June 2016 - All India Chartered Accountant's Society - The Chartered Accountant World

Thursday, June 16, 2016

Clarification regarding cancellation of registration u/s I2AA

It is clarified that it shall not be mandatory to cancel the registration already granted u/s 12AA to a charitable institution merely on the ground that the cut-off specified in the provisoto section 2(15) of the Act is exceeded in a particular year without being there any change in the nature of activities of the institutions. If in any particular year, the specified cut-off is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground(s) prescribed under the act.

CBDT Circular No. 21/2016

Firms have to furnish R & D certificate for deductions

Seeking to check diversion of funds in the name of in-house R&D, the Revenue Department has said companies will have to produce a certificate from an accountant for claiming tax deductions on such expenditures. The provision will have a bearing for bio-technology companies and also those which rely heavily on in-house research & development (R&D). Finance Minister in his Budget 2016-17 has tightened the norms for claiming deductions by reducing the weighted deduction available for in-house R&D from 200 per cent to 150 per cent. The expenditure incurred will also have to be ratified by the Secretary in the Department of Scientific and Industrial Research.

Life insurers resist IRDA's compulsory listing suggestion

The Insurance Regulatory and Development Authority (Irda) wants life insurers to mandatorily list shares on the stock exchanges while the industry has said that promoters should be allowed flexibility in capital management. In a recent meeting with CEOs, the regulator asked insurers to compulsorily evaluate listing in order to improve corporate governance.

The industry, however, suggested that not more than three-four companies are in a position to evaluate listing since growth in new business and profitability remains a challenge.

Management expense caps announced for general insurers

The Insurance Regulatory and Development Authority of India (Irdai) has brought out a new set of norms on expenses of management for general insurance and standalone health insurance companies, based on the line of business. These take effect from this financial year.

Expenses of management would include all those in the nature of operating expenses — commission, brokerage, remuneration to agents and to intermediaries, charged to the revenue account.

No general insurance or health insurance business can exceed the amount stipulated. In motor insurance, the allowable expense is 37.5 per cent of gross premium for the first Rs 500 crore. It is 32.5 per cent for the next Rs 250 crore and 30 per cent for the balance. There would be penalties if the expense limits are exceeded.

Govt eases garment export incentives

Concerned over stagnating garment exports, the Union ministry of commerce has removed restrictions under the Incremental Exports Incentivisation Scheme.

MCA notifies sections of Companies act 2013

The provisions of clause (iv) of sub-section (29) of section 2, sections 435 to 438 (both sections inclusive) and section 440 of the said Act shall come into force w.e.f. 18^th May 2016.

Return of pre-deposit in Sarfaesi suits

A borrower can file an appeal against the Debt Recovery Tribunal (DRT) before the appellate tribunal only if he deposits 50 per cent of the due amount or 50 per cent ordered by the DRT, whichever is less. That is the rule under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act. The appellate tribunal may reduce the amount to 25 per cent. What is the fate of such deposit on the disposal of the appeal? The Supreme Court ruled that the amount is deposited by the borrower with the tribunal and not the creditor and it is not bailment. In the Axis Bank versus SBS Organic case, the borrower sought the return of the pre-deposit after the disposal of the suit. But the bank opposed it and claimed it on the ground that the amount had to be set off against the dues of the borrower. The bank contended that it has to secure the entire debt by proceeding against the secured assets, and therefore, the deposit is liable to be appropriated by the bank. Rejecting the arguments of the bank, the judgment stated that the Act permitted the secured creditor to proceed only against the secured assets. The pre-deposit as a condition is neither a secured asset nor a secured debt, since the borrower has not created any security interest on such pre-deposit in favour of the secured creditor. The bank has no lien on the amount either, the judgment said, ordering the return of the pre-deposit.

Norms relaxed for faster movement of coastal cargo

"The container carrying coastal goods shall be clearly marked with the words 'For Coastal Carriage Only' on all sides. There shall be no examination of the coastal goods, the container shall be sealed with tamper-proof one-time bottle seal and then the same can be loaded on to the vessel," CBEC said in a circular.

It further said non-containerized cargo will also be allowed to be loaded on the vessel provided it is clearly marked on the packing 'For Coastal Carriage Only' to make it easily identifiable.

CCI Panel set up to vet Etailers' Cashback Sops

India's competition watchdog has formed an in-house expert panel to ascertain whether the cashback incentives offered by digital wallets and e-tailers on recharges, bill payments or purchase of other products constitute predatory pricing.

Govt raises support for exports under MEIS

The government has broadened the ambit of its Merchandise Exports from India Scheme (MEIS) and scrapped a requirement for exporters to submit landing certificates of goods to avail of benefits under the MEIS.
Under the MEIS, the government usually provides exporters duty credit scrip at 2% and 3% of their export turnover, depending upon the product and the export destination, as envisaged in the foreign trade policy 2015-20. The scrip can be transferred or used for payment of a number of duties, including the basic customs duty.
All 5,012 products covered under the MEIS will be eligible for global coverage from May 4, according to the directorate general of foreign trade. This means irrespective of the export destinations, the outbound shipments of all items contained in the MEIS list will be eligible for specific benefits under the scheme. Earlier, exports of as many as 2,787 products were eligible for MEIS benefits only if they were shipped to specified regions.

Centre genetically modifies trade rules

After imposing intrusive price controls on genetically modified (GM) cotton seeds late last year, the government has now nullified, in a single stroke, all the existing licence agreements between trait providers and seed producers and laid down new mandatory norms for licensing, completely depriving technology companies like US-based Monsanto of the freedom to choose the licensees or negotiate commercial terms.

Reserve Bank India caps customer liability in fraudulent deals

RBI would take strict action, including heavy penalty, if the banking industry continues to harness such unethical and unacceptable practices of misspelling third party products. It would be appropriate for the banks to put in place a system of period inspection on sale of third party products by their own staff or DSAs.

Wednesday, June 15, 2016

Key takeaways from Model GST law - Summary - Compilation

On June 14, 2016 the Finance Ministry has released the 'Model GST Law'. It outlines the structure of the GST regime. Further, the draft of 'Integrated GST Bill, 2016' is also released along with such Model GST laws. It also provides the framework for levy and collection of CGST and SGST. "CGST" is the tax levied under the Central Goods and Services Tax Bill, 2016. "IGST" is the tax levied under the Integrated Goods and Services Tax Bill, 2016.

Key takeaways from Model GST law are given hereunder:

Threshold limit for registration - The dealer is required to take registration under this law if his aggregate turnover in a financial year exceeds Rs.9 lakhs. However, dealers conducting business in any North Eastern State are required to take registration if their turnover exceeds Rs.4 lakhs.
Place of registration- The dealer has to take registration in the State from where taxable goods or services are supplied.
Migration of existing taxpayers to GST - Every person already registered under extant law will be issued a certificate of registration on a provisional basis. This certificate shall be valid for period of 6 months. Such person will have to furnish the requisite information within 6 months and on furnishing of such information, final registration certificate shall be granted by the Central/State Government.
GST compliance rating score - Every taxable person shall be assigned a GST compliance rating score based on his record of compliance with the provisions of this Act. The GST compliance rating score shall be updated at periodic intervals and intimated to the taxable person and also placed in the public domain.
Levy of Tax - The person registered under this law is liable to pay tax if his aggregate turnover in a financial year exceeds Rs 10 lakhs. However, a dealer conducting business in any of the North Eastern is required to pay tax if his aggregate turnover exceeds Rs. 5 lakhs.

A negative list has also been prescribed for transactions and activities of Government and Local Authorities which shall be exempt from GST levy, like activities of issuance of passport, visa, driving license, birth certificate or death certificate, etc.
Taxable Event - The taxable event under GST regime will be supply of goods or services. Supply includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration. It also includes importation of service, whether or not for a consideration.
Point of taxation - CGST/SGST shall be payable at the earliest of the following dates, namely:
(i) Date on which the goods are removed for supply to the recipient (in case of movable goods).

(ii) Date on which the goods are made available to the recipient (in case of immovable goods).

(iii) Date of issuing invoice by supplier; or

(iv) Date of receipt of payment by supplier; or

(v) Date on which recipient shows the receipt of the goods in his books of account.
TCS on online sales of goods or service - Every E-commerce operator engaged in facilitating the supply of any goods and/or services (like Amazon, Flipkart, etc.) shall collect tax at source at the time of credit or at the time of payment whichever is earlier.
Valuation Rules - Such Rules shall apply to the supply of goods and/or services under the IGST/CGST/SGST Bill. Some of the methods prescribed for valuation are given hereunder:
a) Transaction Value: As per this method the value of goods and/or services shall be the transaction value.
b) Transaction value of goods or services of like kind: Where value of supply cannot be determined under previous method [i.e. point a], the value shall be determined on the basis of transaction value of goods and/or services of like kind and quality supplied at or about the same time to customers.
c) Computed Value Method: Where value cannot be determined under previous method [i.e., point b], it shall be based on computed value which shall include cost of production, manufacture or processing of the goods or, the cost of the provision of services, the charges, if any, for design and brand and amount towards profit and general expenses.
d) Residual Method: Where the value cannot be determined under the computed value method, the value shall be determined using reasonable means consistent with the principles and general provisions of these Rules.
Utilization of credit:

Utilization of IGST: The amount of input tax credit on account of IGST available in the electronic credit ledger of dealer shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order.

Utilization of SGST: The amount of input tax credit on account of SGST available in the electronic credit ledger shall first be utilized towards payment of SGST and the amount remaining, if any, may be utilized towards the payment of IGST.

Utilization of CGST: The amount of input tax credit on account of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST.

Note: The input tax credit on account of CGST shall not be available for payment of SGST.
Payment - Any tax, interest, penalty, fee, etc., shall be paid via internet banking or by using credit/debit cards or NEFT or RTGS. This amount shall be credited to the electronic cash ledger of dealer.
TDS - The Central or a State Government may mandate certain departments (viz, local authority, Govt. agencies) to deduct tax at the rate of one percent on notified goods or services, where the total value of such supply, under a contract, exceeds Rs 10 lakhs.
Refund - A person can claim refund of any tax and interest by making an application in that regard to the prescribed officer of IGST/CGST/SGST. The application can be made before the expiry of two years from the relevant date as may be prescribed. It has been provided that the limitation of two years shall not apply where such tax or interest or the amount has been paid under protest.
Returns - Dealers shall be required to furnish following returns
a) Monthly Return: Every registered taxable person shall have to e-file a monthly return for inward and outward supplies of goods and/or services, input tax credit availed, tax payable, tax paid and other particulars within 20 days after the end of such month.

b) Return for Composition Scheme: Dealers paying tax under composition scheme shall have to furnish a return for each quarter or part thereof, electronically within 18 days after the end of such quarter.

c) TDS Return: Every dealer who is required to deduct tax at source shall furnish a return electronically within 10 days after the end of month in which deduction is made.

d) Return for Input Service Distributor: Every Input Service Distributor shall file e-return for every calendar month or part thereof, within 13 days after the end of such month.

e) First Return: Every registered taxable person paying CGST/SGST on all intra-State supplies of goods and/or services shall have to furnish the first return from the date on which he became liable to registration till the end of the month in which the registration has been granted.

f) Annual return: Every registered taxable person shall have to furnish an annual return for every financial year electronically on or before the 31st day of December following the end of such financial year.

g) Final return: Every registered taxable person who applies for cancellation of registration shall have to furnish a final return within three months of the date of cancellation or date of cancellation order, whichever is later, in a prescribed form.
15. Transitional Provisions

a. Under the Model GST Law, a registered taxable person will be entitled to take credit of the amount of cenvat credit/ Value Added Tax carried forward in a return furnished by him in respect of the period ending with the day immediately preceeding the appointed day.

b. As per Model GST Law, a registered taxable person shall be entitled to take in his electronic credit ledger/credit of the unavailed cenvat credit/ unavailed input tax credit in respect of capital goods not carried forward in a return furnished by him for the period ending with the day immediately preceding the appointed day.

c. If a person registered under GST was not liable to be registered under the earlier law or if he was manufacturing exempted goods under the earlier law which are not taxable, then he will be allowed to take credit of eligible duties and taxes in respect of inputs held in stocks or semi-finished/finished goods.

d. Every claim for refund of any duty/tax and interest, if any, paid on such duty/tax or any other amount, filed by any person before the appointed day, shall be disposed of in accordance with the provisions of earlier law and any amount eventually accruing to him shall be paid in cash. However, where any claim for refund is fully or partially rejected, the amount so rejected shall lapse

Government to link 585 agri-markets electronically by next year

The government will cover as many as 585 agricultural markets electronically by next year, which will allow farmers to sell their produce anywhere in the country. On April 14, the government had launched the project on a pilot basis, beginning with 21 markets covering eight States.

SC returns government Memorandum of Procedure for selection of high court judges

The Supreme Court has turned down a new Memorandum of Procedure (MoP) — a guideline for selection of high court judges — and returned it to the government, two months after the Centre prepared it.

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