CBIC Circulars issued post 47 Council Meeting

 

 

Certain circulars have been issued by the Ministry of Finance yesterday to provide clarifications on various aspects/ transactions ranging from tax treatment, rate of tax, exemptions etc.

CBIC lowers e-invoice turnover threshold to INR10 crore with effect from 1 October 2022

 This Tax Alert summarizes a recent Notification^[1] issued by the Central Board of Indirect Taxes and Customs (CBIC) under goods and services tax (GST).

With effect from 1 October 2022, e-invoicing will be applicable to taxpayers having aggregate turnover exceeding INR10 crore in any preceding financial year from 2017 to 2018 onwards.

Earlier, the threshold limit for e-invoicing was reduced from time to time, as under:

• INR500 crore to INR100 crore (w.e.f. 1 January 2021),
• INR100 crore to INR50 crore (w.e.f. 1 April 2021) and
• INR50 crore to INR20 crore (w.e.f. 1 April 2022).

As per media reports, we understand that the government is contemplating to further reduce the threshold to INR5 crore in the future.

The move to reduce turnover threshold and increase the ambit of e-invoicing is mainly aimed at resolving mis-match errors and to check tax evasion.

Considering the timelines, concerned businesses will have to ramp up their IT systems in order to comply with the e- invoicing norms.

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).