shall not include refundable deposit, discount allowed subject to certain conditions before or at the time of supply.

 

Q 2. What is transaction value?

 

Ans. Transaction value refers to the price actually paid or payable for the supply of goods and or services where the supplier and the recipient are not related and price is the sole consideration for the supply. It includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply.

 

Q 3. Are there separate valuation provisions for CGST, SGST and IGST and for Goods and Services?

 

Ans. No, section 15 is common for all three taxes and also common for goods and services.

 

Q 4. Is contract price not sufficient to determine valuation of supply?

 

Ans. Contract price is more specifically referred to as ‘transaction value’ and that is the basis for

computing tax. However, when the price is influenced by factors like relationship of parties or where certain transactions are deemed to be supply, which do not have a price, the value has to be determined in accordance with the GST Valuation Rules.

 

Q 5. Is reference to GST Valuation Rules required in all cases?

 

Ans. No. Reference to GST Valuation Rules is required only in cases where value cannot be determined under subsection (1) of Section 15.

 

Q 6. Can the transaction value declared under section 15(1) be accepted?

 

Ans. Yes, it can be accepted after examining for inclusions in section 15(2). Furthermore, the transaction value can be accepted even where the supplier and recipient are related, provided the relationship has not influenced the price.

 

Q 7. Whether post-supply discounts or incentives are to be included in the transaction value?

 

Ans. Yes. where the post-supply discount is established as per the agreement which is known at or before the time of supply and where such discount specifically linked to the relevant invoice and the recipient has reversed input tax credit attributable to such discount, the discount is allowed as admissible deduction under Section 15 of the model GST law.

 

Q 8. Whether pre-supply discounts allowed before or at the time of supply are includible in the transaction value?

 

Ans. No, provided it is allowed in the course of normal trade practice and has been duly recorded in the invoice.

 

Q 9. When are the provisions of the Valuation Rules applicable?

 

Ans. Valuation Rules are applicable when (i) consideration either wholly or in part not in money terms; (ii) parties are related or supply by any specified category of supplier; and (iii) transaction value declared is not reliable.

 

Q 10. What are the inclusions specified in Section 15(2) which could be added to Transaction Value?

 

Ans. The inclusions specified in Section15 (2) which could be added to transaction value are as follows: a) Any taxes, duties, cesses, fees and charges levied under any statute, other than the SGST/CGST Act and the Goods and Services Tax (Compensation to the States for Loss of Revenue) Act, 2016, if charged separately by the supplier to the recipient; b) Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services; c) Incidental expenses, such as commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or as the case may be supply of the services; d) Interest or late fee or penalty for delayed payment of any consideration for any supply; and e) Subsidies directly linked to the price excluding subsidies provided by the Central and State Government.

 

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FAQs on GST – Registration -Series II

Q 1. What is advantage of taking registration in GST?

Ans. Registration under Goods and Service Tax (GST) regime will confer following advantages to the business: • Legally recognized as supplier of goods or services. • Proper accounting of taxes paid on the input goods or services which can be utilized for payment of GST due on supply of goods or services or both by the business. • Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on the goods or services supplied to purchasers or recipients. • Getting eligible to avail various other benefits and privileges rendered under the GST laws.

 

Q 2. Can a person without GST registration claim ITC and collect tax?

Ans. No, a person without GST registration can neither collect GST from his customers nor can claim any input tax credit of GST paid by him.

Q 3. What will be the effective date of registration?

Ans. Where the application for registration has been submitted within thirty days from the date on which the person becomes liable to registration, the effective date of registration shall be the date on which he became liable for registration. Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming liable to registration, the effective date of registration shall be the date of grant of registration. In case of a person taking registration voluntarily while being within the threshold exemption limit for paying tax, the effective date of registration shall be the date of order of registration.

Q 4. Who are the persons liable to take a Registration under the Model GST Law?

Ans. As per Section 22 of the CGST/SGST Act 2017, every supplier (including his agent) who makes a taxable supply i.e. supply of goods and / or services which are leviable to tax under GST law, and his aggregate turn over in a financial year exceeds the threshold limit of twenty lakh rupees shall be liable to register himself in the State or the Union territory of Delhi or Puducherry from where he makes the taxable supply. In case of eleven special category states (as mentioned in Art.279A(4)(g) of the Constitution of India), this threshold limit for registration liability is ten lakh rupees. Besides, Section 24 of the Act mentions certain categories of suppliers, who shall be liable to take registration even if their aggregate turnover is below the said threshold limit of 20 lakh rupees. On the other hand, as per Section 23 of the Act, an agriculturist in respect of supply of his agricultural produce; as also any person exclusively making supply of non-taxable or wholly exempted goods and/or services under GST law will not be liable for registration.

Q 5. What is aggregate turnover?

Ans. As per section 2(6) of the CGST/SGST Act “aggregate turnover” includes the aggregate value of: (i) all taxable supplies, (ii) all exempt supplies, (iii) exports of goods and/or service, and, (iv) all inter-state supplies of a person having the same PAN. The above shall be computed on all India basis and excludes taxes charged under the CGST Act, SGST Act, UTGST Act, and the IGST Act. Aggregate turnover shall include all supplies made by the Taxable person, whether on his own account or made on behalf of all his principals. Aggregate turnover does not include value of supplies on which tax is levied on reverse charge basis, and value of inward supplies. The value of goods after completion of job work is not includible in the turnover of the job-worker. It will be treated as supply of goods by the principal and will accordingly be includible in the turnover of the Principal.

Q 6. Which are the cases in which registration is compulsory?

Ans. As per Section 24 of the CGST/SGST Act, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit: i) persons making any inter-State taxable supply; ii) casual taxable persons; iii) persons who are required to pay tax under reverse charge; iv) electronic commerce operators required to pay tax under sub-section (5) of section 9; v) non-resident taxable persons; vi) persons who are required to deduct tax under section 51; vii) persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise; viii) Input service distributor (whether or not separately registered under the Act) ix) persons who are required to collect tax under section 52; x) every electronic commerce operator xi) every person supplying online information and data base retrieval services from a place outside India to a person in India, other than a registered person; and, xii) such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

Q 7. What is the time limit for taking a Registration under GST?

Ans. A person should take a Registration, within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as is prescribed under the Registration Rules. A Casual Taxable person and a non-resident taxable person should however apply for registration at least 5 days prior to commencement of business.

Q 8. If a person is operating in different states, with the same PAN number, whether he can operate with a single Registration?

Ans. No. Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST in terms of Sub-section (1) of Section 22 of the CGST/SGST Act.

Q 9. Whether a person having multiple business verticals in a state can obtain for different registrations?

Ans. Yes. In terms of the proviso to Sub-Section (2) of Section 25, a person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed.

Q 10. Is there a provision for a person to get himself voluntarily registered though he may not be liable to pay GST?

Ans. Yes. In terms of Sub-section (3) of Section 25, a person, though not liable to be registered under Section 22 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered taxable person, shall apply to such person.

Q 11. Is possession of a Permanent Account Number (PAN) mandatory for obtaining a Registration?

Ans. Yes. As per Section 25(6) of the CGST/SGST Act every person shall have a Permanent Account Number issued under the Income Tax Act,1961(43 of 1961) in order to be eligible for grant of registration. However as per the proviso to the aforesaid section 25(6), a person required to deduct tax under Section 51, may have, in lieu of a PAN, a Tax Deduction and Collection Account Number issued under the said Income Tax Act, in order to be eligible for grant of registration. Also, as per Section 25(7) PAN is not mandatory for a nonresident taxable person who may be granted registration on the basis of any other document as maybe prescribed.

Q 12. Whether the Department through the proper officer, can suo-moto proceed to register of a Person under this Act?

Ans. Yes. In terms of sub-section (8) of Section 25, where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action which may be taken under this Act, or under any other law for the time being in force, proceed to register such person in the manner as is prescribed in the Registration rules.

Q 13. Whether the proper officer can reject an Application for Registration?

Ans. Yes. In terms of sub-section 10 of section 25 of the CGST/SGST Act, the proper officer can reject an application for registration after due verification.

Q 14. Whether the Registration granted to any person is permanent?

Ans. Yes, the registration Certificate once granted is permanent unless surrendered, cancelled, suspended or revoked.

Q 15. Is it necessary for the UN bodies to get registration under GST?

Ans. Yes. In terms of Section 25(9) of the CGST/SGST Act, all notified UN bodies, Consulate or Embassy of foreign countries and any other class of persons so notified would be required to obtain a unique identification number (UIN) from the GST portal. The structure of the said ID would be uniform across the States in conformity with GSTIN structure and the same will be common for the Centre and the States. This UIN will be needed for claiming refund of taxes paid on notified supplies of goods and services received by them, and for any other purpose as may be notified.

Q 16. What is the responsibility of the taxable person supplying to UN bodies?

Ans. The taxable supplier supplying to these organizations is expected to mention the UIN on the invoices and treat such supplies as supplies to another registered person (B2B) and the invoices of the same will be uploaded by the supplier.

Q 17. Is it necessary for the Govt. Organization to get registration?

Ans. A unique identification number (ID) would be given by the respective state tax authorities through GST portal to Government authorities / PSUs not making outwards supplies of GST goods (and thus not liable to obtain GST registration) but are making inter-state purchases.

Q 18. Who is a Casual Taxable Person?

Ans. Casual Taxable Person has been defined in Section 2 (20) of the CGST/SGST Act meaning a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business, whether as principal, or agent or in any other capacity, in a State or a Union territory where he has no fixed place of business.

Q 19. Who is a Non-resident Taxable Person?

Ans. In terms of Section 2(77) of the CGST/SGST Act, a nonresident taxable person means any person who occasionally undertakes transactions involving supply of goods and/or services whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.

Q 20. What is the validity period of the Registration certificate issued to a Casual Taxable Person and non- Resident Taxable person?

Ans. In terms of Section 27(1) read with proviso thereto, the certificate of registration issued to a “casual taxable person” or a “non-resident taxable person” shall be valid for a period specified in the application for registration or ninety days from the effective date of registration, whichever is earlier. However, the proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period of ninety days by a further period not exceeding ninety days.

Q 21. Is there any Advance tax to be paid by a Casual Taxable Person and Non-resident Taxable Person at the time of obtaining registration under this Special Category?

Ans. Yes. While a normal taxable person does not have to make any advance deposit of tax to obtain registration, a casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration is required, in terms of Section 27(2) read with proviso thereto, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought. If registration is to be extended beyond the initial period of ninety days, an advance additional amount of tax equivalent to the estimated tax liability is to be deposited for the period for which the extension beyond ninety days is being sought.

Q 22. Whether Amendments to the Registration Certificate is permissible?

Ans. Yes. In terms of Section 28, the proper officer may, on the basis of such information furnished either by the registrant or as ascertained by him, approve or reject amendments in the registration particulars within a period of 15 common working days from the date of receipt of application for amendment. It is to be noted that permission of the proper officer for making amendments will be required for only certain core fields of information, whereas for the other fields, the certificate of registration shall stand amended upon submission of application in the GST common portal.

Q 23. Whether Cancellation of Registration Certificate is permissible?

Ans. Yes. Any Registration granted under this Act may be cancelled by the Proper Officer, in circumstances mentioned in Section 29 of the CGST/SGST Act. The proper officer may, either on his own motion or on an application filed, in the prescribed manner, by the registered taxable person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed. As per the Registration Rules, an order for cancellation is to be issued within 30 days from the date of receipt of reply to SCN (in cases where the cancellation is proposed to be carried out suo moto by the proper officer) or from the date of receipt of application for cancellation (in case where the taxable person/legal heir applies for such cancellation)

Q 24. Whether cancellation of Registration under CGST Act means cancellation under SGST Act also?

Ans. Yes, the cancellation of registration under one Act (say CGST Act) shall be deemed to be a cancellation of registration under the other Act (i.e. SGST Act). (Section 29 (4))

Q 25. Can the proper Officer Cancel the Registration on his own?

Ans. Yes, in certain circumstances specified under section 29(2) of the CGST/SGST Act, the proper officer can cancel the registration on his own. Such circumstances include contravention of any of the prescribed provisions of the CGST Act or the rules made there under, not filing return by a composition dealer for three consecutive tax periods or non-furnishing of returns by a regular taxpayer for a continuous period of six months, and not commencing business within six months from the date of voluntary registration. However, before cancelling the registration, the proper officer has to follow the principles of natural justice. (proviso to Section 29(2)(e))

Q 26. What happens when the registration is obtained by means of willful mis-statement, fraud or suppression of facts?

Ans. In such cases, the registration may be cancelled with retrospective effect by the proper officer. (Section 29(2)(e))

Q 27. Is there an option to take centralized registration for services under GST Law?

Ans. No, the tax paper has to take separate registration in every state from where he makes taxable supplies.

Q 28. If the taxpayer has different business verticals in one state, will he have to obtain separate registration for each such vertical in the state?

Ans. No, however the taxpayer has the option to register such separate business verticals independently in terms of the proviso to Section 25(2) of the CGTST Act, 2017.

Q 29. Who is an ISD?

Ans. ISD stands for Input Service Distributor and has been defined under Section 2(61) of the CGST/SGST Act. It is basically an office meant to receive tax invoices towards receipt of input services and further distribute the credit to supplier units (having the same PAN) proportionately.

Q 30. Will ISD be required to be separately registered other than the existing tax payer registration?

Ans. Yes, the ISD registration is for one office of the taxpayer which will be different from the normal registration.

Q 31. Can a tax payer have multiple ISDs?

Ans. Yes. Different offices of a tax payer can apply for ISD registration.

Q 32. What could be the liabilities (in so far as registration is concerned) on transfer of a business?

Ans. The transferee or the successor shall be liable to be registered with effect from such transfer or succession and he will have to obtain a fresh registration with effect from the date of such transfer or succession. (Section 22(3)).

Q 33. Whether all assesses / dealers who are already registered under existing central excise/service tax/ vat laws will have to obtain fresh registration?

Ans. No, GSTN shall migrate all such assessees/dealers to the GSTN network and shall issue a provisional registration certificate with GSTIN number on the appointed day, which after due verification by the departmental officers within six months, will be converted into final registration certificate. For converting the provisional registration to final registration the registrants will be asked to submit all requisite documents and information required for registration in a prescribed period of time. Failure to do so will result in cancellation of the provisional GSTIN number. The service tax assesses having centralized registration will have to apply afresh in the respective states wherever they have their businesses.

Q 34. Whether the job worker will have to be compulsorily registered?

Ans. No, a Job worker is a supplier of services and will be obliged to take registration only when his turnover crosses the prescribed threshold of 20/10 Lakhs.

Q 35. Whether the goods will be permitted to be supplied from the place of business of a job worker?

Ans. Yes. But only in cases where the job worker is registered, or if not, the principal declares the place of business of the job worker as his additional place of business.

Q 36. At the time of registration will the assessee have to declare all his places of business?

Ans. Yes. The principal place of business and place of business have been separately defined under section 2(89) & 2(85) of the CGST/SGST Act respectively. The taxpayer will have to declare the principal place of business as well as the details of additional places of business in the registration form.

Q 37. Is there any system to facilitate smaller dealers or dealers having no IT infrastructure?

Ans. In order to cater to the needs of tax payers who are not IT savvy, following facilities shall be made available: – Tax Return Preparer(TRP): A taxable person may prepare his registration application /returns himself or can approach the TRP for assistance. TRP will prepare the said registration document / return in prescribed format on the basis of the information furnished to him by the taxable person. The legal responsibility of the correctness of information contained in the forms prepared by the TRP will rest with the taxable person only and the TRP shall not be liable for any errors or incorrect information. Facilitation Centre (FC): shall be responsible for the digitization and/or uploading of the forms and documents including summary sheet duly signed by the Authorized Signatory and given to it by the taxable person. After uploading the data on common portal using the ID and Password of FC, a print-out of acknowledgement will be taken and signed by the FC and handed over to the taxable person for his records. The FC will scan and upload the summary sheet duly signed by the Authorized Signatory.

Q 38. Is there any facility for digital signature in the GSTN registration?

Ans. Tax payers would have the option to sign the submitted application using valid digital signatures. There will be two options for electronically signing the application or other submissions- by e-signing through Aadhar number, or through DSC i.e. by registering the tax payer’s digital signature certificate with GST portal. However, companies or limited liability partnership entities will have to sign mandatorily through DSC only. Only level 2 and level 3 DSC certificates will be acceptable for signature purpose.

Q 39. What will be the time limit for the decision on the on line registration application?

Ans. If the information and the uploaded documents are found in order, the State and the Central authorities shall have to respond to the application within three common working days. If they communicate any deficiency or discrepancy in the application within such time, then the applicant will have to remove the discrepancy / deficiency within 7 days of such communication. Thereafter, for either approving the application or rejecting it, the State and the Central authorities will have 7 days from the date when the taxable person communicates removal of deficiencies. In case no response is given by the departmental authorities within the said time line, the portal shall automatically generate the registration.

Q 40. What will be the time of response by the applicant if any query is raised in the online application?

Ans. If during the process of verification, one of the tax authorities raises some query or notices some error, the same shall be communicated to the applicant and to the other tax authority through the GST Common Portal within 3 common working days. The applicant will reply to the query/rectify the error/ answer the query within a period of seven days from the date of receipt of deficiency intimation. On receipt of additional document or clarification, the relevant tax authority will respond within seven common working days from the date of receipt of clarification.

Q 41. What is the process of refusal of registration?

Ans. In case registration is refused, the applicant will be informed about the reasons for such refusal through a speaking order. The applicant shall have the right to appeal against the decision of the Authority. As per sub-section (2) of section 26 of the CGST Act, any rejection of application for registration by one authority (i.e. under the CGST Act / SGST Act) shall be deemed to be a rejection of application for registration by the other tax authority (i.e. under the SGST Act / UTGST Act/ CGST Act).

Q 42. Will there be any communication related to the application disposal?

Ans. The applicant shall be informed of the fact of grant or rejection of his registration application through an e-mail and SMS by the GST common portal. Jurisdictional details would be intimated to the applicant at this stage.

Q 43. Can the registration certificate be downloaded from the GSTN portal?

Ans. In case registration is granted; applicant can download the Registration Certificate from the GST common portal.

Q 44. Can cancellation of registration order be revoked?

Ans. Yes, but only in cases where the initial cancellation has been done by the proper officer suo moto, and not on the request of the taxable person or his legal heirs. A person whose registration has been cancelled suo moto can apply to the proper officer for revocation of cancellation of registration within 30 days from the date of communication of the cancellation order. The proper officer may within a period of 30 days from the date of receipt of application for revocation of cancellation or receipt of information/clarification, either revoke the cancellation or reject the application for revocation of cancellation of registration.

Q 45. Does cancellation of registration impose any tax obligations on the person whose registration is so cancelled?

Ans. Yes, as per Section 29(5) of the CGST/SGST Act, every registered taxable person whose registration is cancelled shall pay an amount, by way of debit in the electronic cash/credit ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semifinished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher.

Q 46. What is the difference between casual and nonresident taxable persons?

Ans. Casual and Non-resident taxable persons are separately defined in the CGST/SGST Act in Sections 2(20) and 2(77) respectively. Some of the differences are outlined below: Casual Taxable Person Non-resident Taxable Person Occasional undertakes transactions involving supply of goods or services in a state or UT where he has no fixed place of business. Occasional undertakes transactions involving supply of goods or services but has no fixed place of business residence in India. Has a PAN Number Do not have a PAN Number; A nonresident person, if having PAN number may take registration as a casual taxable person Same application form for registration as for normal taxable persons viz GST REG- 01 Separate application form for registration by non-resident taxable person viz GST REG-9 Has to undertake transactions in the course or furtherance of business Business test absent in the definition Has to file normal GSTR-1, GSTR-2 and GSTR-3 returns Has to file a separate simplified return in the format GSTR-5 Can claim ITC of all inward supplies Can get ITC only in respect of import of goods and /or services.

 

FAQs ON GOODS AND SERVICES TAX (GST) – Series I

Q 1. What is Goods and Services Tax (GST)?

Ans. It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

 

Q 2. What exactly is the concept of destination based tax on consumption?

Ans. The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

 

Q 3. Which of the existing taxes are proposed to be subsumed under GST?

Ans. The GST would replace the following taxes: (i) taxes currently levied and collected by the Centre: a. Central Excise duty b. Duties of Excise (Medicinal and Toilet Preparations) c. Additional Duties of Excise (Goods of Special Importance) d. Additional Duties of Excise (Textiles and Textile Products) e. Additional Duties of Customs (commonly known as CVD) f. Special Additional Duty of Customs (SAD) g. Service Tax h. Central Surcharges and Cesses so far as they relate to supply of goods and services (ii) State taxes that would be subsumed under the GST are: a. State VAT b. Central Sales Tax c. Luxury Tax d. Entry Tax (all forms) e. Entertainment and Amusement Tax(except when levied by the local bodies) f. Taxes on advertisements g. Purchase Tax h. Taxes on lotteries, betting and gambling i. State Surcharges and Cesses so far as they relate to supply of goods and services The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

 

Q 4. What principles were adopted for subsuming the above taxes under GST?

Ans. The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind: (i) Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services. (ii) Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other. (iii) The subsumation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST. (v) Revenue fairness for both the Union and the States individually would need to be attempted.

 

Q 5. Which are the commodities proposed to be kept outside the purview of GST?

Ans. Article 366(12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption. So alcohol for human consumption is kept out of GST by way of definition of GST in constitution. Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST. Furthermore, electricity has been kept out of GST.

Q 6. What will be the status in respect of taxation of above commodities after introduction of GST?

Ans. The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities.

 

Q 7. What will be status of Tobacco and Tobacco products under the GST regime?

Ans. Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

 

Q 8. What type of GST is proposed to be implemented?
Ans. It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States/ Union territory would be called the State GST (SGST)/ UTGST. Similarly, Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

Q 9. Why is Dual GST required?

Ans. India is a federal country where both the Centre and the States have been assigned the powersto levy and collect taxes t h r o u g h a p p r o p r i a t e legislation. Both t h e l e v e l s of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

 

Q 10. Which authority will levy and administer GST?

Ans. Centre will levy and administer CGST & IGST while respective states /UTs will levy and administer

SGST/ UTGST.

 

Q 11. Why was the Constitution of India amended recently in the context of GST?

Ans. Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax. Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution ofIndia has been amended by the Constitution (one hundred and first amendment) Act, 2016 for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

 

Q 12. How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)?

Ans. The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.

Illustration I: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for, say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component i n t o a C e n t r a l G o v e r n m e n t a c c o u n t w h i l e the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10) in cash as he would be entitled to setoff this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST. Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc.). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.

Q 13. What are the benefits which the Country will accrue from GST?

Ans. Introduction of GST would be a very significantstep in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer.

Q 14. What is IGST?

Ans. Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Under Article 269A of the Constitution, the GST on supplies in the course of interState trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Q 15. Who will decide rates for levy of GST?

Ans. The CGST and SGST would be levied at rates to be jointly decided by the Centre and States. The rates would be notified on the recommendations of the GST Council. Q 15. What would be the role of GST Council? Ans. A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on (i) the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST; (ii) the goods and services that may be subjected to or exempted from the GST; (iii) the date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel; (iv) modelGSTlaws,principlesoflevy,apportionment of IGST and the principles that govern the place of supply; (v) the threshold limit of turnover below which the goods and services may be exempted from GST; (vi) the rates including floor rates with bands of GST; (vii)any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster; (viii) special provision with respect to the NorthEast States, J&K, Himachal Pradesh and Uttarakhand; and (ix) any other matter relating to the GST, as the Council may decide.

Q 16. What is the guiding principle of GST Council?

Ans. The mechanism of GST Council would ensure harmonization on different aspects of GST between the Centre and the States as well as among States. It has been p r o v i d e d i n t h e C o n s t i t u t i o n ( one h u n d r e d a n d first amendment) Act, 2016 that the GST Council, in its discharge of various functions, shall be guided by the need for a harmonized structure of GST and for the development of a harmonized national market for goods and services.

 

Q 17. How will decisions be taken by GST Council?

Ans. The Constitution (one hundred and first amendment) Act, 2016 provides that every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4th of the weighted votes of the Members present and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weightage of 2/3rd of the total votes cast in that meeting. One half of the total number of members of the GST Council shall constitute the quorum at its meetings.

 

Q 18. Who is liable to pay GST under the proposed GST regime?

Ans. Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the turnover threshold of Rs.20 lakhs (Rs. 10 lakhs for NE & Special Category States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. The CGST / SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all inter- State supply of goods and/or services. The CGST /SGST and IGST are payable at the rates specified in the Schedules to the respective Acts.

 

Q 19. What are the benefits available to small tax payers under the GST regime?

Ans. Tax payers with an aggregate turnover in a financial year u p t o [Rs.20 lakhs & Rs.10 Lakhs for NE and special category states] w o u l d b e e x e m p t f r o m tax. Further, a person whose aggregate turnover in the preceding financial year is less than Rs.50 Lakhs can opt for a simplified composition scheme where tax will payable at a concessional rate on the turnover in a state. [Aggregate turnover shall include the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST.] Aggregate turnover shall be computed on all India basis. For NE States and special category states, the exemption threshold shall be [Rs. 10 lakhs]. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption.

 

Q 20. How will the goods and services be classified under GST regime?

Ans. HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2-digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code (SAC)

 

Q 21. How will imports be taxed under GST?

Ans. Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.

 

Q 22. How will Exports be treated under GST?

Ans. Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters. The Exporter will have an option to either pay tax on the output and claim refund of IGST or export under Bond without payment of IGST and claim refund of Input Tax Credit (ITC).

 

Q 23. What is the scope of composition scheme under GST? Ans. Small taxpayers with an aggregate turnover in a preceding financial year up to [Rs. 50 lakhs] shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover in a state during the year without the benefit of ITC. The rate of tax for CGST and SGST/UTGST shall not be less than [1% for manufacturer & 0.5% in other cases; 2.5% for specific services as mentioned in para 6(b) of Schedule II viz Serving of food or any other article for human consumption]. A tax payer opting for composition levy shall not collect any tax from his customers. The government may increase the above said limit of 50 lakhs rupees to up to one crore rupees, on the recommendation of GST Council. Tax payers making inter- state supplies or making supplies through ecommerce operators who are required to collect tax at source shall not be eligible for composition scheme.

 

Q 24. Whether t h e composition scheme w i l l be optional or compulsory?

Ans. Optional.

 

Q 25. What is GSTN and its role in the GST regime?

Ans. GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST. The functions of the GSTN would, inter alia, include: (i) facilitating registration; (ii) forwarding the returns to Central and State authorities; (iii) computation and settlement of IGST; (iv) matching of tax payment details with banking network; (v) providing various MIS reports to the Central and the State Governments based on the tax payer return information; (vi) providing analysis of tax payers’ profile; and (vii) running the matching engine for matching, reversal and reclaim of input tax credit. The GSTN is developing a common GST portal and applications for registration, payment, return and MIS/ reports. The GSTN would also be integrating the common GST portal with the existing tax administration IT systems and would be building interfaces for tax payers. Further, the GSTN is developing back-end modules like assessment, audit, refund, appeal etc. for 19 States and UTs (Model II States). The CBEC and Model I States (15 States) are themselves developing their GST back-end systems. Integration of GST front-end system with back-end systems will have to be completed and tested well in advance for making the transition smooth.

 

Q 26. How are the disputes going to be resolved under the GST regime?

Ans. The Constitution (one hundred and first amendment) Act, 2016 provides that the Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute- (a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side and one or more other Sates on the other side; or (c) between two or more States, arising out of the recommendations of the Council or implementation thereof.

 

Q 27. What is the purpose of Compliance rating mechanism?

Ans. As per Section 149 of the CGST/SGST Act, every registered person shall be assigned a compliance rating based on the record of compliance in respect of specified parameters. Such ratings shall also be placed in the public domain. A prospective client will be able to see the compliance ratings of suppliers and take a decision as to whether to deal with a particular supplier or not. This will create healthy competition amongst taxable persons.

 

Q 28. Whether actionable claims liable to GST?

Ans. As per section 2(52) of the CGST/SGST Act actionable claims are to be considered as goods. Schedule III read with Section 7 of the CGST/SGST Act lists the activities or transactions which shall be treated neither as supply of goods nor supply of services. The Schedule lists actionable claims other than lottery, betting and gambling as one of such transactions. Thus only lottery, betting and gambling shall be treated as supplies under the GST regime. All the other actionable claims shall not be supplies.

 

Q 29. Whether transaction in securities be taxable in GST?

Ans. Securities have been specifically excluded from the definition of goods as well as services. Thus, the transaction in securities shall not be liable to GST.

 

Q 30. What is the concept of Information Return?

Ans. Information return is based on the idea of verifying the compliance levels of registered persons through information procured from independent third party sources. As per section 150 of the CGST/SGST Act, many authorities who are responsible for maintaining records of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details of transaction of goods or services or both or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property under any law for the time being in force, are mandated to furnish an information return of the same in respect of such periods, within such time, in such form and manner and to such authority or agency as may be prescribed. Failure to do so may result in penalty being imposed as per Section 123.

 

Q 31. Different companies have different types of accounting software packages and no specific format are mandated for keeping records. How will department be able to read into these complex software? Ans. As per Section 153 of the CGST/SGST Act, having regard to the nature and complexity of a case and in the interest of revenue, department may take assistance from an expert at any state of scrutiny, inquiry, investigation or any other proceedings.

 

Q 32.Is there anyprovision inGST fortax treatment of goods returned by the recipient?

Ans. Yes, Section 34 deals with such situations. Where the goods supplied are returned by the recipient, the registered person (supplier of goods) may issue to the recipient a credit note containing the prescribed particulars. The details of the credit note shall be declared by the supplier in the returns for the month during which such credit note was issued but not later than September following the end of the year in which such supply was made or the date of filing of the relevant annual return, whichever is earlier. The details of the credit note shall be matched with the corresponding reduction in claim for input tax credit by the recipient in his valid return for the same tax period or any subsequent tax period and the claim for reduction in output tax liability by the supplier that matches with the corresponding reduction in claim for ITC by the recipient shall be finally accepted and communicated to both parties. Q

 

  1. What is Anti-Profiteering measure?

Ans. As per section 171 of the CGST/SGST Act, any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. An authority may be constituted by the government to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. **** 2. Levy of and Exemption from Tax

 

More FAQs would be coming in my FAQs- Series II

TAX RATES FOR ASSESSMENT YEAR 2017-18

Tax Rates

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

Assessment Year 2017-18

Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 10%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Less: Rebate under Section 87A [see Note]

Add: Surcharge and Education Cess [see Note]

Assessment Year 2018-19

Taxable income Tax Rate
Up to Rs. 2,50,000 Nil
Rs. 2,50,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Less: Rebate under Section 87A [see Note]

Add: Surcharge and Education Cess [see Note]

  1. In case of a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of the previous year)

Assessment Year 2017-18

Taxable income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 – Rs. 5,00,000 10%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Less: Rebate under Section 87A [see Note]

Add: Surcharge and Education Cess [see Note]

Assessment Year 2018-19

Taxable income Tax Rate
Up to Rs. 3,00,000 Nil
Rs. 3,00,000 – Rs. 5,00,000 5%
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Less: Rebate under Section 87A [see Note]

Add: Surcharge and Education Cess [see Note]

  1. In case of a resident super senior citizen (who is 80 years or more at any time during the previous year)

Assessment Year 2017-18

Taxable income Tax Rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Add: Surcharge and Education Cess [see Note]

Assessment Year 2018-19

Taxable income Tax Rate
Up to Rs. 5,00,000 Nil
Rs. 5,00,000 – Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Add: Surcharge and Education Cess [see Note]

Note:

Assessment Year 2017-18

  1. a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 15% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
  2. b) Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  3. c) Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
  4. d) Rebate under Section 87A: The rebate is available to a resident individual if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 5,000, whichever is less.

Assessment Year 2018-19

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

For the Assessment Year 2017-18 and 2018-19, a partnership firm (including LLP) is taxable at 30%.

Add:

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

For the Assessment Year 2017-18 and 2018-19, a local authority is taxable at 30%.

Add:

  1. d) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).
  2. e) Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  3. f) Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
  4. Domestic Company

For the Assessment Year 2017-18 and 2018-19, a domestic company is taxable at 30%. For Assessment Year 2017-18, tax rate would be 29% where turnover or gross receipt of the company does not exceed Rs. 5 crore in the previous year 2014-15.However, for Assessment year 2018-19, tax rate would be 25% where turnover or gross receipt of the company does not exceed Rs. 50 crore in the previous year 2015-16.

Add:

  1. a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:

(i) Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

(ii) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.

  1. b) Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  2. c) Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
  3. Foreign Company

Assessment Year 2017-18 and Assessment Year 2018-19

Nature of Income Tax Rate
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government 50%
Any other income 40%

 

Add:

  1. a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 5% of such tax, where total income exceeds ten crore rupees. However, the surcharge shall be subject to marginal relief, which shall be as under:

(i) Where income exceeds one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

(ii) Where income exceeds ten crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.

  1. b) Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.
  2. c) Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.
  3. Co-operative Society

Assessment Year 2017-18 and Assessment Year 2018-19

Taxable income Tax Rate
Up to Rs. 10,000 10%
Rs. 10,000 to Rs. 20,000 20%
Above Rs. 20,000 30%

 

Add:

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

NEW SECTIONS / ADDITIONS MENTIONED IN ITR 6 (for Cos.) for A.Y. 2017-18

1.Insertion of new section 115BA:

Location in ITR6 : In Part A-Gen, clause (e)

After section 115B of the Income-tax Act, with effect from the 1st day of April, 2017, the following section shall be inserted, namely:—

“115BA. Tax on income of certain domestic companies.—(1) Notwithstanding anything contained in this Act but subject to the provisions of section 111A and section 112, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2017, shall, at the option of such person, be computed at the rate of twenty-five per cent, if the conditions contained in sub-section (2) are satisfied.

(2) For the purposes of sub-section (1), the following conditions shall apply, namely:—

(a)   the company has been set-up and registered on or after the 1st day of March, 2016;
(b)   the company is not engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it; and
(c)   the total income of the company has been computed,—

 

(i)   without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AC or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AC or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A under the heading “C.—Deductions in respect of certain incomes” other than the provisions of section 80JJAA;
(ii)   without set off of any loss carried forward from any earlier assessment year if such loss is attributable to any of the deductions referred to in sub-clause (i); and
(iii)   depreciation under section 32, other than clause (iia) of sub-section (1) of the said section, is determined in the manner as may be prescribed.

(3) The loss referred to in sub-clause (ii) of clause (c) of sub-section (2) shall be deemed to have been already given full effect to and no further deduction for such loss shall be allowed for any subsequent year.

(4) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the first of the returns of income which the person is required to furnish under the provisions of this Act:

Provided that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.”.

 

 

 

  1. Insertion of new section 115BBF

Location in ITR6 : In Part B-TI under ‘Profits and gains from business and profession’

After section 115BBE of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2017, namely:—

‘115BBF. Tax on income from patent.—(1) Where the total income of an eligible assessee includes any income by way of royalty in respect of a patent developed and registered in India, the income-tax payable shall be the aggregate of—

(a)   the amount of income-tax calculated on the income by way of royalty in respect of the patent at the rate of ten per cent; and
(b)   the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the income referred to in clause (a).

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the eligible assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).

(3) The eligible assessee may exercise the option for taxation of income by way of royalty in respect of a patent developed and registered in India in accordance with the provisions of this section, in the prescribed manner, on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the relevant previous year.

(4) Where an eligible assessee opts for taxation of income by way of royalty in respect of a patent developed and registered in India for any previous year in accordance with the provisions of this section and the assessee offers the income for taxation for any of the five assessment years relevant to the previous year succeeding the previous year not in accordance with the provisions of sub-section (1), then, the assessee 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 such income has not been offered to tax in accordance with the provisions of sub-section (1).

Explanation.—For the purposes of this section,—

(a)   “developed” means at least seventy-five per cent of the expenditure incurred in India by the eligible assessee for any invention in respect of which patent is granted under the Patents Act, 1970 (39 of 1970) (herein referred to as the Patents Act);
(b)   “eligible assessee” means a person resident in India and who is a patentee;
(c)   “invention” shall have the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Patents Act;
(d)   “lump sum” includes an advance payment on account of such royalties which is not returnable;
(e)   “patent” shall have the meaning assigned to it in clause (m) of sub-section (1) of section 2 of the Patents Act;
(f)   “patentee” means the person, being the true and first inventor of the invention, whose name is entered on the patent register as the patentee, in accordance with the Patents Act, and includes every such person, being the true and first inventor of the invention, where more than one person is registered as patentee under that Act in respect of that patent;
(g)   “patented article” and “patented process” shall have the meanings respectively assigned to them in clause (o) of sub-section (1) of section 2 of the Patents Act;
(h)   “royalty”, in respect of a patent, means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains” or consideration for sale of product manufactured with the use of patented process or the patented article for commercial use) for the—

 

(i)   transfer of all or any rights (including the granting of a licence) in respect of a patent; or
(ii)   imparting of any information concerning the working of, or the use of, a patent; or
(iii)   use of any patent; or
(iv)   rendering of any services in connection with the activities referred to in sub-clauses (i) to (iii);

 

(i)   “true and first inventor” shall have the meaning assigned to it in clause (y) of sub-section (1) of section 2 of the Patents Act.’.

 

  1. Insertion of new sections 92CC and 92CD.

Location in ITR6 : In the Verification Column:

After section 92CB of the Income-tax Act, the following sections shall be inserted with effect from the 1st day of July, 2012, namely:—

’92CC. Advance pricing agreement.—(1) The Board, with the approval of the Central Government, may enter into an advance pricing agreement with any person, determining the arm’s length price or specifying the manner in which arm’s length price is to be determined, in relation to an international transaction to be entered into by that person.

(2) The manner of determination of arm’s length price referred to in sub-section (1), may include the methods referred to in sub-section (1) of section 92C or any other method, with such adjustments or variations, as may be necessary or expedient so to do.

(3) Notwithstanding anything contained in section 92C or section 92CA, the arm’s length price of any international transaction, in respect of which the advance pricing agreement has been entered into, shall be determined in accordance with the advance pricing agreement so entered.

(4) The agreement referred to in sub-section (1) shall be valid for such period not exceeding five consecutive previous years as may be specified in the agreement.

(5) The advance pricing agreement entered into shall be binding—

(a)  on the person in whose case, and in respect of the transaction in relation to which, the agreement has been entered into; and

(b)  on the Commissioner, and the income-tax authorities subordinate to him, in respect of the said person and the said transaction.

(6) The agreement referred to in sub-section (1) shall not be binding if there is a change in law or facts having bearing on the agreement so entered.

(7) The Board may, with the approval of the Central Government, by an order, declare an agreement to be void ab initio, if it finds that the agreement has been obtained by the person by fraud or misrepresentation of facts.

(8) Upon declaring the agreement void ab initio,

(a)  all the provisions of the Act shall apply to the person as if such agreement had never been entered into; and

(b)  notwithstanding anything contained in the Act, for the purpose of computing any period of limitation under this Act, the period beginning with the date of such agreement and ending on the date of order under sub-section (7) shall be excluded:

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation, referred to in any provision of this Act, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.

(9) The Board may, for the purposes of this section, prescribe a scheme specifying therein the manner, form, procedure and any other matter generally in respect of the advance pricing agreement.

(10) Where an application is made by a person for entering into an agreement referred to in sub-section (1), the proceeding shall be deemed to be pending in the case of the person for the purposes of the Act.

92CD. Effect to advance pricing agreement.—(1) Notwithstanding anything to the contrary contained in section 139, where any person has entered into an agreement and prior to the date of entering into the agreement, any return of income has been furnished under the provisions of section 139 for any assessment year relevant to a previous year to which such agreement applies, such person shall furnish, within a period of three months from the end of the month in which the said agreement was entered into, a modified return in accordance with and limited to the agreement.

(2) Save as otherwise provided in this section, all other provisions of this Act shall apply accordingly as if the modified return is a return furnished under section 139.

(3) If the assessment or reassessment proceedings for an assessment year relevant to a previous year to which the agreement applies have been completed before the expiry of period allowed for furnishing of modified return under sub-section (1), the Assessing Officer shall, in a case where modified return is filed in accordance with the provisions of sub-section (1), proceed to assess or reassess or recompute the total income of the relevant assessment year having regard to and in accordance with the agreement.

(4) Where the assessment or reassessment proceedings for an assessment year relevant to the previous year to which the agreement applies are pending on the date of filing of modified return in accordance with the provisions of sub-section (1), the Assessing Officer shall proceed to complete the assessment or reassessment proceedings in accordance with the agreement taking into consideration the modified return so furnished.

(5) Notwithstanding anything contained in section 153 or section 153B or section 144C,—

(a)  the order of assessment, reassessment or recomputation of total income under sub-section (3) shall be passed within a period of one year from the end of the financial year in which the modified return under sub-section (1) is furnished;

(b)  the period of limitation as provided in section 153 or section 153B or section 144C for completion of pending assessment or reassessment proceedings referred to in sub-section (4) shall be extended by a period of twelve months.

(6) For the purposes of this section,—

(i)  “agreement” means an agreement referred to in sub-section (1) of section 92CC;

(ii)  the assessment or reassessment proceedings for an assessment year shall be deemed to have been completed where—

(a)  an assessment or reassessment order has been passed; or

(b)  no notice has been issued under sub-section (2) of section 143 till the expiry of the limitation period provided under the said section.’.

 

4. Schedule ICDS Effect of Income Computation Disclosure Standards on profit
Sl. No. ICDS Amount (+) or (-)
(i) (ii) (iii)
I Accounting Policies
II Valuation of Inventories
III Construction Contracts
IV Revenue Recognition
V Tangible Fixed Assets
VI Changes in Foreign Exchange Rates
VII Government Grants
VIII Securities
IX Borrowing Costs

 

 

  1. Following section 80-IAC shall be inserted after section 80-IAB by the Finance Act, 2016, w.e.f. 1-4-2017 :

Location in ITR6 : Schedule VI-A

Special provision in respect of specified business.

80-IAC. (1) Where the gross total income of an assessee, being an eligible start-up, includes any profits and gains derived from eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent of the profits and gains derived from such business for three consecutive assessment years.

(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any three consecutive assessment years out of five years beginning from the year in which the eligible start-up is incorporated.

(3) This section applies to a start-up which fulfils the following conditions, namely:—

 (i)  it is not formed by splitting up, or the reconstruction, of a business already in existence:

Provided that this condition shall not apply in respect of a start-up which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as referred to in section 33B, in the circumstances and within the period specified in that section;

(ii)  it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation 1.— For the purposes of this clause, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if all the following conditions are fulfilled, namely:—

(a)  such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India;

(b)  such machinery or plant is imported into India;

(c)  no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee.

Explanation 2.—Where in the case of a start-up, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with.

(4) The provisions of sub-section (5) and sub-sections (7) to (11) of section 80-IA shall apply to the start-ups for the purpose of allowing deductions under sub-section (1).

Explanation.—For the purposes of this section,—

(i)  “eligible business” means a business which involves innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property;

(ii)  “eligible start-up” means a company or a limited liability partnership engaged in eligible business which fulfils the following conditions, namely:—

 (a)  it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2019;

 (b)  the total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021; and

 (c)  it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government;

(iii) “limited liability partnership” means a partnership referred to in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009).

 

  1. Insertion of new section 80-IBA.

Location in ITR6 : Schedule VI-A

After section 80-IB of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2017, namely:—

’80-IBA. Deductions in respect of profits and gains from housing projects.—(1) Where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to the provisions of this section, be allowed, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business.

(2) For the purposes of sub-section (1), a housing project shall be a project which fulfils the following conditions, namely:—

(a)   the project is approved by the competent authority after the 1st day of June, 2016, but on or before the 31st day of March, 2019;
(b)   the project is completed within a period of three years from the date of approval by the competent authority:
  Provided that,—

 

(i)   where the approval in respect of a housing project is obtained more than once, the project shall be deemed to have been approved on the date on which the building plan of such housing project was first approved by the competent authority; and
(ii)   the project shall be deemed to have been completed when a certificate of completion of project as a whole is obtained in writing from the competent authority;

 

(c)   the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area;
(d)   the project is on a plot of land measuring not less than—

 

(i)   one thousand square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities; or
(ii)   two thousand square metres, where the project is located in any other place;

 

(e)   the project is the only housing project on the plot of land as specified in clause (d);
(f)   the built-up area of the residential unit comprised in the housing project does not exceed—

 

(i)   thirty square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities; or
(ii)   sixty square metres, where the project is located in any other place;

 

(g)   where a residential unit in the housing project is allotted to an individual, no other residential unit in the housing project shall be allotted to the individual or the spouse or the minor children of such individual;
(h)   the project utilises—

 

(i)   not less than ninety per cent of the floor area ratio permissible in respect of the plot of land under the rules to be made by the Central Government or the State Government or the local authority, as the case may be, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities, or
(ii)   not less than eighty per cent of such floor area ratio where such project is located in any place other, than the place referred to in sub-clause (i); and

 

(i)   the assessee maintains separate books of account in respect of the housing project.

(3) Nothing contained in this section shall apply to any assessee who executes the housing project as a works-contract awarded by any person (including the Central Government or the State Government).

(4) Where the housing project is not completed within the period specified under clause (b) of sub-section (2) and in respect of which a deduction has been claimed and allowed under this section, the total amount of deduction so claimed and allowed in one or more previous years, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the period for completion so expires.

(5) Where any amount of profits and gains derived from the business of developing and building housing projects is claimed and allowed under this section for any assessment year, deduction to the extent of such profit and gains shall not be allowed under any other provisions of this Act.

(6) For the purposes of this section,—

(a)   “built-up area” means the inner measurements of the residential unit at the floor level, including projections and balconies, as increased by the thickness of the walls, but does not include the common areas shared with other residential units, including any open terrace so shared;
(b)   “competent authority” means the authority empowered to approve the building plan by or under any law for the time being in force;
(c)   “floor area ratio” means the quotient obtained by dividing the total covered area of plinth area on all the floors by the area of the plot of land;
(d)   “housing project” means a project consisting predominantly of residential units with such other facilities and amenities as the competent authority may approve subject to the provisions of this section;
(e)   “residential unit” means an independent housing unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through and interior door in a shared hallway and not by walking through the living space of another household.’.

 

   
                     

 

INCOME TAX AMENDMENTS MADE BY FINANCE ACT, 2016 EFFECTIVE FROM 1ST JUNE, 2016

 

  1. Equalisation Levy Section 10

Under section 10, a new Clause 50 has been inserted that provides for exemption of income from  “specified services”  chargeable to  equalization  levy  wherein  “specified service” shall have mean as given in section 161(i) of Chapter VIII of the Finance Act, 2016.

Section 40(a) (Expense disallowance provision)

A new clause (ib) has been inserted in section 40(a) that provides that the expenses incurred for “specified services” chargeable under this Chapter shall not be allowed as deduction in case assessee fails to deduct and deposit the equalisation levy with the government. Where it has been deducted in the subsequent year or has been deducted during the previous year but paid after the due date, it shall be allowed as deduction in the previous year in which it has been paid.

A new Chapter VIII has been inserted in Finance Act, 2016 with respect to Equalisation levy.

 

  1. Income Declaration Scheme, 2016

A one-time disclosure scheme i.e Income Declaration Scheme, 2016 for declaration of undisclosed income of any financial year upto 2015-16 was added in Finance Bill 2016. The same is to be brought w.e.f. June 1, 2016 and it is to remain open up to the date1 to be notified by the Central Government in the Official gazette.

Section 153A or 153C (Assessment in cases of search)

The Income Declaration Scheme, 2016 shall not be applicable in case where notices have been issued under section 153A or 153C.

  1. New Direct Tax Dispute Resolution Scheme, 2016

A new Direct Tax Dispute Resolution Scheme, 2016, has been provided, salient features of which are:

  1. Yesterday CBDT specified December 31, 2016 as cut-off date for making declaration to designated authority under the scheme
  2. a) The scheme  to  be  applicable  to  “tax  arrears”  (including  tax,  interest  or  penalty) determined under the Income-tax Act or the Wealth-tax Act, 1957 in respect of which appeal is pending before CIT(A)/CWT(A) as on February 29, 2016 ;
  3. b) The declarant under the scheme be required to pay tax at the applicable rate plus interest upto the date of assessment.  However,  in  case  of  disputed tax exceeding rupees ten lakh, 25% of the minimum penalty leviable shall also be required to be paid;
  4. c) Consequent to such declaration, appeal in respect of the disputed income and disputed wealth pending before the Commissioner (Appeals) shall be deemed to be withdraw
  5. New taxation regime for Securitization Trusts:

Section 115TC (Tax on income from securitization trusts)

Section 115TC provides for situations where a securitization trust defaults in payment of tax and is considered to be assessee in default. Following changes are made therein:

  1. i) In clause (a), “or security receipt” has been inserted in the definition of “investor”;
  2. ii) In sub-clause (ii), “or” is inserted after the words “Reserve Bank of India”,

iii) A new  sub-clause  has  been  added  to  the  definition  of  securitization  trust  thereby expanding its definition;

  1. iv) Clause (e) has been added to define “security receipt”, which shall have the same meaning as  given  in   section  2(1)(zg)  of  the  Securitisation  and  Reconstruction  of Financial Assets and Enforcement of Security Interest Act, 2002;

A new Chapter XII-EB i.e. ( Special Provisions relating to tax on accreted income of certain trusts and institutions) has been added to provide for levy of additional income- tax in case of conversion into, or merger with, any non-charitable form or on transfer of assets of a charitable organization on its dissolution to a non-charitable institution. For this, Section 115TD, 115TE and 115TF have been inserted.

Section 194LBC: (TDS on income in respect of investment in securitization trust)

A new section 194LBC is inserted after Section 194LBB.

Sub – section (1) provides that where any income is payable to an investor who is a resident in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, then the person responsible for making the payment shall deduct tax at source at the rate of 20%, if the payee is an individual or a HUF; or 30% if payee is any other person.

Sub – section (2) provides that where any income is payable to an investor a non- resident  or  a foreign company in respect of  an investment  in  a  securitisation  trust specified in clause (d) of the Explanation occurring after section 115TCA, then the person responsible for making the payment shall deduct tax at source at the rates in force.

  1. TDS provisions

Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections :

Present Section Heads Existing Threshold

Limit (Rs.)

Amended Threshold

Limit (Rs.)

192A Payment of accumulated balance due to an employee 30,000 50,000
194BB Winnings from Horse Race 5,000 10,000
194C Payments to Contractors Aggregate annual limit of 75,000 Aggregate annual limit of 1,00,000
194LA Payment of Compensation on acquisition of certain Immovable Property 2,00,000 2,50,000
194D Insurance commission 20,000 15,000
194G Commission on sale of lottery tickets 1,000 15,000
194H Commission or brokerage 5,000 15,000

Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act:

 

Present Section

 

 

Heads

 

Existing Rate of TDS (%)

Amended Rate of TDS (%)
194DA Payment in respect of Life Insurance Policy 2% 1%
194EE Payments in respect of NSS Deposits 20% 10%
194D Insurance Commission Rate in force (10%) 5%
194G Commission on sale of lottery tickets 10% 5%
194H Commission or brokerage 10% 5%
  1. Section 194K and Section 194L:

Section 194K for tax deducted at source for income in respect of units is omitted.

Section 194L for tax deducted at source for payment of compensation on acquisition of Capital Asset is omitted.

  1. Section 194LBA (TDS on certain income from units of a business trust):

Sub – section (1) and sub – section(2) is amended for deducting tax at source on payments in respect of distributed income referred to in section 115UA, being of the nature referred to in clause (23FC) of section 10 and in the nature referred to in sub – clause (a) of clause (23FC) of section 10 also.

  1. Section 194LBB (TDS on income in respect of units of investment fund):

In order to rationalize the TDS regime in respect of payments made by the investment funds to its investors, it is proposed to amend Sec 194LBB to provide that the person responsible for making the payment to the investor shall deduct income-tax u/s 194LBB at the rate of 10% where the payee is a resident and at the rates in force where the payee is a non-resident.

A proviso is inserted which provides that where the payee is a non-resident or a foreign company, no deduction shall be made in case any income is not chargeable to tax under the provisions of the Act.

  1. Section 197 (Certificate for lower deduction of tax):

Section 197 is amended to include Section 194LBB, Section 194LBC in the list of sections for which a certificate for deduction of tax at lower rate or no deduction of tax can be obtained.

  1. Section 197A:

Sub – section (1A) and (1C) is amended for making the recipients of payments referred to in Sec 194-I also eligible for filing self-declaration in Form no 15G/15H for non- deduction of tax at source.

  1. Section 206AA:

In order to reduce compliance burden, Sec. 206AA(7) is amended to provide that the provisions of this section shall also not apply to a non-resident, not being a company, or to a foreign company, in respect of any other payment, other than interest on bonds, subject to such conditions as may be prescribed.

  1. Section 206C:

Sub – section (1D) is amended to include consideration for sale of any goods (other than bullion or jewellery) or providing any service for the purpose of collecting tax from buyer. A new clause (iii) is inserted to sub – section (1D) which provides that tax should be collected at source for any goods, other than those referred to in clauses (i) and (ii), or any service if the amount exceeds two hundred thousand rupees.

New sub – section (1E) and (1F) inserted after sub – section (1D)

  1. Section 2

i)A new clause (23C) has been added to section 2 to define the term “hearing” to include communication of data and documents through electronic mode

  1. ii) Section  2(37A)  is  amended  to  now  provide  that  “rate  or  rates  in  force”  for purpose of deduction shall include section 194LBB and section 194LBC.
  2. Section 92CA (Reference to TPO)

In section 92CA (3A) it has been provided that if assessment proceedings are stayed by a court order or where a reference for exchange of information has been made by the competent authority and time-limit available to TPO is less than 60 days after excluding the time for which assessment was stayed or time taken for receipt of information, then such remaining period shall be extended to 60 days.

  1. Section 115O (Dividend distribution tax on companies)

Sub-section 7has been added to section 115O to   provide that no tax on distributed profits shall be chargeable in respect of any amount declared, distributed or paid by the specified domestic company by way of dividend (whether interim or otherwise) to a business trust out of its current income on or after the specified date.

  1. Section 115QA (Tax on distributed income to shareholders)

Amended Section 115QA provide that the provision shall apply to any buy back of unlisted share undertaken by the company in accordance with the provisions of the law relating to the Companies and not necessarily restricted to Sec 77A of the Companies Act, 1956.

  1. Section 115TA (Tax on distributed income to investors)

In section 115TA sub-section (5) has been inserted that provides an exception with a prospective effect, to this section for income distributed by a securitization trust to its investors.

  1. Section 124 (jurisdiction of AOs)

Sec 124(3) is amended to specifically provide that cases where search is initiated under section 132 or books of accounts, other documents or any assets are requisitioned under section 132A, no person shall be entitled to call into question the jurisdiction of an Assessing Officer after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.

19.Section 133 (Power to call for information by prescribed income-tax authority), 147 (re- assessments) and 143 (assessments)

  1. i) To expedite  the  mechanism  of  assessment,  133C  has  been  amended  to  provide legislative framework for processing of information and documents obtained from assessee  and  make  the  outcome  available  to  the Assessing  Officer  for  necessary action.
  2. ii) Section  147   defines  situations   where   income   chargeable   to  tax  has   escaped assessment can be reopened for assessment, as per the amendment- information received by the department u/s 133C can also be base for detection of cases of income escaping assessment.

iii) Section 143(1)(a) is amended to expand scope of adjustment which can be made while processing return u/s 143(1)(a) based on data available to the Department in the form of audit report  filed  by the  assessee,  returns of  earlier  years  of  the  assessee,  26AS statement, Form 16, and Form 16A. However, before making any such adjustments, an intimation shall be given to the assessee either in writing or through electronic mode requiring him to respond to such adjustments. The response received, if any, will be duly considered before making any adjustment. However, if no response is received within thirty days of issue of such intimation, the processing shall be carried out incorporating the adjustments.

20.Section 211:

Sub – section (1) which provides that advance tax on current income to be calculated in the manner laid down in Sec. 209 is substituted.

Clause (a) makes assessees other than those mentioned in clause (b) liable to pay advance tax while clause (b) makes an eligible assessee  in  respect of  an  eligible business referred to in section 44AD liable to pay advance tax.

21.Section 220:

Provisos are inserted after Sec. 220(2A)(iii) to provide that –

  1. i) an order accepting or rejecting application of an assessee shall be passed by the concerned officers within a period of twelve months from the end of the month in which such application is received.
  2. ii) no order rejecting the application of the assessee under sections 220 / 273A/273AA shall be passed without giving the assessee an opportunity of being heard.

iii) However, in respect of applications pending as on June 1, 2016, the order under said sections shall be passed on or before May 31, 2017.

  1. Section 234C:

Consequential changes are made in Sec. 234C in line with advance tax provisions amended in point no. 12 above.

23.Section 244A:

Interest on refund u/s 244A –

  1. i) If return filed after the due date – interest on refund to be payable from the date of filing return
  2. ii) Interest on refund of self assessment tax- from date of filing return or payment of tax whichever is later.

iii) For the purpose of determining the order of adjustment of payments received against the taxes due, the prepaid taxes i.e. the TDS, TCS and advance tax shall be adjusted first.

  1. iv) Further, additional interest of 3% would be payable where the refunds arise on account of appeal effect and there is delay in passing of order giving effect to appellate order beyond 3 months or beyond the period of extension granted by Commissioner or Principal Commissioner. In such cases, interest would be payable for the period from date following the date of expiry of 3 months or extended period as the case may be to the date on which the refund is granted

24.Section 252 (Appellate Tribunal)

  1. i) Sub – section (3)(b) is amended which provides that Senior Vice-President of ITAT is precluded from appointed by Central Govt. as President.
  2. ii) Sub – section 4A is omitted.

iii) Sub – section (5) is amended which provides that Senior Vice-President is precluded exercising powers and functions of the President as may be delegated to him by the President

  1. Section 253 (Appeals to Appellate Tribunal):

Sub-sections (2A) and (3A) of section 253 have been omitted in order to expedite the litigation process and omit filing of appeal by the Assessing Officer against the order of the Dispute Resolution Panel. To give effect to this, relevant amendments are made to sub-section (3A) and (4) of the section.

26.Section 254 (Powers of Appellate Tribunal)

The time limit for rectifying the order of appellate tribunal is now 6 months from the end of the month is which the order was passed.

  1. Section 255

The monetary limit for disposing of the Taxpayer’s case by the Appellate Tribunal is now increased to fifty lakh rupees from fifteen lakh rupees.

  1. Section 273A and 273AA

Section 273A and 273AA is amended to provide time limit for disposing applications made for immunity for penalty.   Proposes that order under sub-section (4) for either accepting or rejecting the application in full or part shall be passed within a period of twelve months from the end of the month in which the application under the said sub- section is received by the Principal commissioner or the Commissioner.

  1. Section 281B

Sec. 281B is amended to provide that AO shall revoke provisional attachment of assets when assessee furnishes bank guarantee for an amount not less than fair market value of such provisionally attached property or for an amount sufficient to protect the interest of Revenue.

  1. Section 282A.

An amendment was proposed in Section   282A(1) so as to provide that notices and documents required to be issued by income-tax authority under the Act shall be issued by such authority either in paper form or in electronic form in accordance with such procedure as may be prescribed.

  1. Section 132

Sec 132A was added to provide that the provisions of chapter VII shall also not apply to taxable  commodities transactions  entered  into  by  any  person  on  a  recognized association located in unit of IFSC where the consideration for such transaction is paid or payable in foreign currency, and thus this transaction was exempted from CTT w.e.f June 1st 2016.

Key changes in new ITR forms for AY 2017-18

The CBDT has notified new income-tax return forms (ITR forms) for the assessment year 2017-18. It has prescribed simplified version of ITR-1 with fewer columns. A new column has been inserted in ITR Forms to report cash deposits in banks above 2 lakhs during the demonetisation period, i.e., from November 9, 2016 to December 30, 2016.

CBDT had prescribed new ‘Form ITR 4 Sugam’ for taxpayers opting for presumptive taxation scheme. A new column has been prescribed to mention digital receipts as the rate of presumptive income is 6% for such receipts.

Changes in new ITR forms:-

1) Simplified one page ITR Form for Salaried class taxpayers

[ITR 1 Sahaj]

Now the Govt. has notified simplified one page form ‘ITR-1 Sahaj’ for individuals earning income from salary, pension, one house property and income from other sources. It has removed columns which are not frequently used by the taxpayers.

New ‘ITR-1 Sahaj’ has retained those deductions which are most frequently used by the taxpayers, viz, under Section 80C, 80D, 80G and 80TTA.

If any taxpayer wants to claim deduction under any other provision of chapter VI-A he can specify the relevant Section in column titled as ‘Any other’. Schedules of TDS and TCS have been merged into one in order to make ITR 1 shorter and simpler.

However, new columns have been inserted to report dividend income and long-term capital gains exempt under Section 10(34) and Section 10(38) respectively.

2) Disclosure of cash deposits during demonetization

[ITR 1, 2, 3, 4, 5, 6, 7]

A new column has been introduced in all ITR Forms to report on cash deposited by taxpayers in their bank accounts during the demonetization period, i.e., from November 9, 2016 to December 30, 2016. However, taxpayer are required to fill up this column only if they have deposited Rs 2 lakh or more during the demonetization period.

3) Quoting of Aadhar Number

[ITR 1, 2, 3, 4]

The Finance Bill, 2017 as passed by Lok Sabha has introduced a new Section 139AA requiring every person to quote Aadhar number in the return of income. If any person does not possess the Aadhaar Number but he had applied for the Aadhaar card then he can quote Enrolment ID of Aadhaar application Form in the ITR.

It may be noted that firms are also required to Quote Aadhaar number of their Partner/members in new ITR 5. Further, in case of trust Aadhaar number of Author(s) / Founder(s) / Trustee(s) / Manager(s), etc., are required to be specified in new ITR 7.

4) Income taxable at special rates

[ITR 2, 3, 5, 6, 7]

Unexplained income

As per Section 115BBE any unexplained credit or investment attracts tax at 60% (plus surcharge and cess, as applicable), irrespective of the slab of income.

Now new columns have been inserted in ITR Forms under ‘Schedule OS’ to report such unexplained income under ‘Schedule SI’.

It may be noted that any taxpayer having unexplained income cannot opt for ITR-1 Sahaj.

Dividend above Rs 10 lakhs

As per Section 115BBDA the dividend received from domestic company is taxable at rate of 10% if aggregate amount of such dividend exceeds Rs. 10 lakh. New column has been inserted in ITR Forms to declare such dividend income in ‘Schedule OS’.

It may be noted that any taxpayer having dividend income above Rs 10 lakhs and covered under Section 115BBDA cannot opt for ‘ITR-1 Sahaj’.

Patent income

A new column has been inserted in ITR Forms to declare royalty income from patent developed and registered in India and chargeable to tax at 10% under section 115BBF.

5) Deduction under section 80EE

[ITR 2, 3, 4]

Section 80EE allows deduction on home loan interest for first time home buyers. This deduction is over and above the Rs 2 lakhs limit covered under Section 24(b).

A new field has been provided in new ITR Forms under Schedule VI-A deductions to claim home loan interest under Section 80EE.

6) Declaration of value of assets and liabilities by Individuals/HUF earning above Rs 50 lakhs

[ITR 2, 3, 4]

During 2016, the Govt. had introduced new Schedule requiring individuals/HUFs to declare the value of assets and liabilities if their total income exceeds Rs. 50 lakhs. Taxpayers were required to mention cost of immovable property, jewellery, bullion, vehicles, shares, bank and cash balance, etc.

Now tax payers are also required to disclose address of immovable property and description of movable assets in new ITR Forms. Further, new fields have been introduced in ITR Forms for disclosure of ‘Interest held in the assets of a firm or AOP as a partner or member’. Such members/partners are also required to disclose name, address, PAN of the firm or AOP.

7) Registration number of Chartered Accountant Firm

[ITR 3, 5, 6]

Now taxpayers are required to mention registration number of firm of Chartered Accountant which has done audit in ITR Forms.

8) Bifurcation of receipt/expenses from business and profession in no account case.

[ITR 3, 5]

In old ITR Forms there was no option to bifurcate income and expense of business and profession separately. All receipts were to be clubbed together and shown in ITR.

Now in new ITR forms, there is an option to show receipts from business and profession separately.

9) Deduction of additional depreciation in case of asset put to use for less than 180 days in preceding year

[ITR 3, 5, 6]

In case of purchase of an asset which is put to use for less than 180 days, additional depreciation shall be restricted to 50% for that year and remaining would be allowable in the succeeding year.

In old ITR Forms, no column was there under ‘Schedule DPM’ to claim unutilized 50% additional depreciation in succeeding year. Now in new ITR Forms such column has been inserted to claim unutilized 50% depreciation.

10) Segregation of digital receipts and other receipts under presumptive taxation scheme

[ITR 4]

As per the presumptive taxation scheme under Section 44AD, 8% of gross receipts or turnover will be deemed as income of the taxpayer. However, in 2017 Union Budget such limit has been proposed to be reduced to 6% for digital receipts of taxpayer.

In new ITR form, new columns have been inserted to show turnover received through digital mode. Consequently, columns have been inserted to show presumptive income at 6% and 8%.

The Finance Act 2016, had introduced the presumptive taxation scheme for professionals as well. Now new ITR 4 Form shows an option to avail such presumptive taxation scheme for professionals under Section 44ADA.

11) Details of receipts as mentioned in Form 26AS under TDS schedule

[ITR 4]

ITR 4 which is now applicable for taxpayer opting for presumptive taxation scheme has a new column under the ‘Schedule TDS2’ to show the receipts as mentioned in Form 26AS.

12) Disallowance for non-deducting or non-payment of Equalisation levy

[ITR 3, 5, 6]

The Finance Act, 2016 has introduced new provision to deduct 1% Equalization Levy on payment made for certain advertisement services paid to non-residents.

Any default in deduction or payment of Equalization levy would attract disallowance of Section 40(a)(ib). In new ITR Forms a new column has been inserted under ‘Part A-OI’ to mention such disallowance under section 40(a)(ib).

13) Disallowance of any amount payable for use of railway assets

[ITR 3, 5, 6]

Any sum payable by the assessee to the Indian Railways for the use of railway assets shall be allowed as deduction on actual payment basis as per section 43B.

A new column has been inserted under ‘Part A-OI’ for disallowance under section 43B in case of non-payment of such amount on or before due date of furnishing return of income.

14) New schedule to report ‘receipt and payment’ account of a company under liquidation

[ITR 6]

A new schedule ‘Part A-OL’ has been inserted in ITR 6 to furnish details of ‘receipt and payment’ account of company under liquidation.

15) Changes related to ITR 7

[ITR 7]

Various changes have been introduced in the new ITR 7 form. Now trust is required to furnish following additional details in new ITR 7 –

  1. a) Registration number and date of registration for business trusts registered with the SEBI.
  2. b) ‘Schedule AI’ to report aggregate of income referred to in section 11 and 12 excluding voluntary contribution.
  3. c) ‘Schedule ER’ to report amount applied to charitable or religious purposes (revenue account).
  4. d) ‘Schedule EC’ to report amount applied to charitable or religious purposes (capital account).
  5. e) ‘Schedule 115TD’ to report accreted income of trust under section 115TD

 

Source: www.incometaxindia.gov.in  and taxmann

Management Representation Letter

This letter is most sought after document which an Auditor seeks from the Management of the Company once he has been appointed to audit there accounts. This letter sets out the scope of responsibility which each side assumes and intents, thereby help fix accountability. A sample Management Representation Letter is :

                                                             ABC PRIVATE LIMITED

                              Regd. Office: 8, Abc Lane, Mumbai-700 001 (Maharasthra)

 

To                                                                                                                    Date:27.06.2016

XYZ & Co.

Chartered Accountants

Junction Road,T20, 2nd Floor,

Mumbai – 700 001

 

Dear Sir,

 

Re:     Representation of management for the Statutory Audit for the year ending 31st March, 2016.

===============================================

This representation letter is provided in connection with your audit of the financial statements, the Balance Sheet as at 31st March, 2016 and the Profit & Loss Account for the year ended on that date for the purpose of expressing an opinion as to whether the said financial statements give a true and fair view of the said financial position ofABC Private Ltd. of 31st March, 2016 and of the results of operations for the year then ended. We acknowledge our responsibility for preparation of the said financial statements in accordance with the requirements of the Companies Act, 1956 and recognized accounting policies and practices, including the Accounting Standards issued by the Institute of Chartered Accountants of India.

We confirm, to the best of our knowledge and belief, the following representations:

ACCOUNTING POLICIES:

  1. The accounting policies which are material or critical in determining the results of operations for the year and financial positions are set out in the financial statements are consistent, with those adopted in the financial statements for the previous year. The financial statements are prepared on accrual basis except as stated otherwise in the financial statements.

ASSETS:

  1. The company has a satisfactory title to all assets and there are no liens or encumbrances on the Company’s assets and that the title deeds of immovable property are in possession of the Company.

 

FIXED ASSETS:

3.1.    The company has maintained proper records showing full particulars including quantative details and situation of fixed assets.

The fixed assets of the Company are physically verified according to a phased programme designed to cover all items over a period of three years.

Addition to Fixed Assets amounting to Rs………  have been made and put to use during the year.

We further confirm that no capital expenditure incurred in relation to above assets charged to revenue account.

 

3.2.    The net book values at which fixed assets are stated in the balance sheet are arrived at:

  1. a) after taking into account all capital expenditure and additions thereto, but no expenditure properly chargeable to revenue;
  1. b) after eliminating the cost and accumulated depreciation relating to items sold, discarded, demolished or destroyed;
  1. c) after providing for adequate depreciation on fixed assets during the year.

 

CAPITAL COMMITMENTS:

  1. At the Balance Sheet date, there were no outstanding commitments.

INVENTORIES

  1. The company has not purchased/sold any goods during the year nor is there any opening stocks.

INVESTMENTS

6.1     All the investments are considered as long term investment and are stated at cost. No provision has been made for diminution in value of Investments which are considered temporary in nature by the management.

6.2     The investments as shown in the books are properly valued. Proper records have been maintained for the transaction relating to shares and timely entries have been made. All the securities shown there have been held by the Company in its own name.

6.3     The basis of valuation is the same as those used in the previous year.

DEBTORS, LOANS AND ADVANCES:

7.1.    Sundry debtors as on 31.03.16 comprise of amount receivable from Revive Traders Pvt. Ltd.

7.2.    The following items appearing in the books as at 31st March, 2016 are considered good and fully recoverable. No provisions have been made against them.

Loans                                        Rs…………

Advances                                    Rs………..

 

OTHER CURRENT ASSETS:

  • In the opinion of the Board of Directors, other current assets have a value on realization in the ordinary course of the Company’s business which is at least equal to the amount at which they are stated in the Balance Sheet.
  • The company has Rs. ……………. as Cash balance as on 31.03.16 as certified by the management.

LIABILITIES:

9.1.    The debit and credit balances of current liabilities and advances have been correctly allocated and shown in the balance sheet.

9.2.    We have recorded all known liabilities in the financial statements. No legal case is pending except those stated in the financial statements against the company or instituted by the Company, which would give rise to any material liability.

  1. We state that we did not give any guarantee to third parties.
  1. There is co contingent liability to the knowledge of the Management which may likely to result in a loss and which, therefore, require adjustment of assets or liabilities.

 

PROVISION FOR CLAIMS AND LOSSES:

  1. Provision has been made in the accounts for all known losses and claims of material amounts.
  1. There have been no events subsequent to the balance sheet date, which require adjustment of or disclosure in, the financial statements or notes thereto.

 

PROFIT AND LOSS ACCOUNT:

14.1.   Except as disclosed in the financial statements, the results for the year were not materially affected by:

  1. transactions of a nature not usually undertaken by the company;
  2. circumstances of an exceptional or non – recurring nature;
  3. charges or credits relating to prior years;
  4. changes in accounting policies.

14.2.   The allocation between capital and revenue has been correctly done and that no expenditure of capital nature has been charged to revenue.

ACCOUNTING STANDARDS

  1. We confirm following representation in respect of related parties:
  1. We have identified all the related parties and transactions with such parties. The information provided to you is complete in all respects.
  2. The disclosures made in the financial statements are adequate having regard to the framework under which the financial statements have been drawn.
  3. The financial statements are free from material misstatements, including omissions with regard to related parties and transactions with related parties.

 

16.1   Deferred Tax Assets have not been recognized as there is no reasonable certainty that sufficient future taxable income will be available to realize the same.

16.2    The Company does not have any assets which are required to be impaired in accordance with provision of AS 28 issued by The Institute of Chartered Accountants of India.

16.3    The Company has  entered into any derivative instruments for trading or speculative purposes and Rs…………. is receivable from XY Traders Pvt. Ltd. in that regard as on 31.03.2016.

GENERAL:

  1. The Company do not have sale and purchase commitments and has not pledged its assets as collateral security.

 

  1. There have been no irregularities involving management or employees which have a Significant role in the system or internal control that could have a material effect on the financial statement.

There are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and for sale of goods.

  1. The financial statements are free of material mis-statements, including omissions.

20.1.   The Company has complied with all aspects of contractual agreement that could have a material impact on the financial statements in the event of non-compliance. There has been no non-compliance with requirements of regularity authorities that could have a material impact on the financial statements in the event of non-compliance.

20.2.   There is no contravention during the year of the provisions of section 74,75,180, 185 and 186 of the Companies Act, 1956 as amended.

  1. We have no plans or intentions that may materially affect the carrying value or classification or assets and liabilities reflected in the financial statements.
  1. All purchase/acquisitions and disposals of fixed assets and investments made during the year have duly been approved by appropriate authority.
  1. There are no payments or remuneration provided or paid to Directors and/or other managerial personnel during the year which required disclosure in pursuance of Schedule III to the Companies Act, 2013 besides what have been shown in the financial statements.
  1. No personal expenses of employees or Directors other than those payable under contractual obligations or in accordance with the prevailing practices have been charged to revenue.
  1. There is no undisputed amount payable in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duties and Excise Duties and any other statutory dues outstanding as at the year end for a period of more than six months from the day they became payable. Company is regular in payment of all undisputed statutory dues relating to all that enactment’s which have been enforced by law.
  1. We have received representation from all our Directors confirming that none of the companies in which they are Directors, has violated any provisions of section 164 of the Companies Act, 2013, which precludes them from being a Director of a Public Limited Company and in particular none of these companies has defaulted in. Filing the Annual Accounts and Annual Returns within the prescribed time for the financial year 2013-14, 2014-15 and 2015-16.Repaying its deposit or interest thereon on due date or redeem its Debentures on due date or pay dividend and such failure has continued for one year or more.

28.Register of Contracts:

  1. The Company has recorded particulars of all contracts or arrangements in Register (MBP-4) referred to in section 189(1) of the Companies Act, 2013 read with rule 16(1),  in the register required to be maintained under that section.
  2. The rate of interest and other terms and conditions on which loans given to companies, firms or other parties have been stated in Register maintained pursuant to section 186 of the Companies Act, 2013 they are not prima facie prejudicial to the interest of the company.
  3. There is no overdue amount of interest or installment on loan borrowed from companies, firms or other parties as stated in the register maintained for that purpose.
  1. The Company has not given any guarantee for loans taken by others from Bank or financial institutions.
  1. The Board of Directors monitors and reviews the operation of Company periodically. The Board of Directors verifies, cross check various accounts, reports generated by computer system and during their review which covers:
  1. Cash flow including fund management (Bank reconciliation)
  2. statutory deduction, payment of statutory dues and timely submission of all returns
  3. Releasing payments and authorizing vouchers for expenses,
  4. Discharging dues to creditors, cost control measures etc.
  1. The company has not taken any loan or financial assistance from financial institutions and/or banks.
  1. The company has not granted any loans and advances on the basis of securities by way of pledge of shares, debentures or other securities.
  1. The company is neither a chit fund nor a nidhi/mutual benefit society..
  1. The company is not required to maintain cost records under section 209(1)(d) of the Companies Act, 1956 for any product of the company.
  1. The company has not accepted any deposit from public.
  1. The company has not raised any term loan during the year.
  1. The company has not used any funds raised on short term for long term investment.
  1. Preferencial Offer, if any, has been as per section 62(1)(c ) read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014 and Section 42 read with Rule 14 of Companies (Prospectus and Allotment of Securities) Rule 2014.
  1. The company has not issued any debentures.
  1. The company has not raised any money by public issue during the year.
  1. No fraud on or by the Company has come to our notice or reported during the year.
  1. The company is a Small and Medium Sized Company (SMC) as defined in the General Instructions in respect of Accounting Standards notified under the Companies Act, 1956. Accordingly the company has complied with the Accounting Standards as applicable to a Small and Medium Sized Company.
  1. Pursuant to sub-section (1) of section 467 of the Companies Act, 2013, the amount due to Micro and Small Enterprises, if any, has been disclosed in Balance Sheet.

 

For, ABC PRIVATE LIMITED

 

(DIRECTOR)

Life Insurance Plans

Life Insurance Plans for Insurance and savings under section 80C of the Income Tax Act, 1961

NEW ENDOWMENT PLAN(Table 814)

This a plan in which premium is given annually but the maturity proceeds is given to the life insured only after a fixed period of time. Let us take an example:

Name                                  :   Mr. A

Age                                      :  30 years

Term                                    :  16 years

Double Accident Benefit :   5,00,000 (If death is caused by accident, 5 lac extra would be received)

Sum Assured                      :  5,00,000

 

In the above case, 1st year premium with tax 3.75% would result in yearly premium of Rs. 32,767/- (31585 + 1184). From next year onwards tax would be at lower rate of 1.875% so it would come to Rs. 32,177/- ( 31585 + 592).

 

Approximate tax saved every year is 9830/-

Total approximate paid premium over the years would be Rs. 5,15,424/-

 

Approximate return at maturity time:

Sum Assured                               :  5,00,000/-

Bonus                                           :  3,36,000/-

Final Additional Bonus (FAB)   :     12,500/-

 

Total approximate return at maturity date is Rs. 8,48,500/-

 

JEEVAN ANAND (Table 815)

This is an endowment plan with the tagline…”Jindagai ke sath bhi aur jindagi ke baad bhi”. It means that you would get the full benefits or maturity proceeds on survivorship, i.e, completion of term and later again your family would get the sum assured  when the insured dies or reaches the age of 80.

 

Name                                  :    Mr. A

Age                                      :   30 years

Term                                    :   16 years

Death Sum Assured          :   6,25,000

Sum Assured                      :   5,00,000

 

In the above case, 1st year premium with tax 3.75% would result in yearly premium of Rs. 38,291/- (36907 + 1384). From next year onwards tax would be at lower rate of 1.875% so it would come to Rs. 37,599/- ( 36907 + 692).

 

Approximate tax saved every year is 11487/-

Total approximate paid premium over the years would be Rs. 6,02,276/-

 

Approximate return at maturity time:

Sum Assured                               :  5,00,000/-

Bonus                                           :  3,60,000/-

Final Additional Bonus (FAB)   :     12,500/-

 

Total approximate return at maturity date is Rs. 8,72,500/-, plus life time Rs. 5,00,000/- risk cover.

 

JEEVAN TARUN (Table No. 834)

This is a children policy for child before 12 years of age.  The policy matures when the child attains the age of 25 years. If some untoward incident happens with the proposers, then the future premium payments are waived and maturity benefits of the policy are not disturbed. In this policy, we have to make one choice out of the following four:

  • No survival, maturity benefit 100% of sum assured
  • 5% of Sum Assured for 5 years, Maturity benefit of 75% of sum assured.
  • 10% of Sum Assured for 5 years, Maturity benefit of 50% of sum assured
  • 15% of Sum Assured for 5 yers, Maturity benefit of 25% of sum assured.

 

 

Suppose, we choose the option, 10% of Sum Assured for 5 years, maturity benefit of 50% of sum assured.

 

Name                                  :    Master  A

Age                                      :   10 years

Proposer’s Age                  :   40 (Father or Mother)

Term                                    :   15 years

Death Sum Assured          :   6,25,000

Sum Assured                      :   5,00,000

Premium Waiver Rider     :   Yes

 

In the above case, 1st year premium with tax 3.75% would result in yearly premium of Rs. 49,778/- (47979 + 1799). From next year onwards tax would be at lower rate of 1.875% so it would come to Rs. 48,879/- (47979 + 900).

 

Approximate tax saved every year is 14933/-

Total approximate paid premium over the years would be Rs. 4,89,689/-

 

Money Back At:

20 to 24th Total 5 year :    50,000 (i.e, 50000 X 5  = 2,50,000)

Bonus                                           :  2,85,000/-

Final Additional Bonus (FAB)   :     10,000/-

Approximate Return at Maturity Time : 25th year (50% Sum Assured + Bonus + Final Additional Bonus) 5,45,000-

Total approximate return is Rs. 7,95,000/-

 

BIMA BACHAT(Table no. 816)

This is a single premium plan, when only one premium is paid and maturity is received after certain fixed number of years.

Name                                  :    Mr  A

Age                                      :   30 years

Term                                    :   9 years

Sum Assured                      :   5,00,000

 

 

The Single Premium With Tax would be Rs. 367363/- (354085 + 13278)

 

Approximate tax saved is 45000/-

 

Money Back At:

3rd year                          :  75,000/-

6th year                          :  75,000/-

Loyalty Addition (LA)  :   55,000/-

 

Approximate return at maturity time 9th year (single premium paid + Loyalty Addition) Rs. 4,22,363/-

 

Total approximate maturity Rs. 5,72,363/-

 

JEEVAN AKSHAY VI(  Table No.

This is a pension plan where the annuity starts immediately. Suppose, we choose the option of ‘Annuity for life with return of purchase price.

 

Age                                :        40

Sum Assured               :   5,00,000/-

Single Premium          :   5,07,500/-

 

Annual annuity is Rs. 34,150/- and on death the sum of Rs. 5,07,500/- shall be given back to the nominee.

 

PRADHAN MANTRI GARIB KALYAN YOGNA

When this scheme was launched, there was a hue and cry from opposition that why is the government giving the black money hoarders a change to convert the black into white when it was announced at the time of erstwhile ‘Income Disclosure Scheme’ that no further chance would be given. I personally feel that Government was left with no option but to bring the PRADHAN MANTRI GARIB KALYAN YOGNA.  The situation was such that people were trying various means and options of converting there black money into white money illegally. Various bank officials and managers were also arrested in this connection. Innocent people who had earned the money by hard way but never filed there income tax returns were the most hit, there money was not actually black but they cannot prove it now.

I personally advice that this YOGNA should be embraced with open hands, it is better to invest here than to go after some crook who only assures that there money will be converted into white (at least some part). Such money will never escape scrutiny from the Income Tax Department and the money paid to such crook is a dead loss.

When the old 500/- and 1000/- notes were banned, people lamented that they did not opt for INCOME DISCLOSURE SCHEME where tax rate was 45%, believe me that if you do not opt for PRADHAN MANTRI GARIB KALYAN YOGNA then you will lament that why did you miss this opportunity. I am saying so because, going by the track record of our honorable Prime Minister, he does what he says. He is saying that this is just a beginning , the picture is yet to come. Dear friends, he is going to come in a big way with THE BENAMI TRANSACTIONS (PROHIBITION) ACT .

Three steps are required to be taken in this PMGKYogna:

  1. Declaring about the deposits and cash
  2. Pay taxes and make the deposit:

The declarant has to pay 30% tax, 33% as surcharge tax, 10% penalty on overall income. This will come to almost around 50% of the total income. The person has to pay 25% of total declared amount to Pradhan Mantri Garib Kalyan Yogna, 2016. This deposit shall be blocked for a period of four (4) years and thereafter shall be paid without interest.

Suppose declared income  is                          100

Tax (30%)                                                                     30.00

Surcharge (33%)                                                           9.90

Penalty (10%)                                                               10.

—–

49.90

  1. Declaration shall be made with payment and deposit proof

The last date for availing this YOGNA is 31st January, 2017 so hurry up.

The following persons are not eligible to opt for the PMGKY:

  1. Any person in respect of whom an order of detention has been made Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
  2. Any person who is liable to punishment under Prevention of Corruption Act, 1988, Benami Property Transaction Act, 1988 or Prevention of Money-laundering Act ,2002
  3. The persons having undisclosed foreign income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 1992
  4. Any person notified under Special Court Act, 1992

Government had brought certain amendments in the Income tax provisions so that tax on undisclosed income is 30% and with surcharge etc upto 50% but once the time is over the dreaded sections of Income Tax Act, 1961 will be unleased. They will make you dole out 60% tax and interest and penalty that will add up to a figure sufficient enough to your head a whirling experience.

Just have a look at some of the penalty provisions of the Income Tax Act:

Section Nature of default Penalty leviable
(1) (2) (3)
158BFA(2) Determination of undisclosed income of block period Minimum : 100 per cent of tax leviable in respect of undisclosed income
Maximum : 300 per cent of tax leviable in respect of undisclosed income.
221(1) Default in making payment of tax Such amount as Assessing Officer may impose but not exceeding amount of tax in arrears
270A(1) Under-reporting and misreporting of income A sum equal to 50% of the amount of tax payable on under-reported income.

However, if under-reported income is in consequence of any misreporting thereof by any person, the penalty shall be equal to 200% of the amount of tax payable on under-reported income