Finance Minister announces several relief measures relating to Statutory and Regulatory compliance matters across Sectors in view of COVID-19 outbreak

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The Union Finance &Corporate Affairs Minister Smt. Niramla Sitharaman today announced several important relief measures taken by the Government of India in view of COVID-19 outbreak, especially on statutory and regulatory compliance matters related to several sectors.

 While addressing the press conference through video conferencing here today, Smt. Sitharaman announced much-needed relief measures in areas of Income Tax, GST, Customs &Central Excise, Corporate Affairs, Insolvency &Bankruptcy Code (IBC) Fisheries, Banking Sector and Commerce. The Minister of State for Finance &Corporate Affairs Shri Anurag Singh Thakur was also present besides Shri A.B. Pandey, Finance Secretary and Shri Atanu Chakraborty, Secretary, Department of Economic Affairs.

Following are the decisions with respect to statutory and regulatory compliance matters related to various sectors: —

 Income Tax

1.Extend last date for income tax returns for (FY 18-19) from 31st March, 2020 to 30th June, 2020

2. Aadhaar-PAN linking date to be extended from 31st March, 2020 to 30th  June, 2020.

 3. Vivad se Vishwas scheme – no additional 10% amount, if payment made by June 30, 2020.

 4. Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for 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 under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.

5. For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020 and 30th June 2020, reduced interest rate at 9% instead of 12 %/18 % per annum ( i.e. 0.75% per month instead of 1/1.5 percent per month) will be charged for this period. No late fee/penalty shall be charged for delay relating to this period.

 5. Necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course.

 GST/Indirect Tax

1.Those having aggregate annual turnover less than Rs. 5 Crore Last date can file GSTR-3B due in March, April and May 2020 by the last week of June, 2020. No interest, late fee, and penalty to be charged.

 2. Others can file returns due in March, April and May 2020 by last week of June 2020 but the same would attract reduced rate of interest @9 % per annum from 15 days after due date (current interest rate is 18 % per annum). No late fee and penalty to be charged, if complied before till 30th June 2020.

3. Date for opting for composition scheme is extended till the last week of June, 2020. Further, the last date for making payments for the quarter ending 31st March, 2020 and filing of return for 2019-20 by the composition dealers will be extended till the last week of June, 2020.

 4. Date for filing GST annual returns of FY 18-19, which is due on 31st March, 2020 is extended till the last week of June 2020.

 5. Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.

6. Necessary legal circulars and legislative amendments to give effect to the aforesaid GST relief shall follow with the approval of GST Council.

 7. Payment date under Sabka Vishwas Scheme shall be extended to 30th June, 2020. No interest for this period shall be charged if paid by 30th June, 2020.

 8. Customs 24X7 Custom clearance till end of 30th June, 2020.

9. Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.

 Financial Services

Relaxations for 3 months Debit card holders to withdraw cash for free from any other banks’ ATM for 3 months Waiver of minimum balance fee Reduced bank charges for digital trade transactions for all trade finance consumers.

 Corporate Affairs

 1.No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including  financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’;

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

3. Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies &their auditors for the year 2019-20.

 4. As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the IDs of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.

 5. Requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020. 5. Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, may be done so before 30th June 2020.

7. Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. An additional time of 6 more months shall be allowed.

 8. Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation.

 9. Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to Rs 1 crore (from the existing threshold of Rs 1 lakh). This will by and large prevent triggering of insolvency proceedings against MSMEs. If the current situation continues beyond 30th of April 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.

10. Detailed notifications/circulars in this regard shall be issued by the Ministry of Corporate Affairs separately.

Department of Fisheries

1.All Sanitary Permits (SIPs) for import of SPF Shrimp Broodstock and other Agriculture inputs expiring between 01.03.2020 to 15.04.2020 extended by 3 months.

2. Delay upto 1 month in arrival of consignments to be condoned. 3.Rebooking of quarantine cubicles for cancelled consignments in Aquatic Quarantine Facility (AQF) Chennai without additional booking charges .

4. The verification of documents and grant of NOC for Quarantine would be relaxed from 7 days to 3 days Department of Commerce Extension of timelines for various compliance and procedures will be given.

Detailed notifications will be issued by Ministry of Commerce.

Source : PIB Delhi

37th Meeting of the GST Council, Goa Notifications

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The GST Council, in its 37th meeting held today at Goa, recommended the following: 1. Relaxation in filing of annual returns for MSMEs for FY 2017-18 and FY 2018-19 as under: a. waiver of the requirement of filing FORM GSTR-9A for Composition Taxpayers for the said tax periods; and b. filing of FORM GSTR-9 for those taxpayers who (are required to file the said return but) have aggregate turnover up to Rs. 2 crores made optional for the said tax periods. 2. A Committee of Officers to be constituted to examine the simplification of Forms for Annual Return and reconciliation statement. 3. Extension of last date for filing of appeals against orders of Appellate Authority before the GST Appellate Tribunal as the Appellate Tribunals are yet not functional. 4. In order to nudge taxpayers to timely file their statement of outward supplies, imposition of restrictions on availment of input tax credit by the recipients in cases where details of outward supplies are not furnished by the suppliers in the statement under section 37 of the CGST Act, 2017. 5. New return system now to be introduced from April, 2020 (earlier proposed from October, 2019), in order to give ample opportunity to taxpayers as well as the system to adapt and accordingly specifying the due date for furnishing of return in FORM GSTR-3B and details of outward supplies in FORM GSTR-1 for the period October, 2019 – March, 2020. 6. Issuance of circulars for uniformity in application of law across all jurisdictions: a. procedure to claim refund in FORM GST RFD-01A subsequent to favourable order in appeal or any other forum; b. eligibility to file a refund application in FORM GST RFD-01A for a period and category under which a NIL refund application has already been filed; and c. clarification regarding supply of Information Technology enabled Services (ITeS services) (in supersession of Circular No. 107/26/2019-GST dated 18.07.2019) being made on own account or as intermediary. Page 2 of 2 7. Rescinding of Circular No.105/24/2019-GST dated 28.06.2019, ab-initio, which was issued in respect of post-sales discount. 8. Suitable amendments in CGST Act, UTGST Act, and the corresponding SGST Acts in view of creation of UTs of Jammu & Kashmir and Ladakh. 9. Integrated refund system with disbursal by single authority to be introduced from 24th September, 2019. 10. In principle decision to link Aadhar with registration of taxpayers under GST and examine the possibility of making Aadhar mandatory for claiming refunds. 11. In order to tackle the menace of fake invoices and fraudulent refunds, in principle decision to prescribe reasonable restrictions on passing of credit by risky taxpayers including risky new taxpayers.

PRESS RELEASE ON GST RATE ON GOODS AS RECOMMENDED BY THE GST COUNCIL IN ITS 37th MEETING HELD ON 20.09.2019 GST Council in the 37th meeting held on 20.09.2019 at Goa took the following decisions in respect to rates relating to goods. I. GST rates reduction, – a) 18% to 12% on parts of Slide Fasteners b) 18% to 5% on Marine Fuel 0.5% (FO) c) 12% to 5% on Wet Grinders (consisting stone as a grinder) d) 5% to Nil on:- (i) Dried tamarind (ii) Plates and cups made up of leaves/ flowers/bark e) 3% to 0.25% on cut and polished semi- precious stones f) Applicable rate to 5% on specified goods for petroleum operations undertaken under Hydrocarbon Exploration Licensing Policy (HELP) g) Exemptions from GST/IGST on:- (i) imports of specified defence goods not being manufactured indigenously (upto 2024) (ii) supply of goods and services to FIFA and other specified persons for organizing the Under-17 Women’s Football World Cup in India. (iii) supply of goods and services to Food and Agriculture Organisation (FAO) for specified projects in India. II. GST rates have been recommended to be increased from, – a) 5% to 12% on goods, falling under chapter 86 of tariff like railway wagons, coaches, rolling stock (without refund of accumulated ITC). This is to address the concern of ITC accumulation with suppliers of these goods. b) 18% to 28% +12% compensation cess on caffeinated Beverages III. Measures for Export Promotion a) Exemption from GST/IGST:- (i) at the time of import on Silver/Platinum by specified nominated agencies (ii) supply of Silver/Platinum by specified nominated agency to exporters for exports of Jewellery, b) Inclusion of Diamond India Limited (DIL) in the list of nominated agencies eligible for IGST exemption on imports of Gold/ Silver/Platinum so as to supply at Nil GST to Jewellery exporters. IV. A uniform GST rate of 12% on Polypropylene/Polyethylene Woven and Non- Woven Bags and sacks, whether or not laminated, of a kind used for packing of goods (from present rates of 5%/12%/18%) V. GST concession in certain cases for specific period: – a) Exemption to Fishmeal for the period 01.07.17 to 30.09.19. There were doubts as regards taxability of fishmeal in view of the interpretational issues. However, any tax collected for this period shall be required to be deposited. b) 12% GST during the period 1.07.2017 to 31.12.2018, on pulley, wheels and other parts (falling under heading 8483) and used as parts of agricultural machinery. VI. Passenger vehicles of engine capacity 1500 cc in case of diesel, 1200 cc in case of petrol and length not exceeding 4000mm designed for carrying upto 9 persons attract compensation cess of 1% for petrol and 3% for diesel vehicle. Council recommended same compensation cess rate for vehicles having these specifications (length and engine capacity) but designed for carrying more than 10 persons but upto 13 persons. (Presently these vehicles attract compensation cess at the rate of 15%) VII. Other miscellaneous Changes:  Aerated drink manufacturers shall be excluded from composition scheme.  Option to pay GST at the rate of 18% on transaction value at the time of disposal of specified goods for petroleum operations (on which concessional GST rate of 5% was paid at the time of original supply) provided that the goods are certified by Directorate General of Hydrocarbons (DGH) as non-serviceable.  Restriction on refund of compensation cess on tobacco products (in case of inverted duty structure)  Prescribing modalities for allowing concessions on spare parts imported temporarily by foreign airlines for repair of their aircraft, while in India in transit in terms of the Chicago Convention on Civil Aviation.  Certain other changes of technical nature for the sake of clarity in application of notification. VIII. Clarifications as regards applicability of GST rate in respect of certain goods recommended by GST Council which inter-alia includes: a) Mere heating of leguminous vegetables (gram/lentil) for removing moisture, or to soften and puff it or removing the skin, and not subjecting to any other processing or addition of any other ingredients (salt, oil etc.) would be classified under HS code 0713. b) All “mechanical sprayers” falling under HS Code 8424 would attract 12% GST. c) Parts like Solar Evacuation tubes for solar power based devices like solar water heater, solar steam, generation systems, would be eligible to 5% GST rate. d) Exclusive parts and accessories suitable for use solely or principally with a medical device (falling under headings 9018, 9019, 9021 or 9022) would fall in respective headings and attract GST at the concessional rate of 12%. e) Almond milk is classifiable under HS code 22029990 and attracts GST rate of 18%. f) Imported stores for Navy would be entitled to exemption from IGST. The rate changes shall be made effective with effect from 1st October, 2019.

PRESS RELEASE ON GST RATE ON SERVICES AS RECOMMENDED BY THE GST COUNCIL IN ITS 37th MEETING HELD ON 20th SEPTEMBER, 2019 GST Council in the 37th meeting held on 20th September, 2019 at Goa took following decisions relating to changes in GST rates, ITC eligibility criteria, exemptions and clarifications on connected issues. (A) EXEMPTIONS / CHANGES IN GST RATES / ITC ELIGIBILITY CRITERIA: Rate reduction sector wise: Hospitality and tourism: 1. To reduce the rate of GST on hotel accommodation service as below: – Transaction Value per Unit (Rs) per day GST Rs 1000 and less Nil Rs 1001 to Rs 7500 12% Rs 7501 and more 18% 2. To reduce rate of GST on outdoor catering services other than in premises having daily tariff of unit of accommodation of Rs 7501 from present 18% with ITC to 5% without ITC. The rate shall be mandatory for all kinds of catering. Catering in premises with daily tariff of unit of accommodation is Rs 7501 and above shall remain at 18% with ITC. Job work service: 3. To reduce rate of GST from 5% to 1.5% on supply of job work services in relation to diamonds. 4. To reduce rate of GST from 18% to 12% on supply of machine job work such as in engineering industry, except supply of job work in relation to bus body building which would remain at 18%. Exemption sector wise: Warehousing: 5. To exempt prospectively services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea. Transportation: 6. To increase the validity of conditional exemption of GST on export freight by air or sea by another year, i.e. till 30.09.2020. 2 Insurance: 7. To exempt “BANGLA SHASYA BIMA” (BSB) crop insurance scheme of West Bengal Government. 8. To exempt services of life insurance business provided or agreed to be provided by the Central Armed Paramilitary Forces (under Ministry of Home Affairs) Group Insurance Funds to their members under the respective Group Insurance Schemes of these Central Armed Paramilitary forces. Export promotion: 9. To exempt services provided by an intermediary to a supplier of goods or recipient of goods when both the supplier and recipient are located outside the taxable territory. 10. To issue a notification under Section 13(13) of IGST Act notifying the place of supply of specified R&D services (such as Integrated discovery and development, Evaluation of the efficacy of new chemical/ biological entities in animal models of disease, Evaluation of biological activity of novel chemical/ biological entities in in-vitro assays, Drug metabolism and pharmacokinetics of new chemical entities, Safety Assessment/ Toxicology, Stability Studies, Bio Equivalence and Bio Availability Studies, Clinical trials, Bio analytical studies) provided by Indian pharma companies to foreign service recipients, as the place of effective use and enjoyment of a service i.e. location of the service recipient. 11. To clarify that the place of supply of chip design software R&D services provided by Indian companies to foreign clients by using sample test kits in India is the location of the service recipient and section 13(3)(a) of IGST Act, 2017 is not applicable for determining the place of supply in such cases. Miscellaneous 12. To allow the registered authors an option to pay GST on royalty charged from publishers under forward charge and observe regular GST compliance. 13. To notify grant of liquor licence by State Governments against payment of license fee as a “no supply” to remove implementational ambiguity on the subject. 14. To exempt services related to FIFA Under-17 Women’s World Cup 2020 similar to existing exemption given to FIFA U17 World Cup 2017. (B) RATIONALIZATION/ TRADE FACILITATION MEASURES: 15. To allow payment of GST on securities lending service under reverse charge mechanism (RCM) at the merit rate of 18% and to clarify that GST on securities lending service for period prior to RCM period shall be paid on forward charge basis. IGST shall be payable on supply of these services and in cases where CGST/SGST/UTGST have been paid, such taxpayers will not be required to pay tax again. 3 16. To allow RCM to suppliers paying GST @ 5% on renting of vehicles, from registered person other than body corporate (LLP, proprietorship) when services provided to body corporate entities. (C) CLARIFICATIONS: 17. To clarify the scope of the entry ‘services of exploration, mining or drilling of petroleum crude or natural gas or both”. 18. To clarify taxability of Passenger Service Fee (PSF) and User Development Fee (UDF) levied by airport operators. Note: It is proposed to issue notifications giving effect to these recommendations of the Council on 1 st October, 2019. [This note presents the decision of the GST Council in simple language for easy understanding which would be given effect to through Gazette notifications/ circulars which shall have force of law.]

Sabka Vishwas (Legacy Dispute Resolution) Scheme-2019

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Sabka Vishwas (Legacy Dispute Resolution) Scheme-2019: Golden Opportunity to Wipe off Old Tax Dues

There is a flood of Offers/Sale/Discounts going on in the Market. So why only the Private Sector should have all the fun. Government has also come out with the “Indirect Taxes Sale” providing up to 70% Discount.

The Finance Minister in her maiden budget introduced Sabka Vishwas (Legacy Dispute Resolution) 2019 (LDRS) in order to curb the pending litigations under the erstwhile Indirect Tax Enactments. The scheme provides relief from tax, penalty, interest, immunity from prosecution, etc., on account of pending disputes.

Effective Date of LDRS: The effective date will be notified in the official Gazette.

Indirect Taxes Enactments covered under LDRS: Scheme covers 29 enactments  including Excise , Service Tax, Sugar Cess, Salt Cess, tobacco cess  enactments etc.

Eligibility conditions to avail benefit under LDRS:

All persons are eligible to opt for the scheme. Except the following:

> who have filed an appeal before the appellate forum and such appeal has been heard finally on or before the 30th day of June, 2019

> who have been convicted for any offence punishable for the matter for which he intends to file a declaration

> who have been issued a show cause notice and the final hearing has taken place on or before the 30th day of  June, 2019

> who have been issued a show cause notice for an erroneous refund or refund

> who have been subjected to an enquiry or investigation or audit and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before the 30th day of June, 2019

> a person making a voluntary disclosure after being subjected to any enquiry or investigation or audit; or

> a person making a voluntary disclosure after having filed a return wherein he has indicated an amount of duty as payable, but has not paid it

> who have filed an application in the Settlement Commission for settlement of a case

> persons seeking to make declarations with respect to excisable goods set forth in the Fourth Schedule to the Central Excise Act, 1944.

Quantum of Relief available under LDRS:

The relief available to a declarant under this Scheme shall be calculated as follows:

S. N. Situation Relief Available
1 where the tax dues are relatable to a show cause notice or one or more appeals arising out of such notice which is pending as on the 30th day of June, 2019       Tax Dues up to 50 Lakhs  : 70 % Tax Dues more than 50 lakhs   : 50 %  
2 where the tax dues are relatable to a show cause notice for late fee or penalty only, and the amount of duty in the said notice has been paid or is nil : Entire amount of late fee or penalty
3 where the tax dues are relatable to an amount in arrears : Duty amount up to 50 laksh : 60% Duty Amount more than 50 lakhs : 40%  
4 where the tax dues are linked to an enquiry, investigation or audit against the declarant and the amount quantified on or before the 30th day of June, 2019 is: Tax Dues up to 50 Lakhs  : 70 % Tax Dues more than 50 lakhs : 50 %  
5 where the tax dues are payable on account of a voluntary disclosure by the declarant, then No Relief
     

Please Note that any amount paid as pre-deposit at any stage of appellate proceedings under the indirect tax enactment or as deposit during enquiry, investigation or audit, shall be deducted when issuing the statement indicating the amount payable by the declarant. However if Pre-deposit or deposit amount exceeds the amount payable under declaration, the declarant shall not be entitled to any refund.

Meaning of “Tax Dues” under LDRS

S. N. Situation Tax Dues
1. Where a single appeal arising out of an order is pending as on the 30th day of June, 2019 before the appellate forum The total amount of duty which is being disputed in the said appeal  
2. Where more than one appeal arising out of an order, one by the declarant and the other being a departmental appeal, which are pending as on the 30th day of June, 2019 before the appellate forum The sum of the amount of duty which is being disputed by the declarant in his appeal and the amount of duty being disputed in the departmental appeal  
3 Where a show cause notice under any of the indirect tax enactment has been received by the declarant on or before the 30th day of June, 2019 The amount of duty stated to be payable by the declarant in the said notice
4   Where an enquiry or investigation or audit is pending against the declarant    The amount of duty payable under any of the indirect tax enactment which has been quantified on or before the 30th day of June, 2019
  5 Where the amount has been voluntarily disclosed by the declarant The total amount of duty stated in the declaration
6 Where an amount in arrears relating to the declarant is due                The amount in arrears

Whether any interest or penalty is payable?

If a Declarant opts for this scheme he is not required to pay any amount towards interest and penalty.

 How to make payment of liability under LDRS Scheme?

Amount payable under LDRS cannot be paid by utilizing input tax credit account under the indirect tax enactment or any other Act. The payment is to be discharged in cash only.

 Whether tax liability paid under LDRS Scheme can be claimed as ITC?

No. The tax discharged under LDRS cannot be claimed as ITC.

 Procedure for filing declaration under LDRS Scheme:

Step 1: Submission of declaration electronically in prescribed manner

Step 2: Designated Committee (DC) to verify the correctness of the declaration, except in case of voluntary disclosure

Step 3: a) Declared dues accepted by Designated Committee – DC shall issue statement of amount payable electronically within 60 days from date of declaration

b) In case amount assessed by DC is higher than the declaration amount – DC shall issueestimate of amount payable electronically within 30 days from the date of declaration and the declarant shall be afforded an opportunity of being heard before issue of final statement

Step 4: Declarant will have to pay the amount electronically within 30 days from the date of issue of such statement.

Step 5: DC shall issue a discharge certificate in electronic form, within 30 days of said payment and submission of proof of withdrawal of appeal, Discharge Certificate shall be conclusive to the matter and time period.

Any appeal or reference or a reply to the show cause notice against any order or notice giving rise to the tax dues, before the appellate forum, other than the Supreme Court or the High Court shall be deemed to be withdrawn.

In case of any writ petition or appeal or reference before the High Court or Supreme Court, the declarant shall file an application for withdrawal.

 Implication of issue of Discharge Certificate

Issuance of discharge certificate with respect to the amount payable, shall be conclusive as to the matter and time period stated therein, and;

•The declarant shall not be liable to pay any further duty, interest or penalty with respect to the matter and time period covered in the declaration

•The declarant shall not be prosecuted under the indirect tax enactment with respect to the matter and time period covered in the declaration

•No matter and time period covered by the declaration shall be reopened in any other indirect enactment

 Concluding Remarks:

This is more liberal scheme compared to previous Voluntary Compliance Encouragement Scheme (VCES) scheme.  (VCES) offered waiver of interest and penalty only, whereas LDRS not only provides for waiver of Interest and Penalty but waiver of Tax dues also. So, this is the golden opportunity for those who wants to get rid of litigation and pending tax liability.

Though the scheme has been announced but there are many doubts which we expect will be clarified once the rules and FAQs are also issued.

This amnesty scheme once again enhanced the “Vishwas” of Dishonest / Non-compliant assesses fully justifying its Title.

Disclaimer:

The contents of this article are meant for information purpose only. Readers are advised to refer the full text of scheme and consult their legal advisors for better understanding.

Click Here Download Departmental Notice

Useful Income Tax Exemptions Tips for the Salaried Persons

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Sections 50C/43CA/56(2)(x) of Income Tax Act concerning Adoption of Circle Rates for Computation of Capital Gain/Business Profits/Income from Other Sources on Land & Building, Results in Double Taxation & are Contrary to Real Income Theory!!

The Finance Act 2002 has introduced a new section 50C with effect from 1-4-2003, for the purpose of computation of capital gains in real estate transactions, in the hands of seller of such land and/or building. Under this section the sale consideration as declared by the seller of land and/or building is to be substituted by the stamp duty valuation rate/circle rate of such land and/or building, in cases where the declared sale consideration is less than the corresponding stamp duty valuation rate/circle rate, for the purpose of calculating capital gains under Section 48 of the Income Tax Act, 1961.

The Explanatory Memorandum to the Finance Bill 2002 explained the rationale of introduction of the said section 50C in the Direct Tax Laws as under:

Computation of Capital Gains in Real Estate Transactions:

The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property.

It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act.

It is further proposed to provide that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and will take the full value of consideration to be the value adopted or assessed for stamp duty purposes.

It is also proposed to provide that if the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to recompute the capital gains by taking the revised value as the full value of consideration.

These amendments will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years.”

Similarly a new section 43CA has been incorporated in the Income Tax Act by the Finance Act 2013. Under this section the sale consideration as declared by the seller of land and/or building is to be substituted by the stamp duty valuation rates/circle rates of such land and/or building, in cases where the declared sale consideration is less than the corresponding stamp duty valuation rates/circle rates, for the purpose of calculating income in the hands of seller under the head “Profits & Gains of Business or Profession”.

The Explanatory Memorandum to the Finance Bill 2013 explaining the rationale of introduction of the said section 43CA in the Direct Tax Laws provided as under:

COMPUTATION OF INCOME UNDER THE HEAD “PROFITS AND GAINS OF BUSINESS OR PROFESSION” FOR TRANSFER OF IMMOVABLE PROPERTY IN CERTAIN CASES

Currently, when a capital asset, being immovable property, is transferred for a consideration which is less than the value adopted, assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, then such value (stamp duty value) is taken as full value of consideration under section 50C of the Income-tax Act. These provisions do not apply to transfer of immovable property, held by the transferor as stock-in-trade.

It is proposed to provide by inserting a new section 43CA that where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head “Profits and gains of business of profession”.

It is also proposed to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value may be taken as on the date of the agreement for transfer and not as on the date of registration for such transfer. However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement.

These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.

Since then, the Revenue Authorities are pressing into service the deeming fiction of substituting the declared sales consideration of land and/or building, by the stamp duty valuation rate/circle rate u/s 50C/43CA of the Act, and are re-computing the resultant capital gains/business gains respectively, on such deeming fiction basis, in the hands of the seller of such land and/or building.

Interestingly, the deeming fiction of taxability as envisaged in sections 50C and 43CA of the Income Tax Act, did not remain confined to just in the hands of seller of land and/or building and it has got extended in the hands of purchaser of land and/or building as well. There is one another section viz. 56(2)(vii)/56(2)(x) of the Income Tax Act, which provides for taxing the shortfall in the declared purchase consideration with that of the corresponding stamp duty valuation rate/circle rate of land and/or building in the hands of purchaser under the head ‘income for other sources’.

Uptill 1.4.2017, as per provisions of section 56(2)(vii), any sum of money or any property which was received without consideration or for inadequate consideration (in excess of the specified limit of Rs. 50,000) by an individual or HUF was chargeable to income-tax in the hands of the recipient under the head “Income from other sources”.  The definition of ‘property’ for the purpose of this section included immovable property, jewellery, shares, paintings, etc. The cases where the declared purchase consideration of land and/or building falls short of the corresponding stamp duty valuation rate/ circle rate, were covered under the purview of the term ‘inadequate consideration’ in the context of receipt of an immovable property, by the purchaser.

The Finance Act, 2017 inserted a new clause (x) in sub-section (2) of section 56 so as to provide that receipt of the sum of money or the property by any person on or after 1-4-2017 without consideration or for inadequate consideration in excess of threshold limit of Rs. 50,000 shall be chargeable to tax in the hands of the recipient under the head “Income from other sources”.

The Explanatory Memorandum to the Finance Bill, 2017 explained the rationale of the amendment as under:

“Widening scope of Income from Other Sources

Under the existing provisions of section 56(2)(vii), any sum of money or any property which is received without consideration or for inadequate consideration (in excess of the specified limit of Rs. 50,000) by an individual or HUF is chargeable to income-tax in the hands of the resident under the head “Income from other sources” subject to certain exceptions. Further, receipt of certain shares by a firm or a company in which the public are not substantially interested is also chargeable to income-tax in case such receipt is in excess of Rs. 50,000 and is received without consideration or for inadequate consideration. The existing definition of property for the purpose of this section includes immovable property, jewellery, shares, paintings, etc. These anti-abuse provisions are currently applicable only in case of individual or HUF and firm or company in certain cases. Therefore, receipt of sum of money or property without consideration or for inadequate consideration does not attract these anti-abuse provisions in cases of other assessees. In order to prevent the practice of receiving the sum of money or the property without consideration or for inadequate consideration, it is proposed to insert a new clause (x) in sub-section (2) of section 56 so as to provide that receipt of the sum of money or the property by any person without consideration or for inadequate consideration in excess of Rs. 50,000 shall be chargeable to tax in the hands of the recipient under the head “Income from other sources”. It is also proposed to widen the scope of existing exceptions by including the receipt by certain trusts or institutions and receipt by way of certain transfers not regarded as transfer under section 47.”

Double Taxation:

In the existing framework of the Income Tax Act, for the same income or rather the deeming income, both the seller and the buyer of land and/or building, are being taxed twice and as such the pressing of service of such deeming fiction of taxation both in the hands of the seller and/or buyer of land and/or building is resulting in “Double Taxation”. This ‘double taxation’ is contrary to the well-established and well settled principle of Law and canons of direct taxation that “a same income can’t be taxed twice.”

Time and again, numerous judgements of the Hon’ble Supreme Court and the Hon’ble High Courts have held the incidence and levy of ‘double taxation’ as unlawful and a nullity in the eyes of Law, prominent among these being the judgements of Hon’ble Supreme Court in the undermentioned cases viz.

•Laxmipat Singhania vs. CIT 72 ITR 291 (SC)

•CIT vs. Devi Prasad Vishwanath Prasad 72 ITR 194 (SC)

The Legislature while preparing and legislating the Direct Taxation Laws has always kept in mind the unlawful-ness and impermissibility of ‘double taxation’ of any particular income. The Income Tax Act contains numerous sections wherein the ‘double taxation’ of any income has been considered as impermissible and unlawful in the Act itself. The prominent examples include non-taxability of the partners’ share of profits in the partnership firm/LLP, in the hands of partners by virtue of express exemption u/s 10(2) of the Income Tax Act, non-taxability of Dividend income upto Rs. 10 lakhs, in the hands of recipient u/s 115BBDA, the express provisions as contained in sections 90 and 91 of the Income Tax Act and the Double Taxation Avoidance Agreements (DTAA) ensuring the avoidance of double taxation of income in two countries.

No doubt, the Constitution of India does not curtails or prohibits the Legislature for enacting and incorporating the express and specific provisions in the Income Tax Act resulting in ‘double taxation’, as has been presently done in incorporating section 56(2)(vii)/56(2)(x) in the Act, in addition to the prevailing section 50C/43CA of the Income Tax Act.

However, it is also desirable to keep in mind that such imposition of ‘double taxation’ even by express provisions in the Act is principally and fundamentally contrary to the principles of natural justice, equity and fair play and as such must be avoided by the Legislature. Just as any particular expenditure is allowable as tax deductible expenditure only in the hands of one particular assessee only and it is not allowed in the hands of two or more assessees, similarly the same income can’t be taxed twice in the hands of one or more assessees.

Contrary to “Real Income Theory”:

Further, this deeming fiction of taxation as envisaged in sections 50C, 43CA and 56(2)(x) of the Income Tax Act, needs to be examined from another perspective also, that is the “real income theory” perspective.

Time and again, numerous judgements of the Hon’ble Supreme Court and the Hon’ble High Courts have upheld the “real income theory” postulating the taxation of only real and actual income and not notional income. Some of the significant judgements of Hon’ble Supreme Court in this regards are enumerated as under viz.

•CIT vs. Shoorji Vallabhdas & Co. 46 ITR 144 (SC)

•CIT vs. Chamanlal Mangaldas & Co. 39 ITR 8 (SC)

•CIT vs. Virtual Soft Systems Ltd 404 ITR 409 (SC)

•CIT vs. Bokaro Steel Ltd 236 ITR 315 (SC)

In view of the currently prevailing sluggishness and slow-down in the real estate sector, the property transactions of sale and purchase of land and/or building, in majority regions and areas, are taking place at prices/rates much below their respective circle/stamp duty valuation rates.

In such cases, the application of the provisions of section 50C/43CA/56(2), deeming the sale/purchase consideration equivalent to the applicable stamp duty/circle rates irrespective of the fact that the actual sale/purchase consideration is lesser than the circle rate, is resulting in a lot of undue hardships both in the hands of sellers as well as buyers, in the form of unwarranted and unjustified income tax liability on notional sale/purchase consideration towards immovable property.

It needs to be appreciated that the legislative intent of introduction of the said sections 50C/43CA/56(2) was to plug the cash dealings and under-recording and reporting of sale/purchase consideration of immovable properties in the arena, wherein market rates of immovable properties were substantially higher than their corresponding circle rates.

However, presently times have changed. Circle Rates have been revised on a substantially higher side whereas the market rates of immovable properties have comparatively fallen in view of the sluggishness in the real estate sector, and as such the gap between the market rates and circle rates of immovable properties has narrowed down considerably and infact in large number of areas and regions, the actual transaction rates/market rates of immovable properties are even lower than the circle rates.

The well-established and well settled “real income theory” postulates that only real and actual income can be taxed and any notional income can’t be brought under the purview of taxation. However, the existing legal provisions as contained in sections 50C, 43CA and 56(2)(x) of the Income Tax Act, provides for the deeming fiction of taxing the notional income in those cases of sale and/or purchase of land and/or building, where the actual transaction rates/market rates of such immovable properties are even lower than the circle rates.

The provision for reference to valuation officer u/s 55A of the Act, in cases where the assessee objects to the adoption of stamp duty valuation rate/ circle rate in deeming the sale/purchase consideration, is also practically turning out to be a redundant and ineffective provision in view of the subjectivity and complexity involved in such valuation.

Concluding Remarks:

In view of the changed dynamics of the demand & supply conditions in the real estate sector, there is an immediate and crucial need for the review, reconsideration and rationalisation of the existing provisions of section 50C/43CA/56(2)(x) of the Income Tax Act, providing for the unjustified adoption of stamp duty valuation rates/ circle rates in deeming the sale/purchase consideration of immovable properties, even in those cases where the actual transaction rates/market rates are lower than the circle rates, so as to bring them in alignment with the actual transaction rates of immovable properties, in order to ensure the avoidance of “double taxation” both in the hands of sellers and buyers as well as to avoid the “taxation of notional income” contrary to the “real income theory” in order to provide the “ease of living” to the general masses and to provide the much needed push and fillip to the real estate sector.

Reverse Charge Mechanism (RCM) Under GST Updated till Date:

gst registration


In the normal course of business, the person supplying goods or services is required to deposit GST. But by virtue of Sec 9(3) & 9(4) of the CGST Act, 2017and in terms of Sec 5(3) & 5(4) of the IGST Act, 2017, the liability to deposit GST has been vested on recipient of goods & services under Reverse Charge.

As per Sec 2(98) of the CGST Act, 2017

“reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;

In exercise of the power conferred by Sec 9(3) & 9(4) of the CGST Act,2017 and Sec 5(3) & 5(4) of the IGST Act,2017 the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Reverse charge – Tax payable by recipient of goods or services or both

GST shall be paid by the recipient of goods or services or both, on reverse charge basis, in the following cases:

1. Supply of goods or services or both, notified by the Government u/s 9(3) of CGST Act,2017 or u/s 5(3) of IGST Act, 2017 on the recommendations of the GST Council (e.g. Notification No. 04/2017 Dated 28 June 2017, Notification No. 13/2017 Dated 28th June 2017, Notification No. 33/2017 Dated 13th Oct 2017, Notification No. 36/2017 Dated 13 Oct 2017,  Notification No. 43/2017 Dated 14 Nov 2017 & Notification No. 03/2018 Dated 25th Jan 2018 – Central Tax (Rate), Notification No. 11/2018- Central Tax (Rate)  Dated 28 May 2018, Notification No. 10/2017- Dated 28th June 2017, Notification No. 34/2017- Dated 13th June 2017 & Notification No. 03/2018- Dated 25th Jan 2018 –Integrated Tax (Rate), Notification No 12/2018- Dated 28 May  2018 , Notification No 05/2019- Dated 29 March  2019–Integrated Tax (Rate)

2. Supply of taxable goods or services or both by an unregistered supplier to a registered person u/s 9(4) of CGST Act, 2017 or u/s 5(4) of IGST Act, 2017

There is a lot of confusion created as to whether RCM will be applicable from 1st February 2019 or not?

The reason behind the confusion arising in minds of people is the CGST(Rate) Notification no. 01/2019 dated 29th January 2019 which talks about rescinding the section 9(4) notification (notification no. 08/2017) dated 28th June 2017 in order to bring into effect the amendments regarding RCM on supplies by unregistered persons in the GST Acts and CGST Notification no. 02/2019 dated 29th January 2019.

Notification no. 2/2019 C.T dated 29th January 2019 notifies the CGST Amendment Act 2018  w.e.f. 01st February 2019 wherein the section 9(4) of CGST Act has been amended as follows:-

In section 9 of the principal Act, for sub-section (4), the following sub-section shall be substituted, namely:––

“(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.”

 This provision is not applicable to all registered persons, goods and services. It is applicable only to selected categories of registered persons & Goods and services which has to be notified by the Government.

Notification No. 07/2019 Central Tax ( Rate)  dated 29 March 2019 has been issued to specify that the builder shall be liable to pay tax under RCM on specific services

Number of notifications had been issued for suspension of the RCM provisions under sec 9(4)  (Notification No. 8/2017-Central Tax (Rate) Dated 28 June  2017,Notification No. 38/2017 Dated 13 October 2017  , Notification No. 10/2018 Dated 23 Mar 2018 , Notification No. 12/2018 Dated 29 June 2018, Notification No. 22/2018 Dated 06 Aug 2018 ,Central Tax (Rate) Notification No. 32/2017 Dated 13th October 2017 – Integrated Tax(Rate)).

In case of goods or services covered under RCM, all the provisions of the CGST Act shall apply to the recipient in the aforesaid cases as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

GOODS COVERED UNDER REVERSE CHARGE:

The Central Government, vide Notification No. 4/2017-Central Tax (Rate) Dated 28th June 2017 and vide Notification No.43/2017-Central Tax (Rate) Dated 14thNovember 2017, Notification No. 11/2018-Central Tax (Rate) Dated 28 May 2018has specifies the supply of following goods, tax on which shall be paid on reverse charge basis by the recipient of such goods, if he is a registered person.

1) Cashew nuts, not shelled or peeled

2) Bidi Wrapper leaves (tendu)

3) Tobacco leaves

4) Silk yarn

5) Supply of Lottery

6) Raw Cotton by Agriculturist

7) Primary Sector lending certificate

SERVICES COVERED UNDER REVERSE CHARGE:

The Central Government vide Notification No.13/2017-Central Tax(Rate) Dated 28-06-2017, Notification No. 22/2017- Central Tax (Rate) dated-22nd August, 2017, Notification No. 33/2017-Central Tax(Rate) Dated 13-10-2017, Notification No.03/2018 Dated 25th Jan 2018 – Central Tax (Rate), Notification No. 11/2018 Dated 28 May 2018 ,) Notification No. 16/2018-Integrated Tax (Rate), Dated: 26th July, 2018, Notification No. 29/2018 Dated 31 Dec 2018 , Notification No. 05/2019 Dated 29 March 2019 – Central Tax (Rate) Circular No. 86/05/2019- GST Dated  01 Jan 2019 has notified following categories of services wherein whole of the tax shall be payable by the recipient on services U/s 9(3) of CGST Act,2017 on Reverse charge basis.

Sl No Category of supply of services          Supplier of Service Recipient of service  
1 Supply of services by a Goods Transport Agency (GTA) [who has not paid central tax at the rate of 6%], in respect of transportation of goods by road. Goods Transport Agency (GTA)   (a) any factory registered under or governed by the Factories Act, 1948; or (b) any society registered under the Societies Registration Act 1860 or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act; or (e) any Body  Corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person  
2 Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly An individual Advocate including a senior advocate or firm of advocates Any business entity located in the taxable territory.
3 Services supplied by an arbitral tribunal to a business entity An arbitral tribunal Any business entity located in the taxable territory
4 Services provided by way of sponsorship to any Body corporate or partnership firm. Any person Any Body corporate or partnership firm
5 Services supplied by the Central Government, State, Government, Union territory or local authority to a business entity excluding, – (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. Central Government, State Government, Union territory or local authority Any business entity located in the taxable territory
5A Services supplied by a director of a company/body corporate to the said company/body corporate. Central Government, State Government, Union territory or local authority Any person registered under the Central Goods and Services Tax Act, 2017
6 Services supplied by a director of a company/body corporate to the said company/body corporate. A director of a company or a body corporate The company or a body corporate located in the taxable territory
7 Services supplied by an insurance agent to any person carrying on insurance business An insurance agent            Any person carrying on insurance business, located in the taxable territory
8 Services supplied by a recovery agent to a banking company or a financial institution or a non- banking financial company                    A recovery agent A banking  company or a financial institution or a non banking financial company, located in the taxable territory.
9 Supply of services by an author, music composer, photographer, artist or the like by way of  transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act,1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like. Author or music composer, photographer, artist, or the like           Publisher, music company, producer or the like, located in the taxable territory.
10 Supply of service by the members of overseeing committee to Reserve Bank of India           Members of The Overseeing Committee constituted by the Reserve Bank of India Reserve Bank of India
11 Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs). (Notification No. 16/2018-Integrated Tax (Rate), Dated: 26th July, 2018)   Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm. A banking company or a non-banking financial company, located in the taxable territory
12 Services provided by business facilitator (BF) to a banking company (clarification  vide circular No. 85/05/2019 – GST dt 01 Jan 2019) Business facilitator (BF)            Banking company
13 Security services (services provided by way of supply of security personnel) provided to a registered person: Provided that nothing contained in this entry shall apply to, – (i) (a) a Department or Establishment of the Central Govt. or State Government or Union territory; or (b) local authority; or (c) Governmental agencies; which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under section 51 of the Act and not for making a taxable supply of goods or services; or (ii) a registered  person paying tax under section 10 of the said Act. Notification No. 29/2018 – Central tax dated 31.12.2018   Any person other than a body corporate A registered person, located in the taxable territory  

In addition to above services, following two additional services has been notified by the Central Government vide Notification No.10/2017-Integrated Tax(Rate) Dated 28-06-2017 wherein whole of the tax shall be payable by the recipient on services U/s 5(3) of IGST Act,2017 on Reverse charge basis.

Sl No. Category of supply of services          Supplier of Service              Recipient of service  
1 Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient.        Any person located in a non-taxable territory.            Any person located in the taxable territory other than non-taxable online recipient.
2 Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the Customs Station of clearance in India.                 A person located in a non-taxable territory. Importer, as defined in Sec 2(26) of the Customs Act,1962, located in the taxable territory.