Festival is here…

Festival unlimited with poojas and celebrations and this year, the month of October became a month of the festival for India. While the whole of the nation celebrates the festival of lights, we professionals would be busy in filing the Annual Filings to the ROC. Need any help, you shall always remember Zappy for ROC related activities.

This month, we thought why don’t we dig into GST which is a new concept which the GST council is trying to bring awareness to the public. Our beloved ICSI also conducted several webinars and videos available at http://www.icsi.edu/GST_events.aspx for GST awareness among professionals. So this is a piece of an initiative by Zappy’s team to help you know a little about this ocean and its impact on CA and CS professional along with our usual Legal Term and updates from MCA, SEBI, RBI and IT Departments.

 Saranya Deivasigamani,
CEO

GST

The legislation amending the Constitution to enable Goods and Services Tax (GST) has become a law with President Pranab Mukherjee giving his assent to the bill ratified by more than 50 percent state assemblies. This is a significant milestone achieved in the implementation of GST that sets the stage for GST Council, which will work out the details of the tax, including the rate at which it will be levied. The Constitution (122nd Amendment) (GST) Bill allows for the introduction of GST that will replace multiple indirect taxes levied by centre and states, creating one national market that is expected to bump up GDP by as high as 2 percent. The government is looking to implement the new tax regime from April 1, 2017. Once the central GST law is finalised, the government would introduce it in the winter session while states would take state GST law to their assembly.

The Goods and Service Tax (GST) will be a comprehensive nationwide indirect tax on the manufacture, sale and consumption of goods and services throughout India. The aim is to have one indirect tax for the whole nation, which will make India a unified common market. GST will be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method and would make not just manufacturing but also the interstate transportation of goods more efficient.

The GST will have two components keeping in mind the federal structure of India: the Central GST (CGST) and the State GST (SGST). Currently, we have Value-Added Tax (VAT) systems both at the central and state levels. But the central VAT or CENVAT mechanism extends tax set-offs only against central excise duty and service tax paid up to the level of production. CENVAT does not extend to value addition by the distributive trade below the stage of manufacturing; even manufacturers cannot claim set-off against other central taxes such as additional excise duty and surcharge. Likewise, state VATs cover only sales. Sellers can claim the credit only against VAT paid on previous purchases. The VAT also does not subsume a host of other taxes imposed by the states such as luxury and entertainment tax, octroi, etc. Once GST comes into effect, all central- and state-level taxes and levies on all goods and services will be subsumed within an integrated tax having two components: a central GST and a state GST. The GST will subsume central taxes such as excise duty and service tax and state taxes including VAT, octroi, entry tax. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.The Regulations were made effective from December 01, 2015. But Regulations relating to (i) passing of ordinary resolution instead of special resolution in case of all material related party transactions subject to related parties abstaining from voting on such resolutions, in line with the provisions of the Companies Act, 2013, and (ii) re-classification of promoters as public shareholders under various circumstances, shall be effective from September 02, 2015 itself.

Central taxes that the GST will replace

• Central Excise Duty
• Duties of Excise (medicinal and toilet preparations)
• Additional Duties of Excise (goods of special importance)
• Additional Duties of Excise (textiles and textile products)
• Additional Duties of Customs (commonly known as CVD)
• Special Additional Duty of Customs (SAD)
• Service Tax
• Countervailing Duty
• Cesses and surcharges in so far as they relate to the supply of goods or services.

State taxes that the GST will subsume

• State VAT
• Central Sales Tax
• Purchase Tax
• Luxury Tax
• Entry Tax (all forms)
• Entertainment Tax (not levied by local bodies)
• Taxes on advertisements
• Taxes on lotteries, betting and gambling
• State cesses and surcharges

The introduction of GST would be a significant step in the reform of indirect taxation in India. Amalgamating several central and state taxes on a single tax will mitigate cascading or double taxation, facilitating a common national market. This would be hugely beneficial for consumers as the tax burden on inter-state logistics will be cheaper. A common tax would mean easy compliance and uniformity of tax rates and structures for industry and would thus contribute to ease of doing business by removing cascading costs. For central and state governments, GST is expected to lead to easier administration and enforcement. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilisation of credit would be permitted.

Probable Rate Structure in GST

Exclusions in GST

Following products are excluded from GST –

• Petroleum Products
• Alcoholic Beverages
• Diesel
• Tobacco

Advantages of GST Bill

Introduction of GST will bring following benefits –

• Multiple Taxation is removed.
• Goods and Services are taxed at same rate.
• Taxes on the Manufacturers are reduced.
• It helps in the seamless flow of credit in the country.

Disadvantages of GST Bill

• The tax on services would go from 14 to 20% after the implementation of GST.
• The Tax on retails will almost get doubled.
• The tax on imported Goods will be around 6%.
• There will be a control on every system by the Central and State Governments.

In a single line, we can say that GST will simplify administration, improve compliance and remove distortions in production, trade and consumption.

Legal Term

Surrebuttal

Surrebuttal is a response to the opposing party’s rebuttal; in essence, it is a rebuttal to a rebuttal.

Rebuttal

Rebuttal is a form of evidence that is presented to contradict or nullify other evidence that has been presented by an adverse party. By analogy, the same term is used in politics and public affairs to refer to the informal process by which statements, designed to refute or negate specific arguments put forward by opponents, are deployed in the media.

MCA Updates

• e-Form INC-29 (Integrated Incorporation Form) will be withdrawn w.e.f. 1st November, 2016. MCA has initiated Government Process Re-engineering (GPR) and launched Simplified proforma for Incorporating Company Electronically (SPICe) along with electronic MoA (SPICe MoA) and electronic AoA (SPICe AoA) e-Form, INC-2 (One Person Company), or INC-7 (Incorporation of Company) e-Forms, are available for incorporation.
• Costing taxonomy 2012 for filing Forms I-XBRL and A-XBRL along with business rules is available on XBRL portal w.e.f. 08 Oct 2016.
• C&I taxonomy, for filing Annual Financial Statements in AOC-4 XBRL is being amended to include mandatory CSR / CARO related details and others changes. The revised business rules along with the change sheet and Taxonomy (2016) are available on MCA portal w.e.f. 05, October, 2016. The updated C&I Taxonomy 2016 should be used for filing annual financial statements in respect of financial years commencing on or after 01.04.2014.
• Filing Form 3 within 30 days of incorporation of LLP is mandatory.

SEBI Updates

• RBI in its Fourth Bi-monthly Policy Statement for the year 2015-16, dated September 29, 2015 had announced a Medium Term Framework (MTF) for FPI limits in Government securities in consultation with the Government of India. Accordingly, SEBI had issued circulars CIR/IMD/FPIC/8/2015 dated October 06, 2015 and IMD/FPIC/CIR/P/2016/45 dated March 29, 2016 regarding the allocation and monitoring of FPI debt investment limits in Government securities.

RBI Updates

• Import Data Processing and Monitoring System (IDPMS) has been developed in consultation with the Customs authorities and other stakeholders.

Income Tax Updates

• Income-tax (23rd till 27thAmendment) Rules, 2016 were notified in this month on various sections.
• Backward Area Notification for the State of Andhra Pradesh for the purpose of Tax incentives under Section 32AD and 32 of the Income-tax act,1961
• Section 145 of the Income-tax Act, 1961 – Method of Accounting – Income Computation and Disclosure Standards (ICDS) Notified under section 145(2) – Rescission of Notification No. SO 892(E), Dated 31-3-2015