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The National Democratic Alliance government plans to shift to the goods and service tax (GST) regime on July 1. In the new indirect tax architecture,  some existing cesses, that are currently levied, will be done away with. Yet the government has budgeted for increases in even those cesses that will  cease to exist after July 1. The Budget does not separately show collections in the GST regime but continues to project collections for excise duties  and services taxes through the year. This has led experts to question whether the government has factored in the impact of the shift to GST in the Budget, including that on the schemes that are funded from cess collections.   The Budget pegs the cess and surcharge collections for FY 18 at Rs 2.96 lakhcrore — a jump of Rs 46,298 crore over the Revised Estimates (RE) of FY17.These cesses and surcharges include the ones imposed along with both direct and indirect taxes.   A senior tax consultant said: “The...

The I-T department today said companies that had a turnover of less than Rs 50 crore in 2015-16 will pay tax at the reduced rate of 25 per cent from April 1 even if they cross the threshold in 2016-17 or subsequent years.   Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said the income tax department will come out with a clarification on which companies would be eligible to avail the tax benefit.   In order to boost the SME sector, Finance Minister Arun Jaitley in Budget 2017-18 reduced the income tax for smaller companies with annual turnover up to Rs 50 crore to 25 per cent as against the usual rate of 30 per cent.   "If your turnover in 2015-16 was Rs 50 crore then you will be subject to 25 per cent tax. We will come out with clarification on (applicability of the tax benefit to) new companies," Chandra said.   According to the memorandum to the Finance Bill 2017, in case of domestic company, the rate of income-tax sh...

Two Budget proposals could curb the demand for residential properties, whose market has already slipped after demonetisation. According to the Budget, a person owning a second home can claim a deduction of Rs 2 lakh a year on account of losses on it. Currently there is no limit on the deduction that can be claimed. “Unless property prices start appreciating, this move will reduce the incentive a salaried person earlier had to invest in a second home and optimise tax. We believe this is likely to impact demand, especially in the top seven metros (more service-sector jobs), in an already weak market,” said Samar Sarda, Nischint Chawathe and Abhijeet Sakhare of Kotak Institutional Equities in a report on February 2.   Further, there could be prepayments of loans on such properties, and that might put pressure on housing finance companies, they said.   Abhishek Anand, an analyst with JM Financial Institutional Securities, said the move increased the cost of funding by ...

The goods and services tax (GST) law that has been drafted has a provision that did not get the attention that it deserves. It relates to the anti-profiteering measure in Section 163 which is quoted below: “163. Anti-profiteering Measure (1) The central Government may by law constitute an Authority, or entrust an existing Authority constituted under any law, to examine whether input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him.” It is one of the most devastatingly retrograde measures that have been incorporated in the GST law. Because of the intense hullabaloo that went on in the GST Council over the rates of duty and the control by the Centre and the states on assessees, this aspect of the matter must not have gotten the benefit of detailed discussion that it deserved from the GST Council. ...

Unnecessary queries and delays in refund likely to reduce From the next financial year, 201718, it will get tougher for taxpayers to avoid filing returns. But at the same time, unnecessary queries in case of a tax notice and endless waiting in case of appeals may soon come to an end. The Union Budget 2017-18 has provisions that seek to promote compliance while making things easier for those who comply. Fee for delay in filing returns: Currently, if a taxpayer does not file returns on time there is a penalty. The penalty is discretionary and payable post facto, that is, after you have filed returns. It is also levied only if it is proved that the taxpayer has intentionally not filed returns. So, technically it is possible to delay filing returns till the end of the next financial year. This means for FY17, returns have to be filed by July 31, 2017. It can be delayed till March 31, 2018, if there is no tax payable (if you have only salary income and the entire tax is cut by way...

Sebi asked to provide details of such transactions for finance ministry and tax department to study these and issue final guidelines on ‘anti-abuse’ measures   The finance ministry has sought an “exhaustive list” of wide-ranging off-market transactions from the Securities and Exchange Board of India, to decide whether  investors have to pay long-term capital gains (LTCG) tax under a new rule. The proposed clause in this year’s Budget says those who acquired shares in unlisted  companies after October 1, 2004, will have to pay LTCG if they hadn’t paid securities transaction tax (STT) at the time of purchase. At present, STT is not paid  when shares are acquired in off-market transactions such as mergers and acquisitions,qualified institutional placements or private equity investments in unlisted companies.   The ministry official and the tax department are working closely to finalise guidelines,to be issued after considering the concerns raised by ...

The government is planning to resume labour reforms by introducing twolabour Bills in the second half of the Budget session of Parliament,a move Likely to be resisted by Opposition parties andunions.  The Bills are the Industrial Relations Code Bill, 2016, and the Wage Code Bill, 2016.The second half of the session begins on March 9.Labour ministry officials say that all formalities, including tripartite consultations with the trade unions and approval from the law ministry,have been done.  Both the Bills are with a Group of Ministers. It will make changes if required and then they will be placed before the cabinet.  The government wants to integrate around 40 labour laws into four pieces of legislation. For example, all wage-related laws will be amalgamated to form the Wage Code and the industrial relations laws will be part of the related Code. In his Budget speech, Union Finance Minister Arun Jaitley reiterated forming the four labour Codes,the process of whi...

Fiscal deficit target of 3.2% realistic,he says Finance Minister Arun Jaitley on Friday said an institution to tackle non-performing assets (NPAs) of banks and over-leveraged companies could not be funded by the government alone through budgetary support.He,however,did not dismiss the idea of the body mooted by the Economic Survey. Interacting with representatives of industry chambers,two days after he tabled the Budget in the Lok Sabha, Jaitley said he would not like to get into a situation where eventually NPAs become a government issue and the whole thing has to be supported out of the Budget. The Economic Survey for 2016-17 stated the country has been trying to solve its‘Twin Balance Sheet’problem — overleveraged companies and bad-loan encumbered banks,alegacy of the boom  period around the Global Financial Crisis.So far,there had been limited success,it said. It suggested a centralised Public Sector Asset Rehabilitation Agency (PARA),which could take charge ofthe largest, mos...

Airtel payments bank charge a fee of 0.65% on all cash withdrawals above Rs 4,000 from the account The Narendra Modi government is considering a cap on service charges levied on online transactions, as it looks to encourage further digital means of payments  for goods and services. According to a senior government source, rules are to be amended to put a limit on service charge as volume of transactions increase. "The government has received feedback from consumers and stakeholders on how high rates of service charges are disincentivising them to shift to a less cash economy." said the person, and added that there would be notification on the matter soon.   Some of the mobile wallets charge around one per cent service charge for KYC (know your customer) and around four percent service charge for non-KYC account holders for using their services, said shopkeepers using mobile wallets.   Airtel payments bank charge a fee of 0.65 per cent on all cash withdrawals above Rs 4,0...

POLITICAL FUNDING Move to ensure that the proposed instrument is not misused as a parallel currency Precautions will be built in to ensure the anonymity of the donors' contribution The government is plan ning to impose a time limit for redeem ing the electoral bonds announced in the Budget to ensure that the proposed instrument of political funding is not misused as a parallel currency . A senior government official in volved in framing of the new mechanism told ET on condition of ano nymity that the bonds will have to be redeemed within a specified number of days to ensure the bonds are credited into the designated banks ac counts of political parties at the earliest. “There will be a fixed time window for redeeming the electoral bonds. In fact, this time window will be in terms of days, not months or years,“ the official said. This will ensure that the proposed electoral bonds do not become a par allel currency for exchange between multiple entities, a prospect that could def...

Revenue secretary says GST on schedule for implementation later this year Revenue secretary Hasmukh Adhia said the goods and services tax is on schedule for implementation later this year and that there would be no harassment of genuine taxpayers over deposits of old notes in the wake of demonetisation. The government has been able to mine data following the currency swap announcement on November 8 and match deposits to inco me profiles. But enough safeguards have been built into the system to prevent persecution. “First of all, we have never gone beyond our mandate of taking up more than 1% of cases for scrutiny,“ Adhia said. “The question is that because of demonetisation there is a large amount of data which we have got and that data people are fea ring will be mi sused for haras sing people.“ The 18 lakh acco unt holders that have come to attention as a result of this data mining will be given a chance to explain their sources of income. “We have not allowed this data to be sent d...