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2022 PDF

Cross Border Insights - September 2022

Taking the essence of InfoDive one step ahead and strengthening its foundation of providing insightful updates and key aspects of FEMA, International Taxation & Transaction Advisory to our immersive reader, we are glad to announce that we are rebranding “InfoDive” as “GBCA Crossborder Insights - Tax & Regulatory Edge”. 
 
On successful completion of a year of sharing insights to our readers, GBCA Crossborder Insights - Tax & Regulatory Edge will now be published Bi-Monthly instead of quarterly keeping in mind the rapid developments in this field. 
 
We hope that our readers shall welcome the changing landscape of our Newsletter with same enthusiasm and energy. 
 
We recently celebrated 75th Independence Day in style with the Tricolour unfurled across homes and institutions in the country. Despite being one of the oldest civilisation, we are a young democracy and the way India has emerged to be 5th largest and fastest growing economy in the world as compared to situation where we were dependent on western world in the last century is commendable. With sustained growth of foreign reserves over time, India is now in a much better position as compared to other countries in Asia Pacific region to liberalise foreign investment and participate globally. Recently Government has liberalised overseas investment for Indian residents and clarified concepts which had ambiguity. 
 
During this pious period of Ganesh Chaturthi and Paryushan, we reflect on our conduct and our being and hope to continue to evolve on our spiritual journeys. We seek your pardon for anytime we may have hurt you. 
 
With this we present our Bimonthly Newsletter – GBCA Crossborder Insights - Tax & Regulatory Edge focusing on various issues, controversies and recent trends in the areas of FEMA, International Tax & Transaction Advisory
 
Key Highlights of September 2022 Newsletter Issue are as under: 
 
•            Overseas Investment under FEMA – Comparative Analysis 
•            Key changes in Overseas Investment by AIF/VCF 
•            International Tax Regulatory updates

To view the newsletter, click here. 

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2022 PDF

Newsletter - August 2022

India celebrated its 75th Independence day in style with the Tricolour unfurled across homes and institutions in the country. As a young democracy, we have indeed come a long way. It's important to remember that the Indian subcontinent comprised a number of states governed by different rulers. Boundaries were constantly redrawn and political alliances were made aplenty. 

 

Most historians would have thought that it would be impossible to keep together a disparate group of people in a secular India. We speak 22 (official) languages and over 700 dialects and follow a variety of religions. It is the strength of the freedom struggle that united us and keeps us together as a country. As we remember that struggle, pay homage to the fighters and celebrate our Independence - we strengthen our unity.

 

While we celebrated our 75th Independence day, it marked the day our neighbours in Afghanistan completed 1 year under the rule of the Taliban. The economy has contracted by approximately 30% as foreign aid stopped flowing to the country and girls have been left out of schools and women have been asked to leave jobs. Some of the things we take for granted in India are perhaps things to be grateful for.

 

Inflation across the world continues to bring difficulty to people. In Thailand, the price of their staple food, noodles, was increased by 33% after being held constant for 14 years. Europe is reeling under the pressures of high energy prices and things are likely to get tougher as we move towards winter and the heating requirement increases. All businesses should be mindful of sudden shifts in input costs and dislocations in buying power of their customers. 

 

During this pious period of Paryushan, we reflect on our conduct and our being and hope to continue to evolve on our spiritual journeys. We seek your pardon for anytime we may have hurt you. 

 

INDIRECT TAX (GST)

 

RECENT CLARIFICATION UNDER GST

 
With an honest attempt to reduce the litigation , the department has came up with circular to provide clarity in relation to GST Applicability on liquidated damages, compensation and penalty arising out of breach of contract, GST payable under RCM on Renting of motor vehicle and many more clarifications.
 
 
 
DIRECT TAX

 

CBDT NOTIFIES CONDITIONS FOR COVID-19 RELATED TAX EXEMPTIONS

 
The Finance Act, 2022 brought an amendment with respect to exemption of money received on account of Covid-19 related illness subject to conditions to be prescribed. In this context, the CBDT has notified the requirements and conditions to avail such tax exemption.
 
To Know more please click here
 
 

 

 

 

 

 

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2022 PDF

Newsletter - July 2022

As India prepares itself to celebrate its 75th Independence Day, the country has appointed its 15th President, Droupadi Murmu. She is the first President of India who belongs to the Tribal community and is the second woman President of the country. 

 

The war between Russia and Ukraine continues and it's been over 160 days since the start. There doesn't seem to be any clarity at this point how the war will end. It's interesting to note that Ukrainians that had left the country in the beginning of the war, have started returning to the country over the last few months. Exports of agricultural products from Ukraine have also restarted via Turkey. A lot of things are now looking more normal as commodity prices have eased and availability of products increases. 

 

Geopolitics continues to be centre stage for a lot of news. Nancy Pelosi's visit to Taiwan has caused more questions around US-China relationships and actions that China may take. The silver lining for India in this could be that China related Geopolitical news shall continue to keep Businesses across the world focused on building a China+1 strategy for sourcing and demand for products from India will continue to remain buoyant. This is a strategic shift in thinking which should build longer term supply chains from India. 

 

The Government has widened the GST net by a levy of 5% GSTon pre-packed and labelled food items such as cereals, pulses and flour weighing less than 25 kg. This will make some items more expensive for the common man, however, this goes towards widening of a tax base in the country to ensure that there is a contribution towards nation building activities from a broader base of people. 

 

India is positioned well, both internally and externally - it's time for us to make sure we capture the opportunities provided and at the same time contribute towards further growth of the country.


 

INDIRECT TAX (GST)


 
SERVICES BY WAY OF RENTING OF RESIDENTIAL DWELLING
 
The dynamics of renting residential property under GST has changed with effect from 18th July. 2022. The decision to bring the renting of residential dwelling under Reverse Charge Mechanism was taken in 47th GST Council Meeting. A summary of the change and a note explaining how it affects individuals and businesses is enclosed herewith.
 

 

 

DIRECT TAX

 
NOTE ON S. 194R - TDS ON BENEFIT OR PERQUISITE ARISING FROM BUSINESS OR PROFESSION.
 
Finance Act, 2022 introduced new withholding provisions under section 194R of the Income Tax Act, 1961 on providing any benefit or perquisite arising from business or exercise of profession to a resident. Subsequently, CBDT issued circular no 12 dated 16 June 2022 to remove difficulties and clarify issues on interpretation of the provisions. 
 
To know more please click here.

 

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2022

Newsletter - June 2022

Another month has gone by, and the war between Russia and Ukraine still carries on - and so does the hope of a cease fire. Global commodity prices have cooled down from their peaks in May and early June. This is good for inflation in the future.
 
In Maharashtra, the 2019 Political Crisis had sown the seeds for the current 2022 Political Crisis. A faction of the Shiv Sena has broken away and, as of this writing, Mr. Uddhav Thackeray has tendered his resignation as the Chief Minister.
 
The condemnable beheading of a tailor in Udaipur shows how hate and religion based differences are spreading across India. Extremism is on the rise along with divisiveness. While on the other hand, a climate disaster leads to flooding in the North East, has united Assam and Bangladesh and misery. This reminds us of the fragility of our society in the face of nature and the need to unite in face of our common enemy rather than remain divided.
 
The rainfall across a number of states in India has been in deficit in the month of June while the North-East, has been inundated. We need coordinated global action to invest in fighting Climate Change.
 
Our businesses should be aligned with long term secular trends and it is clear that fighting climate change and the sustainability agenda is one such mega trend. We hope that we are all focusing on this - for our businesses and our collective future as a species.
 
 

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2022

Newsletter - May 2022

India has been victorious and can count itself as one among 6 countries that have ever won the Thomas Cup! Indonesia has been a champion in this Badminton team tournament over the years with 14 victories and followed by China and Malaysia at 10 and 5 victories respectively. Denmark, Japan and now India have had one victory each.
 
Generally, a society that operates at a good economic level, is where people can afford to be involved in sports. This is indicative of the way our economy and society are evolving and growing.
 
While societies evolve - some things remain stuck in history and become political issues. The US Constitution's 2nd amendment in 1791 ensured the people had a constitutional right to carry and use firearms and ammunition. This right has become a political tool today and has led to countless lives being lost to mindless shooting incidents - the last one in Texas at school children being a particularly saddening example of the same.
 
Supply chain constraints and global liquidity situation, exacerbated by availability of some commodities due to the still ongoing Ukraine - Russia war has resulted in uncomfortable inflation across the world. While some companies are facing margin pressures, for the consumers, this has meant that after meeting healthcare bills during the pandemic, there is increasing cost of everything - right from basic necessities like food.
 
The central banks in most countries (other than China) have attempted to quell this inflation through increasing interest rates and hoping that it reduces demand - a collateral impact of this has been in markets globally.
 
We hope the new monkeypox virus scare doesn't lead to more human impact. The world needs a period to heal and get back to normalcy - including the lack of war, mindless shooting of people or inability to afford food. We hope those times come soon. 
 
DIRECT TAX

FOREIGN RETIREMENT BENEFIT ACCOUNT  
 
Recently, the Government has notified Rule to address the mismatch in taxation faced by individuals who have foreign retirement benefit accounts by providing an option to individuals to tax such income on withdrawal/ redemption basis instead of accrual basis.
 
The Article features the details of the option available to address such tax mismatch and reporting compliance along with key actionables for residents or individuals planning to return to India, who hold IRA(s) in foreign country.
 
 

UPDATED RETURN OF INCOME 
 
As a step forward to promote voluntary tax compliance and to reduce litigation, Government of India vide Finance Act, 2022 has introduced the concept of updated return. With effect from 01/04/2022 certain assessee’s can file updated return of income by paying additional tax on additional income within a period of 24 months from end of relevant assessment year.  
 
To know more in detail, please click here.

 

INDIRECT TAX (GST)

CASE LAW ANALYSIS ON GUJARAT HC VERDICT ON VALUATION OF LAND ON CONSTRUCTION OF FLAT OR UNIT
 
In case of Purchase of under-construction flat/units GST is leviable on the entire agreement or contract value minus the value of land. However, there is a mandatory deeming fiction presuming 1/3rd of the total amount charged as attributable towards sale of land, irrespective of the actual value of land.  Recently, The Hon'ble Gujarat High Court (HC) has occasion to deal with the constitutional validity of this mandatory deeming fiction. The Hon'ble Gujarat HC has held that the mandatory fixed rate of deduction of 1/3rd of total consideration towards value of land ultra-vires the Provisions of GST Act.  The Hon'ble Gujarat HC has directed refund to be granted of excess GST to the affected taxpayer. The brief analysis of said case law is enclosed herewith.
 
To know more in detail, please click here.
 

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2022

Newsletter - April 2022

The war between Russia and Ukraine continues - what seemed like a swift and quick political move by Russia is getting to be a protracted war with intermittent ceasefires. As it is said, one should not try and predict anything, especially about the future. At the same time, China has put Shanghai in a lockdown over Covid fears and Sri Lanka continues to suffer economically due to poor decisions by the Government.

The power vested in the governments and a few individuals can have some significant implications for the public. Elon Musk's decision to acquire Twitter and take it private, is another example of extreme power getting vested in the hands of a few people. While Elon Musk says his intentions are to encourage freedom of speech, having the worlds 'town hall' in the hands of an individual leaves it open to his whims and has the potential for abuse. We already saw this with Facebook being used to meddle in the US elections in 2016. 

Business dynamics remain highly volatile with higher commodity prices and inflation. Interest rates seem to be inching higher too and at the same time the wage bill for a lot of companies is seeing a jump. Profit margins will need to be monitored closely and investments in capacity need to be recalibrated to see if the increased costs of capital inputs require anything to be re-planned. 

Despite the challenges, demand is great for most businesses and it is great to be able to make more human connections as Covid restrictions have been relaxed. While there is a small wave of Covid that seems to be imminent, we hope you stay safe and in good health.

 

INDIRECT TAX (GST)

HIGH COURT OF GUJARAT - ORDER BLOCKING OF ECL WITHOUT RECORDING REASON IN WRITING IS ERRONEOUS
 
The Government has introduced Rule 86A to block ineligible or fraudulently availed Input Tax Credit (ITC) by the taxpayers vide Notification No. 75/2019 dated 26.12.2019. As per this rule, the Commissioner or any officer authorized by him can block the ITC available in the Electronic credit ledger (ECL) of the taxpayer if he has ‘reasons to believe’ that taxpayer has fraudulently availed ITC. This Rule was inserted to curb the malpractice of fake invoicing without actual supply of goods.  Recently, Hon’ble High Court of Gujarat has allowed the writ application filed by the petitioner M/s New Nalbandh Traders and order of blocking of ECL is quashed and set aside. The brief analysis of said case law is enclosed herewith.
 

 

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2022

Newsletter - March 2022

For most of us across the world, Covid seems to have largely abated. As we looked at getting back to our normal, the Russian attack on Ukraine has taken centre stage in the global geopolitical arena. Wars wreak havoc on the lives of people it impacts - as our intellect evolves, we should be able discuss our differences and come to solutions without war. We have a long way to go till we reach that point it seems. The loss of lives is wrong, but as with all things human, there are just a lot of complex angles to the current war. Thankfully, Russia seems to be now finally at a point of retreating its influence from some key areas in Ukraine and there is a hope that negotiations may bear fruit soon.

We have had an uncharacteristic peaceful world for the last few decades where we had a 'cold war'. This was an aberration as the history of humanity is filled with varying degrees of wars and battles being played out for resources and power in different parts of the world. The peace spurred global supply chain lines and led to increased productivity across the world and in turn the interdependence of countries for goods and services, became a reason to avoid any large scale wars. 

Covid showed us the fragility of the global just in time system for goods. Supply constraints lead to early inflation for some products which was later exacerbated by the large scale money printing and return of demand. The Russia Ukraine war has gone one step further in making businesses rethink their supply strategies. A war with this degree of military engagement was least expected by the world and going forward the disruptions caused by Covid and the War shall remain key risks that most business strategies will be forced to incorporate. This could mean that the spectre of higher productivity and lower costs that came with globalization may be behind us. 

The quote by Russian leader Lenin is most appropriate right now. “There are decades where nothing happens; and there are weeks where decades happen.” The events of the past few weeks may have a lasting impact on how countries and businesses interact with each other. It is important to be attuned to these changes and grasp opportunities that they may yield. We pray that the conflicts stop and the cost and difficulties faced by people in this war end immediately.

INDIRECT TAX (GST)

SHOW CAUSE NOTICE IS INVALID WITHOUT STATING THE CONTRAVENTIONS COMMITTED 
 
Show cause notice (SCN) has great significance in adjudication proceeding for mandatory compliance of principal of natural justice. SCN is mandatory requirement for raising any demand under GST Act except payment of Interest under section 50 and assessment of non-filers of return under section 62 of CGST Act. The Jharkhand High court has allowed the writ petition filed by the M/s Nkas Service Private Limited being petitioner who has received SCN being vague and not disclosing the offence or contravention and denies the petitioner of any opportunity to properly defend itself. It is therefore clearly in violation of principles of natural justice. The brief analysis of said case law is enclosed herewith.
 
 
 

REVERSAL OF GST CREDIT IN CASE OF SALE/DISPOSAL/WRITE OFF OF CAPITAL GOODS
 
One of the important features of GST is seamless flow of input tax credit across the country. When you purchase anything, you are required to pay GST on it at the applicable rate for that product or service. Later, you can claim input tax credit (ITC) on the GST paid on your purchases. Similarly, when you are purchasing any Capital asset for your business, you will pay the GST at applicable rate. If you claim depreciation on the GST paid while purchasing the capital asset, you cannot claim ITC. This GST paid can be claimed as credit in the same way as inputs. However, if your sale or dispose of the capital goods before the end of 5 years from the date of purchase then you have to reverse the proportionate ITC on the same. The enclosed article provides brief explanation on treatment of ITC on capital goods at the time of sale/ disposal or write off in Books.
 
To know more in detail, please click here.
 
 
DIRECT TAX 

NOTE ON TAXATION OF RIGHT OF ENTITLEMENT TO EQUITY SHARES  
 
Renouncement of rights of listed equity shares are taxable under the head Income from Capital Gains as a short term capital gain. The benefit of gains taxable at 15% u/s 111A may not be available as renouncement of rights is outside the purview of section 111A. 
 
To know about the rate of tax, please click here.

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2022

Newsletter - January 2022

A few of the governments steps have yielded great results. The boost to manufacturing from the lower tax rate on new manufacturing companies to the PLI schemes being announced is helping make India stronger in manufacturing.

As the world normalizes from the Omicron lead wave three of the pandemic, there are multiple moving parts to the global economy. Inflation is running above most central banks comfort zone and the Federal Reserve’s rate hike and liquidity withdrawal announcements have given global markets a bit of a jolt. 

USA is experiencing a very strong economic growth and very low unemployment, while China is coming hard on its real estate sector which is causing some issues in its local financial markets and threatens to make a lot of people unemployed while in India, some sectors like IT are seeing huge increments in salaries while it is reported that the lower segments of the society have seen a reduction in wages over the last five years. 

Greed has become commonplace and this can be seen across easy money making that people have experienced in the stock market to the number of people who are speculating in alternative assets. The case of a startup founder who was asked to step down from the company for investigations of fraud and also an alleged recording that was leaked where he was threatening a bank employee for an opportunity lost. These instances should serve as reminders for us to check our own orientation on the emotional spectrum. 

Meanwhile, there is greed and fear being played out between the NATO forces and Russia with respect to Ukraine. We hope that peaceful negotiations can ensue and a war can be averted.

 
INDIRECT TAX (GST)

EXTENSION ON GST REFUND APPLICATION 
 
In a major relief on account of drastic increase in number of COVID cases across the country, The High Court of Bombay referring to the order of Hon’ble Supreme Court regarding the limitation for any suit, appeal, application and or proceedings has held that limitation prescribed for refund application under Section 54 of CGST Act 2017 shall also get extended. The analysis of the said case law is attached herewith.
 
 

NON EXTENSION OF E-WAY BILL VALIDITY DOES NOT AMOUNT TO TAX EVASION
 
The Hon’ble Supreme Court affirmed the judgement passed by the Hon’ble Telangana High Court and held that tax evasion cannot be presumed on mere non-extension of validity of E-way bill by assessee due to traffic blockage and agitation, for which revenue authority is responsible for not providing smooth passage of traffic. The brief analysis of the said case law is enclosed herewith.
      
To know more in detail, please click here.
 

GST AMENDMENTS EFFECTIVE FROM 01.01.2022
 
With effect from 1st January, 2022, section 16 which prescribes conditions for availment of ITC has been amended to introduce an additional condition - Input Tax Credit on invoices to be availed only to the extent such invoices are reflected on the portal in Form GSTR-2B. An analysis on what this implies and how it impacts you is attached herewith .
 
To know more in detail, please click here.
 

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2021

Newsletter - December 2021

The year comes to a close as we spent a full year with the Corona Virus. It has been challenging during the times of the Delta variant that swept across the country with ferocity and we lost many people and later as the wave receded, we spent sometime with family during the festival months.

However, the new variant of the virus is now fully upon us and spreading very rapidly across the population. We are lucky that early observations show that this variant is largely like the seasonal flu and not like the Delta variant in severity and mortality. We pray and hope that it stays like that and all that we need to go through is some discomfort from having a cold and mild fever.

Our governments might go into protection mode and may ask us to curtail some social and commercial interactions. We need to keep an eye out for the trend in hospitalizations and deaths before panicking fully.

The new year is time for new resolutions - one resolution that I think we all should make is to focus on sustainability as a practice, rather than a buzzword, and look at sustainability in all aspects of our life.

Our consumption habits are not sustainable for the environment is something that most of us have now understood, however, we need to look at sustainability in areas like whether our business model and structure is sustainable or can be disrupted and what can be done to make it sustainable? The same can be extended for for our physical and spiritual well-being. Doing actions that sustain our health and well-being is critical.

We wish you a very happy new year and wish you and your loved ones stay safe and healthy.

DIRECT TAX 
OVERVIEW OF ‘CPGrams’
 
Our Prime Minister Office (PMO) of India has introduced a service called  ‘CPGrams’ with the aim to provide citizens with a platform for redressal of their grievances. If you have any grievance against any government organisation in the country, you can lodge your grievance which will go to the concerned Ministry / Department / State Government for immediate redressal.
 
 
 
INDIRECT TAX (GST)

GST ON RESTAURANT SERVICE THROUGH ECO FROM 01.01.22
 
Adding to the complexities of the e-commerce sector, the Government has introduced changes in respect of GST on restaurant services supplied by restaurants through E-commerce operators (ECOs) by issuing Notification No. 17/2021- Central Tax (Rate) dated 18/11/2021 along with clarification through Circular No. 167/23/2021- GST dated 17/12/2021. In view of such change, the ECOs shall be liable to pay GST on service supplied by restaurants through ECOs with effect from 01st January, 2022.
 
To know more in detail, please click here.
 
 

GST AMENDMENTS EFFECTIVE FROM 01.01.2022
 
The Central Board of Indirect Tax Council has issued Notification No. 39/2021 dated 21st December 2021 wherein all the sections of Finance Act 2021 (not notified earlier) have been notified to be effective from 1st January, 2022. Some of the important provisions have been analysed in the attached note for your ease of reference and includes – 
• Retrospective amendment to the definition of “supply” to clarify taxability of         transactions between AOP / BOI and its’ members
• Additional Restriction on availment of Input Tax Credit introduced in the Act
• Penalty for contravention of provisions of CGST Act in case of transportation or     storage of goods in transit revised
• Meaning of “self-assessed tax” for the purposes of recovery of tax expanded to     include details furnished in GSTR-1
• The quantum of pre-deposit increased to 25% of penalty for appeal against an     order of detention or seizure
 
To know more in detail, please click here.

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2021

Newsletter - November 2021

The advances in technology have led to us being able to quickly find out about new variants of the Corona virus and also propagate some fear and some misinformation relating to the same at the speed of thought.

We are lucky that our scientists work so hard to ensure that we stay on top of the evolution of the virus and understand the risks and remedies as soon as possible. The Omicron variety has been causing some degree of panic - while in situations like Covid-19 where it is better to be safe and early rather than sorry and late - it is good that we are back on our guard about border control and meeting people in groups. However, we should remember that despite anything being said about the efficacy, or lack thereof, of the current vaccines for the new strain of the virus, we cannot let our guard down thinking there is no hope with the vaccines, and vaccinations are a must as they and masks / social distancing are the best defence against Covid-19.

The next year is likely to see increased volatility and confusion on global markets and businesses. The US Federal Reserve is worried about inflation but at the same time would like to remain accommodative for any new coronavirus strain related economic weakness. The confusion around global liquidity will keep markets on the edge and volatility high, and supply chain disruptions and commodity prices shall also impact business margins and cash flows. 

While we have seen a great boost to margins from an uptick in sales of the organized players and also some aggressive cost cutting by them through the lockdowns, with elevated prices of inputs, it is becoming a challenging environment to conduct business with long term pricing and delivery contracts. Margins for a number of businesses may shrink next year - keep an eye on your costs and working capital requirements.

The last 18 months were largely a one way street in markets and businesses due to a variety of government mandated tail winds supporting the businesses. Large IPOs have come to tap the public markets and start ups have raised copious amounts of capital at high valuations. The business and consumer landscape has changed dramatically in this period and it may continue to evolve at a rapid pace in the coming months. Be mindful to the changes and adapt accordingly - there are large opportunities to tap - we just need to be ready and willing to see them and tap them.

DIRECT TAX 
Annual Information System (AIS)
 
The newly launched Annual Information Statement is a tool that tells taxpayer what the department knows about them. It provides comprehensive view of all the financial transaction undertaken by the tax payer in a year.
 
 
 
INDIRECT TAX (GST)

Refund on account of failure to claim Input Tax Credit due to Non-Availability of GSTR-2A Denied
 
Recently, Supreme Court has set aside Delhi High court Judgment which had allowed the Bharti Airtel Ltd. being respondent to amend GSTR-3B returns for the period from July 2017 to September 2017. Due to such amendment respondent was entitled to get refund of 923 crore paid through Electronic cash ledger.
 
To know more in detail, please click here.

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2021

Newsletter - May 2021

Our war with the virus wages on but it is definitely a quieter time right now. We are extraordinarily lucky to be living at a time when advances in Science and Medicine are rapid. It is remarkable what we have been able to achieve. From understanding the nature of the virus early on in 2020 to preparing a testing system that can quickly identify whether someone has the infection, to working on a vaccine at Global scale, we really have to be grateful for what we have achieved. India has also recently announced the discovery of a Covid specific drug that would work on the disease. 
 
The scale of the pain was made very real with the images that came from the Ganga river – showing the difficulty people have had with dealing with the death of their loved ones. There is a lot of angst among people for the way the crisis was handled – the government and administrators need to acknowledge their lapses and what they would do to fix them. It seems increasingly likely that we would have a third wave of the pandemic in India and the Government and administrators will have a chance to prove to people that they are in control of the situation and that they can help organize things to prevent agony among the population.
 
While the world is dealing with Covid – Israel and Palestine relationship has deteriorated and they have fired rockets, killing many innocent people. The world needs more healing and not more destruction. We sincerely hope that the two sides can resolve their differences and achieve their goals without further loss of lives.
 
Padmashri Dr. KK Aggarwal, a former president of the Indian Medical Association, did hundreds of videos over the last year to educated the people in simple language about how to deal with Covid. We are unfortunate to have lost him to Covid after a long battle. Even while fighting the disease and being on Oxygen, he continued his public awareness and education videos and said that the “Show must go on”. He had several co-morbidities and had to take medicines to suppress his immunity for some other issues, due to which his response to the Vaccine may have been less than adequate. This in no way reduces the efficacy of the vaccine and we must continue to take it. We salute Dr. KK Aggarwal and are inspired by his commitment to public welfare.

DIRECT TAX

SCOPE OF STATEMENT OF FINANCIAL TRANSACTION (SFT) WIDENED TO INCLUDE DIVIDEND INCOME AND INTEREST INCOME
 
The scope of reporting under statement of financial transaction has been broadened to include information relating to dividend income and interest income from F.Y. 2020-21 and onwards.
 
  
EXTENSION OF VARIOUS DUE DATES UNDER INCOME TAX ACT, 1961
 
In view of the pandemic, in order to provide relief to taxpayers, CBDT vide circular no. 09 of 2021 dated 20-05-2021 has extended the due dates for various compliances including filing the TDS returns and statement of financial transaction. 
 
To know more about the extended due dates please click here.
 
INDIRECT TAX (GST)
RECENT GST NOTIFICATIONS DATED 1ST MAY 2021

The Government has announced various reliefs due to COVID-19 under GST Laws such as extension of due date of GSTR-1, GSTR-4 & ITC-04, waiver of late fees for GSTR-3B, relaxation in interest rate on delay in filing GSTR-3B, extension in time limit of various actions under GST etc. through the notifications issued on 01st May 2021. Let's go through all the notifications in depth.
 
To know more please click here.
 
GST IMPLICATION ON E-COMMERCE SECTOR

The Indian e-commerce industry has been on an upward growth trajectory. The Indian Industry is expected to be around 86 Billion Dollars in 2021. The online retail market in India is estimated to be 25% of the total organized retail market. By 2034, it is predicted to surpass the United States to become the second largest e-commerce market globally. The young demography, increasing internet and smartphone penetration, and relatively better economic performance, 100% FDI allowed under this sector are some key drivers of the e-commerce Sector. Further due to such huge growth in the e-commerce industry there is a huge amount of revenue from the e-commerce sector. With respect to e-commerce operators, compliance has increased. GST implications like registration, time of supply, place of supply, value of supply, levy and collection, etc. on the E- commerce transactions are discussed in this article.
 
To know more please click here
 

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2021

Newsletter - August 2021

We have completed the Olympics 2020 in the year 2021, in a spectacle without spectators! These are different times indeed but what is important is that as humans we are doing all that is possible to achieve the most optimal outcome possible.

Reading about the Olympics brings about some interesting characteristics of the human experience. The feedback from those who made it to the podium shows that the ones that take home the Bronze are actually happier than those who take home the Silver. This is a quirk that confounds our rational approach to things. 

A Silver medal in an absolute sense is better than a Bronze medal, so logically the Silver medalists should be happier. However, in a lot of sporting formats, the Silver is won in the final match, where the sports person loses that match to win the silver, while the Bronze is often won by winning the last match. Also, in other sporting formats like a race, the two people in front of the pack are fighting to come first, while it’s the third and forth in the pack that are fighting to just be able to get a medal and a chance at the podium. Bronze winners are happy to make the Podium as they are aware that if they were slightly slower, they may have been almost as good but would be fourth and without a medal.

We have seen during the last year and a half, people that have had severe illnesses and hospitalizations but have survived, have been grateful to be alive as they saw some others succumb to the virus. At the same time, some of those that did not have the illness but were quarantined at home for safety, may have lamented someone’s vacation pictures on Instagram. Some businesses have made handsome profits and they may be looking at some of their competitors who moved earlier or had financing available and may be regretting their inability to fully replicate the success, while those that had almost written off their businesses but still managed to stay afloat are just happy to be around as the economy now opens up.

It is truly important to objectively see where you are and be grateful for the same, while ensuring that there is no complacency since what has been done well, can always be done better in the future.


DIRECT TAX

CURRENT YEAR CAPITAL GAINS ARISING OUT OF BUSINESS COULD BE SET OFF AGAINST BROUGHT FORWARD BUSINESS LOSS
 
Recently, Karantaka High Court held that capital gain income earned during a year can be set off against brought forward business loss, as such income had the attributes of business income. Thus, an analogy can be drawn that if an income has the characteristics of business income although taxable under any other heads of income can be set-off against the brought forward business loss.
 
 
INDIRECT TAX (GST)
QRMP SCHEME
 
The Central Board of Indirect Taxes & Customs (CBIC) introduced Quarterly Return Filing and Monthly Payment of Taxes (QRMP) scheme under Goods and Services Tax (GST) vide circular 143/13/2020- GST dated 10th November2020. It allows the small taxpayers to file returns on a quarterly basis and make tax payments on a monthly basis with effect from 01.01.2021. Due to the introduction of the QRMP scheme, the taxpayer gets some relief from compliance burden though it’s not reduced substantially as monthly payment and uploading of invoice via Invoice Furnish Facility (IFF) which is optional to be filed on monthly basis still required.

 

To know more please click here.
 
ITC CANNOT BE DENIED MERELY ON ACCOUNT OF NON-REFLECTION OF TRANSACTION IN GSTR 2A
 
Ever been punished for no fault of yours? Well, the honest GST taxpayers are being punished by the Government for non-compliance of the statute by the suppliers of these taxpayers. The harsh matching mechanism of Input Tax Credit in GSTR 2A leads to not only blocking of capital but also to loss of business.
 
To add insult to the injury, the technical glitches faced by taxpayers in the initial implementation of GST made the whole process more cumbersome. 
 
The Hon’ble Kerala High Court and Madras High Court, in recent rulings on requirement of Input Tax Credit reconciliation with GSTR 2A, have awarded vital reliefs to unfortunate taxpayers.

 

To know more please click here.
 
CASE STUDY ANALYSIS FOR REGISTRATION REQUIRED FOR A MEDICAL STORE RUN BY A CHARITABLE TRUST AND MEDICINE SOLD AT LOWER RATE IS CONSIDERED AS SUPPLY.
 
The trusts are generally formed for charitable purpose so as to provide better services and reach to the under privileged. The nature of transactions undertaken by a trust has always been peculiar and so the taxability of such transactions. There is no blanket exemption provided to charitable trust under GST. To verify taxability under GST, each activity carried out by Trust is required to be analyzed.
 
In a writ filed by charitable Trust against the order passed by Gujarat Appellate Authority for Advance Ruling (GAAAR), the high court of Gujarat has upheld the order passed by GAAAR that sale of medicine a is regarded as supply and the Charitable Trust is liable to be registered under GST even if medicines are provided at a lower rate.
 
To know more please click here.
 
COMPANIES ACT 
CARO 2020- AN EVER INCREASING CONUNDRUM OF REPORTING OR A MOVE TOWARDS EARLY WARNING SIGNALS
 
The Companies (Auditors' Report) has been revised on 25th February, 2020. The new Order is applicable for audit reports issued by the statutory auditor from the reporting periods beginning from 1st April, 2021. While adding to transparency in the financial reporting, this will surely add to certain increased procedures for the companies and auditors alike

 

To know more please click here.
 
 

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2021

Newsletter - October 2021

The UN Climate Change conference starts in Glasgow next week. The COP26 as it is called, it is an important event where companies, technologists, policymakers, environmentalists and philanthropists will congregate and set the climate change agenda. 

We are running out of time to do enough to arrest climate change and avoid its ill effects and we have seen only in the last couple of years the damage and destruction caused by unseasonal and excessive Cyclones and rainfall in many parts of world while we saw unbearable heat waves in many others.

The latest deluge in Uttarakhand and other parts of India and Nepal were another reminder that this threat is real. We are paying for this with loss of human lives, damage to wealth and the overall ecosystem.

As more people make more climate friendly choices, companies will soon have no option but to be sensitive to sustainability in their processes and products. Shifting consumer preferences is a strong way to push everyone to have an economic incentive to adopt sustainability.

India lost against Pakistan in cricket. Amongst the disappointment across India, a few people have been booked for celebrating Pakistan's victory. That's an act that cannot be excused but in this hyper polarized world, we forget that we can appreciate the effort put in by the competing team while still lamenting our loss and reflecting on what we could have done different.

Climate change is similar. We can appreciate the advances made through industrialization in the last two and the benefits and comforts that have accrued to us in the process. Advances in technology has made our life's longer and healthier and more comfortable. The side effects of that have been climate change. We are building our understanding and awareness of how to battle this and we need to reflect on what actions we need to change and what we need to take to protect our planet and our future. Decisions businesses take on products and processes and choices made by consumers shall go a long way in ensuring we meet our climate change goals.

INDIRECT TAX (GST)
GST Refund on Tax wrongfully paid under incorrect head
 
Recently, CBIC has clarified the time limit in respect of GST refund application for tax wrongfully paid under incorrect head by paying the Tax under correct head without Interest as per section 77 of CGST Act and section 19 of IGST Act.
 
The time limit for application of Refund is two years from relevant date for every type of refund application as per Rule 89 of CGST Rules. Now, what is this relevant date in case of refund application involving payment under wrong head which is subsequently corrected by payment in correct head was question for interpretation.
 
 
VKC FOOTSTEPS INDIA PVT. LTD. V/S. UNION OF INDIA & ORS. (THE SUPREME COURT OF INDIA) [13.09.2021] - REFUND OF TAX PAID ON INPUT SERVICES CANNOT BE CLAIMED UNDER INVERTED DUTY STRUCTURE, TAXPAYERS CAN CLAIM ONLY REFUND OF TAX PAID ON INPUT GOODS.
 
In GST, accumulation of Input Tax Credit happens when the tax paid on inputs is more than the output tax liability. Such accumulation will have to be carried over to the next financial year till such time as it can be utilised by the registered person for payment of output tax liability.
 
However, the GST Law permits refund of unutilised ITC in two scenarios, namely if such credit accumulation is on account of zero-rated supplies or on account of inverted duty structure. In case of Supreme Court judgment VKC Footstep India Pvt. Ltd. held that Refund of tax paid on input services cannot be claimed under Inverted Duty Structure, taxpayers can claim only refund of tax paid on input goods. Here we present an analysis of said judgment.
 
To know more, please click here.
 
OTHER TRANSACTION ADVISORY 

LISTING BY OFFER OF SALE – TAX IMPLICATIONS
 
Currently, India is witnessing list of large number of IPOs in the form of fresh issue or Offer for sale (OFS) or combination. While the process of listing is more of a regulatory process, one (promoters and existing investors of an unlisted entity) has to be mindful of tax implications arising on IPO more specifically on OFS. We have covered in this article key the tax implications and nuances in respect of OFS mode of an IPO.
 
To know more in detail, please click here.
 

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2021

Newsletter - June 2021

After having discussed Covid-19 for almost a year and a half, it feels that we have finally found some space to look at other things.

The supply chain disruptions caused by the pandemic has related to some supply constraints that have pushed inflation in India higher than the 6% which was supposed to be RBI’s highest tolerance level. However, since these are not demand lead and the RBI shall ensure that they continue to support growth as there is a lot to be done till we are able to reach back at our true economic potential.

Vaccine availability has eased from the initial period where we are short supplied. We need to encourage more people around us to get the vaccine as that would be critical to achieve a level of immunity that could help us avoid further ‘waves’ of the pandemic and would enable our businesses to get back to normalcy. This is a joint responsibility we all have towards a commitment to revert to a thriving economy.

Business and market volatility is likely to be higher with more surprises as the economy keeps adjusting to demand ebbing and flowing and supply chains reverting to normalcy over time. The business managers shall need to ensure that they are able to focus on the short-term volatility while planning strategically for the longer term.

Our work for the next few months is cut out, barring a new wave emerging which is a distinct possibility. Manage the short term, be strategic for the longer term, stay safe and get vaccinated.

Here’s hoping that we avoid any further Covid waves are our businesses and the economy revert to normal at the earliest.
 
DIRECT TAX

INTRODUCTION FOR TDS ON PURCHASE OF GOODS
 
To widen the scope of TDS, new tax provision has been introduced under the Income Tax Act for certain buyers having turnover of more than INR 10 Crores. This compliance applies with effect from 01 July 2021 in respect of purchase of goods exceeding INR 50 lakhs from a single seller during the financial year.

 

 

INTRODUCTION FOR HIGHER RATE OF TDS/TCS FOR NON FILERS

In order to encourage people to file their income tax returns, new provisions under the Income Tax Act are made applicable with effect from 01 July 2021, based on which deductors/collectors may have to deduct/collect TDS/TCS at higher rate in case the deductee/collectee has not filed the Income Tax returns for 2 years and aggregate TDS/TCS in his case exceeds 50,000 in both the years.

 

To know more please click here.

INDIRECT TAX (GST)

GST UPDATES ON EXTENSION OF DUE DATES FOR JUNE’21

The GST Council in its 43rd meeting held on 28th May, 2021 at New Delhi took the following decisions relating to changes related to GST law and procedure. The same have been notified via 12 notifications on 01st June 2021. A synopsis of all such notifications is provided hereunder.

 

To know more please click here.
 
IGST ON IMPORT OF OXYGEN CONCENTRATORS BY INDIVIDUALS AS A GIFT FOR PERSONAL USE
 
The second wave Covid-19 pandemic has turned out to be far worse than the first. While the number of people gasping for breath is remarkably high the tax policy and administration of the country is, on the other hand, also struggling with an oxygen crisis of its own (in a manner of speaking).
 
To know more in detail, please click here.
 

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2021

Newsletter - September 2021

The world continues to heal and rebound from the ravages of the pandemic, and we have a sense of normalcy that has returned as even the Indian Prime Minister has made an international trip to the USA this month!

The Indian economy and the larger corporates seem to be bouncing back from the troughs of the pandemic very well. The GST collection and direct tax collection is a testament to this strength. The stock market is at new highs, we have seen a record number of ‘unicorns’ in the start up world and we have even seen a significant uptick in the property market with number of transactions and value of properties going up. While this is a great outcome for equity holders, a handful of startup entrepreneurs and developers, the inequality within the country has just increased materially over the last year. The unfortunate reality is that a lot of under privileged kids who might have leveraged education to take their families out of poverty, are facing a challenge as schools have still not opened fully and a number of these kids may not return to school. 

China has taken a very stern stand against inequality and has been talking about ‘common prosperity’ whereby they will reduce income inequality and rein in the billionaires by regulating various industries including education and real estate. China’s largest property developer, Evergrande, is facing imminent bankruptcy and property prices in China have softened due to the strict financial norms set out by the government for developers. The Chinese government was aware of the problems that would ensue with their regulations and while a lot of people are fearing a ‘Lehman’ moment starting from China, there is a good chance that China may be able to manage the fallout from Evergrande’s collapse. 

Since the beginning of the pandemic, as western countries have looked to diversify away from China in manufacturing and now with the stern actions being taken by the Chinese government across the tech sector, it seems that our ‘Make In India’ and PLI schemes will attract a lot of foreign capital. We all need to keep our eyes and ears open and look out for the opportunities as they come our way while the global power balances are reset.


INDIRECT TAX (GST)
GST RETURN ACTION POINTS FOR SEPTEMBER 2021
 
September is considered to be a crucial month for any Financial Year as it includes major compliances under the Goods & Services Act. Here, we provide you with an article contains GST Return Action Points for September 2021 it includes the list of action points and its brief explanation which should be performed by a registered person under GST.

 

 
DEMAND CANNOT BE RAISED FOR REVERSAL OF INPUT TAX CREDIT WHEN INVESTIGATION WAS UNDERWAY AND INCOMPLETE
 
Imagine, you pay tax and penalty to the government for some misdeeds for which investigation is initiated and the Hon'ble High Court asks the government to refund the whole amount back to you along with interest in absence of concluded investigation.
 
A little hard to digest right?
 
The Telangana High Court has, in a recent judgement, done the same since the course of action followed by the Revenue Department was not tenable under the law and the department was asked to follow the due procedure to demand the liability.
 
To know more, please click here.
 
DIRECT TAX 
EXTENSION OF VARIOUS DUE DATES UNDER INCOME TAX ACT,1961
 
Considering the difficulties faced by taxpayers and other stakeholders, CBDT vide circular no. 17 of 2021 dated 09-09-2021 has extended the due dates for filing ITRs and various other reports of audit for A.Y. 2020-21. 
 
To know more about the extended due dates please click here
 

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2021

Newsletter- July, 2021

While we are in some form of lockdown, a lot of unlocking has happened in the wealth of investors - Zomato has been listed with a lot of fanfare. This is momentous and has finally shown how startups that have scaled using venture capital funds, can finally list on the exchanges and smaller investors can participate in their story.

The valuation of the companies would be influenced heavily by the ebb and flow of investor confidence, however another factor that companies especially in China have had to contend with is the stern treatment meted out by Chinese government towards their 'tech' sector. China shelved the plans of Ant Financials, China's largest Fintech company, it suspended its homegrown 'Uber' equivalent, Didi Chuxing from the app stores after the company listed in the US and has now called for a regulation that would make all 'Ed-tech' companies become non-profit entities.

The last 18 months have shown us that our personal and business wellbeing can be at risk through a number of factors, some of which are outside of our primary causes of concern. 

India won its first medal at the Tokyo Olympics and last month saw England lose the Euro Cup 2020. While India's celebrated Mira's victory, the English people went on a rampage in their streets - this often makes one wonder, if this same degree of passion could be brought to the work we do and how we can impact the lives of others, the world would be an infinitely better place to live. We are witnessing disruptions in business at an unprecedented scale and the next decade is one where we will have to be passionate about the work we do but also evaluate the prospects of our old business models in a dispassionate and unattached manner. 

The right combination of passion and dispassion is required to be not stuck in the past and still bring the best results forward for yourself and your business.

COMPANY LAW

SMALL COMPANY – APPLICABILITY AND BENEFITS
 
Definition of Small Company under Companies Act, 2013 amended vide Finance Bill 2021 has been made effective from 1st April, 2021. 
 
Amended definition of small companies as per Section 2(85) of the Companies act, 2013 is:
“Small company means a company, other than public company if both conditions are fulfilled:
  • It has a paid up share capital less than INR 2 Crores (previously 50 Lakhs) and,
  • It has an annual turnover less than INR 20 Crores (previously 2 crores). 
But following companies are not small company even though they comply with above 2 conditions:
  • a holding company or a subsidiary company;
  • a company registered under section 8 of Companies Act, 2013 (Not for profit organization-NGO)
  • a company or body corporate governed by any special Act.

INDIRECT TAX (GST)
NO REVERSAL OF ITC IN RESPECT OF LOSS OF INPUTS DURING MANUFACTURING PROCESS
Manufacturing has emerged as one of the high growth sectors in India. Prime Minister of India, Mr. Narendra Modi, launched the ‘Make in India’ program to place India on the world map as a manufacturing hub and give global recognition to the Indian economy. The manufacturing sector of India has the potential to reach US$ 1 trillion by 2025. The implementation of the Goods and Services Tax (GST) will make India a common market with a GDP of US$ 2.5 trillion along with a population of 1.32 billion people, which will be a big draw for investors.
 
The Hon'ble Madras High Court, in a recent decision on allowability of input tax credit, has accorded a major relief to the manufacturing sector.
 
To know more please click here.
 
RESIDENTS’ WELFARE ASSOCIATION LIABLE TO PAY GST ON MEMBERS’ MONTHLY CONTRIBUTION ONLY ON AN AMOUNT EXCEEDING RS. 7500/-
Residents’ Welfare Association (RWA) and legally elected bodies that manage housing societies, are free to charge maintenance amount from residents based on the size of members’ flat. Usually housing societies levy maintenance charges as per the area of flat or on other variables if the apartments are of the same size. According to GST exemption notification No. 02/2018- Central Tax (rated) dated 25.01.2018, service provided by such association to its member for reimbursement of charges or share of contribution up to Rs. 7,500/- (earlier it was 5,000) per month per member for sourcing of goods or service for common use of member in a residential complex are exempt from GST.  However, if aggregate turnover is more than Rs. 20 lakhs yearly, the society needs to register and  pay 18% GST on member's contributions which are taxable.
 
Madras High Court while quashing the Authority of Advance ruling (AAR) and Circular No. 109 dated 22.07.2019 held that RWA liable to pay GST on the members’ monthly contribution only on the amount exceeding Rs. 7,500/- not on the entire amount.

 

To know more please click here.
 
FEMA
ARE YOU AN NRI PLANNING TO REMIT FUNDS ABROAD? HERE’S THE PROCEDURE TO COMPLETE THE PROCESS 
There are times when Non-residents want to remit money outside India– to relatives as gifts, for education/medical purposes, investments etc. or simply transfer surplus funds to their own account in the country of residence. Your remittances abroad involve dealing with foreign exchange and therefore, are governed by the Foreign Exchange Management Act, 1999 (FEMA).
 
Additionally, the authorized dealer banks need to verify that your remittance in compliance with the Income Tax Laws i.e. tax has been duly paid on funds being remitted and TDS, if any has been deducted. In this article, we are covering the essential aspects for NRIs for remitting funds abroad.

 

To know more please click here
 
NBFC
DETAILED NOTE ON NBFC
A Non-Banking Financial Company (NBFC) is a company holding registration from the RBI to do the financial business of lending and acquisition of shares/ debentures/ other securities etc.
 
In India, a company cannot carry out financial activities as its principal business (i.e. when financial assets and financial income, both, are more than 50% of total assets and total income respectively) unless it is registered as NBFC with RBI or registered with another financial regulator. Also lending activities by non-corporates requires a money lending license for getting protection in case of default by the borrower.
 
HNIs and big corporate groups proposing to do lending activities and also other financial investments, can consider NBFC as a preferred mode for carrying out such lending and investment activities. A Company registered as NBFC with the RBI not only provides a legal structure to do financial activities but it also offers various other advantages as covered in the attached note.
 
To know more in detail, please click here.

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2022 PDF

Newsletter - August 2022

India celebrated its 75th Independence day in style with the Tricolour unfurled across homes and institutions in the country. As a young democracy, we have indeed come a long way. It's important to remember that the Indian subcontinent comprised a number of states governed by different rulers. Boundaries were constantly redrawn and political alliances were made aplenty. 

 

Most historians would have thought that it would be impossible to keep together a disparate group of people in a secular India. We speak 22 (official) languages and over 700 dialects and follow a variety of religions. It is the strength of the freedom struggle that united us and keeps us together as a country. As we remember that struggle, pay homage to the fighters and celebrate our Independence - we strengthen our unity.

 

While we celebrated our 75th Independence day, it marked the day our neighbours in Afghanistan completed 1 year under the rule of the Taliban. The economy has contracted by approximately 30% as foreign aid stopped flowing to the country and girls have been left out of schools and women have been asked to leave jobs. Some of the things we take for granted in India are perhaps things to be grateful for.

 

Inflation across the world continues to bring difficulty to people. In Thailand, the price of their staple food, noodles, was increased by 33% after being held constant for 14 years. Europe is reeling under the pressures of high energy prices and things are likely to get tougher as we move towards winter and the heating requirement increases. All businesses should be mindful of sudden shifts in input costs and dislocations in buying power of their customers. 

 

During this pious period of Paryushan, we reflect on our conduct and our being and hope to continue to evolve on our spiritual journeys. We seek your pardon for anytime we may have hurt you. 

 

INDIRECT TAX (GST)

 

RECENT CLARIFICATION UNDER GST

 
With an honest attempt to reduce the litigation , the department has came up with circular to provide clarity in relation to GST Applicability on liquidated damages, compensation and penalty arising out of breach of contract, GST payable under RCM on Renting of motor vehicle and many more clarifications.
 
 
 
DIRECT TAX

 

CBDT NOTIFIES CONDITIONS FOR COVID-19 RELATED TAX EXEMPTIONS

 
The Finance Act, 2022 brought an amendment with respect to exemption of money received on account of Covid-19 related illness subject to conditions to be prescribed. In this context, the CBDT has notified the requirements and conditions to avail such tax exemption.
 
To Know more please click here
 
 

 

 

 

 

 

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