Thursday, July 13, 2017

GST : TRADERS WITHIN REVENUE THRESHOLD OF 1.5 CR WILL UNDER EXCLUSIVE CONTROL OF THE STATE

GST Council says states will get exclusive control over all dealers up to a revenue of Rs1.5 crore—addressing the issue of dual control over small traders

In a big step towards the implementation of the goods and services tax (GST), the centre and the states on Friday reached a consensus on most contentious issues under the new indirect tax regime, raising hope that they would be able to agree on the last remaining issue, the tax rates, by next month.

The GST council, at its first meeting, agreed on a revenue threshold of Rs20 lakh below which the traders will be exempted from GST. This limit will be Rs10 lakh for the north-eastern and hill states.

The council also managed to reach middle ground on sharing of administrative powers between the centre and the states. It decided that states will get exclusive control over all dealers up to a revenue threshold of Rs1.5 crore—thus addressing the issue of dual control over small traders.

Given the lack of expertise among states to levy service tax, the centre will get control over all the existing 1.1 million service tax-registered dealers irrespective of their revenue levels.

The new additions to the dealer base will be shared between the centre and the states at a later stage once the states develop the requisite expertise.

For traders with revenue above Rs1.5 crore, a mechanism will be worked out wherein an assessee will be regulated either by the central government or the state government, based on risk evaluation.“All decisions were arrived at by a consensus and not by voting,” said finance minister Arun Jaitley after the meeting.

The swift agreement on these contentious issues also raises hopes that the 1 April 2017 implementation date for GST will be met. Revenue secretary Hasmukh Adhia said the GST council had made good progress in managing to resolve many issues.

The next meeting of the GST council will be held on 30 September when it will decide on the five categories of draft rules detailing the processes under GST and on area-based and industry-wise exemptions. The tax rates and the slabs will be decided at a meeting to be held between 17 and 19 October.

In the meeting held Friday, the states agreed to keep 2015-16 as the base year for computation of compensation. All items including cesses will be included in the revenue base.

It has been agreed that compensation to the states for potential revenue loss resulting from the transition to GST will not be bunched up and either made bi-monthly or quarterly. However, the final procedure for computation of revenue projections is yet to be worked out. The options being discussed are to arrive at a growth rate for revenue projections, or take into account the revenue for the best three years in the last five years.

The exemption limit will make it administratively easier for the government and keep several small businesses out of the GST ambit, said Pratik Jain, leader, indirect tax, at consulting firm PricewaterhouseCoopers India.

The decision to give centre administrative control over small traders may mean dual control for companies that provide both goods and services, said Harishanker Subramaniam, national leader, indirect tax, at EY India.

Business Standard, New Delhi, 10th July 2017

Friday, July 7, 2017

Perks Gifts to Employees May Come Under GST

Cos could however claim input tax credit on intra-company transactions.

India Inc may have to deal with another avatar of GST — the tax may be applicable on senior executives’ big-ticket perquisites over and above those mentioned in the employment contract and on gift items of over Rs 50,000. However, companies should be able to claim input tax credit on these intracompany ‘transactions’.

Tax professionals ET spoke to said the rate may be in the 18% band, depending on the nature of the perk/gift. A finance ministry official, who did not wish to be identified, said an employer’s gifts to employees will be treated as supplies without any consideration and attract GST. However, companies are likely to be able to claim input tax credit on it. Keeping tabs on company perks and gifts will not be an additional enforcement cost to the government, tax experts said. All purchases by companies will be available on GSTN. Therefore, during audits these issues can be easily identified. GST rules say services by an employee to the employer will not attract tax if they are related to his/ her employment. However, other kind of services may attract GST. “If an employee acts as a DJ in a company offsite and gets paid, such payment by his employer will attract GST,” said Waman Parkhi, partner, indirect tax, at consultancy firm KPMG.

Economic Times New Delhi, 06th July 2017

Tuesday, July 4, 2017

GST: Directors face higher risks for tax default

The goods and services tax (GST), India’s new indirect tax regime, makes directors of private limited companies liable for recovery of unpaid taxes, interest or penalties pertaining to supply of goods or services. To complicate matters, the GST Acts do not provide a definition for the term ‘director’ or make any distinction between executive or non-executive directors. Further, the existing directors and officer’s liability insurance — that helps a company hedge against professional and functional risks emanating from managing and running a business – do not cover the additional risks under GST.

Section 89 of the Central GST Act refers to recovery of tax, interest and penalties in case of private companies. “In such cases all directors will be held liable unless they prove it is not due to their neglect or breach of duty," says Shriram Subramanian, founder and managing director, InGovern Research Services.

Legal experts say VAT Acts of some states put the onus on directors for such pending recoveries from private companies, which are in the process of being wound up. However, GST extends this to pending tax dues of all private companies, taking a cue from provisions similar to the one provided in Section 179 of the Income Tax Act,1961, notes Lalit Kumar, partner, J Sagar Associates.

Experts point out that these provisions are applicable notwithstanding the limited liabilities that a director may have under the Companies Act, 2013.

What the Central GST Act says

Section 89: (1) Notwithstanding anything contained in the Companies Act, 2013, where any tax, interest or penalty due from a private company in respect of any supply of goods or services or both for any period cannot be recovered, then, every person who was a director of the private company during such period shall, jointly and severally, be liable for the  payment of such tax, interest or penalty unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

“As a consequence, all persons who were directors of the company during the period of default would be exposed to personal liability to make good the unpaid tax, interest or penalty liabilities," says Sandeep Chilana, partner, Shardul Amarchand Mangaldas. The maximum penalty liabilities under GST laws can go up to 100 per cent of the pending tax amount, he adds.

The provision does not cover directors of public companies, including those which converted from private to public before recovery proceedings are initiated.As the GST Acts do not define the term ‘directors’, this means the provisions would apply to executive as well as non-executive directors, including independent and foreign directors, exposing them to the liabilities. This could expose foreign directors in Indian subsidiaries and joint ventures to huge risks in India, necessitating a review of their position, points out a note on GST by law firm Shardul Amarchand Mangaldas.

Insurance policies may not come in handy to cover the risks posed to directors by the new indirect tax regime. Experts say directors and officers liability insurance (also known as D&O insurance) covers are general in nature and are not specific to any kind of tax liability. “Taxes are always excluded from D&O policies. Also there is an exclusion for negligence," says Chilana.

In face of charges of non-recovery of taxes, interest or penalties, the best bet for a director is to prove that there has been no gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, say legal experts. 

Business Standard New Delhi, 03rd July 2017

Thursday, June 29, 2017

Arun Jaitley: System geared up for GST from July 1

The government has notified the implementation of the central goods and services tax (C-GST) from July 1, making it clear that the roll out of the new indirect tax regime is on course. “I don’t see much of a problem. Small issues will always arise whenever you make a change of any kind. But I’m sure the system is fully geared up and the system will eventually smoothen itself out,” finance minister Arun Jaitley said after a Cabinet meeting on Wednesday.

Asked about West Bengal chief minister Mamata Banerjee’s statement against the implementation of GST from July 1, Jaitley said the date had been decided by consensus by the GST Council, which meant by the Centre as well as all the states.

“It [the date] has not been decided by the Centre. And more importantly, there is a constitutional mandate and that mandate is that on 16th of September, you
will lose the right to collect existing taxes. So the alternate system has to come into pl ..“We have spent so much time in building consensus and fortunately, we were able to build consensus. Therefore that spirit of consensus should be maintained by all. Even the function we are organising symbolises that larger national consensus,” he said.

When asked about Trinamool and some other Opposition parties planning to boycott the midnight launch function. States will now notify their respective GST Acts and other provisions including the roll out date.

The Centre has also notified some For purchases from unregistered vendors, a limit of Rs 5,000 a day has been prescribed for payment of tax under reverse charge, which provides relief from cumbersome compliances in case of small and petty expenses.

Further, for purchases exceeding this value, instead of self-invoicing for every transaction, a facility of doing this on a monthly basis has been provided for. A simple summary format for the first two months has also been prescribed (GSTR- 3B) in line with the announcement made in the last GST Council meeting.

It has notified the number of Harmonised System of Nomenclature digits required to be printed on a tax invoice. A registered person with an annual turnover of up to Rs 1.5 crore in the preceding financial year will not be required to mention the digits.

Those with turnover between Rs 1.5 crore and Rs 2 crore will mention two digits and those above Rs 5 crore will mention four digits.Centre has also notified the rate of interest of 18% for delayed payments, 24% for excess claim of input tax credit or undue or excess reduction in output liability, 6% in case of withheld refund and 9% for delayed refund after an order of adjudicating authority of appellate tribunal.

The government would also unveil a new simplified procedure on Thursday for exporters to ensure a smooth transition to GST.“The new procedures will be in line with the GST,” a government official told ET. Customs has already started testing new forms on its systems. Central Board of Excise and Customs has also issued a set of guidance for importers and exporters to help them transition  to GST changes in GST to give relief to small vendors.

The Economic Times New Delhi, 29th June 2017



Wednesday, June 14, 2017

TDS on Rent – Section 194-IB w.e.f 1st June 2017

Bare Act wordings


[Payment of rent by certain individuals or Hindu undivided family.

194-IB. 

(1) Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per cent of such income as income-tax thereon.
(2) The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.
Explanation.—For the purposes of this section, "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.]

Persons required to deduct TDS under Section 194IB

  1. Individual and HUF who are not required to get his accounts audited under section 44AB.
  2. Individual and HUF who are required to get his accounts audited under Points (c), (d) or (e) of section 44AB.
In other words  only individuals and huf who are required to get his accounts audited due to turnover or gross receipts higher than specified limits are not covered under this section, all other individuals are covered in this section.
Individuals and HUF not covered under this section (as mentioned above), company, partnership firm, AOP and  BOI are required to deducted TDS from rent under section 194I.

Payment Covered

Payment of rent to a resident for land or building exceeding Rs. 50,000 per month is liable for tax deduction. Payment of rent paid or payable after 1st June 2017 are covered  only.

TDS Rate

TDS is deductible at the rate of 5% of the rent paid or payable. If the person receiving rent doesn’t furnish his PAN then TDS is deductible at the rate of 20% subject to maximum limit of amount of rent payable for the month of march or last month of tenancy as the case may be.

Time of Deduction

TDS is to be deducted only one time in a year and not in every month. TDS is to be deducted at earlier from the following
  1. Time of credit of rent to the account of payee for the month of march or the last month of tenancy, if property is vacated during the year as the case may be.
  2. Time of payment of rent to payee for the month of march or the last month of tenancy , if property is vacated during the year as the case may be.

TAN number Not required

TAN number is not required by such person to deduct and deposit TDS.

Flow Chart on Section 194-IB



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Saturday, June 3, 2017

Extension of Due Date of furnishing SFT from 31st May 2017 to 30th June 2017


CBDT has vide Press release dated 31st May, 2017 extended the due date for furnishing Statement of Financial Transaction (SFT).

Section 285BA of the Income-tax Act, 1961 requires furnishing of a statement of financial transaction (SFT) for transactions prescribed under Rule 114E of the Income-tax Rules, 1962. The due date for filing such SFT in Form 61A in respect of specified financial transactions registered or recorded during Financial Year 2016-17 is 31st May 2017.

Representations were received in the Central Board of Direct Taxes (CBDT) requesting for extension of the date of filing of the said SFT on account of the teething problems and the volume of data to be compiled. In view of these representations and in order to remove inconvenience and to facilitate ease of compliance, the CBDT, in exercise of powers conferred under section 119 of the Act, have extended the due date of furnishing of the SFT under Rule 114E (5) of the IT Rules, read with sub-section (1) of section 285BA of the Income Tax Act, 1961 in respect of Specified Financial Transactions registered or recorded during Financial Year 2016-17, from 31st May 2017 to 30th June 2017. 

Please find attached Press Release for your information.

GST : TRADERS WITHIN REVENUE THRESHOLD OF 1.5 CR WILL UNDER EXCLUSIVE CONTROL OF THE STATE

GST Council says states will get exclusive control over all dealers up to a revenue of Rs1.5 crore—addressing the issue of dual control ove...