CA Online

Transitioning tax credits under GST Clarity is required for assessees to take necessary steps — in terms of readying supporting documentation where credits can be transitioned, and also negotiating with counterparties on who will bear sunk costs where credits can’t be transitioned With the goods and services tax (GST) looming, one of the biggest challenges that businesses are grappling with is the transition of existing tax credits. Such credits, once transitioned, can be used to pay GST on outward supplies. Credits that cannot be transitioned become a sunk cost for businesses, given that outward supplies will attract GST at the prescribed rates, but at the same time, a corresponding credit will not be available for offset. The GST law contemplates two broad scenarios in which credits can be carried forward. The first is a currently registered assessee under the central/state laws, who can transition 100 per cent of the credit shown in his returns. The second is a currently unregis...

FDI likely to rise further after GST: Moody’s India is likely see increased foreign direct investment (FDI) inflows on the back of reforms such as introduction of the goods and services tax and the bankruptcy code, international ratings agency Moody’s said in a report on Monday. “Combined with reforms such as the introduction of a goods and services tax, which lowers the cost and complexity of doing business, and a simplified and clarified bankruptcy code, FDI is likely to rise further,” the agency said in its report on how structural reforms by Asia Pacific sovereigns could become more effective from stronger global demand. In India, Moody’s said, the government has raised ceilings for authorised FDI in a number of sectors. “FDI has already increased substantially, albeit from a low base,” the report said. FDI in India grew by 18% during 2016 to touch Rs 46 billion, data released by the Department of Industrial Policy and Promotion showed. The Narendra Modi government has liberali...

I-T Dept Goes after Defunct Cos for Tax Frauds UNDER LENS Sends notices to reopen assessment against cos in marketing, realty space that no longer exist on suspicion of frauds or fund diversion The tax office is reopening old records of many companies that have wound up and no longer exist in the books of the government -something the revenue department has rarely done in the past. Former directors of such closely-held private companies, which have received tax notices along with the official liquidators, fear they could be suddenly saddled with unforeseen liabilities. While opening new private companies and shutting down old ones have often been a ploy to move unaccounted money, some of the companies set up to carry out bona fide businesses which subsequently failed have also come under the glare of the income tax department. Till now, the department has ty pically stayed away from companies to which it had issued nonobjection certificate prior to the winding process. But, it...

Recent low inflation means you pay more capital gains tax Prices rising at a slower rate should be good news. But not if you have earned long-term capital gains. The consistent decline in inflation in the past 3-4 years means that long-term capital gains can no longer escape tax through indexation. Indexation takes into account the inflation during the holding period and accordingly adjusts the purchase price of certain assets. This upward revision in purchase price reduces the capital gains and brings down the tax liability. Between 2008 and 2012, consumer inflation was raging in double digits, which meant that debt fund investors were earning tax-free gains. In fact, the inflation was so high that they could book notional losses and adjust them against other taxable long-term capital gains. Someone who invested Rs 1 lakh in a debt fund on 1 April 2011 would have earned Rs 28,400 over the next three years. However, with the cost inflation index (CII) shooting up 9.3% during the sa...

Jurisdiction-free I-T assessment of taxpayers on the anvil CBDT has constituted a special team of officers to prepare modalities to abolish the old system The Income Tax Department is working on a new system of jurisdiction-free assessment, where a taxpayer would be assessed by a taxman based in any part of the country as part of measures to reduce instances of corruption and harassment. Officials said the Central Board of Direct Taxes (CBDT), that frames policy for the tax department, has constituted a special team of officers to prepare modalities for this path- breaking initiative and abolish the age-old prevalent system of a taxpayer being assessed in a specific circle of the city or town where he or she is based. "This first-of-its-kind initiative will totally change the relationship and dealing between an assessee and his Assessing Officer (AO). The income tax returns, scrutiny cases and all other I-T related correspondence of a taxpayer will go to a officer chosen rando...

GSTN reopens window for composition scheme The GST Network (GSTN) on Sunday said it has reopened the facility for small taxpayers with turnover of up to Rs 75 lakh to opt for composition scheme. Such small taxpayers will have time till September 30 to opt for the scheme, which offers easy compliance for business as returns are to be filed only quarterly. Taxpayers were earlier given time till August 16 to opt for composition scheme. But, only 10.86 lakh tax payers, out of total 85 lakh registered businesses opted for the scheme. In a statement, GSTN said the window will be open for those assessees who have migrated from the earlier excise/ service tax/VAT regime as well as for new registered taxpayers. "To make this facility available to all those who could not opt for Composition, the facility has been opened again," it said. The GST Council had last week decided to reopen the window for allowing taxpayers to opt for the scheme. Those who opt for composition scheme durin...

GST Transitional Claims of Over Rs 1 Cr to be Scrutinised While tax collections in July were Rs 95,000 cr, transitional credit claims are Rs 65,000 cr As much as Rs 65,000 crore out of the nearly Rs 95,000 crore tax collections in July -the first month of GST -have been claimed as transitional credit by taxpayers, prompting the apex indirect taxes body the Central Board of Excise and Customs to order a scrutiny of all cases above Rs 1 crore.   The Goods and Services Tax (GST) regime, which kicked in from July 1, allows tax credit on stock purchased during the previous tax regime. This facility is available only up to six months from the date of GST rollout. The Central Board of Excise and Customs (CBEC), the body which deals with formulation and implementation of policy concerning the levy and collection of indirect taxes, in a letter dated September 11 has asked tax officials to verify GST transitional credit claims of over `1 crore. In the transitional credit form TRAN-1 fi...

Driving Licences may be Linked to Aadhaar The government is planning to link driving licences with Aadhaar to curb duplicate and fake licences, IT minister Ravi Shankar Prasad said on Friday.He said he has spoken to transport minister Nitin Gadkari about the linkage. “We are planning to link driving licence to Aadhaar. I have had a word with Gadkari-ji regarding this,“ said Prasad, while speaking at Digital Haryana Summit 2017. “So digital identity confirms physical identity with the help of digital tech nology,“ he said. A transport ministry official said they may not be able to comment on it since it is a state matter and transport is not in the central list. “We'll only be able to comment after we consult the states. However, from our side, we're already getting the entire database of driving licence in the country on a common platform so that there's no duplication anymore,“ said the official. On Friday, the government of Haryana in association with IT industry bo...

Tax authorities to scan transition credit claim of 162 companies As many as 162 companies, that have claimed the goods and services tax (GST) transitional credit of more than Rs 1 crore, are under the scanner of tax authorities. They would verify whether these claims are eligible. In the transitional credit form TRAN-1 filed by taxpayers along with their maiden returns for July, businesses have claimed credit of over Rs 65,000 crore for excise, service tax or VAT paid before the GST was rolled out from July 1. In view of such huge claims, the Central Board of Excise and Customs (CBEC) in a letter to chief commissioners said according to the GST law, carry forward of transitional credit is permitted only when such credit is permissible under the law. “The possibility of claiming ineligible credit due to mistake or confusion cannot be ruled out ,” CBEC said. CBEC asked the chief commissioners to send a report on the claims made by these 162 firms to it by September 20. The Business S...

GST squeezes exporters’ order books 15% drop across industries and product categories till Oct: FIEO Two months after the implementation of the goods and services tax (GST), the order books of exporters are said to have taken a hit, with estimates pegging the impact by up to 15 per cent across industries and product categories. The impact could be seen even as exports saw double-digit rise in August year-on-year (y-o-y). According to an assessment by the Federation of Indian Export Organisations (FIEO), the large drop was seen in export orders that were meant to be delivered until October. The dip, registered over a period of two months since July (when the GST was introduced), was largely on account of exporters not fulfilling orders due to lack of credit, said Ajay Sahai, director general at FIEO. The liquidity crunch had forced many to use available resources to manage existing business operations rather than fulfilling orders from abroad, he said. Though export growth accelerat...

Small creditors use bankruptcy rules to squeeze big players In late June, one of India's top wind power equipment makers, Inox Wind Ltd, was dragged into insolvency courts by a logistics handler over unpaid dues of Rs 88,000. Two weeks on, the matter was settled, with dues paid off. The case illustrates how small creditors and vendors, previously at the mercy of large debtors, are now using India's new bankruptcy code as a pressure ploy to secure payment of dues that would earlier have been all but impossible to recover. India overhauled bankruptcy laws last year with the main goal of helping banks tackle a Rs 150-billion bad loan issue that is crimping growth in the economy. Less than a year on, insolvency professionals say it is vendors and small suppliers, also referred to as operational creditors, who are using the new rules as leverage to recover dues much more effectively than banks owed far larger sums. "It is not necessarily a negative thing, but it was not the ...