PROFESIONAL UPDATES JANUARY 19, 2016

PROFESIONAL UPDATES JANUARY 19, 2016

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STARTUP INDIA: Hon’ble PM Modi launches Startup India Program on Sat, 16 JAN 2016 to boost innovation based business with many incentives and ease of doing business.

  • Income Tax exemption for First 3 years.
  • Fund of ₹ 10,000 Crore (with ₹ 2,500 crore each year) to be invested in Startups in next 4 years and a Credit Guarantee Fund for ₹ 500 crore each year for next 5 years.
  • Capital Gain exemption if Startups invest capital by selling their personal assets.
  • 80% Rebate in registering Patent.
  • Easy Exits in 90 days.
  • Self-certification compliances.
  • No kind of Inspection for first 3 years.
  • Incubation program to be started in 5 Lac Schools and setting up of 35 new Incubation Centres.
  • No Govt intervention in Startups.
  • A scheme for Women Entrepreneur to be announced soon.
  • A group of lawyers to be setup who will help resolving Patent related problems for free.
  • 7 New Research Parks to be started with a fund of ₹ 100 crore each.
  • Organising Startup Fest all over India and abroad regularly.
  • Mobile App based registration for Startups from April 1, 2016.
  • Atal Innovation Mission (AIM) for encouraging Innovation among Startups.

The following are the Conditions for taking benefits of Startup Scheme:

1)It must be an entity registered/incorporated as

  • Private Limited Company under the Companies Act, 2013; or
  • Registered Partnership firm under the Indian Partnership Act, 1932; or
  • Limited Liability Partnership under the Limited Liability Partnership Act, 2008.

2) Five years must not had elapsed from the date of incorporation/registration.

3)  Annual turnover (as defined in the Companies Act, 2013) in any preceding financial year must not exceed Rs. 25 crores.

4)Startup must be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

5)The Startup must aim to develop and commercialise:

  •   A new product or service or process;
  • A significantly improved existing product or service or process,  that will create or add value for customers or workflow.

6)The Startup must not merely be engaged in:

  • Developing products or services or processes which do not have potential for commercialization; or
  • Undifferentiated products or services or processes; or
  • products or services or processes with no or limited incremental value for customers or workflow

7)The Startup must not be formed by splitting up, or reconstruction, of a business already in existence.

8) The Startup has obtained certification from the Inter-Ministerial Board, setup by DIPP to validate the innovative nature of the business and

  • Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or
  • Be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or
  • Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or
  • Be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI* that endorses innovative nature of the business; or
  • Be funded by GoI as part of any specified scheme to promote innovation; or
  • Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

* DIPP may publish a ‘negative’ list of funds which are not eligible for this initiative.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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INDUSTRY HIGHLIGHT FOR THE MONTH OF NOVEMBER

Bulls say India is the ‘next China’ OCT 28, 2015

Untitled35TODAY UPDATE :

The bulls say India is the ‘next China’. Odds are they are right, if not today then within a decade or so. But even if this proves to be right in terms of growth, India is a very different country than China on many fundamental dimensions, demography and democracy being key. But most importantly, China has been built on infrastructure, investment and manufacturing, while India has barely scratched the surface on all three.

India began its economic reform in the early 1990s, more than a  ..

Read more at: 

http://economictimes.indiatimes.com/articleshow/49548115.cmsutm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

NEW DELHI: SpiceJetBSE 6.22 % today announced discount sale offering fares starting as low as Rs. 749/- base fare (excluding taxes) for the domestic sector and Rs. 3,999/- all in for the international sectors respectively. More than 3,00,000 lakh seats are available on this sale!

Tickets on sale can be booked October 27 and October 29, 2015, for travel between February 1, 2016, and October 29, 2016.

“The all inclusive one-way fare applicable on direct flights encompasses all ..

Read more at:
http://economictimes.indiatimes.com/articleshow/49547906.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

“Follow the pundits”, is a strategy many investors looking to making a fortune on the stock markets swear by. There are several investors in the United States who have built the ‘Buffett portfolio’, following the strategy of Warren Buffett. The cornerstone of Warren Buffett’s investment philosophy is to identify stocks that pass the ‘basic screen test’. Inspired by Buffett, ET Intelligence Group trained its gaze on Dalal Street stocks to find winners in the basic screen test. In what comes as  ..

Read more at:
http://economictimes.indiatimes.com/articleshow/49515324.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

NEW DELHI: Crossing a significant milestone in negotiations for the 36-aircraft Rafale fighter deal, India and France have firmed up an understanding on the offsets segment under which the French have agreed to invest 50 per cent of the deal’s worth in related sectors.

The offsets deal was clinched in the last few days, people aware of the matter told ET. Even as the deal was being reached, French aircraft manufacturer Dassault had already reached out to Indian companies in the defenc ..

Read more at:
http://economictimes.indiatimes.com/articleshow/49487260.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

NEW YORK: The United States is the best partner for Prime Minister Narendra Modi’s ” Make in India” campaign as the two nations seek to reinforce their strategic interests through commerce, a senior US government official said Tuesday.

Under Secretary of Commerce Stefan Selig said that because the US produces “the best manufacturing exports” India will have “no better partner” in its bid to make the country “an elite manufacturing hub on the global stage.”

Briefing reporters he ..

Read more at:
http://economictimes.indiatimes.com/articleshow/48982795.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

CHENNAI: India’s atomic power company Nuclear Power Corporation of India Ltd (NPCIL) is likely to restart its first 1,000 MW unit at Kudankulam Nuclear Power Project (KNPP) only in December this year, said a source.

The source, not wanting to be named, told IANS: “The first unit is expected to restart generation only in December. The second unit may take longer time to start power generation.”

The NPCIL is building two 1,000 MW atomic power plants with Russian equipment at  ..

Read more at:
http://economictimes.indiatimes.com/articleshow/49548253.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com  or call at 9555555480

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HIGHLIGHT ON NOTIFICATION REGARDING BLACK MONEY

CENTRAL BOARD OF DIRECT TAXATION – INCOME TAX DEPARTMENT NOTIFIES FORM 6 –TO ENABLES ONLINE DECLARATION OF BLACK MONEY OUTSIDE INDIA

Untitled18AThe Online filing of Form 6 under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 has been issued under the menu “e-File” after login. Taxpayers are requested to e-File Form 6 during the compliance window which ends on September 30, 2015.[Refer Notification No. 58/2015 dated 02/07/2015]Form-6 is for Declaration of undisclosed asset located outside India under section 59 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

All Basic Steps for Electronic filing of Form 6 are as under:

  1. Download and Fill Form 6 from Income Tax E-filing Website
  2. Generate xml file of Form 6
  3. Go to and login at https://income tax india e-filing.gov.in/
  4. Under the menu “e-File” select “Upload Form 6 (for undisclosed foreign assets)
  5. Attach xml file of Form 6 and Scanned Documents in pdf

The maximum size of scanned documents should not be more than 50MB

The following scanned documents are required to be attached:

(a) Valuation Report

(b) Separate computation of FMV (if done other than mentioned in Rule 3)

  1. Click on Submit to finish uploading and attaché Digital signature when prompted. DSC is mandatory for all the assesses.
  2. Download/save the acknowledgement as required.

Related Updates:

CBDT Notification 58/2015 Black Money Rules, Valuation and Forms Click Here>>

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:info@carajput.com or call at 9555555480

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HIGHLIGHT ON GST

Goods & Service Tax in India

3Proactive Actions & Expectations of Indian Company

Goods and Service Tax (‘GST’) is an efficient, effective and modern mode of taxation which facilitates effective tax administration with minimum tax collection cost. The globe is having around 195 countries and out of that, around 140 countries are working on the GST model. Few developed countries like Australia (10%), Canada (5%) New Zealand (12.5%), Singapore (7%) etc. are among the first runners who adopted the efficient tax model. Even, our neighbor country Pakistan is also having GST but only the abbreviation convey the right expression, full form of GST in Pakistan stand for General Sales Tax!!

Now a days lot discussion on GST are going on among the Government authorities and trade. Expectations of Trade are on high sprits for the GST model. The objective of this article is to discuss expectations of Indian Inc. from proposed GST.

Multistage taxation on the manufacture i.e. Customs duty on imports, Central excise duty on manufacture, Central Sales Tax (CST) / Value Added Tax (VAT) on sale of goods, Service Tax on provision of services, Further levies such as Entry Tax, Octroi, Cess by the State or local municipal corporations/municipalities are the major block in the progress of trade. Above this Entertainment tax, Luxury Tax etc. are also playing an extra toping role to distaste the trade.

Even a common man can understand the plight of the trade who is bound to comply, pay, administer and then assessment which is also a time and energy consuming exercise. The present tax base may be lucrative in volume but not in value terms.

Tax model, devoid of multiple taxes and manifold compliance requirements which allow seamless credit mechanism, has been the dream of the industry for long. To lessen the plight of trade and to facilitate the easy administration of tax are two main causes which are pushing revenue authorities to change the present multi tax model into GST model.

Introduction of GST in India has started with the concept of CENVAT (merging the service tax input tax credit with Central Excise Input Tax credit). The concept of GST was recognized by the Indian revenue authority long back, but the first step was taken on 10th September 2004, when the cross input tax credit of Service Tax and Central Excise was allowed. Unified GST is the most appropriate model of GST, but whether the said model is workable in the Indian context, it is a big question to answer.

In India the power to collect tax is bifurcated between Centre and State. Unified GST model require collecting of taxes by Centre and then sharing with States. The requisites of said model would affect the basis fabric of the federal structure of the India. The state power of revenue rising would be exercised by the Centre which will create problems of dependency of states on centre. Further, managing unified GST by the Centre would not be easy task with the available resources. Further, bifurcation of Centre GST and State GST into goods tax and service tax would not fulfill the purpose of GST.

Press reports are confirming the dual GST which would jointly governed by state and centre. There is still a veil on the picture how dual GST will be different with the present multi level tax model.  But it is almost final that unified GST would not be the future model of tax.

As per the one of the big four consultancy firm’s poll, “More than two thirds of respondents are not in favors of dual GST. Further, About 75% of respondents of specific sector like telecom, transport and logistics segments are not in favor of dual GST,”

Revenue Neutral Rate (RNR) is another centre of confusion. Presently Trade is paying around 20.74% (12.5% +8.24% = 20.74%) as Central Excise Duty, VAT (4% to 20%) along with the service tax @ 10.30%. Indian Inc. is expecting the consolidated RNR at the present level.

Subsuming of all Indirect Taxes is another fair expectation of the trade. However, trade is not convinced on the authorities promise to merge all indirect taxes due to the past experience on the VAT.

Exemption limit is like a weighing machine which needs to be balanced by revenue authorities to justify the administration cost as well as tax base. The threshold limit for present tax base is on a very conservative approach. The threshold limit should be on higher side so that tax collection cost and administration cost can be maintained at reasonable levels. Trade is expecting higher threshold limit so that transaction cost of the small trades may be justified.

Further the fate of general exemptions on the essential commodities and location based exemptions is not yet clear. However, it can be predictable that these exemptions may be prevailed in the form of payment of tax and then refund method. The experience of trade to get the refund is not very appreciative despite of genuine efforts of the revenue authorities. Trade is expecting clear cut exemptions on the product or location. However, exemptions would not fulfill the purpose of providing benefit to the deprived consumers. GST is consumption tax and exemptions can distort the basis objective. Consumer with high consumption power would avail the benefit of exemption.

The fate of stamp duty on transfer of immovable property is not clear. Trade is expecting subsume of stamp duty with GST. Further, it is also expected that subsumed stamp duty on the immovable property should be levied on the value added not on the full consideration.

Is Indian Company really ready to adopt Goods and Service Tax (‘GST”)? The answer of this question is really tough in the current scenario. Presently, Indian Inc. is bound to comply with multi taxes and sufferings in term of high tax cost. Short span of time provided to readjust and realign it business process will increase suffering further. How Indian Inc. can realign its business model, supply chains, logistics with in few month and how anyone can expect this!! Following are the few points on which Indian Inc. should act proactively on the new proposed GST model.

Business Strategy/Pricing Policy/Logistics

Impact of tax cost on pricing policy should be reviewed as per new GST rates on inputs/ final products. Options of backward and forward integration in terms of overall tax cost and efficiency may be explored.

Feasible study of inter state supplies or warehousing in terms of new valuation rules of goods and services would be the need of hour. Further, supply chain and distribution channels may need a review as per the new regulations.

First discussion paper on GST affirms few positions, like applicability of Integrated Goods and Service Tax (IGST) on inter state transaction, allowance of cross credit among goods and services, non allowance of credit among State GST and Central GST. Indian Inc. can evaluate the different feasible options and plan proactively the future course of action.

Abolition of Central Sales Tax (“CST’):

Revenue authorities are committed to abolish CST from April 01, 2010. On this auspicious day Indian Inc. would say good bye to CST and will welcome GST (may be delayed for further few months!!). Inc. engaged in manufacturing which are having presence on pan India basis needs adjustments/realignments in the supply chain due to abolition of CST. The cost benefit analysis of distribution cost vs. warehousing cost should be done to evaluate the tax impact on the products.

Statutory Concessional Forms:

Next action point for Indian Inc is the collection of statutory concessional forms. Form F (concessional form for branch transfer) may be the internal matter of the trade and easy to coordinate among the branches; will not pose as a big challenge. The bigger challenge is to collect Form C (concessional form for inter state sale). Proper strategy on coordination with the buyer would minimize the tax liability and future exposure.

Location Based Exemptions:

Inc. having manufacturing facilities in the state of Uttaranchal, Himachal Pradesh and availing location based exemptions need to review their business model. Present scheme of exemption may be adopted by GST in the form of first pay and then refund scheme. This scheme will definitely increase the working capital requirement of the company. Further getting refund would also require documentation and have administration cost. A study on the requirement of additional working capital would be required. Administration Cost Vs. exemption benefits should be evaluated to determine the best available option.

Export obligations:

Most of the export promotions schemes like EPCG, SEZ and EOUs are attached with export obligations, which are calculated as per the current tax rates. Inc. availing export promotions schemes should do a study of impact of the GST and need to re-calculate the duty obligation with respect to the export as per the new rates. Surety Bonds executed with the revenue authorities would require a suitable amendment in view of changed liability as per the applicable GST.

Changes in the ERP System:

GST will come with the new tax rates; new formats of the invoices, returns, challan would also be amended as per the GST requirement. ERP need to be amended in terms of the above changes. Accounting entries for GST would also be required to amend as per the new tax model.

Training of the Middle Management:

Management should be ready to adopt the changes in the minimum period of time. As per the discussion paper, each state will have its own legislation. However, uniformity on the broad issues has been assured by discussion paper. In light of changed legislations, rates, formats core tax team should be prepared and well trained.

At the last but not the least, trade expects a reasonable time to realign business transaction as per the proposed GST model. In case of Direct Tax, the draft is available among the public, proposed to be implemented from 2012. GST draft which is proposed to be implemented from April 2010 (five months to go) is yet to take time to come into public!! The recent statement of Honorable Finance Minister surprised the trade that delays of few months would not a surprise for him, this delay can provide few more hours to plan for re-adjustment of business process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:  info@carajput.com or call at 9555555480

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HIGHLIGHT ON BLACK MONEY BILL

SALIENT FEATURES OF THE BLACK MONEY BILL

Untitled15AThe Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Bill, 2015, popularly known as Black Money Bill passed by both the Houses of Parliament, requires all Indians to declare undisclosed foreign assets and income. This bill will be effective from 01.04.2016. It is expected that compliance window could be open for 2-3 months to declare undisclosed income and assets. A further six months could be provided to make tax payments.

Here are the salient features of the Black Money Bill:-

  • Tax on all undisclosed foreign income will have to be paid at the flat rate of 30 per cent without any exemption, deduction, set off or carry forward losses that the Income Tax Act permits.
  • Tax on all undisclosed foreign income will have to be paid at the flat rate of 30 per cent without any exemption, deduction, set off or carry forward losses that the Income Tax Act permits.
  • Enhanced punishment of jail for 3-10 years for willful evasion of tax on foreign income along with a penalty equal to three times the amount of tax evaded or 90 per cent of the undisclosed income or the value of the asset.
  • There is a limited compliance window offer. Offenders would have to pay tax at the rate of 30 per cent but concessional penalty would be equal to the tax amount. I.e. 30%.
  • Failure to file returns of foreign income or assets will attract a penalty of Rs. 10 lakh.
  • New law will not cover those having amounts equivalent to Rs 5 lakhs in bank accounts abroad, which may belong to students or those working there.
  • The compliance window will give an opportunity for payment of tax and penalty, “once the compliance window closes, people are going to be taxed very heavily.
  • Tax and penalty of 120 per cent (30% TAX and 90% PENALTY), which will be imposed after the expiry of ‘compliance window’, means the value of assets is gone.
  • It will apply only to resident and will not cover Non-Resident Indians (NRIs) working abroad. Those who work abroad are not going to be covered. It is those who are resident taxpayers and assessesed in India, and who keep unauthorized income outside are going to be liable under this Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09555555480.

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CORPORATE UPDATE ON DIRECTORS REPORT

COMPANY LAWS UPDATE ON DIRECTORS REPORT FOR PRIVATE LIMITED COMPANIES & SMALL COMPANIES

Untitled32A24 Points to Be Taken To Directors Report For Private Limited Companies & Small Companies:-

  1. Extract of Annual Return (Extract of annual return relating to FY to which the Board’s Report relates shall be attached.) MGT 9/Sec 134 (3) (a) r/w rule 12 of Cos (MAD) Rules.
  2. Number of Meetings Of The Board, including dates of Board and Committees meetings held indicating the number of Meetings attended by each Director -SS1.(Clarification by ICSI – SS 1 to apply to BM in respect of which Notices are issued on or after 1stJuly, 2015.) Sec 134 (3) (b);/Secretarial Standards 1.
  3. 3 Directors’ Responsibility Statement -Accounting Standards –Accounting Policies- Proper and efficient care for 3 things-Going concern basis-Adequate Internal Financial Controls-Compliance with all applicable laws.Above 6 points to be cover / Sec 134 (3) (C) & (5).
  4. Explanation or Comments By The Bod on every qualification, reservation or adverse remark or disclaimer made bythe Auditors in Audit report Sec 134 (3)(f) (i).
  5. Particulars of Loans, Guarantees or Investments U/S186 -Sec 134 (3) (g).
  6. Related Party Contracts or Arrangements (Particulars of contract along with justification for entering into such contract) AOC 2/ Sec 134 (3) (h) r/w Rule 8(2) of Cos (Accounts) Rules.
  1. State of the Company’s Affairs Sec 134 (3) (i).
  1. Amounts proposed to be Carried to Reserves, if any Sec 134 (3) (j).
  1. Amount recommended as Dividend, if any, Sec 134 (3) (k).
  1. Material Changes & Commitments affecting financial position of the Company, occurring after Balance Sheet Date (Details of material changes occurring between date of Financial Statements & Board Report) Sec 134 (4) (l).
  2. Energy Conservation, Technology absorption, FOREX earnings & outgo, in prescribed manner Sec 134 (3) (m) r/w Rule 8(3) of Cos (Accounts) Rule.
  3. Statement indicating development & implementation of RISK Management Policy (This is required only if risk factors are there) Sec 134 (3) (n).
  4. Financial Highlights& Change in the nature of business Sec 134 (3)(q) r/w Rule 8(5).
  5. Details of Directors/ KMP Appointed/Resigned during the year Sec 134 (3)(q) r/w Rule (8)(5)(iii) of Cos (Accounts) Rules, 2014 & Sec168 (1).
  6. Name of the Companies Which Have Become/Ceased to be subsidiaries, JVs or Associate companies during the year Sec 134 (3)(q) r/w Rule (8)(5)(iv) of Cos (Accounts) Rules, 2014.
  1. Details of significant and material Orders Passed By The Regulators, Courts, Tribunals impacting the going concern status and company’s operations in future Sec 134 (3)(q) r/w Rule 8 (5) (vii) of Cos (Accounts) Rules.
  1. Details in respect of adequacy of internal Financial Controls with reference to Financial Statements Sec 134 (3)(q) r/w Rule 8 (5) (viii) of Cos (Accounts) Rules.
  2. Separate section containing a report on Performance And Financial Position Of Each Of Subsidiaries, Associates& JVs included in the Consolidated FS of the Co Rule 8(1) of Cos (Accounts) Rules.
  1. Disclosures under Sexual Harassment Of Women at Workplace (Prevention, prohibition &redressal) Act, 2013 Sexual Harassment of Women at Workplace (Prevention, prohibition &redressal) Act, 2013.
  1. Details about CSR Committee, Policy, its implementation and initiatives taken during the year (To be included if following limits are triggered –NW ≥ 500Cr TO ≥ 1000 Cr NP≥ 5 Cr)Format prescribed in CSR Rules Sec 134 (o); 135 (2) r/w Rule 8 of Cos (CSR) Rules.
  1. Disclosure on establishment of Vigil Mechanism (Applicable to Cos which have accepted deposits from the public or borrowed money from banks & FIs in excess of Rs 50 Cr) Sec 177(9) r/w Rule 7 of Cos(Meetings of the BoD) Rules.
  2. Prescribed details of Deposits covered under Chapter V of the Act Sec 134 (3)(q) r/w Rule (8)(5)(v) & (vi) of Cos (Accounts) Rules, 2014.
  3. Issue of Equity Shares with Differential Rights, Sweat Equity, ESOS, etc. Sec 43, 54 r/w Rule4 (4); 8 (13) & 12 (9) of Cos & Sec 62 (1)(b) r/w rule 12(9) of Cos(Share Cap & Debenture) Rules.
  4. Disclosure in respect of Voting Rights not exercised directly by the employees in respect of shares to which the scheme relates -Sec 67(3) r/w Rule 16 of Cos(Share Cap & Debenture) Rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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CORPORATE AND PROFESSIONAL UPDATE

Untitled270

Larger Bench of Bangalore CESTAT decides five key issues in relation to Turnkey Projects

The Bench of in the case of M/s Lanco Infratech Ltd. 2015 TIOL-768-CESTAT – BANG-LB has decided five key issues relating to Service tax on various infrastructure projects undertaken for Government. The same has been discussed below:

S.no. Issue Larger Bench held that
1. Whether laying of pipelines for lift irrigation systems, transmission and distribution of drinking water or sewerage, undertaken for Government/ Government undertakings should be classified under ECIS aserection, commission or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise; or installation of plumbing, drain laying or other installations for transport of fluids, enumerated in Section 65(105)(zzd) as defined under Section 65(39a), during 16.06.2005 to 31.05.2007; or must be classified under CICS, as amounting to construction of pipeline or conduit; and if classifiable under the later provision, whether the activity is not taxable since it is not used or to be used, engaged or to be engaged primarily for industry or commerce; Laying of pipelines/ conduits for lift irrigation systems for transmission of water or for sewerage disposal, undertaken for Government/ Government undertakings and involving associated activities like trenching, soil preparation and filling, supporting masonry work, jointing of pipes, electro-mechanical works or pumping stations and like activity, is classifiable only under Commercial or Industrial Construction Service (CICS) for the period up to 01.06.2007 and not under Erection, Commissioning or Installation Service (ECIS);
2. Whether construction of canals for irrigation purposes and laying of pipelines including as part of lift irrigation systems, undertaken for the Government/ Government undertakings is liable to service tax under WCS as turnkey projects, including engineering, procurement and construction or commissioning projects under clause (e) of Explanation (ii) in the definition of WCS or is excluded from the ambit of WCS since it is in respect of a “Dam” and thus stands excluded from WCS, as defined; (i) Construction of canals for irrigation or water supply; construction or laying of pipelines/ conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract “in respect of dam” and is thus excluded from the scope of “Works Contract Service” defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision;(ii) Turnkey/ EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105) (zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. In the light of the decision in Alstom Projects India Ltd., fortified by the Special Bench decision (dated 19.03.2015) in Larsen & Toubro Ltd. reference, a turnkey/ EPC contract is taxable prior to 01.06.2007 as well. On and since 01.06.2007, turnkey/ EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/ EPC contract must be classified under any of the clauses (a) to (d),
Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/ EPC contract, classifiable as Commercial or Industrial Construction Service (CICS) prior to 01.06.2007, would be classifiable under clause (b), Explanation (ii), Section 65(105)(zzzza) on and from 01.06.2007 and would not be eligible to service tax if the rendition of service thereby is primarily for non-commercial, non-industrial purpose, in view of the exclusionary clause in clause (b) of the definition of WCS. This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65 (105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable services like ECIS, CICS or COCS; and other services when bundled to amount to turnkey/ EPC;(iii) Construction of canals/ pipelines/ conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/ Government undertakings would be for non-commercial, non-industrial purposes, even when executed under turnkey/ EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to service tax, in view of the exclusion enacted in clause (b);
3. Whether, turnkey projects, including engineering, procurement and construction or commissioning (EPC) projects specified in clause (e) is merely an enumeration of the mode of execution of taxable services specified in clauses (a) to (d) or is a wholly distinct taxable service and is eligible to service tax as an independent species of works contract service;
4. Whether, even if clause (e) in Explanation (ii) of WCS is considered a distinct and independent service, where construction of canals for irrigation purposes and laying of pipelines either as part of lift irrigation systems or for transport and distribution of water is undertaken for Government/ Government undertakings, the same is more appropriately covered under clause (b) of WCS i.e. construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, by applying principles of classification set out in Section 65A(2)(a) & (b) and thus fall outside the ambit of levy, since the activity is not primarily for the purpose of commerce or industry; or whether a contrary view that clause (e) being an independent entry, activities falling there under would be taxable even if the rendition of service thereby or there under, was not primarily for non-commercial or non-industrial purposes;
5. Where execution of the whole or a part of the work is sub-contracted on back to back basis by the main contractor (which is a joint venture) to sub-contractors, in the absence of any transfer of property in goods involved in the execution of such works, from the main contractor to the Government/ Government undertakings, whether levy of service tax in the hands of appellant (main contractor) is valid under WCS, in the light of the judgment in State of A.P. vs. L & T Ltd. Where under an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/ contractee, assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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WHETHER COLLECTION OF CHEQUES DURING INSPECTION IS LEGAL?

Whether collection of cheques during inspection by enforcement authorities (CT) is legal?

31In Commercial Taxes Department, the Assessment Wing and Enforcement Wing function under the control of the Commissioner of Commercial Taxes. According to the administrative policy of the Tamil Nadu State Government, Commercial Taxes Check posts are static locations where inter-State movements of vehicles are monitored. In order to monitor movement of goods within the State, Roving Squads have been established across the State and they are provided with modern gadgets like Hand-held Terminals to view the profile and status of dealers who are transporting the goods. In addition, there are groups available under each Deputy Commissioner (Enforcement) to carry out surprise inspection of the place of business to detect evasion of tax. The same group officers also carry out the annual audit in the business premises after prior intimation to the dealer. The Inter-State Investigation Cell which is headed by a Joint Commissioner mainly coordinates with the officers of other States to control evasion of tax on inter State transactions and exchanges data with them for further processing to arrest tax evasion.  During such inspection or Audit, the officials find defects in the books of accounts, sale Bills, availment of ITC, or filing of incorrect VAT or CST returns or in Form WW or non-filing of statutory forms etc., and uses their power to collect Cheques for the defects noticed forcibly and without knowing the legal provisions the assessees are accepting their defects, whether correct or not, and handover cheques. In some cases, the Department without waiting for the assessment to complete freeze the bank account of the Assessee for non-cooperation. Whether such collection of payment from the dealer during inspection is maintainable? Or freezing the bank account is legal? The questions are to be answered.

COURT DECISION:

In the recent decision, the Hon’ble High Court of Madras while disposing the W.P in the case of Mr. B. Manoharn Vs The Commercial Tax Officer (Enforcement) Group-I, W.P.(MD) No.723 of 2015 reported in (2015) 56 taxmann.com 4 (Madras HC) held that without assessment order or without giving an opportunity of personal hearing, there cannot be collection of tax, at the time of inspection and that without any assessment order or without any demand, there cannot be a forcible collection of tax, especially, when the petitioner challenged even the issuance of cheques. Therefore, this Court also directs the authorities concerned to de-freeze the account of the petitioner immediately.

 LEGAL PROVISIONS:

TNVAT Act, 2006 Section 65 deals with power of the enforcement officials and as per this section they have got powers to inspect the books, accounts and other records. Section 72 deals with composition of offences. Section 45 deals with mode of recovery. The extracts of the three relevant sections are as under:

POWERS OF ENTRY, INSPECTION ETC.,

Sec 65. (1) Any officer prescribed by the Government in this behalf may, for the purposes of this Act, require any dealer to produce before him the accounts, registers, records and other documents, and to furnish any other information relating to his business.

(2) All accounts, registers, records and other documents maintained by a dealer in the course of his business, the goods in his possession, and his offices, shops, godowns, vessels or vehicles shall be open to inspection, at all reasonable times, by such officer:

Provided that no residential accommodation not being a place of business-cum-residence shall be entered into and searched by such officer except on the authority of a search warrant issued by a Magistrate having jurisdiction over the area, and all searches under this sub-section shall, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure, 1973.

(3) If any such officer has reason to suspect that any dealer is attempting to evade the payment of any tax, fee or other amount due from him under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers, records or other documents of the dealer as he may consider necessary, and shall give the dealer a receipt for the same. The accounts, registers, records and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under this Act.

(4) Any such officer shall, for the purposes of sub-section (2) or sub-section (3), also have power to enter and search any office, shop, godown, vessel, vehicle, building or place belonging to any other dealer or any other person, if such officer has reason to believe that a dealer keeps, or is keeping any of his goods, accounts, registers, records or other documents in such office, shop, godown, vessel, vehicle, building or place.

Explanation.- It shall be open to the Government to prescribe different classes of officers for the purpose of taking action under sub-sections (1), (2) and (3).

COMPOSITION OF OFFENCES:-

Sec 72. (1) The prescribed authority may, whether on application made to it in this behalf or otherwise, give any person, who has committed or is reasonably suspected of having committed an offence under this Act, option to pay within a specified period, by way of composition of such offence -

(a) where the offence consists of failure to pay, or attempt to evade or evasion of, any tax payable under this Act, in addition to the tax so payable, a sum of money not exceeding rupees two thousand or double the amount of the tax payable, whichever is greater, and

(b) in other cases, a sum of money not exceeding rupees two thousand.

(2) On payment of such sum of money and the tax, if any, payable under this Act, no prosecution for an offence under this Act shall be instituted in respect of the same facts on which a composition has been allowed under this section.

(3) Where the prescribed authority, on application made under sub- section (1), passes an order refusing to allow composition under this section, it shall record in writing the reasons therefore and furnish to the applicant on request a brief statement of the same unless in any case the prescribed authority is of the opinion that it will not be in the public interest to furnish such statement.

FURTHER MODE OF RECOVERY

Sec 45,:- (1) The assessing authority may, at any time or from time to time, by notice in writing a copy of which shall be forwarded to the dealer at his last address known to the assessing authority require -

(a) any person from whom money is due or may become due to the dealer, or to any person who has become liable to pay any amount due under this Act ; or

(b) any person who holds or may subsequently hold money for, or on account of the dealer or other person who has become liable to pay any amount due under this Act, (2) … .. …

(3) … .. …

(4) … .. …

(5) … .. …

(6) Any amount which a person required to pay to the assessing authority or for which he is personally liable to the assessing authority under this Section shall, if it remains unpaid, be a charge on the properties of the said person and may be recovered as if it were an arrear of land revenue.

Explanation :-  For the purposes of this Section, the amount due to a dealer or money held for or on account of a dealer by any person shall be computed after taking into account such claims, if any, as may have fallen due for payment of such dealer to such person and as may be lawfully subsisting. “

It is therefore concluded that only power to conduct an inspection has been postulated under Section 65 of the T.N.V.A.T. Act, 2006 which clearly defines the power to order production of accounts, power of entry, inspection, etc. and in the Section cited above, it is nowhere stated that the inspecting officials have powers to forcibly collect the cheques from the petitioner at the time of inspection. The following case laws support that the enforcement wing officials have no jurisdiction to collect the tax even before the assessment order is passed by the Assessing Authority and therefore, the action of the Inspecting officials is highly arbitrary and illegal and the action of the officials in attaching the bank account pending assessment is totally unwarranted. In the case of Astek Electricals, the Hon’ble High Court has observed and held that without due assessment, the authorities had straight away written to the bank attaching petitioner’s bank account which, under no stretch of imagination, can be sustained and this action of the authorities is in complete violation of the principles of natural justice. In some of the cases, the Hon’ble High Court has directed the authorities to return the cheques forcibly collected to the assessee.

  • M/s. HOTEL BLUE NILE Vs. STATE OF TAMIL NADU (MAD.) (1992) 87 STC 513).
  • M/s. KUMAR COMMERCIAL AGENCIES Vs. DEPUTY COMMERCIAL TAX OFFICER (1993(4) M.T.C.R.563).
  • M/s. OUTDOOR ADVERTISING SERVICES, REP. BY ITS PROPRIETOR R.MURALI Vs. THE DEPUTY COMMERCIAL TAX OFFICER (ENFORCEMENT) AND ANOTHER (W.P.NO.29341 OF 2005, DATED 10.9.2009
  • M/s. KEERAN BUILDERS PRIVATE LIMITED REP. BY ITS MANAGING DIRECTOR E.NAKKEERAN Vs. THE ASSESSMENT COMMISSIONER (CT) (ENFT), AND ANOTHER (W.P.NO.212 OF 2011, DATED 25.1.2011)
  • M/s. Mura Gents VsThe Commercial Tax Officer P.No.21544 of 2010,
  • M/s. Astek Electricals And … VsThe Assistant Commissioner (CT) Writ Petition No: 6672 of 2013.

CONCLUSION:

Though the authorities are vested with ample powers to take action for the recovery of the tax due, such action must be preceded by issuance of a notice demanding such tax following a due assessment by the Assessing Authorities. The inspection authorities will have to submit the audit paras and reports or inspection notes to the jurisdictional Assessing Authority who will assess by issuing notice and demand must be done in accordance with law namely, after giving an opportunity to the assessee to put forth their defence/explanation for the queries raised, more particularly, in a case of surprise inspection/search. Hence collection of cheque during inspection out of coercion is legally in correct, unwarranted and bad in law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact:   info@carajput.com or call at 9555555480

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GUIDELINES FOR MOBILE VIRTUAL NETWORK OPERATORS SET TO LAUNCH THEMSELVES IN INDIA

GUIDELINES FOR MOBILE VIRTUAL NETWORK OPERATORS SET TO LAUNCH THEMSELVES IN INDIA

Untitled25ARecent media reports confirm that the Mobile Virtual Network Operators (“MVNOs”) have been allowed by the Telecom Commission (“Commission”) to launch their operations in India. Though the entry of MVNOs in the Indian market was permitted in 2008 but so far the Department of Telecommunications (“DOT”) has issued no guidelines with regard to their operation. Following this approval by the Commission, DOT is expected to come out with specific guidelines very soon which is bound to attract a lot of MVNOs in the Indian market, one of the fastest growing mobile markets.

MVNOs are companies that provide mobile phone services but do not own their own cellular network or airwaves. In most cases, they do not even possess the infrastructure to run an independent mobile network. MVNOs buy airtime from an existing mobile network operator and then sell this airtime to the end consumers under their own brand. This airtime is operated using any mobile technology, such as Code Division Multiple Access (CDMA), Global System for Mobile Communications (GSM) or Universal Mobile Telecommunications System (UMTS).

The Commission has also levied some restriction on how MVNOs will operate in India. According to them, MVNOs can partner only with one mobile operator for a particular area. Mobile operators, on the other hand, can partner with multiple MVNOs even in a single area. MVNOs will also be given licenses for a period of twenty years so that fruits can be reaped by MVNOs, the mobile operators supporting such MVNOs and the end consumer.

Further, the auction of 3G spectrum, which is due this year and high-end services, will attract a lot of MVNOs since most of them specialize in providing such high-end services. Once these guidelines are released by the DOT, existing mobile operators will also hope of partnering with MVNOs to increase the size of their consumer market.

This step by the DOT, following the Commission’s order, is set to attract plenty of MVNOs to India. Not only will this increase competition between the existing mobile operators but also lead to better consumer satisfaction. However, we will have to wait and watch the impact that agreements executed between the existing mobile operators and MVNOs will have on the new competition laws. If any such agreement is held “anti-competitive,” it will be declared void. Before that, the guidelines to be issued by the DOT are eagerly awaited. We will update you on them once they are released.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 9555555480

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