Oct 13, 2017

Gifts Tax and Exceptions Under Income Tax Rules

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Gifts Tax and Exceptions Under Income Tax Rules
In a country like India, where families are close knit and there are a number of festivals, gifts are also abundant. Now, the question that arises is whether gifting can be considered to be taxable either in the hands of the person giving the gift or receiving it? As per income tax laws, giving a gift is not taxable for the donor. However, receiving gifts can attract tax. If the total value of gifts received during the tax year exceeds Rs 50,000, the entire value of gifts received (subject to the basic exemption limit and specified exclusions) would be taxable. For instance, if you get gifts of Rs 5,000 each from 11 friends on your house warming, the total amount exceeds Rs 50,000 and hence the entire Rs 55,000 would be taxable. The tax on gifts needs to be paid by way of advance tax / self-assessment tax before the tax return is filed by the person receiving the gift.

We could receive gifts not only in the form of cash, but also in the form of movable property and at times even immovable properties like a house. Certain moveable assets including jewellery, drawings, paintings, bullion, sculptures, shares and securities received as gifts are subject to tax. In such cases, if the fair market value of the movable property exceeds Rs 50,000, then the entire amount is to be included in the taxable income. To determine the taxable value of an immovable property received as a gift, you need to check the stamp duty value. If the stamp duty value exceeds Rs 50,000, then the amount chargeable to income tax = Stamp Duty Value – Consideration paid by the recipient, if any.

It is pertinent to note here, that if a property, whether moveable or immovable, is purchased at less than its fair market value / stamp duty value, the difference will be regarded as a gift to the purchaser and taxed in his hands if the difference exceeds Rs 50,000.

Do all gifts exceeding Rs 50,000 attract tax? No, the following exceptions have been carved out to treat certain gifts as exempt:

# Gifts received from relatives (definition of relative includes spouse, siblings of self/spouse, parents/grandparents of self/ spouse, etc)
# Gifts received on the occasion of marriage of the individual
# Gifts received under a will / inheritance / on contemplation of death of the payer
# Gifts received from any local authority / fund or foundation as specified in section 10(23C) / trust / institution registered under section 12AA of the domestic tax laws

Hence, you may gift without any limits to your near and dear relatives without worrying about tax. However, a word of caution here. Any income arising to the spouse or minor children or daughters-in-law on the gift given will be clubbed in the hands of the person giving the gift. For example, if you gift a sum of Rs 75 lakh to your wife and she uses this money to purchase a house and receives rent for the house, though the gift of Rs 75 lakh will not be subject to tax either in your or your wife’s hands, the rent that she receives will be regarded as your income and be added to your taxable income and taxed in accordance with the Income Tax Act. It will not once again be taxed in her hands. The clubbing provisions are applicable only to the spouse, minor children and daughters-in-law; gifts to other relatives do not attract clubbing provisions.

In India, gifts have been used widely as a tax planning measure to reduce taxes. Tax authorities, therefore, often probe gifts to establish their authenticity and the legitimacy of the sources of funds out of which gifts have been given. Hence, it would be prudent to maintain documents such as a gift deed, evidencing the fact that the gift has been genuinely received and that the person giving the gift has sufficient sources of funds to justify the gift. Further, in respect of an immovable property, stamp duty also needs to be paid in accordance with the state laws. In some states like Maharashtra, there is a concession in the stamp duty rates if the property is gifted to family members.

Direct Tax Collection Show Growth of 15% Upto September 2017

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Direct Tax Collection Show Growth of 15% Upto September 2017
The provisional figures of Direct Tax collections up to September, 2017 show that net collections are at Rs. 3.86 lakh crore which is 15.8% higher than the net collections for the corresponding period of last year. Net Direct Tax collections represent 39.4% of the total Budget Estimates of Direct Taxes for F.Y. 2017-18 (Rs. 9.8 lakh crore). Gross collections (before adjusting for refunds) have increased by 10.3% to Rs. 4.66 lakh crore during April to September, 2017. Refunds amounting to Rs.79,660 crore have been issued during April to September, 2017.

An amount of Rs. 1.77 lakh crore has been received as Advance Tax up to 30th September, 2017 reflecting a growth of 11.5% over the Advance Tax payments of the corresponding period of last year. The growth in Corporate Income Tax(CIT) Advance Tax is 8.1% and that in Personal Income Tax(PIT) Advance Tax is 30.1%.

 (Surabhi Ahluwalia)
 Commissioner of Income Tax
 (Media & Technical Policy)
 Official Spokesperson, CBDT.

Oct 12, 2017

Another Salary Hike Under 7th Pay Commission Coming Soon

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Another Salary Hike Under 7th Pay Commission Coming Soon
It seems a good news is all set to come for those Central government employees who have been waiting to receive the update on the pay hike on the minimum salary. The minimum pay is expected to go up from Rs 18,000 to Rs 21,000, according to a report in OneIndia. The Central government employees may get an unprecedented hike of 17 per cent, the OneIndia report added. Moreover, the report says that after the hike of 17 per cent, the fitment factor will also be raised from 2.57 to 3 times. Reportedly, officials are of the belief that minimum salary should be Rs 21,000. Authorities are expected to take the decision very soon.

Earlier, in the month of September, a committee was formed to look into various pay related anomalies arising out of the implementation of the 7th Central Pay Commission’s recommendations. The 22-member panel is being headed by Secretary, Department of Personnel and Training (DoPT) and has members from both the official and staff side. “It has been decided to set up the anomaly committee of the National Council (Joint Consultative Machinery) consisting of representatives of the official side and the staff side to settle any anomalies arising out of the implementation of the Pay Commission’s recommendations,” the order issued by the DoPT said.

“From the government side, it will have Member (Staff) Railway Board, secretaries of Department of Telecommunications and Department of Posts, as its members. Besides them, Financial Adviser, Defence Ministry, two joint secretaries from DoPT and another Joint Secretary (Personnel) in Finance Ministry will also be part of the panel. A Deputy Secretary of the DoPT will be Member-Secretary of the panel which has 13 people from the staff side,” the order had said.

The Centre has accepted most of the recommendations of the 7th Pay Commission, to be implemented from January 1, 2016.

Oct 11, 2017

RTGS and NEFT application form of different banks

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RTGS and NEFT application form of different banks
We often need the forms for RTGS and NEFT. These forms are required for funds transfer through one bank account to another bank account. The account holder needs to sign the forms for a valid rtgs and neft. So the account holder needs to visit to the banks or some person needs to collect the forms to the bank and then the account holder will sign these forms for funds transfer.

Sometimes it may create delay and looks like hectic. So there is rtgs and neft forms of different banks. I try to upload as many banks as i can. But not all the banks forms are available. So keep visiting this page and better bookmark this page for easily visit. The rtgs and neft forms are as follows.

You can track RTGS/NEFT confirmation with Live tracking of UTR no.
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Oct 10, 2017

How to do e-Commerce Business in GST

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The internet is a global collection of networks connecting and sharing information through a common set of protocols. It allows computers attached to networks to communicate regardless of manufacturer or brand, architecture, operating system or location. Now, it is effectively using in e-commerce transactions. In e-commerce transactions, usually computer network is used in order to conduct the commercial activities, i.e., to sell or buy the goods or services and also to provide customer services in various aspects.

Approaches To E-Commerce Transactions
2. There are different types of categories for e-commerce transactions, i.e., Business-to-Business transactions (B-2-B), Business to Consumers transactions (C-2-C) and Consumer-to-Consumer transactions (B-2-C).

In Business-to-Consumers approach, the companies are involved with the customers directly for the sale of goods or provisioning of services.

In Business-to-Business approach, the companies are involved with other companies for sale of goods or provisioning of services. These companies are less involved with the retail customers.

In Consumer-to-Consumer approach, the companies facilitate sale of goods or provisioning of services between individual customers.

Further, for the execution of e-commerce transactions, the buyer and seller of goods and services meet on 'E-Commerce operator' platform. The price of the product alongwith various other information are displayed on the platform which enables buyers to decide about the purchase of goods or services. After the buyer has decided to purchase goods/services, the supply of goods or services is made through the person operating the platform by the supplier.

3. The definitions of Electronic commerce and Electronic commerce operator have been given in Section 2(45) and Section 2(44) of the GST Act, 2017 respectively, which have been mentioned here under:

(44)'Electronic commerce' means the supply of goods or services or both, including digital product over digital or electronic network;

(45) 'Electronic commerce operator' means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

From the reading of above-mentioned definition of 'Electronic commerce operator', the essential ingredients of 'Electronic commerce operator' can be summarized as below:

♦ It should be digital or electronic facility or platform : This can be explained by way of an example. Say, Mr. Siddharth logs into the site of UBER for the booking of cabs and specifies his location of pickup and the destination. The information regarding the availability of taxis, time likely to take to reach the pickup point and the nature of taxis available is flashed on the electronic platform. Once Mr. Siddharth accepts the offer, the phone no. of the driver is provided to Mr. Siddharth and at the same time, the phone no. of Mr. Siddharth is flashed to the driver. Thus, two-way connection takes place by the means of communication device. This helps in providing services to customer.

♦ Person shall own, operate or manage the electronic platform: The definition of 'Electronic commerce operator' provides that operator may own the platform or may operate or manage the platform. It is not essential that the electronic commerce operator shall always own the platform. The operator may have agreement with the owner of the platform for operating or managing the platform. Thus, in case electronic platform is owned by one person, say Mr. Murti and is operated by Mr. Mittal. In this case Mr. Mittal will be considered as electronic commerce operator as business is transacted through him.

♦ It should be for electronic-commerce: As per the definition of e-commerce, supply of goods or services including digital products over digital or electronic networks is called e-commerce. In current scenario, there are so many examples for e-commerce like Amazon, flipkart, sanp-deal, etc. These e-commerce websites provide the platform to the persons to buy the goods or services. Thus, e-commerce platform should allow buyers or sellers to meet and finalize the transaction electronically.

4. As per Section 22(1) if a person makes a taxable supply of goods or services or both in a financial year which exceeds aggregate of Rs. 20 lacs/10 lacs (special category States), he shall be liable to be registered under this Act. However, the above-mentioned threshold limit is not applicable in case of e-commerce operator and persons who are making supply of goods or services or both through such electronic commerce operator. In other words, all the business carrying out through e-commerce activities are required to get registered under the GST Act, irrespective of their turnover. Besides this, the benefit of composition scheme shall also not be available to the persons who are engaged in making any supply of goods through an electronic commerce operator.

Tax collection at source (TCS) by E-Commerce Operator
5. As per Section 52(1), the electronic commerce operator shall collect TCS at such rate not exceeding 1% as may be notified on the net value of taxable supplies made through it where the consideration with respect to such supplies is to be collected by the e-commerce operator. The net value of taxable supplies means aggregate value of supplies made by the supplier reducing the value of returned goods or services. For example, Amazon has supplied Adidas shoes from Adidas company to various customers aggregating to Rs. 15 lacs during the month of September, 2017. Further, the customers have returned the goods sold in July 2017 and August 2017 of Adidas shoes to the value of Rs. 3 lacs during the month of September, 2017. In this case, the net value of taxable supply of Adidas shoes is Rs. 12 lacs and Amazon is required to deduct 1% of Rs. 12 lacs as TCS for supplies made in September, 2017.Further, TCS is required to be collected by e-commerce operator on a monthly basis and is required to be deposited in the Government account within 10 days after the end of month in which the collection is made.

Supply of services through e-commerce operator on which tax is to be discharged by e-commerce operator under 'reverse charge machanism'
6. In case of services supplied through e-commerce operator, Section 9(5) of GST Act, 2017 and Section 5(5) of the IGST Act, 2017 empower the Government to specify the services on which tax will be payable by e-commerce operator and not by supplier. In this regard notified services can be mentioned as below:

♦ Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle, for E.g., Uber, Ola, etc.;

♦ Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, for E.g., Goibibo, Makemy trip, etc., and;

♦ Services by way of house-keeping, such as plumbing, carpentering, etc., for E.g., Urban Clap.

Monthly statement by E-Commerce Operator
7. Section 52(4) of the GST Act, 2017 contains the provisions regarding monthly statement by the e-commerce operator. This Section stipulates that every operator shall file a statement electronically of all the amounts collected towards supply of goods or services by the 10th of following month in Form GSTR-8 through common portal. Further, if e-commerce operator after furnishing the monthly statement detects any omission therein, he shall rectify such omission in the statement to be furnished for the month in which such an omission is noticed.

Annual statement by E-Commerce Operator
8. In addition to monthly statement, Section 52(5) also casts an obligation on the operator who has collected TCS to furnish annual statement containing details of outward supply of goods or services or both, including supplies which are returned by the customers and the amount collected by the e-commerce operator. The annual statement is required to be furnished before last day of December following the end of the financial year.

Matching of details
9. The details furnished by the e-commerce operator shall be matched with the corresponding details of outward supplies furnished by the concerned supplier under this Act in terms of the GSTIN of the supplier, the GSTIN/UIN of the recipient, State of place of supply, invoice number of the supplier, date of invoice of supplier, taxable value and tax amount. If the said details do not match with each other, the discrepancies shall be communicated to both, the supplier and electronic operator. It is duty of both, e-commerce operator and the concerned supplier, to rectify the discrepancies. However, if the discrepancies are not recertified by the supplier in the month in which the discrepancy is communicated, the tax will be added to the output tax liability of the said supplier for the calendar month succeeding the month in which the discrepancy is communicated. In short, it will be the responsibility of the supplier making an outward supply to ensure that the proper returns are filed by the e-commerce operator, so that he is also not liable to pay the tax in addition to the tax already collected by the e-commerce operator.

10. On the reading of above we can see that the Government, by introducing various compliances with regard to e-commerce in the GST Act, has tried to regularize the sector. It is hereby pertinent to mention that e-commerce sector in India is one of the most rapidly advancing sectors and introduction of such huge compliance may slow down the progress of the sector. Hence, the Government should try to introduce provisions regarding e-commerce through notifications/clarifications which would help in the advancement of business rather than creating obstacles.

Oct 9, 2017

Work Contract under GST

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Work Contract under GST
Transitions are messy periods. If a transition is for good, the journey through such transitions is worthwhile. The implementation of Goods and Service Tax has been done by the current government assuring the citizens of the same. A complete overhaul of a tax regime is no mean task but India is, in fact, walking on a new path of change. The idea of one nation, one tax is in force and citizens, although struggling, are still moving on.

One of the most litigated and disputed areas in the previous indirect tax regime was the taxation aspects of a works contract. Years of litigation had, somewhat settled the issues pertaining to the area but not in its entirety. GST brought new hopes in this regard and, prima facie it does seem so. But how far is the prima facie reality real is a question to ponder upon.

The intoxicating journey of the works contracts seems to be far from resolved, predominantly given the fundamental changes that the GST regime has brought in.

Works Contract: The Concept
2. The establishment of a nexus between the sphere of works contracts with the current GST law requires an outline of the developments that shaped the principles associated with the taxability of works contracts. The determination of composite transactions as works contracts has been one of the most litigated topics under the indirect tax regime, proving to be a cumbersome ordeal for businesses over the years. From being not taxed at all, to the levy of tax on sale portion, and finally levy on service portion, works contract disputes have come a long way.

A study about determination of taxation perspective vis-a-vis any transaction limits itself to the following major questions:
(i) What is the tax?
(ii) What is the taxable event?
(iii) Who should pay the tax?
(iv) How the tax is to be calculated?
The response to the above in a definitive manner more or less settles the position relating to levy of a tax. The issues relating to a works contract mainly pertain to the determination of the taxable event. Therefore, the vital question at this stage is why is it so?

Works Contract can be defined as a composite contract which includes in itself an element of sales as well as service. Thus, the taxation perspectives of a works contract have always been related to either sales tax or service tax. Prior to the 46th amendment to the Constitution, such sale element in the execution of works contract1 was not taxable. State legislatures did not have competence to charge sales tax under Entry 54, List II of the Seventh Schedule of the Constitution on an indivisible contract of sale of goods, which had components of labour and service and it was not within the domain of the Assessing Officer to dissect an indivisible contract to distinguish between the two constituent elements. Such works contract was said to be indivisible contract wherein the sale and service could not be separated and taxed by the States. Thereafter, clause 29A was inserted in Article 366 of the Constitution introducing the concept of deemed sales wherein a legal fiction was created to separate the sale element in the execution of a works contract. The mechanism for valuation of such sales was also provided by the Apex Court.2 The service element was also taxable only post the introduction of the definition of works contract under the Finance Act, 1994 (the law governing levy of Service Tax in India)3.

Whether a particular contract was a works contract or a contract for sale of goods depend on the dominant intention, as reflected, inter alia, from the terms and conditions of the contract. There existed no strait-jacket formula to determine the nature of the contract, given its dependence on the facts and circumstances of each case.

Post 46th Amendment, with the insertion of sub-section (29-A) in Article 366 of the Constitution, it became evident4 that the Courts started interpreting works contracts in a Constitutional backdrop. Cases which involved transfer of property along with an element of service in the context of work rendered, stood treated as works contracts.

It is pertinent to note that several principles of significance have been laid down by the Hon'ble Supreme Court in the judgements rendered in Larsen & Toubro Ltd. and Anr. v. State of Karnataka5 and Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu6. The Hon'ble Supreme Court in both these cases has made a departure from the traditional understanding of the term "works contract" as had been laid down in preceding adjudications.

What Is A Works Contract?
2.1 The term "works contract" as envisaged in Article 366(29-A)(b), opined the Supreme Court, is amply wide and cannot be confined to a particular understanding of the term, or to a particular form. The term encompasses a wide range and many varieties of contracts. The Parliament had such wide meaning of "works contract" in its view at the time of 46th Amendment. For the purposes of determining the difference between a works contract and contract of sale the Court has further, discussed several cases and finally concluded that a contract may involve both, a contract of work and labour and a contract of sale of goods. The distinction between contract for sale of goods and contract for work (or service) has almost diminished in the matters of composite contract involving both, a contract of work/labour and a contract for the sale for the purposes of Article 366(29-A)(b)7.

Taxable Event For Works Contract
2.2 It was observed by the Hon'ble Court in the Larsen & Toubro Case that following the 46th Amendment, a transfer of property in goods under clause (29-A)(b) of Article 366 came to be deemed to be a sale of the goods involved in the execution of works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. By virtue of the 46th Amendment, States were conferred with the power to tax indivisible contract of works, by enlarging the scope of the expression "tax on the sale or purchase of goods", wherever it occurred in the Constitution. Accordingly, the expression "tax on the sale or purchase of goods" in Entry 54, List II, Schedule VII, when read with the definition clause (29-A) includes the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract. The taxable event, thus, is a deemed sale.8

Dominant Intention Test
2.3 The courts, in both the above-stated cases, have also laid down that it is not necessary to ascertain the dominant intention of the contract. Even if it is not to transfer property in goods and rather, is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the material used in such contract if it otherwise has elements of a works contract. Thus, the Supreme Court has completely ruled out that dominant intention of any contract has relevance if the contract has element of works contract9.

2.4 Conditions For Sustaining Levy Of Tax On Goods Sold In Execution Of Works Contract
Having discussed the scope and ambit of a works contract, the Court went on to broadly frame three conditions for sustaining the levy of tax on the goods sold in the execution of works contract, as under:

(i) there must be a works contract;
(ii) the goods should have been involved in the execution of works contract; and
(iii) the property in those goods must be transferred to a third party either as goods or in some other form.10

Treatment of Works Contract under GST- The twist in the tale
3. The taxable event in the GST regime is the supply of goods or services. Thus, a transaction will come under the purview of the GST law if either it is a supply of goods or a supply of service. A bird's eye view of the provisions of the now applicable GST laws demonstrates that the levy of tax on works contract seems to be settled. As per Section 2(110) of the Central Goods and Services Act, 2017 ('CGST Act), works contract is defined as follows:

"(110) "works contract" means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property."

Further, Schedule II of the CGST Act provides for certain supplies to be treated as supplies of goods or services. Entry 5 of the Schedule provides for certain transactions to be treated as supply of services. Consequently, it has been provided as:

(f) works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

Thus, works contract under GST would be treated as a supply of service and, thus, the rate of tax as provided under the tariff would be applicable on the same. Thus, the dispute as to determination of a contract as a pure sale or a pure service or a works contract has been settled as works contract has to be treated as a supply of service.

However, the point of consideration is as to what constitutes a works contract under the current tax regime? A perusal of the definition of works contract would show that works contract is now defined only in context of an immovable property. Thus, a movable property has been kept outside the purview of a works contract. This slight change of definition has brought the taxpayer to the old but not definitely golden period of tax disputes. On the one hand, GST promises to bring us into a new and simplified era of taxation and on the other hand, it has also brought a taxpayer into a pothole that he had over the years struggled to come out of.

A perusal of the definitions of composite and mixed supply seems to be relevant. Since a movable property is not under the purview of a works contract, the determination of levy of tax on composite transactions relating to movable property would be determined on whether it would constitute a composite supply or a mixed supply. The muddle is created in the composite supply of an immovable property.

As per Section 2(30) of the CGST Act, a composite supply is a supply made by a taxable person comprising of two or more taxable supplies of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply, Further, a principal supply under Section 2(90) of the CGST Act means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of the composite supply is ancillary. Thus, the ghosts of the dominant intent test could still be haunting the taxpayer in relation to composite supply of movable property.

Since dominant intent test under the GST law is statutorily recognized there seem to be many hindrances in the reckoning. Practically, the difficulties that may arise in this regard can be understood through following two examples.

If we take an example of an annual maintenance contract (AMC), AMC's do not involve two separate transactions of supply of goods or services. It is essentially a single transaction only. In an AMC transaction, the intention of the recipient is to ensure that the equipment is up and running. However, such contracts may involve supply of goods in certain cases which may be of a substantial value. Thus, determination of such contracts may become cumbersome in certain cases.

Similarly, in cases of book printing wherein the owner provides the content of writing and the publisher prints the books using its own materials, the question of treatment of the contract as supply of goods or supply of services arises. Further, in such cases the questions relating to marketability of goods, special nature of transactions, etc., will also have to be considered.

Thus, it can be observed that tax treatment of a movable property is still very unclear and an interpretational issue which may open a flood of litigations in the near future.

4. A perusal of the above discussion clearly brings to the fore the point that in certain transactions we have been brought into the post Gannon Dunkerley but pre-46th Constitutional Amendment era. An ideal GST in the present circumstances seems to be an Utopian idea. The matter of fact is that taxpayers would have to cope and find a way out of the confusion under the present rules and regulations. One interesting thing that could help in determining the nature of a principal supply in a composite supply could be through reference to the decision of the Apex Court in the case of The Government of Andhra Pradesh v. Guntur Tobaccos Ltd11 wherein the Hon'ble court identified three types of contracts, viz.:

♦ One, it may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price

♦ Two, it may be for work in which the use of materials is accessory or incidental to the execution of the work

♦ Three, it may be a contract for work and use of supply materials, though not accessory to the execution of the contract
As per the view of the court, the first category is a composite supply of work and sale of goods; the second category does not involve any sale of goods, while as the third category is not a sale because the property does not pass for a price. Bringing the same principles into the GST era, the contracts may be classified as:

♦ The first category of contracts would fall in the category of mixed supply. Although service and goods are being supplied together, yet they are not naturally bundled and do not constitute a composite transaction

♦ The second category of contract would clearly be supply of services as the supply of goods is ancillary to the contract. Even if the contract is treated as a composite supply, the principal supply would still constitute a supply of service

♦ The third category of contracts would also be treated as a supply of service as no consideration is being provided for the goods.

A view that with a new levy comes a new dispute is turning into a reality. It is important to understand the consequences of the application of the dominant intention test. Transactions carried out in respect of immovable property will always be treated as a service and the test will be inconsequential. Further, there may arise the age-old dispute of classification between an immovable and movable property. Generally, a taxpayer will choose the two concepts which will be more beneficial to him. On the other hand, the Department, with the intent of raising more revenue, will classify it otherwise. To summarize, a potential litigation is in the offing and the industry needs to be prepared for it.

Oct 8, 2017

Latest FVU Version 5.6 and RPU Version 2.1 e-TDS Software

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Latest FVU Version 5.6 and RPU Version 2.1 e-TDS Software
Tin.nsdl has launched latest version of return preparation utility RPU 2.1 and File validation utility FVU 5.6 e-Tds software and e-Tds/Tcs return preparation utility. This RPU version 2.1 and FVU version 5.6 are applicable from 7 October 2017.

There are many new features of RPU 2.1 and FVU 5.6 which are as under.
Change in validations for all section codes available for Form 27EQ
- Remark “C” (i.e. for higher rate deduction) is made applicable for all sections available for Form 27EQ.

- “C” remark is only allowed when the values ‘PANAPPLIED’, ‘PANINVALID’ or ‘PANNOTAVBL’ are present in the field ‘PAN of Deductee’.

- In such case, total TCS amount has to be 5% or more of the field “Amount of receipt / debited”.

- The above referred validations are applicable for Regular and Correction statements pertaining to FY 2017-18 onwards.

Addition of new field i.e. “Goods and Service Tax Number (GSTN)“ under form page of TDS/TCS statements
- 15 digit alpha-numeric value to be entered under this field.

- Applicable for regular and correction statements pertains to all forms and FYs.

Change in validation for section code “194J - Fees for Professional or Technical Services” for Form 26Q:
- Remark ‘B’ is made applicable under this section which represents either no deduction or lower deduction.

- The same is applicable for regular and C3 type of correction Statement pertaining to FY 2017-18 onwards.

- Incorporation of latest File Validation Utility (FVU) version 5.6 (applicable for TDS/TCS statements pertaining to FY 2010-11 onwards) and FVU version 2.152 (applicable for TDS/TCS statements from FY 2007-08 up to FY 2009-10).

FVU Features are as follows
 Addition of new field i.e. “Goods and Service Tax Number (GSTN)” under Batch Header (BH) of
TDS/TCS statement

- GSTN no. should be 15 digit alpha-numeric value.
- In case the number is less than 15 digits FVU will populate an error message “Invalid value.
Please provide valid 15 digit GSTN”

- Applicable for regular and correction (C1, C2, C3, C4 and C5) statement pertains to all forms
and FYs.

State code of employer made mandatory in all correction statements (i.e. all batches of
correction statement)
- All the correction statements should have employer/deductors state code under batch header
(BH) field no. 26.

Change in validation for section code “194J - Fees for Professional or Technical Services” for
Form 26Q:
- Remark ‘B’ is made applicable under this section which represents either no deduction or
lower deduction.

- The same is applicable for regular and C3 type of correction Statement pertaining to FY 2017-
18 onwards.

This version of FVU is applicable with effect from October 07, 2017. 
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GST Package for Small and Medium Scale Business

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The GST Council, in its 22nd meeting held at New Delhi on 6th October 2017, has recommended the following facilitative changes to ease the burden of compliance on small and medium businesses:

Composition Scheme
1. The composition scheme shall be made available to taxpayers having annual aggregate turnover of up to Rs. 1 crore as compared to the current turnover threshold of Rs. 75 lacs. This threshold of turnover for special category States, except Jammu & Kashmir and Uttarakhand, shall be increased to Rs. 75 lacs from Rs. 50 lacs. The turnover threshold for Jammu & Kashmir and Uttarakhand shall be Rs. 1 crore. The facility of availing composition under the increased threshold shall be available to both migrated and new taxpayers up to 31.03.2018. The option once exercised shall become operational from the first day of the month immediately succeeding the month in which the option to avail the composition scheme is exercised. New entrants to this scheme shall have to file the return in FORM GSTR-4 only for that portion of the quarter from when the scheme becomes operational and shall file returns as a normal taxpayer for the preceding tax period. The increase in the turnover threshold will make it possible for greater number of taxpayers to avail the benefit of easier compliance under the composition scheme and is expected to greatly benefit the MSME sector.

2. Persons who are otherwise eligible for composition scheme but are providing any exempt service (such as extending deposits to banks for which interest is being received) were being considered ineligible for the said scheme. It has been decided that such persons who are otherwise eligible for availing the composition scheme and are providing any exempt service, shall be eligible for the composition scheme.

3. A Group of Ministers (GoM) shall be constituted to examine measures to make the composition scheme more attractive.

Relief for Small and Medium Enterprises
4. Presently, anyone making inter-state taxable supplies, except inter-State job worker, is compulsorily required to register, irrespective of turnover. It has now been decided to exempt those service providers whose annual aggregate turnover is less than Rs. 20 lacs (Rs. 10 lacs in special category states except J & K) from obtaining registration even if they are making inter-State taxable supplies of services. This measure is expected to significantly reduce the compliance cost of small service providers.

5. To facilitate the ease of payment and return filing for small and medium businesses with annual
aggregate turnover up to Rs. 1.5 crores, it has been decided that such taxpayers shall be required to file quarterly returns in FORM GSTR-1,2 & 3 and pay taxes only on a quarterly basis, starting from the third  quarter of this financial year i.e. October-December, 2017. The registered buyers from such small taxpayers would be eligible to avail ITC on a monthly basis. The due dates for filing the quarterly returns for such taxpayers shall be announced in due course. Meanwhile, all taxpayers will be required to file FORM GSTR-3B on a monthly basis till December, 2017. All taxpayers are also required to file FORM GSTR-1, 2 & 3 for the months of July, August and September, 2017. Due dates for filing the returns for the month of July, 2017 have already been announced. The due dates for the months of August and September, 2017 will be announced in due course.

6. The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under subsection (4) of section 5 of the IGST Act, 2017 shall be suspended till 31.03.2018 and will be reviewed by a committee of experts. This will benefit small businesses and substantially reduce compliance costs.

7. The requirement to pay GST on advances received is also proving to be burdensome for small dealers and manufacturers. In order to mitigate their inconvenience on this account, it has been decided that taxpayers having annual aggregate turnover up to Rs. 1.5 crores shall not be required to pay GST at the time of receipt of advances on account of supply of goods. The GST on such supplies shall be payable only when the supply of goods is made.

8. It has come to light that Goods Transport Agencies (GTAs) are not willing to provide services to
unregistered persons. In order to remove the hardship being faced by small unregistered businesses on this account, the services provided by a GTA to an unregistered person shall be exempted from GST.

Other Facilitation Measures
9. After assessing the readiness of the trade, industry and Government departments, it has been decided that registration and operationalization of TDS/TCS provisions shall be postponed till 31.03.2018.

10. The e-way bill system shall be introduced in a staggered manner with effect from 01.01.2018 and shall be rolled out nationwide with effect from 01.04.2018. This is in order to give trade and industry more time to acclimatize itself with the GST regime.

11. The last date for filing the return in FORM GSTR-4 by a taxpayer under composition scheme for the quarter July-September, 2017 shall be extended to 15.11.2017. Also, the last date for filing the return in FORM GSTR-6 by an input service distributor for the months of July, August and September, 2017 shall be extended to 15.11.2017.

12. Invoice Rules are being modified to provide relief to certain classes of registered persons.

Oct 6, 2017

Modi Tax Bullet Is Coming-How Super Rich Preparing for it

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Modi Tax Bullet Is Coming-How Super Rich Preparing for it
For a year or so, India’s super rich are quietly planning to save a chunk of their big money because they fear the taxman might come calling with a new tax law if it’s passed in the next Budget. The government is considering the levy of an inheritance tax on high net worth individuals.

Inheritance tax had existed in India till 1986, but since the beginning of this year, there has been the talk of the government bringing the levy back. Sources say now the government has sought feedback, , including recommendations, on the proposed re-introduction of inheritance tax, also known as estate duty, two people aware of the development said.

The tax would mean the super rich will have to part with a considerable chunk of their wealth. It tax could range from 5% to 10% and would apply only to families with a certain net worth.

Ever since the super-rich circles started buzzing with the possibility of a new inheritance tax, novel methods are being devised to dodge the tax.
One such method is forming a family trust which insulates their assets. Family trusts would fall outside the scope of inheritance tax—if it is introduced—because there is no transfer in ownership of assets, only a change in the trust shareholding.

Recently, there has been a rise in the number of HNIs wanting to form a trust.
However, many family trusts typically hold only bank accounts and equity shares and not immovable property, experts say. 

 Since most family trusts do not transfer immovable assets in the trusts due to the additional expense of having to pay stamp duty, if such a tax is introduced these assets would be taxed when bequeathed or transferred via gift.

Some of the family trusts are also being formed outside India just to circumvent Indian taxation regulations. Jersey of Channel Islands is emerging as a favourite destination for many businessmen who want to take part of their family trust outside India, say industry trackers. Rich Indian families are now sending at least one of the family members outside India to create a family trust registered in tax-friendly destinations.

“We have seen a spurt in the number of HNIs who want to opt for family trusts as many of them fear that the government may introduce an inheritance tax. However, what is new in these family trusts is the constitution and rules that are being laid by the patriarchs or the promoters on how the beneficiaries must behave morally,” says Sandeep Nerlekar, founder, Terentia Consultants, an estate planning firm. 

Oct 5, 2017

CBEC Approves Undertaking for Exports without Payment of Integrated Tax in Place of Bonds

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CBEC Approves Undertaking for Exports without Payment of Integrated Tax in Place of Bonds
CBEC issued a notification no. 37/2017 dated 4 October 2017 approving a Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax. Full notification is as under.

 In exercise of the powers conferred by section 54 of the Central Goods and Services Tax Act, 2017, and section 20 of the Integrated Goods and Services Tax Act, 2017, sub-rule (5) of rule 96A of the Central Goods and Services Tax Rules, 2017, and in supersession of notification No. 16/2017- Central Tax, dated the 7 th July, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 848 (E), dated the 7 th July, 2017 except as respects things done or omitted to be done before such supersession, the Central Board of Excise and Customs hereby specifies conditions and safeguards for furnishing a Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax -

(i) all registered persons who intend to supply goods or services for export without payment of integrated tax shall be eligible to furnish a Letter of Undertaking in place of a bond except those who have been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred and fifty lakh rupees;

(ii) the Letter of Undertaking shall be furnished on the letter head of the registered person, in duplicate, for a financial year in the annexure to FORM GST RFD – 11 referred to in sub-rule (1) of rule 96A of the Central Goods and Services Tax Rules, 2017 and it shall be executed by the working partner, the Managing Director or the Company Secretary or the proprietor or by a person duly authorised by such working partner or Board of Directors of such company or proprietor;

(iii) where the registered person fails to pay the tax due along with interest, as specified under sub-rule (1) of rule 96A of Central Goods and Services Tax Rules, 2017, within the period mentioned in clause (a) or clause (b) of the said sub-rule, the facility of export without payment of integrated tax will be deemed to have been withdrawn and if the amount mentioned in the said sub-rule is paid, the facility of export without payment of integrated tax shall be restored.

2. The provisions of this notification shall mutatis mutandis apply in respect of zero-rated supply of goods or services or both made by a registered person (including a Special Economic Zone developer or Special Economic Zone unit) to a Special Economic Zone developer or Special Economic Zone unit without payment of integrated tax.
[F. No. 349/74/2017-GST (Pt.) Vol.-II]
Under Secretary to the Government of India