Posted on

Provisional Assessment under GST

Provisional assessment under GST
(Section 60 of The CGST Act, 2017)

If you are unable to determine your tax liability, the GST law has the option to pay tax on a provisional basis. This article explains the procedure of provisional tax assessment under GST and lists out various online application forms under GST law. The procedure can be effectively used to avoid tax litigations.

The provisional assessment provides a way for calculating the tax liability in case the correct tax liability cannot be calculated at the time of supply. The inability to determine the tax amount can be of two types

1.      The inability to determining the rate of tax

2.     The Inability to determine the value of goods or services

The payment of provisional tax can be made only against a bond and security. At the time of finalization, the tax liability can either be high or less as compared to the provisionally paid tax. In case of an increase in the tax liability, the difference is payable along with interest at a specified rate from the first day after the due date of payment of tax till the date of actual payment and in case of the decrease in the tax liability, the amount will be refunded with interest at a specified rate.

Procedure: –

The assessee requesting payment of tax on a provisional basis has to furnish an application along with the supporting documents, electronically in FORM GST ASMT-01 on the common portal.

The Assistant Commissioner / Deputy Commissioner of Central Tax will scrutinize the application in FORM GST ASMT-01. In case, additional information or documents in support is required by the Assistant Commissioner / Deputy Commissioner of Central Tax to decide the case, notice in FORM GST ASMT-02 will be issued to the assessee requesting for submission of the same.

The assessee has to file a reply to the notice in FORM GST ASMT-03, and if he desires can also appear in person before the Assistant Commissioner / Deputy Commissioner of Central Tax to explain his view.

The Assistant Commissioner / Deputy Commissioner of Central Tax will then issue an order in FORM GST ASMT-04 within a period not later than 90 days from the date of receipt of Form GST ASMT-01, allowing the payment of tax on a provisional basis. The order will indicate the amount of tax payable and the amount for which the bond is to be executed along with the security to be furnished. The security in form of bank guarantee will not exceed 25 percent of the amount covered under the bond.

The assessee has to execute the bond in FORMGSTASMT-05 along with the security as bank guarantee for an amount as mentioned in FORM GST ASMT-04. After executing the bond the process of the provisional assessment is complete.

The provisional assessment has to be finalized within 6 months from the date of issuance of FORM GST ASMT-04. The Assistant Commissioner / Deputy Commissioner of Central Tax will issue a notice in FORM GST ASMT-06, calling for information and records required for finalization of assessment and shall issue a final assessment order, specifying the amount payable by the assessee or the amount refundable, if any, in FORM GST ASMT-07.

Once the order in FORM GST ASMT-07 is issued, the assessee has to file an application in FORM GST ASMT-08 for the release of the security furnished.

On receipt of this application, the Assistant Commissioner / Deputy Commissioner of Central Tax will issue an order in FORM GST ASMT-09 in within a period of 7 working days from the date of the receipt of the application for releasing the security after the amount payable specified in FORM GST ASMT-07 has been paid.

Posted on

GST tax assessment

Assessment under GST

The article aims to highlight how tax assessment is carried under GST law. The law has very procedurally defined the steps and actions for assessee and GST officer.

Assessment means the determination of tax liability under GST law and includes self-assessment, re-assessment, summary assessment, and best judgment assessment. Given below are the various types of assessment under the GST Act.

  • Self-assessment (Section 59)
  • Provisional assessment (Section 60)
  • Scrutiny assessment (Section 61)
  • Best judgment assessment (Section 62 & 63)
    • Assessment of non-filers of returns (Section 62)
    • Assessment of unregistered persons (Section 63)
  • Summary assessment (Section 64)

Only self-assessment is done by the taxpayer himself/itself. All the other assessments are undertaken by tax authorities. Under this article, we will discuss about self-assessment under GST, please refer to our other articles on the subject to read about various other assessments.

Self-assessment (Section 59)

Every registered person would be required to assess his tax liability in accordance with the provision of GST laws and report the basis of calculation of tax liability to the tax authorities, by the filing of periodic tax returns under section 39. Currently, Form GSTR 3B is being filed for declaring output and input tax details by assessees.

Related provisions if there is a delay in the filing of periodic tax returns: –

Section 47: – Levy of late fees
Any registered person who fails to furnish the details of outward or inward supplies required under returns required under section 39 by the due date shall pay a late fee of Twenty-five rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees, equal amount of late fees under SGST act shall also be levied.

Provided that such late fees shall be reduced to Rs. 10 in case of nil reporting/liability during the tax period.

The late fee has recently been waived off for the returns being filed between 22nd December 2018 to 31st March 2019 for the period pertaining to July 2017 to September 2018

Section 50: – Interest on late payment of GST liability
(1) Every person who is liable to pay tax, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall pay on his own, interest eighteen per-cent or such rate as may be notified by the Government on the recommendations of the Council.
(2) The interest under sub-section (1) shall be calculated from the day succeeding the day on which such tax was due to be paid till the date of payment.

Further, the GST officer can levy penalties under Section 122 of the CGST Act, in case one file any wrong or false information in the GST returns.

Posted on

Clubbing of Income / Income tax on gifts

Although the Gift tax in India is abolished although certain provisions in Income Tax law makes gifts or income derived from gifts taxable. The below article explains the summary of related gift related provisions under the Income Tax Act.

SECTION

NATURE OF TRANSACTION

TO BE CLUBBED IN THE HANDS OF

CONDITIONS/EXCEPTIONS

Section 60 of Income Tax Act

Transfer of Income without transfer of Assets.

Transferor who transfers
the income.

Irrespective of:
1. Whether such transfer is revocable or not.

2. Whether the transfer is effected before or after the commencement of IT Act.

Income for the purpose of Section 64 includes losses.

Section 61 of the Income Tax Act

Revocable transfer of Assets.

Transferor who transfers
the Assets.

Transfer also held as revocable
1. If there is also a provision in the agreement to re-transfer directly or indirectly whole/part of income/asset to the transferor;

2. If there is a right to reassume power, directly or indirectly, the transfer is held revocable and actual exercise is not necessary.

3. Where no absolute right is given to transferee and asset can revert back to the transferor in prescribed circumstances, the transfer is held as revocable.

Exceptions
Trust/transfer irrevocably during the lifetime of beneficiaries/transferee

Section 64(1)(ii) of Income Tax Act

Salary, Commission,
Fees or remuneration
paid to spouse from a concern in which an individual has a
substantial* interest.

Spouse (husband/wife) whose total income (excluding income to be clubbed)
is greater.

Condition

The relationship of husband
and wife must subsist at the
time of accrual of the income

Exceptions (Clubbing not applicable if)


1. Spouse possesses technical
or professional qualification
and remuneration is solely
attributable to the application of
that knowledge/qualification.

2. Income other than salary, commission, fees or remuneration.

Section 64(1)(iv) of Income Tax Act

Income from assets
transferred directly or indirectly to the spouse without adequate consideration.

(other Than House property*)

Individual transferring
the asset.

Clubbing also applicable, if:-

1. Cash gifted to spouse and he/she invests to earn interest.

2. Capital gain on sale of property which was received without consideration from the spouse.

3. The transaction must be real.

Clubbing not applicable if:
The assets are transferred;


1. With an agreement to live apart.

2. Before marriage.

3. Income earned when relation does not exist.

4. By Karta of HUF gifting co-parceners property to his wife.

5. Property acquired out of pin (saved) money.

6. Income earned out of Income arising from transferred assets not liable for clubbed.

Section 64(1)(vi) of Income Tax Act

Income from the assets transferred to Daughter in Law (son’s wife).

Individual transferring
the Asset.

Conditions:


The transfer should be without adequate consideration. Cross transfers are also covered.

Section 64(1)(vii) of Income Tax Act

Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his Spouse.

Individual transferring
the Asset.

Conditions:


1. The transfer should be
without adequate consideration.

2. Transferor need not necessarily have taxable income of his own

Section 64(1)(viii) of Income Tax Act

Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his Son’s wife.

Individual transferring
the Asset.

Conditions:

1. The transfer should be
without adequate consideration.

2. Transferor need not necessarily have taxable income of his own

Section 64(1A) of the Income Tax Act

Income of a minor child
[Child/kid includes step child, adopted child, and minor married daughter].

1. If the marriage subsists, in the hands of the parent whose taxable income is higher or

2. If parents are staying separate because of divorce, in the hands of the person who maintains the minor child.

3. Income once included
in the total income of either of parents, it shall continue to be included in the hands of the same parent in the subsequent year unless AO is satisfied that it is necessary to do so

Clubbing not applicable for:


1. Income of a minor child
suffering any disability specified u/s. 80U.

2. Income on account of manual work done by the minor child.

3. Income on account of any
activity involving the application
of skills, talent or specialized knowledge and experience such as income from KBC or quiz competition.

4. Income out of property transferred for without consideration to a minor married daughter,

Exemption up to limit:-

The parent in whose hands the minor’s income is clubbed is entitled to an exemption up to Rs. 1,500 per child. [Section 10(32)]

Section 64(2) of the Income Tax Act

Income of HUF from
property converted by the individual into HUF property.

Income is included in
the hands of individual
& not in the hands of
HUF.

Clubbing applicable even if:
The converted property is
subsequently partitioned;
income derived by the spouse from such converted property will be taxable in the hands of the individual.

Section 27 of the Income Tax Act

Income from House property
transferred directly or indirectly to the spouse without adequate consideration.

Individual transferring
the asset.

Income from transfer of such house property will be the income of transferor such as Rental Income etc.

Posted on

Reverse charge mechanism under GST: A boon or bane for small players

 

Any taxes are generally being paid out by seller of goods and services. Under reverse charge mechanism, the tax payment is made by buyer instead of supplier. There are many instances under which one needs to pay tax under reverse charge. In this article, we will analyse the most important section for reverse charge, we will analyse Section 9(4) of CGST Act, which requires payment of tax by registered dealer on any taxable supplies received from unregistered dealers.

 

“The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”

 

This wasn’t a condition in earlier draft model GST law and has been incorporated in revised version of law. The recipient of goods or services needs to pay this tax and claim the amount paid as input. Though it doesn’t increase any tax liability of recipient but will increase administrative and compliance hassle for him. The prescribed process requires one the recipient to raise an Invoice for such transaction and pay the tax. Due to this reason, this move of imposing tax is being considered as unfriendly for small business man.

 

However, this will be a very peculiar position in case the unregistered dealer is dealing with dealers under registered under composition scheme. Under the composition scheme, the dealers are not entitled to claim any input tax and they straight away needs to pay a fixed lowered percentage of tax on total turnover. In such cases for recipient, any such transaction with unregistered dealer becomes a straight forward cost.

 

Let’s see the positive side of RCM provisions, if we deep dive the situation, this may prove as a blessing in disguise for small unregistered players for the reasons as under:

 

  1. If small supplier doesn’t file his GST return, the large players will hesitate to deal with him. Thus, GST restricts business between small and big player.

 

  1. With the introduction of RCM, any small player who generally doesn’t have any input as such is free to remain unregistered. But still the large player can deal with him and pay tax on their own. With the introduction of RCM provisions, now large player don’t need to depend upon tax payment and return filing by such small unregistered suppliers.

 

  1. One also needs to check the cost benefit analysis of GST compliance for a small player vis-a-vis the amount of benefit of GST input availed by him before commenting upon tax efficiency.

 

Thus in our view, though RCM it is being considering as show stopper, it is rather an enabler for small business man and one needs to carefully analyse the matter on highlighted parameters before reaching the conclusion.

Posted on

NGO Registration choices in India

NGO’ are formed for the welfare of deprived, promotion of education, research, sports or such other objects. These are non-profit organisations which work for social cause and address various causes. There are many options available in India for incorporating a NGO.

 

NGO’s tax and other benefits:

The NGO’s are given benefit in Income tax and service tax. The basic criteria are mentioned as under to avail the benefits.

  1. NGO should have any business income. In case of business income, separate records are mandatorily required
  2. The bye laws of organisation should not allow spending of income and assets of NGO other than charitable.
  3. NGO should maintain regular accounts.
  4. NGO should not work for benefit of any particular religious community or caste.

 

With this article, we believe you should be able to appreciate the select right mode of organisation for your planned NGO venture and plan your NGO incorporation steps effectively.

Incorporation:

Description Society Trust Company (Section 8)
Applicable Act The Society Registration Act, 1860 The Registration Act, 1908 The Companies Act, 2013
Approval o name Name is generally granted if available Not required Separate application for name approval with strict guidelines
Minimum number of subscribers required 7 2 2
Voting Rights All members have equal rights All trustees have equal rights The voting rights may vary on the basis of shareholding.
Governing structure Two tier structure
a. General Body
b. Managing body		 All trustees have equal rights Two tier structure
a. General Body
b. Board of directors
Transfer of membership Not transferable Membership can be transferred, however company may choose to provide restrictions on transfer
Annual documents to be filed under the Act above List of general body, list of managing body, annual audited accounts, Chairman’s report to be filed every year. None Annual return and audited accounts
Income tax return Audited accounts to be filed every year
Penal consequences in case of any default Moderate High

 

Funds of NGO:

The organization must spend 85% of its income in any financial year (April 1st to March 31st) on the objects of the organization. The organization has until 12 months following the end of the financial year to comply with this requirement. Surplus income may be accumulated for specific projects for a period ranging from 1 to 5 years. No part of the income or property of the organization may be used or applied directly or indirectly for the benefit of the founder, trustee, relative of the founder or trustee or a person who has contributed in excess of Rs. 50,000 to the organization in a financial year. NGOs can be incorporated with minimum amount of capital.

 

Name of NGO:

For the companies under Section 8, the name shall include the words Foundation, Forum, Association, Federation, Chambers, Confederations, etc. Limited or Pvt. Ltd will not be suffixed with name.

 

Process of Incorporation:

The process of incorporation involves submission of ID, address proofs of subscribers and address proofs of office. The documents are filed along with charter of the organisation for requesting for incorporation. In case of Section 8 Company, one also has to apply for licence under Section 8 of Companies Act prior to incorporation.  The process required submission of business plan of the proposed NGO along with other documents.

 

After incorporation:

 

  • PAN  & TAN Application:

The organisation must apply for PAN number for Income tax filing and TAN (tax deducted at source number) for deduction of TDS for payments to vendors above the threshold defined.

 

  • Income tax registration as charitable organisation:

Application (Form 10A) for registration with Income tax for charitable activities under Section 12AA is a must for NGOs. In order to avail income tax exemption, the organisation must obtain this registration.

 

  • Application for 80G certification under Income Tax Act:

Donor’s get tax advantage if the organisation is registered under Section 80G. Form 10G is used to apply for registration by organisation.

 

  • Service Tax: The entities registered under Section 12AA of the Income Tax are exempt for service tax. In case, the organisation achieves Rs 9 lacs threshold before grant of Income tax registration, the organisation should apply for service tax registration.

 

  • VAT (Value Added Tax): VAT would be applicable in state of Haryana if the sales exceed Rs 500,000 or at the time of any inter-state sales.

 

  • GST (Goods and Service tax): As soon as the GST is implemented, any registration taken in Service tax or VAT would be required to be shifted to GST.

 

Foreign contributions: In order to receive any foreign contributions registration under FCRA would be required.

 

Choosing between above three options:

It’s a difficult choice. The comparative advantages and disadvantages are not alarming enough to recommend any particular for of registration. Registration as company would be more professional and organised way of working, entailing more paper work and compliances. On the other hand, registration as trust would be simplest way with minimal paper work and procedural hassles. Registration as a society will come in between; which is generally the popular choice.

 

Posted on

GST registration for feeelancers

 

Query: Does a freelancer service provider needs to take GST registration.

Answer:

  • If the amount of taxable goods or services is greater than Rs 20 lacs, it is a must.
  • In case, the freelancer needs to give services outside the state of fixed place of business, the above limit of Rs 20 lacs doesn’t apply. He is required to take registration irrespective of turnover
  • If the freelancer occasionally undertakes transaction involving taxable supply of goods or services outside the state of his fixed place of business, he needs to take temporary registration in the state wherein the supply has been made.

 

Posted on

Importance of a business plan

Developing a business plan is the first step to a successful business. Planning is one of the most important parts of running a business, no matter whether it is a large multinational corporation trying to plan an expansion or a small business launching an exciting new product. Most businesses start with a great idea, but in order to take that idea and develop it into a successful company, it’s vitally important to have a business plan. That plan is much like the nervous system of the business: It connects all the parts together and can tell you if a one piece of the company is injured.
Here are the reasons we believe, you absolutely must have a business plan.

 

  1. Thought process commitment: By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can detail alternative future scenarios and set specific objectives and goals along with the resources required to achieve these goals. By understanding your business and the market a little better and planning how best to operate within this environment, you will be well placed to ensure your long-term success.

 

  1. Solve issues before they start:Developing a business plan can help you identify problems that may arise in the future and stop them before they become a disaster.

 

  1. Estimate your startup costs:While creating a business plan, you can more clearly determine your startup costs. A strong plan can also help you wisely spend those funds, get the most out of your money, prepare for future expansion and also prepare for unexpected costs.

 

  1. Organization:Being organized is an important asset in your business toolbox. Having a carefully created plan from the beginning will organize your ideas and goals and allow you to truly understand how you want your business to work.

 

  1. Support funding requirements: Most businesses face investment decisions during the course of their lifetime. Often, these opportunities cannot be funded by free cash flows alone, and the business must seek external funding. However, despite the fact that the market for funding is highly competitive, all prospective lenders will require access to the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. In essence the former helps bankers or investors understand the past, whereas the business plan helps give them a window on the future.

In all, writing a business plan will also help you to think more analytically than ever before about your industry and the role of your business within it. It will help you to see correlations between the different parts of your business e.g. how decreasing the cost of a particular process will affect your overall profit margin.

The value of a business plan simply cannot be overstated. Putting ideas and concepts down on paper is invaluable and the act of researching and compiling data about your competitors and the market will prove to be very useful in the times to come.