The Honorable Finance Minister of India, Mr. Arun Jaitley, delivered the fifth Union Budget on 1st February 2018. As of date, these are proposals only, and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2019-2020 relevant to Financial Year 2018-2019, unless specifically provided otherwise.
Individual tax payers
Tax slabs, rates and rebates remains unchanged for individuals, but with an increase in cess from 3% to 4%. Rebate under section 87A continues at Rs. 2,500 for resident individuals with total income not exceeding Rs. 3.5 lakhs.
Salaried individuals were extended a standard deduction of Rs. 40,000. But this deduction, is at the cost of withdrawal of transport allowance of Rs. 19,200 and medical expenses reimbursement of Rs.15,000 (maximum claim amounts). Transport allowance exemption for differently abled persons to continue.
40% of the withdrawals from National Pension System (NPS) was tax exempt for employees. This has now been extended to all assesses.
Deductions under Section 80D for health insurance premium, preventive health check up or medical expenditure in respect of senior citizens enhanced to INR 50,000 as against current overall limit of INR 30,000. In case of a single premium policy having cover for more than one year, the deduction shall be available on a proportionate basis for the period of cover.
Deduction under section 80DDB in respect of medical treatment of specified diseases relating to senior and very senior citizens has been enhanced to INR 100,000 from the existing limits of INR 60,000 and INR 80,000 respectively
Deduction of INR 50,000 against interest income on deposits held by senior citizens introduced. Current exemption of INR10,000 available for interest on savings account no longer separately available. The threshold for tax withholding on such interest income is also raised to INR 50,000.
No adjustments to sale consideration, in respect of transfer of immovable property, will be required if the difference between the stamp duty value and sale consideration on transfer of immovable property is not more than 5%.
The period of lock-in for specified bonds for investment of capital gains under section 54EC is increased to 5 years from 3 years. For this purpose, long term capital assets are now limited to Land, Building or both.
.Long term capital gains on sale of listed equity shares and equity oriented mutual funds which were exempted have now been brought to the tax net with a tax of 10% for capital gains greater than Rs. 1 Lakh. However, a scheme for exempting gains already accrued till January 31, 2018 has been announced.
Lower corporate income tax for companies at 25% has been extended to companies with an annual turnover of up to Rs. 250 crores from the existing Rs. 50 crores. Tax rates for other companies, firms and LLPs remain unchanged at 30%.
Equity Oriented Mutual funds to be liable to pay tax at the rate of 10% on income distributed to unit holders
Charitable institutions will now be required to be more compliant with respect to deduction of taxes at source and avoiding cash payments in order to avail tax exemption.
Loans or advances extended by companies to shareholders which are treated as deemed dividends are now subject to dividend distribution tax @ 30% which is payable by the company instead of the recipient which simplifies the tax collection machinery. Scope of accumulated profits also widened for purposes of deemed dividend.
Companies which have opted for rehabilitation under the Insolvency and Bankruptcy Code, 2016 can preserve their losses even if their shareholding undergoes a change of more than 51%. Such companies can also claim both unabsorbed losses and depreciation.
Tax benefit to start-ups modified. Benefit of tax holiday extended to start-ups incorporated before 1 April 2021 on satisfaction of specified conditions. Definition of eligible business expanded to include innovation, development or improvement of products or processes or services or a scalable business model with high potential of employment generation or wealth creation Incentive for employment generation.
Proposal to accord 100% tax exemption for profits generated by farm producer companies having turnover less than 100 crores. This exemption is provided for 5 years starting from F.Y 2018-19 to F.Y 2024-25 under section 80PA
Non- resident taxation
Transfer of a capital asset being bond or global depositary receipt under section 115AC of the Act or rupee denominated bond of an Indian company or derivative by a non-resident on a recognized stock exchange located in International Financial Services Center to be exempt where the consideration is paid or payable in foreign currency.
Royalty and fees for technical services payment by National Technical Research Organization to a non-resident to be exempt from tax.
Definition of the term "business connection" under section 9 proposed to be expanded and aligned to the scope of agency PE under the BEPS /MLI provisions. Business connection to also include significant economic presence.
New scheme for scrutiny assessments (e-assessments) to be introduced by way of notification.
Conversion of stock-in-trade to capital asset to be taxable as business income at the fair market value ('FMV') as on date of conversion
Compensation (capital or revenue) for termination or modification of a contract relating to business to be taxable as business income and relating to employment to be taxable as income from other sources.
Certain subjects of frequent litigation such as treatment of compensation received as income and trading in agricultural commodity derivatives as not speculation income, were put to rest
Alternate Minimum Tax for a unit located in International Financial Services Center to be 9% (plus applicable surcharge and cess).
In order to use PAN as Unique Entity Number ('UEN') for non-individual entities, it is proposed that every person, not being an individual, which enters into a financial transaction for an amount aggregating to Rs. 2.5 lakhs or more in a financial year shall be required to apply for PAN. In order to link the financial transactions with the natural persons associated with such aforementioned entities, it is also proposed that the person competent to act on behalf of such entities shall also apply for PAN.
Currently an employee contributes 12% of his or her basic salary as the statutory monthly contribution to the employees provident fund and a matching contribution is made by the employer. Government has proposed to contribute to EPFO (subject to conditions) with respect to new employees for entities in all sector for the next three years.
Cryptocurrencies continued to be considered as not "legal tender". Government to consider exploring the Blockchain technology
Indirect tax proposals
The basic customs duty rate has been increased almost across the board, presumably to encourage local manufacturing. Items such as mobile phone components, fruit juices, TVs, silk fabric, etc. were prominent targets.
The existing Road Cess has been replaced with the new Road and Infrastructure cess with an increase of Rs.2/- per litre of motor spirit. To off set this increase, a reduction of Rs.2/- per litre on CVD of import of motor spirit has been proposed.
Following the near abolition of excise duties, the Central Board of Excise & Customs has been renamed as the Central Board of Indirect Taxes and Customs.
The time limit for the Authority for Advance Rulings to rule on applications has been reduced from 6 months to 3 months. Further, an appellate authority has been constituted to appeal against orders of the Authority for Advance Rulings
The Tax rate for income between Rs.2.5 lakh to Rs.5 lakh has been reduced from 10% to 5%.
10% surcharge introduced for income between Rs.50 lakhs to Rs.1crore.
Tax Rebate – section 87 A
The tax rebate reduced to Rs.2,500 for income up to Rs.3.5 lakhs.
TDS on Rent – section 194 IB
TDS of 5% applicable if the monthly rent paid is more than Rs.50,000/-
Loss from HP – section 71(3A)
The new section restricts the set-off of loss from house property to maximum of Rs.2 lakhs irrespective of the house is rented or self-occupied.
Penalty – section 234F
Additional fee shall be levied for delay in filing the tax return beyond the due date. The fees payable shall be Rs. 5,000 where the return is filed post the due date but on before 31st Dec and Rs.10,000 in other cases. It is restricted to Rs.1000 for tax payers whose income is up to Rs.5 lakhs.
Income tax slabs
Super Senior Citizens
Up to Rs.2.5 lakh
Up to Rs.3 lakh
Rs.2.5 – 5 lakh
Rs.3 – 5 lakh
Up to 5 lakh
Rs.5 – 10 lakh
Rs.5 – 10 lakh
Rs.5 – 10 lakh
Above Rs.10 lakhs
Above Rs.10 lakhs
Above Rs.10 lakhs
Financial Year and Assessment Year
The Financial Year (FY) is the year in which you earn an income. The Assessment Year (AY) is the year following the FY in which the income is evaluated and filing is made.
Return of Income
The particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the Income-tax Department through a return of income.
The return forms are known as ITR forms (Income Tax Return Forms).
Benefits of e-filing the return of income
Save time and efforts.
The e-filed returns are generally processed faster.
Easy to maintain the copies of the return filed.
Paper returns can only be filed by those who are above 80 years of Age or by an individual or HUF whose income does not exceed five lakh rupees and who has not claimed any refund in return of income.
e-Return can be filed by IDT portal or through ERIN such as integrated.
ITRV form to be sent to CPC, Bangalore within 120 days, from the e-filing date.
By verifying the return electronically (EVC), there is no need for sending the ITRV to CPC.
EVC can be done using assesse's Bank Account, AADHAAR, Demat Account or by directly logging in e-filing portal.
Due date for filing the return
The due date for filing of return of income in case of individuals/HUF is 31st of July.
Income Sources and available Deductions
Income: Income from employer
Deductions : HRA, Medical Reimbursement, LTA, Conveyance allowance, etc.
Income : Gain or Loss from property owned
Deductions : Standard deduction of 30% and interest on loan for buying/construction of property.
Income: Profit/Loss from sale of Capital Assets (Property, Jewellery, Shares, MFs)
Deductions : Depends on assets, holding period, cost of indexation, carried forward losses and investment in specified options.
Income : Any income, other than the above
Tax Free : Dividends up to Rs.10 lakhs/SB interest up to Rs.10,000, Gift from Relatives, Interest from NRE accounts, PPF account etc.
Components of Salary
Dearness Allowance (DA)
Medical Reimbursement up to Rs. 15,000 per year is exempted.
Transport Allowance up to Rs.1600per month is exempted
Leave Travel Allowance (LTA)
House Rent Allowance (HRA)
Newspaper / Journal Allowance – amount up to Rs. 12,000/- p.a.
Telephone / Mobile Allowance for office use.
Meal Coupons up to Rs.2200 per month.
Particulars of deduction
Investment /Tuition Fees/Housing Loan principal - Section 80C
National Pension System - Section 80CCD(1B)
Over and above 80C Limit
Additional Limit : Rs.50,000
Medical Insurance Premium - Section 80D
Limit : Rs.25,000/Rs.30,000
Educational Loan Interest - Section 80 E
Donation - Section 80G
Limit : 10% of Gross Total Income
Rent Paid - Section 80GG
Limit : 5000 per month
Interest on Home Loan - Section 24
Limit : Rs.2,00,000
Additional deduction of Rs 50,000 under section 80EE
Subject to conditions
Long term Capital gains exempted from tax in respect of STT paid equity shares/MF under section 10(38)
Dividend Income exempted under Section 10 (34)
Limit : Rs.10 lakhs
80C - Tax Saving Options
Section 80C of Income Tax Act, allow deduction of investment or spending from income tax. But here's how you can maximise your savings by making some common investments.
Market linked investments:
ELSS - Mutual Fund Equity Linked Savings Scheme (MF ELSS) : This has lowest lock-in period of 3 years. In case of a monthly SIP, each instalment has a 3 year lock-in.
ULIP - Unit Linked Insurance Plans (ULIPs) : ULIPs are market linked investments offered by insurance companies; lock-in period of 5 years and gain post lock-in tax free.
NPS - National Pension System (NPS) : Investments of up to Rs.1.5 lakh can be claimed for tax deduction in a financial year. Besides, an additional deduction of up to Rs.50,000 can be claimed under section 80CCD (1B).
Fixed income investments :
Employee Provident Fund : This is your contribution towards provident fund that gets deducted from your salary. Contributions towards Voluntary Provident Fund can also be considered for deduction.
Public Provident Fund : This investments has one of the longest tenures of 15 years with further extension of 5 years allowed each time. The interest rates are linked to that of government securities.
National Saving Certificate (NSC) : Investment in NSC can be claimed as deduction.
Bank Fixed Deposits : Fixed deposit of 5 years with a scheduled bank are eligible for deduction
Tax saving fixed deposits/post office time deposit
Senior Citizen Savings Scheme (SCSS) : Investments in SCSS can also be claimed as deduction
Life insurance Premium: You can claim this deduction when you pay the life insurance premium for yourself, your spouse or your children.
Tuition Fees: If you have paid tuition fees towards full-time education of your children, you can claim deduction for up to two children.
Home loan principal repayment: Repayment of principal amount towards a Housing loan can be considered.
Form 26AS is known as annual statement which contain all tax related information of a tax payer. The details give a clearer picture of the tax commitments of the tax commitments of a tax payer. It is associated with PAN.The form also contains details of
Tax Deducted at Source (TDS)
Tax Collected at Source (TCS)
Details of Advance Tax, along with Refunds and
High value Transactions done by the tax payer.
Form 16 (known as TDS certificate) is an important document that contains details of salary income received, quantum of deduction the employee has availed of and how much of tax has been deducted by the employer during the financial year. The employer has to issue Form 16 to the employees showing the total TDS deducted on income.
Form 16A is also a TDS Certificate. Form 16 is for salary income, where as Form 16A is applicable for TDS on Income other than salary. Banks issue a Form 16A when TDS is deducted by them on interest earned by you in fixed deposits. If you are freelancer, your clients will issue you form 16A if they have made TDS deductions from payment they make to you. Form 16A is also issued for TDS deductions on insurance commission paid. This certificate also has details of name & address of deductor / deductee, PAN/TAN details, and details of TDS deducted & deposited. The income on which TDS is deducted is also specified.
Due Dates for Advance Tax Payments
There is no need for payment of advance tax for a senior citizen who does not have income from business / profession.
15% of estimated tax - June 15, 2017
45% of estimated tax - September 15, 2017
75% of estimated tax - December 15,2017
100% of estimated tax - March 15, 2018
Advance taxes and final tax can be paid at authorized bank branches and remember that all tax payers have to file their ITR.
MCA has notified a scheme for defaulting companies and directors named "Condonation of Delay scheme 2018" in Circular No.16/2017 dated 29.12.2017. The scheme is in force with effect from 01-01-2018 and shall remain in force up to 31.03.2018.Companies registered under the Companies Act, 2013 (or its predecessor Act) are required to file their Annual Financial statements and Annual Returns with the Registrar of Companies and non-filing of such reports is an offence under the said Act.
MCA had recently identified 3,09,614 directors associated with the companies that had failed to file financial statements or annual returns in the MCA21 online registry for a continuous period of three financial years 2013-14 to 2015-16 and they were barred from accessing the online registry and a list of such directors was published on the website of MCA. With a view to giving an opportunity for the non-compliant, defaulting companies to rectify the default, in exercise of its powers conferred under sections 403, 459 and 460 of the Companies Act, 2013, the Central Government has decided to introduce a Scheme namely "Condonation of Delay Scheme 2018" [CODS-2018]
Applicability of the scheme
This scheme is applicable to all defaulting companies (other than the companies which have been stuck off/whose names have been removed from the register of companies under the Act). A defaulting company is permitted to file its overdue documents which were due for filing till 30.06.2017 in accordance with the provisions of this Scheme.
Procedure to be followed
TheDINs of the disqualified directors de-activated at present shall be temporarily activatedduring the validity of the scheme to enable them to file the overdue documents.
The defaulting company shall file the overdue documents in the respective prescribed e-Forms paying the statutory filing fee and additional fee payable as per the Act and Rules.
The defaulting company after filing documents under this scheme, shall seek condonation of delay by filing form e-CODS 2018attached to this scheme along with a fee of Rs. 30,000/-
The DINs of the Directors associated with the defaulting companies that have not filed their overdue documents and the eform CODS, and these are not taken on record in the MCA21 registry and are still found to be disqualified on the conclusion of the scheme in terms of of the Act shall be liable to be deactivated on expiry of the scheme period.
In the event of defaulting companies whose names have been removed from the register of companies under the Act and which have filed applications for revival under the Act up to the date of this scheme, the Director's DIN shall be re-activated only NCLT order of revival subject to the company having filing of all overdue documents
Scheme not to apply for certain documents
This scheme shall not apply to the filing of documents other than the following overdue documents :
Form Number 20B/MGT-7- Form for filing Annual return by a company having share capital.
Form 21A/MGT-7- Particulars of Annual return for the company not having share capital.
Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC-4, AOC-4(CFS), AOC (XBRL) and AOC-4(non-XBRL) – Forms for filing Balance Sheet/Financial Statement and profit and loss account.
Form 66- Form for submission of Compliance Certificate with the Registrar.
Form 23B/ADT-1- Form for intimation for Appointment of Auditors.
The Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned Court(s) for all documents filed under the scheme. However, this scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified.
At the conclusion of the Scheme, the Registrar shall take all necessary actions under the Companies Act, 1956/ 2013 against the companies who have not availed themselves of this Scheme and continue to be in default in filing the overdue documents.
Managing the day to day operations of your business along with complying the corporate and other laws can be little hectic for any entrepreneur. Hence, it is essential to understand such legal requirements to ensure timely fulfillment of compliances, without any levy of interest or penalty.
Form GSTR 3B to continue till March 2018, with payment of tax by 20th of the succeeding month
For filing GSTR 1 taxpayers would be divided into two categories :
Taxpayers with annual aggregate turnover upto Rs. 1.5 crore need to file GSTR-1 on quarterly basis as per the following schedule :
31st Dec 2017
15th Feb 2018
30th April 2018
Taxpayers with annual aggregate turnover more than Rs. 1.5 crore need to file GSTR-1 on monthly basis as per following schedule :
31st Dec 2017
10th Jan 2018
10th Feb 2018
10th Mar 2018
10th Apr 2018
10th May 2018
The time period for filing GSTR-2 and GSTR-3 for the months of July, 2017 to March 2018 would be worked out by a Committee of Officers. However, filing of GSTR-1 will continue for the entire period without requiring filing of GSTR-2 & GSTR-3 for the previous month / period.
Reduced fines on late filing
Fine for late returns has been slashed by 90% to a mere Rs. 20 per day from Rs. 200 per day for a taxpayer with nil liability.
Late fine for not submitting the GSTR-3B within due dates for the months of July, August and September 2017 has been waived off
All the late fee collected on late filing of FORM GSTR 3B will be re-credited to their electronic cash ledger under "Tax"
From October 2017 onwards the amount of late fee on nil returns will be Rs.20 per day
Changes in rate Structure
178 Items shifted
from 28% slab to lower slabs leaving apart sin goods and cess applicable goods.
Restaurants to have no more input tax credit and the rate of tax is changed to 5%.But Restaurants in hotel premises having room tariff of Rs 7500 and above per unit per day (even for a single room) will attract GST of 18% with full ITC
Outdoor catering - 18% with ITC.
Changes in composition scheme
Manufacturers and traders would now operate at a standard rate of 1%
Threshold for the composition scheme has been increased to Rs. 1.5 crores from the current limit of Rs. 1 crore
Those supplying goods and services (services not exceeding Rs 5 lakhs in total) are eligible for compositions scheme
Composition Returns, GSTR-4 due date extended to 24th December
Relief for service providers
All service providers having inter-state supply or supply through e-commerce operator are exempt from GST registration with turnover up to Rs 20 lakhs.
Other reliefs granted
Export of services to Nepal and Bhutan are exempt from GST and have now been allowed to claim a refund of input tax credit paid if any
TRAN-1 can be filed and revised till 31st December 2017. Revision to be done only once.
Manual filing for Advance Ruling application to be introduced
The term "director" has been defined under Companies Act, 2013 Act to mean a director appointed to the board of a company. The Act provides for different categories of directors, including, whole time directors, managing directors, independent directors, nominee directors, and alternate directors and women directors.
The Act had stipulated the following duties under section 166:
A director of a company shall act in accordance with the articles of a company.
A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, and the community and for the protection of environment.
A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain of the company.
A director of a company shall not assign his office and any assignment so made shall be void.
The company had filed annual returns & financial statements with ROC (Registrar of companies) in time and manner as specified in the act/rules.
The compliance of companies act provisions relating to Public offer, Buy back of securities etc
Proper books of accounts has been maintained by the company and financial statements had been prepared in compliance with the notified accounting standards
The Dividend declared is paid in time (within 30 days).
Proper filing of resolutions and agreements with ROC in time and manner as specified.
DIN(Director Identification Number) of all directors is intimated to ROC
Furnish all information, explanation or produce any document to registrar as asked for
All directions issued by registrar are properly complied
That there is no wrongful withholding of properties of companies
Proper disclosures had been made with respect to all contracts or arrangements entered into by the company with other entities, where the officers have interest
No wrongful trading of company securities or price sensitive internal information is not passed on.
Penalty & Imprisonment
A director of a company held negligent or responsible for any of the above specified defaults will be punishable by payment of fine or penalty and even imprisonment in certain cases.The fine or penalty will be ranging up to Rs.25 lakhs and/or the imprisonment period ranges from 1 to 3 years depending upon the nature and seriousness of the default.
Therefore becoming a company director has become a very serious business and should not be undertaken lightly or unadvisedly. So if you are invited to become a company director or are already a director, it is very important that you understand your duties and responsibilities and the potential consequences of their breach prescribed under the Companies Act, 2013.
One Person Company (OPC) is a corporate framework, which incorporates the features of both sole proprietorship and a company. It has only one person as a constituent who will perform in the capacity of a director as well as a shareholder. Thus, OPC will have all the benefits of a private limited company i.e. they will have access to credits, bank loans, limited liability, legal protection for business, access to market etc., all in the name of a separate legal entity.All the provisions applicable to a private company are applicable to an OPC also, unless otherwise expressly excluded.
Advantages of OPC
One Person Company is the only form of corporate entity that can be incorporated and run by a single promoter with limited liability safeguard in India.
Businesses currently run under the proprietorship model could get converted into OPCs without any difficulty.
An OPC has 'perpetual succession' until it is legally put to an end. Being a distinct legal person, the existence of an OPC is unaffected by the demise of the member or other changes in ownership.
Like a Private company, One Person Company can raise funds through venture capital, financial institutions etc.
An OPC will have to face only limited compliance burden in comparison to private limited companies.
OPC needs to conduct at least one Board of directors meeting in each half of a calendar year and the gap between two meetings is not less than 90 days. Further, an OPC is not required to hold an AGM.
Other salient features
The words 'One Person Company' must be mentioned with the name of the company in brackets wherever it appears.
Only a natural person who is an Indian citizen and resident in India shall be
eligible to incorporate a One Person Company;
Shall be a nominee for the sole member of a One Person Company.
A person shall not be eligible to become a member of more than one OPC or become a nominee in more than one such company.
The minimum and maximum number of members in an OPC can be only one
The minimum and maximum number of directors in an OPC can be one (1) and fifteen (15) respectively.In order to increase the number of directors beyond 15 directors, a special resolution must be passed by the OPC to that effect
Financial Statement of an OPC has to be approved by the Board and needs to be signed by only one director for submission to the auditor. Also, an OPC need not prepare Cash Flow Statement as part of its financial statement. The copy of such financial statement along with other documents etc. must be filed with the ROC within 180 days from the closure of the financial year.
Such Company cannot be incorporated or converted into a company under section 8 of the Act.
Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.
Stages of Incorporation
Obtain Digital Signature Certificate [DSC] for the prospective director.
Attain Director Identification Number [DIN] for the prospective director.
Select suitable Company Name, and produce an application to the Ministry of Corporate Affairs for approval of company name.
Draft Memorandum of Association and Articles of Association [MOA & AOA].
Sign and file various documents and forms including MOA & AOA with the Registrar of Companies electronically.
Payment of Requisite fee to Ministry of Corporate Affairs including Stamp Duty.
Scrutiny of documents at Registrar of Companies [ROC].
Receipt of Certificate of Incorporation from ROC.
Capital & Turnover threshold limits for compulsory conversion
Where the paid up share capital of an OPC exceeds Rs. 50 lacs or its average annual turnover of immediately preceding three consecutive financial years exceeds Rs. 2 crores;
Such OPC shall be required to convert itself, into either a private company or public company in accordance with the provisions of section 18 of the Act within 6 month of the date as mentioned above.
The OPC shall alter its memorandum and articles by passing a resolution to give effect to the conversion and to make necessary changes incidental thereto;
The OPC shall within period of sixty days from the date of applicability of above provisions, give a notice to the Registrar in Form No. INC-5 informing that it has ceased to be an OPC and that it is now required to convert itself into a private company.
GST: Small taxpayers can opt for composition scheme before July 21
Small businesses with turnover of up to Rs.75 Lakh are eligible to avail the composition scheme under the goods and services tax regime. Any person who has been granted registration on a provisional basis and has turnover not exceeding Rs.75 Lakh, and who wishes to opt for the composition levy, is required to electronically file intimation at the GST portal on or before 21 July 2017. Under composition scheme, traders, manufacturers and restaurants can pay tax at 1%, 2% and 5%, respectively in the new indirect tax regime. Businesses opting for composition scheme will see a lesser compliance burden as they will have to file returns only once in a quarter as against monthly returns to be filed by other businesses.
Conditions / Consequences
In the case of the following States, the limit of aggregate turnover for composition scheme is Rs. 50 lakhs:- Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh.
Following persons are not allowed to opt for the composition scheme:
A casual taxable person or a non-resident taxable person;
Suppliers whose aggregate turnover in the preceding financial year crossed Rs. 75 lakhs;
Supplier who has purchased any goods or services from unregistered supplier unless he has paid GST on such goods or services on reverse charge basis;
Supplier of services, other than restaurant service;
Persons supplying goods which are not taxable under GST law;
Persons making any inter-State outward supplies of goods;
Suppliers making any supply of goods through an electronic commerce Operator who is required to collect tax at source.
A manufacturer of following goods:
- Ice cream and other edible ice, whether or not containing cocoa
- Pan Masala
- Tobacco and manufactured tobacco substitutes
Aggregate turnover will be computed on the basis of turnover on an all India basis and will include value of all taxable supplies; exempt supplies and exports made by all persons with same PAN, but would exclude inward supplies under reverse charge as well as central, State/Union Territory and Integrated taxes and cess.
A taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take credit on his input supplies. When he switch over from composition scheme to normal scheme, eligible credit on the date of transition would be allowed
As the composition dealer cannot collect tax paid by him on outward supplies from his customers, the registered person making purchases from a taxable person paying tax under the composition scheme cannot avail credit.
·A person opting for composition levy will have to pay tax and electronically file quarterly returns in Form GSTR-4 before 18th of the month succeeding the quarter during which the supplies were made
The option to pay tax under composition scheme lapses from the day on which his aggregate turnover during the financial year exceeds the specified limit (Rs. 75 lakhs /Rs. 50 lakhs). He is required to file intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days from the day on which the threshold limit has been crossed.
A person paying tax under the composition scheme can issue a bill of supply in lieu of tax invoice.
If a person opting to pay tax under the composition scheme receives inputs/input services from an unregistered person, tax will have to be paid on such supplies by the composition taxpayer under reverse charge mechanism.
Such person is required to furnish the details of stock, including the inward supply of goods received from unregistered persons, held by him on the day preceding the date from which he opts to pay tax under the composition scheme, electronically, in FORM GST CMP-03 within a period of sixty days from the date on which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf.
A person making application for fresh registration under GST can opt for composition levy at the time of making application. Such persons can give the option to pay tax under the composition scheme in Part B of FORM GST REG-01. This will be considered as intimation to pay tax under the composition scheme.
In case a person has registration in multiple states, the option to pay tax under composition scheme will have to be exercised for all states.
Such persons shall mention the words "composition taxable person, not eligible to collecttax on supplies" at the top of the bill of supply issued by him; and he shall mention the words "composition taxable person" on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
The registered person will not be able to carry forward the excess ITC of VAT to GST if he opts for composition scheme.
It is mandatory for all individuals to file Income Tax Return (ITR) where his total income exceeds the maximum amount that is not chargeable to Tax ie, if it exceeds Rs.2,50,000 in the FY 2016-17. This limit is Rs 3,00,000 for senior citizens ( who are more than 60 years old but less than 80 years old) and Rs 5,00,000 for super senior citizens (who are more than 80 years old). In the case of partnership firms, return needs to be filed even if there is no taxable income. Due date of filing income tax return for the FY 2016-17(AY 2017-18) is 31st July 2017 for individuals and firms who are not subject to audit under section 44AB of the IT Act.
Different forms for return of income are prescribed for filing IT returns for different status and nature of income.
Types of taxable income
Salaries and perquisites
Income from house property (Ex: Rental income)
Income from Business or Profession
Capital gain on sale of assets/shares
Income from other sources (Ex: Interest earned on bank deposits)
Life insurance premium paid
Contribution to PPF or EPF
Children's tuition fee
Medical insurance premium paid
Subscription to Mutual Funds. (ELSS)
Contribution to Pension Funds including pension scheme of Central Government. (NPS)
Investment in listed equity shares. (for first time investors)
5 year post office time deposit
Subscription to notified securities/notified deposits scheme
Medical expenses of handicapped dependent relative.
Interest paid on loan taken for higher education.
Interest and principal repayment on loan taken for residential house property
Salaried individuals who live in a rented house/apartment can claim house rent allowance or HRA
Donations to approved charitable trusts/institutions, scientific research and rural development etc
Contributions to political parties.
Special benefits available for government employees
Benefits of filing your tax returns in time
Copy of ITR is required at the time of loan application
Eligibility to carry forward capital losses (short-term or long-term), which can help to plan and reduce tax liability in the subsequent years
Visa processing –ITR of last 3 years is a mandatory requirement prescribed under the visa application requirements of many countries
Life insurance companies, ask for ITR receipts for high life covers
Government tender- ITR of last five years are required to be submitted while applying for a government tender
Self-employed - ITR receipts acts as a proof of income source. Filing of tax on time, always adds to the credibility of the assessee
Credit for the tax deducted from you can be claimed through timely filing of ITR which results either in tax refund or reduces the tax liability by the amount already deducted.
ITR can be a sufficient proof for source of income , when a major expense is incurred over assets, events etc
Government is introducing Goods and Services Tax (GST),with effect from 01stJuly 2017. GST is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition throughout India to replace taxes levied by the central and state governments.
Please ensure that the changes in new tax regime are properly understood and appropriate measures are taken for hassle free transition. Please determine the taxability of various transactions undertaken by you including purchases, sales, supply, credit notes, returns etc. to ensure correct payment of taxes and compliance under GST regime.
Pre – Implementation action points for smooth GST transition
If you are an existing tax payer, get your GST enrolment in time by making use of the provisional ID & Password that you have obtained from your concerned indirect tax authority.
Apply for migration in all states if you have centralised registration under Service Tax.
Complete the closing stock working as on 31.03.2017/30.06.2017 on or before the GST implementation date. Please make sure that no old stock ageing more than one year lies in the stock on GST implementation date.
A dealer or manufacturer who has input tax credit under State Vat or Entry Tax in his return on 30-6-2017 can carry forward his input tax credit as SGST Credit.A manufacturer who is having cenvat credit balance in his return on 30-6-2017 can carry forward his cenvat credit as CGST credit. Classify stock tax rate wise, purchased locally to get ITC (Input Tax Credit) into SGST. Also classify stock purchased on invoices bearing duty payment & non duty payments to get ITC transferred to CGST.
Make a separate file of those items which are shown in your unsold stock as on 30.6.2017 e.g. Purchase Bills/ Bill of Entry/ Excise Paying Documents etc.
Dealing with vendors/customers
Get the accounts statement from your suppliers / creditors for the year ended 31/3/2017 & reconcile with your books of accounts
Rectify mismatch reports of purchases, if persists; and revise your indirect tax Returns accordingly
If goods were supplied under CST Act, details of claims and CST forms (C, F, H, I, E-I/E-II) shall be submitted within 60 days)
·Inform your GSTIN / ARN to all suppliers of Goods & Services and obtain GSTIN of all Suppliers & Buyers.
·Make Chart of HSN CODES & GST Rates on your goods & services to be purchased &sold.
Books of Accounts & ERP
Get your Books of accounts finalised for FY 2016-17.
Updating your ERP or accounting systems
Keeping note of GST compliance requirements and effectively training your accountants for GST accounting and returns formats.
Update the invoice formats in ERP with GST requirements.
Take help of appropriate Tax engines/ Decision tables if found necessary.
Assess the requirements for transactional restructuring if any needed to be in compliance with GST. Also analyze the requirements for re-modelling business structures if any
As GST is a destination based tax, strategize your supply management strategies in a manner that minimizes cash flow impact.
Define your sales policies – schemes, discounts and returns and effectively redraft the pricing mechanism
Review and if necessary renew your contracts appropriately.
Impact of abolished and new levies on the recurring finance decisions needs to be analyzed and planned.
Special consideration to quantifying the penal provisions for non-compliance
Please contact us if you require any further clarification regarding the above step plan.