GST anti-profiteering body set up

 The government has set up the National Anti-Profiteering Authority amid reports that some companies, particularly restaurants, are not passing on the benefit of the goods and services tax (GST) rate cuts to consumers. B N Sharma, additional secretary in the department of revenue, was on Tuesday appointed chairman of the authority.
Now, guidelines on what exactly constitutes profiteering are awaited. The authority will exist for a period of two years from the date Sharma takes charge.
The authority is mandated to ensure that the benefits of input credit and the reduction in GST rates on specified goods or services are passed on to the consumers by way of a commensurate reduction in prices. The government also named four senior officials as technical members of the authority.
“With the chairman and technical members now having been appointed, the authority becomes functional thereby reassuring consumers of the government’s commitment that GST would result in lower prices of goods and services,” a statement from the finance ministry said.
Govt eases transfer pricing dispute settlement
In a move to reduce litigation and boost investor confidence, the central government has decided to allow access to a bilateral forum for transfer pricing (TP) disputes, for all tax partner countries. The move to accept applications for bilateral advance pricing agreements (APAs) and mutual agreement procedures (MAPs) is expected to benefit a number of multinational companies that are based in important trade partners.
The government has said that even if a tax treaty with another country does not contain the provision of corresponding adjustment in matters of TP, it would still entertain bilateral MAPs &APAs with such a country. This does away with the requirement to amend tax treaties to remove such a deficiency.
ARCs can Now Control Sick Cos
In a move that would allow asset reconstruction companies (ARCs) take management control of sick companies, the Reserve Bank of India has removed the 26% cap on shareholding after conversion of the debt of the borrowing firm under reconstruction into equity.
In a note to ARCs sent late Thursday, the central bank said ARCs that maintain Rs. 100 crore net owned fund consistently and follow good corporate governance would be exempted from the 26% shareholding limit prescribed in 2014.
“This is a brilliant move,” said Vishal Kampani, managing director of JM Financial Group. “Debt resolution will get more traction and we expect banks to be more willing to sell their bad debts,” he said. ARCs are permitted to convert a portion of debt into shares of the borrower company as a measure of asset reconstruction.
Shipping, Airline Cos Add to GST Woes: Exporters Exporters have informed the finance ministry that goods and services tax refunds are getting delayed due to airline and shipping companies not submitting proof of export to customs and mismatches of invoice numbers in shipping bills and GST return forms.
India’s exports dipped for the first time in 15 months in October, falling 1.1% to $23.1billion and are expected to fall further in November as exporters turn away clients and new orders while they get to grips with the new tax regime, which was rolled out on July 1. Last month’s trade deficit widened the most in three years to $14 billion.
The Federation of Indian Export Organisations (FIEO) also said that despite the customs department allowing manual filing of input tax credit refund claims more than 10 days ago, the required application form (RFD-01A) is not available on the GST portal. “Only a fraction of the IGST (integrated GST) claims of July has been paid. The process has not even started for input tax credit,” FIEO director general Ajay Sahai said.
Divestments, GST mopup to lower fiscal deficit pains The success in divestments and encouraging goods and services tax (GST) collections will help the government reduce pressure on the fiscal math, says are port. “Disinvestment drive and GST rollout will reduce pressure on fiscal arithmetic,” domestic rating agency India Ratings said in a report on Monday.
It can be noted that government has reiterated its commitment to narrow down the fiscal deficit to 3.2 per cent for FY18. Frontloading of expenditure, where the Centre has exhausted 96 per cent of the deficit by August, and also a slowdown in growth had put question marks over whether the Centre will be able to meet the fiscal deficit target or not.

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Reverse Charge Mechanism Under GST

Reverse charge is a mechanism under which the recipient of the goods or services is liable to pay the tax instead of the provider of the goods and services. Under the normal taxation regime, supplier collects the tax from the buyer and deposits the same after adjusting the output tax liability with the input tax credit available. But under reverse charge mechanism, liability to pay tax shifts from supplier to recipient.

Concept of reverse charge

The concept of charging tax on a reverse charge basis is not new. Reverse charge mechanism existed in the previous service tax regime. However, the concept of reverse charge on the supply of goods is new.

In the normal course of business, the supplier of goods or services is liable to pay tax on supply, but in the case of reverse charge, the receiver becomes liable to pay tax instead. Thus, if a supplier who is not registered under GST supplies goods to a person who is registered under GST, the receiver pays GST directly to the government.

By way of an earlier notice dated 13 Oct. 2017, the government suspended the applicability of reverse charges on purchases made by registered persons from unregistered persons until 31 March 2018. This implies that a registered person can avail intrastate supplies of goods and/or services from unregistered persons without any daily ceiling, which was previously capped at Rs. 5000.

It is mandatory to register under GST to those liable to pay tax under Reverse Charge Mechanism irrespective of the threshold limit of 20 lakhs and 10 lakhs (North eastern States).

Applicability of Reverse Charge

• In case of services provided by taxi driver or rent a cab operator through electronic commerce operator then GST has to be paid by E-commerce operator;
•  Services through an E-commerce operator for supply of services (Startups like Housejoy shall be liable to collect GST from customers and pay to Government);
•  Unregistered dealer providing supply to the Registered dealer (Here the Registered dealer is liable to pay GST on such supply);
•  Supply of Cashew nuts, Bidi leaves, tobacco leaves by an agriculturist to any registered person, the registered person is liable to pay GST;
• Service of Goods Transport Agency;
• Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly (Clarified by the Delhi High Court);
• Sponsorship Service received from any person, the liability to pay tax vests with Body corporate or Partnership firm located in taxable territory;
• Services provided by a director of a company or body corporate in such authority of Directorship, the company or body corporate is liable to pay GST;
• In case of services provided by an Insurance Agent, The Person running insurance business is liable to pay GST;
• Nonresident service provider, i.e. in case of imports, the reciepient of services in India would be required to pay such taxes.

Exemptions

In the following circumstances, the reverse charge mechanism shall be exempt: 

• On those Goods & Services which are exempt from GST ;
• Reverse Charge GST doesn’t arise in the case of an interstate supply made by the unregistered supplier (As Interstate supply needs GST registration) ;
• If the total supply of goods and services received from an unregistered person doesn’t exceed Rs.5000 a day.

Thus Reverse Charge Mechanism would boost the indirect tax revenue as well as propel buyers to buy from registered vendors to avoid litigation, disputes, and working capital issues.

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GST Council to trim list of items in 28% tax slab

The Goods and Services Tax (GST) Council is set to further amend tax rules to fix glitches in the new indirect tax system and make it easier for businesses and traders to settle into it.

The move comes as a tacit admission by the authorities of the flaws in the system that have made it hard for businesses and traders to make a smooth transition, and that the system started off with high compliance requirements.

The original GST structure, designed as a sophisticated IT-driven tax regime meant to increase transparency and compliance, is now being re-calibrated to make it easier for taxpayers to adapt to it.

The GST Council is set to trim the list of items in the highest tax slab of 28% by shifting some items of common use as well as products made predominantly by small and medium enterprises (SMEs) to a lower tax slab.The tax rate fitment committee, a panel of central and state officials assisting the GST Council, is rigorously combing through the list of items in the highest slab to identify such items, two people with knowledge of the development said on condition of anonymity.The GST Council wants to address the public perception of high tax rates on certain items of common use as well as give further relief to SMEs, which are labour-intensive.

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Taxman gets more teeth to track non filers of Income Tax

Aimed at further arming the taxman to go after those who do not file their income tax returns (ITRs), a new database of multiple addresses of such erring assessees has been set up by the department.

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A new technology enhancement by the systems wing of the department has been added to the ‘Non Filers Management System’ electronic database, the address used by a person or his associate in the ITR or Annual Information Return filed by him.

Source: Hindustan Times, New Delhi, 15th Feb. 2016

Why your Startup should be an LLP (Limited Liability Partnership) - Incorporation of company in India

A Limited Liability Partnership (LLP) is a Partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from that of an unlimited partnership. In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation. In some countries, an LLP must also have a form of limited liability similar to that of the shareholders of a corporation. In some countries, an LLP must also have at least one "General Partner" with unlimited liability. 

Salient features of an LLP 

An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession. 

Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners. 

Every Limited Liability Partnership shall use the words "Limited Liability Partnership" or its acronym "LLP" as the last words of its name. 

Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners. 

Need for LLP 

For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm. 

This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular. Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals. An LLP is similar in some ways to a standard Partnership, except that the individual members have lower liabilities to any debts which may arise from running the business. There are more administrative duties involved compared to the Partnership business structure. 

In fact, an LLP is more similar to operating a Limited Company. In terms of liability, the Limited Liability Partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP. As a result, LLP's are only recommended for profit running businesses. The rights and responsibilities of all members would usually be laid out in a "Deed of Partnership". The LLP would typically select a "Designated Member" who would be responsible for maintaining communications with Companies House, preparing accounts and acting for the LLP if for some reason it is dissolved further down the line. 

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Tax implications of setting up overseas subsidiaries - subsidiary company in India

There is a rising trend that many start-ups incorporate their ultimate holding companies abroad, especially in Singapore for various reasons with tax being one of the top 3 factors for such decisions. 

Some of them have restructured the holding structures after few months of direct Indian holding to accommodate requests from investors and VCs. Apart from ease of regulatory environment in the case of overseas companies, the tax implications in such scenarios could be a grey area and potentially a serious cause of concern if not managed amicably. 

A typical overseas structure could be:

Let's now try and understand the tax implications of the above mentioned typical structure:  - Capital gains on sale of shares of Singapore Holding Company (SHC): This seems to be one of the biggest reasons for such a structure especially where the funds investing are registered overseas. In the case of Singapore, Mauritius, Dubai or similar jurisdictions, there is no domestic tax on capital gains hence the shareholders may not be subject to tax on sale of shares in SHC.  However consequent to recent amendments in Income tax law, if SHC derives more than 50% of its value from assets in India and that the sale value exceeds Rs. 10 crores, then proportionate capital gains shall still be subject to tax in India irrespective of domestic tax laws in the country of incorporation of SHC.  The case for concern in this scenario is the conflict of interpretation between Double Taxation Avoidance Agreements (DTAA) and Income tax law - since as per DTAA this transaction would continue to be taxed only in Singapore (where capital gains is taxed @ 0%) and as far as Indian laws are concerned, DTAA always prevails over domestic taxation laws.  - Royalty income of SHC: Royalty earned and received by SHC from Indian Selling Company (ISC) would be subject to withholding taxes in India @ 10% provided:  o Tax residency certificates (TRC) of SHC is made available to ISC and o SHC has an Indian PAN  Where one or both the above conditions are not fulfilled the withholding tax rates could be anywhere between 20-40%.  Applicability of Transfer Pricing Rules: Any transaction with an Indian entity with its related person overseas shall fall within the ambit of transfer pricing rules. Accordingly all the transactions which are subject to transfer pricing shall be made at fair market values (technically known as arm's length price [ALP]).  Hence royalties paid by ISC and software development charges received by ISD shall be subject to transfer pricing. Detailed commercial contracts and invoices need to be prepared for these transactions. There are elaborate rules and regulations provided for determining alp which need to be adhered. Non-compliance could lead to serious penalties and tax levies. It is noteworthy to mention that India is one of the popular jurisdictions globally for high value transfer pricing litigations. - Taxability of Dividends distributed by ISC and ISD: Indian companies are subject to corporate tax @ 30% plus surcharge (7/12%) and cess @ 3% depending on their income levels. Post tax profits, when distributed are subject to 15% distribution plus surcharge and cess. However dividends distributed by ISC and ISD to SHC are not subject to any further tax in India since dividends from Indian companies are fully exempt in India.  For more information on tax implications You can consult any tax consultancy in Mumbai. They provide support from Company registration to filing e-returns. For company Laws and company incorporation visit link Company Incorporation in India steps Read more at: http://economictimes.indiatimes.com/articleshow/48261621.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Income Tax Department on Twitter - Company registration India

Income Tax Department launched its official handle on Twitter in order to make assure that all taxpayers remain updated regarding all activities of Income Tax Department. The handle is “incometaxindia_”.

"Follow us to stay updated on the latest taxpayer services," the first tweet by the department said.

Tax payers can access online all tax services at https://incometaxindiaefiling.gov.in.

The income tax department functions under the Central Board of Direct Taxes(CBDT) under the order of Union Finance Ministry.

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