Wednesday, 30 December 2015

Rules regarding quoting of PAN for specified transactions amended W.E.F 1st January 2016

The Government is committed to curbing the circulation of black money and widening of tax base. To collect information of certain types of transactions from third parties in a non-intrusive manner, the Income-tax Rules require quoting of Permanent Account Number (PAN) where the transactions exceed a specified limit. Persons who do not hold PAN are required to fill a form and furnish any one of the specified documents to establish their identity.
              One of the recommendations of the Special Investigation Team (SIT) on Black Money was that quoting of PAN should be made mandatory for all sales and purchases of goods and services where the payment exceeds Rs.1 lakh. Accepting this recommendation, the Finance Minister made an announcement to this effect in his Budget Speech. The Government has since received numerous representations from various quarters regarding the burden of compliance this proposal would entail. Considering the representations, it has been decided that quoting of PAN will be required for transactions of an amount exceeding Rs.2 lakh regardless of the mode of payment.
             To bring a balance between burden of compliance on legitimate transactions and the need to capture information relating to transactions of higher value, the Government has also enhanced the monetary limits of certain transactions which require quoting of PAN. The monetary limits have now been raised to Rs. 10 lakh from Rs. 5 lakh for sale or purchase of immovable property, to Rs.50,000 from Rs. 25,000 in the case of hotel or restaurant bills paid at any one time, and to Rs. 1 lakh from Rs. 50,000 for purchase or sale of shares of an unlisted company. In keeping with the Government’s thrust on financial inclusion, opening of a no-frills bank account such as a Jan Dhan Account will not require PAN.  Other than that, the requirement of PAN applies to opening of all bank accounts including in co-operative banks.
             The changes to the Rules will take effect from 1st January, 2016.
The above changes in the rules are expected to be useful in widening the tax net by non-intrusive methods. They are also expected to help in curbing black money and move towards a cashless economy.
A chart highlighting the key changes to Rule 114B of the Income-tax Act is attached.

Existing requirement
New requirement
Immovable property
Sale/ purchase valued at Rs.5  lakh or more
i.       Sale/ purchase exceeding Rs.10 lakh;
ii.     Properties valued by Stamp Valuation authority at amount exceeding Rs.10 lakh will also need PAN.
Motor vehicle (other than two wheeler)
All sales/purchases
No change
Time deposit
Time deposit exceeding Rs.50,000/- with a banking company
i.      Deposits with Co-op banks, Post Office, Nidhi, NBFC companies will also need PAN;
ii.    Deposits aggregating to more than Rs.5 lakh   during the year will also need PAN
Deposit with Post Office Savings Bank
Exceeding Rs.50,000/-
Sale or purchase of securities
Contract for sale/purchase of a value exceeding Rs.1 lakh
No change
Opening an account (other than time deposit) with a banking company.
All new accounts.
i. Basic Savings Bank Deposit Account excluded (no PAN requirement for opening these accounts);
ii. Co-operative banks also to comply
Installation of telephone/ cellphone connections
All instances
Hotel/restaurant bill(s)
Exceeding Rs.25,000/- at any one time (by any mode of payment)
Cash payment exceeding Rs.50,000/-.
Cash purchase of bank drafts/ pay orders/ banker's cheques
Amount aggregating to Rs.50,000/- or more during any one day
Exceeding Rs.50,000/- on any one day.
Cash deposit with banking company
Cash aggregating to Rs.50,000/- or more during any one day
Cash deposit exceeding Rs.50,000/- in a day.
Foreign travel
Cash payment in connection with foreign travel  of an amount exceeding Rs.25,000/- at any one time (including fare, payment to travel agent, purchase of forex)
Cash payment in connection with foreign travel or purchase of foreign currency of an amount exceeding Rs.50,000/- at any one time (including fare, payment to travel agent)
Credit card
Application to banking company/ any other company/institution for credit card
No change.
Co-operative banks also to comply.
Mutual fund units
Payment of Rs.50,000/- or more for purchase
Payment exceeding Rs.50,000/- for purchase.
Shares of company
Payment of Rs.50,000/-  or more to a company for acquiring its shares
i.      Opening a demat account;
ii.    Purchase or sale of shares of an unlisted company for an amount exceeding Rs.1 lakh per transaction.
Debentures/ bonds
Payment of Rs.50,000/- or more to a company/ institution for acquiring its debentures/ bonds
Payment exceeding Rs.50,000/-.
RBI bonds
Payment of Rs.50,000/-or more to RBI for acquiring its bonds
Payment exceeding Rs.50,000/-.
Life insurance premium
Payment of Rs.50,000/- or more in a year as premium  to an insurer
Payment exceeding Rs.50,000/- in a year.
Purchase of jewellery/bullion
Payment of Rs.5 lakh or more at any one time or against a bill
Deleted and merged with next item in this table
Purchases or sales of goods or services
No requirement
Purchase/ sale of any goods or services exceeding Rs.2 lakh per transaction.
Cash cards/ prepaid instruments issued under Payment & Settlement Act
No requirement
Cash payment aggregating to more than Rs.50,000 in a year.

Tuesday, 17 November 2015

Decoding Swachh Bharat Cess


Chapter VI (Section 119) of the Finance Act 2015 contains provisions for levy and collection of Swachh Bharat Cess (SBC). Now the Government has announced 15th November, 2015 as the date from which the provisions of Section 119 would come into effect (notification No.21/2015-Service Tax, dated 6th November, 2015 refers). Simultaneously, Government has also notified levy of Swachh Bharat Cess at the rate of 0.5% on all taxable services. Effectively, the rate of SBC would be 0.5% and new rate of service tax plus SBC would be 14.5%. As such SBC translates into a tax of 50 paisa only on every one hundred rupees worth of taxable services. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives. 

In this context, the relevant Chapter of the Finance Act, 2015 is reproduced below:-

pter of the Finance Act, 2015 is reproduced below:- “CHAPTER VI SWACHH BHARAT CESS 119. 

(1) This Chapter shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. 

(2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent. on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto. 

(3) The Swachh Bharat Cess leviable under sub-section (2) shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994, or under any other law for the time being in force. 

(4) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may consider necessary. 

(5) The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made thereunder, as the case may be.” 

On this issue, Hon’ble FM in his speech for Budget 2015-16 has stated as under:- “10. The third is ‘Swachh Bharat’ which we have been able to transform into a movement to regenerate India. I can speak of, for example, the 50 lakh toilets already 2 constructed in 2014-15, and I can also assure the Members of this august House that we will indeed attain the target of building six crore toilets. But, Madam, Swachh Bharat is not only a programme of hygiene and cleanliness but, at a deeper level, a programme for preventive health care, and building awareness.”

“123. ----It is also proposed to have an enabling provision to levy Swachh Bharat Cess at a rate of 2% or less on all or certain services if need arises. This Cess will be effective from a date to be notified. Resources generated from this cess will be utilised for financing and promoting initiatives towards Swachh Bharat.”

Effective Date & Rate
The Government issued Notification No. 21/2015-Service Tax, as per which the aforesaid levy comes into force from 15th November, 2015.  By another Notification No. 22/2015-Service Tax, the effective rate of Swatch Bharat Cess, has been notified  @ 0.5% of Taxable Value.
Abatement & Reverse Charge
The Government has further amended the Notification No.  26/2012-Service Tax, by Notification No. 23/2015- Service Tax to provide that the Swatch Bharat Cess, will also be levied on the abated value, as Notified, subject to the conditions specified in the conditions specified.   The reverse charge mechanism  as Notified by Notification No. 30/2012-Service Tax has also been extended to Swatch Bharat Cess, vide Notification No. 24/215-Service Tax.
Optional Scheme for Travel Agents, Insurer etc.
Under Rule 7, 7A, 7B and 7C of the Service Tax Rules, 1994, an optional scheme to Travel Agents, Insurers,  Money Changers and Selling Agents of Lotteries is prescribed.  As per the said scheme, such persons have option to pay Service Tax  computed on their gross receipt, instead of value of their taxable services.  The said scheme has also been extended for the purpose of Swatch Bharat Cess vide Notification No. 25/2015-Service Tax.  The Swatch Bharat Cess payable will be computed by dividing the Service Tax under the said composition scheme by Twenty Eight.  For Example, if a travel agent, under the  said optional scheme was liable to pay Service Tax of Rs. 5400/- He will also be liable to pay Swatch Bharat Cess  amounting to Rs. 200/-
Point of Taxation
It is a new levy, which was not in existence earlier. Rule 5 of Point of Taxation Rules would be applicable in this case. Therefore, in case where payment has been received and invoice is raised before the service becomes taxable, i.e., prior to 15th November, 2015, there is no lability of Swachh Bharat Cess. In case payment has been received before the service became taxable and invoice is raised within 14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise. Swachh Bharat Cess will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date. Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued by 29th Nov, 2015.
CENVAT Credit.
The CBEC has released FAQ on Swatch Bharat Cess, which are available on the website of CBEC.  As per the said FAQ’s, as the Swatch Bharat Cess is not integrated in CENVAT Credit Scheme, hence neither its credit is available not it can be paid by utilizing CENVAT Credit.  With due regards, the clarification issued by the Board is not in confirmation of the Law laid down by Parliament.  The Provisions of Chapter V of the Finance Act, 1994 and the rules made there under applies to the Swatch Bharat Cess also.  The CENVAT Credit Rules, 2004 are notified under Section 94 of the Finance Act, 1994,  and there for the provisions contained in the said rules, are also applicable to Swatch Bharat Cess.  

Tuesday, 20 October 2015

Income Tax Dept going Digital - Starting paperless Assessment

F. No. 225/267/2015-ITA-II

Dated: October 19, 2015


The Principal Chief Commissioners of Income-tax, Delhi / Mumbai / Bengaluru / Ahmedabad / Chennai

Subject: Use of email based communication for paperless Assessment Proceedings-reg.

In order to improve the taxpayer services, enhance the efficiency and to usher in a paperless environment for carrying out the assessment proceedings, CBDT has decided to initiate the concept of using email for corresponding with taxpayers and sending through emails the questionnaires, notice etc. at the time of scrutiny proceedings and getting responses from them using the same medium on a pilot basis. This would eliminate the necessity of visiting the Income-tax Offices by the taxpayers, particularly in smaller cases, involving limited issues and where taxpayer is able to provide details required by the AO without necessitating his physical presence.

2. Steps are being taken by CBDT to devise suitable mechanism for setting up a standardized platform for making such email based communications between the taxpayer and the Income-tax Department seamless and user friendly. To start with, it has been decided to launch a pilot project in this regard in five non-corporate charges at Delhi, Mumbai, Bengaluru, Ahmedabad & Chennai stations. Initially, 100 cases for e-hearing could be identified in each of these charges and major part of assessment processing should be conducted in electronic mode. Also, the cases covered under the aforesaid pilot project should be those which have been selected for scrutiny on the basis of AIR/CIB information or non-matching with 26AS-data. Consent of taxpayers should also be obtained in the beginning and cases of only willing taxpayers be considered under the pilot project. The officers of the Department, through their official e-mail IDs, can interact with the taxpayers at their e-mail IDs as mentioned in the respective returns of income.

3. Board desires that necessary steps may accordingly be taken for initiating the pilot project on top priority.

(Rohit Garg)
Deputy Secretary to the Government of India.

Sunday, 11 October 2015

Everything About Zero Depreciation Car Insurance policy - For those who love peace of mind.

A zero depreciation plan provides policyholders with full claims without any depreciation deduction. This extended cover encompasses the repairing costs of glass, fiber, plastic, rubber parts and wind-shield etc. 

A traditional approach

It was 2009 when Zero depreciation policies entered Indian Markets. Before that it was common to buy a comprehensive insurance plan. One major shortcoming of the comprehensive vehicle insurance plan is it doesn’t cover all expenses more over you will get claim only on depreciated value of parts. Insured people have to shell out money for renovating fiber, rubber and plastic parts. Owners of old cars also have to spend a large amount of money as their old motor parts are replaced by new ones. In a major road-mishap, the expense of restoring these parts can rise over Rs 1 lakh. The owner of the car has to bear these costs even though he or she is armed with a so-called comprehensive cover. 

An Example

Mr. Ayush bought a brand new car and purchased a comprehensive insurance plan for his new car.  Unfortunately his car met an accidents and he incurred Rs.1.5 lacs on repairs of the car. He was surprised to receive only Rs. 1.2 lacs for damages from insurance company as compensation. This is because his insurance company deducted depreciation from the claim amount. This means Mr Ayush could have saved 30,000 rupees if he would have bought zero depreciation policy.

Practical Approach

Most of the Insurance companies offer Zero depreciation policy only for a first few years of the Vehicle which range from 3 to 5 years. Opting for Zero depreciation policy will cost you more than a comprehensive policy but if you are a peace lover them you must go for it. 

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Tuesday, 15 September 2015

Now private company can  accept unsecured loans even from a relatives 

MCA Update on Deposit From Relative By Private Limited Company:

Deposits rules are quickly getting aligned with old 58A exempted rules to private limited company.

Without any upper limit of amount, now a private company can  accept unsecured loans apart from director even from a relative (as per definition) of a director of the company with simple declaration saying the relative has not borrowed same from others. The relative need not be a shareholder of the company.


Monday, 14 September 2015

Smart way to deal With Income Tax Notices

If you are the who has received notice from Income tax department then first you must understand few basics of notice. This article will surely help you on how to deal with Income Tax notices. Usually communication from the Income Tax department causes increase in heart beat for most of us. But you shall note that majority of letter or notices are of routine type and need fever attention. 

What to do when you receive an Income Tax notice?

1. Don’t Ignore: Handle the situation carefully and sincerely. Inform your consultant by email about the notice. if possible send a scan copy. Don't use WhatsApp to inform your Chartered Accountant so that you can always refer when did you inform Chartered Accountant about the notice.   

2. Back to basics: Check the whether the notice is really meant for you by checking basic things like PAN, Name, Assessment year  it related to issuing officer, signature, address with details of ward and circle number. Verify these details to avoid being cheated. To see details go to E filling website see know your AO

3. Preserve  the envelope: If the notice comes by  postal mail, preserve the envelope and staple it on the back of the notice. It serves as proof of the dates on which it was posted and received. I also suggest my clients to write the date time and receivers name on the back of the notice.

4. DIN: If the notice is delivered online, then check the Document Identification Number. In case of online notices also carefully check the authority to whom you should respond 

5. Identify the reason behind the notice: By normal reading one can easily indentifies the reason behind notice. Reasons could be a simple mismatch in TDS or inconsistency in your returns, or some serious concerns like income concealment. It can also be a survey or scrutiny of accounts.

6. Validity: Check the validity of the notice and the timely issuance. Also check the section under which the notice has been issued. For example: A notice under Section 143(3) for scrutiny assessment has to be served within six months of the end of the financial year in which the return was filed. If served later than this period, it will be considered invalid.

7. Gather the documents: Start collecting the documents that the department has requested via the notice. Documents needed can vary depending on the gravity of the notice, usually scrutiny notice may ask for several documents, including bank statements, pay-slips, rent receipts and brokerage statements. While it may not be possible to put all this together in the short time.

8. Letter: Prepare a covering letter along with the set of documents. Also mention list of all the documents enclosed. Many time it is observed that Documents and information produced for verification purpose in original are not mentioned in submission letter.

9. Acknowledgement: Prepare two set of all the documents required, along with a copy of the covering letter. Get your copy stamped to maintain personal records, and as a proof of submission of the documents thereby complying with the notice. In case the officer is absent on the date of submission make sure that your visit is recorded  and acknowledged. 

10. Reply in time: Always respond to the notice on time even if you are unable to collect the required documents. You can even ask for some time to gather all the documents. Timely response will help establish that you are honest, and cooperating with the law.

11. CA help:- If the notice is simply about a factual matter, such as an arithmetical error, TDS mismatch or deduction amount, a taxpayer may respond on his own, Only when it is a serious issue, such as a notice for scrutiny or reassessment under Section 148, should one get a professional to respond. But A chartered accountant will be better equipped to deal with the situation and provide responses.

Friday, 11 September 2015

GST update

GST Update 📢📣
Companies with an annual turnover up to Rs 25 lakh might be exempted from the proposed national goods and services tax (GST). The Centre and states are likely to settle for this threshold as they finalise the GST laws.

According to finance ministry officials, the draft of these laws is expected to be ready by the end of this month. The Centre and states are working on a mechanism to avoid dual scrutiny of companies by them. "The thinking now is that all legal entities with an annual turnover of up to Rs 25 lakh will be completely exempt. This will be applicable to one TIN (Taxpayer Identification Number)," said a ministry official.

The government is looking to reconvene Parliament's monsoon session to get the Constitutional amendment Bill on GST passed in the Rajya Sabha. Three Bills - on the Centre's GST (CGST), states' GST and Integrated GST -would come up after the Constitutional Bill is cleared. Work on the drafts is on.

States wanted a threshold of Rs 10 lakh to protect their revenue, while the Centre has assured them full compensation for five years. Besides, firms with an annual turnover between Rs 25 lakh and Rs 75 lakh will have an option to pay a flat rate of one per cent or GST rate. If they decide to opt for one per cent rate, firms will not get input credits because of which many, particularly dealers, may choose the GST rate.

The exemption limit from value added tax and service tax across states - except the North-East - is close to Rs 10 lakh turnover. "There will be an impact on revenue but it will depend on how many under the Rs 25 lakh to Rs 75 lakh annual turnover bracket opt for the one per cent rate. If 60-70 per cent opt for it, there will be loss of revenue for states but they will also get compensated by the Centre," said Bipin Sapra, tax partner, EY. From the manufacturing point of view, it was important to keep the exemption limit higher, he added.

While these are likely to be part of the GST laws, a final decision on this is to be taken by the yet-unformed GST Council. This is to be constituted within two months of enacting the Constitution amendment. It would comprise the Union and state finance ministers and will be empowered to take key decisions on GST.

The idea is that entities with a turnover of up to Rs 75 lakh will not attract any checks or audits from either the state or the Centre. The Centre will give states a free run on compliance checks for companies with annual turnover above Rs 75 lakh and up to Rs 1.5 crore. "Here, the Centre will only do online scrutiny. And, if states detect non-compliance with respect to CGST, only the Centre will issue a notice. States cannot issue a notice on our behalf," said an official. However, in case of companies with annual turnover of more than Rs 1.5 crore, there will be concurrent audits by both the state government and the Centre.

"The government is still discussing a mechanism of a risk-based selection so that the checks by Centre and states do not overlap," said the official.

The government on Sunday made a renewed appeal to Opposition parties to help pass the Constitutional amendment through an extended monsoon session. It is vital that this be cleared at the earliest for the government to stick to the GST implementation timeline of April 1, 2016. The three draft legislations will lay down the fine print of the uniform indirect tax regime.

With regards
CA Anand Mutha

Wednesday, 27 May 2015

Some simplification in Companies Act. Notified on 25th May, 2015

Companies(Amendment) Act, 2015 is Today notified by MCA.

Below are the vHIGHLIGHTS of the same.

1. Requirement of min. paid up capital to be do ne away with.

2. Having a Common Seal is not mandatory.

3. Section 11 pertaining to Commencement of Business Certificate to be ommited.

4. Penalty for violation of provision regarding acceptance/invitation of deposits stipulated by inserting section 76A. Min penalty 1 cr Max. 10 cr.

5. Dividend not to be given unless prev.yr losses/dep. not provided in prev. yr are set off from current year profits.

6. Auditor to report fraud/ offence involving prescribed amt. to CG. if the amt. is below it reporting to be done to audit committee/ Board and disclosure in board report.

8. Concept of omnibus approval for RPT by audit committee inserted in section 177.

9. Exemption given under rules of section 185 regarding giving loans to WOS and subsi to be incorporated in section itself.

10. Only ordinary resolution will be reqd for related party transaction.

11. No shareholder approval reqd. in case of RPT b/w holding and WOS if a/c of subsidiary consolidated.

CA Anand Mutha

Thursday, 21 May 2015

Maharashtra government Boosts Small Industries- cleares most awaited labour reforms

The Maharashtra government has  decided to amend the Factories Act, 1948, in a bid to encourage growth of small-scale industries (SSI). Nearly 14,300 small-scale units will be freed from the inspector raj and about 190,000 new jobs will be created in the state.

At present, smaller industries may be excluded from the provisions of the Factories Act, 1948, which mandates safety guidelines and working conditions, applies to units with more than 10 workers in premises with power supply and 20 workers in premises without power. However, with the proposed amendment the limit has been increased from 20 and 40 workers.

Further, the condition with regard to prior approval of the management for overtime has been done away with. The government has proposed overtime of 115 hours from the present level of 75 hours to workers in SSI units. 

Moreover, women employees in these industrial units will now be allowed to work during 7 pm and 6 am which was not allowed under section 66 (1) of the Factories Act.

Change in rate of service tax and its impact

Service tax rate is increase to 14 % w.e.f. 1st June 2015. In this regard the provider of service must keep in mind the point of taxation rules in order to calculate the correct rate of tax. For the purpose of simplicity one can go through below mentioned point To understand the impact of change in rate of service tax.

1. Service Provision is complete till 31.05.2015 and Invoice raised till 31.05.2015 but Payment received on or after 01.06.2015- 12.36% applicable.

2. Service complete till 31.05.2015, Invoice raised on or after 01.06.2015 but Payment is received till 31.05.2015 - 12.36%

3. Service Provision complete till 31.05.2015 and Invoice raised on or after 01.06.2015 and Payment also received after 01.06.2015- 14%

4. Invoice raised till 31.05.2015 in advance and some part of total consideration has been paid till 31.05.2015 but Service Provision is being done on or after 01.06.2015 -12.36% for such part payment, 14% for balance to be recd.

5. Entire consideration received till 31.05.2015 but no invoice raised till 31.05.2015 and no service provided -14%

6. Even if entire service has been provided on or after 01.06.2015 but both payment as well as invoicing has been done till 31.05.2015 then -12.36%

CA Anand Mutha

Wednesday, 8 April 2015

Mudra Bank 10 facts you should know

Prime Minister Narendra Modi will launch MUDRA bank or the Micro Units Development and Refinance Agency Ltd. bank in Delhi on Wednesday.

Here's your 10-point cheatsheet to this story.

1) The bank will be an agency to refinance micro-finance institutions and will also act as regulator for the sector.

2) Finance Minister Arun Jaitley in his first full-year Budget in February had proposed the creation of MUDRA bank with a corpus of Rs 20,000 crore and credit guarantee corpus of Rs 3,000 crore.

3) MUDRA bank is expected to benefit about 5.77 crore small business units.

4) Among others, the bank will benefit small manufacturing units, shopkeepers, fruit and vegetable sellers, beauty parlour owners, truck operators, hawkers, artisans in rural and urban areas with financing requirements up to Rs 10 lakh.

5) MUDRA bank will be responsible for regulating and refinancing all micro-finance institutions (MFIs) which are in the business of lending to micro or small business entities engaged in manufacturing, trading and services activities.

6) MUDRA bank would lay down policy guidelines for micro/small enterprise financing business, registration of MFI entities, regulation of MFI entities and accreditation /rating of MFI entities.

7) "The initial products and schemes under this umbrella have already been created and the interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth/development and funding needs of the beneficiary micro unit/entrepreneur," the Finance Ministry said.
8) 'Shishu' would cover loans up to Rs 50,000 while 'Kishor' above Rs 50,000 and up to Rs 5 lakh. 'Tarun' category will cover loans of above Rs 5 lakh and upto Rs 10 lakh.

9) The Finance Ministry said measures to be taken up by MUDRA are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs including women entrepreneurs.

10) Banks, particularly dominant state lenders who are already under pressure over bad loans, have largely held back from lending to a sector where debt repayment installments can often be less than the cost of pursuing the payment.

Tuesday, 10 March 2015

Amendments in Service Tax Provisions as per Budget 2015

Amendments in Service Tax Provisions as per Budget 2015
** Service Tax rate shall remain to be at 12.36% as on 1st April, 2015. The enhanced rate of 14% shall become effective from a date to be notified by Government **
Effective from 01.03.2015
·               Registration Procedure - Rule 4 of Service Tax Rules which deals with registration under service Tax law is being amended to provide that the board, by way of an order specify the conditions, safeguards and procedure for registration in service tax. It has also been prescribed that henceforth registration for single premises shall be granted within 2 days of filing of application, thus simplifying the registration procedure.

·               Electronic Invoices - New Rule 4C has been introduced making provision for issuing digitally signed invoices, bill or Challan has been added along with the option of maintaining of records in electronic form and their authentication by means of digital signatures.

·               Electronic Records - Rule 5 of the Service Tax Rules has been amended stating that the all the records may be preserved in electronic form in such manner that every page of the record so preserved shall be authenticated by means of digital signature.

·               Cenvat Credit Rules -
a.      The time limit to avail the Cenvat Credit of Service Tax paid on Input Services has been increased from 6 months to 1 year. Credit can now be availed on input services invoices within 1 year from the date of invoice.
b.      Rule 4(7) is being amended that in respect of input service where the service tax is liable to be paid under reverse charge by the recipient of service, credit of such service tax can be availed immediately after payment of value of service tax irrespective of the fact whether payment of value of service has been made to the service provider or not.

Effective from 01.04.2015
·               Supply of Manpower Services - Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism.

Exemptions being withdrawn

·               Construction Services provided to a Governmental authority - Services provided to the Government, a Local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
§   Civil Structure or any other original work meant predominantly for use other than commerce or industry or any other business or profession
§   Structure meant predominantly for use as (i) Educational; (ii) Clinical; or (iii) art or cultural establishment
§   A residential complex predominantly meant for use of employees or other specified persons (MPs, MLAs, etc.)
Exemption provided to these services shall now stand withdrawn

·               Original Construction work pertaining to Airport or port - Exemption on Services provided by way of construction, erection, commissioning, or installation of original works pertaining to an airport or port is withdrawn.

·               Specified telephone Services Exemption on the following services is withdrawn. Services of making telephone calls from -
§   Departmentally run public telephone;
§   Guaranteed public telephone operating only local calls; and
§   Service by way of making telephone calls from free telephone at airport and hospital where no bill is issued.

·               Services in relation to mutual fund and lottery -  services provided by
§   A mutual fund agent to a mutual fund or assets management company,
§   Distributor to a mutual fund or Asset Management Company,
§   Selling or marketing agent of lottery ticket to a distributor
Services in relation to mutual fund and lottery as mentioned above are being brought under full reverse charge.

Exemptions newly introduced

The following mentioned services are now exempted -

·               Services in respect of fruits & Vegetables - Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables.

·               Common effluent treatment plant operator - Service provided by a Common Effluent Treatment Plant operator for treatment of effluent.

·               Movie Exhibition Service - Service provided by way of exhibition of movie by the exhibitor (theatre owner) to the distributor or association of persons consisting of such exhibitor as one of its members.

·               Admission to Museum, zoo, etc - Service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.

·               Admission to entertainment events - Service by way of right to admission to,-
§    Exhibition of cinematographic film, circus, dance, or theatrical performances including drama or ballet.
§    Recognized sporting events.
§    Concerts, pageants, award functions, musical or sporting event not covered by the above exemption, where the consideration for such admission is upto Rs. 500 per person.

Exemptions curtailed
·               Services of performing Artists - Exemption to Services provided by a performing artist in folk or classical art form of (i) music, or (ii) dance, or (iii) theatre, has been restricted only to such cases where amount charged is not exceeding Rs. 1,00,000/- for a performance (except brand ambassador).

·               Transportation of Goods by Rail/Vessel - Exemption on transportation of food stuff by rail or vessels from one place in India to another will be limited to milk, salt and food grains including flours, pulses and rice. Transportation of agricultural produce is separately exempt and this exemption would continue.
Exemptions Expanded
·               Health Care Services - All ambulance services including transportation of patients in an ambulance by any person are exempted.

·               Specified Life Insurance Services – Alongwith currently specified schemes of life insurance Life insurance; service provided by way of “Varishtha Pension Bima Yojna” is being exempted.

·               Goods transport agency - Goods transport agency service provided for transport of export goods by road from the place of removal to an inland container depot, a container freight station, a port or airport is exempt from service tax. Scope of this exemption is being widened to exempt such services when provided for transport of export goods by road from the place of removal to a land customs station (LCS).
Changes in Abatement
·               Services of transport by Rail, Road and vessel - A uniform abatement of 70% has been prescribed for transport by rail, road and vessel to bring parity in these sectors. Service tax shall be payable on 30% of the value of such service subject to a uniform condition of non-availment of Cenvat credit on Inputs, Capital goods and Input services.

·               Chit fund - Abatement for the services provided in relation to Chit fund stands withdrawn. Consequently, Service tax shall be paid on full consideration received by the Chit fund foremen.

Effective from the date to be notified by Government after enactment of Act
·               Change in Service tax Rate

a.            The Service tax Rate is being increased from 12% plus Education cess to 14%. Effective increase in Service Tax rate will be from existing rate of 12.36% (inclusive of cesses) to 14%.
b.            Till the time the revised rate comes into effect, the levy of ‘Education cess’ and ‘Secondary and Higher Education cess’ shall continued to be levied in Service Tax.
c.             New Cess ‘Swachh Bharat Cess’ introduced - An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh Bharat initiatives.

·               Production or manufacture of alcoholic liquor  - Section 66D(f) has been proposed to  be substituted to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption under the Service tax net. In other words, service tax shall be levied on contract manufacturing/Job work for production of Alcoholic Liquor.

·               Amusement Parks - Earlier the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places was covered in the Negative list. Budget 2015-16 has proposed to omit the clause (j) of Section 66D. Hence, the same will be taxable from the date to be notified by the Central Government.

·               In respect of certain services like money changing service, service provided by air travel agent, insurance service and service provided by lottery distributor and selling agent the service provider has been allowed to pay service tax at an alternative rate subject to the conditions as prescribed under rule 6 (7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994. Consequent to the upward revision in Service Tax rate, the said alternative rates shall also be revised proportionately. Amendments to this effect have been proposed in the Service Tax Rules. This amendment will come into effect as and when the new service tax rate comes into effect.

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