c.v.o. ca’s news & views vol. 21 no. 5 / november 2017 · 2017-12-06 · c.v.o. ca’s news...

C.V.O. CA’S NEWS & VIEWS VOL. 21 NO. 5 / NOVEMBER 2017

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From the desk of Chairman

NEWS BULLETINCOMMITEE

ChairmanCA Dinesh Shah

Office BearerCA Sunil Dedhia

AdvisorCA Manoj Shah

ConvenorCA Harsh Dedhia

Jt. ConvenorCA Jigar Chheda

MembersCA Hitesh Pasad

CA Bhavin DedhiaCA Kaushik GadaCA Nikita GogriCA Sagar MaruCA Virav DedhiaCA Zalak Savla

Sp. InviteesCA Rakesh Vora

C O N T E N T S

ASSOCIATION NEWS

Forth ComingEvents ........................... 4

EventsRetrospect ..................... 4

A R T I C L E S

Analysis ofReverse ChargeProvisions underGST Law ....................... 6

Analysis ofBlocked Creditsand Input TtaxCredit Reversal .............. 9

Valuationunder GST ................... 15

Importance &Value of Yoga ............. 20

LEGAL UPDATES

Direct TaxUpdates ....................... 22

Update OnSEBI AndCorporateLaw .............................. 24

Respecting each others’ differencesRespecting each others’ differencesRespecting each others’ differencesRespecting each others’ differencesRespecting each others’ differencesTREAT OTHERS THE WAY YOU WANT TO BE TREATED!

We are all products of our own individual upbringing and experience. Each soul carriesdifferent sanskars and habits. A habit is what we do– thinking, anger, etc. are all habits.It is completely natural that we all have different habits and hence, different opinion on awide range of issues.

But each of us can be right in their own perspective. Husband and wife can have differentopinions, parent and child can have different opinion – each can be right despite beingdifferent. Keeping aside the differences in people, their habits and their opinions, we mustlearn to respect each others’ opinion.

We may never agree with each other but we respect each other. We say your opinion maybe right for you, not for me. I may like white but you may like blue or black or green. Youmay never wear white and I may never wear black, but we can still get along. Once weaccept that we are different - not right or wrong - we create an environment of mutualrespect.

The world would be a very dull place if we were all the same and it is the incredible diversityamong people throughout the world that makes it such a fascinating place. Cheaper airtravel and internet has made the world seem a much smaller place and we are increasinglybrought into contact with people from many different ethnicities, religious background,language, cultures and belief systems. You can see this everyday on TV, in the news, innewspapers, out and about in society, etc.

Unfortunately, many people put up barriers to protect themselves instead of openingthemselves up to others. This, in turn leads to a mistrust of the others regardless of color,religion, gender or any other stereotypical excuse given as to why we fear others. On a globalscale, this is often borne out in the wars that we see around the world and in an increasein terrorist activities. We all know that these kinds of responses only really fuel furthermistrust. Yet, even in our own immediate environments such as the work place or in socialgatherings outside of work, we all tend to congregate in our little groups without givingmuch thought to others around us.

When we learn about others and respect our similarities and differences, we get to learnmuch more about the world and about ourselves and this helps us to grow spiritually, insteadof stagnating. It also opens the doors to many other opportunities, be it friendship, worksprospects, travel possibilities or a wider understanding of the world in which we live.

Many people who are fearful of others are not so because they have any sense of resentmenttowards them but because they’re not sure how to go about communicating with them andalso because they fear that their own little ‘cocoon of protection’ might be threatened. Inother words, they make the mistake of believing that others’ viewpoints and opinion mightexpose them to the risk that their own opinion may be deemed worthless. This is simply nottrue. What is important is that everybody is entitled to a viewpoint or opinion and we shouldrespect that right even if we don’t necessarily agree with it.

Tolerance is the key but we can still maintain our own identity and have valid viewpoints.

VOL. 21 NO. 5 / NOVEMBER 2017 C.V.O. CA’S NEWS & VIEWS

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Remember, even identical twins have their own individual experience and opinion! You probably don’t agreewith everything your parents or children say but does that necessarily compromise you?There are many things we can do to move towards accepting other people’s opinion and respecting ourdifference. At a very basic level, we should treat others with the same degree of respect as we wouldlike to be treated ourselves. Embrace the differences, not be afraid of them and never judge a person onfirst impression which is often about how he or she looks. Taking the time to get to know the person within isa far better indicator than pre- judging them or appearance alone.Getting to truly know a new person who we may feel is quite different to us can be a very rewarding experience.It’s true that when we’re looking to make friend or start relationship, we tend to gravitate towards people webelieve are similar in outlook to ourselves. However, in restricting ourselves to that mindset, we can often missout on many interesting experiences.Communication isn’t simply about talking. In fact, some of the best communicators in the world tend to be less‘vocal’ than we might think they’d need to be, to be effective communicators.Take time to listen to other’s opinion and acknowledge them and also be confident to express your firmly heldviewpoint, although a difference in opinion to your own can sometimes make you think about things in adifferent light. This is all part of maturing of the mind. It’s not about convincing others that you are right orabout them convincing you that they’re right but simple matter of being understood and an acceptance thatyou might agree to disagree.If people become more tolerant towards others and take time to get to know some of those whom they wereunfamiliar with previously, it would lead to a far more peaceful and understanding world. Ultimately whenconsidering your own self growth, an acceptance of other people‘s differences is a sure-fire way of gaining a morecomplete acceptance of yourself!

Mumbai CA Dinesh Shah

EVENTS IN RETROSPECT

Compiled by :CA. Harsh DedhiaCA. Jigar Chheda

ASSOCIATIONNEWS

FORTHCOMING EVENTS

STUDY CIRCLE COMMITTEEEvent GST STUDY GROUPTopic Place of Supply of Goods And ServicesDate 13th November, 2017Venue D R Ghalla HallSpeaker GD shall be lead by CA Kewal SatraFees Rs.1,500/- ( For all session)

Rs. 200/- ( per session for members)Rs. 300/- (Non-Members)

CAPITAL MARKET COMMITTEEEvent STUDY COURSE ON TECHNICAL

ON STOCK MARKETDate 16th and 17th December, 2017Details of program will sent in due course

CAPITAL MARKET COMMITTEEEVENT PROGRAM ON CAPITAL MARKETTopic Indian Equity - Kal, Aaj aur KalDate 6th October, 2017Venue Mysore Association Hall

STUDY CIRCLE COMMITTEEEvent STUDY CIRCLE MEETINGTopic Prevention of Money Laundering Act

and Prohibition of BenamiProperty Transaction

Date 16thNovember , 2017Venue D R Ghall Hall, Dadar EastSpeaker CA Kinjal ShahFees Free for Members of DADAR E CPE SC

Rs.300/- for Non members

YOUNG & INDUSTRY MEMBERS COMMITTEEEvent YOGA BY THE BAYDate 2nd Week of DecemberDetails of program will sent in due course

Dr. Aditya Shrinivas -- Indian Economy and its Impact

Atul Suri - Sectorial AnalysisRajesh Kothari - Wealth Creation OppertunityParticipants - 133


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RESIDENTIAL REFRESHER COURSE 2018Goa being traveler’s dream destination, Dadar (E) CPE is pleased to announce the next Residential Refresher Course(RRC) for 22nd - 25th February 2018 (4 Days / 3 Night). With 4 days at disposal, we have ensured perfect blend of studiesalong with leisure.

About the destination:The fun, sunshine and the smallest state of Indiadoesn’t need any introduction. We all feel our soulsrecharged by just hearing the name Let’s Go Goa. SoWhy not make our mood motivated with ResidentialRefresher Course RRC at Club Mahindra South Goa

About Club Mahindra Emerald Palms ResortA sprawling Portuguese villa, located amidst thisscenic and beautiful backdrop. The rooms arespacious and have fabulous views. Though it is nota beach resort, the sea is just a few minutes away.In addition, there are a host of amenities that areaimed at making your stay at Club MahindraEmerald Palms memorable and eminently relaxing.

Distinguished features of RRC 2018: For the first time, we are arranging 4 days - 3 night at Club Mahindra Goa and very nominal cost of Rs. 11K

(ex Club Mahindra Rsort, Goa). RRC is aimed to provide relaxed schedule for learning and enough time forparticipants to enjoy the venue and places around.

The relaxed schedule also helps in networking with professional brethren coming from various professional fields. The participants will be immensely benefitted from multifaceted inputs and views from highly experienced

panelists. There will be longer duration for intensive group discussion. Faculties will be given more time to cover the case

studies in greater depth. After all preliminary learning on GST, now its time to step-up and get answer for all issues being faced day to day.

With dedicated time slot for Q&A on GST we have ensured, you get answer to all your outstanding issues be ittechnical or procedural.

Host : WIRC of ICAI jointly with Dadar East CPE Study Circle.Day & Date : 22nd - 25th February 2018 (4 days 3 Nights)Venue : Club Mahindra Emerald Palms Resort, Pedda, Uttor Doxi,

Varca, South Goa, Salcete, Goa 403721Fee Charges : Rs. 11,000 + applicable GST of Rs 1,980 (registration before 30th Nov)

: Rs 12,000 + GST of Rs 2,160 (for registration after 30th Nov).(All rates ex-Club Mahindra Resort)

Date Topic Faculties/Panellists22nd Feb Keynote Address & Future of CA M.M. ChitaleThursday Accounting & Auditing Profession23rd Feb Discussion paper on Income Tax CA Padamchand KhinchaFriday24th Feb Panel Discussion and dedicated 2 hours for Q&A to CA Heetesh Veera, CA Ashit Shah,Saturday clarify procedural and technical issues on GST CA Shreyas Sangoi, CA Kewal Satra25th Feb Burning issues in IndAS CA Himanshu KisnadwalaSunday. Practice Development Eminent Speaker*Proposed topics: · Discussion on capital market way forward if time permits.

CPE Credit:15 hours

(subject toapproval)


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Abbreviations used:

GST : Goods and Services tax

GST Law : CGST Act, SGST Act, IGST Act, UTGSTAct and notifications/orders issued thereunder

CGST Act : The Central Goods and Services Tax Act,2017

SGST Act : State Goods and Services Tax Act, 2017of respective States

IGST Act : The Integrated Goods and Services TaxAct, 2017

UTGST Act: The Union Territory Goods and ServicesAct, 2017

URD : Unregistered taxable person

RCM : Reverse Charge Mechanism

Introduction:Section 2(98) of the CGST Act defines “reversecharge” to mean –the liability to pay tax by the recipient of supply ofgoods or services or both instead of the supplier ofsuch goods or services or both under sub-section (3) orsub-section (4) of section 9, or under sub-section (3) orsubsection (4) of section 5 of the Integrated Goodsand Services Tax Act

RCM - applicable to goods also:It may be relevant to note that apart from servicesthe RCM. Goods like Cashew nuts (not shelled orpeeled), Bidi wrapper leaves (tendu), Tobacco leaves,Silk yarn and lotteries are covered by the RCM1.

RCM on services:As far as services are concerned, the followingservices are covered under RCM:1. Supply of Services by a goods transport

agency (GTA) in respect of transportation ofgoods by road to-

ANALYSIS OF REVERSE CHARGEPROVISIONS UNDER GST LAW

Contributed by :CA Jayesh Gogri(a member of the association)

he can be reached [email protected]

(a) any factory registered under or governedby the Factories Act, 1948 (63 of 1948); or

(b) any society registered under the SocietiesRegistration Act, 1860 (21 of 1860) or underany other law for the time being in force inany part of India; or

(c) any co-operative society established by orunder any law; or

(d) any person registered under the CentralGoods and Services Tax Act or theIntegrated Goods and Services Tax Actor the State Goods and Services Tax Actor the Union Territory Goods and ServicesTax Act; or

(e) any body corporate established, by or underany law; or

(f) any partnership firm whether registered ornot under any law including association ofpersons; or

(g) any casual taxable person

2. Services supplied by an individual advocateincluding a senior advocate by way ofrepresentational services before any court,tribunal or authority, directly or indirectly, toany business entity located in the taxableterritory, including where contract for provisionof such service has been entered throughanother advocate or a firm of advocates, or by afirm of advocates, by way of legal services, to abusiness entity

3. Services supplied by an arbitral tribunal to abusiness entity

4. Services provided by way of sponsorship to anybody corporate or partnership firm

5. Services supplied by the Central Government,State Government, Union territory or localauthority to a business entity excluding, - (1)renting of immovable property, and

1 Notification no. 4/2017 CGST( Rate) dated 28th June, 2017


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(2) services specified below-

(i) services by the Department of Posts by wayof speed post, express parcel post, lifeinsurance, and agency services provided toa person other than Central Government,State Government or Union territory orlocal authority;

(ii) services in relation to an aircraft ora vessel, insideor outside the precincts ofa port or an airport;

(iii) transport of goods or passengers.

6. Services supplied by a director of a company ora body corporate to the said company or thebody corporate.

7. Services supplied by an insurance agent to anyperson carrying on insurance business

8. Services supplied by a recovery agent to abanking company or a financial institution or anon-banking financial company

9. Supply of services by an author, musiccomposer, photographer, artist or the like byway of transfer or permitting the use orenjoyment of a copyright covered under clause(a) of sub-section (1) of section 13 of theCopyright Act, 1957 relating to originalliterary, dramatic, musical or artistic works to apublisher, music company, producer or the like.

Certain services like manpower supply services,security services, works contract services whichwere covered under RCM in the erstwhile servicetax laws are no more covered under RCM inGST law. Moreover, copyright services ofauthors, etc. have been introduced for the firsttime under RCM.

Reverse charge on inward supplies fromunregistered persons (URD):Section 9(4) of the CGST Act as well as respectiveState Acts and Section 5(4) of the IGST Act prescribeslevy of GST on the supply by URD in the hands ofrecipient of such supply. However, where theaggregate value of such supplies received by aregistered person from any or all the URD suppliers,does not exceed five thousand rupees in a day, suchsupplies were exempt in the hands of recipient2. It

may be noted that the said exemption was applicablein case of intra-state supplies and not to inter-statesupplies. There was no corresponding exemptionunder IGST law.

Recently, the levy under RCM on supplies by URDhas been postponed till 31st March, 20183. In theabsence of express provisions, the effective date of thesame would be the date of publishing the notificationi.e. 13th October, 2017.

Input tax credit:It may be noted that in the GST regime there is nopartial reverse charge. Consequently, personssupplying goods/services covered under RCM are noteligible for claiming input tax credit as they don’thave any output liability to that extent. Moreover,persons involved in exclusive supply of RCM basedgoods/s are not liable to take even registration underGST4.

However, the person who is liable to pay tax underRCM can claim credit in respect of eligible itemssubject to fulfilment of other conditions prescribed. Asper the provisions of Section 16(2) of the CGST Act,the recipient has to pay the amount of supply to thesupplier, he is required to reverse ITC claimed inrespect of such supply. Subsequently, he can reclaimthe credit at the time of payment to the supplier. Nosuch reversal is required in case of supplies coveredunder RCM, in case of non-payment of value to thesupplier.

The supplier of supplies covered under RCM isrequired to reverse the proportionate ITCattributable to the value of such supplies as per theprovisions of Section 17(3) of the CGST Act.

Point of taxation:A. Time of supply of goods:

As per Section 12 (3) of CGST Act, the time ofsupply of goods shall be the earliest of thefollowing dates:(a) the date of the receipt of goods; or(b) the date of payment as entered in the booksof account of the recipient or the date on whichthe payment is debited in his bank account,whichever is earlier; or

2 Notification no. 8/2017 CGST (Rate) dated 28th June, 2017

3 Notification no. 38/2017 CGST (Rate) dated 13th October, 20174 Notification no. 5/2017 CGST dated 19th June, 2017 effective from22nd June, 2017


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(c) the date immediately following thirty daysfrom the date of issue of invoice or any otherdocument, by whatever name called, in lieuthereof by the supplier:

where it is not possible to determine the time ofsupply under clause (a) or clause (b) or clause(c), the time of supply shall be the date of entryin the books of account of the recipient of supply.

B. Time of supply of services:As per Section 13 (3) of CGST Act, the time ofsupply of services shall be the earliest of thefollowing dates:

(a) the date of payment as entered in the booksof account of the recipient or the date onwhich the payment is debited in his bankaccount, whichever is earlier; or

(b) the date immediately following sixty daysfrom the date of issue of invoice or any otherdocument, by whatever name called, in lieuthereof by the supplier:

where it is not possible to determine the timeof supply under clause (a) or clause (b), thetime of supply shall be the date of entry inthe books of account of the recipient ofsupply

Moreover, in case of supply by associatedenterprises, where the supplier of service islocated outside India, the time of supplyshall be the date of entry in the books ofaccount of the recipient of supply or the dateof payment, whichever is earlier.

Registration:

As per the provisions of Section 24, every personliable to pay tax under RCM is liable to be registeredirrespective of his turnover of output supplies.However, the persons who are only engaged inmaking supplies the total tax on which is liable tobepaid on reverse charge basis by the recipient, havebeen exempted from registration5.

Documents:A. Tax invoice/Receipt voucher/Refund

voucher:

The supplier has to mention whether the tax ispayable on reverse charge basis on tax invoice,on receipt voucher in case of advance and onrefund voucher in case of refund of advance.

B. Self-Invoice:

As per the Section 31(3) (f) of the CGST Act, aregistered person who is liable to pay tax undersub-section (3) or sub-section (4) of section 9shall issue an invoice in respect of goods orservices or both received by him from thesupplier who is not registered on the date ofreceipt of goods /services

C. Payment voucher:

A registered person who is liable to pay taxunder sub-section (3) or sub-section (4) of section9 shall issue a payment voucher at the time ofmaking payment to the supplier

D. Records:

As per Rule 56 of the CGST Rules, 2017; everyregistered person has to maintain true andcorrect account of the supplies attracting taxunder RCM

Concluding remarks:

GST is supposed to be a modern tax. However,certain provisions like RCM in case of URD takes thewhole tax paying fraternity to the old regime of Salestax laws which existed prior to VAT regime. Itincreases the burden on the honest and organisedtaxpayers for the government’s inability to deal withunorganised and non-co-operative suppliers.Thankfully, at least for the time being the RCM inrespect of URD has been shelved till the end of thecurrent financial year i.e. upto 31st March, 2018.However, in case of other cases (section 9(3)), thesame is still in force. However, the brighter side ofthis concept is there is no fear of loss of credit due tonon-payment of taxes by the suppliers to thegovernment or improper uploading of details over theportal. The recipient can himself pay the tax andclaim the credit. Due to nascent stage of the law,readers can expect various amendments in the law intimes to come.The article covers the situation of thelaw as on 7th November, 2017

5 Notification no. 5/2017 CGST dated 19th June, 2017 effectivefrom 22nd June, 2017


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ANALYSIS OF BLOCKED CREDITS ANDINPUT TAX CREDIT REVERSAL

Contributed by :CA Tansukh K. Chheda(a member of the association


Input tax credit has its origin in the system of ValueAdded tax (VAT), which is prevailing in westEuropean countries. VAT was developed to avoidcascading effect of tax. In the Indian history ofindirect tax major steps were earlier taken in thisdirection by Introduction of CENVAT Credit rules,2004 by which credit of excise duty and service taxwere allowed to be taken across goods and services.Implementation of Goods and Service Tax law (GST)is the biggest reform in the Indian taxation history.

As GST is a single tax levied across India (right frommanufacture of goods/ services till it reaches the endcustomer), it is important that the chain of input taxcredit does not get broken and everybody is able totake benefit of the same. Input Tax Credit (ITC)mechanism is the backbone of GST which facilitatesthe seamless flow of credit.

Input Tax Credit Framework under GSTGST law in India is operationalized by enactingfollowing laws: Central Goods and Service Tax Act (CGST Act),

Integrated Goods and Service Tax Act (IGSTAct), Union territory Goods and Service tax(UTGST Act) and Compensation Act by CentralGovernment

State Goods and Service Tax Act (SGST Act) byeach State GovernmentProvisions relating to various items includinginput tax credit and utilization therefore ofCGST Act would apply to IGST Act/UTGST Act.Further, similar provisions are made in SGSTAct. Hence, for analysis perspective we will bereferring to CGST Act and Rules made thereunder.

The provisions relating to input tax credit arecontained under section 16 to 21 of the CGST Act,2017 and rule 36 to 45 of the CGST Rules, 2017

Before discussing relevant provisions about blockedcredits and credit reversal we shall briefly touch uponbasic provisions relating to eligibility and conditionsfor availing input tax credit.

Eligibility and conditions for availing input taxcredit:As per section 16 (1) of the CGST Act, every

registered taxable person shall be entitled to takecredit of input tax charged on any supply of goods orservices or both to him which are used or intendedto be used in the course or furtherance of hisbusiness. A notable change is the recognition ofconcept of business for allowing credits has beenbrought in. This is very wide in scope as compared toCENVAT credit rules.

Section 16 (2) of the CGST Act, prescribes followingconditions, which should be fulfilled to avail the InputTax Credit:-1. Registered Person shall be in possession of

following documents as the case may be:- Tax Invoice Debit Note Bill of Entry Invoice issued by recipient in case of supply

received from non-registered person(reverse charge mechanism)

Document issued by Input ServiceDistributor

2. He has received the goods or services or both. Incase of Bill to Ship to cases, it shall be deemedthat the registered person has received the goodson whose instructions goods are delivered toother person.

3. Tax charged in respect of such supply has beenactually paid to the government by the supplier.

4. Furnish the return under Section 39 by therecipient.

Following Point also merit consideration. Input tax credit can be availed only if all the

applicable particulars prescribed under theInvoice Rule are contained in the abovedocuments and information as contained in thesaid documents are furnished in Form GSTR-2(Inward Supply Return)

Where the registered person has claimeddepreciation on the tax component of the cost ofcapital goods and plant and machinery under theprovisions of the Income-tax Act, 1961, the inputtax credit on the said tax component shall not beallowed.


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No input tax credit shall be availed by aregistered person in respect of any tax that hasbeen paid in pursuance of any order. (Wheredemand has been raised on account of any fraud,willful misstatement or suppression of facts)

In case of goods against an invoice are receivedin lots or installments, the registered person shallbe entitled to take credit upon receipt of last lot orinstallment.

Input tax credit cannot be claimed in case ofadvance payment on the basis of receipt voucheras the goods or services is not received.

Time limit to claim input tax creditSection 16(4) of the CGST Act, prescribes time limitfor claiming Input tax credit accordingly input taxcredit cannot be claimed in respect of any invoice ordebit note after The due date of furnishing of the return for the

month of September following the end offinancial year to which such credit relates or

The due date of furnishing of relevant annualreturn whichever is earlier.

Apportionment of credit and blocked creditsAs discussed earlier as per general provision input taxcredit is available in respect of tax charged by thesupplier of goods and services which are used orintended for use in the furtherance of business.However, there are exceptions to general rules.Section 17(5) of the CGST Act, provides for certainexception for which input tax credit is not admissible.

Blocked Input Tax CreditFollowing are the supply on which the input tax creditwould not be admissible under the GST regime

1. Motor vehicles and other conveyanceInput Tax Credit (ITC) on motor vehicles andother conveyances are not admissible exceptwhen they are used for:

making the following taxable supplies, namely Further supply of such vehicles or

conveyance; or Transportation of passenger; or Imparting training on driving, flying,

navigating, such vehicles or conveyance

For Transportation of goods.Input tax credit is not available on purchase ofMotor vehicle (Car, bus, Truck, lorry etc.) andConveyances. As per the definition Conveyanceincludes vessel, aircraft, helicopter etc. As per the

exception provided input tax credit will beavailable to dealer in Motor Vehicle orconveyance. For example Honda Car dealer willbe entitled to input tax credit on purchases ofmotor vehicle which are meant for further supplyto end user. Similarly, input tax credit is alsoavailable to certain service providers who areusing such vehicles or conveyance for providingservices in the nature of transportation ofpassengers or imparting training on driving,flying, navigation.

It may be noted that the Motor Vehicle orconveyance used for transportation of goods areeligible for input tax credit. That means credit isavailable to service provider using the Vehicle fortransportation of goods and to the person usingsuch vehicle for transportation of own goods.

2. Specified supply of Goods or Services orBothCredit of GST paid on following specified goods orservices will not be available:

Food and beverages, outdoor catering, beautytreatment, health services, cosmetic and plasticsurgery except when such goods or services areused for making outward supply of samecategory of goods or services or as an element ofa taxable composite or mixed supply.

Example: Mrs. X purchases cosmetic creams tosupply to her customer while providing beautytreatment services. In such case, ITC paid onpurchases would be eligible as this will qualify asinput used for making outward supply.

Membership of a club, health and fitness centerHere it is to be noted that amount paid towardsobtaining membership of club or health andfitness center is excluded. Other membershipslike membership of Trade association are notcovered in exclusion hence on such paymentcredit would be admissible.

Supply of rent-a-cab, life insurance and healthinsurance except When such services are used for making

outward supply of same category of servicesor as an element of a taxable composite ormixed supply or

Where the Government notifies the serviceswhich are obligatory for an employer toprovide to its employees under any law forthe time in force


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It may be noted that many Government as alabour welfare measure have created obligationon the employer to provide certain facilities toemployees. For example lady employee workingovernight will be provided pick up and dropfacility as per Government ruling than GSTcredit on renting of a cab will be available asinput tax credit.

Travel benefit extended to employee on vacationsuch as leave or home travel concession

3. Works contract services / Supply of goodsor services resulting in immovableproperty:

Works contract services when availed forconstruction of an immovable property(other than plant and machinery) except whereit is an input service for further supply of workscontract service.

Goods or Services or both received by thebusiness entity for construction of animmovable property (other than plant andmachinery) on his own account including whensuch goods or services or both are used in thecourse or furtherance of business

Here “Construction” includes re-construction,renovation, additions, or alterations or repairs, tothe extent of capitalization, to the saidImmovable property.

“Plant and Machinery” means apparatus,equipment, and machinery fixed to earth byfoundation or structural support that are usedfor making outward supply of goods or services orboth and includes such foundation andstructural supports but excludes-(i)Land, building or any other civil structures;(ii) Telecommunication towers; and(iii) Pipelines laid outside the factory premises.[Explanation to section. 17]

The goods or services received by manufacturerfor construction of immovable property otherthan plant and machinery is only disallowed.The definition of plant and machineryspecifically provides that it includes foundationand structural support of plant and machinery.Hence, though there may be construction of civilstructure still such foundation will not qualify forexclusion for input tax credit as being part ofplant and machinery.

4. Supplier under composition:No input tax credit allowed where tax is paidunder composition levy by the supplier.

Supplier who are under composition scheme arenot allowed to collect tax separately and issue‘tax Invoice’ hence input tax credit on supplymade by such composition dealer is not allowable.

5. Non Residential Taxable Person:Tax paid on goods or services or both received bya non-resident taxable person except on goodsimported by such person.

6. Personal use or Consumption:No input tax credit allowed where goods orservices are availed for personal use orconsumption.

As per the provisions of the law input tax creditis available on the goods and services which areused or intended for use in the furtherance ofbusiness. That means goods and services whichare used for personal use or consumption are noteligible for input tax credit.

7. Goods lost , stolen, destroyed, written off ordisposed:No input tax credit allowed where goods whichare lost, stolen, destroyed, written off or disposedof by way of gift or free samples

Credit of GST paid on input or capital goods ispermitted when input or capital goods are used inthe course or furtherance of business. The use ofgoods is essential condition for the purpose ofavailment of credit. When goods are not used butdestroyed or stolen or disposed-off by way of giftor free sample than credit on such input is notavailable.

Example: Gifts given for sales promotion or at theoccasion of Diwali to customer.

8. Tax paid u/s 74 i.e. tax paid upon determinationof tax not paid or short paid or erroneouslyrefunded or input tax credit wrongly availed orutilised by reason of fraud or any willful mis-statement or Suppression of facts. In suchscenario input tax credit is not eligible for suchtaxes paid.

9. Tax paid u/s 129 i.e. tax paid upon detention,seizure and release of goods and Conveyances intransit.


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10. Tax paid u/s 130 i.e. tax paid upon confiscation ofgoods or conveyances and levy of penalty.

Apportionment of credit:Section 17(1) and 17(2) deals with apportionment ofinput tax credit in following circumstances: Section 17(1) goods or services used partly for

other than business purpose:Where the goods or services or both are used bythe registered person partly for the businesspurpose and partly for other purpose, theamount of credit allowed should be restricted tothe amount attributable to the business purpose.The apportionment mechanism is prescribedunder rule 42 of the GST Rules.

Section 17(2) partly for exempt supply:Where the goods or services or both are used bythe registered person partly for effecting taxablesupplies including zero-rated supplies and partlyfor effecting exempt supplies, the amount ofcredit allowed should be restricted to the amountattributable to the said taxable suppliesincluding zero-rated supplies.

Exempt supply is defined u/s. 2(47) of the CGSTAct. “Exempt supply” means supply of any goodsor services or both which attract nil rate of tax orwhich may be wholly exempt from tax undersection 11 or section 6 of IGST Act and includesnon-taxable supply.

The nontaxable supply has been defined insection 2(78). It means supply of goods or serviceswhich is not chargeable to tax under CGST Act orIGST Act. That means items on which no tax islevied under section 9 of GST Act will beconsidered as nontaxable supply.

Zero rated supply has been defined u/s. 16(1) ofthe IGST Act. Accordingly“Zero rated supply” means any of the followingsupplies of goods or services or both, namely:–(a) Export of goods or services or both; or(b) Supply of goods or services or both to a SpecialEconomic Zone developeror a Special Economic Zone unit.So, section 17 (1) and (2) prescribes for reversalof credit in the circumstances mentioned above.Mechanism for reversal is prescribed under rule42 of the GST Rules, 2017 and discussed hereunder.

Manner of Reversal of Input Tax Credit inrespect of Inputs or Inputs ServicesAs discussed above, ineligible credits are required to

be reversed under specific circumstances. For thispurpose, ineligible credit can be determined at theinvoice level. For example, registered person maypurchase input ‘X’ which is being used for makingexempt supply. The registered person is not entitled totake credit on such input which is exclusively used formaking exempt supply.

Similarly there may be goods or services used entirelyfor making taxable supply. For example registeredperson purchases input ‘Y’ which is entirely used formaking taxable supply hence entire input tax creditrelating to this is available. This can be identified atinvoice level itself.

Clause (a) to (d) & clause (f) of Rule 42 (1) of CGSTRules make provision for determination of eligible orineligible credit at the invoice level. The said rules aresummarized here under to determine common credit.

Symbol DescriptionT Total input tax creditT1 Input and input services used

exclusively for purposes other thanbusiness (Totally disallowable)

T2 Input and input services usedexclusively for making exempt supply(Totally disallowable)

T3 Input and input services on which creditis not available u/s. 17 (5) i.e. blockedcredits

T4 Input and input services usedexclusively for making taxable or zerorated supply (fully allowable)

C1 Input Tax Credit (ITC) credited to theelectronic credit ledger

C2 ITC on inputs used for common purpose

C3 Eligible ITC attributed to the purposes ofbusiness and for effecting taxablesuppliesincluding zero rated supplies

D1 Common ITC attributable towardsexempt supplies

D2 Common ITC attributable towards non-business supplies

E Aggregate value of exempt supplyduring tax period

F Total turnover in the State of theregistered person during tax period


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Step-1: Identify T1, T2, T3 and T4 at invoice level asper the description mentioned above.

Step:-2: Calculate allowable credit exclusivelytowards taxable supply and common credits (denotedas C1) as follows:C1 = T - (T1 + T2 + T3)

Step-3: Calculate Input Tax Credit used for commonpurpose (denoted as C2) as follows:C2 = C1 - T4

Step-4: Calculate Common ITC attributable towardsexempt supplies (denoted as D1) as follows:D1 = C2 × E/F

Step-5: Calculate Common ITC attributable towardsnon-business supplies (denoted as D2) as follows:D2 = C2 × 5%

Step -6:Common ITC attributed to the purposes ofbusiness and for effecting taxable supplies includingzero rated supplies (denoted as C3)

C3 = C2 - (D1 + D2)

Note: - The amount ‘C3’ shall be computedseparately for input tax credit of central tax, Statetax, Union territory tax and integrated tax;

Step-7: The amount equal to ‘D1’ and ‘D2’ shall beadded to the output tax liability of the registeredperson.

Important points for consideration: Provided that where the registered person does

not have any turnover during the said tax periodor the aforesaid information is not available, thevalue of ‘E/F’ calculated by taking values of ‘E’and ‘F’ of the last tax period for which details ofsuch turnover are available, previous to themonth during which the said value of ‘E/F’ is tocalculated;

The aggregate value of exempt supplies and totalturnover shall exclude the amount of any duty ortax levied under entry 84 of List I of the SeventhSchedule to the Constitution and entry 51 and 54of List II of the said Schedule.

This procedure has to be followed every monthi.e. on monthly basis, thereafter ‘D1’ and ‘D2’shall be calculated finally for the financialyear before the due date for filing the return forthe month of September following the end of thefinancial year to which such credit relates.

First Scenario:-Annually (D1+D2) > ∑Monthly (D1+D2)Such excess along with interest thereonshall be added to the output tax liability ofthe registered person for a month not laterthan the month of September following the endof the financial year to which such credit relates.

The said person shall be liable to pay intereston the said excess amount at the rate specified forthe period starting from first day of April of thesucceeding financial year till the date ofpayment.

Second Scenario:-Annually (D1+D2) > ∑Monthly (D1+D2)Such excess amount shall be claimed as credit bythe registered person in his return for a monthnot later than the month of Septemberfollowing the end of the financial year to whichsuch credit relates

Manner of Reversal of Input Tax Credit inrespect of Capital Goods:The capital goods which are used entirely for makingtaxable supply then credit is entirely available to theregistered person. However, there are followingsituation where the credit of capital goods cannot befully allowed:o capital goods used partially for business purpose

and partially for other purposeo capital goods used partially for making taxable

supply and partially for making exempt supply.

The input tax credit in respect of capital goods, beingpartly used for the purposes of business andpartly for other purposes, or partly used foreffecting taxable supplies including zero ratedsupplies and partly for effecting exemptsupplies, shall be attributed to the purposes ofbusiness or for effecting taxable supplies in thefollowing manner:-I. Capital goods used or intended to be used

exclusively for non-business purposes orfor effecting exempt suppliesThe amount of Input tax shall be indicated inFORM GSTR-2 and shall not be credited to hiselectronic ledger.

II. Capital goods used or intended to be usedexclusively for effecting taxable suppliesincluding zero rated suppliesThe amount of Input tax shall be indicated inFORM GSTR-2 and shall be credited to hiselectronic ledger.


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III. Capital goods which are not covered underPoint (I) & Point (II)

The amount of Input tax shall be credited to theelectronic ledger and the useful life of such goodsshall be taken as 5 Year, denoted as A

Note: - When Capital Goods covered underpoint (I) & point (II) covered under thispoint (III) subsequently then denoted as A1& A2 respectively

A1/A2 = Input Tax (Original as per invoice) Less5% per quarter (or part thereof) for already usedlife.

Step:-1 Total Input Tax Credit in respect of capital

goods covered under point (III) (denoted asTc):-Tc = A+A1+A2

Input tax credit attributable to a tax periodon common capital goods during theirresidual life (denoted as Tm)Tm = Tc/60

The amount of input tax credit, at thebeginning of a tax period, on all commoncapital goods whose residual life remainsduring the tax period, be denoted as ‘Tr’ andshall be the aggregate of ‘Tm’ for all suchcapital goodsTr = Tm(1) + Tm(2)

Amount of common credit attributabletowards exempted supplies:-Te = (Tr*E/F)Note:- The amount Te shall be computedseparately for central tax, State tax, Unionterritory tax and integrated tax.

Step:-2 The amount Te along with applicable interest

shall, during every tax period of the residual lifeof the concerned capital goods, be added to theoutput tax liability of the person making suchclaim of credit.

This procedure has to be followed every monthi.e. on monthly basis

Symbol MeaningE Exempt turnover of the that tax periodF Total turnover of the that tax period

Important points for consideration: Provided that where the registered person does

not have any turnover during the said tax periodor the aforesaid information is not available, thevalue of ‘E/F’ calculated by taking values of ‘E’and ‘F’ of the last tax period for which details ofsuch turnover are available, previous to themonth during which the said value of ‘E/F’ is tocalculated;

The aggregate value of exempt supplies and totalturnover shall exclude the amount of any duty ortax levied under entry 84 of List I of the SeventhSchedule to the Constitution and entry 51 and 54of List II of the said Schedule.

CLAIM OF CREDIT BY BANKING COMPANYOR A FINANCIAL INSTITUTION

Banking companies or a financial institutionincluding a non-banking financial company aregenerally engaged in supplying services by way ofaccepting deposits, extending loans or advances.These companies provides a lot of taxable & taxexempt supplies and it shall be very tedious tomaintain details of taxable & exempt services everymonth, so the government have provided them anoption to:- either comply with the provisions of ITC reversal

on proper calculations,or avail only 50% of the eligible input tax credit*

on inputs, capital goods and input services andthe rest shall lapse [Section 17(4)]

* Eligible Input Tax Credit is calculated asfollows:Total Input Tax CreditLess: ITC on inputs that are used for non-businesspurposes.Less: ITC inadmissible on supplies i.e Blocked CreditAllowable eligible credit shall be calculated at 50% ofthe above eligible credit

Note:-1. The option once exercised shall not be withdrawn

during the remaining part of the financial year.2. The restriction of 50% shall not apply to the tax

paid on supplies made by one registered person toanother registered person having the samePermanent Account Number.

Conclusion: In GST regime it is important that dueinput tax credits are rightly claimed and used fordischarging tax liability. Any lapse in claiming inputtax credit or wrong claim of credit may lead to cost tothe company besides litigation.


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VALUATIONUNDER GST

Contributed by :CA Shreyas Sangoi(a member of the association)


Background

Historically, valuation under Indirect tax laws hasbeen marred with litigation. Even under GST regime,it appears that valuation provisions will follow thelitigation footprint left by the erstwhile laws. Hence,it is of utmost importance that we understand thevaluation provisions and issues related to them.

Valuation provisions set guidelines as to what will bethe value on which GST is required to be paid onsupply of goods and services. In GST regime, taxneeds to be discharged on ad-valorem basis i.e. as apercentage of value of the supply of goods or services.Section 15 of the CGST Act (‘the Act’) read withDetermination of Value of Supply, CGST Rules, 2017(‘DVR Rules’) lays down the principles of valuationwhich needs to be adhered in different circumstancesand on supply to different persons.

Scheme of Valuation

The Section 15(1) of the Act provides that thevalue of supply of goods or services or both shallbe the Transaction value [in monetary terms],that is the price actually paid or payable for thesaid supply of goods and/or services where thesupplier and the recipient of the supply are notrelated and the price is the sole consideration forthe supply.

Section 15(2) and 15(3) of the Act lists out certaininclusions and exclusions which need to be madeto arrive at a taxable value.

Section 15(4) of the Act provides that wheretransaction value fails, the value of supply shallbe determined in such manner as may beprescribed i.e. recourse needs to be made to DVRRules.

In cases where supply is made for considerationnot in money and supply is between relatedparties and distinct persons, resort is to be takento the DVR Rules to arrive at a transaction value.The DVR Rules also prescribe an alternativevaluation mechanism for certain specifiedtransactions.

Contributed by :CA Poojan Dedhia(a member of the association)


Transaction ValueTransaction value is the ‘price actually paid orpayable’ for supply of goods or services or both i.e.consideration charged from the recipient for supply.In the context of Excise law, the term ‘price actuallypaid or payable’ has been interpreted by the SupremeCourt to mean that whatever is agreed to as the pricefor the goods forms the basis of value, whether suchprice has been paid or not. Hence, the transactionvalue is the agreed contractual price. Further, thereshould be a nexus between the supply of goods /services and amount received, for an amount to beincluded in the transaction value. Therefore, anyamount that is not contractually agreed or does nothave a nexus with the supply, cannot be included inthe transaction value.

The transaction value can be applied only if dualconditions are satisfied –(i) supplier and recipient are not related parties and(ii) price is the sole considerations.

In normal commercial transactions, the invoice valueshould be the transaction value and hence thetaxable value.

Related PartyIn certain specified type of relationships, the personswill be deemed to be ‘related persons’, and ‘person’ forthis purpose will include legal persons. Instances ofthese specified types of relationships are – employerand employee; members of the same family; oneperson directly/indirectly controls the other; personswho are legally recognized partners in business;persons who are officers/directors of one another’sbusinesses; a person who is associated with anotherperson as its sole agent/sole distributor/soleconcessionaire (whether sole agent / distributor is tobe considered qua a particular regional territory or astate or pan India basis is not clear from theprovisions).

ConsiderationThe term ‘consideration’ has been defined widely andin an inclusive manner in section 2(31) of the Act.Therefore, in addition to the specific inclusions statedin that definition, whatever qualifies as considerationordinarily (or in terms of the Indian Contract Act),


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may also be regarded as consideration. The followingwill be included in the definition of ‘consideration’:(a) any payment made or to be made, whether in

money or otherwise (i.e. in kind) in respect of, inresponse to, or for the inducement of, the supplyof goods/services;

(b) such payment may be made by the recipient orby any other person (other than subsidy given byGovernment);

(c) monetary value of any act or forbearance, inrespect of, in response to, or for the inducementof, the supply of goods or services or both,whether by the recipient or by any other person(other than subsidy given by Government);

(d) deposit given in respect of the supply of goods/services, if the supplier applies such deposit asconsideration for such supply. (Refundablesecurity deposit shall not form part ofconsideration, however, adjustment of securitydeposit against value of supply shall be liable toGST).

Mandatory inclusions in the value of supply[Section 15(2)] Any taxes, duties, cesses, fees and charges levied

under laws other than GST related Acts, ifcharged separately by the supplier.

Comments: Tax collected at source in case of scrap sale, may

be included in the transaction value. A question arises as to whether taxes levied

outside India, if separately charged by thesupplier should be included in the transactionvalue. There appears to be no exclusion for thesame.

It should be noted that if taxes are collected as a‘pure agent’ of the recipient, then the same willnot be included (concept of pure agent has beendiscussed below). Eg. Stamp duty collected bybuilder from the purchaser and Stamp dutychallan is directly generated in the name of thepurchaser.

Any amount that supplier is liable to pay for thesupply but is incurred by the recipient and is notincluded in the price actually paid/payable forthe supply.Comments: Electricity cost to be borne by the supplier,

however, the same if provided by the

recipient will be included in transactionvalue.

Free of cost supplies by a builder to thecontractor should not typically be includedin the transaction value if the cost of the saidsupplies was not to be initially incurred bythe contractor, in terms of the agreement.

Incidental expenses, including commission andpacking, charged by supplier to recipient andany amount charged for anything done bysupplier for supply at the time of, or beforedelivery of goods / supply of services (e.g. packingcharges, outward freight, fumigation chargesetc).

Interest/late fee/penalty for delayed payment ofconsideration for supply.Comments: Recovery of interest/late fee is taxable only if

realized from the recipient [section 13(6)].Merely raising a debit note for recovery isnot subject to GST. However, a practicalissue arises as GST liability is created on theGSTN portal once details of invoice / debitnote for recovery of interest raised on thecustomer, is uploaded in GSTR 1.

In case of recovery of interest on delayedpayment of EMI, a question arises as towhether the same is to be included when theinterest per-se is exempt under GST.

Subsidies directly linked to price of supplyexcluding Government subsidies. Eg. Whendistributor sells goods and gets price support fromits Manufacturer. The subsidy so received willform part of transaction value).

Mandatory Exclusions from the value of supply[Section 15(3)] Any discount given before/at the time of

supply, if it has been recorded in the invoiceissued for such supply (e.g. normal Tradediscounts, discount on stock clearance sale)

Any discount given after supply, if suchdiscount is:

established in terms of agreement entered intoat/before time of supply;

specifically linked to relevant invoices; and input tax credit (ITC) attributable to it on the

basis of document issued by supplier has beenreversed by recipient.(e.g. volume/target discount given as permilestones)


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Comments: Discounts given shall be correlated with individual invoices in order to qualify for a deduction and any

lumpsum discount shall not be allowed as a deduction. It would be essential that the agreement stipulates and establishes any post supply discount to be given

(care should be taken while drafting agreements). If the above conditions are not satisfied, even then credit note for giving post supply discount can very well

be issued, however, the GST element on the original invoice will not be reversed.

The following flow chart outlines the valuation mechanism prescribed under the GST law, when the Transactionvalue is not acceptable (related parties or price is not the sole consideration):


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It is very critical to analyze the phrases ‘Open MarketValue’ (‘OMV’) and ‘supply of goods or services or bothof like kind and quality’, which have been defined inthe Explanation to Rule 9 of DVR as under:

“open market value” of a supply of goods or servicesor both means the full value in money, excludingthe integrated tax, central tax, state tax, unionterritory tax and the cess payable by a person in atransaction, where the supplier and the recipient ofthe supply are not related and price is the soleconsideration, to obtain such supply at the sametime when the supply being valued is made”.

This definition seeks to arrive at the Arms’ LengthPrice for a transaction, however, obtaining such avalue and documenting the same, will be practicallychallenging. Eg. OMV of management services by HOto branches may not be available.

“supply of goods or services or both of like kindand quality” means any other supply of goods orservices or both made under similar circumstancesthat, in respect of the characteristics, quality,quantity, functional components, materials, andreputation of the goods or services or both firstmentioned, is the same as, or closely or substantiallyresembles, that supply of goods or services or both”.

To find such a supply which corroborates to so manyattributes of a transaction in question will be verydifficult and more so for valuation of services (whichis intangible in nature). If one uses either of theabove, it will be important to maintain robustdocumentation for the above – data, statistics,technical opinions, certifications etc.

Valuation of Supply between Related anddistinct persons [Rule 28]

Valuation of supply between related persons orbetween distinct persons (i.e. HO and branch offices)has been prescribed in Rule 28 (as depicted in thechart above).

It is very important to note second proviso to Rule 28of DVR, which reads as under:

“Provided further that where the recipient is eligiblefor full input tax credit, the value declared in theinvoice shall be deemed to be the open marketvalue of the goods or services”.

Comments Accordingly, a relaxation has been provided in

case of related party transactions that whateverbe the value declared in the invoice, it shall beaccepted as the transaction value, if the recipientis eligible for full input tax credit. This willprovide huge relief for inter-branch billingsbetween service entities where it is very difficultto arrive at the value of supply of service.

However, the moot question that arises iswhether the said provision is qua a transaction orqua an assessee. Eg. If the recipient branch hassome exempt income (eg. interest income on loansand advances), then whether the said provisionwould be inapplicable on all inter-branchtransactions for the recipient branch as “full”input tax credit would not be available to therecipient. If this interpretation be adopted (whichappears to be), then the said proviso would beinapplicable to many inter-branch transactionsand we will have to proceed sequentially fromRule 28 to 31 to arrive at the transaction value.

Typically, a host of services are provided by theHO to branches and vice versa. For example,supply of legal, finance, admin, strategic decisionmaking etc. services rendered by HO. It would beadvisable that an agreement shall be executedbetween the HO and the branches for supply ofservices inter-se, allocating a value for the supply(based on applicability / non-applicability ofproviso to Rule 28) and invoices be raised at afixed interval as specified in the agreement.

Another interesting issue is whether the cost ofsalary of employees should be taken in valuationof inter-branch services. Supply of services byemployee to employer is not a supply in terms ofSchedule III. Further, the employment contractis generally entered by the employee with thecompany as a whole and not with a particularbranch or HO. Hence, can the cost of the salaryof the employee can be included in valuation ofinter-branch services? On the other hand if thesame is not included the services will be arrivedat a negligible value as salary forms the pre-dominant cost in a service transaction.

Value of Supply of Services in case of a PureAgent [Rule 33]

As per Rule 33 of DVR, expenditure/costs incurred bya supplier as a pure agent of a recipient shall beexcluded from value of supply, if all the followingconditions are satisfied:(i) supplier acts as pure agent of recipient when he


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makes payment to third party on authorisation ofrecipient;

(ii) payment made by pure agent on behalf ofrecipient is separately indicated in invoice issuedto recipient;

(iii) supplies procured by pure agent from third partyare in addition to services (and possibly goods orboth) supplied on his own account;

(iv) supplier acts as pure agent to incur expenditure/costs in the course of his supply as percontractual arrangement with recipient;

(v) supplier neither intends to hold nor holdsany title to goods/services procured/supplied as such agent;

(vi) supplier does not use goods/services soprocured for his own interest; and

(vii) supplier receives only actual amountincurred to procure such goods/services, inaddition to amount received for supply made onhis own account.

Comments: Similar set of conditions also existed in the

Service Tax Law. However, it is pertinent to notethat the said Rule has been liberalized as some ofthe conditions existing in Service Tax Rules havebeen omitted.

Robust documentation needs to be maintainedfor expenses incurred as a pure agent. The cruxof the Rule is that an authorization should beobtained from the recipient to act as pure agent,intention of the supplier should not be to holdtitle in goods / services or use the goods / servicesfor himself (expense invoice can preferably beobtained in the name of the recipient) and thereshould be no element of mark up in thetransaction.

Reimbursement of Property tax by the member tothe co-operative housing society can be claimedas reimbursement as pure agent (as there is noprofit made by the society and the property cardwill show name of member on the records of theauthority).

However, electricity charges of the rented unitwhen reimbursed by the tenant to the landlord inrespect of a commercial property may be taxableas electricity meter is in the name of the landlord(refer to Service tax circular no. 175 /01 /2014– ST, dated: January 10, 2014).

ConclusionWe foresee that the Valuation Provisions are likely toopen the Pandora ’s Box and the litigation will persist,if not increase, under the GST regime. Surely, “AcheDin” in restore for the litigators.

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IMPORTANCE &VALUE OF YOGA

Contributed by :CA Ankit Gala(a member of the association)


Human Beings are made up of threecomponents—body, mind and soul,corresponding to these there are three needs—health, knowledge and inner peace. Health isphysical need, knowledge is our psychologicalneeds and inner peace is spiritual need when allthree are present, then there is harmony.

Yoga gives us relief from countless ailments atthe physical level. The practice of the postures(asanas) strengthens the body and creates afeeling of wellbeing. From the psychological viewpoint, yoga sharpens the intellect and aid inconcentration; it steadies the emotions andencourages a caring for self & others.

The practice of breathing techniques (Pranayam)calms the mind. In the realm of the spiritual yogabrings awareness and the ability to be still.Through meditation inner peace is experienced.Thus, yoga is a practical philosophy involvingevery aspect of a person’s being. It teaches theevolution of the individual by the development ofself-discipline and self-awareness. Anyoneirrespective of age, health, circumstances of lifeand any religion can practice yoga. Yoga helps todiscipline our sense of power within the power ofour own.

If we peep into the benefits of yoga, there arenumerous. It improve physical fitness, stress,controls general wellbeing, mental clarity andgreater self-understanding. People of all ages cando yoga and it can also be adapted for people withdisabilities or special needs. The (asanas)enhance muscle strength, coordination,flexibility and can help to keep our body fitcontrol cholesterol level, reduces weight,normalizes blood pressure and improvescardiovascular performance.

Apart from these when people actively seek toreduce the stress in their lives by consoling themind. The body often works to heal itself. In thissense yoga can be seen not only as a way to getinto shape on several levels, but also as a tool forself-healing.

In today’s world of information and interplanetary voyages most of the people find itdifficult to devote time towards their health andfitness. This has led to drastic increase in healthproblems and health mental stress—the numberone killer in modern days. Unlike the early partof the century when in-factious diseases were theleading killers, today’s health problems & mentalstress are mostly related to life style.

Cardiovascular, heart disease, stroke, andarteriosclerosis, chronic lung disease, diabetes,cirrhosis of liver, suicide and several forms ofcancer are all related to unhealthy lifestyle andbehavior. At one point of time or the other, adoctor comes into the scene in every individual’slife. Yoga is also self-diagnosis, healingprevention and maintenance. Although it is notreplacement of one’s doctor, yet it has beenpracticed safely and successfully by millions ofpeople under the guidance of the experts whonever had doctors, for thousands of years. Withthe help of yoga, the doctor and the individualcan both monitor the progress and the doctor willdefinitely learn from individual how beneficialyoga really is.

In the context of self-diagnosis yoga postures andexercises can be easily done and that too withminimal possible effort. The magic of yoga is thatas we begin the basic stretches we canimmediately discover where our deficiencies are.If we are really up to, then we should not bediscouraged by this.

We can do yoga, as perfectly as possible with amodest amount of care and patience, yogatriggers our body’s natural adaptive andrejuvenating powers. Unless we use it, we willlose it and if we start using it again we can getmost of it back. Some people even claim that yogagave them more vitality than they ever had intheir lives. Even those who began later in lifealso benefited from its practice.

As for athletes or sports persons, yoga can be apowerful enhancement in regular training


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exercises. Adding yoga in a routine trainingprogram helps him / her develop strength,flexibility, range of motion, concentration, andcardio-vascular health and reduces stress,tension and tightness. The most significantbenefit of adding yoga to a training program is itseffect on performance. It allows an athlete totrain harder at higher level because of motion isgreater and the fear of injury reduces.

Some people think it is divine others find itpositively addictive and a powerfully effectivesubstitute for negative habits. Whether borne ofinspiration or by trial and error, yoga techniquessubstitute for the kinds of activities our earlyhuman ancestors must have done in the course ofjust living out in their arboreal lives. It is prettyto say that if we still hung around trees all ourlives like other primates, then 70% to 90% of uswould not end up suffering from chronic back,neck and head pain.

Obviously, it takes time for our body to tuck itselfin here and fill out there. Tissues have to grow.Others need to shrink. This is why it is importantto drink lots of water and eat amount ofwholesome food along with regular moderateexercise. In challenging those muscles toremodel themselves, we are literally clearing outlots of junks from our tissues.

The essence of yoga is to make the process of lifeas efficient and enjoyable as possible. In thebeginning, it is essential that we learn not onlywhat the stretches are, but how to stretch, how torelax and how to breathe etc. Then we will be

ready to work out safely. Yoga does not away thequalities of genuineness, wholesomeness,compassion, but rather instils them within us. Itteaches us that love heals the giver at least asmuch as it does the recipient. In addition, thereindwells the sacred power of community, union,harmony, and fair civilization. It is our birth rightto have access to this information. It is a sign ofour wisdom if we use it, our enlightenment if weshare it.

As we start practicing simple asanas we willimmediately find out what needs attention themost while giving it the attention it calls for. Theeffects are immediate and the results keepbecoming more apparent. The longer and moreoften we engage in the pure self-indulgenthealing art of yoga, the more it will have ahealing effect on us. Yoga is no less magical thanthe power of life itself. It unlocks life’s wonderand unleashes hidden energies.

Through this art everyone can experience thedivine and enjoy the ecstasy of freedom from painand ignorance apart from other gracious rewardslike longevity in living and happiness. It hastaken time for us to wind ourselves up in a knot.Naturally it takes time to unwind oneself. If weare still breathing, it is never too soon or late tostart yoga.

Even our respected & beloved Prime Minister ofIndia promoted Yoga throughout the world &now 21st June of every year is celebrated asWorld Yoga Day.


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LEGAL UPDATES /DECISIONS

SECTION 194A OF THE INCOME-TAXACT, 1961, READ WITH RULES 31A AND37BA, OF THE INCOME-TAX RULES, 1962- DEDUCTION OF TAX AT SOURCE -INTEREST OTHER THAN INTEREST ONSECURITIES - TDS ON INTEREST ONDEPOSITS MADE UNDER CAPITALGAINS ACCOUNTS SCHEME, 1988WHERE DEPOSITOR HAS DECEASED

NOTIFICATION NO.8/2017, DATED 13-9-2017

It has been brought to the notice of CBDT thatin cases of deceased depositor who has madedeposits under the Capital Gains AccountsScheme, 1988; the banks are deducting TDS onthe interest earned on such deposits in the handsof the deceased depositor and issuing TDScertificates in the name of the deceaseddepositor, which is not in accordance with thelaw. Ideally in such type of situations, the TDScertificate on the interest income for and uptothe period of death of the depositor is required tobe issued on the PAN of the deceased depositorand for the period after death of the depositor isrequired to be issued on the PAN of the legalheir. Under sub-rule (5) of Rule 31A of theIncome-tax Rules, 1962, the Director General ofIncome-Tax (Systems) is authorized to specifythe procedures, formats and standards for thepurposes of furnishing and verification of thestatements or claim for refund in Form 26B andshall be responsible for the day-to-dayadministration in relation to furnishing andverification of the statements or claim for refundin Form 26B in the manner so specified. Inexercise of the powers delegated by the CentralBoard of Direct Taxes (Board) under sub-rule (5)of Rule 31A of the Income-Tax Rules, 1962, thePrincipal Director General of Income-Tax

1. DIRECT TAXESUPDATE

Compiled by :CA. Haresh P. Kenia

(Systems) hereby specifies that in case ofdeposits under the Capital Gains AccountsScheme, 1988 where the depositor has deceased:

(i) TDS on the interest income accrued for and uptothe period of death of the depositor is required tobe deducted and reported against PAN of thedepositor, and

(ii) TDS on the interest income accrued for theperiod after death of the depositor is required tobe deducted and reported against PAN of thelegal heir,unless a declaration is filed under sub-rule(2) ofRule 37BA of the Income-tax Rules, 1962 to thateffect.

SECTION 90, READ WITH SECTIONS 90AAND 139, OF THE INCOME-TAX ACT, 1961AND RULES 12 AND 128 OF THE INCOME-TAX RULES, 1962 - DOUBLE TAXATIONRELIEF - FOREIGN TAX CREDIT -PROCEDURE FOR FILING STATEMENTOF INCOME FROM A COUNTRY ORSPECIFIED TERRITORY OUTSIDE INDIAAND FOREIGN TAX CREDIT

NOTIFICATION NO.9 [DGIT(S)-ADG(S)-3/E-FILING NOTIFICATION/FORM 67/2017,DT 19-9-2017

Foreign Tax Credit. — An assessee, being aresident shall be allowed a credit for the amountof any foreign tax paid by him in a country orspecified territory outside India, by way ofdeduction or otherwise, in the year in which theincome corresponding to such tax has beenoffered to tax or assessed to tax in India, in themanner and to the extent as specified in rule 128of the Income Tax (18th amendment) Rules,2016. As per sub-rule (9) of rule 128 thestatement in Form No. 67 referred to in clause (i)of sub-rule (8) and the certificate or thestatement referred to in clause (ii) of sub-rule (8)shall be furnished on or before the due datespecified for furnishing the return of incomeunder sub-section (1) of section 139, in themanner specified for furnishing such return of


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income. In exercise of the powers delegated byCentral Board of Direct Taxes (‘Board’) underrule 12(4) of the Income Tax Rules, 1962, thePrincipal Director General of Income-Tax(Systems) hereby lays down the followingprocedures:

Online filing of Form 67:

1. All assessee’s who are required to file return ofincome electronically under section 139(1) as perrule 12(3) of the Income Tax Rules 1962, arerequired to prepare and submit Form 67 onlinealong with the return of income if credit for theamount of any foreign tax paid by the assesseein a country or specified territory outside India,by way of deduction or otherwise, in the year inwhich the income corresponding to such tax hasbeen offered to tax or assessed to tax in India.

Preparation and Submission of Form 672. Form 67 shall be available to all the assessee’s

login. The assessee is required to login into the e-filing portal using their valid credentials. A linkfor filing the Form has been provided under “e-File’’! Prepare and Submit Online Forms (Otherthan ITR)”. Select Form 67 and assessment yearfrom the drop down. Instructions to fill the formare enclosed along with the form. The completedForm 67 can be submitted by clicking on“Submit” button. Digital Signature Certificate orElectronic Verification Code is mandatory tosubmit Form 67.

3. Submission of Form 67 shall precede filing ofreturn of income.

MISCELLANEOUS - LODGING OF TAXARREAR CLAIMS AND IMPLEADING ASA PARTY BEFORE NCLTs

LETTER [F.NO.ADDL.DIT(R)/BIFR/2017-18/8/733], DATED 20-9-2017

Previously the sick companies used to moveBoard for Industrial and FinancialReconstruction (BIFR) under the Sick IndustrialCompanies (Special Provisions) Act, 1985(SICA). The BIFR had its benches only at Delhi.This Act has been repealed now w.e.f 1-12-2016.The cases of sick companies are now governed by

Insolvency and Bankruptcy Code 2016 (IBC-2016) adjudicated by National Company LawTribunal(NCLT) having 11 Benches at NewDelhi (two benches), Ahmedabad, Allahabad,Bengaluru, Chandigarh, Chennai, Guwahati,Hyderabad, Kolkata and Mumbai. The appealsagainst the orders of these benches can be filedbefore National Company Law AppellateTribunal (NCLAT) at Delhi.

Recently, a case has come to the notice whereinthe Hyderabad Bench of NCLT has passed anorder under sections 30(6) and 31 of IBC-2016allowing various reliefs under the Income-TaxAct without even making the Department aparty to the dispute. The steps to contest thesame are being initiated separately.

Subsequently the website of Insolvency andBankruptcy Board of India (www.ibbi.gov.in)has been accessed and it is found that publicannouncements with regard to initiation ofResolution Process, Voluntary LiquidationProcess and Liquidation Process have been madein 287, 29 and 4 cases respectively as of now.Under the provisions of IBC 2016, the NCLT isrequired to make a public announcement forresolution/insolvency of the sick company (calledcorporate debtor under IBC-2016) forsubmission of claims under section 15 of IBC-2016. You are requested to direct the AssessingOfficers having jurisdiction over these cases tonotify the demands due from these sickcompanies to the Resolution Professionals/Insolvency Professionals (details of whom arealso available on the website) immediately.Simultaneously a request to the NCLT shouldalso be made for impleading the Department asa party to the case in case any other reliefs underthe Income-tax Act are envisaged in theResolution Plan.

A request to Ministry of Corporate Affairs/NCLT/IBBI for notifying the Department in every suchcase is being moved separately so that the needto identify such cases on one to one basis isobviated. As this is likely to take some time, thefield officers may be directed to regularly accessthe site of www.ibbi.gov.in so as to prevent anydelay in future.


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SEBI

A. CIRCULARS1. Integration of broking activities in Equity

Markets and Commodity DerivativesMarkets under single entity

[Issued by the Securities and ExchangeBoard of India vide Circular No. SEBI/HO/MIRSD/MIRSD1/CIR/P/2017/104 datedSeptember 21, 2017]

On account of the Integration, FMC restrictionwith regard to usage of the words ‘Stock’, ‘Shares’and ‘Securities’ in their name by commoditybroker stands withdrawn. Also, authorisation foradjustment of funds among stock exchange andcommodity exchange will not be applicable ifsuch adjustment is within the same brokingentity.

2. Schemes of Arrangement by Listed Entitiesand (ii) Relaxation under Sub-rule (7) ofRule 19 of the Securities Contracts(Regulation) Rules, 1957, 2017

[Issued by the Securities and ExchangeBoard of India vide Circular No. CFD/DIL3/CIR/2017/105 dated September 21, 2017]

SEBI Circular No. CFD/DIL3/CIR/2017/21 datedMarch 10, 2017, laying down the procedure forScheme of Arrangments has been amended tobring it in line with Securities ContractRegulation Rules.

3. Clarification to Enhanced SupervisionCircular

[Issued by the Securities and ExchangeBoard of India vide Circular No. CIR/HO/MIRSD/MIRSD2/CIR/PB/2017/107 datedSeptember 25, 2017]

SEBI has amended the requirement whereinbrokers had to upload client data to the Stockexchanges.

4. Prevention of Unauthorised Trading byStock Brokers

[Issued by the Securities and ExchangeBoard of India vide Circular No. CIR/HO/MIRSD/MIRSD2/CIR/P/2017/108 datedSeptember 26, 2017]

With effect from Jainuary 1, 2018, Stock Brokerswill be required to keep evidence of the clientplacing such order, it could be, inter alia, in theform of:

(a) Physical record written & signed by client;b.Telephone recording; (c) Emailfrom authorizedemail id; (d) Log for internet transactions; (e)Record of SMS messages; and (f) Any otherlegally verifiable record.

5. Foreign Portfolio Investment in CorporateDebt Securities

[Issued by the Securities and ExchangeBoard of India vide Circular No. SEBI/HO/IMD/FPIC/CIR/P/2017/112 dated September29, 2017]

SEBI has introduced imperfect hedging of debtportfolios of Mutual funds and has prescribedexposure limits and disclosures requirements forthe same.

6. Categorization and Rationalization ofMutual Fund Schemes

[Issued by the Securities and ExchangeBoard of India vide Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 6,2017]

SEBI has decided to categorise and rationalize allopen ended scheme, whether existing or wherecomments have been received from SEBI orwhere the documents have been filed and areawaiting comments from SEBI or are in theprocess of being filed.

The categorization is based on type of scheme i.e.Equity, Debt, Hybrid, Solution Oriented or OtherScheme. Further, Large Cap, Mid Cap and SmallCpa have also been defined.

7. Non-compliance with the Minimum PublicShareholding (MPS) requirements

2. UPDATE ONSEBI ANDCORPORATELAWCompiled by : CA. Rajen GadaCA. Neha Gada


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[Issued by the Securities and ExchangeBoard of India vide Circular No. CFD/CMD/CIR/P/2017/115 dated October 10, 2017]

With regard to the Companies not maintainingMPS, SEBI has laid the procedure for action to betaken by the Stock Exchanges against thesedefaulting companies, the quantum of fine to belevied and the action to be taken against thepromoters and directors of such defaultingcompanies.

8. Criteria for Settlement Mode of CommodityDerivative Contracts

[Issued by the Securities and ExchangeBoard of India vide Circular No. SEBI/HO/CDMRD/DMP/CIR/P/2017/116 datedOctober 16, 2017]

SEBI has enlisted the scenarios in which cashsettlement of delivery contract may beundertaken over physical delvery.

9. Securities and Exchange Board of India(International Financial Services Centres)Guidelines, 2015 – Amendments

[Issued by the Securities and ExchangeBoard of India vide Circular No. SEBI/HO/MRD/DSA/CIR/P/2017/117 dated October 17,2017]

The Guidelines have been amended to allow anyentity, either in India or abroad, to form aCompany in IFSC to act as a trading member ofa stock exchange and/or a clearing member of aclearing corporation in IFSC.

For further details, please refer SEBI website atwww.sebi.gov.in.

CORPORATE LAW

A. NOTIFICATIONS

1. Commencement of proviso to section 2(87)of Companies Act, 2013

[Issued by Ministry of Corporate Affairsvide notification no. S.O. 3086(E) datedSeptember 20, 2017]

The definition of subsidiary as defined in section2(87) of the Companies Act, 2013 have come intoeffect from September 20, 2017.

2. Investor Education and Protection FundAuthority (Accounting, Audit, Transferand Refund) Second Amendment Rules,2017

[Issued by Ministry of Corporate Affairsvide notification no. S.O. 1267 (E) datedOctober 13, 2017]

The Rules have been amended for laying downthe procedure for transfer of unclaimed shares tothe Investor Education Protection Fund.

3. Notification for Commencement of section247 of Companies Act 2017

[Issued by Ministry of Corporate Affairsvide notification no. S.O. __ (E) datedOctober 18, 2017]

The provisions of section 247 of the CompaniesAct, 2013 with regard to “Valuation by registeredvaluers” have come into effect from October 18,2017.

4. Notification for delegation of powers undersection 247 of CA 2013 to Insolvency andBankruptcy Board of India

[Issued by Ministry of Corporate Affairsvide notification no. S.O. __ (E) datedOctober 23, 2017]

The Central Government has delegated its powerand function under section 247 of the CompaniesAct, 2013 with regard to ‘Valuation by registeredvaluers’ to the Insolvency and Bankruptcy Boardof India.

B. RULES

1. Companies (Acceptance of Deposit) SecondAmendment Rules, 2017[Issued by Ministry of Corporate Affairsvide notification no. G.S.R. 1172(E) datedSeptember 19, 2017]

The Rules have been amended to allow SpecialIFSC Public and private companies to undertake


26

borrowing and limits have been prescribed forsuch borrowings.

2. Companies (Restriction on number oflayers) Rules 2017

[Issued by Ministry of Corporate Affairsvide notification no. G.S.R. 1176(E) datedSeptember 20, 2017]

This states that no company shall have morethan 2 layers of subsidiaries except BankingCompanies, Non -Banking Finance Company,Insurance Company and Government Company.

It has also laid down the manner of computationof layers.

3. Companies (Registered Valuers andValuation) Rules, 2017

[Issued by Ministry of Corporate Affairsvide notification no. G.S.R. ___(E) datedOctober 18, 2017]

MCA has notified The (Registered Valuers andValuation) Rules, 2017 which deals with variousaspect of registered valuer and valuation such asEligibility, Qualifications And Registration OfValuers, Recognition of Registered ValuersOrganisations, Eligibility for Registered valuers,Cancellation or Suspension of certificate ofregistration or recognition, Valuationstandards. The rules have provided Model CodeOf Conduct for Registered Valuers.

C. CIRCULARS

1. Transfer of Shares to IEPF Authority

[Issued by Ministry of Corporate Affairsvide General Circular No. 12/2017 datedOctober 16, 2017]

The Circular provides for the manner of transferof shares into the demat account maintainedwith NSDL and CDSL and unpaid dividend, etc.on such shares into the account of PunjabNational Bank.

2. Relaxation of additional fees and extensionof last date of filing of AOC-4 XBRL E-

Forms using Ind AS under the CompaniesAct, 2013


The due date for filing of Form AOC-4 XBRLeform for Companies which have prepared basedon IND-AS has been extended to March 31, 2018without payment of any additional fees.

3. Relaxation of additional fee and extensionof last date of filing of AOC-4 and AOC-4(XBRL non-IndAS) under the CompaniesAct,2013


The due date for filing of Form AOC-4 and AOC-4 (XBRL non-IndAS) eforms for Companieswhich have prepared based on IND-AS has beenextended to November 28, 2018 withoutpayment of any additional fees.

For further details, please refer MCA website atwww.mca.gov.in

Our Association’s mouthpiece “News &Views” has readership circulation of morethan 1250 chartered accountant andstudent members.

We have now started acceptingadvertisement for staff vacancy. In caseyou have any vacancy at your office or atany of your client for qualified charteredaccountants or students or anyadministrative job, we will publish yourrequirement in the Journal.

This will be at very nominal cost ofRs. 1,500 for quarter page advertisementper issue. We will be taking advertisementon first cum first serve basis.

Kindly contact CVO CA Office on +91-22-24105987 and speak to Vaibhavi for moredetails.