Skip to main content

Black money drive: Govt to weed out dormant LLPs

Black money drive: Govt to weed out dormant LLPs
After cracking its whip on suspected shell companies, the government has turned its focus on the growing number of Limited Liability Partnership (LLPs) firms.
In suchapartnership, partners can´t be held liable for another´s misconduct or negligence.
As a first step, the government is in the process of identifying and deregistering inactive LLP firms.
“The Registrar of Companies (RoC) is onaspree to strike off inactive LLPs from its register,” says Vikas Gupta, partner, Nangia &Co.
The government has been onadrive against generation of black money and money laundering through use of shell companies.
In his Independence Day speech, Prime Minister Narendra Modi said that the government had identified over 300,000 shell companies and registrations of 175,000 such firms had been cancelled.
Experts point out, just like shell companies, inactive LLPs could be used for tax evasion and money laundering.
The trend of converting existing companies into LLPs and creation of new LLPs spiked after the Companies Act, 2013, came into effect in April 2014, seemingly to tide over the higher compliance requirements.
Around 6,000odd companies converted themselves into the LLP structure as of June 2017 over the last twothree years.
Corporate lawyers say that on an average, 2,5003,000 LLPs get registered every month.
According to the data from the ministry of corporate affairs (MCA), there were 94,304 active LLPs as of June 2017.
What has caught the attention of the government is the steady rise in the number of LLPs in the last one year, peaking at 3,518 in March 2017. In the three months from April to June 2017, 8,019 new LLPs got registered, according to the MCA data.
Many legal experts feel that the demonetisation of highvalue currency notes in November last year gaveafillip to LLPs.
The rise in the number of LLPs could also have been fuelled by the fact that obtaining government approval is notarequirement to convert certain companies into LLPs.
The minimal compliance and regulatory requirements under the LLP structure may have caught the fancy of business owners.
On  a yearly basis, an LLP is only required to file an annual return, andastatement of account and solvency.
All other filings are eventbased, triggered by any change in LLP partners, retirement, resignation and change of address, among others.
Over the past two years, the government and the Reserve Bank of India have also liberalised norms for allowing foreign direct investment in LLPs, while allowing the appointment of foreign partners.
A recent RBI amendment allowed LLPs to avail of external commercial borrowing (ECB), including masala bonds.
Going forward, legal experts expect LLPs to attractagreater slice of foreign direct investment.
The Business Standard, New Delhi, 18th August 2017

Comments

Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Coffee-Toffee, the GST Debate Continues

Hundreds of crores of rupees in the form of taxes ride on the exact categorisation of products Is Parachute hair oil or edible oil? Is KitKat a chocolate or a biscuit? Is a Vicks tablet medicament or confectionery? For the taxpayer and the tax collector, this is much more than an exercise in semantics -hundreds of crores of rupees ride on the exact categorisation.
As the government moves closer to rolling out the goods and services tax (GST) on July 1, many such distinctions are being debated so that no ambiguity remains. Not just that, the government is revisiting old tax cases that were lost over product categorisation, according to people with knowledge of the matter, presumably with a view to making sure that revenue collections can be maximised. “In the past, several tax officers had challenged some of the product categorisations, including those in the retail segment, but lost out in court or at appellate level,“ said one of the persons. “Now we have a chance to go ahead with speci…

Deposit gush:-CA Institute Bats for Special Audit