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Inter State Office Services to attract GST

Inter-state office services to attract GST as per Karnataka AAR

Is your human resource department hiring for your offices in other states? Or your finance department preparing payrolls for employees in other centres? These services by one office to branches in other states will be treated as “supply” and attract goods and services tax (GST), according to an order by the Karnataka Authority of Advance Rulings.

The ruling implies that companies with offices in many cities will need to raise invoices for in house service functions and pay GST. Although the tax can be claimed as an input credit by the receiving location in most cases, it would substantially increase the compliance burden for businesses spread across states.

Businesses need to obtain registration in each state where they have an establishment from where any business activity takes place, even if the activity is only provided to the head office of such businesses.

According to the ruling, a large business with its head office, say, in Mumbai, where the entire finance, IT and HR functions are centralised for its offices across states, would be deemed to be providing support services to other locations and hence need to raise invoices charging GST.

In cases where goods or services are fully or partially exempt from GST — such as hospitals and schools — this would be an incremental cost.

In other words, the employee’s salary or cost at the head office when providing services or supervising other offices will attract (goods and services tax) GST.

According to the AAR, the interpretation has been made as per Entry 2 of Schedule I of the CGST Act.

The above ruling by the Karnataka AAR was made in the case of Columbia Asia Hospitals, which is headquartered in Bangalore.

The AAR stated that the ‘employer-employee relationship’ at the hospital chain’s Bangalore head office exists in that office alone – and not in other branches – even if they are part of the same corporate entity.

The AAR, in a ruling sought by Bengaluru-based Columbia Asia Hospitals, held that the employeremployee relationship in the corporate office exists only there and not with other office units, even if they are part of the same legal entity, as far as the GST law is concerned.

“The activities… shall be treated as supply as per Entry 2 of Schedule I of the CGST Act,” the AAR said. It also held that the employee cost incurred at the corporate office should be considered while arriving at the value of goods or services provided by such offices to other locations.

Inter-state office services to attract GST as per Karnataka AAR

It can never be negated that GST authorities have up to now reworked the laws and provisions under the Goods & Service Tax regime with regard to GST registration and GST return filing procedure as to make them more opportune to the trade & commerce. Nevertheless, the government is very keen on making the system totally flawless for the tax assessees as well as the authorities themselves by periodic modifications and amendments in the GST provisions.

Recently, the Karnataka Authority of Advance Rulings (AAR) has notified that the services provided by a branch of an organization to its branches in other states will now be treated as ‘supply’, and they will attract GST.

IMPLICATION OF THE NOTIFICATION 

The recent ruling by the Karnataka AAR suggests that companies that have their branches in multiple cities in other states will need to raise GST invoices against the in-house services and thus, will have to incur GST liability against such services.

Pros & Cons of the Ruling :

Although the GST paid on the services provided to the branches of other states can be claimed as an input credit by the recipient branch, this would substantially raise the burden of compliance on various businesses spread across different states.

  • For the time being, this will also spread the time-lag in compliances such as GST return filing procedure, especially for various businesses that have GST registration under the composite scheme.
  • Among those entities that will be most affected by this ruling, are the hotel businesses, resorts, health clinics, accommodation businesses, schools, colleges & institutes that have their chains spread across different cities.

Impacts :

While there has been clarity that cross-charge of expenses would be liable to GST, the challenge lies in its valuation. As the cross charge is between the same entity, such expenses are cross-charged at cost without any mark-up. It would be interesting to see whether such valuation is acceptable to the tax authorities,”

According to the experts, the new ruling regarding treatment of interstate services under GST is likely to increase the cost of services in the following sectors-

  • Healthcare
  • Education
  • Entertainment
  • Food Business Operators
  • Spa & Beauty

This is so because the GST liability on the businesses will, in turn, result in the tax burden on the consumers of such services, which will raise the cost of these services.

GST applicability on core management functions

The ruling by the Karnataka AAR could have wider ramifications, triggering GST liabilities for those enterprises that currently do not have to pay GST on their core activities and thus do not qualify for tax credits / refund schemes.

It is also troubling for businesses that supply goods and services that are either GST-exempt, or not within its ambit – healthcare, education, petroleum, and liquor.

Overall, the tax interpretation significantly escalates the costs for enterprises with multi-state operations.

This is because the core functions of any large or multinational firm, such as human resources, IT maintenance, marketing, and accounting – executed from the corporate head office – could be treated as a supply of service to other offices / units.

Hence, the ruling also has tax implications for the salaries of a firm’s C-suite employees – chief executive officer, legal head etc.

Tax experts in India are now waiting to see if the federal government issues a clarification with regards to the validity of the Karnataka AAR interpretation and if it will apply across industry.

Treatment

The ruling has been passed after the application was filed by Columbia Asia Hospitals. This is a Bengaluru-based Healthcare institution that had inquired about the possibility on an advance ruling regarding services rendered by its employees at the corporate office in its chains located in other States— viz. accounting, IT or other administrative functions. They had sought clarification on whether such activities shall be treated as supply under GST.

Non-Taxable Services

Some experts have suggested that this ruling can have unpleasant consequences. Notably, the GST will be applicable to even those entities that are not supposed to incur GST liability on their core activities.

As per a suggestion by an economist, the situation can become worse if a recipient branch is involved in the supply of exempted goods & services. The branch office will have to incur GST liability even in case of supply of exempted services from the supplier unit. It won’t be able to avail input of GST levied by the supplier unit.

Principally, the GST Council in its 28th meeting had exempted several services from GST. the new ruling by Karnataka AAR is likely to put adverse impact on its policy.

Analysts have pointed out that this Advance Ruling on interstate services can be really perplexing as the companies now may need to impose GST on even employee costs in notional head office, and ITC of such GST won’t be available to the recipient branch of the company.

These inferences point out that the GST authorities need to carefully consider the issue and propose a solution accordingly.

Its rulings are case-specific but they have a persuasive impact on tax assessment in the cases of other firms under similar circumstances.

Source : Press Reports

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Income Tax returns 2018: Deadline is today, here’s what happens if you miss it

Income Tax returns deadline 2018: The last date for filing the annual income tax return is August 31, 2018. For people in Kerala, the last date has been further extended to September 15.

The last date for filing the annual income tax return (ITR) for the financial year 2018-19 or assessment year 2018-19 was extended by a month to August 31. The only exception for this is Kerala, where the due date has been further extended to September 15 in wake of the severe floods that created havoc in the state.

Here is all you need to know on how to file IT returns and the penalty that you will face in case you don’t do it by the due date.

Who can file income tax returns?

Any person whose annual income exceeds Rs 2,50,000 is liable to pay income tax. If you are an Indian resident and have assets or investments outside the country, it is mandatory for you to file returns even if your income is not taxable. The limit is Rs 3,00,000 for senior citizens (over 60 years old, but less than 80 years old) and Rs 5,00,000 for super-senior citizens (over 80 years old).

When is the last date to file IT-return?

While the Income Tax department had announced July 31 as the last date, it was later extended to August 31, 2018. In flood-hit Kerala, the taxpayers can pay their tax by September 15. “In view of the disruption caused due to severe floods in Kerala, the Central Board of Direct Taxes (CBDT) hereby further extends the due date for furnishing Income Tax Returns from August 31, 2018 to September 15, 2018 for all Income Tax assesses in the state of Kerala, who were liable to file their Income Tax Returns by August 31, 2018,” a notification from the ministry of finance stated.

As per the present tax laws, you have to verify your return within 120 days of filing it.

What happens in case you don’t file ITR by August 31?

If you miss the Income Tax deadline, you will have a tax liability and will have to file belated returns and pay your taxes along with a simple interest of 1 per cent per month on the outstanding due, calculated from the August 31 deadline. Filing the income tax return after the due date (August 31) could attract a penalty up to Rs. 10,000, depending on the degree of delay, according to the existing income tax laws. If your income is under Rs. 5 lakh, the penalty for late filing is fixed at Rs. 1000.

What are the documents required to file the taxes?

You will require basic documents like PAN card, Aadhaar card (not mandatory) and bank account details before filing the returns. Also keep in handy details regarding Income from any source, such as property, salary, a breakup of salary, last year’s tax returns, bank statements, TDS (Tax Deducted at Source) certificates and Profit and Loss (P&L) account statement, balance sheet and audit reports, if applicable.

Why should you file the returns even if your income is not taxable?

There is a misconception that people without taxable income do not need to file their tax returns. Even if your salary does not fall in any of the tax brackets, you may have other incomes such as income from tax-free bonds, or other non-taxable sources, which amount to over Rs. 2.5 lakh. Read more

Where to file online IT returns?

The Income Tax returns filing process has become largely online. There are two ways to file the form online. One is by manually entering all details and submitting the return online. The other is by uploading XML files through offline methods.

Taxpayers can now file their returns from the comfort of their home by registering not only on the income tax department website i.e., http://www.incometaxindiaefiling.gov.in. but other agent websites as well.

Mistakes one can avoid while filing IT returns online

Filing incorrect or incomplete income sources, mismatching form 16 and form 26AS or choosing the wrong ITR form are some of the common mistakes observed during the filing of income tax returns. If after filing your tax return you realise that you have not reported certain incomes, or made any errors, it is possible to file a revised return.

Source :  Press Reports

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GST returns: New system unlikely before next elections

The roll-out of the new simplified return-filing system for the goods and services tax (GST), which was to kick in from January 2019, may get delayed further and, most probably, beyond the tenure of the current government

The roll-out of the new simplified return-filing system for the goods and services tax (GST), which was to kick in from January 2019, may get delayed further and, most probably, beyond the tenure of the current government. According to sources, even though the Narendra Modi government wants to implement the system before the general election, that may not happen given the time needed to complete the elaborate testing procedures to make the system foolproof.

Officials have been asked not to precipitate a repeat of the glitches faced by the originally conceived triplicate returns system that has never been fully implemented. Since the January deadline for the new system — which will automatically produce monthly returns based on supply data uploaded and inward supplies accepted — is difficult to be met and the announcement of the election is expected by March, the government might have to reconcile with the need to defer it further rather than risk a problematic system close to elections, sources said.

Since the GST returns filing continues to be confined to the summary returns GSTR 3B (with which taxes are paid) and outward supply (GSTR-1), the crucial anti-evasion requirement of invoices matching is not being met. It is assumed this is one of the reasons for the continuing shortfall in GST collections.

“The fear is that even if a handful of people complain of the system’s potential shortcomings, it could be amplified disproportionately on the eve of impending elections,” a government official said on condition of anonymity.

According to the implementation plan, a prototype of the software would be first deployed. This would be followed by release of the beta version of the final software, open for a few taxpayers to use in the real-world environment. However, sources said, the entire cycle could take six to eight months from now.

“We are planning to first release a prototype of the software, which would be connected to a small server. This would then be taken to various industry bodies and tax practitioners for them to use, an essential element to find bugs in the system that can be rectified,” an official said.

He added that it was essential that the new system is exposed to real taxpayers and tax practitioners to make it robust. This is a learning from the (failed) earlier system, which was tested in-house robustly but wasn’t tried by real taxpayers. This had resulted in constant firefighting to resolve glitches after the system went live.

“After the format for the new system was approved by the GST Council, the GST Network has started working on its implementation,” a tax official involved closely with drafting the new system said.

The GST Council in August had approved the format of the new design which promises to be lot less cumbersome for assessees than the original system that required filing three returns every month. In the new system, there will be a facility for sellers to continuously add invoices and for buyers to view them. The system could allow the buyer to lock the invoice after which the seller can’t edit/delete it, making it a confirmed liability of the seller.

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

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LS clears amendments to CGST, IGST, GST compensation bills

The lower house has passed The Integrated Goods and Services Tax (Amendment) Bill, 2018, The Union Territory Goods and Services Tax (Amendment) Bill, 2018, The Goods and Services Tax (Compensation to States) Amendment Bill, 2018 and The Central Goods and Services Tax (Amendment) Bill, 2018.

Finance Minister Piyush Goyal today said the capacity to slash the GST rates on more items would go up as Goods and Services Tax (GST) revenues and the compliance rate increases and the economy formalises.

Goyal was speaking in the Lok Sabha after moving four bills seeking to amend the Goods and Services Tax (GST) laws for consideration and passage. The bills were Central GST (Amendment) Bill, Integrated GST (Amendment) Bill, GST (Compensation to States) Amendment Bill and Union Territory GST (Amendment) Bill.

His speech 45-minute speech was interrupted by Congress members who were in the Well raising anti-government slogans on various issues, including demanding setting up of a joint parliamentary committee to probe the Rafale jet fighter deal.

The Minister said the “GST Council has reduced rates on many items and services in the last round. We want the consumer to be burdened less by indirect tax.”

Elaborating, Goyal said that in the last one year, the GST Council has reduced rates on 384 items and 68 services. “186 items and 99 services were exempted from GST. Also sanitary pads were exempted from the GST,” he said.

He also pointed out that the government was able to collect GST in line with the country’s fiscal deficit target.

Highlights Of Proposed Return Filing Process

  • Taxpayers with a turnover threshold of up to Rs 5 crores can file a quarterly return but the taxes will have to be paid monthly. Forms sugam — for B2B and B2C supplies — and sahaj — for B2B supplies — have been proposed for this category.
  • Taxpayers above this threshold will have to file a monthly return. The due date for the same will be the 20th of the next month.
  • Suppliers can upload invoices anytime during the month and this would be visible to the buyers.
  • Based on the uploaded invoices, buyers will be able to claim input tax credit.
  • Buyers will be able to claim input tax credit for those invoices that are uploaded till the 10th of that month.
  • Taxpayers will be able to file an amendment return twice for any tax period.

The Minister said the “GST Council has reduced rates on many items and services in the last round. We want the consumer to be burdened less by indirect tax.” Elaborating, Goyal said that in the last one year, the GST Council has reduced rates on 384 items and 68 services.

“186 items and 99 services were exempted from GST. Also sanitary pads were exempted from the GST,” he said.

He also pointed out that the government was able to collect GST in line with the country’s fiscal deficit target.

Referring to the recent growth forecast about India by the IMF, he said “I think India’s economic growth will be better than this forecast.”

India is projected to clock an economic growth of 7.5 per cent in the 2019-2020 fiscal year on strengthening of investment and robust private consumption, the IMF had said in its latest report.

Source :  Press Reports

 

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

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Income Tax Return Filing: Avail these Tax Deductions to reduce your Tax Liability

The Income Tax Act allows deductions under various sections to plan your tax-incidence. As individuals, the awareness of these deductions comes in handy in order to reduce the tax liability

The due date for filing the Income Tax return is not far. Tax filing is mandatory for all the individuals whose gross total income is above Rs 2.5 lakh in a financial year. The Income Tax Act allows deductions under various sections to plan your tax-incidence. As individuals, the awareness of these deductions comes in handy in order to reduce the tax liability. These deductions are mainly given on account of your insurance policies to medical expenses.

If you have not been filing your income tax return and seeing your money being transferred to the taxman’s vaults in the form of tax deducted at source, then beware and be aware. You get the benefit of tax refund only when you file your income tax return. Also, your annual tax incidence can be nil if you deploy these tax deductive instruments to the fullest.

The important tax deductions allowed under the Income Tax Act to reduce your tax liability are:

Deduction U/s 80G

If you have made donations to certain funds and institutions established for “charitable purposes” then you can claim a deduction of 50% of the amount donated. However, this deduction is not available if money is donated to a wholly religious trust. Moreover, deduction above Rs 2000 can be provided if the sum is paid by any mode other than cash. It has been done to curb the movement of unaccountable money.

Deduction U/s 80C

Under this section, you are allowed a total deduction of Rs 1.5 lakh paid towards life insurance premium, Public Provident Fund, tax-saving FD, National Saving Certificate, Equity Linked Saving Schemes, National Pension Schemes, term insurance, ULIPs etc. Moreover, a deduction is allowed to pay a premium towards the life insurance of spouse and children.

Apart from this, one can also claim tax deduction benefits against expenses like tuition fees, home loan principal repayment, statutory expenses like stamp duty and registration fee for buying a house etc. The total limit is Rs 1.5 lakh for a financial year.

Deduction U/s 80CCG

If you are a new retail investor and a resident individual, then you can avail the tax-benefit of investment made under the notified equity saving scheme. The Rajiv Gandhi Equity Saving Scheme is one such scheme. However, your gross total income shall not exceed Rs 12 lakh and investment shall be locked for a period of 3 years. The deduction limit is 50% of the amount invested in equity shares which are restricted to Rs 25,000 in a year.

Deduction U/s 80D

For premiums paid towards health insurance policies and expenditure on preventive health check-ups, the deduction is allowed till Rs 25,000. For citizens above 60 years of age, the deduction is allowed till Rs 30,000. Moreover, it includes deductions towards the premium paid for the spouse, dependent children and parents (dependent or otherwise). Moreover, one can claim a deduction of Rs 30,000 for the medical expenditure on the health of a super senior citizen (if mediclaim insurance is not taken). The payment should be made by any mode apart from cash and preventive health check-up can be made by cash.

Deduction U/s 24B

Under this section, one can claim tax deductions towards interest paid on a home loan. The limit is Rs 200,000 per annum.

Deduction U/s 80E

You can avail tax benefits for education loan taken from approved banks or financial institutions. You get tax deduction benefits against interest paid on the education loan. There is no upper limit for claiming deduction under 80 E.

Deduction U/s 80EE

It is allowed for interest paid on loan taken for the acquisition of a residential property. A deduction is available even if the property is under construction. The amount of loan sanctioned shall not exceed Rs 35 lakh and the purchase price of the house does not exceed Rs 50 lakh. The extent of deduction is interest on a  loan or Rs 50,000, whichever is less.

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

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Last date for ITR filing for AY 2018-19 extended

CBDT has extended the due date for ITR filing, considering practical difficulties and genuine hardship. ICAI had recently urged the CBDT to extend the ITR filing due date from 31 July to 31 August.

The last date of Income Tax Return filing has been extended by CBDT, giving some respite to millions of taxpayers. The new due date for filing the income tax return (ITR) for AY2018-19 is 31 August 2018 from 31 July 2018. This move has been taken for individuals for whom the due date is decided under clause (c)  of Explanation 2 of section 139(1).

The due date to file the ITR under this section is for individuals and Hindu Undivided Family (HUF). For assessees whose books of accounts are required to be audited, the due date to file ITR is 30 September. In case where the transfer pricing report has to be submitted, the due date is 30 November.

It may be noted that keeping in view the woes of taxpayers, the direct tax committee of the Institute of Chartered Accountants of India (ICAI) had recently urged the CBDT to extend the ITR filing due date from 31 July to 31 August, at least. Citing genuine hardships and practical difficulties of filing ITR, the institute in a letter had requested the tax department to consider the extension.

The delay in the release of the ITR utilities and continuous updation of the schemas, delay in the updation of the TDS credit in the Form 26AS of the taxpayers and issues arising from the first time implementation of the GST law were cited to be among the significant causes of delay in filing the return.

ICAI had argued that heavy monsoon in India was in its fury. Several floods have been reported in states like Maharashtra, Gujarat, Uttarakhand and Jammu and Kashmir. “This abnormality has disrupted the normalfunctionality, making ITR filing not to be the first agenda in the minds of people”, it said.

The Finance Act 2017 has introduced Section 234F to charge a fee of Rs 5,000 to Rs 10,000 for late filing of the return. If a person files the return after the due date and before 31st December, the fee of Rs 5,000 is required to be paid. For assessees filing the return after 31st December, the fee of Rs 10,000 is levied. Keeping this in view, “extension of the due date by one month is a welcome move as it will make the lives of taxpayers a little less stressful,” tax experts say.

Source :  Press Reports

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

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Deadline To File Income Tax Return Extended By A Month

The Central Board of Direct Taxes (CBDT) has extended the due date for filing of Income Tax Returns from July 31, 2018, to August 31, 2018, for certain categories of taxpayers.

The Central Board of Direct Taxes (CBDT) has extended the due date for filing of Income Tax Returns to August 31, 2018, for categories of taxpayers who were to file their returns by July 31.

The decision comes days ahead of the July 31 deadline, which several groups had requested the government to push to later.

CBDT had notified the new income tax return forms for assessment year 2018-19 on April 5. Experts said the introduction of new forms was leading to delays in filing of returns.

The government on Thursday extended the deadline for filing income tax return for assessment year 2018-19. The deadline of July 31, 2018 has been extended by a month, the Ministry of Finance said in a series of posts on microblogging site Twitter. That means the assessees can file their income tax return (ITR) for financial year 2017-18 by August 31 without any penalty charges.

“The Due Date for filing of Income Tax Returns for Assessment Year 2018-19 is 31.07.2018 for certain categories of taxpayers… Upon consideration of the matter, the Central Board of Direct Taxes (CBDT) extends the ‘Due Date’ for filing of Income Tax Returns from 31st July, 2018 to 31st August, 2018 in respect of the said categories of taxpayers,” the ministry said.

Ministry of Finance

@FinMinIndia

Upon consideration of the matter, the Central Board of Direct Taxes (CBDT) extends the ‘Due Date’ for filing of Income Tax Returns from 31st July, 2018 to 31st August, 2018 in respect of the said categories of taxpayers.

The Central Board of Direct Taxes is the apex policy-making body of the Income Tax Department.

Around 6.84 crore income tax returns were filed during financial year 2017-18, compared to 5.43 crore filed in the previous year, as per government records.

Further, the CBDT had said non-filing of ITR before the due date from this assessment year would lead to a penalty of Rs 1,000, 5,000 and Rs 10,000, depending on when the returns were filed after the deadline. The fine for taxpayers having income under Rs 5 lakh remained at Rs 1,000.

Filing tax returns is mandated by law and is an important proof of your tax compliance. Although ITR return forms are fewer, you would need your documents such as PAN, Aadhar card, proof of investment, TDS certificates etc while e-filing the ITR. Keep your ‘other income’ documents like those of capital gains, rental income, dividend income etc handy too. Documents for foreign income or assets should be organised too.

The income tax department had recently issued alerts warning salaried taxpayers not to follow any unlawful practice of evading taxes either by way of under-reporting income or claiming excess deductions like House Rent Allowance (HRA), Leave Travel Allowance (LTA) etc. Similarly, the department also wants taxpayers to file their tax returns in time and avoid delay. In order to ensure the same, new penalty provisions have been introduced. With the entire process of filing tax turning simpler, expectations are that the income of the government is set to soar.

Source :  Press Reports

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

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