Nov 27, 2009

GST may be 12%

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GST may be 12%
The proposed goods & services tax (GST) could turn out to be a far more benign impost than anyone expected.In what would amount to a radical tax reform, the 13th Finance Commission is understood to have arrived at a revenue-neutral rate of around 12%, at least 4 percentage points lower than what most believed the combined Centre-state rate would be.

According to official sources, in a technical paper the commission is going to release shortly, it would also recommend a substantial broadening of the tax base by including hitherto untaxed – but potentially high-revenue – areas like real estate deals, high-end education and healthcare services. If the proposals are accepted, India Inc’s tax liability will see a major dip. In the commission’s ideal model, GST would subsume taxes on petroleum and alcohol, both of which states want to keep outside the new comprehensive, multi-point tax on value added. Levies on petroleum account for a third of the tax revenues of both the Centre and states.

The commission, headed by Vijay Kelkar, even wants the beedi industry, which forms a large chunk of the domestic tobacco sector, to be brought under GST. The commission’s mandate is to recommend a formula for fiscal resource distribution between the Centre and states, as well as states inter se. It is, therefore, bound to have a decisive say in finalising the GST structure, which is integral to the fiscal resource transfer policy. In fact, the commission has drawn inputs from senior finance ministry officials to prepare the technical paper. The Centre and states continue to disagree on the structure and modalities of GST, with the former keen to use the new tax as a reform tool. So, by releasing the technical paper, the commission would help the Centre turn the table on the empowered committee of state finance ministers, which recently published a GST discussion paper that most analysts said reflected a compromise.

Real estate transactions now attract only stamp duty at the output level, whereas the output incurs input taxes like Vat on construction material and service tax on specified work contracts. “In most countries where a GST / Vat system exists, sale of property is taxed like any other transaction. All input taxes are recouped by taxpayers, except the final consumer, as credit,” said E&Y partner Harishanker Subramaniam. The empowered committee’s model not only leaves many contentious questions unresolved, but also defeats the purpose of capturing most supply chains. under GST to avoid a tax on tax.

The Centre wants the two GST components – central and state – to apply on roughly the same base. The committee’s discussion paper did not agree with this, and proposed that the threshold for goods be retained at the current level of Rs 1.5 crore for central GST and that a much lower threshold of Rs 10 lakh for both goods and services be applicable for state GST. Another point of discord is the number of rates. While the Centre wants a single rate for all transactions on goods or services, the states have pitched for multiple rates by differentiating between goods and services, and also amongst various goods. States have almost agreed on a lower 5% rate for merit goods, but are arguing for the higher standard rate to be 9%
Currently, items that constitute about half the state Vat base are taxed at a lower 4% and this comprises a large number of industrial inputs. Sources said with the finance commission proposals to be out soon, states might strategically defer making any recommendations on rates to March 2010 or beyond. Meanwhile, the Commission on Centre-State Relations, headed by Justice Madan Mohan Punchhi, is also looking into the need and relevance of separate taxes on production and sales of goods & services subsequent to the introduction of the Vat regime.

Nov 26, 2009

Consitution Changes need to made for introducing GST

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Consitution Changes need to made for introducing GST
Constitutional amendment to be basis of new tax regime. The Constitutional amendment for the introduction of goods and services tax (GST) is likely to make more than a dozen changes in the articles relating to Centre-state financial relations, besides changing entries in the Central and state lists.

The Constitutional amendment will be the basis for the new tax regime and will be followed by adoption of separate state and Central GST laws. The last amendment to the Constitution dealing with a financial matter was in 2000, when the Centre was given the power to tax services. The Ministry of Finance was in consultation with the law ministry on drafting of the amendment Bill.

Simultaneously, a joint working group, comprising officials of the central and state governments, is working on the amendment draft. “The Ministry of Law and Justice has conveyed that the amendment will need to make 10-15 changes in various articles since changes in the lists are linked to these provisions. The law ministry is, therefore, trying to ensure the amendment does not make changes in the basic structure of the Constitution, which can be challenged in a court,” an official said.

A crucial issue being discussed is the wording of entries in the lists. Article 246 in Part 11 of the Constitution defines matters on which the Centre and states will have the authority to frame laws. These matters are enumerated in the Seventh Schedule under Union, state and concurrent lists. At present, the Centre is entitled to tax manufacturing of goods and services, while states can tax only sale of goods. “While making changes, the power to tax goods and service cannot be placed in the concurrent list since, in that case, the central law will prevail over the state law. Central GST and state GST also cannot be explicitly listed in the respective lists since specific taxes are not mentioned in the lists,” an official said.

Experts see the Constitutional changes as being “technical in nature”. Satya Poddar, partner, Ernst & Young, said: “There may not be substantial hurdles in the passing of the Bill, assuming there will be a consensus on the broad design of GST. The Constitution was drafted more than 50 years ago when the state of the economy and taxation was different. Revisions should be made to the Constitution, compatible with modern reality.” According to him, the current approach in lists is sectoral. For instance, in Canada, states have the power to tax within the state and the Centre has the power to tax anywhere. “Only restriction is territorial. There are no distinctions, like indirect and direct taxes,” he added.

GST Registration will be Through PAN linked Business Identification Number

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GST Registration will be Through PAN linked Business Identification Number
The model legislation for the introduction of goods and services tax (GST) will have a provision for registration of individuals and companies which pay the tax. The registration will be done through a uniform PAN-linked business identification number. The Department of Revenue in the Ministry of Finance had recently sent a proposal to state governments for making the 10-digit permanent account number (PAN) the starting point for registering GST payees.

As per a senior official, the proposal had been sent recently to state governments in order to have uniformity, against the current practice of having multiple numbers for central excise, value-added tax, central sales tax and importer-exporter codes. Some of the state governments had earlier proposed that the tax information network (TIN) number issued by them for payment of VAT should be used for GST registration, since it was more reliable than PAN. The Centre, however, argued that the number of digits in TIN number varied across states from 12 to 14. It was necessary to have the same of digits for uniformity,” an official said.

The new business identification number was likely to be the 10-digit alphanumeric PAN, in addition to two digits for state code and one or two check numbers for disallowing fake numbers. The total number of digits in the new number was likely to be 13-14. The GST discussion paper presented by the empowered committee of state finance ministers had earlier said the format of the registration number would be worked out in consultation with the Income-Tax Department.

Explaining the advantage of having a PAN-linked number, officials said PAN had an all-India presence. Barring the North-East where residents have income tax exemption, PAN has a presence across the country. It has the single largest base of 40 million assesses as against 6-7 million that were expected to be covered under GST,” said the official. By cross-checking payments of income tax with that of GST through the number, evasion could be prevented. This (the number) would bring the GST PAN-linked system in line with the prevailing PAN-based system for I-T facilitating data exchange and tax-payer compliance,” the GST discussion paper said.

States like Maharashtra, Gujarat and Andhra Pradesh use PAN for preventing evasion through a database linked to it. Atul Gupta, senior director at consultancy firm Deloitte, said: A PAN-linked system would provide a correlation between payment of direct and indirect taxes and the authorities administering them. PAN is uniform throughout the country and other registration numbers, like those in the company laws, are also linked to PAN.” The revenue department had earlier examined a proposal to use the Unique Identification Number for the purpose, but it was dropped since UID would be issued only to citizens while the business identification number would be for all legal entities, including individuals, companies and partnership firms

Nov 25, 2009

Provisions under Section 194J of Income Tax Act in the case of transactions by the Third Party Administrators (TPAs) with Hospitals

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Provisions under Section 194J of Income Tax Act in the case of transactions by the Third Party Administrators (TPAs) with Hospitals
                                               Circular No.-8 /2009
                                                   Government of India
                                                      Ministry of Finance
                                                   Department of Revenue
                                              Central Board of Direct Taxes

                                     New Delhi, dated the 24th November, 2009
Sub: Applicability of provisions under Section 194J of Income Tax Act’61 in
the case of transactions by the Third Party Administrators (TPAs) with
Hospitals etc.

A number of representations have been received from various stakeholders
regarding applicability of provisions under Section 194J of Income Tax Act’61 on
payments made by Third Party Administrators (TPAs) to hospitals on behalf of
insurance companies for settling medical/insurance claims etc with the hospitals.

2. The matter was examined by the Board. As per provisions of section 194J (1)
‘Any person, not being an individual or a Hindu undivided family, who is
responsible for paying to a resident any sum by way of—

(a) fees for professional services, or

(b) fees for technical services, [or]

[(c) royalty, or

(d) any sum referred to in clause (va) of section 28,]

shall, at the time of credit of such sum 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, deduct an amount equal to ten per cent of such sum as
income-tax on income comprised therein…”. Further as per Explanation (a) to
194J “professional services” means services rendered by a person in the course of
carrying on legal, medical, engineering or architectural profession etc..’.

3. The services rendered by hospitals to various patients are primarily medical
services and, therefore, provisions of 194J are applicable on payments made by
TPAs to hospitals etc. Further for invoking provisions of 194J, there is no
stipulation that the professional services have to be necessarily rendered to the
person who makes payment to hospital. Therefore TPAs who are making payment
on behalf of insurance companies to hospitals for settlement of medical/insurance
claims etc under various schemes including Cashless schemes are liable to deduct
tax at source under section 194J on all such payments to hospitals etc.

3.1. In view of above, all such past transactions between TPAs and hospitals
fall within provisions of Section 194J and consequence of failure to deduct tax
or after deducting tax failure to pay on all such transactions would make the
deductor (TPAs) deemed to be an assessee in default in respect of such tax and
also liable for charging of interest under Section 201 (1A) and penalty under

Section 271C.

4. Considering the facts and circumstances of the class of cases of TPAs and
insurance companies, the Board has decided that no proceedings u/s 201 may be
initiated after the expiry of six years from the end of financial year in which such
payment have been made without deducting tax at source etc by the TPAs. The
Board is also of the view that tax demand arising out of Section 201 (1) in
situations arising above, may not be enforced if the deductor(TPA) satisfies the
officer in charge of TDS that the relevant taxes have been paid by the deductee
assessee (hospitals etc.). A certificate from the auditor of the deductee assessee
stating that the tax and interest due from deductee assessee has been paid for the
assessment year concerned would be sufficient compliance for the above purpose.
However, this will not alter the liability to charge interest under Section 201 (1A)
of the Income Tax Act till payment of taxes by the deductee assessee or liability
for penalty under Section 271C of the Income Tax Act as the case may be.

5. The contents of the circular may be brought to the notice of officers and
officials working under you for strict compliance.

RBI Circular to accept cheques written in Regional Languages

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RBI Circular to accept cheques written in Regional Languages
Reserve Bank of India (RBI) vide its Master Circular dated July 1, 2009 has advised all Scheduled Commercial Banks (excluding Regional Rural Banks) that all cheque forms would be printed in Hindi and English. The customer may, however, write cheques in Hindi, English or in the concerned regional language.

This information was given by Minister of State for Finance, Shri Namo Narain Meena in written reply to a question raised in Rajya Sabha today.

Nov 24, 2009

GST Genuine Concerns

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GST Genuine Concerns
Following are the criticism of GST which seems to be unnecessary:-

(1) Threshold:Different thresholds have been proposed, Rs 10 lakh for SGST (lower for some underdeveloped states), Rs 1.5 crore for CGST for goods and a lesser amount (not indicated as yet) for services. Thus, there will be four thresholds which has been criticised by several analysts but one must remember it is different in many developed countries as well.

(2) Purchase tax: This will remain outside either fully or partly. This is not desirable but it is only limited to a couple of States.

(3) Items containing alcohol: They will also remain outside GST. Sales tax/VAT will continue to be levied on them. Some States may make them Vatable. Excise duty also will continue to be levied on them. This position is not ideal but the existence of a separate excise duty is not a new concept. It is already there in European Union. In the European Union along with VAT there is also excise duty on tobacco, alcohol andmineral oil. The revenue collected from excises is substantial. In 1970, the total excise revenue average was 4.4 per cent of GDP which got reduced to 3.38 per cent in 1998. In 2001 it was 3.8 per cent. There are wide differences between member states in respect of incidence of excise duty. So the point that I want to make about alcohol is that ideally there should not be difference in the VAT rates between States but in regard to excise duty that can remain in addition to VAT. And it is not against the principle of GST.

(4) Petroleum products: They will not come under GST but the existing situation will continue which means that the sales tax will continue to be levied by the states andthe Centre also would continue with excise duty on it. The system in the EU is also that petroleum products are under GST and there is also excise duty on them. It is not much different.
However, there are certain other concerns which are genuine:

a) Entry Tax:Only those which are not in lieu of Octroi will only be subsumed. So Entry Tax may continue which is a real concern.

(b) Input credit for inter-State Transactions: Inter-State credit of input tax has been proposed to be worked through IGST model which is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. Officers are struggling to understand the mechanism which by any standard is extremely complicated involving for every consignment several transactions like payment of tax to the State, transfer of tax from the selling State to the Centre, again transfer from Centre to the buying State, book adjustment through a huge computer system etc.,
Conclusion is that it would be better to have the normal system of state-to-state input credit operated by the states. The present proposal is for a bigger tax jungle than the existing jungle.

Nov 23, 2009

Holding Time Limit for Claiming Deduction u/s 80C on Investments

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Holding Time Limit for Claiming Deduction u/s 80C on Investments
In respect of the some investments/deposits eligible for deduction under section 80C, in some cases , the law provides a minimum period of holding for claiming deduction u/s 80C otherwise it will be taxable. Such cases are given below-
Time Limit for qualifying deduction u/s 80C
 Unit- Linked insurance plan (ULIP) – 5 years
 Life Insurance Premium – 2 years
 Cost of Purchase/ Construction of a residential House property including repayment of Loan – 5 Years
 Deposit under senior citizen saving scheme – 5 Years
 Time deposit in post office – 5 Years
In the case of withdrawal before 5 years by the depositor during his lifetime from amount deposit under
 Senior Citizen Saving Scheme
 Time deposit in Post Office
 The amount withdrawn (excluding interest which has already been taxed in earlier year) will be taxable in the year of withdrawal.
In the case of
 Unit- Linked insurance plan (ULIP)
 Life –Insurance Premium
 Cost of purchase/construction of a residential house property including repayment of loan
 Any contribution made towards the above plan in the said previous year will not be qualified for deduction u/s 80C
 The quantum of deduction already taken in the preceding years would be deemed as income of the taxpayer in the year in which contribution to the plan is terminated.
Important Notes for claiming deduction u/s 80C
 The above deductions are available only on payment basis.
 It may be noted that the aggregate amount of deduction u/s 80C, 80CCC and 80CCD cannot exceed Rs. 1,00,000/-

Form 15G and 15H

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Form 15G and 15H
Form 15G and Form 15H are used for averting the TDS deduction on interest earned during the financial year on fixed deposits in Banks. There are lots of hesitations in the minds of my subscribers about these forms. They usually enquire about these questions i.e. What is Form 15G and form 15H, How one can submit these forms, How to fill these forms, What is purpose to use these forms ?. In this article i will try to cover all aspect of form 15G and form 15H.
Form 15H
In routine process Bank will deduct tax at source on fixed deposit interest, if it is above Rs. 10000. The TDS is deducted at the rate of 10% (if PAN not furnished the rate is 20%). So to get the income tax refund , you have to file the income tax return . To avoid this process, you have to declare that you have not any taxable income. The main and only purpose of these forms, is to submit declaration in writing in duplicate that there is not tax payable on his total income. In this case the payer shall not deduct any tax at source.
 Form 15H must be used above 65 years old individual.
 Previous year income should not be taxable.
 Form 15H should be submitted before the first payment of interest on fixed deposit.
Form 15G
 Form 15G is same like Form 15H difference is only that form 15G is for every individual below then 65 years.
The duty of submit these forms with assessee before end of the financial year or first payment of interest whichever is earlier.
The payer is under an obligation to deduct tax until the declaration in Form No. 15 G/15H is received and in the event that such form is not received till the end of the financial year, the failure to deduct tax amounts to violation of this section.

Dispute Resolution Panel Rules of Income Tax 2009

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Dispute Resolution Panel Rules of Income Tax 2009
New Delhi, the 20th November, 2009

S.O. 2958(E).- In exercise of the powers conferred by sub-section (14) of section
144C of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct
Taxes makes the following rules to regulate the procedure of the Dispute
Resolution Panel, namely:-

1. Short title and commencement. - (1) These rules may be called the Incometax
(Dispute Resolution Panel) Rules, 2009.
(2) They shall come into force on the date of their publication in the Official

2. Definitions. - In these rules, unless the context otherwise requires,—
(i) “Act” means the Income-tax Act, 1961 (43 of 1961);
(ii) “panel” means the Dispute Resolution Panel;
(iii) “Form” means a form appended to these rules;
(iv) “Secretariat”, in relation to panel, means the designated office for
filing of objections by the eligible assessee under section 144C;
(v) “section” means a section of the Act.
(vi) words and expressions used herein but not defined and defined in the
Act shall have the meanings respectively assigned to them in the

3. Constitution of the Panel. – (1) The Board may, on the basis of workload
and for efficient functioning, constitute panel in the places specified in column (2)
on the Table below, having jurisdiction over the areas specified in column (3)


Serial no Head-quarters Jurisdiction

1 Delhi 1-NCT of delhi 2-Punjab,Haryana,Chandigarh & J&K 3- U.P,Uttrakhand,Rajasthan,Himachal Pradesh

2 Mumbai 1-Mumbai 2- Rest of Maharashtra except pune 3- Goa, M.P, Chattisgarh

3 Ahemdabad Gujarat, Daman Diu, Dadra Nagar Haveli

4 Kolkata West Bengal, North East States and Andaman Nicobar 2- Bihar,Orrisa & Jharkhand

5 Chennai Tamil Nadu & Pondicherry

6 Hyderabad Andhra Pradesh

7 Bangalore Karnataka, Kerala & Lakshadweep

8 Pune Pune

(2) The Board shall assign by name three Commissioners of Income-tax to
each panel as Members who by name, in addition to their regular duties as
Commissioners, shall also carry on the functions of the panel.

(3) Where any Member of the panel is transferred, the Board shall assign, by
name, another Commissioner of Income-tax in the place of the outgoing Member
of the panel to carry out the functions of the panel.

(4) Each panel shall have a secretariat for receiving objections, correspondence
and other documents to be filed by the eligible assessee and shall also be
responsible for issuing notices, correspondence and direction if any, on behalf of
the panel.

(5) The Chief Commissioner of Income-tax (CCA) shall, for the purposes of
sub-rule (4), constitute the secretariat for the panel.

4. Procedure for filing objections. –
(1) The objections if any, of the eligible
assessee to the draft order may be filed in person or through his agent within the
specified period in Form No. 35A.

(2) The objections referred to in sub-rule (1) shall be in English and presented to
the Secretariat of the panel.

(3) The objections shall be filed in paper book form in quadruplicate duly
accompanied by –
(a) four copies of the draft order duly authenticated by the eligible assessee
or his authorised representative:
Provided that in the case of draft assessment under sub- section (3) of
section 143 read with section 144A, the objections shall also be
accompanied by four copies of the directions issued by the Joint
Commissioner or Additional Commissioner under section 144A and in
the case of draft assessment under sub-section (3) of section 143 read
with section 147, the objections shall also be accompanied by four
copies of the original assessment order, if any:
Provided further that the Panel may, in its discretion, either accept the
objections which are not accompanied by all or any of the documents
referred to above or reject it.

(b) the evidence, if any, the eligible assessee intends to rely upon including
any document or statement or paper submitted to the assessing officer:
Provided that where the eligible assessee intends to rely upon any
additional evidence other than those submitted to the assessing officer,
such additional evidence shall not form part of the paper book but may
be filed along with a separate application stating the reasons for filing
such additional evidence.

5. Notice for hearing. - The panel shall issue notice to the eligible assessee and
the concerned assessing officer specifying the date and place of hearing of the

6. Call for records. - The panel shall also call for records relating the draft
order and permit the assessing officer to file report, if any, to the objections filed
by eligible assessee.

7. Hearing of objections. –
(1) For the purpose of hearing of objections, the panel may hold its sittings at its headquarters or at such other place or places as it may deem proper.

(2) On the date fixed for hearing, if an authorised representative appears on
behalf of eligible assessee, he shall file the authorisation letter before the
commencement of the hearing.

(3) The panel may consider the application for filing additional affidavit and
may either allow such application or reject it.

(4) The eligible assessee may, with the permission of the panel, urge any
additional ground which has not been set forth in the objections.

8. No abatement of proceedings. – After filing objections, if the eligible
assessee, being an individual, dies or is adjudicated insolvent, or being a
company, is wound up, the proceedings before the panel shall not abate and shall
be continued by the executor, administrator or other legal representative of such
individual assessee or by the assignee, receiver or liquidator of such assessee
being a company, as the case may be.

9. Power to call for or permit additional evidence. - Where the panel deems it
necessary, it may call upon or, as the case may be, permit the eligible assessee to
produce any document or examine any witness or file any affidavit to enable it to
issue proper directions:
Provided that the panel shall, while so permitting the eligible assessee record its
reasons for such permission.

10. Issue of directions.
(1) On the date fixed for hearing or on any other date to which the hearing may be adjourned, if the eligible assessee or his authorised
representative do not appear, or when they appear, upon hearing the objections,
the panel may, within the specified time, issue such directions as it deems proper.

(2) While hearing the objections, the panel shall not be confined to the grounds
set forth in the objections but shall have power to consider any matter or grounds
arising out of the proceedings.

(3) On conclusion of hearing, the panel shall issue directions within the
specified period.

11. Directions to be communicated to parties. - The panel shall, after the
directions are issued, communicate the same to the eligible assessee and to the
assessing officer.

12. Passing of Assessment Order. - Upon receipt of directions from the
panel, the Assessing Officer shall pass the Assessment Order in accordance with
the procedure prescribed in sub-section (13) of section 144C.

13. Rectification of mistake or error.- After the issue of directions under
rule 10, if nay mistake or error is apparent in such direction, the panel may, suo
motu, or on an application from the eligible assessee or the assessing officer,
rectify such mistake or error, and also direct the assessing officer to modify the
assessment order accordingly.

14. Appeal against Assessment Order. - Any appeal against the Assessment
Order passed in pursuance of the directions of the panel shall be filed before the
Appellate Tribunal in Form No. 36B.

[Notification SO.No.2958(E)/2009/ F.No.142/22/2009-TPL]
Pawan K. Kumar
Director (TPL-IV)

Nov 22, 2009

Income Tax 80C Deduction on Tuition Fees

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Income Tax 80C Deduction on Tuition Fees
Tuition fees under income tax act is full time education of any two children in any university, college, school or other educational institution, subject to over-all limit of tax deduction under section 80C. Deduction for tuition Fees is valid for Rs.100000. The total amount of deduction under section 80C , 80CCC and 80CCD shall not exceed Rs. 1,00,000/-.

Payment allowed for deduction u/s 80C on Tuition Fees

Fees paid to regular educational institution irrespective of the class attended by the child.
Payment of fees to play schools or crèches will be allowed as deduction.
Fees for admission are excluded from amounts eligible for deduction.
The deduction is allowed only for two children.
Deduction is available of paid basis.
Adopted Child’s tuition fees is also eligible for deduction
Tuition Fees which is allowed for deduction u/s 80C

Deduction is not allowed for private tuition, coaching center.
University College School or other educational institution must be situated in India. It can be affiliate to any foreign university.
A late fee is not eligible for deduction.
Development fees or donation is not eligible.
Payment of fees for overseas education is not allowed.
Fees for admission are excluded from amounts eligible for deduction.
Transport charges, hostel charges, Mess charges, library fees charges incurred for education are not allowed.
Spouse’s tuition fees is not allowed for deduction.

Nov 20, 2009

No Surcharge & Cess on TDS for Non-Salaries

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No Surcharge & Cess on TDS for Non-Salaries
Finance Act (2) of 2009 comes with major amendment in TDS provisions, where it withdraws additional deductions of surcharge and cess for Non-Salaried, Resident Payments. This would give a slight relax to the deductors in calculating the rate of tax.
Applicable only on Non-Salaried, Resident Payments
the withdrawal of Surcharge and Cess is applicable only for Non Salaried payments, made to Indian Residents.
No Surcharge, But Cess on Salaried Payments
This amendment to Finance Act is not applicable for Salaried DS deductions, where the rate of tax will be determined by the rates in force and increased by Cess. Note that, in case of salaries, Surcharge is not applicable on Individuals from 2009-10 FY, so there is no question of surcharge applicability.
Surcharge Applicability on TDS
For the payments made under sections 193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 195, 196B, 196C and 196D,Surcharge should be calculated at the rate of two and half percent, in the case of every company other than a domestic company, in case the amount paid/payable during the financial year exceeds one crore. For other cases, no surcharge has to be made.
The same condition holds for Payments collected u/s 206C (TCS) from company, other than a domestic company and the amount collected/liable for collection in the financial year exceeds one crore.
Applicability of Cess
For the payments made under sections 193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 195, 196B, 196C and 196D, Cess should be calculated at the rate of 3% on Tax plus surcharge, provided that, the amount is not being paid to is paid to a domestic company and any other person who is resident in India.
Rate of Surcharge:
The amended rate of surcharge is as under:
1. Payment made to Company, other than a domestic company
a. Amount paid/payable during the financial year exceeds one crore = 2.5%
b. Below one Crore = ZERO
2. Payment made to others = ZERO
Rate of Cess:
The amended rate of Cess, including Education cess and Secondary/Higher education cess are as under:
1. Payment to a domestic Company = ZERO
2. Payment made to other than companies, who is resident of India = ZERO
3. Others = 3%
Applicability of Amended provisions
the amended provisions would be applicable from October 1, 2009

Nov 19, 2009

GST may be set at 14-16% : FINANCE MINISTER

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GST may be set at 14-16% : FINANCE MINISTER
Come 1 ST APRIL 2010..


GST may be set at 14-16% : FINANCE MINISTER



Goods & Service Tax will be applicable instead of Vat & Excise

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Goods & Service Tax will be applicable instead of Vat & Excise

The indirect tax regime in India is evolving into GST in the year 2010. The steps towards introduction of GST have commenced. The Empowered Committee of State Finance Ministers has introduced the First Discussion Paper on GST in India on November 10, 2009. A dual structure of Central GST (CGST) and State GST (SGST) is proposed to be imposed on the manufacture of goods and on provision of services. A continuous chain of set-off from the original producer’s point and service provider’s point up to the retailer’s level would be established which would eliminate the burden of all cascading effects.

For sale or services transactions between two states (inter-state), the Government has proposed to impose Inter State GST (IGST) which will include both CGST and SGST. Between the Inter-state transactions and Intra-state transactions which will be more beneficial to the assesses is the topic of discussion of this Article.

Transactions with in a state: -

The manufacture and sale of goods as well as provision of services if carried within a state, then CGST and SGST will be leviable on such activities. As per the proposed plan, the assesses will be required to pay element of both CGST and SGST separately. Assessee is required to deposit both CGST and SGST in separate revenue accounts. The Input Tax Credit (ITC) is also allowed to be taken separately for CGST and SGST. The assessee is required to file the returns separately.

The credit of CGST taken by the assessee will have to be utilized to pay CGST only and credit of SGST taken is to be utilized to pay SGST only. Cross adjustment of tax credit between CGST and SGST will not be allowed.

Intra-State Transactions: -

For the inter-state transactions of goods and services, the Empowered Committee has adopted the IGST model. The scope of IGST model, as discussed in First Discussion Paper, is that the IGST will be levied by the Centre and it would be CGST plus SGST on all inter-state transactions of taxable goods and services.

It is proposed that the inter-state seller will pay IGST on value addition after adjusting available credit of IGST, CGST and SGST on his purchases. The Exporting state will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.

The major advantages of IGST Model as per discussion paper are as under: -

- Maintenance of uninterrupted ITC chain on inter-State transactions.

- No upfront payment of tax or substantial blockage of funds for the inter-state seller or buyer.

- No refund claim in exporting State, as ITC is used up while paying the tax.

- Self monitoring model.

- Level of computerization is limited to inter-State dealers and Central and State Governments should be able to computerize their processes expeditiously.

- As all inter-State dealers will be e-registers and correspondence with them will be by e-mail, the compliance level will improve substantially.

- Model can take ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account.

Thus, in case of inter-state transactions, the credit can be adjusted in both CGST and SGST. The credit of IGST can be used to for payment of either CGST or SGST.

In case Exemption is granted from CGST: -

It is also proposed in the said discussion paper that the exemption from CGST will be separate as that from the SGST. The exemption limit proposed in CGST is Rs. 150 Lakhs which is at par with exemption limit for small scale manufacturers under the Central Excise Act, 1944. But the exemption from SGST is kept at par with the current VAT exemption limit. Similarly, the discussion paper says that the service provider exemption from CGST should be kept high as currently they are enjoying exemption of Rs. 10 Lakhs. But there is no hint given for exemption limit for service providers from SGST.

Even the discussion paper brings out a peculiar situation wherein the State Authorities will be empowered under their respective state GST statutes to exempt various goods that are of peculiar nature looking to the specificity existing in that state. If such a power is being granted to the states then the situation will be that certain goods will be exempted by SGST in that state, however, CGST will be levied on those products.

Thus, it is clear that there will be separate exemption for CGST and SGST. Further, if the CGST is exempt then the assessee will not be allowed to take the credit of CGST. Similarly, if the SGST is exempt then credit of the same will not be allowed.

Now, suppose an assessee is granted exemption from CGST but SGST is applicable, then the credit of CGST will not be available to him but he will be able to take the credit of SGST. From this aspect if we consider transactions from one state to another then IGST will be paid as it will be available as credit since SGST is payable on his final product or output services. Then he will be able to take the credit of IGST which is sum total of CGST and SGST. He will be more benefited as the CGST is not payable but he will be able to take the credit of CGST in garb of IGST. He will adjust the same in payment of SGST.

If this happens then it will lead to situation where an assessee is exempted either from CGST or SGST and the other is payable, then in such situation he will like to procure goods or services from outside state rather than inside the state. This will reverse the position as existing now in the VAT. In current regime, if one purchase from outside state then he has to pay CST and the credit of same is not available. But if an assessee purchases goods inside the state then VAT is payable and credit of the same is available. As such, everyone intends to purchase the goods from inside the state.

Although it is very premature to say as only discussion paper is published for the GSTbut we have prepared the article on our understanding of the said paper. Looking to the recommendations as depicted in the discussion paper the situation as picturized by us in this article seems to be more factual but nothing can be expressed with utmost certainty as the law and GST code is yet to be released by the Government.

Before Parting: -

Thus, from the above discussion, the inter-state transactions appear to be more beneficial to the assessee who is providing output service or is manufacturing final product. This is because the assessee will not be paying the tax in cash and will be able to utilize the credit of IGST to do so. The views expressed by us in this article are the views as understood by us while analyzing the recommendations of Empowered Committee of State Finance Ministers and in no way signifies the views of the Government. The scenario as analyzed by us above will be clear only after the Government releases a GST code or further clarification on this matter. From Government’s side also, the utmost care has to be taken of this point while drafting the rules and regulations for GST.

Prepared By: – CA Pradeep Jain,

Sukhvinder Kaur, LLB (FYIC)

Siddharth Rutiya

RBI Circular on RTGS

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RBI Circular on RTGS

As you are aware, the Reserve Bank of India has taken a series of initiatives in the recent past to facilitate electronic mode of funds transfers as a result of which the volume processed in RTGS and NEFT systems have grown substantially. It is observed that of late, certain banks have been accepting receipts to Government accounts through RTGS. However, banks are not following a uniform practice while facilitating such transactions. On the basis of discussions with various major RTGS participant banks, it has been decided as under:

As per the extant Government rules, only accredited banks are permitted to receive payments to Government and every credit to the Government account needs to be supported by a Challan. The RTGS message transfer platform is designed to carry only funds transfer messages and not challan. The receiving bank therefore is not in a position to afford credit to the Government account in the absence of the challan accompanying the message in RTGS. This often results in transactions getting returned.

In order to facilitate Government receipts through RTGS it has been decided that participants originating Government transactions in RTGS can do so only when the receiving bank is in agreement with the sending bank to receive funds. In case it is bilaterally decided to undertake such a funds transfer in RTGS, banks have to use the interbank mode R 42 for such transfers.

RTGS participants may please note that this is an interim arrangement and would continue till such time the procedure followed for Government receipts is fine tuned with RTGS frame work.

The bank originating the transaction must capture complete information of the sender and receiver in the message format in conformity with Wire Transfer guidelines. The message may carry additional information if required by the receiving bank in field tag 7495.

Please acknowledge receipt.

Yours faithfully,

(G. Padmanabhan)

Chief General Manager


RBI/2009-10/ 226

DPSS (CO) RTGS No. 991 / 04.04.002 / 2009 – 2010 November 17, 2009


Chairman and Managing Director /

Chief Executive Officer of all banks participating in RTGS

Nov 18, 2009

No TDS on Transport Contract if PAN Provided

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No TDS on Transport Contract if PAN Provided

As per the amended section 194C, through Finance Act (2) of 2009, No deduction shall be made from any payments made to a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his PAN to the deductor.

This new subsection 6 of 194-C makes such transport contractor to compulsorily provide PAN to the Deductor, failing to which TDS will be made by Deductor as per 194C.

This provision is applicable on payments made from October 01, 2009 to March 31, 2010. Such scenario should be determined by checking whether the Deductee has provided his PAN to the Deductor, during the payment.

New returns for such information
Deductor should furnish a separate return containing the details of Transport Contractors, who have provided PAN and TDS has not been made in accordance to subsection 6 of 194C. CBDT would be prescribing the format for such return and the methodology to file such return shortly. However it is expected to be one time activity for the Deductor to furnish these details after 31/03/2009, containing the information of all 6 Months.Department has not notified the new form till today(17.11.2009)

End date of such provision
Even though the date 31/03/2010, the end date for this provision is not specified in amended 194-C section, the Financial budget documents of 2009, clearly indicated its termination by such date. It is expected that the forthcoming finance act 2010, will amend the section by removing the sub sections 6 and 7 of 194C.

Whether These provisions applicable to all types of Transport contracts?

The Most FAQ about these new provision whether this provision is applicable on all types of Transport contractor or contractor covered under 44AF.The answer is that new section 194C refer section 44AF only for the purpose to define the meaning of Goods carriage so these provisions are applicable to all type of transport contractor and not restricted to person defined under section 44AF.
Further these provisions are applicable only on "goods carriage" so in my opinion it is not applicable on passenger transportation.

Registration of PAN for Form 26AS

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Registration of PAN for Form 26AS

NSDL introduces a new system of Form 26AS registration, wherein it eases the complete process for employees in the organization. In this program, NSDL will automatically register the PAN and provide the password to PAN Holder.

The process
In this process, NSDL will approve the organization to place a request for PAN registration. On such approval, the organization has to submit the list of employees for Form 26AS, along with their Valid PAN and Valid Email ID. Once NSDL receives such data, it will communicate to every employee over email and takes the confirmation for Form 26AS creation. On receipt of confirmation from Employee, NSDL will automatically create a login along with password and communicates it confidentially over the email. Employee has to login to such account with minimum days specified and activate the account.

To begin with, NSDL is analyzing the organizations to place such request. Initially it would be for large companies listed in Stock Exchanges. Also such companies should have quite huge number of employees. Such companies may also be assessed with other criteria, including employee count in TDS statements, etc and once it is satisfied, organization will be approved for placing such request.

The process may also be later extended with more organizations covered under the scheme. Organizations which are listed in stock exchanges and have got huge number of employees can also contact NSDL voluntarily and ask for more information

Watch Form 26AS with Net Banking

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Watch Form 26AS with Net Banking

With a new initiative, NSDL enhances Form 26AS viewing facility at internet banking account of PAN holder. For this purpose NSDL has already made the necessary arrangement with all banks under OLTAS. These banks would enable the link for Form 26AS at their Internet Banking pages.

As per the information available, banks will be enabled to link for the NSDL website, wherein it directly displays data of respective PAN holder for selected Financial Year. During such process, Banks would authenticate the PAN of the bank account holder, before enabling such link at their login.

Banks are already in work of making such technical integration and display of data. It is also said that, NSDL will not be sharing such information directly to the banks, and such data will be displayed through NSDL hosted website only. Banks will integrate the link to pass PAN and the Financial Year, for which data needs to be displayed.

Such banks are expected to come with a communication to their account holders on, how to get their link enabled for Form 26AS.

Nov 14, 2009

E-Filing of Service Tax Return will compulsory in Two Months

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E-Filing of Service Tax Return will compulsory in Two Months

The Government will make e-filing of service tax return mandatory within a couple of months, said a senior official of the Central Board of Excise and Customs (CBEC). “Electronic filingof service tax will be made compulsory in the next two months,” CBEC member Y G Parande told reporters on the sidelines of a PHD chamber seminar.

Parande also expressed hope thatthe government would meetservice tax collection target during the fiscal despite impact of stimulus package on revenue realisation.

The government proposed to collect Rs 65,000 crore as service tax during the year.

The service tax collection during the first seven months has gone down by 5.4 per cent to Rs 28,926 crore compared with corresponding period last year.

Attributing decline in revenue collections to incentives given by the government to help the economy combat the impact of global slowdown, Parande said, “certainly, the stimulus packages have had the effect (on indirect tax collections), particularly because rates were brought down.”