15 things you should know about Model GST Law

On June 14, 2016 the Finance Ministry has released the 'Model GST Law'. It outlines the structure of the GST regime. Further, the draft of 'Integrated GST Bill, 2016' is also released along with such Model GST laws. It also provides the framework for levy and collection of CGST and SGST. "CGST" is the tax levied under the Central Goods and Services Tax Bill, 2016. "IGST" is the tax levied under the Integrated Goods and Services Tax Bill, 2016.

Key takeaways from ModelGST law are given hereunder:

1) Threshold limit for registration

The dealer is required to take registration under this law if his aggregate turnover in a financial year exceeds Rs.9 lakhs. However, dealers conducting business in any North Eastern State are required to take registration if their turnover exceeds Rs.4 lakhs.

2) Place of registration

The dealer has to take registration in the State from where taxable goods or services are supplied.

3) Migration of existing taxpayers to GST

Every person already registered under extant law will be issued a certificate of registration on a provisional basis. This certificate shall be valid for period of 6 months. Such person will have to furnish the requisite information within 6 months and on furnishing of such information, final registration certificate shall be granted by the Central/State Government.

Sec. 246A doesn’t allow filing of appeal before CIT(A) against order passed by AO under Sec. 195(2)

Facts:

a) ONGC entered into a contract with Abu Dhabi Ship Building PJSC and Rodman Polyship, Vigo, Spain for construction of Immediate Support Vessels (ISV).

b) ONGC filed application before the Assessing Officer (AO) under section 195(2) requesting for approval for non–deduction of tax at source on payment for the construction of the ISVs.

c) AO rejected the application as he was of the view said payments were taxable in India and, thus, liable to tax deduction at source under section 195.

d) Abu Dhabi Ship Building (payee) filed an appeal before the CIT (Appeals) challenging the order under section 195(2). CIT (A) reversed the order of AO.

e) Aggrieved by the order of CIT (A), revenue filed the instant appeal before the Tribunal. The issue before the Tribunal was as under:

Dividend income of Indian co. was exempt if Brazilian co. had paid taxes above 15% before distribution of dividend

Facts:

a)    Assessee, an Indian company, invested certain amount in equity capital of Brazilian company and received certain dividend income during the year.

b)    Assessing Officer (AO) contended that dividend was received by assessee from a foreign company. Therefore, it would not fall in the ambit of dividend distribution tax as contemplated in section 115-O and, accordingly, it would not be exempt under section 10(34).

c)    Assessee contended that Brazilian company had already paid tax at the rate of 34% on its profits , i.e., in excess of rate of 15% as prescribed in paragraph 2 of Article 10 of DTAA between India and Brazil (DTAA), before distribution of dividend income. Therefore, it wouldn’t be liable to pay tax on such dividend income in India in terms of Paragraph 3 of Article 23 of India-Brazil DTAA.

d)    CIT (Appeals) set aside the addition taking view that the AO did not consider DTAA provisions while considering the taxability of dividend in India.

e)    Aggrieved by the order of CIT (A), revenue filed the instant appeal before the tribunal.

15 things you should know about Model GST Law

On June 14, 2016 the Finance Ministry has released the 'Model GST Law'. It outlines the structure of the GST regime. Further, the draft of 'Integrated GST Bill, 2016' is also released along with such Model GST laws. It also provides the framework for levy and collection of CGST and SGST. "CGST" is the tax levied under the Central Goods and Services Tax Bill, 2016. "IGST" is the tax levied under the Integrated Goods and Services Tax Bill, 2016. Key takeaways from Model GST law are given hereunder:

1) Threshold limit for registration

The dealer is required to take registration under this law if his aggregate turnover in a financial year exceeds Rs.9 lakhs. However, dealers conducting business in any North Eastern State are required to take registration if their turnover exceeds Rs.4 lakhs.

2) Place of registration

The dealer has to take registration in the State from where taxable goods or services are supplied.

3) Migration of existing taxpayers to GST

Every person already registered under extant law will be issued a certificate of registration on a provisional basis. This certificate shall be valid for period of 6 months. Such person will have to furnish the requisite information within 6 months and on furnishing of such information, final registration certificate shall be granted by the Central/State Government.

4) GST compliance rating score

Every taxable person shall be assigned a GST compliance rating score based on his record of compliance  ith the provisions of this Act. The GST compliance rating score shall be updated at periodic intervals and intimated to the taxable person and also placed in the public domain.

5) Levy of Tax

The person registered under this law is liable to pay tax if his aggregate turnover in a financial year exceeds Rs 10 lakhs. However, a dealer conducting business in any of the North Eastern is required to pay tax if his aggregate turnover exceeds Rs. 5 lakhs. A negative list has also been prescribed for transactions and activities of Government and Local Authorities which shall be exempt from GST levy, like activities of issuance of passport, visa, driving license, birth certificate or death certificate, etc.

6) Taxable Event

The taxable event under GST regime will be supply of goods or services. Supply includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration. It also includes importation of service, whether or not for a consideration.

Amritsar based CA gets life time ban for being mastermind of accommodation entries

Chartered Accountant Act, 1949: Name of practicing Chartered Accountant shall be removed from register of members for life as he was master mind in scam of providing accommodation entries and was held guilty of professional misconduct. Facts:

a) The allegations against respondent, a practicing Chartered Accountant at Amritsar, were that he was master-mind in a scam of providing accommodation entries to various concerns after charging commission ranging from 1% to 3%.He was also operating all benami bank accounts.

b) After receipt of the complaint, proceedings were initiated against Chartered Accountant. Copy of the complaint was sent to him, however, the notice was received back undelivered with postal remarks “left country”. The matter was considered in the meeting of the Disciplinary Council in its meeting and Chartered Accountant was found guilty of professional and other misconduct.

c) After considering the submissions of the complainant, the Council accepted the report of the Disciplinary Committee. The Council, decided to recommend to this court for removal of the name of Chartered Accountant from the register of members for a period of 10 years.

d) The submission of learned counsel for the ICAI is that not only the recommendations made by the Council be accepted, but seeing the conduct of Chartered Accountant, he deserves to be penalised by removing his name from the register of members for life.

The Law not applied – a mistake apparent from the record

Rectification of mistake.

154. [(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,—

(a)			amend any order passed by it under the provisions of this Act ;
[(b)			amend any intimation or deemed intimation under sub-section (1) of section 143;]]
[(c)			amend any intimation under sub-section (1) of section 200A;]
[(d)			amend any intimation under sub-section (1) of section 206CB. ]

1. The purpose of this study is to examine the scope of the usage "rectifying any mistake apparent fromthe record", as appearing in section 154. The pre-condition for the rectification of any mistake is that it should be an apparent mistake, obvious from the record. Interestingly, the terms mistake, apparent, &the record have not been defined in the Act, hence are subject to judicial interpretation.

Unabsorbed depreciation deductible from book profits even if it was adjusted under rehabilitation Scheme

Facts:

a) The assessee-company made huge loss and its net worth got wiped out. Therefore, the case of the assessee was referred to BIFR under SICA. It was declared as 'sick' industrial unit. 

b) The Board has sanctioned the rehabilitation scheme and, all credit amounts lying in various accounts, such as, equity share capital account, share premium account, etc. were transferred to credit of rehabilitation account. Ultimately, the credit balance in that account was used to liquidate the debit balance of profit & loss account by way of transfer of debit balance of P&L to the rehabilitation scheme account to the extent of credit balance available therein.

c) Since the net worth of the company was negative till AY 2008-09, it was not under the obligation to pay book-profit tax as per clause(vii) of Explanation to section 115JB. During AY 2012-13, assessee claimed deduction of unabsorbed depreciation loss of earlier years while computing the book profit. However, AO denied such deduction. He held that once the assessee made credits in the P&L account by way of restructuring , then the debit balance would be considered as wiped out from the P&L account and thus no unabsorbed depreciation would be available for reduction under Section 115JB.On appeal, CIT(A) upheld AO’s order.

Transaction charges paid to Stock Exchange don't attract sec. 194J TDS

Facts:

a) The assessee debited certain amount on account of transaction charges paid to the Stock Exchange. The Assessing Officer disallowed such charges on the ground that the assessee had not deducted tax at source while making the payment of transaction charges.

b) The Commissioner (Appeals) held that the transaction charges were paid to the Stock Exchange for rendering the managerial services which constituted fees for technical services under section 194J and, hence, the assessee was liable to deduct tax at source before crediting the transaction charges to the Stock Exchange. In that view of the matter, the disallowance was upheld.

c) The aggrieved-assessee filed the instant appeal. 

The Tribunal held in favour of assessee as under:

InvITs- A New Investment Gateway for Infrastructure Growth in India

Introduction

1. Large scale, efficient Infrastructure is the basic requirement for any economy to function competitively. This is also essential to maintain and updated these infra for continuous growth and smooth running of economy.

With the vision of Make in India, our Prime Minister has given much emphasis on infrastructure growth and taking various steps to revive the sector. Several infrastructure projects which are under development in India are on hold or delayed due to various reasons. These infra systems are high-cost investments.

The infrastructure projects comprising roads and highways, ports, power, Communication and water sanitation projects etc. have been facing severe liquidity crunch due to the limited funding options, high interest cost and lack of investor interest. Witnessing the requirement for infrastructure in a country like India coupled with the huge funding requirements of the infrastructure developers, the structureof InvIT seems to be a much needed and a welcome introduction.

Finance Minister Mr. Arun Jaitely announces exemption from dividend distribution tax (DDT) by a domestic company to business trust (InvITs) in his speech in Budget 2016 . This announcement has suddenly given momentum to attract investor in Infra companies.

Custom duty borne by purchaser would be deductible even if liability disputed by importer seller

Facts:

a) Assessee-firm purchased certain imported products under two agreements. The price as agreed in both the cases was the gross costs to the sellers with certain amount of net profit. The gross cost included all expenditure incurred by the sellers for supplying the goods to the assessee.

b) However, as there was uncertainty about the incidence of customs duties, the parties inserted a clause in the agreements, to make it clear that any liability with respect to duty of customs payable by the seller, would be a part of the costs and the buyer (assessee) would pay for the same. In terms of the contract the assessee was required to pay custom duty of Rs 1.78 crores to its seller as a part of the cost of the goods.

c) While completing assessment, the Assessing Officer accepted expenditure incurred on account of customs duty. There after, the CIT, in exercise of powers under section 263, reversed assessment order holding that the amount of custom duty was a contingent liability as the sellers of goods had challenged the same in the Supreme Court.

d) On appeal, the Tribunal held that liability on account of customs duty was to be allowed as the deduction on accrual basis. Aggrieved-revenue filed the instant appeal. The High Court held in favour of assessee as under: