EXTENSION OF GSTR-9 AND GSTR-9C FOR FINANCIAL YEAR 2017-18 AND 2018-19
Filing of Form GSTR-9 (Annual Return) and Form GSTR-9C (Reconciliation Statement) for Financial Year 2017-18 to 31st December 2019 and for Financial Year 2018-19 to 31st March 2020.
RECENT UPDATES -
Here are the highlights –
- All domestic companies to be allowed to pay corporation tax at the rate of 22% (effective rate 25.17% including cess and surcharge). This would be subject to the condition that these companies do not avail of any tax incentives or exemptions. Moreover, no Minimum Alternative Tax (MAT) would be imposed on these companies.
- Any new domestic manufacturing company, incorporated on or after October 1, 2019, will be allowed to pay corporation tax at the rate of 15% (effective rate 17.01%). No MAT will be imposed on these companies either. This will be subject to the condition that the company does not avail of any tax incentives or exemptions and commences production by 31 March, 2023. Companies that are availaing tax holidays at present can join the new regime once their tax holiday period ends, announced the minister.
- To provide relief to companies that continue to avail of exemptions and incentives, the rate of MAT has been reduced from 18.5% to 15%.
- Enhanced surcharge introduced by the Finance Act 2019 shall not apply to capital gains arising on sale of equity share in a company/unit of equity-oriented fund or unit of business trust liable for securities transaction tax, the FM announced.
- Enhanced surcharge shall not apply to capital gains on sale of any securities, including derivatives, in the hands of Foreign Portfolio Investors (FPIs)
- Relief to listed companies which have already made a public announcement of buyback before 5th July 2019. No tax on buyback of shares in case of such companies.
- The finance minister also announced an expansion in the scope of CSR activities. The companies can now spend 2% of the money on state or union govt incubators, PSUs, state universities, IITs, public-funded entities.
- TDS on additional payments made when purchasing immovable property:
While buying a property, you will have to include the payment made for other services or amenities such as club membership fee, car parking fee, electricity and water facility fee and so on when computing the amount paid for the property for the purpose of deducting TDS.
- 2% TDS on cash withdrawals from bank account
Cash withdrawals exceeding Rs 1 crore on aggregate basis during the year from an account held with a bank, cooperative bank or post office will invite levy of TDS from September 1. The move is aimed at discouraging large cash transactions and also to promote a less cash economy. A new section 194N has been inserted in the Income Tax Act which defines that TDS will be levied at the rate of two per cent on cash withdrawals made from the account
- 5% TDS on payments made by individuals and HUFs to contractors and professionals
Individuals and HUFs making a payment to contractors and professionals exceeding Rs 50 lakh in aggregate per annum will also be required to deduct TDS at the rate of 5 per cent.
This would mean that individuals making payments over this limit for house renovation, wedding functions or for any other purpose to a single professional in a year would be required to deduct tax at the time of making the payment.
Introduction of the Scheme –
- The Scheme shall be called the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
- The scheme shall come into force on such date when notified in the Official Gazette.
- The Scheme is probably last measure for resolving past disputes of Central Excise, Service Tax and 26 other indirect tax enactments.
- Eligible persons will declare the unpaid tax dues and pay the same in accordance with the provisions of the Scheme.
- Benefits of the scheme include concessions in basic tax, penalty, interest or any other proceedings including prosecutions.
Eligible Person who can avail benefit under Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019
All persons other than those mentioned below are eligible to opt for the scheme.
- who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019;
- who have been convicted for any offence punishable for the matter for which he intends to file a declaration;
- who have been issued a show cause notice and the final hearing has taken place on or before the 30th day of June, 2019;
- who have been issued a show cause notice for an erroneous refund or refund;
- who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before the 30th day of June, 2019;
- a person making a voluntary disclosure after being subjected to any enquiry or investigation or audit; or
- a person making a voluntary disclosure after having filed a return wherein he has indicated an amount of duty as payable, but has not paid it;
- who have filed an application in the Settlement Commission for settlement of a case;
- persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to theCentral Excise Act, 1944.
Quantum of Relief under the Scheme.
Total tax due <= 50 Lacs
Total tax due > 50 Lacs
70% of tax dues
50% of tax dues
· where the tax due is related to a show cause notice or appeals arising out of such notice which is pending as on the 30th day of June, 2019 or;
· where the tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before the 30th day of June, 2019.
Total tax due <= 50 Lacs
Total tax due > 50 Lacs
60% of tax dues
40% of tax dues
· where the tax due is related to an amount in arrears in a return under the indirect tax enactment, wherein the declarant has indicated an amount of duty as payable but not paid it and the duty amount indicated.
Liability Pertaining to Late Fees and Penalty
· Where the tax dues are relatable to a show cause notice for late fee or penalty only, and the amount of duty in the said notice has been paid or is nil, then, the entire amount of late fee or penalty
· No Relief from Tax Dues. However 100% relief from interest and penalty.
Key Features of the Scheme
- All the schemes declared earlier under indirect taxes earlier where giving relief of interest and penalty only. However this scheme gives relief in tax payment also to the extent mentioned in above table.
- Declarant can adjust any pre-deposit amount paid before filing of appeal. However if pre-deposit is more than the amount due then no refund would be granted in this scheme.
- The payment of Tax dues cannot be made by utilizing input tax credit, which means tax will have to be paid in cash.
- Tax Discharged under this scheme cannot be claimed as input tax credit.
- Tax paid under this scheme will not be refundable in any circumstances.
Process of Application
- The declaration forms for application under this scheme are yet to be notified.
- If there is any dispute in the application filed, the designated authority will issue details of amount payable to the declarant within 30 days of filing of application and a hearing would be granted to the declarant before final statement is accorded.
- Designated authority will verify the details (except in case of voluntary declaration) and issue a statement of amount payable to the declarant within 60 days from the date of filing of declaration.
- Within 30 days of the receipt of the Statement, declarant will have to pay the amount of tax dues as per statement.
- Designated authority shall issue a discharge certificate in electronic form, within 30 days of payment and submission of proof of withdrawal of appeal.
Post Receipt of Discharge Certificate
Issuance of discharge certificate will mean the following;
- The declarant shall not be liable to pay any further duty, interest or penalty with respect to the matter and time period covered in the declaration.
- The declarant shall not be prosecuted under the indirect tax enactment with respect to the matter and time period covered in the declaration.
- No matter and time period covered by the declaration shall be reopened in any other indirect enactment.
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Note on issuing Convertible Notes
We are in the phase of Startup financing; Venture Capital financing, angel investments.
Earlier the companies were raising funds by way of Issuing equity and preference shares, debentures, commercial papers etc.
The Reserve Bank of India (RBI) has issued a Notification No. 377 dated 10 January, 2017 wherein it has introduced a new instrument in case of startups of convertible note.
What is a convertible Note:
‘Convertible Note’ means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument.
What is a Startup Company:
A ‘startup company’ means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognized as such in accordance with notification1 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.
Convertible Notes by an Indian startup company may be issued to:
- A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered/ incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian startup company for an amount of twenty five lakh rupees or more in a single tranche.
- A startup company, engaged in a sector where investment by a person resident outside India requires Government approval, may issue convertible notes to a person resident outside India only with such approval.
- Further, issue of equity shares against such convertible notes shall be in compliance with the entry route, sectoral caps, pricing guidelines and other attendant conditions for foreign investment.
- A startup company issuing convertible notes to a person resident outside India shall receive the amount of consideration by inward remittance through banking channels or by debit to the NRE/ FCNR (B)/ Escrow account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Repayment or sale proceeds may be remitted outside India or credited to NRE/ FCNR (B) account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
- A NRI or an OCI may acquire convertible notes on non-repatriation basis in accordance with Schedule 4of these Regulations.
- A person resident outside India may acquire or transfer by way of sale, convertible notes, from or to, a person resident in or outside India, provided the transfer takes place in accordance with the entry routes and pricing guidelines as prescribed for capital instruments.
Advantages of Convertible Note
- Primarily in case of a new startup, there may not be any valuation base and hence difficult to determine the valuation for issuing equity shares. Moreover the tax authorities are also questioning the startups on premium received on equity shares based on DCF method of valuation. Hence convertible note serves the purpose of fund raising in simple and faster way.
- No control is diluted in the company as there are no voting rights attached to the note.
Form Convertible Notes (CN):
- The Indian startup company issuing Convertible Notes to a person resident outside India shall report such inflows to the Authorized Dealer bank in Form CN within 30 days of such issue.
- A person resident in India, who may be a transferor or transferee of Convertible Notes issued by an Indian startup company shall report such transfers to or from a person resident outside India, as the case may be, in Form CN to the Authorized Dealer bank within 30 days of such transfer.
- The Authorized Dealer bank shall submit consolidated statements to the Reserve Bank.
More and more startups have been using convertible notes for raising funds as the deals are closed in much shorter time. Startups can give different prices to different investors and thereby close the deals faster.
The ease of issuing convertible notes is the reason for its popularity among startup companies. However, it is important to note that the convertible notes can be issued by only recognized Startup companies.
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PREFACE: Ms. Nirmala Sitharaman the first lady Finance Minister of India, delivered her maiden budget under 2nd term of Modi government on 05 July 2019. The budget was aimed at building and creating a developed nation. The budget aimed at ease of doing business, infusion of capital in PSU banks, incentives to Startups etc. The futuristic approach of the finance minister is firmly well placed. There are lot of schemes and ideas which once implemented will show there results. We are presenting the proposed important changes in direct and indirect tax.
- Tax rate reduced to 25% for companies with annual turnover up to Rs. 400 crores. Earlier the tax rate of 25% was limited to Companies having turnover of upto Rs.250 crores.
- Surcharge increased on individuals having taxable income from Rs. 2 crores to Rs. 5 crores to 25% from 15% and Rs. 5 crores and above to 37% from 15%.
- One can file tax returns using Aadhaar and use it wherever they are required to quote PAN.
- Investment linked income tax exemptions to companies who setup mega‐manufacturing plants in sunrise and advanced technology areas u/s 35AD.
- Additional income tax deduction of Rs. 1.5 lakh on interest paid on electric vehicle loans. This is a welcome move considering the rise in the pollution levels.
- Additional deduction up to Rs. 1.5 lakhs to individuals for interest paid on loans borrowed up to 31st March, 2020 for purchase of house valued up to Rs. 45 lakhs. This is in line with the government’s dream project of Pradhan Mantri Awaas Yojana. It is proposed to introduce a new Section 80EEA under IT Act which will enable an assessee to claim a deduction of interest upto INR 1.50 lakhs on loan taken.
- Buy back Tax of 20% extended to listed companies.
- Withdrawal of cash exceeding Rs 1 Crore for business payments during the year will attract TDS of 2%.
- Payments made by individuals or HUFs to resident contractors or professionals exceeding Rs 50 lakhs in aggregate within a year to attract TDS of 5%.
- Gift by resident to non‐residents will be considered as income deemed to accrue or arise in India and will be taxed in the hands of such non‐ resident’s in India.
- Capital gains exemptions from sale of residential house for investment in start‐ups extended upto 31st March 2021.
- Startups not subject to scrutiny with respect to valuation of share premium.
- Interest on GST will now be applicable only in case of cash component of the liability. Where there is sufficient balance in electronic credit ledger, interest will not be required to be paid.
- A dispute resolution scheme, called “The Sabka Vishwas Legacy Dispute Resolution Scheme, 2019” is proposed to reduce huge pending litigations with respect to pre‐GST regime. The relief under the scheme ranges from 40 % to 70 % of the tax dues. The scheme also provides relief from payment of interest, penalty and prosecution. The scheme covers tax dues on account of Appeal, Show cause notice, arrears declared in return or any other arrears.
- Balance in electronic cash ledger is now made transferable from one head to another head. This was much needed step required to avoid tedious process in application and grant of refund of tax. Transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger under the CGST Act to the electronic cash ledger for IGST, CGST, SGST, UTGST or cess, subject to prescribed conditions.
- Composition scheme for supply of services or mixed supplies. New section is proposed to be inserted. The maximum tax rate under such scheme would be 3% of the turnover.
- Section (3A) is proposed to be introduced to Section 171 of CGST Act in terms of which any person who is held to be guilty, shall be liable to a penalty equivalent to 10% of the amount so profiteered if such amount is not deposited within thirty days of the date of passing of the order by the National Anti‐Profiteering Authority.
CBDT vide Notification 36/2019, dated 12th April, 2019 has revised format of Annexure II in TDS Statement for Form 24Q. CBDT has also made it mandatory for all deductors to issue the TDS certificate in Part B of Form No. 16 (TDS on salary) by downloading it through TRACES Portal. The same will be applicable in respect of all sums deducted u/s 192 on or after April 1, 2018. The revised format is more elaborative and informative and is in line with Income Tax Returns forms.
Form 16 is a certificate provided on yearly basis to all employees by 15 June after end of respective financial year. On the basis of information given in Form 16 by employer, employees file their Income tax return.
Form 16 comprise of 2 Parts namely: Part A & Part B.
Part A has details of the amount paid, TDS deducted from Salary and TDS deposited to government. Since 2012, Employers were mandatorily required to issue PART A of form 16 after downloading the same from TDS TRACES portal to their Employees.
Part B has details of Salary break up, Exempted allowances, Perquisites, Deductions and rebate allowed to the employees along with tax due and tax deducted. Earlier, Part B was prepared by the employer but now Income Tax Department has standardized format of Part B and has made it mandatory for the Employers to download the aforesaid Form from the TDS TRACES portal and issue the same to their respective Employees.
Changes/ Additional requirements in Annexure II of Form No. 24Q
- Earlier deductions under Chapter VI-A were disclosed in consolidated manner in Form 16. Now, under Revised Form 16 they have to be disclosed separately under specific sections (Sec 80C, 80CCC, 80CCD (1), 80CCD (1B), 80CCD (2), 80D, 80E, 80G, 80TTA etc.) which will enable the tax authorities to get a better
insight of various components of the deductions claimed by Taxpayers in their respective Income Tax returns.
- Earlier there was no separate row for disclosure of income from previous employer in Form 16 and it was clubbed by the Companies in a separate head meant for all incomes which Employees wishes to report. Now in revised Form 16, a separate row has been inserted for the same.
- Earlier in Form 16, all the exempted allowances under section 10 were clubbed together under one head. Now in revised Form 16, all the exempted allowances have to be disclosed under specific headings such as Gratuity, Leave Travel Allowances, Pension, etc. & the balance allowances will have to be disclosed under one residual head.
- Separate row introduced for Rebate under section 87A (If Applicable)
- Separate row introduced for Standard deduction u/s 16 (ia).
- PAN of landlord shall be mandatorily furnished where the aggregate rent paid during the previous year exceeds Rs 1,00,000/- & House rent allowance exemption is claimed under Sec 10(13A).
- PAN of lender shall be mandatorily furnished where the housing loan, on which interest is paid, is taken from a person other than a Financial Institution or the Employer in revised Form 16. The same was previously optional.
- Other than Salary income which an employee could declare to the Employer has been limited to Income from House Property and Income from Other Sources under Revised Form 16. Earlier, the same was open ended and the employee could also declare income from Capital Gains to his employer for deduction of taxes at source.
MCA vide its notification dated 29.03.2019 has inserted a new rule 38A -Application for Registration of the Goods and Service Tax Identification Number (GSTIN),Employees State Insurance Corporation (ESIC) and Employees Provident Fund Organization (EPFO) Registration through INC-35. In line with Governments objective for Ease of doing business in India, this is a welcome step.
Now, the application of incorporation of a company under Rule 38 can be accompanied by E-Form AGILE (INC-35).i.e. along with SPICE, INC-33 and INC-34 AGILE forms can be uploaded.
[Note that it is not mandatory to apply for GSTIN, ESIC and EPFO numbers at the time of incorporation. It is an option at the discretion of the Company to take registration along with incorporation.]
As we are entering the financial year 2019-20, there are few changes in tax laws which will directly impact most of the tax payers. As announced in the budget speech presented by Hon. Piyush Goyal, the changes will be effective as on 01.04.2019. Following are the changes.
- Taxpayers with Taxable Income of up to INR 5 lakh during the financial year will not be required to pay tax on the income. Taxable income will mean income after all eligible deductions u/s 80 (80C, 80CCC, 80CCD, 80D, 80TTA, 80E, 80GG etc) of the Income Tax Act, 1961.
- Now a tax payer can have two self-occupied houses from 01.04.2019. The tax payer is no more required to pay notional rent on the second house. However he will be required to pay notional rent on third and consecutive houses.
- The TDS threshold limit for interest income through bank and post office deposits has been increased from INR 10000 to INR 40000.
- The TDS threshold limit for rental income is increased from INR 180000 to INR 240000.
- The standard deduction limit has been raised to INR 50,000 from INR 40,000.
- Long term capital gains tax exempted on two houses for FY 2019-20 subject to limit of gain does not exceed to INR 2 crores.
- GST Rates on Affordable housing is reduced to 1% without availment of Input tax credit which is in confirmation with the Governments scheme for affordable housing for poor.
- GST Rates on other constructions is reduced to 5% without availment of Input tax credit. Earlier tax rate was 12% with input tax credit.