February 2019- Tax Due Dates

India

Sr No	Due Date	Related to	Compliance to be made
1	11.02.2019	GST	Filing of GSTR 1 for the month of January, 2019

2

20.02.2019

GST

Payment of GST for the month of January, 2019 Filing of GSTR 3B for the month of January, 2019

3

07.02.2019

TDS/TCS (Income Tax)

· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of January 2019. · Deposit TDS from Salaries deducted during the month of January 2019 • Deposit TCS for collections made under section 206C including sale of scrap during the month of January 2019, if any

GST Amendments in force from tomorrow (1.2.2019): Hits and Misses from a Tax Controversy Management perspective

1.             Background and introduction:-

1.1.        The 28^th GST Council meeting on 21.7.2018 had, inter alia, approved several amendments to the GST laws [namely Central Goods and Service Tax Act, 2017 (“CGST Act”), Integrated Goods and Service Tax Act, 2017 (“IGST Act”), Union Territory Goods and Service Tax Act, 2017 (“UTGST Act”) and the Goods and Service Tax (Compensation to States) Act, 2017 (“GST Compensation to States Act”)]. The said amendments were placed before the Parliament (and the State legislatures) for carrying out amendments in the respective GST legislations – the Ministry of Law and Justice published that the amendment bills to all the GST laws received presidential assent (after being passed by the Parliament) on 29^th August 2018.

CBDT : Clarifies official assignee's status as 'artificial juridical person' for return filing & tax computation

CBDT clarifies applicability of 'representative assessee' provisions u/s 160 to official assignees and their classification in the appropriate category of 'person' as defined u/s 2(31) of the Income-tax Act; States that since official assignees do not receive income or manage property on behalf of debtor, they cannot be considered as representative assessee of debtors u/s 160(1)(iii) while computing tax liability arising from estate of debtors; Further clarifies that the status of official assignee is that of 'artificial juridical person' as prescribed u/s 2(31)(vii); Thus states that official assignee is required to file income-tax return electronically in the ITR Form applicable to 'artificial juridical person' separately for each of the estate of the insolvent and income shall be taxed as per the rates applicable to an 'artificial juridical person'; Further, requires official assignee to obtain a separate PAN for each of the estate of the insolvent

Start ups vs Government.

Nearly 70 start-up founders and Indian software product consortium iSPIRT, have written a letter to Prime Minister Narendra Modi seeking immediate intervention on the ongoing 'Angel Tax' tussle between the

income tax department and start-ups. In the two-page letter start-up founders have cautioned the government that if the  issue is not resolved immediately, Modi's 'Startup India' movement could be derailed forever. With close to 39,000 start-ups having raised around $38.5 billion in the last four years, start-up community has claimed in the letter to have created a value of close $130 billion dollars in India along with ample employment opportunities. The letter has also quoted a survey by LocalCircles, where 38 per cent of start-up founders have admitted to have received one or more IT notices in 2018, making the situation grave compared to last year.

Section 56 and 68 of the IT act, empowers the department to demand taxes

from start-ups for money raised by them from individuals (angel investors)

for issuance of shares (at a premium value) above the 'fair market value'. The  valuation being subject to a report by a merchant banker, which either

applies the net asset value method or the discounted free cash flow method.

The start-ups will also have to furnish information of the investors including personal details like IT returns and net asset value of the investor to satisfy the assessing officer, to consider the investment as a bonafide transaction.

The entire 'Angel Tax' issue started precipitating two years ago, when startup founders were sent demand notices by the Income Tax department,

to clear the dues. The notices sought founders to pay the difference between the fair value and the premium at which the amounts were raised from angel investors though share sale.

Cofounder of one of the start up says, "Start-ups in an angel round typically raise around Rs. 50 lakhs to 2 crore and not more. With most companies dying within 1000 days of starting up, getting a notice after 3 years makes no sense". With DCF or discounted cash flow method not widely accepted by the assessing officers, "The junior officers are thinking that if we have raised money from angel investors, it's a doubtful transaction" he adds.

At around the same time last year, when start-up companies started

receiving notices, India's noted angel investors like Kris Gopalakrishnan,

Mohandas Pai and Indian Angel Network (India's largest angel network

forum) had raised their concern with the commerce ministry, DIPP and also  Finance ministry over the provisions.

"When we sent a representation to the government last year, they assured

that there would be no coercion and again it has come up now with the next

year's assessment being done by the department," said Mohandas Pai,

Founder, Aaron capital.

As a quick fix remedy, several notifications with clarifications have already

been issued till date either by the DIPP or CBDT. The notification issued in

April 2018, mandated start-ups not only to register with DIPP but also seek

approval from the inter-ministerial board or IMB before raising funds to

keep the investment off IT radar. Where time is of the essence for an early

stage start-up, how can one wait for government approvals.

"When someone is willing to fund a brilliant idea, should a founder start

work or should he take approval from IMB before starting work and then

receive fund to start work? " he asks. Most start-up founders say that with

the inter-ministerial board sitting just once a month for clearances, the

waiting period for approval is anywhere between 3-6 months. This period

can be a death nail for early stage start-ups that are looking for survival

through angel investment and bring the company to some scale for the next

round of funding.

Even if we are to go by the government's own status report, though DIPP has recognised a total of 14,036 start-ups under its umbrella, a mere 91 start-ups have been approved for availing tax benefits by IMB, as of 3rd week of November 2018.

According to a group of start-up founders, who are spearheading the

movement to end this law, , over 2000 notices have already been slapped this year. But the problem lies very much at the heart of the Income Tax Act.

The underlying question of veracity of valuation still needs to be addressed and till then the tax officials are well within their rights to recover the dues, by the letter of the law. "If a start-up company wants they can challenge this in a writ petition and at the jurisdictional high court or the CIT appeal and then ITAT like any regular tax appeal,".

In the present scenario the intended sections were never meant to be applied to start-ups. "When a tax is unfairly applied the only remedy is take it off the  law. The other reason being, now with GAAR under Indian law effectively dealing with malafide transactions, the utility of the clause in under 56 and 68 simply does not exist,"

The problem for start-ups is not just the cumbersome compliance process

but also lack of understanding on the part of policy makers and tax

authorities on how start-ups work. More over these provisions are attracted

by start-ups registered in India and angel investors in India, making this

unfairly skewed in a rather flattish start-up world where big ticket funding

are coming from foreign investors.

"Out of the $13.7 billion dollars funding that India got last year, only 10 per

cent came from India, we are on the way to becoming a digital colony. If you go after angels who are investing, they will simply stop investing,"

Industry experts believe that intervention by the government should be

minimal. "Most of the start-ups, if they get funding and they are successful,

are already doing several filing under various laws. The data is already available with the regulators to take action against errant,"

"If we have to encourage entrepreneurship to increase employment, these kinds of cases become a deterrent,"

Cross Charge Vs ISD-Activities performed by the Employees at Corporate Office providing the services in the course of or in relation to employment- treated as taxable supply as per entry 2 of schedule I

Name of Appellant: Columbia Asia Hospitals Private Limited

Brief of Order-in-Appeal (OIA) : The appallate authority for advance ruling upheld the rulings passed under section 98(4) of the GST Act 2017 vide NO.KAR ADRG 15/2018 dated 27/07/2018 i.e. wherein the activities performed by the Employees at IMO ( "India Management Office (IMO)" i.e Corporate Office) providing the services in the course of or in relation to employment such as accounting, administrative and IT system management to their distinct units located at other state is treated as taxable supply as per entry 2 of schedule I appended to Act, read with section 7 of the CGST Act 2017

Appeal Order No. & Date: KAR/AAAR/Appeal-05/2018 dated 12-12-2018

AAR Order No. & Date, against which Appeal has been filed. : KAR/AAR-15/2018 dated 27-07-2018

The appellant filed an application on 1403.2018 before the Karnataka Authority for  Advance Ruling under Section 97 Of CGST/KGST Act, 2017 read with Rule 104 Of CGST/KGST Rules, 2017 in form GST ARA-01 , seeking a ruling on the following question:

Whether the activities performed by the employees at the Corporate Office in the  Course of or in relation to employment, such as accounting, other administrative  and IT System Maintenance for the units located in the other states as well i.e  distinct persons as per Section 25(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) shall be treated as supply as per Entry 2 of Schedule I of the  CGST act or it shall not be treated as supply Of Service as per entry I Of Schedule III of the CGST Act?

However, with respect to employee cost there are no invoices raised by the management Office treating the same as activities carried out by employees in the course of or in relation to his employment which does not amount to supply of service. The Appellant explained before the Authority that, the activities carried out by employees from the IMO for accounting and other administrative functions with respect to other units, would amount to supply Of services between distinct persons Without consideration as per Entry I Of Schedule I. However, by virtue Of specific relaxation provided in Entry I of Schedule Ill of the CGST Act, which states that "Services by an employee to the employer in the Course of or in relation to his employment" shall not be treated as supply of service. the same shall not be treated as Supply Of services

As per entry 2 of schedule 1 of the CGST Act, any supply between distinct persons is to be treated as a “supply” in terms of Section 7 of the said Act, In view of this deeming fiction in the law, the service supplied by the IMO to its other units by way of performing activities which benefits the other distinct persons is liable to be charged to GST. In accounting terminology this concept is referred to as “cross charge”. The IMO will cross Charge the other units of the same entity, the cost Of rendering its services which benefit its other units, by raising a tax invoice and charging applicable GST. The valuation for the supply of the service rendered by the IMO to the  other distinct persons will be done in terms of Rule 28 or 30 of the CGST Rules, In arriving at the cost of provision of the service by the IMO, the cost of employees working in the IMO has to be factored into. This is because the activities performed at the IMO cannot be done without human workforce and hence the cost Of such workforce is an integral part of the service provided by the IMO.

In the case of cross charge, there is an element of service rendered by the person who cross charges his other units even though they belong to the same legal entity. On the other hand, in the case Of ISD, there is no element of Service at all, but a mere distribution Of Credit Further,  certain expenses like rent paid on the immovable property, housekeeping services, etc incurred in maintaining and operating the IMO will not be distributable under the ISD route, rather they are required to be allocated to the Other units only by way Of cross charge. Therefore, the argument of the Appellant that the ISD mechanism is squarely applicable to them and not the cross charge method is not legally correct The ISD mechanism is purely for the purpose of distributing the CGST/SGST/IGST tax on the receipt of input services by the office of the supplier of taxable goods or services or both having the same PAN. The ISD mechanism is subject to certain  conditions laid down in Section 20 of the CGST Act, As per the ISD provisions, the office of the supplier of taxable goods or services Or both receives tax invoices for input services which are used by all their units having the same PAN. The ITC on such invoices is distributed to the Other units having the same PAN

In view of the above discussions, we uphold the Ruling dated 27.07.2018 passed by the Karnataka Authority for Advance Ruling as under:

The India Management Office (IMO) of the Appellant is providing a service to its other distinct units by way of carrying out activities such as accounting, administrative work, etc with the use Of the services Of the employees working in the IMO, the outcome of which benefits all the other units and such activity is to be treated as a taxable supply in terms Of the entry 2 of Schedule I read with Section 7 of the CGST Act 

The appeal is disposed off in the above manner,

Please click below to download complete detail-

http://gstcouncil.gov.in/sites/default/files/appellate-order/ColumbiaAsiaAppealOrder.pdf

Tax department hit hard on Innocent Citizen yet Again

Recently Income tax department has issued communication to taxpayer who had not filed their return of Income for the financial year ended  March 31, 2018.  Following are the due date which Income tax department prescribed.

Ø  July 31, 2018 extended till August 31, 2018

Ø  December 31, 2018 with fine of Rs. 5000 u/s 234E.

Ø  March 31, 2019 with fine of Rs. 10000 u/s 234E

Thus taxpayer have time till March 31, 2019 to file their tax return .  It should be noted that in maximum cases that  tax department has already received the tax by way of TDS and what is left out from taxpayer was only compliances of filing tax return for which they have already started collecting fine under section 234E of the Income tax act. 

However, before March 31, 2019,tax department started issuing communication for non-compliances of tax return  and accordingly tax payer has been provided time line of 21 days only even though as per statute time limit is upto March 31, 2019.

The intention of tax department is good as they want more and more people to file their tax return, however, the way it has been done is causing hardship to innocent citizen.   The finance ministry should re-visit the process and make some improvement  which may reduce the hardship.

The author is available at his email ID taxbymanish@yahoo.com  for your valuable feedback.

MCA Amends Companies (Acceptance of Deposits) Rules, 2014

The Ministry of Corporate Affairs (‘MCA’) vide a Notification dated January 22, 2019 (‘MCA Notification’) has broadened the extant framework for Companies (Acceptance of Deposits) Rules, 2014 with an objective to further enhance the transparency, disclosure to the stakeholders and improve governance in the Corporate Sector

Recent tax updates

Dear All

We are pleased to enclose our special edition 'Tax Highlights'. It summarises recent key direct tax and indirect tax related developments . . Hope you will find it useful and informative.   The details were provided in very short description and in case you need any additional information for any particular issue we are happy to share the same on your request.

TAX HIGHLIGHTS

INCOME TAX

·     Delhi High Court  recently held that deduction u/s 10A which was not claimed in the return of Income should be allowed to assesse during the assessment proceedings. 

·         Space provided to foreign entity for rendering services constitutes PE in India. 

·         Services provided by seconded employees does not constitute PE

·         Fees received for domain name registration are taxable as Royalty

·         Payment made to Google for advertisement is Royalty

·         CBDT Issues final notification on special transitional provisions of POEM.

·         DTAA benefit cannot be denied in absence of TRC.

·         CBDT Notified rules of conversion of inventory into capital assets

·         Gujarat High Court held that no disallowance on year end provisions of expenses for non deduction of TDS

·         Waiver of loan for purchase of capital assets is not business income but capital receipts.

·         CBDT: Withdraws circular on Sec. 56(2)(viia) applicability to ‘fresh’ issuance of shares

·         Mumbai High court held that Settlement of ESOP-shares by settlor, assessable as ‘capital-gains’ in Trust’s hands. 

·         IT Department specifies procedure for online application for nil/lower TDS / TCS

·         India signs DTAA agreement with Hong Kong.

Indirect Tax

·     

    Mumbai CESTAT held that CENVAT credit available on CSR expenses.

·         Supreme court held that ITC in a statute does not violate the rights guaranteed under the constitution.

·         CBEC Clarifies that no GST on export of back office services

·         In the 32^nd GST Council Meeting, state government has been provided to fix the threshold limit of registration and annual turnover limit for composition dealer increased to Rs. 1.5 Corers. 

·         Input tax credit on FY 2017-18 invoices can be claimed until due date of GSTR-3B of March 2019

·         Government has notified security services under reverse charge w.e.f 1st Jan 2019.

·         GST Annual audit for FY 2017-18 date extended till June 30, 2018. Also the new forms has been notified.

·         Appellate authority upholds GST advance ruling in case of Columbia Asia - Cost of employees at head office to be cross charged to other branches

International Tax

Important Changes to Malaysian Withholding Tax (WHT) Regulations

Please be informed of the following changes to Malaysian Withholding Tax (WHT) regulations with effect from December 28, 2018:

Category	Before December 28, 2018	On or After December 28, 2018	General WHT Rate *
Technical service fees (essentially covers most types of services, including, marketing, consulting, legal, etc.	WHT is only applicable for technical services rendered in Malaysia	WHT is applicable for all services rendered in Malaysia excluding freight charges General WHT Rate *	10%

* WHT rate could be reduced based on the Double Taxation Agreement (“DTA”).

CBDT identifies non-filers, gives 21 days time to file online-response

CBDT identifies non-filers (who enter into high value transactions and have potential tax liabilities but have still not filed their tax returns ) through Non-filers Monitoring System(NMS) by using Data Analytics (sourcing information from SFT statements, TDS/TCS statements, foreign remittances details etc); Data analysis has identified several potential non-filers who have carried out high value transactions in Financial Year 2017-18 but have still not filed Income Tax Return for Assessment Year 2018-19; Enables e-verification of these NMS cases, states that Taxpayers can access information related to their case from the ‘Compliance portal’ which is accessible through the e-filing portal of the Department, re-iterates that "there is no need to visit any Income Tax office for submitting response"; Requires non-filers to assess their tax liability for AY 2018-19 and file the Income Tax Returns (ITR) or submit online response within 21 days;  States that upon satisfactory explanation, matters will be closed online, however, in cases where no return is filed or no response 

CBDT takes third shot at Sec. 56(2)(viia) cherry, directs officers to ignore 'incorrect' view

CBDT clarifies that the view taken by Circular no. 10 dated Dec 31, 2018 [subsequently withdrawn by Circular no. 2 / 2019] that Sec. 56(2)(viia) would not apply to fresh issuance of shares, “would not be a correct approach, as it could be subject to abuse and would be contrary to the express provisions and the legislative intent of Sec. 56(2)(viia) or similar provisions contained in Sec. 56(2)..”; Makes it clear that “the said circular shall not be taken into account by any income-tax authority in any proceedings under the Act.”; States that any view expressed by Board vide Circular no. 10 of 2018 shall be considered to have never been expressed. 

CBDT: Gives Jan 31st ultimatum for withdrawal of ‘low-tax’ effect appeals

CBDT orders completion of withdrawal of Departmental ‘low-tax’ effect appeals from ITAT and HC by January 31st, in pursuance to circular no. 3 of 2018 [substantially enhancing the monetary limits for filing appeal]; Provides status of appeals withdrawal as on January 15th,highlights 0% pendency for withdrawal of identified appeals from HC in CCA regions – Delhi & Mumbai, whereas CCA regions Bhubaneswar & Guwahati show 100% pendency; While Delhi once again leads on appeals-withdrawal from ITATs with 0% pendency, however Kolkata, Jaipur & Guwahati show over 50% pendency; Thus, CBDT remarks that, “substantial scope of withdrawal of identified appeals exists”; Calls for immediate efforts for completing the appeal withdrawal process. 

Major Decisions taken by the GST Council in its 32nd Meeting (10-01-2019)

Recommendations made by the GST Council in its 32^nd Meeting held today under the Chairmanship of the Union Minister of Finance & Corporate Affairs, Shri Arun Jaitley

Post recent GST amendments- KEY ACTION

Following are key action areas/ points to be noted after the recent GST amendments:

1.         Input tax credit on FY 2017-18 invoices can be claimed until due date of GSTR-3B of March 2019

1.1     Applicability of extended timeline for forward charge and reverse charge invoices/ bill of entry

·                As per the rationale provided by the Government, the following aspect is relevant to note:

FY 2017-18 being the first year of implementation of GST, there were difficulties in implementing the provisions of the GST laws, as the tax payers were not familiar with the following provisions:

-        Recipients eligible to avail input tax credit could not claim the same because of missing invoices or debit notes in GSTR-2A within the stipulated time (as per section 16(4) of CGST Act);

-        Suppliers could not rectify the error or omission in GSTR-1 within the stipulated time (as per section 37(3) of the CGST Act).

·                As per the amendment, the following proviso has been added under Section 16(4) of the CGST Act which is a section that prescribes a time limit for claiming credits basis an invoice/ debit note:

-        Input tax credit in respect of invoices/ debit notes in relation to invoices raised during FY 2017-18 can now be claimed until the due date of furnishing Form GSTR 3B for the month of March 2019 i.e. April 20, 2019.

-        The above extension in due date for availment of input tax credit for FY 17-18 invoices is applicable in respect of the invoices which have been uploaded in GSTR-1 until April 11, 2019 (in GSTR-1 of March 2019).

·                As a corollary, the following inferences need to be evaluated with respect to the extension:

Type of document	Applicability of extension [through proviso to section 16(4)]	Remarks
Invoice issued by supplier for goods/ services	Applicable	Covered under the amendment and credit may be claimed until date of furnishing GSTR-3B of March 2019
Self-invoice issued by recipient (RCM of services)	May not be applicable	Not covered under the extension (till April 20, 2019) as the condition of upload of invoices by the suppliers in their GSTR-1 will not apply with respect to self-invoices
Bill of entry (import of goods)	May not be applicable	A possible position (albeit prone to litigation) could be explored that section 16(4) of CGST Act is confined to invoice/ debit note and does not apply to bill of entry (where credit could be claimed until date of filing annual return)
A specific tax position / detailed analysis would therefore be required where credit is proposed to be taken under the proviso for self invoice (for GST paid under RCM) and bill of entry (for import of goods)

1.2     Action steps for availment of input tax credit for FY 17-18 invoices in various scenarios

·                Following scenarios and corresponding action steps could be considered with regard to availment of ITC for FY 2017-18:

S No	Scenarios for FY 2017-18 invoices		Action Points
	Whether supplier invoice displayed in GSTR-2A?	Whether ITC has been availed in GSTR-3B
1	ITC displayed in GSTR-2A upto September 2018	ITC not availed in GSTR 3B till date	Avail ITC until GSTR 3B for the month of March 2019 – due date is April 20, 2019 basis extension above
2	ITC not displayed in GSTR-2A upto September 2018	ITC already availed upto GSTR 3B for September 2018	1.     Intimate vendors to upload/ amend invoice details in GSTR 1 for the month of March 2019 - due date is April 11, 2019 2.     If the vendors do not upload/ amend the data in GSTR-1 by April 11, 2019, a position could be explored  that ITC availed based on valid invoices issued by the suppliers should be eligible even if the same is not uploaded by the vendors – In this regard, reference could be made to the Press release dated October 18, 2018 which states that facility to view ITC in FORM GSTR-2A (by recipient) is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions of Section 16 of the Act.
3	ITC is displayed in GSTR 2A after September 2018 (ie from October 2018 onwards)	ITC has not been availed in GSTR-3B till date	Avail ITC until GSTR 3B for the month of March 2019 – due date is April 20, 2019 basis extension above
4	ITC is displayed in GSTR 2A after September 2018 (ie from October 2018 onwards)	ITC has been availed in GSTR-3B (irrespective of whether before or after September 2018)	No further action required.
5	ITC is not displayed in GSTR 2A until March 2019	ITC availed upto GSTR 3B for September 2018	If the vendors do not upload/ amend the data in GSTR-1 by April 11, 2019, a position could be explored  that ITC availed based on valid invoices issued by the suppliers should be eligible even if the same is not uploaded by the vendors – In this regard, reference could be made to the Press release dated October 18, 2018 which states that facility to view ITC in FORM GSTR-2A (by recipient) is in the nature of taxpayer facilitation and does not impact the ability of the taxpayer to avail ITC on self-assessment basis in consonance with the provisions of Section 16 of the Act.
6	ITC is not displayed in GSTR 2A until March 2019	ITC has not been availed in GSTR 3B until GSTR 3B for March 2019	Credit may not be eligible to be claimed in these cases without vendor upload of invoices which is a condition for the extension of time limit

2.         Details to be uploaded/ amended in GSTR-1

·                Errors/ omissions in filing of GSTR-1 for output invoices of FY 2017-18 can be corrected in the system until the GSTR-1 filings for the month of March 2019 – due date being April 11, 2019.

·                However, it is pertinent to note that currently, the option to rectify the error/ omission of FY 17-18 is not operational on the portal. We shall intimate you the same once it is operational.

3.         GST under reverse charge on security services

·                GST in respect of security services (services provided by way of supply of security personnel, the following service is now covered under reverse charge from January 1, 2019:

-       If the security service is provided by any person other than a body corporate;

The service is provided to a registered person located in the taxable territory