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Ministerial group formed to consider tax relief for small businesses

GST Council decides to form a ministerial panel to examine a series of tax and compliance relief proposals for the benefit of MSMEs which form the backbone of the manufacturing sector, the rural economy

Federal indirect tax body the Goods and Services Tax (GST) Council on Saturday decided to form a ministerial panel to examine a series of tax and compliance relief proposals for the benefit of small businesses which form the backbone of the manufacturing sector and the rural economy.

Union finance minister Piyush Goyal, who chaired the Council meeting in the capital, said the panel to be chaired by union minister of state for finance Shiv Pratap Shukla will examine all proposals received so far regarding tax relief for micro, small and medium (MSME) enterprises and make recommendations to the Council.

“All proposals will be reviewed in detail by the ministerial panel in consultation with the fitment and law committees (of officials),” said the minister. The Council decided to try a pilot project for refunding 20% of GST paid on business-to-consumer transactions using Rupay card and BHIM mobile application subject to a cap of ₹100. However, to implement this, the IT system has to get ready first.

Amit Mitra, West Bengal finance minister, said the group of ministers will look into all proposals relating to tax rates and procedure relaxation including the proposal to give relief to MSMEs with sales upto ₹1.5 crores from the central GST (CGST). This would restore the excise duty exemption available to small businesses with sales upto ₹1.5 crore that existed in the pre-GST era, he said.

Mitra said the council decided to run the pilot project for tax refund on select digital transactions after the technology is ready. “One or two states may run the pilot and depending on the experience, further rollout may be considered,” said Mitra. He, however, expressed concerns about giving incentives from GST revenue proceeds, which may not be a good idea in principle.

Bihar Deputy chief minister Sushil Modi said the revenue impact of the refund for select digital transactions may be around ₹980 crore as Rupay and Bhim account for 20% of all digital transactions. Uttar Pradesh, Bihar, Maharashtra and Gujarat have all agreed to join this pilot project, he said. “Compliance will increase. In the longer run, it will encourage formalization of the economy,” said Modi.

Experts said that more than tax cuts, small businesses want easier rules. “More than any financial incentive, MSMEs have been looking forward to easier compliance and faster refunds for exporters,”

R. Muralidharan, senior director at Deloitte India, said that if simplification of procedures are done in true spirit, it will help MSMEs focus on their core business rather than spending a disproportionately high amount of time on compliance matters and this will help in boosting productivity.

Small businesses play a crucial role in supporting the manufacturing sector and in job creation, especially in rural areas. As per a 2016 official survey, MSMEs have created over 11 crore jobs in manufacturing, trade and services, contributing about 29% of gross domestic product (GDP) and about half of total exports. Despite their key role in the economy, they face challenges including access to credit and technology.

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One-time Settlement of VAT, Excise Disputes in the Offing

The scheme, if approved, would allow officials to focus on GST compliance instead of dealing with legacy issues and could also generate instant one-time revenue for the govt.

India could consider offering a one-time settlement to clear legacy central excise duty and value added tax (VAT) issues to ensure they do not linger and act as a drag in the goods and services tax regime. The GST Council, the apex decision-making body for the tax, will take up the proposal at a meeting on August 4.

The scheme, if approved, would allow officials to focus on GST compliance instead of dealing with legacy issues and could also generate instant one-time revenue for the government. “It would clean the slate,” said an official privy to the proposal.

The scheme could cover assessments as well as arrears, according to the proposal that is part of the council’s agenda. GST was rolled out on July 1 last year, replacing a range of central and state taxes including central excise duty, countervailing duty, cesses, VAT , entry tax and purchase tax.

VAT PENDENCY
The VAT regime across the country was not uniform, with states having their own laws and procedures. This meant separate filings by businesses across states in line with each state’s VAT framework.

There is a backlog of two or three VAT assessments for every dealer in each state, according to an industry experts. As a result, tax teams of companies are not only grappling with GST law and compliance requirements, but are also compiling documents, collecting pending statutory forms and preparing reconciliations to complete VAT assessments.

Most tax manpower has shifted to GST and only a few are left to cater to the old tax regime, which is further fuelling pendency.

“For companies with pan-India operations (e.g. in FMCG, consumer electronics), at least two-three assessments are pending in each state. Thus, assuming a company has operations in 20 states, the total number of pending VAT assessments for such company in all states could be in the range of 40 to 50,” .

CENTRE KEEN TO CUT DISPUTES
The government is keen to cut down on unnecessary disputes and litigation. It recently raised the monetary thresholds for filing appeals by the Central Board of Indirect Taxes and Customs as well as the Central Board of Direct Taxes. CBIC will withdraw 18% of such cases from tribunals, 22% from high courts and 21% from the Supreme Court.

The CBIC has asked its field formations to clear past cases expeditiously to focus on the GST regime, which is still settling down.

“As newer litigations are coming up under GST, it’s important for the government to clean up the past as early as possible by coming with a onetime settlement for old litigation, wherein penalty and interest (at least partially) is waived,”.

Source :  Press Reports

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Haven’t filed I-T return yet

Not only citizens with income above basic exemption limit, those with income below it are also advised to file ITR on time

In a relief for salaried tax payers, the government recently extended the date for filing income tax returns (ITR) by one month till August 31. Filing ITR is a must for any responsible citizen earning an income. As per government records, around 68 million income tax returns were filed during FY 2017-18, compared to 54 million filed during FY 2016-17. The number is expected to rise further this year. However, many people in India still don’t file return despite getting remuneration.

It is mandatory to file tax return if your taxable income falls above the basic exemption threshold of Rs 250,000. One should file their tax returns on time as failing to do so will attract penalties. Apart from avoiding punishment, filing returns on time has several other advantages too.

Here’s a look at top 10 advantages of filing ITR on time:

1. Being a responsible citizen: It is mandatory for every individual who earns a specific income and pays income tax on it, to file income tax return before July 31. In addition to this, those who are not eligible to file taxes can still file voluntary returns. When you file returns, you are fulfiling sort of a national duty which brings you into the mainstream as your income gets recorded with the I-T department with applicable tax (if there is any) having been paid. In other words, it’s a sign of being a responsible citizen.

2. Helpful during loan applications: Individuals who are planning to apply for home loans or vehicle loans, filing ITR can prove to be very helpful. Almost all major banks ask for a copy of returns, thus keeping a steady record of filing ITRs may make life easier for you in such a situation. ITR can have further significance as an income proof and an individual might be able to use it to get a loan in line with his/her income.

3. Loss adjustment: Losses incurred by an individual both short-term and long-term, speculative as well as non-speculative, capital or any other type of losses, which are not recorded in the tax return, cannot be carried forward or adjusted against the capital gains made in the subsequent years. So, if you do not file a return then you may not be eligible for any exemption against your tax liability in subsequent years.

4. To claim a refund: There are cases when after TDS deductions or advance tax filings an individual ends up paying more than his/her actual tax liability. In that case, that person can claim a refund from the I-T department through an ITR. So, if a person doesn’t file an ITR he may not get his/her refund.

5. Travelling Overseas: During visa processing, foreign consultants may ask you for your ITR records/receipts of previous years in interviews. The reason is to ensure that the person applying for the visa has an income source in India and does not actually intends to leave the country forever. Many major countries in Europe, US and Canada strictly follow this process and thus filing ITR gains further importance.

6. Buying life insurance: These days, ITR receipts are required when one opts to buy a term policy with sum insured of Rs 5 million or more. Life insurance companies like LIC use ITR documents to verify your annual income.

7. Filing of govt tender: ITR documents also come handy when one need to fill a government tender. Government demands tax return receipts of the previous five years to ensure that the person filing the tender will be able to support the payment obligation.

8. Proof of income and tax payment for the self-employed: Unlike the salaried class, businessmen do not get Form 16. Hence, ITR receipts become an extemely important document for them.

9. Avoid penalties: Filing income tax return is mandatory for individuals whose income falls in the tax bracket. Such individuals might be penalised up to Rs 10,000, besides interest, for not filing ITR on time.

10. An important financial document: Not only while applying for a loan or visa, ITR receipts can be useful in many other ways as it is an important financial document. It is even more detailed than Form 16 as it entails your income and taxation along with revenue from other sources.

Citizens with income below the taxable bracket should also file ITR as most of the above given advantages are also applicable for them.

VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.

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GST not payable on reimbursement of costs to liaison offices by Foreign Companies

Setting up a liaison office in India, is typically the first step for many foreign companies, as they test the waters for setting foot in India. A liaison office, which is required to be registered with the Reserve Bank of India (RBI) is not permitted to carry on any commercial activities, rather it acts as a communication channel between the parent company and Indian parties.

The Authority for Advance Rulings (AAR) – has recently held that payments made by a foreign company to reimburse the expenses of its liaison office in India, will not be subject to GST.

Setting up a liaison office in India, is typically the first step for many foreign companies, as they test the waters for setting foot in India. A liaison office, which is required to be registered with the Reserve Bank of India (RBI) is not permitted to carry on any commercial activities, rather it acts as a communication channel between the parent company and Indian parties. The entire expenses of the liaison office are to be met exclusively out of funds received from abroad through normal banking channels.

In this case, which was heard by the AAR – Rajasthan bench, the Jaipur based liaison office of the Dutch furniture manufacturer, Habufa Meubelen, sought a ruling on whether the reimbursement of expenses and salary paid to the liaison office by its head office would be subject to GST.

The Netherlands head office reimbursed its liaison office for expenses incurred by it, such as salary, rent, security, electricity, travel etc.

The AAR observed: The applicant (ie: liaison office) does not have any other source of income and it is solely dependent on the head office for reimbursing all the expenses incurred by it. Therefore liaison office cannot be treated as separate persons. Thus, there cannot be any flow of services between them as one cannot provide service to self. Based on this reasoning the AAR concluded that – the reimbursement of expenses made by the head office cannot be treated as consideration towards any service. In the absence of any service being provided there can be no levy of GST, concluded the AAR.

The AAR bench further held that the liaison office is not required to get itself registered under GST.

Source :   Press Reports

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GST Council could cut tax rates on these items in next meeting

The all-powerful Goods and Services Tax (GST) Council, which is scheduled to meet on July 21, could announce another round of tax cuts on many items.

The all-powerful Goods and Services Tax (GST) Council, which is scheduled to meet on July 21, could announce another round of tax cuts on many items such as sanitary napkins, handicrafts and handloom goods, news agency PTI reported. Some services are also likely to see some rate rationalisation as well.

While on one hand, the GST Council may announce tax cuts, on the other hand, is exploring the legality of imposing ‘agriculture cess’ on some luxury items. Most handloom and handicraft products and sanitary napkins that could witness a cut are taxed at 12%.

 

Most importantly, the GST Council is expected to discuss the implementation of the simplified monthly returns system. In May, the Council had announced launching a single-return system for making the process easier and for improving the compliance. Giving the blueprint of the new filing system, Finance Secretary Hasmukh Adhia said that it will take between 6 and 12 months to get fully implemented.

The single return filing system, to be implemented in phases, will be applicable for everybody except for businesses opting for composition scheme and filing nil returns, Hasmukh Adhia had said, adding that new single monthly return for B to C will have details of total turnover, for B to B it will have details of all sales invoices along with 4-digit HSN code. The GST Council had also proposed invoice matching along with the new filing system.

The big rate rationalisation took place in November 2017, when more than 200 items were brought to lower tax brackets from 28%, 18%, and 12%. Later in January, tax rates were cut on 9 items, while increased on 2. Since the implementation of the GST on July 1, 2017, the government has been criticised for too high taxes and too many tax slabs.

Source :  Press Reports

VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.

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Due Date for filing Income Tax Returns

With the due date of 31 July 2018 for filing returns for Financial Year 2017-18 fast approaching, one should be aware of the significant changes in the tax return process introduced this year. Understanding these changes will be useful in filing tax returns timely and accurately.

While the deadline for filing the return remains the same at 31 July, one of the biggest change is the introduction of late filing fees of Rs 5,000 (if the return is filed by 31 December) or Rs 10,000 (if filed after 31 December). There is a lower fee amount of Rs 1,000 prescribed for income levels up to Rs 500,000.

Relevant sections are presented herewith for your reference:

Section 139(1) deals with filing of return of income on due date:

  1. (1) Every person,—

(a)  being a company or a firm; or

(b)  being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax,

shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed 

Explanation 2 of section 139 explains due date:

Explanation 2.—In this sub-section, “due date” means,—

(a)  where the assessee other than an assessee referred to in clause (aa) is—

 (i)  a company ; or

(ii)  a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or

(iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,

the 30th day of September of the assessment year;

(aa)  in the case of an assessee who is required to furnish a report referred to in section 92E, the 30th day of November of the assessment year;

(b)  in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year;

(c)  in the case of any other assessee, the 31st day of July of the assessment year.

Following conclusions can be drawn from above mentioned sections :

Due date of Income Tax return will be 31st July 2018 for Assessment Year 18-19 [Financial Year 17-18] for all individual except:

  • Companies
  • Persons other than companies whose books are required to be audited
  • Working partner of a firm whose accounts are required to be audited

Due date of Income Tax return will be 30th September 2018 for Assessment Year 18-19 [Financial Year 17-18] for all:

  • Companies
  • Persons other than companies whose books are required to be audited
  • Working partner of a firm whose accounts are required to be audited

But excluding assesses who are required to submit a report pertaining to international or specified domestic transactions under section 92E.

Due date of Income Tax return will be 30th November 2018 for Assessment Year 18-19 [Financial Year 17-18] for all assesses who are required to submit a report pertaining to international or specified domestic transactions under section 92E.

Stakeholders are requested to file their return on time so as to avoid late fee to be charged in case of delay in filing ITR for year ended 31st march 2018.

Till last year, a penalty of Rs 5,000 could have been levied for filing return after 12 months from the year-end, but only after the tax officer issued a notice to show cause against penalty levy, conducted a hearing and passed a written order. Unlike this penalty till last year, which was selectively levied by the taxman, now such late filing fees are required to be mandatorily paid upfront in all cases of default. Hence, one would need to be cautious of the filing due date to avoid such unnecessary costs.

The maximum time limit for filing the original tax return was already crunched 12 months (from 24 months), so such return can be filed up to the following 31 March at most.

However, an option has been provided to individuals having taxable income up to Rs 500,000 without any tax refund claim or super senior individuals (aged more than 80 years), who can file returns in paper format.

Income Tax Department. Reuters.

Another additional disclosure requirement introduced in all return forms is consequent to the new provisions introduced effective 1 April 2017, where the landlord receiving rent over Rs 50,000 per month from a tenant will be subject to deduction of tax at source.

Where the tenant has undertaken these compliances under his own PAN, the existing fields for deductor of tax are modified to allow entry of tenant’s name, his/her PAN and the amount of tax deducted from rent paid. Therefore, the landlord reporting rental income in the return can avail credit for such tax and pay differential tax.

It may be noted that the due date for filing Income Tax Returns for FY 2017-2018 for Individuals is 31st July 2018.

Please refer the table for finding due dates for the Financial Year 2017-18 :

Category of Taxpayer Due Date for Tax Filing – FY 2017-18
Individual July 31st 2018
Body of Individuals (BOI) July 31st 2018
Hindu Undivided Family (HUF) July 31st 2018
Association of Persons (AOP) July 31st 2018
Businesses (Requiring Audit) September 30th 2018
Businesses (Requiring TP Report) November 30th 2018

(This is income tax return for the financial year 2017-18. Applicable for income earned from April 1st, 2017 to March 31st, 2018).

VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.

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Commerce Ministry to treat Exports as a Priority Sector Lending

Addressing an event held by Federation of Indian Export Organisations, Commerce Minister Suresh Prabhu said the commerce ministry pitched for treating exports as a priority sector lending.

Holding that global trade is passing through “challenging times”, Prabhu on Saturday said the existence of World Trade Organisation (WTO) was under threat.

According to him, WTO is “a must” and in its absence, there will be chaos in the global trade.

“Today, it is the most challenging time for the global trade. We never had such a challenging time. For the first time, the existence of WTO is under threat. People are questioning the accepted trading norms,” he said here.

Giving an example of “letter of credit”, a prerequisite for exports, Prabhu said fundamentals of global trade are “under scrutiny”.

“If you don’t have WTO, not only India, every country will have a problem. We strongly feel WTO is a must because it guarantees certain rules and regulations to run global trade. There will be chaos if you don’t have WTO.”

“We are not only talking of reform of WTO and working on how to revitalise it. I personally work with important ministers of the world and am trying to find out (the way forward), improving WTO is one thing and discarding it is a different thing,” he said, adding that the country is trying to keep the organisation alive and strong.

He said India was working on specific bilateral relationship with various countries in Africa, Latin and central America, Europe and Asia.

He also said the Commerce Ministry pitched for treating exports as a priority sector lending.

“Exports must be treated as priority sector lending and we are talking to Finance Ministry and the Reserve Bank of India. How do you say priority of India is export when it is not a priority for lending?” he asked.

The government would ensure that the country’s global mission would support exporters and for which a paper has been prepared, he said.

“We are talking to Finance and External Affair Ministry time and again. Promoting exports will need an opening of our missions abroad. It requires cabinet approval like Japan’s Jetro or Australia’s Austrade… we must have this,” he added.

Source : Press Reports

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