Nominee Cannot Spend Out Of Deceased’s Estate Unless It Is For Welfare Of Legal Heirs

Be aware of what rights, obligations and rights of the nominee as well as the legal heir in relation to their rights regarding the estate of the deceased if the deceased passes away interstate

In the past, someone wrote an inquiry on social media inquiring about the status of the benefits that were paid for her husband who died by his employer. These benefits were then given to her father-in-law since the nominee. The amount due was the not paid salary, gratuity and other benefits for employees like insurance and provident funds.

"I reside within my family with the inlaws. My father-in law wants to transfer the entire amount of these death benefits into my account at the bank. However, he got these benefits only a couple of weeks ago and used a portion of the funds mostly on food items as well as other household items. According to my understanding, as we are Hindus and even though my husband listed my father-in law's name as his nominee my son and I are the legal inheritors. Do you think this is a valid assumption?" the reader asked.

What is their legal Status?

Ruchika Bhagat chartered accountant and managing director of Neeraj Bhagat & Co, an New Delhi based CA firm According to the Hindu Succession Act, 2005 in the event of an intestate (no will) succession, property rights will be transferred to heirs of class 1, that includes daughters, sons mother, widow or son of a deceased son, and others.

"The estate of the deceased should be divided between all class I heirs in a proportional manner in the event that some members will be willing to part with their shares, a non-objection certificate or settlement deed will be necessary in that regard,"Bhagat says.

In this specific instance any transfer that is unilaterally made from an individual the deceased's father-in-law to the daughter-in law without consulting with the son of the deceased or any other legal heirs would be null and void, according to Bhagat.

According to Bhagat the issue of marriage must be taken into account when deciding on these issues. If the spouse divorced prior to death, the fundamental nature of marriage is changed, and "therefore the spouse will not be considered to be an legal heir therefore, she will not have the right to part in this property."

What Do the Legal Heirs of The Deceased Do Now?

Abhinay Sharma managing partner of ASL Partners, a New Delhi-based law firm. He advises that should the deceased person not have a Will in place, the legal heir should seek an heirship certificate from the legal system or an estate certification from the Civil Court/Tehsildar office or the court designated for civil cases or the designated civil court.

Both of these documents legally prove that the people are in fact the legal descendants of the dead.

A succession certificate is needed to purchase any property that is immovable or movable by the legal heirs in their own name. The certificate also transfers the debts to descendants of deceased. Only the successors (children or grandchildren) of the deceased are able to apply to the court designated to request this.

Legal heir certificates have little significance under the Succession Act, 1925 and is necessary to be able to claim benefits such as provident funds pension, retirement, etc. It is only available through legal heirs such as parents, spouses or children from the decedent.

Says Mihir Tanna, associate director of SK Patodia and Associates, an Mumbai-based CA firm, "Any income earned after the date of death of the deceased is tax-deductible to the legal heir , but it takes time to transfer assets to the name of the legal hair. So, any income earned following death is also taxable against the PAN of the deceased and tax deducted (if appropriate) is deducted from the PAN of the deceased up to the point at which assets transfer."

What are the obligations of the nominee of the Person Who Passed Away?

Technically, there's no any time frame within which the nominee is required to pay the proceeds to the legal descendants. The main purpose for a nomination to make sure that the estate of the deceased doesn't remain ownerless in the time when succession disputes are being settled.

"Thus when there is a possibility of settlement of succession dispute, the nominee will be legally bound to transfer all property to the legal heirs." Bhagat adds.

Bhagat claims"the person who is the nominee is the trustee for the estate, and therefore is responsible for the estate until it is passed to legal inheritors. Additionally the nominee is an authorized representative under the Income Tax Act of 1961, consequently, "he is also liable to prepare the tax return for income of the deceased, and pay the taxes due from the deceased, based on the proceeds of the estate."

In no way can the nominee be removed from the estate, unless it is to benefit the legal inheritors. If he makes use of them for any other reason the legal heirs will be legally entitled to claim the funds.

"Further It is possible that upon mutual understanding the legal heirs following the time that the person who is nominated has spent this amount, can accept the transfer by writing," Bhagat adds.

GST For Import And Export

 

What exactly is GST? What is its purpose?

GST is a tax that is single on the supply of products and services, from the producer to the end user. Tax credits for input taxes that are paid at each step will be available at the next stage of value-addition that is what makes GST basically a tax on value-added at every stage. 

The Benefits of GST for Imports as well as Exports

Export of products export of goods section 2 (5) "export of products" and its grammatical variations and equivalent expressions, is transporting goods from India to a location that is not India The export of items will be considered as zero-rated supply

Services exported"export of services" Advertisements in 2(6) "export of services" 2(6) "export of service" refers to the provision of any service , when

(i) the provider of services is located in India;

(ii) the person who is receiving service is not located in India;

(iii) the location for supply of services is not in India;

Zero-Rated Supply With zero ratings, it's intended to mean that

• all the value chain of supply is tax-free.
• Not only is output exempt from tax not only is it tax-free, but there's no limit to taking credit of taxes paid on input used to make or provide output supply.

In the sense of making the products or services zero-rated.

The supply of all goods and services is not zero-rated.As as per the GST Law exports are meant to be zero-rated. The zero-rated principle is used in spirit and letter to exports and the supply to SEZ.

Import of goods and Services - ''Import of goods" along with its grammatical variants and related expressions, is that goods are brought into India from in the outside of India"Import of Services" is the provision of any service.-the service is provided by

Export Methods

Phase 1 Stage 1: In this step, items are shipped from the warehouses of the exporter or from the place of the company to the CONTAINER FREIGHT STATION, or the INLAND CONTAINER DEPOT.For transport purposes the exporter must create an electronic way invoice at this stage.Here I would like to emphasize that If the invoice is lower than Rs.50,000or less, then the creation of an e-way bill isn't necessary.

2. 2: The products transferred from the warehouse of the exporter into CFS or ICD is then delivered at the terminal or airport.This transfer of goods to an airport or port is exempt from the requirement of of an electronic bill.

Import Procedures

Phase 1 Once the goods arrive at the port or at the airport here, the items are believed to have been actually imported.

2. Following the arrival of the merchandise in the ports, these goods are in the custody of customs.

3. After the goods are removed from the customs custody the goods are then shipped to be cleared at either CFS (Container Freight Station) or ICD (Inland Courier Depot).These types of transactions are not subject to creating an electronic bill for this type of transaction.

Stage 4. Then, these products are then transported to CFS or ICD in either the Warehouse that is bonded; or to the factories or to businesses consumes.

What's E-Way Bill and how it functions?

A digital Way Bill (E-Way Bill) is a yielding device which, via a computer device or program, the individual who is moving products uploads pertinent information and data prior to the goods are moved and generates an e-way invoice through the GST website.

• Import Amount and duration of an electronic bill will be calculated when the items are shipped to the place of the factory or business from CFS/ICD or warehouses.
• Export Distance and validity of an electronic way bill must be determined prior to the transport of products from the place of the company to ICD/CFS or warehouses as the situation could be.

Where to Supply of Goods

The place of supply for products shipped into or exported out of India --

The location of supply for products imported in or exported out of India is determined in line with the requirements in Section 11 of the IGST Act 2017.

According to the regulations of Section 11.11, the location for the supply of goods must be as follows:

Levability and Integrated Taxes for High Seas Sales Transactions

The High Sea sales is one popular selling practice that is carried out by the buyer in actuality and a third party buyer when the merchandise is in the high seas or prior to the time that the merchandise has passed through the customs border of the particular country.

Let's look at the procedure of high sea sales through an simple example.If an Indian buyer India buys an item from a vendor within the USA and sells it to a different buyer in India even though the product or item is in transit, it's known as the high sea sale.There is no limit to selling the same item to multiple buyers when they are on high seas.

The required documents to be considered for high-sea sales under the GST Law. GST Law

• Commercial Invoice
• High Sale Agreement
• Bill of Lading
• Certificate of Origin
• Import Invoice
• Insurance Certificate

Import of Services

The IGST act of 2017 defines the importation of service as the provision of any kind of service that:

• The service provider has its headquarters outside India
• The person who is the recipient of this program is in India and
• The place of supply for the service is India

Furthermore, the nature of the service being imported along with the motive behind it and the reason for its import determine whether a specific service import can be classified as supply.

Situation I Import of Service to Consider If or not in the furtherance of businessSay it is an importation of service.Further this import is considered to be a consideration, but could be to benefit business.Thus the importation of services in this situation is regarded as an offer.

This means that any exchange of service without consideration cannot be regarded to be a supply.It is not required that an import of a service as a result of consideration is carried out to benefit an enterprise.

Second Case Importation of Services by a Taxable Individual from a Distinct or Related Person

If there is an import of a service from a distinct or related person, as per article 25 of the CGT Act, 2017.Further, such an import of a service is for the interest of business and could or might not be done in exchange for consideration.Such an import of a service is considered to be a supply.

A Letter Intent in the context of GST

The letter of undertaking is the form of document the user submits to declare that they have met all the conditions under GST.It is provided in the event that an export is undertaken without paying IGST.Also as per Notification No.37/2017 Central Tax, it is mandatory to supply LUT to export either services or goods or both, and without paying IGST.If the exporter is not able to supply the LUT and is not able to provide it, he will have the obligation to either pay IGST or pay the export bond.Earlier LUT could only be submitted offline at the relevant GST office.But to make it easier the process, the Government has now made LUT submission online.

The importance of the location of Supply

• The incorrect classification of supply states that are interstate or intrastate, and vice versa can result in hardship for the taxpayer, as per section 19 of the IGST Act and section 70 of the CGST Act
• In the event that tax was incorrectly paid on account of the incorrect classification the refund has to be requested by the taxpayer. The taxpayer must make the appropriate tax payment, as well as interest for the delay , on the basis of a revised or correct classification
• Additionally, a correct estimation of the place of supply can help us determine the amount of tax.As If the location of supply is identified as being outside of India Tax does not need to be paid on the transaction.

OIDAR - sec 13(12)

Online Information Database Access and Retrieval services (hereinafter called OIDAR) refers to a class of services that are offered via the the internet, and delivered to the user online, without physical contact with the seller of these services.For E.g.downloading or purchasing an electronic book online to pay for it would constitute a receipt of OIDAR services through the user who downloads the e-book and makes an online payment.

There is no GST levyable in the following cases

• Transfer of goods from a area that is tax-free to a different place within the territory that is not tax-free, without goods entering India
• Warehoused goods are available to anyone who is cleared for consumption at home
• The supply of goods is made by the consignee to other person, based on the endorsement of a document that confirms title to the items, after the items were shipped from the point of origin outside India but prior to clearance for domestic consumption.

Merchant Exports covered under GST

Merchant exporters are one who is involved in trade activities and is exporting or planning to export.They don't have manufacturing units.They purchase goods from a supplier and deliver them to customers in foreign countries.

Merchant exporters are legally required to be registered as per GST.Under GST, the GST regime, the process for exporting is now simplified, merchant exporters can also choose to

Create an export under bond/LUT Then, the unutilized input tax credit may get claimed for a tax refund.

OR to export through the payment of IGST and then request a refund of the same.However it is not available if the person who is exporting does not have an option under the Special Relief Scheme of buying products at 0.1 percent GST.

Merchant exports are comparable to regular exports.They help the economy by the addition of foreign currency.Therefore the government has offered discount rates to merchant exporters. This helps themto lower their capital requirements.Thus the government has granted specific relief for merchant exporters through reduction of their GST amount to 0.1 percent for purchases of products from local suppliers

Deemed Exports

• Delivery of goods to a registered person in exchange for Advance Authorization
• Capital goods supply by a registered individual against an Export Promotion Authorization for Capital Goods
• A person who supplies goods to an individual who is registered to an Export Oriented Unit
• Gold supply by a financial institution or Public Sector Undertaking against Advance Authorization.

What happens when refunds are able to be refused or refused?

• The company has not provided any returns
• You are required to pay any tax to pay interest, tax or penalty
• Deduct any unpaid taxes, interests penalties, late fees, and taxes from the refund amount. order to refund is in appeal. The award of the refund could be detrimental to the revenue from the appeal in the event of fraud or malfeasance committed

There are reasons why the refund may be delayed?

• Insufficient Information
• The lack of diligence when making GST returns
• Error when matching the information electronically

Interest in a delayed refund

• Request for refunds made
• If the refund cannot be given after 60 days from request
• 6 percent p.a.Interest for the duration of delay
• Refunds are given after 60 days of Order of Appellate Authority / Tribunalor Court
• 9percent p.a for the time of delay.

Summary the government of India is constantly taking measures to promote its domestic products overseas through a variety of measures.One of these directions in the area of Taxation is the return of ITC earned on exports to allow these products to compete on the International market and to encourage the production of indigenous goods and thus increasing India's foreign exchange reserves.Further important is that to be able to claim the benefits of export, one needs to create the proper documentation in accordance with GST Act. GST Act.

The Author's Bio

Author: Ruchika Bhagat FCA providing assistance to foreign firms in establishing and closing businesses in India and ensuring compliance with the various tax laws that apply to foreign businesses when establishing an operation in India.Neeraj Bhagat and Company. Chartered Accountants is a established Chartered Accountancy firm founded in 1997 and has its headquarters in New Delhi.

Registration of Foreign Companies in India

Registration of Foreign Companies in India

Companies (Registration of Foreign Companies) Rules, 2014 prescribes guidelines to be followed for the Registration of foreign companies in India.

Particulars relating to directors and Secretary to be furnished to the Registrar by foreign Companies:

1. Every foreign company shall, within thirty days of establishment of its place of business in India, in addition to the particulars specified in subsection (1) of section 380 of the Act (i.e, Companies Act, 2013), Chartered accountant firm also deliver to the Registrar for registration, a list of directors and Secretary of such company.

2. The list of directors and secretary or equivalent (by whatever name called) of the foreign company shall contain the prescribed particulars, for each of the persons included in such list.

3. (3) A foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1 with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and with the documents required to be delivered for registration by a foreign company in accordance with the provisions Expatriates taxation of sub-section (1) of section 380 and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required by such foreign company to establish a place of business in India or a declaration from the authorized representative of such foreign company that no such approval is required.

4. (4) Where any alteration is made or occurs in the document delivered to the Registrar for registration under sub-section (1) of section 380, the foreign company shall file with the GST consultants in Mumbai Registrar, a return in Form FC2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars of the alteration, within a period of thirty days from the date on which the alteration was made or occurred.

Financial Statement of foreign company:

Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including-

2. Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents; namely:-

a. Statement of related party transaction, which shall include-

b. Statement of Expats taxation of profits which shall include-

c. Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business of foreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include-

3. The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate.
Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.

Related Party Transaction | Section 188 | Companies Act, 2013

Analysis on Related Party Transaction Under Section 188 of the Companies Act, 2013 – Section 188 of Companies Act, 2013 is been made effective from 01.04.2014 and since than the same been amended nine times till date. In this article Analyses Provision of Section 188-

Meaning of Related Party

Transactions Covered

Some Important Definitions:
1. Goods means every kind of movable property other than actionable claim and money and includes stock and shares, growing crops, grass attached to or forming part of the land which are agreed to be severed before sale or under contract of sale.
2. “office or place of profit” means any office or place—
(i) if the director receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
(ii) if any individual other than a director or any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
(iii). “arm’s length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.

Compliance provisions in regard to Related Party Transaction:

Exception to above:

In the case of Wholly Owned Subsidiary, the resolution passed by the holding company shall be sufficient for the purpose of entering into the transaction between the wholly owned subsidiary and the holding company.

Some Important Notes:

If the transaction is in the ordinary course of business and done on an arm’s length basis it shall not require the approval of the board or the company.

1. No member shall vote on the special resolution if such member is a related party and this clause is not applicable to such Company in which ninety per cent. or more members, in number, are relatives of promoters or are related parties.
2. Details of every contract entered into shall find its reference in the Board’s report along with justification about the same
3. Ratification of the transaction may be done by the Board or the shareholders within three months. If the same is not done, then the contract will be voidable at the option of the Board.
4. If the contract is with anyone related to the director, or is authorized by any other director, the directors concerned shall make good to the company for losses if any caused to the company.

Penalty for Contravention under Section 188
For Directors or any other employee in default:
Listed Company

• Imprisonment – Maximum 1 Year months;

and/or

• Fine – Minimum Rs. 25,000/- and Maximum Rs. 5 Lakhs.

Other than Listed Company

• Fine – Minimum Rs. 25,000/- and Maximum Rs. 5 Lakhs.

FDI in Construction Development sector in India

The Construction/ Real Estate sector is one of the most critical sectors of the Indian economy due to its huge multiplier effect on the economy. Any impact on the Real Estate sector has a direct bearing on economic growth. Due to the well-acknowledged need for foreign investments into this sector because of the sheer demand, the Foreign Direct Investment (FDI) route has attracted foreign investors’ interest in this sector.

In the year 2005, Reserve Bank of India (RBI) issued a notification and the township, housing, construction development project sector and built up infrastructure was opened for 100% FDI with specific terms and conditions.

The Reserve Bank of India has recently relaxed norms on end-use of funds raised via external commercial borrowings, making it more attractive and viable for corporates including non-banking finance companies to raise cheaper offshore funds. With a view to further liberalize the ECB framework, it has been decided to relax the end-use restrictions and allow the use of funds for working capital requirements, general corporate purposes and repayment of rupee loans. ECBs with a minimum average maturity period of 10 years can now be used for working capital purposes and general corporate purposes.

These changes will improve ease of doing business in India.

There have been changes in FDI policy in this sector from time to time and following is the updated policy as of now.

*Real Estate Business
“Real Estate Business” has been defined as dealing in land and immovable property with a view of earning profit there from and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city/regional level infrastructure, townships. Significantly, the earning of rent or income, not amounting to transfer, from lease of a project in which FDI is permitted would not tantamount to ‘Real Estate Business’.

Applicable conditions for FDI in Real Estate Sector in India:

ConditionsApplicability under FDI Policy 2017Minimum CapitalizationNo minimum requirementExit and Lock-in restrictions• The investor is permitted to exit from the investment: (i) after 3 years from the date of each tranche of foreign investment, or (ii) on the completion of the project; or (iii) on the completion/development of trunk infrastructure i.e., roads, water supply, street lighting, drainage and sewerage.• The lock-in period of 3 years will also not apply to Hotels & Tourist Resorts, Hospitals, Special Economic Zones, Educational Institutions, Old Age Homes and investment by NRIs.Transfer of stake from a non-resident investor to another non-resident investorTransfer without any repatriation of investment is not subject to any lock-in or prior RBI approval.Separate Phases/ProjectsEach phase of a project is considered as a separate project for the purposes of the FDI PolicyMinimum Land StipulationThere is no minimum area requirement.Completed Assets• 100% FDI is permitted under automatic route into completed projects for operation and management of townships, malls/ shopping complexes and business centers.• However, there is a lock-in period of 3 years applicable.Transfer of control from residents to non-residentsTransfer of control from residents to non-residents as a consequence of foreign investment is also permitted. However, there is a lock in period of 3 years applicable and no transfer of immovable property is permitted during this period.Earning or rent/income on lease of the propertyFDI is not permitted in an entity which is engaged or proposes to engage in ‘Real Estate Business’. However the earning of rent/ income on lease of the property, not amounting to transfer, does not amount to ‘Real Estate Business’ and hence is permitted.Obligations on Indian Investee company• Indian Investee Company is permitted to sell only developed plots, i.e. the plots where trunk infrastructure has been available.• Indian Investee Company is responsible for obtaining all approvals, payment of development and other charges, and compliance with all other requirements as prescribed by local government bodies.Authority to monitor complianceThe State Government/Municipal/Local Body concerned, which approves the building/development plans, will monitor compliance of all the conditions by the developer.

Open Conditions

• Timeline at which stage the foreign investment must come in is not provided in the existing regulations and the clarification on the same is awaited.
• In the absence of any timeline for investment, since the FDI is permitted in construction-development projects, it is to be seen at what stage a project can qualify as being in the ‘construction-development’ phase.
• Real estate being a state subject, any guidelines or regulations by state for the benefit of foreign investors would be a welcome step and is awaited.

Take Away
RBI has been regularly improving the real estate sector for FDI, which will hold great potential for formation of employment and generation of income. Furthermore, considering the urgent need to enhance the affordable housing stock, the government had provided definite relaxations to conditions for FDI in Real Estate sector. It also clarified that real estate broking services do not amount to real estate business and are, therefore, eligible for 100 per cent FDI under the automatic route.

FDI in India | FDI in India

Post Incorporation Compliances For Private Limited Companies

Article explains Post Incorporation Compliances For Private Limited Companies which includes Compliances under Companies Act, 2013, Compliances under GST Law, Compliances under FEMA, RBI/FDI Reporting and Compliances with DGFT (Director General of Foreign Trade).
Part I: Compliances under Companies Act, 2013
♠ Hold first Board Meeting of the Company within 30 days from the date of Incorporation to discuss the agenda as written below in explanation I
♠ Opening of Bank Account within 60 days from the date of Incorporation
♠ Injection of Subscription money in the Bank Account of the Company within 60 days from the date of Incorporation
♠ Upon receipt of Subscription money, the Company shall issue share certificates in form SH-1 to the first subscribers within 60 days from the date of Incorporation
♠ Payment of Stamp Duty on Share Certificates within 30 days from the date of issue of share certificates

Explanation I:
Within 30 days from the date of incorporation of the Company, the company shall hold first Board Meeting of the Company and the following agendas are required to be discussed:

Within 30 days from the date of incorporation of the Company, the company shall hold first Board Meeting of the Company and the following agendas are required to be discussed:
Part II: Compliances under GST Act
GST registration
Company in India is required to register under GST Act i.e Goods & Service Act. The government will issue a GSTIN to be used for the future correspondences of the business of the company
Filing of returns
The Company is required to file the periodical (monthly & annually) returns as prescribed by the government on the prescribed due dates to provide detail regarding sale and purchase of goods & services and for claiming the input credit also.
Part III: Compliances under FEMA, RBI/FDI Reporting

 

Within 30 days from the date of allotment of subscription money, Form FC-GPR has to be filled on FIRMS, RBI Portal. And to report the FDI, the Company should register itself with the Entity User and Business user on FIRMS, RBI Portal.
Filling of Annual Return of Assets and Liabilities (“FLA Return”) by 15th day of July every year in respect of FDI on FLAIR portal of RBI and to file FLA Return, the Company should register itself on the FLAIR portal of RBI
Note: In case the subscribers to the memorandum of association of the Company are foreign nationals or the funds have been received by the Company from the country other than India, then the FDI Reporting under FEMA Regulations, 1999 has to be complied with.
Part IV: Compliances with DGFT (Director General of Foreign Trade)
Application to obtain Import Export Code (“IEC”)
Govt. Fees for application for registration is Rs. 500/-.
Application for modification in IEC
The Company is required to intimate about the changes in the details given initially at time of applying IEC to the department for modification in the IEC.

More Good News in Works for Startups

There could be more measures in the offing for startups following the budget announcements. The government is working on another set of measures that could be rolled out soon to make it easier for them to do business in the country.

A new set of tax return forms, aimed at saving angel investors and startups from any questioning by tax officers, will be rolled out by September.

“We would be modifying the return forms, which will allow the system to check if the investment made in the startup is genuinely made by someone capable of making that kind of investment,” a senior government official said.

The move is in line with the e-verification for angel investors in the budget. E-verification seeks to help establish the identity of the investor and source of his funds. Consequently, funds raised by startups will not require any kind of scrutiny by the income-tax department.

The government has extended the tax benefit to category-II Alternative Investment Funds (AIFs). These would also, like category-1 AIFs, not face scrutiny on the valuation of shares held by them in startups.

EOUs can import from Pakistan without paying Customs duty
We are a 100 per cent EOU and manufacturer-exporter of textile readymade garments. We are getting garment orders from our buyer from USA and we have to import fabric from Pakistan. However, as per notification 5/2019-Cus dated February 16, 2019, duty of 200 per cent is applicable under new HS code no. 9806.00 for imports from Pakistan. Can we import fabric from Pakistan under the EOU scheme without paying duty?

As mentioned by you the said notification 5/2019 has inserted anew tariff entry at 98060000 for all goods originating in or imported from Pakistan. The 200 per cent duty is levied against that entry 98060000, which becomes part of the First Schedule to the Customs Tariff Act, 1975. As an EOU, you claim exemption on imported goods under notification no. 52/2003Cus dated March 31, 2003. That notification grants exemption on goods imported by EOUs from the whole of customs duty leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (besides other duties and taxes). Therefore, you can import fabric from Pakistan under the said notification 52/2003 without payment of duty. We are holding an EPCG authorisation. We did some job-work for an exporter by way of embroidery on garments and invoiced to the exporter for the job-work done.

Higher Surcharge to Impact 40% FPIs: Finmin Math
A quick analysis by the finance ministry shows that about 40% of foreign portfolio investors (FPIs) — those that follow the trust structure — will be impacted by the higher surcharge levied in the budget. The majority 60% of FPIs that use the corporate structure will not be impacted.The finance ministry is trying to ascertain why these FPIs, mostly coming in through tax havens, are using the trust structure and how this benefits them, a government source said. Any decision on this will need to consider that special dispensation for FPIs will distort the tax structure, the person said.

FPIs Mull Going ‘Corporate’, But Changing Won’t be Easy
At least 30 big-ticket foreign portfolio investors (FPIs) have reached out to their advisers, seeking advice on converting themselves from trusts and association of persons (AOPs) to corporates after the budget increased the surcharge on the super-rich, said two people aware of the developments.
The funds that have sought advice include two leading US-based mutual funds and a European hedge fund managing over US1 billion of assets in India.

Lawyers and tax consultants have warned FPIs against carrying out such a change in structure since that could invoke the provisions of domestic tax avoidance laws. As per the General Anti-Avoidance Rules (GAAR), tax implications cannot be the sole reason for a fund to make changes to its structure or jurisdiction. If invoked, GAAR could result in penalties and legal action against these funds.

Breather for Exporters as Centre to Pay ITC Refund for State GST
In a major relief to exporters, the Centre will now pay the input tax credit (ITC) refunds of state taxes, thereby reducing transaction time and costs, and manual interface in claim processing.As per industry, there is a huge difference in the amount claimed, state goods and services tax (SGST) sanction amount received from central tax authority and the amount actually disbursed.
“The central government has been authorised to pay the amount of refund towards state taxes to the taxpayers,” according to the 2019-20 budget.

At present, the taxpayers file refund claims with the central tax officer, who clears half the claims, and the rest are cleared by the state tax authorities, leading to higher time taken in claim processing and refund sanctioning.
Exporters also say that ITC refund is partly electronic and partly manual. The exporter files refund application at the portal, takes a printout along with acknowledgement and carries it to GST authorities in hard copy along with required documents, which too vary from authorities to authorities. The physical interface adds to the transaction time and cost.

Tax Incentive for affordable housing
The Finance (No.2) Bill, 2019 has many measures which are forward looking in the sense that some incentives are given to the taxpayers. At the same time it also contains a bundle of regulatory measures warranting strict adherence / compliance for enjoying the tax benefits provided therein.
One of the measures introduced in the Finance (No.2) Bill, 2019 is directed towards affordable housing. Two sections are the focus of this refresher viz. section 80EEA providing extra deduction for home buyers and section 80-IBA which is amended to enlarge the scope of incentive for housing projects. Thus the measures satisfy the personal taxpayers by giving extra deduction while computing total income and also provide incentive for housing projects by enlarging the towns and cities where the project is located.

Chartered accountant in India

Unlocking GSTR 9C

What is GST Audit?
Audit is examination of records, returns and other documents maintained or furnished by the registered person under GST Law or any other law. The examination is to verify the correctness of:

• Turnover declared;
• Taxes paid;
• Refund claimed; and
• Input tax credit availed;

And to assess his compliance with the provisions of this act or the rules made there under.

Who is required to get his accounts audited?
Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of Section 35 and he shall furnish a copy of the audited annual accounts and a reconciliation statement, duly certified, in GSTR 9C, electronically through the common portal.

Who is authorised to do the GST Audit?
Every registered person whose turnover in a financial year exceeds two crore rupees has to get his accounts audited by either a Chartered Accountant or a Cost Accountant.

What is the due date of filling Form GSTR-9C?
The registered person is required to submit electronically a copy of the:

• audited annual accounts(of the legal entity);
• annual return in the prescribed form GSTR 9 (of the registered person);
• reconciliation statement, duly certified, reconciling the value of supplies declared in the return furnished for the financial year along with the audited financial statement in GSTR 9C (refer Appendix for GSTR 9C); and
• such other particulars as prescribed;
• On or before the 31st day of December following the end of the financial year.

However as per the latest notification from GST Council, all registered person are required to file Form GSTR-9C by 31st August, 2019.

CLARIFICATIONS/ QUERIES RELATED TO FORM GSTR-9C
1. What are the pre-conditions for filing Form GSTR 9C?

• User should be registered and should have a valid GSTIN.
• User has filed Form GSTR-9 for the relevant financial year.
• The aggregate turnover of such registered person during the financial year exceeds two crore rupees.
• He should have got his accounts audited as prescribed.

2. What is the role of Chartered Accountant or a Cost Accountant in certifying reconciliation statement?
There are apprehensions that the chartered accountant or cost accountant may go beyond the books of account in their recommendations under FORM GSTR-9C. The GST Act is clearing this regard. With respect to the reconciliation statement, their role is limited to reconciling the values declared in annual return (FORM GSTR-9) with the audited annual accounts of the taxpayer

3. What do you mean by Aggregate Turnover under GST Act?
Aggregate turnover means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

4. Does stock transfer made between two branches having different GSTIN will be included in the Aggregate Turnover?
Yes, the definition of Aggregate Turnover clearly mentions that supplies made between two distinct person having the same Permanent Account Number will be included in the aggregate turnover. Thus stock transfer provided from a branch located in one state to a branch located in another state will be included in the aggregate turnover of the branch supplying the goods or services.

5. Whether Non-GST supplies will be included in the turnover or not?
Non-GST supplies includes supply of alcoholic liquor for human consumption, motor spirit (commonly known as petrol), high speed diesel, aviation turbine fuel petroleum crude and natural gas and transactions specified in Schedule III of the CGST Act.
All above are part of the exempt supplies and the definition of aggregate turnover includes exempt supplies.

6. Whether supplies made between the period April 2017 to June 2017 will be include in the turnover to determine the eligibility for filling of reconciliation statement i.e., Form GSTR-9C?
As per the latest Clarification regarding Annual Returns and Reconciliation Statement, dated 03/07/2019 from the Govt., the aggregate turnover for this purpose shall be reckoned for the period July, 2017 to March, 2018.

7. To determine the limit of aggregate turnover of Rs.2 Crore, GSTIN wise turnover has to be checked?
It may be noted that the aggregate turnover i.e. the turnover of all the registrations having the same Permanent Account Number is to be used for determining the requirement of filing of reconciliation statement. Therefore, if there are two registrations in two different States on the same PAN, say State A (with turnover of Rs. 1.2 Crore) and State B (with turnover of Rs. 1 Crore) they are both required to file reconciliation statements individually for their registrations since their aggregate turnover is greater than Rs.2 Crore.

8. How does turnover of each GSTIN must be derived?
Since the information has to be in the context of each registrant, the Registered Person and the Auditor must be equipped to file the said Form separately for every registration. The Registered Person must be able to carve out a trial balance for every State/UT (viz. every registration) from the consolidated trial balance of the entity for which the financial statements are prepared and audited. If this is not possible, then the Registered Person must derive the transactions of every registration from the single trial balance for the entity which was the subject matter of audit.

9. What other points has to be kept in mind while considering the Turnover from the audited financial statements?
While considering the turnover from the audited financial statements, the Auditor is also Required to include indirect income in the form of dividend, interest, for ex fluctuation, profit on sale of assets, etc. if such income are attributable (based on underlying documents and contracts to relate to the said registered person). Any amount of return supplies credited to purchase or expenditure account would not be considered for the purpose of arriving at the turnover under Sl. No. 5A. Such adjustment has been dealt with under appropriate Sl. No. in this Part.

To ensure completeness and correctness of the details of turnover to be declared, the following checks could be used:
a. turnover in State/UT (in case of single registration) must reconcile to the turnover disclosed in the audited financial statements;
b. turnover in State/UT (in case of multiple registration) must reconcile to the turnover as recorded in the books of accounts of each registration;
c. Master reconciliation to ensure that the details of turnover declared for different registrations (in case of multiple registrations either due to presence in multiple States/UTs’ or due to unit(s) in SEZ) with the total turnover of the entity.

10. What details are to be provided in Sl. No. 5B (Unbilled revenue at the beginning of financial year)?
Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting in the last financial year and was carried forward to the current financial year shall be declared in Sl. No. 5B. In other words, when GST is payable during the financial year on such revenue (which was recognized earlier), the value of such revenue shall be declared here.
(For example, if rupees Ten Crores of unbilled revenue existed for the financial year 2016-17, and during the current financial year, GST was paid on rupees Four Crores of such revenue, then value of rupees Four Crores rupees shall be declared here).

11. What are the adjustments to be included/ excluded from Sl. No.5C of FORM GSTR-9C?
Advances received can be for various purposes. Therefore, the advances on which GST is liable should only be considered for the adjustment. The illustrations of advances to be included/ excluded are as follows:

Include for Adjustment
A. Advance received in respect of services for which the supply has not been made as on 31st March 2018
Revenue not recognized in books, but offered to tax for GST
B. Advance received for Goods before 15th Nov 2017 and the supply of goods not complete as on 31st March 2018
Revenue not recognized in books, but offered to tax for GST

Exclude for Adjustment (GST is not applicable)
A. Advance received for EXEMPTED services as on 31St March 2018
B. Advance received for Goods after 15th Nov 2017
C. Deposits or Loans received

12. How to calculate tax on the Advances Received?
One has calculated tax on advance and paid tax while filing the return for that month. The advance received (if exclusive of tax) would be considered as cum-tax.
Two important points to note:
(a) Whenever the rate of tax cannot be determined during receipt of advance, GST @ 18% has to be charged.
(b) Whenever the nature of supply cannot be ascertained, the advance is considered as inter-State supply and IGST has to be paid.

13. What is the effect of credit notes issued in relation to exempt supplies, zero-rated supplies and non-GST outward supplies?
Supply of exempt, zero-rated and non-GST outward supply of goods and/ or services are not liable to GST. In such a scenario, the credit notes issued for claiming reduction in the taxable value shall be recorded in the audited annual financial statements. Such credit notes should be declared against Part II Sl. No. 5J of FORM GSTR-9C. Where credit notes related to zero-rated supplies are already reported in FORM GSTR-1, in FORM GSTR-9 as well as in books of accounts, such credit notes may not be declared in this Sl. No. 5J.

14. How common cost incurred for all the GSTIN’s will be allocated?
This could be done based on the turnover of each distinct person, or based on manpower deployed, or any other suitable cost-driver relevant to each such cost to be allocated. Manpower employed by the legal entity must also be allocated to Belong to specific branch (GSTIN-wise allocation of staff cost)
If the registered person has registered himself as an ISD then it will allocate the common input credit by issuing prescribed document for the purposes of distributing the credit of GST on the said services to another branch of the same legal person.

For Example:
Head office of ABC limited is located at Bangalore having branches at Chennai, Mumbai and Kolkata. The head office incurred annual software maintenance expense (service received) on behalf of all its branches and received the invoice for the same. Since software is used by all its branches, the input tax credit of entire services cannot be claimed at Bangalore. The same has to be distributed to all the three locations. Here, the Head office at Bangalore is the Input Service Distributor.
Another concept is of Cross Charge, where transactions between distinct persons are deemed as supplies even when such transactions do not involve supply.
Accordingly, stock transfer of goods between the branches or services between the branches being a transaction between distinct persons comes within the ambit of GST Laws and will become GST Liability for the head branch and input for the other branch to whom the services has been provided.

For Example:
XYZ Limited has Head office in Maharashtra, following centralized billing and payment mechanism. XYZ Limited has 2 registrations at Delhi and Karnataka. HO has availed certain audit services on payment of IGST. However, such audit services shall be used at both the locations i.e. Delhi and Karnataka. Thus, when the HO charges for the said audit services to respective locations, it shall be required to supply under an appropriate invoice and cross charge the value of audit services accordingly.

15. Is there any reconciliation required in FORM GSTR-9C in case of sale of capital goods?
In respect of sale of capital goods, only the profit/ loss arising on the sale of such capital goods is disclosed in the Profit and Loss account. Whereas, the GST on supply of capital goods is leviable on the transaction value or input tax credit is reversed as per the formula prescribed in section 18(6) of the CGST Act. In order to reconcile the difference, the profit/ loss arising on sale of such capital goods has to be adjusted along with the transaction value on which GST has been paid under Sl. No. 5O to reconcile with the amount disclosed in FORM GSTR-9. Data for such transactions can be ascertained from the deletions disclosed in the Fixed Asset Schedule / Fixed Assets Register.

16. Is there a separate reporting to be made in FORM GSTR-9C of ITC accounted in books in the current financial year (i.e. 1-July 2017 to 31-Mar-2018) and not claimed in return in FORM GSTR-3B in 2017-18 but claimed in the next financial year 2018-19?
Separate disclosure should be made in Part IV, Sl. No. 12 C of FORM GSTR-9C in respect of all such supplies. This credit can also relate to goods which are in transit as at the close of financial year and which are received in the next year. Thereby, it is to be availed as a bona fide credit in the next financial year.

17. How would Form GSTR 9C be verified and signed by Chartered Accountant/ Cost Accountant?
Once the Chartered Accountant/Cost Accountant fills up, validates and previews the required details in the GSTR-9C Offline Utility and clicks the Generate JSON File to Upload GSTR-9C details on GST Portal button, popup window appears to save the generated JSON file. When he/she selects the desired location to save the file and clicks “Save”, emSigner window automatically opens in a separate Internet Explorer browser window—if he/she has installed emSigner in the machine—using which he/she can sign the file by affixing his/her digital signature on it.
Note: Make sure, in PT V tab of the Worksheet, you have entered the same PAN with which you had registered your DSC. Otherwise, you won’t be able to e-sign using your DSC while generating JSON file.

18. Can the Internal Auditor of the registered person certify FORM GSTR-9C?
An internal auditor cannot certify FORM GSTR-9C as per the instructions issued by ICAI.

19. Can FORM GSTR-9C be certified by a different Chartered Accountant for another distinct person of the same entity?
There is no restriction under the CGST Act or under the ICAI regulation in relation to certification of FORM GSTR-9C by different Chartered Accountant for another distinct person of the same entity.

Accounting company in India | GSTR 9