Welcome to AJSH & Co.

Financial/Estate Planning
Income tax adviser in India

Income Tax: Skepticism eliminated

What is Income Tax?
A tax imposed on taxable income or profits of persons (whether individual, firm, company, Artificial Juridical Person, Association of Persons, Body of Individuals or Local Authority). Taxation rates may vary by type or characteristics of tax payers.

Tax trend followed in India:
In India, two types of tax trends are followed:

  • Progressive Rates: When the tax rate increases as the taxable income increases.
  • Proportional Rates: When the tax rates are uniform, irrespective of the person or their incomes.

Income tax in itself is a vast concept and cannot be understood in entirety by a layman, so here are few answers to drive away all ifs’ and buts’ that usually arise:

  • Are gifts from relatives always tax free?
    The provisions of Section 56 of Income Tax Act, 1956, state that the section provides for a cap of INR 50,000 on gifts received from non-relatives and if gifts exceeded the amount, the same would be taxable under the head “income from other sources.” But there was no such cap on gifts received from a relative.
  • What is the meaning of Presumptive taxable scheme?
    As per section 44AA of the Income-tax Act, 1961, a person engaged in business is required to maintain regular books of account under certain circumstances. In order to provide relief to small taxpayers, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, 44ADA and 44AE. A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from the job of maintenance of books of account. ​
  • Is occasion a necessary condition for receiving any sum from a relative as a gift?
    The need to provide an explanation on the occasion for which gift was received is not mandatory, as per the provisions of Section 56 of Income Tax Act, 1956.
  • How is long-term capital gain from NABARD bonds taxed?
    Long-term capital gains (LTCG), after indexation, from zero-coupon bonds of NABARD are taxable at 20.8% and without indexation they are taxable at 10.40%, after taking into account basic exemption limit.
  • Is deduction allowed on money invested in Senior Citizens’ Saving Scheme (SCSS)?
    Amount deposited in SCSS is eligible for deduction under section 80C of the Income Tax Act, subject to the maximum limit of Rs 1.5 lakh.
  • What are Equity Oriented Mutual funds?
    Mutual Funds that apply 65% or more of their corpus to equity or equity related securities at all times.
  • How Equity Oriented Mutual Funds are taxed?
    1. Gains on equity oriented mutual funds held for less than a year are treated as short-term capital gains and taxed at 15%.
    2. Gains on equity oriented mutual funds held for a year or more are treated as long-term capital gains and taxed at 10% for gains exceeding Rs 1 lakh in a year.
    3. For equity oriented mutual funds invested on or before 31 January 2018, gains till that date will be considered as grandfathered and will be exempt from tax.
  • Is maintaining proof or records of earnings necessary? ​​
    For every source of income one should maintain proof of earning and the records specified under the Income-tax Act. In case no such records are prescribed, reasonable records with which one can support the claim of execution of income should be maintained.
  • Is relief available from double taxation, if income is earned in both India as well as abroad?
    A person can claim relief in respect of income which is charged to tax both in India as well as abroad. Relief is granted either, as per the provisions of double taxation avoidance agreement entered into with that country (foreign country) by the Government of India or by allowing relief as per section 91 of Income Tax Act in respect of tax paid in the foreign country.
  • When are incomes deemed to be received in India?
    Following incomes are treated as incomes deemed to be received in India: ​

    1. Interest credited to recognised provident fund account of an employee in excess of 9.5% per annum.
    2. Employer’s contribution to recognised provident fund in excess of 12% of the salary of the employee.
    3. Transferred balance in case of re-org​anization of unrecognised provident fund.
    4. Contribution by the Central Government or other employer to the account of the employee in case of notified pension scheme referred to in section 80CCD​.​
  • What is the eligibility for being taxable under Presumptive taxable Scheme under section 44AD?
    The scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm). Further, a person who has made any claim towards deductions under section 10A / 10AA / 10B / 10BA or under  sections 80HH to ​80RRB in the relevant year, cannot come under the purview of this scheme.We believe that income tax cannot be illustrated and explained with few questions because of its vast dominion. Still confused and have questions regarding your income tax filing, you can reach our team of experts.

If you require any assistance in filing income tax returns, corporate returns, tax assessments, tax planning, structuring, transaction advisory, please click here.

6-2-770x433

Rupee sliding: Reasons & Forecast

What is value of currency for an economy?
An economy is often represented by the people who live there and the value its currency has, further the value of a currency depends on factors that affect the economy like imports and exports, performance of equity markets, foreign exchange reserves, macroeconomic policies, inflation, employment, interest rates, growth rate, trade deficit, foreign investment inflows, banking capital, commodity prices and geopolitical conditions. Currencies are often influenced by income levels through consumer splurge. When income increases, people tend to expend more. Demand for imported goods increases demand for foreign currencies, thus, weakening the local currency.

Reasons for Rupee depreciation against USD:

  • Crude oil- US restricted all countries, including India to import crude oil from Iran. Iran being the second most largest exporter of crude oil to India due to geographic proximity that saves  shipping cost as well as the favourable financial terms offered by Iran, including the longest credit period among all of India’s suppliers is losing its rupee value further.
  • Trade war- US and China have been involved in heated up trade war as they are imposing import tariffs on goods from either of these countries and such a situation is not viable for a country like India.Trade war is leading the markets into period of risk off where prices of all assets are moving lower. US Dollar and Japanese Yen are observed to be the major beneficiaries from trade war. Indian Rupee is already under pressure from high crude oil prices and on-going trade war sparked another bout of capital outflows.
  • Fiscal deficit blues- As a result of hike in crude oil prices, crude oil imports from Iran and trade war between US and China India’s fiscal deficit might get hurt over the upcoming quarters as India is a net importer of crude oil and also heavily dependent on it. It is further expected that weakness in Indian Rupee might persist as it will be difficult to fund the widening current account deficit given the increased return by way of higher US Dollar rates offered by other emerging market debtors.
  • FPI outflows: FPIs (Foreign Portfolio Investors) have surfaced as net sellers in the months of FY2018 and have already sold-off around INR14,000 crores worth of equity and debt securities so far, leaving Rupee to a downslide.

Ways to protect the depreciating currency:

  • The country should sell more goods in overseas market than it buys from them and have a trade surplus, which leads to more foreign currency into the country than what is paid for imports. Thus, strengthening the local currency.
  • As the difference in interest rates between countries is one of the major factors for rupee depreciating, RBI’s move to deregulate interest rates on savings deposits and fixed deposits held by Non-Resident Indians (NRIs) proved to be a successful part of a series of steps to stem the fall in the rupee. By allowing banks to increase rates on NRI rupee accounts and bring them on a par with domestic term deposit rates, the RBI expects fund inflows from NRIs, resulting in a rise in demand for rupees and strengthening value of the local currency.
  • Some ways through which the RBI controls the movement of the rupee are:
    1. Changes in interest rates
    2. Relaxation or tightening of rules for fund flows
    3. Tweaking the cash reserve ratio (the proportion of money banks have to keep with the central bank)
    4. Selling or buying dollars in the open market
    5. Fixation of the statutory liquidity ratio, that is, the proportion of money banks have to invest in government bonds
    6. The repo rate, at which RBI lends to banks.

While an increase in interest rates makes a currency expensive, changes in cash reserve and statutory liquidity ratios increase or decrease the quantity of money available, impacting its value in the positive direction.

Forecast:
Increased customs duty on total 19 categories of “non-essential items” such as washing machines, refrigerators, radial tyres, and aviation turbine fuel (ATF) witnessed an import of around INR 86,000 crores in 2017-18, leading to improvement in Current Account Deficit and attracting inflows. The Indian rupee will also be benefited from any inclusion of local government bonds in the JP Morgan government bond index for emerging markets. Also, citing the $1 billion rupee-linked bond issuance launched by World Bank’s private sector arm International Finance Corp, rise in value of rupee can be speculated.

We are a Chartered Accountants firm rendering a gamut of services related to accounting & bookkeeping, auditing and assurance, taxation, business process outsourcing and company formation in India. If you require any assistance, please click here.

FDI-1024x341

India: The nucleus for FDIs

Foreign businesses often channelize their funds to reap the benefits of fast growing economy, cheap labor and wide scope of earning increased returns in India. To capture and relish such benefits, FDIs are superintended towards India in huge proportions by different countries around the world. 

What is FDI?
Foreign Direct Investment (FDI) is generally termed as an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company.

India amidst top destinations for FDI
India ranks among the top 10 host economies for FDI, according to the United Nations Conference on Trade and Development (UNCTAD) 2018 World Investment Report. FDI inflows hit an all-time high of USD 44.5 billion in 2016, however, following the global downward trend, flows to India declined in 2017 to USD 39.9 billion.

In January 2018, the Indian government gave its approval to a number of major amendments aiming to further liberalise and simplify the national FDI policy. In the last three years, the government had already eased 87 FDI rules across 21 sectors. In 2018, India ranked 100th out of 190 countries in the Doing Business report published by the World Bank.

Russia contemplating investments in India
One such major step can be sighted by the Russian Direct Investment Fund (RDIF) moving towards investing in India eyeing to boost infrastructure funding. As mentioned by Kirill Dmitriev, CEO, RDIF in an interview that RDIF will sign two key deals at this annual summit on October 5, 2018:

  • Agreement with their partners in India to jointly invest in ports & logistics; and
  • Joint investment in mineral fertilisers, including the construction of production facilities and related infrastructure, as well as the introduction of advanced technologies in Russia and India. The agreement also provides for the supply of PhosAgro products to Indian partners on a long-term basis.

Growth spotted
The sectors attracting the greatest amounts of FDI in India include the services sector, followed by IT services and software, construction, the automobile industry and wholesale and retail trade.

FDI Equity Inflows by Country

Main Investing Countries 

 (January – March 2018)

%

 (April – June 2018)

%

Mauritius 34 33
Singapore 18 19
Netherlands 6 6
United States 6 6
Japan 7 7
Germany 3 3
United Kingdom 7 7
Cyprus 3 2
France 2 2
U.A.E. 2 2

Discerning the consistent and steady growth in the influx of FDIs, one can identify these to be a secure source of foreign funds entering in the economy subsequently. Thus, promoting all sectors in India.

Is it a lot to take in? Need some assistance or more information for investment in India, please click here.

Also, we can assist you in setting up your presence in India, company formation in India, statutory accounting and bookkeeping and other regulatory requirements.

Source:

  1. https://en.portal.santandertrade.com/establish-overseas/india/foreign-investment
  2. http://www.dipp.nic.in/fdi-publications

 

 

what-are-the-functions-of-management

Place of Effective Management: Concept and Impact

To determine the residential status of foreign companies, the Finance Act 2015 introduced the concept of place of effective management (POEM). By definition in Indian Tax Laws “Place of effective management” means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance, made.

The Finance Act, 2016 has changed the effectivity of the said amendment to section 6(3) of the Act. These amended provisions came into effect from 1st April 2017 and are now applicable for Assessment Year 2017-18 and subsequent assessment years.

‘Place of effective management’ (POEM) is an internationally recognized test for determination of residence of a company incorporated in a foreign jurisdiction. Most of the tax treaties entered into by India recognizes the concept of ‘place of effective management’ for determination of residence of a company as a tie-breaker rule for avoidance of double taxation.

Prior to the 2015 amendment, a company was classified as an Indian resident:

  • If company is incorporated in India; or
  • If during that year, the control and management of its affairs is situated wholly in India

Classification as per these provisions provided tax avoidance opportunities to companies. Companies used to artificially escape the residential status by shifting insignificant or isolated events related with control and management outside India. Further, this liberal test resulted in shift of profits by incorporating shell companies outside India, which were substantially controlled from India.

 General Principles of relevance for determining POEM

  • It depends on the facts and circumstances of a given case for each year.
  • Driven by the concept is one of substance over form.
  • An entity may have more than one place of management but it can have only one POEM.
  • The POEM will be required to be determined on a year-to year basis.
  • Review and study of all facts related to the management and control of the company are necessary as the POEM determination cannot be based on isolated facts.
  • If, during the tax year, the POEM is exists both in and out of India, the POEM is presumed to be in India.

Quantitatively, companies with turnover of INR 50 crore or less in a financial year will be exempt from the POEM provisions. Qualitatively, companies with active business outside India will be exempt from these provisions.

 The CBDT has spelled out the criteria for the active business test:

  • Passive income should not be more than 50% of total income;
  • Less than 50% of total assets should be situated in India;
  • Less than 50% of total employees should be situated in India; and
  • Payroll expenses on such employees should be less than 50% of total payroll expenditure.

 “Passive income” of a company shall be aggregate of:

  • Income from the transactions where both the purchase and sale of goods is from / to its associated enterprises; and
  • Income by way of royalty, dividend, capital gains, interest or rental income.

*Interest is not considered as passive income in case of banks and NBFCs

Once your active income is more than 50%, it will be presumed that your place of effective management is outside India, as long as you have majority of the board meetings outside India which is easy to satisfy but they’ve also said that you can’t misuse this rule.

 For companies except those engaged in ABOI, determination of POEM is a two-stage process:

  • Identifying or ascertaining the person or persons who actually make the key management and commercial decisions for conduct of the company’s business as a whole.
  • Determination of place where these decisions are, in fact, being made.

The CBDT has stated that the intent of POEM is to tap shell companies trying to avoid tax compliances in India. The POEM cannot be established to be in India merely because one or more of the following conditions exist:

  • Foreign company is wholly owned by an Indian company.
  • Foreign company has a permanent establishment in India.
  • One or some of the directors of a foreign company reside in India.
  • Local management in India relates to activities carried out by a foreign company in India.
  • Support functions that are preparatory and auxiliary in character in India

The foreign companies having POEM in India have to pay corporate tax at a rate of 40% instead of 25% payable by companies that have status “resident of India”.

 As it may not be possible to provide a detailed list of all the factors that must be considered, we welcome you to clarify your queries regarding the same. Reach us here.

Transfer pricing with APAs

Transfer pricing made easy with APAs

Over the past few years, the number of transfer pricing audits has been increased and aggressive positions have been adopted by the Indian Revenue Authority, which has contributed to long drawn and protracted litigation. The Central Board of Direct Taxes (CBDT) signed nine unilateral advance pricing agreements (APAs) with Indian taxpayers in July, this year, as it looks to reduce litigation by providing certainty in transfer pricing.
The APA program is designed to avoid the conflict arising in an audit and to nurture more effective communication between taxpayers and the Indian Revenue Authority, by helping both the parties to focus on relevant facts and circumstances in advance.

Advance pricing agreement (APA)
An APA is an agreement between the taxpayer and tax authority determining the pricing of intercompany transactions for future years. In case of a roll-back, it would also include past years. The taxpayer and tax authority mutually agree on the transfer pricing methodology (TPM) to be applied for a certain period of time (generally five years) based on the fulfillment of certain terms and conditions. APA is an effective tool used in several countries with established transfer pricing regimes to avoid future disputes in a cooperative manner.

 APAs pin down

  • Transactions covered by an APA
  • Transfer pricing method (TPM)
  • APA term
  • Operational and compliance provisions
  • Appropriate adjustments
  • Critical assumptions regarding future events
  • Required APA records
  • Annual compliance reporting responsibility

 Types of APAs

  • Unilateral: An APA between a taxpayer and the tax administration of the country where it is subject to taxation.
  • Bilateral: An APA entered into by the taxpayers, associated enterprise (AE) of the tax payer in the foreign country, the tax administration of the host country and the foreign tax administration.
  • Multilateral: An APA that involves the tax payer, two or more AEs of the tax payer in different foreign countries, tax authority of the country where the tax payer is located and the tax authorities of AEs.

 Key benefits of an APA

  • An APA provides certainty on transfer pricing and the TPM to be adopted for intercompany transactions covered under agreement.
  • Certainty with respect to tax outcome of the tax payer’s international transactions.
  • A bilateral or multilateral APA also wipes out the risk of potential double taxation arising from controlled transactions.
  • Removal of an audit threat and deliverance of a particular tax outcome based on the terms of the agreement.
  • Substantial reduction in risk and cost associated with audits and appeals over the APA term.
  • For tax authorities, an APA reduces cost of administration and also provides with additional resources.
  • APA renewal provides an excellent leverage of time and efforts expended during negotiating the original APA. The Indian APA rules also allow the taxpayer to convert a unilateral into bilateral and vice-versa, if required.

Consequently, APAs provide a win-win situation for all the stakeholders involved.

 The APA process in India
In line with APA process in other countries around the world, the Indian APA rules prescribe a process that breaks into the following four phases:

  • Pre-filing consultation: The process for APA would start with pre-filing consultation meeting. The taxpayer can request for a pre-filing consultation meeting which shall be held with the objective of determining the scope of the agreement, understanding the transfer pricing issues involved and examining the suitability of international transactions for an APA. The taxpayer also has an option of applying for a pre-filing consultation on an anonymous basis. This process is non-binding on the taxpayers and the Revenue. Taxpayer is required to fill form (From No. 3CEC) for a pre-filing consultation. It is vital not only to the APA process, but also to determine the course of the APA.
  • Formal APA application: After the pre-filing meeting, if the taxpayer is desirous of applying for an APA, an application would be required to be made in prescribed form (Form No. 3CED) containing specified information. The APA application filing fee is also payable at this stage.
  • Negotiation: Once the application is accepted, the APA team shall hold meetings with the applicant and undertake necessary inquiries relating to the case. Post the discussion and inquiries, the APA team shall prepare a draft report which shall be provided to the Competent Authority (for bilateral / multilateral APA), or DGIT (for unilateral APA).
  • Finalization: This phase involves exchange of feedbacks on draft APA, finalization of the APA and giving effect to the initial years covered under the APA term that have already elapsed.

 Statutory fee for filing an APA application
The APA filing fee, i.e. fee to be paid while filing the formal APA application is dependent upon the amount of the proposed covered transactions over the proposed APA term, as below:

  • INR 1 million for international transactions up to INR 1 billion
  • INR 1.5 million for international transactions up to INR 2 billion
  • INR 2 million for international transactions greater than INR 2 billion

*No fee prescribed for the pre-filing consultation process.

If you require any assistance on transfer pricing documentation including transfer pricing reports, Form- 3CEB and Advance Pricing Agreements (APA), you may reach us.

Audit under GST

GST Audits- An overview

Section- 2(13) of the CGST Act defines Audit as the examination of records, returns and other documents maintained or furnished by the registered person under the Act / rules made there under or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of the GST Act or the rules made thereunder.

*No audit is required for businesses with turnover less than INR 2 crore.

Types of GST Audit
There are 3 types of GST audits:

  1. Audit to be conducted by a Chartered Accountant or a Cost Accountant: Every taxpayer with revenue exceeding the prescribed limit of INR 2 crore during a financial year shall get his accounts audited by a Chartered Accountant or a Cost Accountant. Such taxpayers whose audit is conducted by a Chartered or Cost Accountant shall submit:
  • An annual return by filling the form GSTR 9B along with the reconciliation statement by 31st December of the next financial year;
  • The audited copy of the annual accounts;
  • A reconciliation statement, reconciling the value of supplies declared in the return with the audited annual financial statement; and
  • Other particulars as prescribed.
  1. Audit to be conducted by the tax authorities: As per Section 65 of the CGST / SGST Act, the Commissioner or any officer of CGST or SGST or UTGST authorized by him by a general or specific order, may conduct audit of any registered / enlisted individual. Intimation of the audit is provided to the taxpayer at least 15 days in advance in Form GST ADT-01 and the audit is to be completed within 3 months from the date of commencement of the audit. In rare cases, the GST Commissioner has the powers to extend the period by another 6 months, if required.
  2. Special Audits: If at any stage of investigation or any other proceedings, tax authority is of the opinion that the value has not been correctly declared or credit availed is not within the normal limits, department may order special audit under the mandate of Section 66, by its nominated Chartered Accountant or Cost Accountant.

The Chartered Accountant or Cost Accountant so nominated shall submit audit report to tax officer within the period of 90 days. This period may be extended further for 90 days by tax officer on application made by registered person or the chartered accountant. The registered person shall be given an opportunity of being heard in respect findings of special audit. The expenses of the audit of records, including the remuneration of such chartered accountant or cost accountant shall be paid by the Commissioner.

Where the special audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the officer may initiate required action.

Obligations of the Auditee
Auditees shall have following obligations during the course of audit:

  • The taxable person will be required to provide the necessary facility to verify the books of account / other documents as required.
  • The auditee needs to furnish the required information and render assistance for timely completion of the audit.

Findings of the Audit
On conclusion of an audit, the officer shall inform the taxable person within 30 days of:

  • Findings of audit;
  • Their reasons; and
  • The taxable person’s rights and obligations.

Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under section 73 or section 74.

If you are facing challenges in compliance with GST or require any assistance in GST audits, you may reach us. For any questions regarding this, please click here.

GST adviser in India

Highlights of 29th GST council meeting

The 29th GST Council meeting chaired by Union finance minister Piyush Goyal was held at New Delhi on the 4th August, 2018. The meeting was aimed to address the issues of the Micro, Small and Medium Enterprises (MSMEs).

Key decisions taken by council in the meeting

Incentivizing digital transactions
Federal indirect tax body the GST Council, keeping in mind the end goal of digitalization of the economy, enhancing tax compliance and elevating the collection of tax has decided to incentivize digital payments of tax. The council came up with plan to roll out a pilot project for refunding 20% of GST paid on business-to-consumer transactions through RuPay card, BHIM mobile application, unified Payment Interface (UPI), debit card etc.

To implement this, the IT system has to get ready first. Therefore, government will develop the software in assistance with NPCI to process the cashback. The cashback is subject to a cap of INR 100.

Addressing MSME issues
The Micro, Small and Medium Enterprises (MSMEs)  play a significant role in country’s development, by the volume of revenue & employment it generates. The sector contributes to half of the exports and around 29% of the GDP.

The GST council has decided to form a new panel to examine a series of tax and compliance relief proposals pertaining to MSME and small traders. Panel to be chaired by union minister of state for finance Shiv Pratap Shukla will examine all proposals received so far regarding tax relief including the proposal to give relief to MSMEs with sales up to INR 1.5 crores from the central GST (CGST). This would restore the excise duty exemption available to these businesses in the pre-GST era.

This penal will do in depth study of the issues related to MSMEs and small taxpayers and thereafter will submit their findings and recommendations before GST Council.

No GST rate cut
Owing to lower GST revenues, no decisions were taken on the rate cut or rate rationalization. Also, there was no discussion on the GST return filing form simplification either.

The next meeting of the GST Council will be held on 28-29 September in Goa. For further updates stay tuned here!

For any query on this, reach our GST advisors.

compliance-839x450

New compliance for directors – DIR-3 KYC

The Central Government of India decided to conduct KYC drive to bring down the shell companies. Ministry would be conducting KYC of all the directors of the companies as a part of updating its registry.

MCA (Ministry of Corporate Affairs) has amended and inserted a new rule, Rule 12A (Directors KYC) vide the Companies (Appointment and Qualification of Director) Rules, Fourth Amendment Rules, 2018 . The rule came into effect on July 10, 2018.

In a registered company or new company registration, every director who has been allotted Director Identification Number (DIN) on or before 31st March, 2018 and whose DIN is in ‘Approved’ status would be mandatorily required to file form DIR-3 KYC by August 31, 2018.

Directors of the company will be going through this KYC procedure annually.

Need for this amendment

  • Government is administering a drive to maximize corporate governance in order to get rid of shell companies, unprincipled and dishonest directors who are running benami companies (where actual owners and directors are not on the records or books). This KYC exercise is undertaken to sift that only genuine individuals are responsible for running the affairs of any company.
  • MCA would be conducting KYC of all the directors of the company as a part of updating its registry.

Who all are covered under this compliance?

  • All the individuals whether residents in India, non-residents or foreign nationals, who are directors / partners any companies / LLP are required to file KYC form.
  • The KYC details are to be mandatorily submitted by director of the company and by disqualified directors as well.

Directors are required to fill the DIR-3 KYC E- Form available on the MCA’s website.

Information Required 

  • It is mandatory for the Indian directors that all the data furnished in the DIR-3 KYC form is in accordance with the information registered with the Income Tax Department (in PAN)
  • The full name of applicant, as mentioned in attached documents, should be provided without using any abbreviations.
  • Using of prefix, Late is not required for a deceased person. The married women are also required to fill in their father’s name only.
  • It is obligatory for a foreign national with a DIN, to possess a passport. The passport number shall be duly filled in the form. For Indian nationals, having a passport isn’t compulsory, but in case the person has a passport then its details must be mentioned in the form.
  • Details of AADHAR should be in compliance with the details furnished in both PAN and DIN.
  • The applicant must provide personal working mobile number and e-mail id. An OTP shall be sent for the verification of both the contact details.
  • Present residential address should be the one mentioned in the documents attached for the address proof. The permanent address may or may not be the same.

Documents to attach with Form

  • Identity proof (PAN / Passport/ AADHAR Card): The document should declare applicant’s and his father’s name along with the photograph of the applicant and his date of birth.
  • Proof of present address: Passport/ AADHAR Card/ Voter Identity.

Signatures

  • The form has to be digitally signed by the applicant using digital signature.

Certification of DIR-3 KYC form

  • The form has to be certified subsequent to its verification, with the original documents, by a practicing CA/CS/CMA professional.

Fee for filing DIR -3 KYC form

  • No fees to fill form DIR-3 KYC provided the form is being filled within the specified time-frame.
  • The applicant will be filed with a fee of INR 5000 in case of delayed submission.

Consequences for not filing e-form DIR-3 KYC

  • After expiry of the due date by which the KYC form is to be filed, in case of non-compliance, the DIN shall be marked deactivated along with the reason “Non-filing of DIR-3 KYC” .However, the de-activated DIN shall be re-activated only after filing of E-form DIR-3 KYC.
  • Also late fee penalty of INR 5000 shall be levied on filing after the expiry of due date.

Make sure you file DIR-3 KYC before 31st August 2018. If you need any assistance to comply with this new rule reach out our experts.

GST Returns

Key outcomes of the 28th GST Council meet held on 21st July 2018

GST return filing process

  • Small taxpayers with less than INR 5 crores of turnover can opt to file GST return quarterly against earlier limit of INR 1.5 crores. Quarterly return filing will be similar to the monthly return. However, tax payment would still be monthly, through a challan. Only small taxpayers making B2C supply or making B2B and B2C supply can enroll for quarterly GST return filing. Small taxpayers involved in only B2B supply cannot file quarterly returns under this scheme.
  • Two simplified returns have been designed- “Sugam” and “Sahaj”, where in the first one, report only B2C supplies and the other report both B2B & B2C supplies, respectively.
  • The returns that have to be filed monthly, has also been simplified. The new return is simple with two main tables. One for reporting outward supplies and one for reporting inward supplies for availing input tax credit. The process would be based on Invoice “UPLOAD – LOCK – PAY TAX” for most tax payers.
  • A new facility is proposed by the GSTN wherein NIL return filers (no purchase and no sale) can file Return by just sending an SMS.

Composite dealers

  • Limit not exceeding 10% of the turnover of services rendered in the preceding financial year, or INR 5 lakhs, whichever is higher shall be fixed for opting into the composite scheme. Restaurant services are not be considered for this measure.
  • Threshold limit for opting for composition scheme to be raised to INR 1 crore from existing INR 1.5 crore.

GST registration

  • Taxpayers may opt for multiple registrations within a State / Union territory in respect of multiple places of business located within the same State / Union territory. Earlier it was restricted to multiple businesses in the separate States.
  • Now it becomes mandatory to register under GST for those E-commerce operators who are required to collect tax at source.
  • The threshold exemption limit for GST registration increased to INR 20 lakhs from INR 10 lakhs for 6 States -Taxpayers operating in Sikkim, Arunachal Pradesh, Himachal Pradesh, Uttarakhand, Assam & Meghalaya.
  • Registration to remain temporarily suspended for the time cancellation of registration is under process, so that the taxpayer is relieved of continued compliance burden under the law.

 Reverse charge mechanism

  • An amendment is proposed to levy GST on reverse charge mechanism on receipt of supplies from unregistered suppliers, to be applicable to only specified goods in case of certain notified classes of registered persons.

E-way bills compliance

  • As the RFID readers or tags will be introduced with Goods and Services Tax Network (GSTN) for transporters in the next 6 months, this is supposed to relieve the transporters from wait at check posts.
  • Standard operating procedure to be adopted to reduce harassment of transporters avoid unnecessary hardship at checkpoints and to give effect to a uniform.

GST migration re-opened

  • Those businesses that had VAT or Service Tax or Central Excise registration were required to migrate and obtain GSTIN by registering under GST. This migration was later closed.
  • The 28th GST Council has now approved the proposal to open the migration window for taxpayers, who received provisional IDs but could not complete the migration process.
  • Taxpayers who filed Part- A of form GST REG-26, but not Part- B need to approach the jurisdictional Central Tax / State Tax nodal officers with the necessary details on or before 31st August, 2018 to complete the procedure.
  • All such taxpayers who are now migrating will also be not levied a penalty for late filing GST return. However, such taxpayers will have to file GST return first along with the payment of late fee. On filing the GST return, the GSTN would provide credit by way of a reversal of the amount paid as late fees in the cash ledger under the tax head.

*To encourage the same the late fee payable for delayed filing of return in such cases is decided to be waived.

For exporters

  • Exemption on outward transportation of all goods by air and sea is extended by another year till 30th September, 2019.
  • Services provided in sectors like banking, IT have been provided relief by exempting services supplied by an establishment of a person in India to any establishment of that person outside India (related party).

Other key points

  • Currently, the fiber material is charged at a higher GST rate of 12% as compared to the final apparel that was made out of it attracted only 5%. Due to this, ITC on fiber material was not being able to be utilized. On account of the inverted duty structure that currently prevails in this industry, GST council has proposed for the provision of allowing refund of the accumulated ITC by giving prospective effect to its applicability from 27th July 2018.
  • Registered persons may issue consolidated credit / debit notes in respect of multiple invoices issued in a Financial Year.
  • Hotels to be taxed on actual tariff basis not on declared tariff.

Rate rationalized

  • Common-use foot wares having retail price up to INR 1,000 to be taxed at 5 % for those with price exceeding INR 1000, 18% GST rate will be applicable.
  • Ethanol oil for oil companies to be taxed at 5 per cent in place of 18 % earlier.
  • GST rates for all leather items reduced to 18 per cent from 28 %.
  • GST rates cut to 18% for special purpose vehicles, work truck, trailers.
  • Rates on scents, toilet spray now under 18 % slab.
  • GST on bamboo flooring put under 12 % category.
  • Handicraft items to now be taxed at 12 %.
  • GST on handbags, jewellery box, wooden box for paintings, artware of glass, stone endeavour, ornamental framed mirrors, handmade lamps etc. reduced to 12%.
  • GST on imported urea reduced to 5%.
  • Rates for 17 white goods including — Washing machine, Refrigerators, TV, Video games, Vacuum cleaners, Trailers, Juicer mixer, Grinders, Shavers & Hair driers, water cooler, water heaters, Lithium ion batteries, electric iron – reduced by 10 % from 28 % to 18 %.

Exempted items

  • Sanitary napkins that were earlier taxed at 12 % has been put under exempted category.
  • Marbles, stone and wood deities get exemption.
  • Rakhi and fortified milk are also exempted.

New GST rates

blog

Next Council meet is going to be held on 4th August 2018.For further updates stay tuned here!
For any query on this, reach our GST advisors.