Corporate and Professional Updates on 28th August 2019

Direct Tax Updates:

• LTCG from penny stocks cannot be treated as bogus if documentation is in order and no fault found by Assessing Officer. Chandra Prakash Jhunjhunwala Vs DCIT (ITAT Kolkata).
• The task force to overhaul the nearly 60-year-old Income Tax Act has recommended retaining the long-term capital gains (LTCG) tax and the securities transaction tax (STT), while abolishing the dividend distribution tax (DDT). The panel has instead suggested imposing tax on the person receiving dividends, sources in the know said. The proposed move to withdraw the DDT would help encourage investments by addressing multiple taxation of income and bringing down the effective tax rate on companies, which is among the highest in the world, the sources said. The eight-member panel on the direct taxes code (DTC), which submitted its report to Finance Minister Nirmala Sitharaman last week, has proposed a range of reforms for personal income tax by rationalising the highest tax slabs of 20 per cent and 30 per cent to improve compliance.
• Although the market has been demanding the withdrawal of the LTCG tax reintroduced in last year’s Budget, the panel, led by Central Board of Direct Taxes Member Akhilesh Ranjan, is learnt to have taken a view that no preferential treatment must be given to any class of investors. The LTCG tax is levied on gains arising from the transfer of listed equity shares exceeding Rs 1,00,000, at 10 per cent. Besides, the case for retaining the STT has been its simplicity of collection and assured revenues. The STT is a direct tax payable on the value of taxable securities transactions done through a stock exchange.
• It is levied at 0.1 per cent of turnover for delivery-based equity transactions, while for intra-day transactions, the STT for purchase is nil, and for sale, it is 0.025 per cent of the turnover. “There is a strong case to do away with the DDT to improve investor sentiment. It is resulting in multiplicity of taxation for companies. Besides, foreign shareholders cannot avail of foreign tax credit as the DDT is not borne directly by them,” said a person in the know. “LTCG should continue to be levied as is the case today to promote parity.”
• The DDT results in the cascading of taxes as companies pay dividends out of profits which are already taxed. The DDT becomes a cost for foreign shareholders as they find it difficult to avail of foreign tax credits for it, which is a credit in home country for taxes paid overseas. It would also help domestic investors as they can take credit of the DDT while paying income tax or refund if their tax liability is nil. “The idea is to go back to the classical way of taxing dividends in the hands of shareholders,” another source said. This will need changes in Section II5 (O) of the Income Tax Act. The current DDT rate stands at 20.55 per cent including surcharge and cess. “This (removing DDT) has been a long-standing demand of the industry as this leads to triple taxation and increased tax cost for investors in general.
• Overseas Investors are not able to take credit of the DDT in their home country and this adds to their tax cost. This also makes India competitive vis-a-vis other countries,” Amit Maheshwari, managing partner at Ashok Maheshwary & LLP said. He said shifting the taxation of dividend to the recipient would enable MNCs to utilise the DTAAs with India more effectively to reduce the tax paid on dividends and also claim a credit of that in the home country. “It is expected that this will also bring down the effective tax rate of India which has been repeated called as very high internationally,” he said. For the personal income tax, the task force has recommended reworking slabs of 20 per cent and 30 per cent to improve compliance.
• The committee was constituted to look into the direct tax system prevalent in various countries, international best practices, the economic needs of the country, and other related matters. The panel also looked into administration and improvement in revenue targeting, data collection and tax intelligence. The high level panel also recommended slashing the corporate tax rate to an even rate of 25 per cent for both domestic and foreign companies.

• Due date for submitting income tax returns is 31st Aug 2019 for all cases in which income tax audit is not mandatory.
• Task force on direct tax code has recommended abolishing the dividend distribution tax while retaining the longterm capital gains tax and securities transaction tax, a source in the know of the matter said.

• Income Tax department launched ‘e-filing Lite’, a lighter version of online ITR filing facility, on Thursday to facilitate the easy and quick filing of returns by taxpayers.
• CBDT notified that it is mandatory to quote your Aadhaar number while filing ITR unless specifically exempted. The notification further specifies that tax return cannot be filed either electronically or manually without quoting Aadhaar number. To quote your Aadhaar number in your ITR, additional spaces have been provided.

Indirect Tax Updates:

• CBEC said the designated committee will take a decision within 60 days on declaration made by an assessee for relief under the service tax and excise duty amnesty scheme. Sabka Vishwas – Legacy Dispute Resolution Scheme, 2019, will become operational for four months beginning September 1.
• GST Council will hold its 37th meeting on September 20 in Goa, but is unlikely to consider any rate reduction. Many sectors are clamouring for a rate reduction. They range from automobile to cement to biscuit. Now, if it is done for one sector, it can open floodgates. We should not forget the revenue situation.

• GST collection was above Rs 1 trillion in July, mainly on account of higher mop-up under the integrated GST. GST collection at Rs 1.02 trillion in the month was slightly more than 2 per cent higher than the Rs 99,939 crore in June and 5.8 per cent higher than the Rs 96,483 crore in July last year.

Read more about: What is core Business Activity GST

RBI Updates:

• RBI’s balance sheet should be strong enough to support banks if there is a need to recapitalise them during a financial crisis, said the report of the committee to review the economic capital framework (ECF) of the central bank.
• RBI Governor may have ruled out an Asset Quality Review for NBFCs, but an ongoing central bank inspection of the books of non-bank companies shows that the exercise is as stringent as the official scrutiny that had earlier pushed high-street lenders to declare higher bad loans

• The Reserve Bank of India’s (RBI’s) balance sheet should be strong enough to support banks if there is a need to recapitalise them during a financial crisis, said the report of the committee to review the economic capital framework (ECF) of the central bank. India, with one the lowest sovereign ratings, and not having a reserve currency to boot, should not think that risky actions by the government would still be as safe as advanced economies, said the panel headed by former RBI governor Bimal Jalan. “The fact that ELA (emergency liquidity assistance) operations by the AE (advanced economy) central banks did not result in losses for them should not draw the central banking community into any false sense of complacency about the riskiness of such actions,” the report, released on the RBI website on Tuesday, said. “Had the AEs, which are ‘issuers of reserve currencies’, not followed up their ‘qualitative easing’ programmes with the very significant ‘quantitative easing’, it is possible that their ELA operations could have ended very differently.”
• “The committee, therefore, recognised that the RBI’s financial stability risk provisions need to be viewed for what they truly are, i.e. the country’s savings for a rainy day (a financial stability crisis), built up over decades and maintained with the RBI in view of its role as the LoLR (lender of last resort). Its balance sheet, therefore, has to be demonstrably credible to discharge this function with the requisite financial strength.” To maintain resilience, the committee suggested a relatively smaller transfer than what was anticipated. The RBI board accepted the recommendations and transferred the maximum amount of Rs 52,637 crore as excess provisions that the committee gave leeway to.
• Contrary to expectations, the committee overturned the RBI board’s previous decision of maintaining capital buffer of 3 per cent with medium-to-long term target of 4 per cent. Instead, the committee said the buffer should be between 2-6.5 per cent, and finally suggested that ‘realised equity’, or roughly the contingency fund, should be maintained between 5.5 per cent and 6.5 per cent of the assets, including 1 per cent buffer. Finance Secretary Rajiv Kumar, the government’s nominee on the committee, objected to this, stating that the provision for monetary and financial stability risk should be maintained at 3 per cent.
• According to the committee, a higher transfer is not possible when banks in India are at a vulnerable position. “While large public sector ownership has been seen as a positive in preventing bank runs in the past, the NPA crisis has thrown light on the challenges that arise if a sizable majority of the banking sector looks at the government for recapitalisation,” the committee said.

Other Updates:

• New FDI rules to lure Apple, Oneplus, others: ICEA
• Cabinet clears Rs 6,268 crore sugar export subsidy
• US-China trade dispute presents opportunity for India
• DGCA calls urgent meeting with Indigo, GoAir
• Voda gets nod to raise share capital to Rs 50K cr
• India Ratings cuts growth forecast for FY 2019-20 to 6-year low at 6.7%
• Govt okays 100% FDI in contract mfg, eases rules for single brand retail
• Moody’s downgrades YES Bank’s ratings, changes outlook to negative
• After EOI submission, Synergy Group eyes 49% stake in Jet Airways
• IOC to invest Rs 2 trn in 5-7 yrs, develop a new energy storage technology
• Iran suggests barter trade with India for sectors like agri, drugs
• Govt mulls scrapping cap on foreign investment in coal mining
• Piramal Enterprises defers NCD plans
• NCLT allows IL&FS to sell seven wind assets to Orix for Rs 4,800 cr
• Every economy faces headwinds, India no exception: Vedanta
• Indian Oil to build a 1 GW electric vehicle battery plant
• Gains from massive bond buying helped transfer higher surplus: RBI
• Moody’s revises Indian steel producers’ outlook to negative
• IIFL Wealth to acquire L&T Finance’s wealth management business
• Trai issues draft of broadcasting and cable services interconnection regulations
• Despite climate concerns, India further opens up its coal sector.
• Iran to open bank branch in India in 2-3 months to boost trade
• Iran, India could seal preferential trade agreement by 2019 end: Iranian envoy
• US-China trade dispute presents opportunity for India, says DBS report
• Every economy faces headwinds, India no exception: Vedanta
• Gold nears Rs 40,000; silver soars Rs 2,110
• Rate cuts not enough to re-fire damp India housing market: Report
• Government weighing options on using RBI payout
• Nestle India will replace Indiabulls Housing Finance in the Nifty-50 Index

• China’s new pharma law may open door for India: Report
• Jio beats Airtel to be top telecom revenue earner
• Bank recapitalisation unlikely to deliver much: S&P
• Major relief to stressed realty sector on the anvil
• Mutual funds are not there to provide risk capital: Sebi chief
• HDFC Life will continue to beat industry growth: CMD
• Rupee posts biggest single-day gain in 5 months
• RBI’s fund transfer eases Centre’s gross tax revenue target to 16%
• RBI’s bonanza to give govt ammunition to fight slowdown, boost capex
• Govt to consider relaxing FDI norms in single brand retail on Wenesday
• Microfinance industry to cross Rs 1 trn loan portfolio in Q2 FY20: Report
• Sebi asks MF trustees to be more proactive, not wait for regulator to act
• India calls for uniform GAP standards in SAARC nations
• Chemical industry seeks restoring tax incentive for R&D
• Tata Metaliks plans to double ductile iron pipe production
• Elgi Equipments’ US-subsidiary Pattons expands into LA
• IndiGo looking for new formula to induct wide-body aircraft: CEO
• PFC gets shareholders’ approval to raise ₹70,000 cr in a year
• S&P places IDBI Bank on credit watch negative owing to capital breach
• Antitrust watchdog CCI to assess media, broadcasting sector
• CG Power to monetize non-core assets, raise fresh equity
• Irdai sets up single point of contact for regulatory sandbox
• DHFL seeks board’s approval to raise funds via share sale
• FM Nirmala Sitharamana blasts critics of RBI transfer of surplus funds to govt
• SBI says doesn’t need capital from government
• Cabinet to soon consider India-Mauritius free trade agreement for approval
• Government says FDI in chemical industry very low; asks industry to introspect
• With aim to create 40,000 jobs, vivo to pump in Rs 7500 cr to ramp up mfg in India
• Maruti Suzuki cuts 3,000 contract jobs
• Infosys closes Rs 8,260 cr buyback offer, takes back 11.05 cr shares
• Indian economy set for weakest quarter of growth in five years.

• • PV volumes to come under further pressure in August
  • Honda Cars sales dip 49% to 10,250 units in July
  • Airtel reports Q1 loss of Rs 2,866 crore
  • Economic woes not as bad as 1991: Ex-RBI dy guv
  • Tata Motors cuts Tigor EV price by up to Rs 80,000
  • L&T gets shareholders’ nod to raise Rs 4,000 crore via securities
  • Auto sales in July fall for 9th consecutive month due to poor demand
  • Govt to issue overseas sovereign bonds in tranches: FinMin official
  • CRISIL revises down India’s GDP growth estimate to 6.9% for FY20
  • India, world’s No. 2 coal buyer, plans to cut imports by a third in 5 years
  • MFs’ Essel group exposure likely to fall by 30-50% after Zee stake sale
  • Jeff Bezos sells Amazon shares worth $1.8-bn , reduces stake to $110 bn
  • Life insurance industry likely to see 14-15% growth: CARE
  • Banks free to have separate caps for lending to power, renewables sectors: RBI to Centre
  • DoT may get less than 50% of₹92,000 cr AGR dues from telcos
  • Voltas eyes ₹50-cr business from Kerala this Onam
  • Suzuki Motorcycle India sales up 18% in July
  • Ashok Leyland July sales down 28% at 10,927 units
  • US to slap 10% tariff on $300 billion more in Chinese goods: Donald Trump
  • RBI allows Bank of China to offer regular banking services in India
  • Normal monsoon likely in August, September: IMD
  • Marico Q1 net profit up 21.6% to ₹315 crore
  • SEBI sends letter to MFs detailing 23 lapses in FY 17
  • Shapoorji Pallonji’s solar EPC business announces ₹3,125 crore public offer
  • PNB plans aggressive recoveries to contain gross NPA below 12%
  • NCLAT sets aside order directing return of land to Jaypee Infratech
  • Amazon.in inks lease pact with GMR Hyderabad Airport City
  • Tata Power consolidated Q1 net falls 87 pct year-on-year
  • TVS Motor July sales down 13 per cent at 2,79,465 units
  • Sensex tanks over 450 points, Nifty finishes below 11,000-mark
  • Finance Minister Sitharaman to meet CEOs of PSU banks on Friday
  • Coal India to spend Rs 700 cr to procure 40 rakes

  Key Due Dates:

  • 7 August: EQUALIZATION LEVY DEPOSIT- Equalization Levy is a direct tax, which is withheld at the time of payment by the service recipient where the annual payment made to one service provider (Non  Residents only) exceeds Rs. 1,00,000 in one financial year for the specified and notified services.
  • 10 August: GSTR-7 RETURN FILLING DUE DATE – Due Date for filing GSTR-7 by person liable to deduct TDS under GST for previous   quarter.
  • 10 August: GSTR-8 RETURN FILLING DUE DATE – GSTR-8 is a return to be filed by e-commerce operators who are required to deduct TCS (Tax collected at source) under GST.
  • 11 August: GSTR-1 RETURN FILLING DUE DATE – GST Filing of returns by registered person with aggregate turnover more than 1.50 crores.
  • 13 August:  GSTR-6 RETURN FILLING DUE DATE- Due Date for filing return by Input Service Distributors for previous month.
  • 15 August:  PROVIDEND FUND / ESI DUE DATES- Due date for payment of Provident fund and ESI contribution for the previous month.
  • 20 August: GSTR-5 RETURN FILLING DUE DATE- Due date of GSTR-5 (for Non-resident Taxable person) for the Previous month.
  • 20 August: GSTR-5A RETURN FILLING DUE DATE- Return by person providing online information and database access or retrieval services by a person located outside India made to Non-Taxable persons in India for the previous month.
  • 20 August: GSTR-3B RETURN FILLING DUE DATE – Due date for filling GSTR – 3B return for Previous month.
  • 31 August: INCOME TAX RETURN EXTENDED- Filing income tax for individual and non-corporates [who are not subject to tax audit].
  • 31 August: GSTR-9 RETURN FILLING DUE DATE – Annual Return to be filed by Regular Taxpayers filing GSTR 1, GSTR 2, and GSTR 3. It needs to be filed electronically on the GST portal directly or through a facilitation center.
  • 31 August: GSTR-9A RETURN FILLING DUE DATE – Taxable Persons paying tax under Section 10 of CGST Act, the composition scheme, are required to submit their annual returns in Form GSTR 9A.
  • 31 August: GSTR-9B RETURN FILLING DUE DATE- Annual Return to be filed by e-commerce operators who have filed GSTR 8 during the financial year.
  • 31 August: GSTR-9C RETURN FILLING DUE DATE- Taxpayers whose annual turnover exceeds INR 2 crores in a Financial Year are required to get their accounts audited by a practicing Chartered Accountant or Cost Accountant before filing returns in Form GSTR 9C.

• 31 August: INCOME TAX RETURN EXTENDED- Filing income tax for individual and non-corporates [who are not subject to tax audit].
• 30 November: GSTR-9 RETURN FILLING DUE DATE – Annual Return to be filed by Regular Taxpayers filing GSTR 1, GSTR 2, and GSTR 3. It needs to be filed electronically on the GST portal directly or through a facilitation center.
• 31 November: GSTR-9A RETURN FILLING DUE DATE – Taxable Persons paying tax under Section 10 of CGST Act, the composition scheme, are required to submit their annual returns in Form GSTR 9A.
• 31 November: GSTR-9B RETURN FILLING DUE DATE- Annual Return to be filed by e-commerce operators who have filed GSTR 8 during the financial year.
• 31 November: GSTR-9C RETURN FILLING DUE DATE- Taxpayers whose annual turnover exceeds INR 2 crores in a Financial Year are required to get their accounts audited by a practicing Chartered Accountant or Cost Accountant before filing returns in Form GSTR 9C.

Read more about: What is core Business Activity GST

Read more about: All about GST Offenses, Penalties, and Appeals