IndianCAs by Ashwin Nagar

20 November 2009

Good transactions under Goods and Services Tax

Prepared By: - CA Pradeep Jain,

Sukhvinder Kaur, LLB (FYIC)

Siddharth Rutiya

Visit us : www.capradeepjain.com

Introduction: -

The indirect tax regime in India is evolving into GST in the year 2010. The steps towards introduction of GST have commenced. The Empowered Committee of State Finance Ministers has introduced the First Discussion Paper on GST in India on November 10, 2009. A dual structure of Central GST (CGST) and State GST (SGST) is proposed to be imposed on the manufacture of goods and on provision of services. A continuous chain of set-off from the original producer's point and service provider's point upto the retailer's level would be established which would eliminate the burden of all cascading effects.

For sale or services transactions between two states (inter-state), the Government has proposed to impose Inter State GST (IGST) which will include both CGST and SGST. Between the Inter-state transactions and Intra-state transactions which will be more beneficial to the assessee is the topic of discussion of this Article.

Transactions with in a state: -

The manufacture and sale of goods as well as provision of services if carried within a state, then CGST and SGST will be leviable on such activities. As per the proposed plan, the assessee will be required to pay element of both CGST and SGST separately. Assessee is required to deposit both CGST and SGST in separate revenue accounts. The Input Tax Credit (ITC) is also allowed to be taken separately for CGST and SGST. The assessee is required to file the returns separately.

The credit of CGST taken by the assessee will have to be utilised to pay CGST only and credit of SGST taken is to be utilised to pay SGST only. Cross adjustment of tax credit between CGST and SGST will not be allowed.

Intra-State Transactions: -

For the inter-state transactions of goods and services, the Empowered Committee has adopted the IGST model. The scope of IGST model, as discussed in First Discussion Paper, is that the IGST will be levied by the Centre and it would be CGST plus SGST on all inter-state transactions of taxable goods and services.

It is proposed that the inter-state seller will pay IGST on value addition after adjusting available credit of IGST, CGST and SGST on his purchases. The Exporting state will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.

The major advantages of IGST Model as per discussion paper are as under: -

- Maintenance of uninterrupted ITC chain on inter-State transactions.

- No upfront payment of tax or substantial blockage of funds for the inter-state seller or buyer.

- No refund claim in exporting State, as ITC is used up while paying the tax.

- Self monitoring model.

- Level of computerization is limited to inter-State dealers and Central and State Governments should be able to computerize their processes expeditiously.

- As all inter-State dealers will be e-registers and correspondence with them will be by e-mail, the compliance level will improve substantially.

- Model can take `Business to Business' as well as `Business to Consumer' transactions into account.

Thus, in case of inter-state transactions, the credit can be adjusted in both CGST and SGST. The credit of IGST can be used to for payment of either CGST or SGST.

In case Exemption is granted from CGST: -

It is also proposed in the said discussion paper that the exemption from CGST will be separate as that from the SGST. The exemption limit proposed in CGST is Rs. 150 Lakhs which is at par with exemption limit for small scale manufacturers under the Central Excise Act, 1944. But the exemption from SGST is kept at par with the current VAT exemption limit. Similarly, the discussion paper says that the service provider exemption from CGST should be kept high as currently they are enjoying exemption of Rs. 10 Lakhs. But there is no hint given for exemption limit for service providers from SGST.

Even the discussion paper brings out a peculiar situation wherein the State Authorities will be empowered under their respective state GST statutes to exempt various goods that are of peculiar nature looking to the specificity existing in that state. If such a power is being granted to the states then the situation will be that certain goods will be exempted by SGST in that state, however, CGST will be levied on those products.

Thus, it is clear that there will be separate exemption for CGST and SGST. Further, if the CGST is exempt then the assessee will not be allowed to take the credit of CGST. Similarly, if the SGST is exempt then credit of the same will not be allowed.

Now, suppose an assessee is granted exemption from CGST but SGST is applicable, then the credit of CGST will not be available to him but he will be able to take the credit of SGST. From this aspect if we consider transactions from one state to another then IGST will be paid as it will be available as credit since SGST is payable on his final product or output services. Then he will be able to take the credit of IGST which is sum total of CGST and SGST. He will be more benefited as the CGST is not payable but he will be able to take the credit of CGST in garb of IGST. He will adjust the same in payment of SGST.

If this happens then it will lead to situation where an assessee is exempted either from CGST or SGST and the other is payable, then in such situation he will like to procure goods or services from outside state rather than inside the state. This will reverse the position as existing now in the VAT. In current regime, if one purchase from outside state then he has to pay CST and the credit of same is not available. But if an assessee purchases goods inside the state then VAT is payable and credit of the same is available. As such, everyone intends to purchase the goods from inside the state.

Although it is very premature to say as only discussion paper is published for the GST but we have prepared the article on our understanding of the said paper. Looking to the recommendations as depicted in the discussion paper the situation as picturized by us in this article seems to be more factual but nothing can be expressed with utmost certainty as the law and GST code is yet to be released by the Government.

Before Parting: -

Thus, from the above discussion, the inter-state transactions appear to be more beneficial to the assessee who is providing output service or is manufacturing final product. This is because the assessee will not be paying the tax in cash and will be able to utilize the credit of IGST to do so. The views expressed by us in this article are the views as understood by us while analyzing the recommendations of Empowered Committee of State Finance Ministers and in no way signifies the views of the Government. The scenario as analyzed by us above will be clear only after the Government releases a GST code or further clarification on this matter. From Government's side also, the utmost care has to be taken of this point while drafting the rules and regulations for GST.

19 November 2009

Sad Demise of CA Rahul Roy, Past President, ICAI

ICAI MOURNS THE SAD AND SUDDEN DEMISE OF ITS PAST PRESIDENT, CA. RAHUL ROY (19-11-2009)

ICAI MOURNS THE SAD AND SUDDEN DEMISE OF ITS

PAST PRESIDENT, CA. RAHUL ROY

CA. Rahul Roy, past President of the ICAI passed away last night.

CA. Roy was born on 4th October, 1963 and became the youngest President of the ICAI in the year 1998-99 at the age of 34. He was elected to the Central Council for the first time for the term 1995-98 and was elected as the Vice President in the first term itself. He served the Council for two terms from 1995 to 2001. Prior to that, he was elected to the Eastern India Regional Council for the term 1992-95. During his tenure in the EIRC which he served for one term, he served as its Secretary, Vice Chairman and Chairman.

CA. Roy represented India in the IFAC's Ethics Committee of IFAC and in the Steering Group on Formulations for Extractive Industries of the International Accounting Standards Committee.

CA. Roy is survived by his wife, Mrs. Soma Roy and a 14 year old daughter, Rohini.

The cremation will take place at 2.00 PM tomorrow i.e. 20th November, 2009 at Kolkata. Prior to that, at 12.00 noon tomorrow, his body will be kept at EIRC premises for members, students and others to pay their last respects.

--
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18 November 2009

CBDT on DTC

CBDT feels tax code needs major rework

Corporate India is not the sole critic of the Direct Taxes Code. The code, precursor to a brand new income tax law, has found opposition from within government, too. An internal committee of the Central Board of Direct Taxes, the principal policy-maker in the domain, has called for a thorough review of the code, including a revision of the income tax slabs and the definition of 'income from salaries'.

The committee has mooted a review of the proposed income tax rates, fearing significant revenue losses. It has also proposed a narrowing of the tax slabs. The concern is that the proposal to tax annual income between Rs 1.6 lakh and Rs 10 lakh at the lowest rate of 10% could affect revenue streams even if all perks are added in the definition of salary income.

As for corporate tax, the panel has suggested retaining the current 30% tax, instead of at the proposed 25%.

The code has proposed a radical shift in the tax rates on the rationale that lower rates lead to better compliance. Accordingly, it has suggested taxing annual income between Rs 1.6 lakh and Rs 10 lakh at a rate of 10%, annual income between Rs 10 lakh and Rs 25 lakh at 20% and income above Rs 25 lakh at 30%.

Coming out in aid of salaried employees, the panel has also called for re-examining the definition of salary income. It has suggested that allowances given

to an employee for the discharge of his official duties should be excluded, to avoid the hassles of record keeping for employees and tax officials. Further, reimbursement for medical expenses and employer's contributions to provident fund should not be clubbed with salary income.

In contrast, the code has mooted that all perquisites should be included in salary income and proposed to do away with exemptions such as house rent allowance, leave travel concession, leave encashment and medical reimbursement.

Significantly, the committee has said retirement savings should not be brought under the exempt-exempt-tax (EET) regime as it will be 'unnecessarily harsh' on tax payers.

It has also called for reviewing proposals on international taxation, especially those relating to general anti-avoidance rules (GAAR). At present, the code proposes that under GAAR, the revenue department can make a presumption that an arrangement is entered into by two entities for tax benefit (tax avoidance) alone, unless it is rebutted by the taxpayer. It has suggested that specific provisions should say when such a presumption would be made.

The code, which seeks to replace the Income Tax Act, 1961, was earlier criticised by the National Academy of Direct Taxes–the training and education body for direct taxes—which had even questioned the basis of the draft legislation. It had said instead of a complete overhaul , the IT Act can be simplified by adding new circulars & notifications and recent judgments. It had also said the code was prepared without consulting field formations, trade and industry.

Source : Financial Express

17 November 2009

IndianCAs: Sleep and Heart Attacks(What killed Ranjan Das and Lessons for Corporate India)

What killed Ranjan Das and Lessons for Corporate India

A month ago, many of us heard about the sad demise of Ranjan Das from Bandra, Mumbai. Ranjan, just 42 years of age, was the CEO of SAP-Indian Subcontinent, the youngest CEO of an MNC in India. He was very active in sports, was a fitness freak and a marathon runner. It was common to see him run on Bandra's Carter Road. Just after Diwali, on 21st Oct, he returned home from his gym after a workout, collapsed with a massive heart attack and died. He is survived by his wife and two very young kids.

It was certainly a wake-up call for corporate India. However, it was even more disastrous for runners amongst us. Since Ranjan was an avid marathoner (in Feb 09, he ran Chennai Marathon at the same time some of us were running Pondicherry Marathon 180 km away), the question came as to why an exceptionally active, athletic person succumb to heart attack at 42 years of age.

Was it the stress?

A couple of you called me asking about the reasons. While Ranjan had mentioned that he faced a lot of stress, that is a common element in most of our lives. We used to think that by being fit, one can conquer the bad effects of stress. So I doubted if the cause was stress.

The Real Reason

However, everyone missed out a small line in the reports that Ranjan used to make do with 4-5 hours of sleep. This is an earlier interview of Ranjan on NDTV in the program 'Boss' Day Out':

http://connect.in.com/ranjan-das/play-video-boss-day-out-ranjan-das-of-sap-india-229111-807ecfcf1ad966036c289b3ba6c376f2530d7484.html

Here he himself admits that he would love to get more sleep (and that he was not proud of his ability to manage without sleep, contrary to what others extolled).

The Evidence

Last week, I was working with a well-known cardiologist on the subject of 'Heart Disease caused by Lack of Sleep'. While I cannot share the video nor the slides because of confidentiality reasons, I have distilled the key points below in the hope it will save some of our lives.

Some Excerpts:

· Short sleep duration (<5 or 5-6 hours) increased risk for high BP by 350% to 500% compared to those who slept longer than 6 hours per night. Paper published in 2009.

As you know, high BP kills.

· Young people (25-49 years of age) are twice as likely to get high BP if they sleep less. Paper published in 2006.

· Individuals who slept less than 5 hours a night had a 3-fold increased risk of heart attacks. Paper published in 1999.

· Complete and partial lack of sleep increased the blood concentrations of High sensitivity C-Reactive Protein (hs-cRP), the strongest predictor of heart attacks. Even after getting adequate sleep later, the levels stayed high!!

· Just one night of sleep loss increases very toxic substances in body such as Interleukin-6 (IL-6), Tumour Necrosis Factor-Alpha (TNF-alpha) and C-reactive protein (cRP). They increase risks of many medical conditions, including cancer, arthritis andheart disease. Paper published in 2004.

· Sleeping for <=5 hours per night leads to 39% increase in heart disease. Sleeping for <=6 hours per night leads to 18% increase in heart disease. Paper published in 2006.

Ideal Sleep

For lack of space, I cannot explain here the ideal sleep architecture. But in brief, sleep is composed of two stages: REM (Rapid Eye Movement) and non-REM. The former helps in mental consolidation while the latter helps in physical repair and rebuilding. During the night, you alternate between REM and non-REM stages 4-5 times.

The earlier part of sleep is mostly non-REM. During that period, your pituitary gland releases growth hormones that repair your body. The latter part of sleep is more and more REM type.

For you to be mentally alert during the day, the latter part of sleep is more important. No wonder when you wake up with an alarm clock after 5-6 hours of sleep, you are mentally irritable throughout the day (lack of REM sleep). And if you have slept for less than 5 hours, your body is in a complete physical mess (lack of non-REM sleep), you are tired throughout the day, moving like a zombie and your immunity is way down (I've been there, done that L)

Finally, as long-distance runners, you need an hour of extra sleep to repair the running related damage.

If you want to know if you are getting adequate sleep, take Epworth Sleepiness Test below.

Error! Filename not specified.

Interpretation: Score of 0-9 is considered normal while 10 and above abnormal. Many a times, I have clocked 21 out the maximum possible 24, the only saving grace being the last situation, since I don't like to drive (maybe, I should ask my driver to answer that lineJ)
In conclusion:

Barring stress control, Ranjan Das did everything right: eating proper food, exercising (marathoning!), maintaining proper weight. But he missed getting proper and adequate sleep, minimum 7 hours. In my opinion, that killed him.

If you are not getting enough sleep (7 hours), you are playing with fire, even if you have low stress.

I always took pride in my ability to work 50 hours at a stretch whenever the situation warranted. But I was so spooked after seeing the scientific evidence last week that since Saturday night, I ensure I do not even set the alarm clock under 7 hours. Now, that is a nice excuse to get some more sleep. J

Unfortunately, Ranjan Das is not alone when it comes to missing sleep. Many of us are doing exactly the same, perhaps out of ignorance. Please forward this mail to as many of your colleagues as possible, especially those who might be short-changing their sleep. If we can save even one young life because of this email, I would be the happiest person on earth.

| Ashwin Nagar | FCA and SAP-FICO\SEM-BCS |

Success is not permanent and failure is not final

Ph: India: +91-98330-15352 US: +1-323-325-4111

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16 November 2009

Report of ITD on e-Return

Report on the Quality of Data and Matching of TDS / TCS Claims in your E-Return -

Dear Taxpayer,

Subject: Report on the Quality of Data and Matching of TDS / TCS Claims in your E-Return - Reg

1. Income Tax Department congratulates you for filing your Income Tax return electronically. As a pro-active measure, a Data Quality and Matching Report for TDS and TCS claims in I-T Return is being sent as an attachment to this email.

2. The objective of issuing the Data Quality and Matching Report for TDS and TCS claims in I-T Return is:

a. To enable you to ascertain the extent of matching of your TDS / TCS claims in the Income Tax Return filed by you with the TDS / TCS reported by the tax Deductors /Collectors. In case the matching is 100%, you may be assured of accurate credit and quicker processing of the I-T Return.

b. To enable you to take up the matter pertaining to any deficiencies or mismatches in the TDS / TCS reported with your Deductor / Collector so that the corrective action can be taken by them by filing an updated E-TDS return with NSDL with your correct PAN or TDS amount.

c. To enable you to identify claims made by you using invalid TAN. In all cases where TAN is invalid the "Name of the Deductor" is mentioned as "INVALID TAN" and in all such cases no match is possible. The TAN in these cases would have to rectified by you by filing a revised Return of Income with correct TAN.

3. The TDS / TCS credit information available are based on the valid PAN details submitted by the Deductors up to the date mentioned in the Data Quality and Matching Report for TDS and TCS claims in I-T Return. Please note that all TDS /TCS from the same Deductor / Collector is added and consolidated as a single entry, both on the claims side as well as on the data reported to Department side.

4. To open the statement, please enter the PAN and date of birth in case of individualtax payers and the date of incorporation for non-individual tax payers as password in theformat of AAAAA1234ADDMMYYYY in lowercase. The date of birth / incorporation should be same as furnished to the Department and available in the Income Tax Department PAN master (as printed on the PAN card).

For example, if your PAN is AZZPZ2398K and date of birth / incorporation is January 21, 1985 then the password will be azzpz2398k21011985

5. The Data Quality and Matching Report is in the attached ZIP file with your PAN as the file name. To open the file all you need is any Unzip software and MS Excel or Open Office Excel compatible software.

6. Please note that this email does not convey any confirmation of acceptance or rejection of any TDS or TCS claim and neither does this indicate that processing has been completed or will be completed in any manner.The Report merely conveys a factual position of the extent of match between your claims and data reported to the Department as on the date specified.The details given herein may be altered upon receipt of updated E-TDS / TCS returns filed by Deductors / Collectors subsequent to the specified date.

7. This is a special service for the benefit of taxpayers who have chosen to file their I-T returns electronically and is being sent to you at the email address mentioned by you in the Income Tax Return.

This is a system generated mail. Please do not reply back to this email ID.
For and on behalf of
The Income Tax Department
(This is a computer generated mail and calls for no signature)