Tax Due Date - Aug 22

 

Sl No	Due Date	Related to	Compliance to be made
1	11.08.2022	GST	Filing of GSTR – 1 for the month of July 2022
2	20.08.2022	GST	- Payment & filing of GST return for the Month of July 2022- Form GSTR 3B
5	07.08.2022	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 July 2022. · Deposit TDS from Salaries deducted during the month of July 2022 • Deposit TCS for collections made under section 206C including sale of scrap during the month of July 2022, if any • Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of July 2022, if any

Foreign Payments Dikkat.

 

Foreign payments are an important part of business nowadays and with #Foreign_Payments come increased compliances.

 

China allows a company to register as "dormant” to allow companies to be maintained if no activity

 

In March 2022, new policies came about, allowing companies to go into dormant mode. This was in response to companies that wanted to remain in China but were struggling during the current economic conditions because of Covid.

Bombay HC holds International inbound roaming and long-distance telecom services billed to foreign operators qualify as export of services

 

This Tax Alert summarizes recent ruling[1] of the Bombay High Court (HC) on zero-rating of International Inbound Roaming (IIR) and International Long Distance (ILD) services provided by Indian telecom operator to foreign telecom operators (FTO)s.

Process of disclosing Interest on PF in Income tax returm.

From FY 2021-22, salaried taxpayer whose contribution in PF more than Rs. 2.5 Lakhs requires to pay tax on the interest income on PF contribution exceeds Rs. 2.5 Lakhs per annum.  This interest income is taxable at applicable slab rate which in most cases will be 30% plus applicable surcharge & cess.

GST on Pre-packing foods.

 

FAQ dt 17-7-2022 confirms now:

NN 6/2022 and 7/2022 have now w.e.f.18-07-2022*  made edible items taxable @ 5%/12% if these items are pre packaged and labled i.e. items are placed in package, whether sealed or not, carrying  pre determined quantity. The items must be placed in package without the purchaser being present to be called pre packaged. Further package or its label must be required to bear declarations under Legal Meteorology Act to bring it under taxation net. In other words if package is not intended to carry pre- determined quantity or is not required to bear statutory declarations, then gst shall not be imposed.

RCM GST on Residential Houses.

 

Renting of residential dwelling for use as residence is exempt from GST. Residential dwelling rented for use as residence may  be used for purposes other than residence  but that does not wean off the exemption under law. Residential dwelling rented for use other than residence was never exempt and continues to be taxable.  Hence it not the actual use but the terms of  agreement that might decide taxability of residential dwelling.  Law till 17-07-2022 does not make distinction whether residential dwelling is rented to registered person or unregistered person. However vide NN 4/2022 dated 13-07-2022, where residential dwelling  for use as residence is rented to a registered person, exemption from gst shall not be available and gst shall be applicable.

Mandatory online filing of Income tax forms.

 

CBDT (DGIT Systems) vide notification no. 03/2022 dated 16.07.2022 has prescribed the following forms to be filed electronically :

Club Membership Fees

 

Is club membership fees is a capital or revenue expenditure?  

Provisions of the Income Tax Act, 1961

As per section 37(1), “Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".

Notification No 3/2022 - Form 10F to be filed electronically

 

Foreign payments are an important part of our business and with Foreign Payments come compliances.

In case of a payment to any of our foreign vendor from STL India, we are required to obtain the documents mentioned below, to analyze the withholding obligation and withheld taxes before making the payment:

Notification No 3/2022 Form 10-IA to be filed electronically

 

As per the Income Tax Act, 1961, in case of person with disability, deduction is allowed u/s 80U and incase of a dependent with disability, deduction is allowed u/s 80DD.

 

“Consideration” for the issue of shares for the purpose of section 56(2)(viib) of the IT Act encompasses the conversion of CCD

 

BACKGROUND

Section 56(2)(viib) of the Income-tax Act 1961 (IT Act) is attracted when a closely held company issues shares at a premium and the consideration exceeds Fair Market Value (FMV). It provides that the difference between the actual consideration and the FMV of the shares or Face value of shares (in case FMV is lower than Face Value) shall be deemed to be the income of such a closely held company and accordingly taxable under the head ‘Income from other Sources’. Apart from the issue of equity shares, the Company can also raise funds through the issue of Preference Shares, hybrid instruments such as Compulsorily Convertible Debentures (CCDs), Compulsorily Convertible Preference Shares (CCPS), Non-Convertible Debentures (NCDs) etc. Whether section 56(2)(viib) of the IT Act gets attracted when the funds are raised through hybrid instruments like CCDs is open to interpretation.

GST Latest summary of Notification and Circulars

 

§  Clause (c) of Section 110 of the Finance Act 2022 through Section 49(10) of the CGST Act, provides for any amount of tax, interest, penalty, fee or any other amount in an Electronic Cash Ledger can be transferred to a distinct person.

§  Extended time for issuing any demand orders for non-fraud cases for the Financial Year 2017-18 upto September 30, 2023.

§  Value of duty credit scrip’s shall be not included in the aggregate value of exempt supplies for the reversal of common credits in respect of inputs or inputs services or capital goods.  

§  A formula amended to consider utilization of ITC on account of inputs and input services on the pro-rata ratio basis.

§  The registered person shall report non-GST supply separately and shall have an option to either separately report his supplies as exempted and nil-rated supply or report consolidated for the two heads in the exempted column.

§  Six-digit HSN code is mandatory for taxpayers having annual turnover in the preceding year upto 5 Cr for both inward and outward supplies and four-digit HSN Code for taxpayers having annual turnover in the preceding year upto 5 Cr.

§  Scope of ITC is being widened and would now be made available in respect of goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force.

§  Balance in the electronic credit ledger can be used for making payment of any tax under the GST Law

§  Balance in electronic credit ledger cannot be used for making payment of any liability other than tax under the GST Laws.

Checklist for 194R

 

No	Particulars	Questions for the sales promotion and business team
1	Benefit to vendors / contractors/ customers	Is there any benefit / perquisite provided by your company to any vendor / contractor / customer / any other person in the course of business (other than employees where tax is already withheld under Section 192). For example: Providing free products / dinners / vouchers to any distributor or contractor.  Providing free meals / benefits to employees or workers of contractor, etc.                            **Kindly note that benefit either in cash or kind should be mentioned above. Whether any expenses on food and venue are incurred during customer meetings, etc. Whether goods / items are given free of cost under luck draw? Whether the system of luck draw is manual or automated? Whether any marketing support is provided to distributors / dealers?
2	Cash and sales discounts	Does your company, in the course of business, provide any cash discounts, sales discounts, benefits or perquisites to its customers? If answer to the above is yes, what are the kind of benefits provided? Benefit can include anything and everything such as given free tickets to an events, free goods such as mobile phone, gold coin, cash discount, etc.
3	Out of pocket expenses	Do you charge OPEs to your customers? If yes whether any withholding done by customers? Whether your vendors charge you OPEs?
4	Conferences/ Seminars	Do you organize any conferences for its contractors / vendors / any other party? If yes, please provide nature of these conferences and benefits provided attendees.
5	ESOPs	Whether ESOPs are given to your employees by your Parent company without any cross charge?
6	Employee expenses	Whether your employees or directors take vendors / clients out for dinner / any other entertainment? If yes, what is the value of cost incurred? Do your employees receive any benefit or perquisite from a third party?
7	Director’s expenses	Whether membership fee for various clubs/institutes is borne by the Company? Are directors taken on business trips or personal trips in India or outside India?
8	Debt related matters	Are you providing or availing an interest free loan / corporate guarantees / moratorium? Any restructuring proposed – write off of loan or discounts being provided by Banks?
9	Corporate Social Responsibility	Are you subject to CSR provisions? If yes, are your providing goods/services for free? Whether CSR activities can be considered as providing benefit or perquisite under Section 194R?
10	Intra-group transactions	Whether any type of benefit is received by Indian entity from its group holding company? Such as use of brand, internal SAP systems without any consideration. Whether there is use of common office space without any cross-charge?
11	Additional services	Whether free services are provided along with the regular services? For e.g. free installation services is provided along with sale of goods. Whether free training is provided to the customers on purchase of software or goods?

  

CLAUSE 44 OF TAX AUDIT REPORT.

 Under Section 44AB of the Income-tax Act, Assessee has to get his books of accounts audited if the turnover exceeds a certain threshold limit or if the profit offered for taxation is lower than the prescribed percentage.

Circulars issued pursuant to 47 Council Meeting

 

various circulars have been issued by the Ministry of Finance to give effect to the recommendations made by the GST Council in the 47^th meeting.

 

A summary of the relevant ones is captured below for your ready reference:

How to disclose ITC in GSTR-3B - Circular 170 - the key to consistent disclosures

 CBIC has clarified on reporting of the supplies to end-users, composition taxpayers, and UIN holders as well as on the disclosure of ineligible/blocked input tax credits and reversals thereof.

Maharashtra AAAR holds activities performed by Liaison office for its overseas Head office as taxable supply

 

This Tax Alert summarizes a recent ruling of the Maharashtra Appellate Authority for Advance Ruling (AAAR). The ruling deals with applicability of Goods and Services Tax (GST) on activities undertaken by liaison office (LO) at behest of its overseas head office (HO).

Notifications issued pursuant to the decisions taken at the 47th Council Meeting

 We wish to update that various notifications have been issued by Ministry of Finance to give effect to the recommendations made by the GST Council in the 47^th meeting.

 

The summary of the same is captured below for your ready reference:

Central Government notifies inclusion of NFTs and exclusion of certain items from the scope of virtual digital asset

 Central Government notifies inclusion of NFTs and exclusion of certain items from the scope of virtual digital asset

This Tax Alert explains Notification Nos. 74 and 75 of 2022 dated 30 June 2022 issued by the Central Government (CG). Notification No. 74 excludes certain items like gift cards, mileage points, web subscriptions etc. from the scope of definition of “virtual digital assets” (VDA). Notification No. 75 notifies “token” which meets the definition of VDA as non-fungible token (NFT) but excludes NFTs representing ownership of underlying tangible assets from the scope of definition of VDA.

GST Council recommends rate rationalization and changes in GST law and procedure

This Tax Alert summarizes a recent press release issued by the Ministry of Finance. The 47th meeting of Goods and Services Tax (GST) Council was held on 28 and 29 June 2022 in Chandigarh.

The key decisions are as follows:

Press Release for recommendations of GST Council in its 47th Council Meeting held on 28th and 29th June 2022

  

 

This is to update you on the recent Press Release issued in respect of 47^th GST Council Meeting held on 28^th June and 29^th June 2022. The recommendations of the GST Council would be given effect through relevant Circulars/ Notifications/ Law amendments which shall have the force of law. The current press release only for the purpose of information.

ITC mismatch can be communicated by way of a SCN

 This is to apprise you about an important decision by Hon'ble Madras High Court ('HC') in the case of Mahendra Feeds and Foods, 2022 (5) TMI 1237. The HC was dealing with the question as to whether a Show Cause Notice ('SCN') can be the first intimation of Input Tax credit (‘ITC’) mismatch.

 

Facts

 

·                The Petitioner availed ITC for the FY 2017-18 and 2018-19. The GST Department issued a SCN requiring the Petitioner to explain the ITC mismatch.

 

·                The Petitioner contended that before issuance of a SCN, Department was obliged to first communicate the mismatch to both the supplier and recipient as per Section 42(3). Thus, SCN cannot be issued as a very first communication.

 

·                The Department submitted that SCN issued to the recipient was itself a communication as per Section 42(3).

 

HC Judgement

 

·                After receipt of SCN, if at all the petitioner wanted to rectify the ITC mismatch, he would have submitted the supporting documents to substantiate that output tax had been paid by the supplier, which he failed to do.

 

·                Therefore, SCN can be treated as communication as per Section 42(3), intimating the ITC mismatch.

 

 | Remarks

 

·                Apparently, the HC made it clear that merely on such small technical ground, an adjudication proceeding cannot be diluted, especially when the Petitioner did not even care to explain the mismatch or put forth a reply.

 

·                This decision will surely encourage GST authorities to issue a SCN directly for ITC mismatches which will definitely create a problematic situation for taxpayers.

CBDT issues guidelines for applying new withholding provisions on transfer of virtual digital assets

 This Tax Alert explains Circular No. 13 dated 22 June 2022 (Circular) issued by the Central Board of Direct Taxes (CBDT) with a view to remove difficulties and provide guidance for giving effect to the newly inserted provision for tax deduction at source (TDS) on consideration arising from transfer of virtual digital asset (VDA) under the Income Tax Law (ITL).

With effect from 1 July 2022, a person responsible for paying any sum as consideration to a resident in India for transfer of VDA, is required to undertake TDS @ 1%, subject to certain conditions. The ITL also contains a specific provision enabling the CBDT to issue guidelines for the purposes of removal of any difficulty in giving effect to the TDS provisions on transfer of VDA (TDS on VDA).

Pursuant to representations made by the stakeholders and in exercise of the power to issue guidelines to remove difficulties, the CBDT has issued the Circular to clarify certain issues on the interpretation/application of TDS on VDA.

Key clarifications provided in the Circular broadly include (i) determining the person responsible for withholding tax where the transfer of VDA is routed through an “Exchange” (thereby involving multiple parties in a transaction); (ii) TDS mechanism where transfer of VDA is for consideration paid in kind or in exchange for another VDA; (iii) TDS when consideration is paid through a payment gateway; (iv) clarification on overlap between TDS on VDA and TDS on purchase of goods; (v) TDS on net value of consideration and (vi) computation of annual thresholds to trigger TDS on VDA.

CBDT has also, vide a separate Notification, amended the procedural rules and prescribed forms to enable various compliances and furnish information, inter alia, in relation to TDS on VDA.

Taxation of NRI in India.

 

An NRI's income taxes in India will depend upon his residential status for the year as per the income tax rules mentioned above. If your status is resident your global income is taxable in India. If your status is 'NRI,' your income earned or accrued in India is taxable in India.

CBIC issues guidelines for review, post-audit and sanction of refund claims under GST

This Tax Alert summarizes a recent Instruction issued by the Central Board of Indirect Taxes and Customs (CBIC) relating to sanction, post audit and review of refund claims under Goods and Services Tax (GST).

Restrictions on cash transactions in Income Tax Act:

 1. As per Sec 13A, if donation is received by political parties in cash exceeding Rs 2000, exemption shall not be available to them. 

 2. Deduction U/S 35AD shall not be allowed if cash payment exceeds Rs 10,000. 

Comparison between Section 112 & 112A

 The similarity between Section 112 and Section 112A of Income Tax Act, 1961.

Both sections covers following

1.    Long Term Capital Asset:- Equity share in a company Unit of Equity Oriented Fund Unit of a business trust

2.    Both sections determine tax on long term capital gains and falls under chapter XII of the Income Tax Act, 1961.

3.    First proviso in both the sections is same which is related to benefit of slab rate in case of Individual and HUF,  being a resident.

4.    Deductions under Chapter-VIA are not available in both sections.

5.    Both sections have one common tax rate @ 10% subject to fulfilment of conditions specified therein

Difference between Section 112 and Section 112A of Income Tax Act, 1961

SN	Particulars	Section 112A	Section 112A
1	Type	Cover all securities	Cover only equity shares, Mutual Fund & business trust
2	STT Payment	Not required	Mandatory
3	Tax Rate	10% without indexation or 20% with indexation  -  whichever is beneficial.	10% in excess of onel lakh capital gain.

Taxation of MLD

 

TDS on payment to Non Resident

 TDS on non-resident payment has always been a complex area of Income Tax Compliances. Detailed analysis is required to be performed to each transaction to understand TDS on foreign payment before you can initiate a payment. Wrong TDS on foreign party may put your company at greater risk in later years when the assessment is done.

IMPORTANT TAX CHANGES FOR FY 2022-23.

As the new financial year (FY) 2022-23 begins from April 1, several income tax and financial changes will come into effect. We provide a list of few such changes applicable from April 1, 2022.

Higher TDS from April 1 if ITR for FY 2020-21 not filed

As per the announcement made in the Union Budget 2022, if ITR for one year is not filed, then higher TDS, TCS will be applicable in the next financial year. It must be noted that this higher TDS will not be applicable if the source of income is salary or provident fund. However, higher TDS will be deducted from interest income, dividend income, etc. as specified under the Income-tax Act.

Service tax applicability on secondment of employees

 The Hon’ble Supreme Court of India in the matter of M/s Northern Operating Systems Pvt. Ltd. (“NOS”) in relation to taxability of the arrangement of secondment of expat employees to Indian entity under reverse charge mechanism.

 

SC rules IGST is not leviable on inbound ocean freight in case of CIF contracts

 The issue involved was whether Integrated Goods and Services Tax (IGST) can be separately levied and collected from the Indian importer on ocean freight paid by the foreign exporter to a foreign shipping line, where Customs duty together with IGST has been already discharged on the value of imported goods.

Recent Income Tax Court decesions.

 

·         Mumbai ITAT held that no disallowance of reinsurance payments to foreign re-insurers under section 37(1) and/ or 40(a)(ia) of the Income-tax Act, 1961.

 

Understand section 80JJAA: Deduction wrt employment of new employees

 

A. Criteria
1. Any assessee who has business income and is subject to audit u/s 44AB
2. Business must not be formed by splitting up or reconstructing of an existing business
3. Business must not be transferred from any other person or as a result of any business re-organization.
4. Filing of Form No 10DA.

Understand Treaty impact on Adani-Holcim deal.

 

The Adani recently announced aquisation of Cement companies ACC & Ambuja cement from Holcim group based in Switzerland. Currently, the equity (covered by the deal) is held by the Holcim group as under:

 

Ambuja Cements Limited – 63.55% stake is held by Holderind Investments Limited, a Mauritius entity ('Holding entity'). In turn, the Holding entity is owned by Holderfin B.V, a Netherlands entity ('Intermediate Holding entity') which is ultimately owned by Holcim Limited, Switzerland ('Ultimate Holding entity').

ACC Limited - 50.05% stake is held by Ambuja Cements Limited, whereas the Holding entity owns a 4.48% stake.

 

Tax on Super Anuation fund

 

Payment from Super Anuation fund

Electricity Charges are Includible in Rent for Charging GST - AAAR

 

This is to apprise you about a recent decision by Appellate Authority for Advance Ruling (‘AAAR’) in the case of Harish Chand Modi, RAJ/AAAR/05/2021-22, wherein it was held that reimbursement of electricity expenses by the lessee to lessor would form part of taxable value and not to be treated as ‘Pure Agency Services’.

 

Do not claim less GST input for the month of April 2022

•  The GST taxpayer is advised to restrict their claim  of input credit based on the entries available in GSTR 2B for the particular month.  
• GSTR 2B is a register with a cut off date of 12th of every month and the same includes GST input of previous months and the current month.
• For April 22, we can see GSTR 2B which contains details of previous months and not current months.
• GSTR 2A for April 22 is available with input credit of the current month.
• The GSTN had issued an advisory for the present technical glitch and advised to claim input credit based on the credit available in GSTR-2A.
• by doing this, GST taxpayers can claim only input entries available for the current month and are not able to claim input credit of the previous month for which entries are available in GSTR 3B.
• it is advisable to add GSTR 2A & 2B and then claim the consolidated amount.      

CBDT notifies tax return form (Form ITR-U) and the manner to furnish updated return

 This Tax Alert summarizes the key highlights of Notification No.48/2022 dated 30 April 2022 issued by the Central Board of Direct Taxes (CBDT) which amends the Income Tax Rules, 1962 by inserting Rule 12AC which provides for tax return form (Form ITR-U) and the manner for furnishing updated return.

GST Implications on Merger of Two GSTINs Having Same PAN

 In the case of Crystal Crop Protection Limited [GST-ARA-31/2021-22/B-50]. The AAR held that the transfer of business by way of merger of two GSTINs having same PAN would not qualify as ‘transfer of business as going concern’ and hence would constitute as supply of Goods and not supply of Services.

 

No ITC available of GST paid on procurement of goods/services for promotional scheme– Tamil Nadu AAAR

 The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) has affirmed the observations of Tamil Nadu AAR and held that ITC of GST paid on procurement of goods/services for the promotional scheme is not available as per Section 17(5) of the CGST Act. The AAAR elucidated that since the retailers ultimately consumed the goods/services provided under the reward scheme, such personal consumption by appellant or by its retailers would disentitle them to avail ITC. Hence, the contention regarding applicability of clause to the stage of procurement use and not on the last use would be of no avail to the appellant. The AAAR has emphasised upon the non-obstante clauses of Section 17(5) and remarked that these clauses put embargo on availability of ITC itself.  The AAAR concluded that giving away of goods/services under the scheme is not a supply. Therefore, ITC of the GST paid on the goods/services procured for the scheme is not available to the appellant.

Tax paid under erstwhile regime is permissible to carry forward under GST regime as credit in the electronic credit ledger - Madras High Court

 The Madras High Court (HC) allowed credit of service tax paid under RCM [after the introduction of the Goods and Services Tax (GST)], which could not be availed as transitional credit. The HC ruled that the chance of seeking a refund or credit cannot be denied merely because the transitional provision has come into effect and credit could not be claimed under Section 140(1). The HC observed that taxpayers should not be rendered remediless and, hence, invoked the doctrine of necessity as the HC felt it a dire necessity for the legislation to address such situations. The HC noted that if the GST regime had not come into effect, the petitioner would have been eligible to claim the Central Value Added Tax (CENVAT) credit of all the amounts paid. Thus, the HC suggested the Revenue to carry forward the credit in the electronic credit ledger of the petitioner.

Supreme Court upholds validity of assessment in the name of amalgamating company post amalgamation on factual grounds

 This Tax Alert summarizes a recent Supreme Court (SC) ruling in the case of Mahagun Realtors (P) Ltd. (Taxpayer), wherein the issue before the SC was whether an issue of notice, in the name of amalgamating company post the Appointed Date and passing of assessment order in the name of amalgamating company as represented by amalgamated company, would invalidate the assessment since amalgamating company ceases to exist in law post the Appointed Date.

CBDT exempts non-resident individuals visiting India from tax collection on LRS remittance and overseas tour program package

 This Tax Alert explains Notification dated 30 March 2022  issued by the CBDT which exempts individuals, not resident in India (NR) as per the provisions of Income Tax Laws and visiting India, from tax collection at source (TCS) on foreign remittances made under Liberalized Remittance Scheme (LRS) and for purchase of overseas tour program package (OTPP).

CBDT notifies fees payable in case of delay in linking Aadhaar with PAN and defers other consequences of non-linking till 31 March 2023

 This Tax Alert explains Notification No. 17/2022 dated 29 March 2022, Press Release dated 30 March 2022 and Circular No. 7/2022 dated 30 March 2022 issued by the Central Board of Direct Taxes (CBDT), providing quantum of fees to be levied on the taxpayer who fails to link their Aadhaar with their Permanent Account Number (PAN), as mandated by the Income Tax Laws , on or before 31 March 2022, as well as the last operative date for PAN which is not linked with Aadhaar.

Government extends tenure of Foreign Trade Policy and the benefit of exemption to EOUs and others

 This Tax Alert summarizes a recent Notification and Public Notice ^[1] issued by the Directorate General of Foreign Trade (DGFT) extending Foreign Trade Policy 2015-2020 (FTP) by further six months.