Tag: #incometax

GST: Simplified

GST is a destination-based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a nutshell, only value addition will be taxed and the burden of tax is to be borne by the final consumer. 

A few important points of consideration are given below: 

The tax would accrue to the taxing authority, which has jurisdiction over the place of consumption which is also termed as place of supply. 

1. The Existing Taxes that are proposed to be Subsumed under GST- 

The GST would replace the following taxes: 

(i) Taxes currently levied and collected by the Centre:

a. Central Excise duty 

b. Duties of Excise (Medicinal and Toilet Preparations) 

c. Additional Duties of Excise (Goods of Special Importance) 

d. Additional Duties of Excise (Textiles and Textile Products) 

e. Additional Duties of Customs (commonly known as CVD) 

f. Special Additional Duty of Customs (SAD) 

g. Service Tax 

h. Central Surcharges and Cesses so far as they relate to supply of goods and services 

(ii) State taxes that would be subsumed under the GST are: 

a. State VAT b. Central Sales Tax

c. Luxury Tax

d. Entry Tax (all forms)

e. Entertainment and Amusement Tax (except when levied by the local bodies) 

f. Taxes on advertisements

g. Purchase Tax

h. Taxes on lotteries, betting and gambling i. State Surcharges and Cesses so far as they relate to supply of goods and services. 

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST. 

2. The Status of Tobacco and Tobacco Products under the GST Regime- 

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products. 

3.Type of GST proposed to be Implemented- 

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and /or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly, Integrated GST (IGST) will be levied and administered by the Centre on every inter-state supply of goods and services. 

4. Need for Dual GST-  India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.  

5. Authority to Levy and Administer GST-  Centre will levy and administer CGST and IGST, while states will levy and administer SGST.   

6. Benefits from GST-  Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer.  

7. Concept of IGST-  Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Under Article 269A of the Constitution, the GST on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.  

8. Deciding Authority for levy of GST- The CGST and SGST would be levied at rates to be jointly decided by the Centre and States. The rates would be notified on the recommendations of the GST Council.  

Tax reforms must be implemented. To improve revenue performance factors like globalization, large informal sectors and policies of neighboring countries must be considered. 

The Indian Tax System

There are various references in History which act as evidence that taxation existed in olden times also. Some references are ‘Arthashastra’ by Chanakya, King Dalip’s regime and Caesar Augustus. The word “Tax” originated from “Taxation” meaning ‘an estimate’. These were imposed and collected on the trade of commodities or livestock in a disorganised manner. The importance of tax increased with time and became a source of government income and expenditure.

TAX STRUCTURE IN INDIA 

India has a well developed taxation structure. The tax system in India is mainly a three-tier system which is based between the Centre, State governments and the Local Government organisations. In most cases, these local bodies include the local councils and the municipalities. According to the Constitution of India, the Government has the right to levy taxes on individuals and organisations. However, the Constitution states that none has the right to levy or charge taxes except the authority of law. 

The tax structure in India is divided into two components: Direct Taxes (such as income tax) and indirect taxes (such as custom duty). 

I. Direct Taxes: Direct taxes are those taxes that are not shifted, that is, the incidence of which falls on persons who pay them to the government, the taxpayer. According to Article 265, each tax levied or collected has to be backed by an accompanying law, passed either by the Parliament or the State Legislature. 

The direct taxes in India are: 1. Wealth Tax- 

Wealth tax is one of the major direct taxes in India. It is also known as the Wealth Tax Act, 1957. This tax is applicable to all the citizens of India. Wealth tax is the cess levied on owned property. It applies to those who enjoy property ownership benefits. It is applicable to every property owner till he or she retains the ownership of that particular property. The tax paid on property depends entirely on the current market rate. In case the property is not generating any income, then also wealth tax has to be paid. 

2. Corporate Income Tax- 

Corporate income tax is levied in many different forms in India. Corporate Income Tax is primarily meant to be paid by domestic corporations. Domestic corporations in India pay a minimum income tax rate of 35 per cent along with a surcharge of 2.5 per cent. Corporate income tax is also applicable to foreign organisations that have their own economic bases working in the country. These types of corporations are required to pay tax on 40 per cent of their income along with a surcharge of 2 per cent. This surcharge goes as a reservation for funding the state‘s education. Corporate income tax is also applicable to all the people that are working for any corporation in or outside India. 

3. Personal Income Tax- 

This is the most common form of tax in India. The system of personal income tax in India is very similar to the taxation system in the United States of America. It is based on the personal income of an individual. If the annual income of an individual is under Rs. 1, 80, 000/- then he or she is exempted from paying any personal tax. There are further allowances made under the personal income tax domain for the physically handicapped and elderly. 

II. INDIRECT TAXES: An indirect tax is defined as a tax levied on goods and services rather than on income or profits. Given below are the indirect taxes imposed in India: 

1. Sales Tax- 

Sales tax is the tax levied by the State Government on goods bought and sold in the country. This policy is followed in most industrially developed countries in the world. The taxes levied under sales tax are not the same for all kinds of goods. 

2. Custom Duties-

Custom duties were introduced in India through the Customs Act in 1962. This duty was introduced with the aim of checking illegal exports and imports of goods. Taxes are charged for all the goods that are imported into the country, mainly to protect the industries in India. 

Shortcomings of Indian Tax System: 1. Canon of Justice: The increased activities of the Government of India to develop the infrastructure and economy indicate a regressive tax structure that is against the canon of justice. The lower and middle income groups have to bear more burden of taxation as compared to the higher income groups because the government tries to raise amounts by indirect taxation. 

2. Agricultural Income: Agricultural income is not taxed in India. Hence, there is a higher burden of taxes on the urban areas. 

3. Complex Tax Framework: India has a complex tax framework with contradictory tax exemptions. Efforts are being made by the IT Department to enhance and simplify transparency of the tax system to help the individual taxpayers by reducing their compliance costs. 

4. Removal of Tax Incentives: Tax exemptions are given to achieve the objectives of development but they promote rent seeking behaviour, contributing to the complex tax laws. Exemptions lead to tax leakage and tax abuse which makes the system counterproductive and dysfunctional. 

5. Refunds: Getting refunds of tax from the Income Tax Department is a difficult process. It should be made easier by easy accessibility through internet services and refunding electronically. 

6. PAN: The tax base must be increased by extending PAN to cover all citizens serving as a Citizen Identification Number. 

7. Monopolistic Power of Tax Officials: The tax officials operate within a geographical limit with ambiguously defined roles that leads to abusive behaviour on their part. A high degree of discretionary power and lack of adequate monitoring and reporting mechanisms leads to corruption. The tax officials misuse the rules of the government and extract illegal payments from taxpayers. 

8. Lack of Supervision: There is a lack of supervision and monitoring of officers and holding them accountable for their actions. There must be promotion and enforcement of ethical standards, merit based recruitments, promotion procedures and regular staff rotation schemes to prevent the creation of a nexus. 

9. Decrease in Tax Revenue due to Corruption: Corruption decreases tax revenue, which leads to a shortfall in the funds of the government. This forces governments to resort to public borrowing and public debt, thereby endangering fiscal sustainability. Corruption adds to the adverse effect over investment and growth. 

10. Broadening the Tax Base: The majority in India do not file personal income tax. To bring them into the tax net, the government adopted a “one-in-six” scheme under which an individual satisfies one out of six criteria. This measure has increased the number of individual income tax payers, but a lot needs to be done still. 

India was different from other countries as they were made by the Indian citizens without any sort of external interference. 

There are different types of taxes in India. The system of taxation in India is clearly vested in the hands of authorities such as the central government, state government and the local governments. The taxes that are levied by the central government are on personal income, central excise, custom duties and service tax.

Recent Tax Announcements made and Regulatory Reliefs given due to the COVID-19 Effect : An Indian Context

As the world battles the COVID-19 pandemic, countries are moving to stringent measures like lockdowns and curfews. With markets crashing, the global economy is staring at a deep distress.

Entire world is fighting against epidemic COVID 19 outbreak and Hon’ble Prime Minister of India Sh. Narendra Damodardas Modi has taken much need precautionary step of complete lockdown from midnight 12’o clock of 24th March, 2020 onwards for next 21 days and again extended to 3rd May, 2020 for another 19 days.

In this difficult environment, each regulatory body is releasing relief measures and guidelines for easing out the impact of COVID 19. On the financial and compliance front, announcements have been flowing from the Government authorities in the form of deferment of statutory due dates or relaxation in payment terms to overcome the financial crisis being faced due to lock-down.

Similar to several countries, the Government of India has begun working on an economic package to deal with the impact of the pandemic. Realising the hardships faced by its citizens, the Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman has announced several important relief measures on tax and regulatory aspects.

The Finance Minister also announced that necessary legal circulars and legislative amendments for giving effect to these relief measures will be issued by the concerned Authority.

Following is the summarised form of the key announcements made by the Finance Minister here below:

Direct Taxes

1. Extension of tax return filing deadline

The deadline for the following types of tax return have been extended from 31 March 2020 to 30 June 2020

  1. Belated income-tax return for tax year 2018-19
  2. Revised income-tax return for tax year 2018-19

2. The timeline for linking Aadhaar with PAN has been extended to 30 June 2020

3. Relief with regards to delay in payment of taxes

  • Interest at the reduced rate of 9% (i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged on delay in respect of following payments made between 20 March 2020 and 30 June 2020:
    1. Advanced tax
    2. Self-assessment tax
    3. Regular tax
    4. Taxes withheld or collected at source
    5. Equalization levy
    6. Securities Transaction Tax and
    7. Commodities Transaction Tax
  • Penalty and late fees in relation to the above mentioned payments are to be waived off

4. Extension of compliance due dates

In respect of the following, where the due dates fall between 20 March 2020 and 29 June 2020, the revised due dates shall be 30 June 2020:

  • Issue of notice
  • Intimation
  • Notification
  • Approval order
  • Sanction order
  • Filing of appeal
  • Furnishing of return, statements, applications, reports, any other documents
  • Completion of proceedings by the authority and
  • Any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains

5. The Direct Tax Vivad se Vishwas Act, 2020:

The timeline for payment of disputed arrears without attracting additional 10% amount under the Vivad se Vishwas Scheme extended from 31 March 2020 to 30 June 2020.

Indirect Taxes

1. Extension of GST return filing deadlines:

  • The last date for filing the forms GSTR-3B due in months of March, April and May 2020 (i.e. returns of February, March and April 2020) will be extended till 30 June 2020 (in staggered manner)
  • Date for filing GST annual returns of FY 18-19, which is due on 31 March 2020 is extended till the last week of June 2020

2. Relief in respect of payment of taxes

  • For those having aggregate annual turnover less than INR 50mn, no interest, late fee, and penalty will be charged for the period
  • However, for those having an aggregate annual turnover of more than INR 50mn, a reduced rate of interest @ 9% per annum will be charged from 15 days after due date (current interest rate is 18 % per annum) for the delayed payment between 20 March 2020 and 30 June 2020, but no late fee and penalty will be charged if complied before 30 June 2020
  • Last date for making payments by the Composition dealers for the quarter ending 31 March 2020 will be extended till the last week of June 2020
  • Payment under Sabka Vishwas Scheme shall be made without interest till 30 June 2020

3. Extension of compliances due dates

In respect of the following under GST law, where the due date falls between 20 March 2020 and 29 June 2020, shall be extended to 30 June 2020:

  • Issue of notice
  • Notification
  • Approval order
  • Sanction order
  • Filing of appeal and
  • Furnishing of return, statements, applications, reports, any other documents

4. Date for opting for composition scheme for the F.Y. 2020-2021 is extended till 30 June 2020

5. 24X7 Custom clearance till end of 30 June 2020

Corporate Laws 

1. CARO 2020

Applicability of Companies (Auditor’s Report) Order, 2020 will be effective from FY 2020-2021

2. Board meeting

The mandatory requirement of holding Board meetings within prescribed interval provided by the Companies Act, 2013 (120 days) shall be extended by a period of 60 days till next two quarters i.e. till 30 September

3. Meeting of Independence Directors

For FY 2019-20, if mandatory one meeting of independent directors is not held, the same will not be treated as non-compliance

4. Form INC-20A- Declaration of commencement of Business

New Companies being given 6 more months for filing declaration of commencement of business

5. Debenture

Time line to invest 15% of debentures maturing in a particular year has been extended from 30 April 2020 to 30 June 2020

6. Deposit Reserve

Requirement of creating a Deposit Reserve (equal to 20%) of deposits maturing during FY 20-21, extended to 30 June 2020 instead of 30 April 2020

7. Minimum residency

Non-compliances with 182 days residency in India by Director will not treated as non-compliance

8. No Additional Fees

Moratorium period from 1 April 2020 to 30 September 2020, during which no additional fee would be charged in respect of any filing, irrespective of its due date

9. Insolvency and Bankruptcy Code 2016 (IBC)

  • Minimum amount of default required to initiate insolvency and liquidation on corporate debtors raised from INR 1 lakh to INR 1 crore, effective immediately, in order to prevent admission of MSMEs defaulting due to economic conditions in lieu of COVID-19
  • Proposed Suspension of new initiations of Corporate Insolvency Resolution Process under Sections 7, 9 and 10 of IBC for 6 months, contingent upon scenario beyond 30 April 2020 as a safeguard companies from defaults attributable to financial downturn pursuant to the COVID-19 pandemic

Among the measures announced late on Tuesday, the government extended the e-way bill validity for the second time since the lockdown was imposed. The e-way bill generated on or before March 24 and expiring during the March 20-April 15 period would now be valid till May 31. This is likely to help trucks stuck en route to reach their destinations.

Further, the notification extended by three months the deadline for furnishing the annual return and GST audit for financial year 2018-19 to September 30. Additionally, a taxpayer can now furnish monthly return GSTR-3B showing nil sales through SMS using the registered mobile number. This return would be verified by a registered mobile number based one-time password (OTP) facility, the notification said.

WEBSITES REFERRED

1)https://www.mondaq.com/india/operational-impacts-and-strategy/915470/covid-19-impact-indian-government-announces-tax-and-regulatory-reliefs

2)https://vjmglobal.com/blog/covid-19-statutory-businesss-regulatory-relief/

3)https://www.financialexpress.com/economy/procedural-relief-to-gst-payers-but-experts-say-no-substitute-for-financial-package/1950617/

4)http://www.lawstreetindia.com/experts/column?sid=354

5)https://www.a2ztaxcorp.com/fm-releases-ordinance-on-direct-tax-on-relaxation-provided-on-24th-march-2020/

6)https://www.a2ztaxcorp.com/fm-releases-ordinance-on-indirect-tax-on-relaxation-provided-on-march-24-2020/

7)https://dashnews.org/tax-day-in-the-u-s-causes-confusion-within-the-crypto-space/

JOB WORK UNDER GST

Introduction

The Indian economy is one of the most robust economies in the World and one of the key components which constitutes it significantly is known as Job work. So what’s the definition of Job Work?

Definition

As per Section  2(68) of the CGST Act, 2017 Job Work is defined as ‘any treatment or process undertaken by a person on goods belonging to another registered person’. 

Meaning

Job-work means it is the processing of goods supplied by principal. The job worker is required to carry out the process specified and it includes outsourced activities that may or may not culminate into manufacture. 

The one who does the said job would be termed as ‘job worker’. The ownership of the goods does not transfer to the job worker but it rests with the principal.

About the Concept

The concept of job work is stated and explained in the Central Excise. It is a concept wherein a principal manufacturer can send an input or semi-finished good to a job worker for further processing. 

Many facilities and procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job work.

The whole idea behind this is that the principal must be made responsible for meeting the compliances on behalf of the job worker on the goods processed by the worker.

One must also consider the fact that typically the job-workers are small persons who are unable to comply with the discrete provisions of the law.

The most relevant and pertinent point is what are the Procedural aspects that have to be dealt with in regards to the Job Work?

Certain facilities with the specific conditions are offered in relation to job work some of which are as under:

a) A registered person (Principal) can send inputs/capital goods under intimation and subject to the certain conditions without payment of tax to a job worker and from there to another job worker and after completion of job work bring back such goods without payment of tax.

The principal is not required to reverse the ITC availed on inputs or capital goods dispatched to job worker.

b) Principal can send inputs or capital goods directly to the job worker without bringing them to his premises, still the principal can avail the credit of tax paid on such inputs or capital goods. 

c) However, inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year and 3 years,respectively, from the date of sending such goods to the job worker.

d) After processing of goods, the job worker may clear the goods to-

(i) Another job worker for further processing;

(ii) Dispatch the goods to any of the place of business of the principal without payment of 

(iii) Remove the goods on payment of tax within tax;

(iv) India or without payment of tax for export outside India on fulfilment of conditions.

The facility of supply of goods by principal to the third party directly from the premises of the job worker on payment of tax in India likewise with or without payment of tax for export may be availed by the principal on declaring premise of the job worker as his additional place of business in registration. In case the job worker is a registered person under GST, even declaring the premises of the job worker as additional place of business is not required. 

Before supply of goods to job worker, principal would be required to intimate the Jurisdictional Officer containing the details of description of inputs intended to be sent by the principal and the nature of processing to be carried out by the job worker.

The said intimation shall also contain the details of another job worker, if any. The inputs or capital goods shall be sent to the job worker under the cover of a challan issued by the principal. 

The challan shall be issued even for the inputs or capital goods sent directly to the job worker. The challan shall contain the details specified in Rule 10 of the Invoice Rules.

The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.

Input Tax credit on goods supplied to job worker under Section 19 of the CGST Act, 2017 provides that the principal (a person supplying taxable goods to the job worker) shall be entitled to take the credit of input tax paid on inputs sent to the job- worker for the job work. 

Further, the proviso also provides that the principal can take the credit even when the goods have been directly supplied to the job worker without bringing into the premise of the principal.

The principal need not wait till the inputs are first brought to his place of business.

Time Limits for return of processed goods

As per section 19 of the CGST Act, 2017, inputs and capital goods after processing shall be returned back to principal within one year or three years respectively of their being sent out.

Extended meaning of input

As per the explanation provided in section 143 of the CGST Act, 2017, where certain process is carried out on the input before removal of the same to the job worker, such product after carrying out the process to be referred as the intermediate product.

Waste clearing provisions

Pursuant to section 143 (5) of the CGST Act, 2017, waste generated at the premises of the job worker may be supplied directly by the registered job worker from his place of business on payment of tax or s such waste 

may be cleared by the principal, in case the job worker is not registered. 

Transitional provisions 

Inputs or partially processed inputs which are sent to a job worker prior to introduction of GST under the provisions of existing law [Central Excise] and if such goods are returned within 6 months from the appointed day i.e. 1st July, 2017 no tax would be payable. 

If such goods are not returned within prescribed time, the input tax credit availed on such goods will be liable to be recovered. 

If manufactured goods are removed, prior to the appointed day, without payment of duty for testing or any other process which does not amount to manufacture, and such goods are returned within 6 months from the appointed day, then no tax will be payable. 

For the purpose of these provisions during the transitional period, the manufacturer and the job worker are required to declare the details of such goods sent/received for job work in prescribed format GST TRAN-1, within 90 days of the introduction of the GST.

Conclusion

The tax treatment of job work under GST remains largely similar to the current regime. An important point to note is that the period within which inputs should be brought back or supplied from the job worker’s place is now 1 year instead of 180 days earlier. 

Similarly, the period within which capital goods should be brought back or supplied is now 3 years instead of 1 year earlier. Also, GST will now be levied on processing charges charged by the job worker.

For the manufacturing industry, these provisions are positive and in line with the Government’s all-out support for the sector.

WEBSITES REFERRED

  1. https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.cbic.gov.in/htdocs-cbec/gst/Job_Work.pdf&ved=2ahUKEwiM4NO6weDqAhXyzjgGHczlBlEQFjAAegQIBRAB&usg=AOvVaw2keJbawF1WoGvEOssOT6H9
  1. https://blog.saginfotech.com/job-work-under-gst
  1. https://www.google.com/amp/s/blogs.tallysolutions.com/job-work-under-gst/amp/
  1. https://www.simpletaxindia.net/2017/07/job-work-under-gst.html?m=1
  1. https://www.google.com/amp/s/www.taxscan.in/job-work-gst-need-know/12594/%3famp
  1. https://www.slideshare.net/mobile/VijayaKumarKavilikat/central-goods-and-sales-tax-act-overview