Highlights of the India-Hong Kong DTAA

GST - Agenda for the second year - Part 36 - Interest - Is it a consideration for supply?Govt amends Import Policy conditions for Electronics & IT goodsPrabhu meets US Counterpart; both hail robust bilateral tiesIndia takes measures to boost trade with AfricaCBIC Member John Joseph gets addl charge of Member (IT, Legal & CV)GST - Petitioners should be called before the CBIC for a consultative meeting; deliberations to be placed along with petition before the GST council for its consideration: HCArgument that price of 'Electric Chimney' was not increased at the time of introduction of GST when tax rate was fixed at 28%, hence the question of reducing price when GST rate was brought down to 18% is legally unsustainable: NAAContention that effective tax rate during VAT period was around 18% and the GST rate w.e.f 15.11.2017 was also 18%, therefore, there was no need for revision in price when tax rate had been decreased from 28% to 18% is untenable: NAAVAT - Delivery of possession is sine qua non, for transfer of 'right to use' of goods and to invoke provisions of Sec 3-F of UP VAT Act: HCGovernment permits export of Potatoes, Onions, Rice, Wheat Flour, Sugar, Dal and Eggs to Republic of Maldives under bilateral trade agreementAmendments made in ANF 3B of Handbook of Procedures for applying for SEIS benefits under FTPAmendments in ANF 3D - number of entries of Shipping bills/Airway bills which can be filed in a single online ANF 3D application increased from 50 to 250 for claiming MEIS benefitsCus - Enhancement of redemption fine without determining market value of goods and duty payable, cannot be sustained: CESTATCus - Since replacement cost represents intrinsic value of container, agreed upon between lessor and lessee in one way lease, same is basis of value: CESTATIncome tax - Omission to consider mixed question of law & fact - Fit case for remand: HCIncome tax - Independent primary evidence and not secondry, should be basis for addition u/s 69C: HCIncome tax - Active PAN number of deceased assessee is no basis to presume that assessee is alive, more so if Revenue was intimated about demise: HCIncome tax - Unaccounted cash credit - Cash payments made without any entry in balance sheet merits addition u/s 68: ITATIncome tax - Proviso to Section 2(15) will not affect institutions involved in imparting education: ITATCX - Charge of clandestine removal is a serious charge and must be supported by evidence - as no actual stocking done by Revenue, no reason to disbelieve the statement of Internal Auditor: HCST - It is inexplicable as to how Department withdrew SCN dated 30.08.2001 and issued a fresh SCN in 2004 for very same period: CESTATCX - No penalty can be imposed on a Private Limited Company under Rule 26(1) of CER: CESTATGST - Agenda for the second year - Part 36 - Interest - Is it a consideration for supply?Govt amends Import Policy conditions for Electronics & IT goods

The India-Hong Kong DTAA enters into force from 30th November, 2018. The same would be effectively applicable from 01st April, 2019.  Accordingly, the benefit of the provisions of the DTAA can be claimed in respect of the income derived in any year starting from April 1, 2019. The companies engaged into cross-border transactions with Hong Kong were eagerly awaiting this DTAA to become effective. The articles of India-Hong Kong DTAA are aligned with BEPS and MLI in order to curb tax evasion/ avoidance, treaty shopping practices, conduit companies practices etc. Now, the companies resident in India as well as Hong Kong would be able to take shelter under the treaty, thereby, avoiding double taxation and/ or taxation at higher rates.

Challenge in Realty Sector - 'ongoing projects vs new projects'

AS all  are well aware, the GST law, insofar as it concerns the Realty Sector, has been virtually re-written with effect from 1-4-2019 and that, the levy of GST at the lower rates without the benefit of ITC is compulsory for projects which commence on or after 1-4-2019 and that, in respect of 'ongoing projects', the Developer has the option to continue with the old scheme wherein, ITC is allowed. Hence, the new scheme would, by and large, boil down to the interpretation of the definitions of an 'ongoing project' and 'a project which commences on or after 1-4-2019'.   

GST updates- Notifications, Circulars & Orders -April 2019

• MOU-Data Sharing between CBDT to GSTN         
• Updated versions of GST - Concept and Status, and GST - An Update as on 01/05/2019 : 
• GST applicability on Seed Certification Tags         
• GST exemption on the upfront amount payable in installments for long term lease of plots, under Notification No. 12/2017 – Central Tax (R) S. No.41 dated 28.06.2017                
• GST Practitioner Examination     
• Time period for filing GSTR-3B for the month of March 2019 extended   
• Special Procedure for Return filing by Composition Taxpayers     
• Amendment to CGST Rules, 2017              
• Effective date of implementation of Rule 138E of CGST Rules, 2017           
• Clarification in respect of utilization of ITC under GST      
• Order of utilization of input tax credit after insertion of Rule 88A               
• CGST (Fifth Removal of Difficulties) Order, 2019 
• Revocation of cancellation of registration             
• Amendment to CGST Rules, 2017              
• Enhancements in E-Way Bill System        
• Generation of Electronic Invoice through GST Portal        
• GST Council not to adjudicate on Representations under GST : Case of Union of India Vs Shiyaad reported in 2019-TIOL-888-HCKerala-GST
• Interest mandatorily payable on gross tax liability on delayed payment of GST :  Case of Megha Engineering And Infrastructures Ltd Vs CCT  reported in 2019-TIOL-893-HC-Telangana-GST     

Tax Due Date- May 2019

Sr No	Due Date	Related to	Compliance to be made
1	11.05.2019	GST	Filing of GSTR 1 for the month of April, 2019
2	20.05.2019	GST	Payment of GST for the month of April, 2019 Filing of GSTR 3B for the month of April, 2019
3	07.05.2019	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 April 2019. Deposit TDS from Salaries deducted during the month of April 2019 Deposit TCS for collections made under section 206C including sale of scrap during the month of April 2019, if any
4	31.05.2019	TDS/TCS (Income Tax)	Furnish quarterly statement of tax deducted at source (TDS) and tax collected at source (TCS) for the quarter ended Jan-March 2019 in Form 24Q / 26Q / 27Q / 27EQ.
5	31.05.2019	Income Tax	Filing of Annual Information Return u/s 285BA

Benefits To SEZ Entities Under The Income Tax Law

Basic Understanding:

The government has notified various specified areas as Special Economic Zones (“SEZ”) or Free Trade  SEZones under the provisions of Section 3 and Section 4 of the Special Economic Zone Act, 2005 (“SEZ Act”). Section 27 of the SEZ Act provides that “the provisions of the Income-tax Act, 1961 (“the Act”), as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on the authorized operations in a Special Economic Zone or Unit subject to the modifications specified in the Second Schedule (2^nd Schedule)”. 2^nd Schedule to SEZ Act provides the modifications made under the Income tax Act, 1961 for the purpose of giving some relaxations to the SEZ Unit. The same, inter-alia, includes the introduction of Section 10AA of the Income tax Act, 1961 w.e.f. financial year 2005-06. We will understand the provisions of Section 10AA of the Income tax Act, 1961 in this article and also the relaxations and exemptions given to SEZ under Income tax laws.  

Rule 12 of the Income Tax Rules, 1962

The Central Board of Direct Taxes, vide notification no. 32/2019 dated 1st April 2019, introduced the Income Tax (Second Amendment) Rules, 2019 which are made effective from 1st April 2019. Vide the said Income Tax (Second Amendment) Rules, 2019, rule 12 of the Income Tax Rules, 1962 has been amended and format of Form ITR-1 (SAHAJ), Form ITR-2, Form ITR-3, Form ITR-4 (SUGAM), Form ITR-5, Form ITR-6, Form ITR-7 and Form ITR-V has been updated. In this article, we look at the various changed introduced by the new Rule 12 of the Income Tax Rules, 1962.

Form ITR-1 (Sahaj)

With effect from 1st April 2019, additionally, the following categories of person will not able to a file income tax return in Form ITR-1:

• Individuals claiming deduction under section 57 (other than deduction claimed under section 57 (iia);
• Individuals being the director in any company;
• Individual holding unlisted equity shares at any time during the previous year;
• Individual who is assessable for the whole or part of the income on which TDS has been deducted in the hands of a person other than the assessee.

Form ITR-4 (Sugam)

With effect from 1st April 2019, additionally, the following categories of person will not able to file a return in Form ITR-4 i.e. SUGAM

• The person who has assets located outside India (assets includes financial interest in any entity);
• The person having signing authority in any account being located outside India;
• The person having income from any of the source outside India;
• The person having the income to be apportioned as per provisions of section 5A;
• Person being director in any company;
• The person holding any unlisted equity shares at any time during the previous year;
• The person having total income more than INR 50 Lakhs;
• The person who is the owner of more than one house property and the income of such house property is chargeable under the head ‘Income from House Property’;
• The person who is assessable for the whole or part of the income on which TDS has been deducted in the hands of a person other than the assessee.

Amendment in Mandatory Electronic Filing of Income Tax Return

As all are aware, electronic filing of income tax return is mandatory, however, the following categories of persons are exempted from the same –

• An individual having an age of 80 or more at any time during the previous year; and
• An individual who is furnishing a return of income in Form ITR-1 (SAHAJ) or Form ITR-4 (SUGAM).

The above categories of person can file their return of income in any of the following manner –

• Electronically under digital signature;
• Filing the return electronically under EVC (electronic verification code);
• Filing the return electronically and submitting the verification of return in Form ITR-V; or
• Filing the return in paper form.

I-T dept revises format of TDS certificate issued by employer

The Income Tax department has revised Form 16 by adding various details, including income from house property and remuneration received from other employers, thereby making it more comprehensive to help check tax avoidance. It will also include segregated information regarding deductions under various tax saving schemes, investments in tax savings instruments, different allowances received by the employee as well as income from other sources.

Everything about Registration of NBFC in India

NBFC stands for Non-Banking Financial Company and is registered under the Companies Act, 2013 and managed by RBI with activities very similar to the bank except for some major differences. NBFC is known to provide financial support and services to businesses and individuals. One of the principal objectives of a Non-Banking Financial Company is to provide loans, personal loans, working capital loans, shared investments, other stocks and debenture issued by the Government or the other local authorities, leasing, insurance business as well as offers Market Place Lending Platform (P2P) for businesses.

New ITR Forms For Assessment Year 2019-2020

Vide notification dated 1^st April, 2019, the CBDT has introduced Income Tax (Second Amendment) Rules, 2019. Vide the said notification the CBDT has notified Income Tax Return (ITR) Forms for the Assessment Year 2019-2020 (Financial year 2018-2019). In total 7 types of Income Tax Return Norms are being notified which are being listed herein below –

Tax due date - April 2019

Sr No	Due Date	Related to	Compliance to be made
1	11.04.2019	GST	Filing of GSTR 1 for the month of February, 2019

3

20.04.2019

GST

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

4

30.04.2019

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 March 2019. · Deposit TDS from Salaries deducted during the month of March 2019 • Deposit TCS for collections made under section 206C including sale of scrap during the month of March 2019, if any

Business Connection new development

In order to align the domestic laws with the modifications being done by Organisation for Economic Co-operation and Development (OECD) through Base Erosion and Profit Shifting (BEPS) and the Multilateral Instruments (MLI) some very significant amendments have been done in international taxation  

Green Shoe Option

Public issue of shares (also knows as IPO) is a very common way of raising funds
by a corporate entity. However many a times it has been seen that after public
issue of shares the listed price of securities falls below issue price which creates panic
in the market and discourages the investors to put their hard earned money in IPO
market.

Growing story of GST in India - Few points.

01.   Multiple rate going to be exist

02.   Dispute going to be raise much for input ta credit.

03.   Multiple state registration

04.   FOC Supply (Free of Cost) is taxable 

05.   TDS & TCS applicability on E Commerce

06.   Employee Recovery   is most  debatable.

07.   Anti –profiting going to be stay.

08.   No clarity on Columbia – Asia cross charge

09.     New Litigations  

(i)                  Use of brand name by associate companies.

(ii)                Liquidated damage.  Further no input 

(iii)               Verification of Trans-1.  No input credit of CESS.    Already challenged in High Court.

10.    Follow the ISD mechanism while doing cross charge.

GST COUNCIL UPDATE

Decisions taken by the GST Council in the 34^thmeeting held on 19^thMarch, 2019 regarding GST rate on real estate sector

GST Council in the 34^th meeting held on 19^th March, 2019 at New Delhi discussed the operational details for implementation of the recommendations made by the council in its 33^rd meeting for lower effective GST rate of 1% in case of affordable houses and 5% on construction of houses other than affordable house. The council decided the modalities of the transition as follows.

GST RULES EFFECTIVE FROM APRIL 1, 2019

Article discusses changes in 

1. GST Provisions related to Threshold Limit for Registration in case of goods , Services and Both Goods & Services 

2. Changes in GST Composition Scheme 

3. Supply with or without consideration – treated as supply under GST, Changes in TCS Provisions and 

4. Proposed New GST Return Formats.

Circular clarifying various doubts related to treatment of sales promotion scheme under GST

Circular No. 92/11/2019-GST

F. No. 20/16/04/2018-GST

New Delhi, Dated the 7th March, 2019

Subject: Clarification on various doubts related to treatment of sales promotion schemes under GST - Reg.

Various representations have been received seeking clarification on issues raised with respect to tax treatment of sales promotion schemes under GST. To ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the said Act”) hereby clarifies the issues in succeeding paragraphs.

2. It has been noticed that there are several promotional schemes which are offered by taxable persons to increase sales volume and to attract new customers for their products. Some of these schemes have been examined and clarification on the aspects of taxability, valuation, availability or otherwise of Input Tax Credit in the hands of the supplier (hereinafter referred to as the “ITC”) in relation to the said schemes are detailed hereunder:

New Functionalities enabled on GST portal

This is to update you on certain new functionalities enabled on the GSTN portal.

·         Monthly comparison statement of liability declared and statement of ITC claimed: Government has come up with the credit and liability comparison statement which captures monthly comparison of output liability declared in returns (between GSTR-3B and GSTR-1) and ITC availed (between GSTR-3B and GSTR-2A). Further, taxpayers can also download detailed reports capturing the comparison of output liability and shortfall/ excess thereof. Some of the reports available on the GST portal  are mentioned below:

Ø  Comparison of output liability other than export/ reverse charge

Ø  Comparison of output liability due to reverse charge

Ø  Comparison of output liability due to exports and SEZ supplies

Ø  Comparison of ITC availed with GSTR-2A

·         Facility of filing of annual return (GSTR-9): Government has enabled filing of GSTR-9 on GST portal. We have provided hereunder the salient features for ease of reference:

Ø  GSTR-9 can be filed using ‘Prepare Online’ or ‘Prepare Offline’. However, ‘Prepare Offline’ option has not been activated on the GST portal as of now.

Ø  Annual return in Form GSTR-9 once filed cannot be revised.

Ø  Option to download annual summary of GSTR-1 and GSTR-3B has been enabled. Further, computation of ITC based on GSTR-2A is being auto-populated on the portal basis the GSTR-1 filed by the corresponding supplies.

Apart from the above functionalities, Government has also released the proposed return formats. 

Three Imp Judgements On Core Issues

CIT vs. Tasgaon Taluka S.S.K. Ltd (Supreme Court)

S. 37(1)/40A(2) Business expenditure vs. sharing of profit: The AO has to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and determine what amount forms part of the profit. Whatever is the profit component is sharing of profit/distribution of profit and the rest is deductible as expenditure

Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not