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NOVEMBER 2016 | VOLUME 1
e-NEWSLETTER Chartered Accountant
04 | GST Impact on Procurement P lanning/ Vendor Management 06 | GST Payment Rules - Made S imple 08 | Workshop on Goods and Serv ices Tax 09 | Const i tut ional Prov is ions for GST 15 | Va luat ions under GST 17 | Offences and penalt ies under GST 19 | ERP Readiness for GST 21 | Yoga - a way to hea lthy l iv ing 22 | Deduct ions do not go l ibera l wi th Courts 24 | Assessment in GST- a repet i t ion avoided 26 | Gl impses 29 | Corporate t ie -up
Index
"The right combination is between a free economy and social policy that addresses the needs of
society and creates equal opportunity." - Benjamin Netanyahu
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Managing Committee Editorial Board
CA. Naveen Garg - Chairman
CA. Rakesh K. Agarwal - Vice Chairman
CA. Arun Aggarwal - Secretary
CA. Manish Goyal - Treasurer
CA. Amit Gupta - Executive Member
CA. Lalit Aggarwal - Executive Member
CA. Sandeep Garg - Executive Member
CA. Vipul Jain - Executive Member
CA. Naveen Garg - Chief Editor
Members:
CA. Rakesh K. Agarwal
CA. Arun Aggarwal
CA. Manish Goyal
CA. Amit Gupta
CA. Lalit Aggarwal
CA. Sandeep Garg
CA. Vipul Jain
Chairman’s Message
CA. Naveen Garg (Chairman)
Gurgaon Branch of NIRC of ICAI
Dear Professional Colleagues and Students,
November is an important month for the students, the month of ICAI exams. It is the
time when they have to make the best of their efforts as great future awaits them. The
very old and simple saying that “there is no substitute for hard work” has been proven
right time and again. By the time, this newsletter will reach you, our CA students must
be writing their examinations and my fellow members must have come out of their
festive spirits. October was yet another hectic month with all due dates of tax audits,
service tax returns and TDS returns falling one another. But this all exhaustion and
fatigue got over with the zeal of festival celebrations.
The activities at the institute are continuing at high spirits with support from all of you.
Continuing from September month, the workshop on ‘GST - Place of Supply under
MGL’ were also organized in the month of October on Friday, 7th October 2016. A
seminar on ‘Audit and GST Features in Tally and Diwali Milan’ were organized on
Saturday, 22ndOctober 2016.
To give short snap of the ongoing month, Gurgaon branch has started with ‘Certificate
Course on IFRS’ from 5th of Nov onwards. Also there is a big reason for cheers as our
Gurgaon CA members Cricket team brought laurels by winning an ‘Inter Branch Cricket
Tournament’ held on 5th& 6th Nov hosted by our Gurgaon branch only.
We have two more major events awaiting in December month. Gurgaon Branch is going
to host ‘CA Students National Convention’ on 10th and 11thDecember, 2016. All the
members are requested to please encourage their articles to participate in every activity
of this mega programme. This is not only an academic event but a platform for skill
enhancement and public speaking. A Post Qualification Course on International
Taxation will be starting from 17th December in Gurgaon.
Gurgaon branch, once again requests all its members to bring sponsorships for the
events and the seminars. Any advertisement for e- newsletter is also welcome. Also it’s
open for any type of corporate tie ups for the benefit of CA fraternity.
Gurgaon branch is open to new ideas and programmes, members are requested to give
suggestions and contribute their thoughts.
‘A journey of a thousand miles must begin with a single step.’
--- lao Tsu
Thank You!
02
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CA. Arun Agarwal (Secretary)
Gurgaon Branch of NIRC of ICAI
03
Dear Professional Colleagues,
We indeed are living in interesting times that will make path breaking impact on this
country’s history!
The month of October was a lighter one at the branch with one seminars and
one Group Discussion. Inter branch cricket tournament held on 5-6 November 2016
was a huge success with participation of eight teams from across north India. There
was a great display of sportsman ship shown by the players. We are happy to inform
that your Own Gurgaon Team won the series defeating mighty Faridabad team in the
nail biting finals!
The group discussions on GST started earlier were halted for a few weeks on account
of Diwali celebrations and the ITR fillings deadline on 17th October 2017. We shall
start the same in this month and continue through next few months.
We started the First ever Certificate Course on IFRS in Gurgaon Branch from 5th
November 2016 with 46 participants. Following this and in line with the intent of
members received in the survey conducted earlier, we have planned a Diploma
Course on International Taxation from 17th December 2016. Interested members may
contact the branch for more information.
Further, the countdown has begun for the National Convention for CA students in
Gurgaon to be hosted on 10-11th December 2016. We request you to educate CA
students around you and to take active participations in this event which is “By the
CA Students, For the CA Students”
Friends, the step of demonetization of High Denomination currency by our
Honorable Prime Minister is a strong step to address the grave issues of fake currency
and unaccounted money in the economy. On the part of Branch, we shall be holding
a special seminar on “Government’s crusade on Black Money (incl Overview and
Impact analysis of Demonetization of High Denomination Currency Notes)” early
next week. The details of this seminar shall be out soon.
Each one of the committee member is getting regular suggestions from you with
respect to the branch’s working. We are grateful of your participation and request to
please keep them coming!
Thank You!
Managing Committee Editorial Board
CA. Naveen Garg - Chairman
CA. Rakesh K. Agarwal - Vice Chairman
CA. Arun Aggarwal - Secretary
CA. Manish Goyal - Treasurer
CA. Amit Gupta - Executive Member
CA. Lalit Aggarwal - Executive Member
CA. Sandeep Garg - Executive Member
CA. Vipul Jain - Executive Member
CA. Naveen Garg - Chief Editor
Members:
CA. Rakesh K. Agarwal
CA. Arun Aggarwal
CA. Manish Goyal
CA. Amit Gupta
CA. Lalit Aggarwal
CA. Sandeep Garg
CA. Vipul Jain
Secretary’s Message
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GST Impact on Procurement Planning/ Vendor Management
CA. Ashish Chaudhary
Proper procurement planning and vendor management is going to be key during GST regime especially during transition phase and upto sometimes post migration. There after there may be need to have continuous relook at professionalism of vendor base and the need to reconsider alternative source of procurement so that the overall cost of procurement is optimized.
Few important aspects in procurement planning and vendor management could be as follows:
1. Procurement from registered vendors: The cascading effect of taxes is going to come down significantly in GST owing to cross sectional credit admissibility. This requires that the vendor must be registered so that the tax paid by him on his procurement is not added to the cost of goods/services and passed on to the company resulting in reduction of cost to that extent.
2. Purchase from unregistered vendor- likelihood of tax on purchases: It is learnt that purchase of goods/services from unregistered dealers could attract the levy of GST in the hand of recipient resulting in increased compliance burden.
3. Purchase from taxable person under composition scheme: There could be a situation where the vendor is registered under composition scheme and not charging GST. On the face of invoice, it could appear that the prices are lower but it may not be necessary considering the fact that tax paid on his procurement become integral part of the cost of his product/service and not passed on the company. Hence, all B2B purchase should be made from vendor registered under normal scheme.
4. Timely registration of vendor during migration to GST: There is provision that all existing registered assessee under VAT, CST, Excise, Service Tax or other taxes being subsumed in GST would be allowed automatic registration under GST on provisional basis valid for 6 months. Final registration would be granted on furnishing necessary details. But it is always preferable to insist the vendor to migrate/obtain registration under GST in advance to avoid the follow-ing problems:
a. The vendor master of ERP could be updated timely. b. In case the vendor is not allowed to registration owing
to deficiency in documentations/any other reasons, the credit taken during the period tax charged by him
under provisional registration could be questioned. (though provision is not clear till date as to what would happen under this circumstances)
c. There is no need of having reconciliation/updation of records on vendor obtaining normal registration post provisional number.
5. Realignment of source of vendor: The factors determining selection of vendors, in past, were largely driven based on indirect tax impact due to many restriction/non-allowability of credits. However, these considerations may not be determining factors in GST while making vendor selection. Important criteria under GST for vendor selection could be as follows:
a. The cost of product/service being offered b. The quality of product/services being offered c. The professionalism of vendor in doing the business d. Compliance level (registration, timely raising of
invoices, timely payment of taxes and filing of returns etc.) followed by vendors under GST
e. Proximity of source of procurement to the place of its usage in case the product/service is critical to the product/services being supplied by company.
f. Cost of transportation This indicates that the tax consideration may not be domi-nant after GST. Hence, existing vendors selected based on the tax consideration may require relook in GST. 6. Change in procurement/inventory policy: The policy
followed by company may require relook in GST especially the policy followed as to inventory holding viz a viz Just in Time (JIT) Purchase considering the fact that accumulation of stock in large quantity could entail blockages of huge working capital. Most of the businesses would prefer to go for JIT purchase in GST with minimum stock in hand.
7. Centralized vs decentralized contract: The decision to go for centralized or decentralized contract for procurement especially in case of service contracts is going to be very critical considering that the services provided by vendor to multiple offices located in different states of the same company under single contract could involve the complexities of deemed supply among various offices of the recipient. i.e. A company awards contract for advertisement to a media
Email: [email protected]
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GST Impact on Procurement Planning/ Vendor Management
agency for undertaking advertisement of multiple products/services of the company across the country for lump sum consideration. The invoice is required to be issued to contracting office of the service recipient which is not registered as ISD. As the service is enjoyed by various offices of the recipient located across different states, it could be considered as deemed supply by contracting office to all other offices and liable to GST within multiple offices of the same company.
8. Amendment of existing contracts with vendors: There may be need to amend existing contracts with vendors in light of GST.
9. Evaluation of cost of goods/services procured with existing vendors: It is commonly understood that the cost of goods/services are likely to come down in medium term post GST implementation though there could be some rise in the initial period. This depends on various factors i.e. existing rate of tax viz a viz tax rate under GST, exemptions, availability of higher credits, interest cost on differential cash flow etc. This requires in-depth assessment of the cost of procurement from different sources/vendors. Following could be broad guiding factors:
a. Wherever the cost of goods/services is likely to come down, the negotiation should be made with vendors to pass on the benefit. There may be clause in the agreement to re-evaluate cost at periodical interval.
b. If the impact of GST is likely to be negative on some of the products/services, long term contract should be entered into with vendor with specific condition of not allowing price variation during the tenure of the contract.
10. Timely payment of taxes by vendor under GST: Credit would be allowed under GST provided the vendor has paid full tax to government. If the credit is availed by recipient but supplier has not paid tax to the government, it would be added to the tax liability of recipient who needs to pay it along with interest. This requires proper monitoring as to whether vendor has paid tax to the government. If the vendor base is from unorganized sector, this could pose significant challenge for recipient resulting in negative impact on working capital and frequent instances requiring reversal of credit/payment of interest. This necessitates proper monitoring system to be put in place for vendors especially unorganized vendors.
11. Filing of timely returns by vendors: Similar to payment of tax, filing of return by vendor is mandatory for allowing credit to the recipient. Hence, proper control/ monitoring mechanism must be established to ensure that returns are filed timely by vendors.
12. Practice of making advance to vendors: GST is payable at
the time of supply of goods/services. Receiving advance is
also one of the criterion for determining time of supply. Hence, the vendor needs to pay GST at the time of advance. Credit is admissible to recipient at the time of receipt of goods/services. This could result in situations where GST is payable at the time of making payment to vendor but credit is admissible at the time of receipt of goods/services. This could result in timing differences between cash outflow (of taxes) and taking credits. Hence, practice of making advances to vendors may require to be looked into.
13. Identification of place of supply of procurement: Place of supply of goods/service needs to be ascertained to determine applicable taxes (IGST or CGST & SGST). Wrong determination of place of supply could lead to charging and payment of wrong taxes. The Model GST Law, in such cases, provides for paying correct taxes and claiming the refund of tax paid wrongly. Such cases could result in blockage of credits at the end of recipient also. Hence, the recipient is required to determine the place of supply of all procurements properly so that the tax charged by vendor is correct and there is no blockage of credits in their hand.
14. Discounting policy: There could be need to redesign the discounting policy as the Model GST Law requires the discount/incentive to be linked to original invoice. If not linked, the deduction from transaction value may not be allowed and liability to pay tax arises.
15. Vendor Compliance Rating Score- an important criterion for vendor selection: One of the important criterion for vendor selection could be their compliance rating score in GST.
16. E-Procurement: There may need to explore the alternative ways of selection of vendors and one of such ways could be to make e-procurement so that the cost competitiveness could be ensured.
17. GST ready of vendors: It is equally important that all the vendors of the company get the impact of GST assessment done on their business and proper processes and procedures put in place so that all negative consequences, as discussed above at many places, could be avoided.
Conclusion: Above highlights critical points in vendor selection and procurement planning under GST so that the entity is able to take all possible benefits and safeguarded against any unwarranted outcomes. There could be few other important aspects similar to such based on nature of actual composition of vendor base of the company. Author could be reached at [email protected]
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GST Payment Rules - Made Simple
CA Raman Gopal Jamdagni
Section 35 of the Model GST Law provides provisions
for payment of tax, interest, penalty and other amounts.
As per which, every deposit made towards tax, interest,
penalty, fee or any other amount by a taxable person
shall be credited to the electronic cash ledger of such
person. Further, it also provides that the input tax credit
as self-assessed in the return of a taxable person shall be
credited to his electronic credit ledger.
The Government has prescribed the manner of
maintaining electronic cash and credit ledgers through
the draft GST Payment Rules. These electronic ledgers
function similarly to a bank account where in deposits
and withdrawals are credited and debited respectively.
As per rule 3 of the said rules, the electronic cash
ledger shall be maintained in FORM GST PMT-3 for
each registered taxable person on the Common
Portal (GSTN server). All the cash deposits made
by the assessee towards payment of tax, interest,
penalty, fee or any other amount would be credited
in the cash ledger and such cash ledger would be
debited as and when the amount is utilized to
discharge respective liabilities.
Further, any amount deducted at source on account
of a taxable person shall also get credited to this
electronic cash ledger. Similarly, the amount of cash
refund claimed by the assessee shall also get debited
from the said ledger. However, when the refund
application is rejected, Electronic Cash Ledger shall
be credited back to the extent of rejection.
The registered taxable person or any other person
on his behalf making payment shall generate a
challan in Form GST PMT-4 with the respective
payment details on the said GST common portal.
The said challan shall be valid for a period of 15
days.
The payment shall be made through any of the
following modes:
i. Internet Banking through authorized banks;
ii. Credit card or Debit card after registering the same
with the Common Portal;
iii. National Electronic Fund Transfer (NEFT) or Real
Time Gross Settlement (RTGS) from any bank;
iv. Over the Counter payment (OTC) through
authorized banks for deposits up to ten thousand
rupees per challan per tax period, by cash, cheque
or demand draft – Restriction of Rs.10,000/- is not
applicable to Government department/ recovery
agents/officer authorized in this regard.
Person who is not registered under GST required to
make payment shall obtain a temporary
identification number from the authorized officer
and deposit using Form GST PMT-5 details of which
will be maintained at common portal.
In case of payment made by way of NEFT or RTGS
mode, the mandate form shall be generated along
with the challan & shall be submitted to the bank
from where the payment is to be made. Such
mandate form would be valid up to 15 days from
the challan date.
A Challan Identification Number (CIN) will be
generated on successful credit of the amount to the
concerned government account and such CIN shall
Email: [email protected]
Electronic Cash Ledger
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GST Payment Rules - Made Simple
be indicated in the challan. When due to any
technical fault, CIN is not generated, then the
assessee may represent electronically in FORM GST
PMT-6.
On receipt of CIN from the authorized Bank, the
said amount shall be credited to the electronic cash
ledger.
Section 2(41) of Model GST Law defines electronic
credit ledger as “Input tax credit ledger in electronic
form maintained at the common portal (GSTN
Server) for each registered taxable person in the
manner prescribed in GST payment rules.
Any claim of input tax credit (CSGT, SGST & IGST)
on supply of goods and or services shall be credited
to the electronic credit ledger maintained in Form
GST PMT-2. Such electronic credit ledger shall be
debited on utilization for making tax payment under
the provisions of the GST Act.
Unutilized balance in Cenvat credit ledger can be
claimed as refund by a registered taxable person at
the end of any tax period at the option of assessee.
The amount to the extent of the refund claim shall
be debited in the said ledger. Then, to the extent of
refund claim rejected if any, shall be re-credited to
the electronic credit ledger by the proper officer by
an order made in Form GST PMT -2A.
All liabilities of a taxable person under GST Act
shall be recorded and maintained in an electronic
register called Electronic Tax Liability Register
(ETLR). Rule 1 of the proposed GST payment rules
provides that the ETLR shall be maintained in Form
GST PMT-1 on the Common Portal.
The electronic tax liability register of a registered
taxable person shall be debited by:
The amount payable towards tax, interest, late fee
or any other amount payable as per the return filed.
The amount of tax, interest, penalty or any other
amount payable as determined by a proper officer
in pursuance of any proceeding under the Act.
The amount of tax and interest payable as a result
of mismatch of input tax credit.
Any amount of interest that may accrue from time
to time.
Electronic tax liability ledger shall be credited as and
when the taxable person discharges his liability
either through Electronic Credit Ledger or
Electronic Cash Ledger.
Summary of forms prescribed under GST payment rules
are as follows:
Conclusion: On one part there is an Electronic tax
liability register (ETLR) and on the other side there are
two ledgers namely Electronic Cash Ledger & Electronic
Credit Ledger (ECL). The debits in ETLR would be the
credits in ECL. Similarly the Credits in ETLR would be
the debits of ECL. All payment mechanism under GST
will be controlled by these three electronic ledgers.
Author could be reached at [email protected]
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Electronic Credit Ledger
Electronic Tax Liability Register
SNO Form No. Title of the Form
1. Form GST PMT-1
Electronic Tax Liability Register of Taxpayer (Part–I: Return related liabilities Electronic Tax Liability Register of Tax-payer) (Part–II: Other than return related liabilities)
2. Form GST PMT-2 Electronic Credit Ledger
3. Form GST PMT-2A Order for re-credit of the amount to cash or credit ledger
4. Form GST PMT-3 Electronic Cash Ledger
5. Form GST PMT-4 Challan For Deposit of Goods and Services Tax
6. Form GST PMT-5 Payment Register of Tem-porary IDs / Un-registered Taxpayers
7. Form GST PMT-6 Application For Credit of Missing Payment (CIN not generated)
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Workshop
Gurgaon Branch of NIRC of ICAI is hosting weekly Group Discussion on
Goods and Services Tax
Tentative Topics
Principles of Supply under Model GST Law
Principles of Place of Supply under Model GST Law
Principles of Time of Supply under Model GST Law
Principles of Value of Supply under Model GST Law
GST from CEO/ CFO/ Owners point of view
Input tax Credit under Model GST Law
Impact of GST for IT/ITES/ BPO sector / Technology
Matching reversal under Model GST Law
Impact of GST for Logistics sector
Impact of GST for Automotive sector
Registrations, returns and payment processes in GST
Transitional provisions
Impact of GST for Hospitality sector
Weekly Discussion on Every Friday/Saturday 02(Two) CPE credit hours for each session. Led by Industry/Topic Experts No fee applicable
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Constitutional Provisions for GST
CA Raman Singla
As you are aware that for nearly thirteen years, India
has been on the verge of implementing a GST (Goods
& Services Tax). But now, with political consensus
secured, the nation is on the cusp of executing one of
the most ambitious and remarkable tax reforms in its
independent history. As per Article 265 of Constitution
of India, no tax can be collected without the authority
of law. Thus, there needs to know the Constitutional
amendments made for GST to have a complete grip
over the subject.
The GST Constitutional (122nd Amendment) Bill’ 2014
became the GST Constitutional (101st Amendment)
Act’ 2016 when the president assented the provisions of
bill on 8th Sept’ 2016.
GST Constitutional (101st Amendment) Act’ 2016
contains the provisions which are necessary for the
implementation of GST Regime. The present
amendments would subsume a number of indirect taxes
presently being levied by Central and State
Governments into GST thereby doing away the
cascading of taxes and providing a common national
market for Goods and Services. The aim to bring about
these amendments in the Constitution is to confer
simultaneous power on Parliament and State
legislatures to make laws for levying GST
simultaneously on every transaction of supply and
Goods and Services.
The amendment Act contains 20 amendments. As per
Sub Section (2) of Section 1, the constitutional
amendments are to be enforced with effect from such
date as the Central Government may, by notification in
the Official Gazette, appoint. The central government,
in exercise of this power has appointed the 16th day of
September, 2016 as the date on which the provisions of
Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 17,
18, 19 and 20 of the said Constitutional amendment
Act, shall come into force. This notification has been
issued to carry out the provisions of Constitutional
amendments. Prior to this notification, the presidential
order dated 12th September 2016, has also confirmed the
constitution of GST Council.
Thus, all the amendments of Constitution (One Hundred
and First Amendment) Act, 2016 is now active. The
amendments are tabled below for ready reference of the
readers:-
Email: [email protected]
09
Provision Issue
Section 1
This section provides for short title and commencement o f the Constitution (Amendment) Act. As per Sub Sect ion (2 ) , these amendments are to be applicable from the date to be notified by the Central Government.
Section 2 (Most Important Amendment)
N E W A R T I C L E 2 4 6 A INSERTED – SPECIAL PROVISION WITH RESPECT TO GOODS AND SERVICES TAX This section makes enabling provisions for the Union and States with respect to the GST legislation. It further specifies that Parliament has exclusive power to make laws with respect to GST on interstate transactions. Thus, as per these provisions, the CGST and SGST Act shall be made by Central Government and State Governments respectively, while the IGST Act shall be made by Central Government only.
Section 3
AMENDMENT OF ARTICLE 248 This section seeks to make consequential amendments in article 248 of the Constitution in view of the amendment in section 2 of the Bill.
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Provision Issue
Section 4
AMENDMENT OF ARTICLE 249
This section seeks to make consequential
amendments in article 249 of the
Constitution in view of the amendment in
section 2 of the Act. This amendment
enables Parliament to make laws in national
interest, if so required as per the procedure
laid therein.
Section 5
AMENDMENT OF ARTICLE 250
This section seeks to make consequential
amendments in article 250 of the
Constitution in view of the proposed
amendment in section 2 of the Act. The
amendment makes it clear that Union may
legislate as in other cases if a proclamation
of emergency is in operation.
Section 6
AMENDMENT OF ARTICLE 268
This section seeks to amend article 268 of
the Constitution to omit the duties of excise
on medicinal and toilet preparations from
the purview of the power of the
Government of India in view of the
proposed imposition of goods and services
tax on goods and services.
Section 7
OMISSION OF ARTICLE 268A
This section seeks to omit article 268A of
the Constitution. The said article empowers
the Government of India to levy taxes on
services. As tax on services has been
brought under GST, such a provision would
no longer be required.
Section 8
AMENDMENT OF ARTICLE 269
Article 269 provides for the taxes levied and
collected by the Union but assigned to the
States. The present amendment has been
made consequential to the insertion of new
article 269A which provides for levy of
goods and services tax on supplies in the
course of inter-State trade or commerce.
Provision Issue
Section 9
( M o s t
I m p o r t a n t
Amendment)
INSERTION OF NEW ARTICLE
269A – LEVY AND COLLECTION
OF GOODS AND SERVICES TAX
IN COURSE OF INTER-STATE
TRADE OR COMMERCE
The present section seeks to insert a
new article 269A which provides for
goods and services tax on supplies in
the course of inter-State trade or
commerce which shall be levied and
collected by the Government of India
and such tax shall be apportioned
between the Union and the States in
the manner as may be provided by
P a r l i am e n t b y l a w o n t h e
recommendations of the Goods and
Services Tax Council. It also provides
that Parliament may, by law,
formula te the pr inc ip les for
determining the place of supply, and
when a supply of goods, or of services,
or both takes place in the course of
inter-State trade or commerce.
Section 10
AMENDMENT OF ARTICLE 270
This amendment provides that goods
and services tax levied and collected
by the Government of India, shall also
be distributed.
Section 11
( M o s t
I m p o r t a n t
Amendment)
AMENDMENT OF ARTICLE 271
This amendment put restrictions on
the powers of Parliament to levy
surcharge for on the GST. In other
words, it provides that goods and
services on which GST is levied shall
not be subject to any surcharge under
article 271.
Constitutional Provisions for GST
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Constitutional Provisions for GST
Provision Issue
Section 12 ( M o s t I m p o r t a n t Amendment)
INSERTION OF NEW ARTICLE 279A – GOODS AND SERVICES TAX COUNCIL The present section has inserted the provisions for GST Council. The Goods and Services Tax Council shall consist of the following members, namely:- The Union Finance Minister........................ Chairperson; The Union Minister of State in charge of Revenue or Finance................. Member; The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government....................Members. Further the Goods and Services Tax Council shall make recommendations to the Union and the States on- The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax; The goods and services that may be subjected to, or exempted from the goods and services tax; Model Goods and Services Tax Laws, principles of levy, apportionment of Integrated Goods and Services Tax and the principles that govern the place of supply; The threshold limit of turnover below which goods and services may be exempted from goods and services tax; The rates including floor rates with bands of goods and services tax; Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and Any other matter relating to the goods and services tax, as the Council may decide.
Section 13 AMENDMENT OF ARTICLE 286 This is a consequential amendment
Section 14 ( I m p o r t a n t Amendment)
AMENDMENT OF ARTICLE 366 The present section specifies the definition of 'Goods and Services Tax’, ‘Services’ and ‘State’. As per the definitions, only alcoholic liquor for human consumption has been excluded from the ambit of GST Constitutionally. All other forms of alcohol like alcohol for industrial use and medicinal and toilet preparation containing alcohol which falls in the taxing domain of the Central Government have been included in GST. This exclusion has been done to address the strong concern of the states regarding loss of revenue if potable alcohol was to be subsumed under GST.
Section 15
AMENDMENT OF ARTICLE 368 This clause seeks to amend article 368 of the Constitution in view of the amendments referred to in Section 12 of the said Act (GST Council) so as to apply the special procedure which requires the ratification of the Bill by the Legislatures of not less than one half of the States in addition to the method of voting provided for amendment of the Constitution. Thus, any modification in GST Council shall also require the ratification by the legislatures of one half of the states.
Section 16
AMENDMENT OF SIXTH SCHEDULE This section seeks to amend the sub-paragraph (3) of paragraph 8 of the Sixth Schedule to the Constitution with a view to empower the District Council for an autonomous district to have the power to levy and collect taxes on entertainment and amusements within such district.
Section 17 ( I m p o r t a n t Amendment)
AMENDMENT OF SEVENTH SCHEDULE This section seeks to make the consequential amendments in Union List and State List Entries
Section 18
The present section provides for the Mandatory Compensation to States for 5 years for loss of revenue on account of introduction of goods and services tax. The present Constitutional amendment Act has deleted the provisions for the applicability of 1% additional tax on interstate transactions.
Section 19 This section seeks to provide for transitional provisions. This section prescribe a timeframe of 1 year within which the subsuming of different indirect taxes into GST would take place and enable the competent Legislature to amend or repeal their existing laws to pave the way for imposition of SGST in the States.
Section 20 This section provides the power to president to remove difficulties within a period of 3 years.
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Key Differences between Ind AS and IFRS under Asset Group
CA. Pankaj Sharma
MCA has notified 40 Indian Accounting Standards
(Ind ASs) vide its notification dated February 16, 2015
and March 30, 2016. Indian Accounting Standards are
the set of converged accounting standards notified by
the MCA which are in line with IFRS as issued by the
IASB but subject to certain carve outs (differences) as
notified by the MCA. Ind AS are almost similar to
the IFRS but with few carve outs so as to make them
suitable for Indian Economic Environment. A carve
out essentially means that certain requirements of an
accounting standard under IFRS will not be adopted.
In this article a summary of significant differences
between Ind AS and IFRS under Asset Group is
provided.
1. Elimination of option on recognition of inventories
as an expense based on function-wise classification
Paragraph 38 of IAS 2 dealing with recognition of
inventories as an expense based on function-wise
classification, has been deleted keeping in view the
fact that option provided in IAS 1 to present an
analysis of expenses recognized in profit or loss using
a classification based on their function within the
entity has been removed.
In Ind AS 2 this option has been deleted since Ind AS
1 permits only nature-wise classification of expenses.
1. Elimination of option to reduce the government
grant in arriving at the carrying amount of property,
plant and equipment.
IAS 16 provides in relation to the measurement of
cost, the carrying amount of an item of property,
plant and equipment may be reduced by government
grants in accordance with IAS 20 Accounting for
Government Grants and Disclosure of Government
Assistance.
In Ind AS 16, Paragraph 28 has been deleted since Ind
AS 20, Accounting for Government Grants and
Disclosure of Government Assistance, does not
permit the option of reducing the carrying amount of
an item of property, plant and equipment by the
amount of government grant received in respect of
such an item, which is permitted in IAS 20.
1. Measurement of land and building classified as
investment property and valued at fair value model.
As per paragraph 18-19 of IAS 17, Separate
measurement of the land and buildings elements is
not required when the lessee’s interest in both land
and buildings is classified as an investment property in
accordance with IAS 40 and the fair value model is
adopted.
Not Applicable since Ind AS 40, Investment Property,
prohibits the use of fair value model. Accordingly,
paragraph 18-19 of Ind AS 17 has been deleted.
2. Treatment of escalation of lease rentals due to the
general inflation
No guidance under IFRS
Paragraphs 33 and 50 of Ind AS 17 have been
modified to provide that where the escalation of lease
rentals is in line with the expected general inflation so
as to compensate the lessor for expected inflationary
cost, the increases in the rentals shall not be straight
lined.
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INTERNATIONAL ACCOUNTING STANDARD 2 INVENTORIES
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INTERNATIONAL ACCOUNTING STANDARD 17 LEASES
INTERNATIONAL ACCOUNTING STANDARD 16 PROPERTY, PLANT AND EQUIPMENT
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Key Differences between Ind AS and IFRS under Asset Group
1. Elimination of option to measure the
non-monetary government grants at nominal value
IAS 20 gives an option to measure non-monetary
government grants either at their fair value or at
nominal value.
Ind AS 20 requires measurement of such grants only
at their fair value. Thus, the option to measure these
grants at nominal value is not available under Ind AS
20.
2. Elimination of option to present grants as
deduction in arriving at the carrying amount of the
asset.
IAS 20 gives an option to present the grants related
to assets, including non-monetary grants at fair value
in the balance sheet either by setting up the grant as
deferred income or by deducting the grant in arriving
at the carrying amount of the asset.
Ind AS 20 requires presentation of such grants in
balance sheet only by setting up the grant as deferred
income. Thus, the option to present such grants by
deduction of the grant in arriving at the carrying
amount of the asset is not available under Ind AS 20.
1. Guidance on exchange difference arising from
foreign currency eligible for capitalization
IAS 23 provides no guidance as to how the
adjustment prescribed in paragraph 6(e) is to be
determined.
However in Ind AS 23, paragraph 6A is added to
provide the guidance on the exchange difference
arising from foreign currency eligible for
capitalization.
“Para 6A. With regard to exchange difference
required to be treated as borrowing costs in
accordance with paragraph 6(e), the manner of
arriving at the adjustments stated therein shall be as
follows:
(i)the adjustment should be of an amount which is
equivalent to the extent to which the exchange loss
does not exceed the difference between the cost of
borrowing in functional currency when compared to
the cost of borrowing in a foreign currency.
(ii)where there is an unrealized exchange loss which is
treated as an adjustment to interest and subsequently
there is a realized or unrealized gain in respect of the
settlement or translation of the same borrowing, the
gain to the extent of the loss previously recognized as
an adjustment should also be recognized as an
adjustment to interest.”
1. Impairment of the Investment Property measured
at fair value
IAS 36 is not applicable regarding impairment of
Investment Property that is measured at fair value.
Under Ind AS 36 it’s not applicable since the fair
value measurement option is not available under Ind
AS 40. Therefore paragraph 2(f) is deleted in Ind AS
36 as Ind AS 40 requires cost model.
1. Acquisition of an Intangible asset by way of a gov-
ernment grant
IAS 38, Intangible Assets, provides the option to an
entity to recognize both asset and grant initially at fair
value or at a nominal amount plus any expenditure
that is directly attributable to preparing the asset for
its intended use.
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INTERNATIONAL ACCOUNTING STANDARD 20 ACCOUNTING FOR GOVERNMENT GRANTS AND DISCLOSURE OF GOVERNMENT ASSISTANCE
INTERNATIONAL ACCOUNTING STANDARD 23 BORROWING COSTS
INTERNATIONAL ACCOUNTING STANDARD 36 IMPAIRMENT OF ASSETS
INTERNATIONAL ACCOUNTING STANDARD 38 INTANGIBLE ASSETS
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Key Differences between Ind AS and IFRS under Asset Group
Ind AS 38 allows only fair value for recognizing the
intangible asset and grant in accordance with Ind AS
20.
2. Amortization of intangible asset arising from
service concession arrangement in respect of toll road
Not applicable under IFRS
Intangible assets recognized for service concession
arrangements in respect of toll road under IGAAP
up to the period ending immediately before the
beginning of the first Ind AS reporting period can be
amortized as per the policy adopted under IGAAP.
“Paragraph 7AA has been inserted to scope out the
entity that opts to amortize the intangible assets
arising from service concession arrangements in
respect of toll roads recognized in the financial
statements for the period ending immediately before
the beginning of the first Ind AS reporting period as
per the exception given in paragraph D22 of
Appendix D to Ind AS 101.”
1. Elimination of option to recognize investment
properties at fair value.
IAS 40 permits both cost model and fair value model
(except in some situations) for measurement of
investment properties after initial recognition.
Ind AS 40 permits only the cost model.
2. Prohibition on the treatment of property interest
held in an operating lease as investment property
IAS 40 permits treatment of property interest held in
an operating lease as investment property, if the
definition of investment property is otherwise met
and fair value model is applied. In such cases, the
operating lease would be accounted as if it were a
finance lease.
Ind AS 40 prohibits the use of fair value model hence
this treatment is prohibited in Ind AS 40.
Ind AS 41 is similar to IAS 41 apart from different
terminology used in Ind AS.
1. Presentation of discontinued operations in the
separate income statement
IFRS 5 has options to present the items of profit or
loss of discontinued operations in a separate income
statement and other comprehensive income or in one
single statement containing both as IAS 1 permits
both methods of presentation.
However, in IND AS 105 the requirements regarding
presentation of discontinued operations in the
separate income statement, where separate income
statement is presented under paragraph 33A have
been deleted.
This change is consequential to the removal of option
regarding two statement approach in Ind AS 1. Ind
AS 1 requires that the components of profit or loss
and components of other comprehensive income
shall be presented as a part of the statement of profit
and loss.
2. Clarification inserted on conditions for classification
of a non-current asset (or disposal group) as held for
sale.
IFRS 5 does not provide any such clarification.
Paragraph 7 of Ind AS 105 prescribes the conditions
for classification of a non-current asset (or disposal
group) as held for sale. A clarification has been added
in Paragraph 7 that the non-current asset (or disposal
group) cannot be classified as held for sale, if the
entity intends to sell it in a distant future.
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INTERNATIONAL ACCOUNTING STANDARD 40 INVESTMENT PROPERTY
INTERNATIONAL FINANCIAL REPORTING STANDARD 5 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
INTERNATIONAL ACCOUNTING STANDARD 41 AGRICULTURE
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CA. Saurabh Gupta
GST stands for "Goods and Services Tax", and is
proposed to be a comprehensive indirect tax levy on
manufacture, sale and consumption of goods as well
as services at the national level. It will replace all
indirect taxes levied on goods and services by the
Indian Central and State governments. Second draft
of GST law is supposed to be tabled in Parliament for
approval shortly. The first model law has already
been shared with public and the comments were in-
vited.
So, on which value, GST will be levied?
There seems to be very obvious answer to this i.e.
price on which the exchange of goods and services
will take place. But, is it that simple, let’s check the
GST valuation Rules, 2016. Rule 3 of GST Valuation
rules conveys the same answer and affirms that
transaction value shall even be accepted where the
supplier and recipient of supply are related parties
provided their relationship has not influenced the
price. But this is subject to Rule 7.
Rule 7 empowers the GST officer with draconian
provision to reject transaction value, if he has reasons
to doubt the truth or accuracy of the value declared.
He has been given powers to ask further information
and evidences to cross check the price. If the officer
still has reasonable doubt as to the value of transac-
tion, after evaluation as per Rule 7, the price will be
determined by Rule 4.
Rule 4 is the spinal cord of valuation rules, it
introduces transfer pricing concept in the Model
GST law. As per Rule 4, the transaction value of
goods or services will be value of like kind and
quality supplied at or about the same time to other
customers with the adjustments to relevant factors
like difference in date of supply, commercial and
quantity levels, composition, quality and design.
However, adjustment would also be made for freight
and insurance charges depending upon place of
supply. Rule 5 further strengthens the spinal cord
above and provides that if the value cannot be
determined by method as stated in Rule 4, it will be
computed on the basis of cost of production or cost
of services, charges for the design or brand with the
addition of usual profit and general expenses. The
point to note here is, that these rules are applicable
to all transactions irrespective of related party status.
A cursory reading of above rules may look very
normal and simple to one but as you give a deep
thought to it, you will start feeling the butterflies in
stomach and it will leave you with bundle of nerves.
Basically, the Model GST Law has introduced transfer
pricing concept in the law. Was it required, it is just
copies from earlier laws? It won’t be wrong to say,
the way it has been introduced
“Kahin ki eent, kahin ka roda; bhanumati ne kunba
joda”
Let’s understand more about transfer pricing and it’s
applicability in existing laws. Transfer pricing is the
setting of the price for goods and services sold
between controlled (or related) legal entities within
an enterprise. In principle, a transfer price should
match either what the seller would charge an
independent, arm's length customer, or what the
buyer would pay an independent, arm's length
supplier. Transfer pricing is perceived as major tool
for corporate tax avoidance and is also referred as
base erosion and profit sharing (BEPS). Transfer
pricing adjustments have been a feature of many tax
laws across the globe since the 1930s. All the cross
border transactions made with related parties abroad
are subject to pass the litmus tests of transfer pricing
laws in order to prove that the transaction has been
made on Arm’s length price. The rules in this regard
have been adopted by most of the countries to
safeguard their tax revenue. India’s transfer pricing
regulations also broadly adopts the OECD principles
currently.
Income Tax Act specifically lays out procedure for
transfer pricing audits for transactions entered with
international related parties. Domestic related party
transactions are also required to be reported
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Valuations under GST
15
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separately with audit requirements for higher
amounts.
The proposed valuation rules in Model GST law are
on the lines of India’s Customs Valuation
(Determination of Value of Imported Goods) Rules,
2007. In fact, it won’t be wrong to say that language of
the proposed law has been copied from existing
custom valuation rules. The custom law also requires
related parties to refer to Special Valuation Branch
(SVB) for evaluation of arms length price. Further,
with the use of technology, customs have developed
the dynamic data bank of historical rates reported by
various importers using tariff codes to identify
abnormally priced transactions. On the top of it,
customs have also fixed duty price in case of various
items to do away with valuation issues. According to
study done by a sample set of importers, among the
various roadblocks in the domain of trade facilitation,
valuation related issues account for 19% of the
grievances, followed by tariff classification grievances
(16%).
The question arises, can customs law be replicated in
GST? The objectives behind transfer provisions are
quite different, in customs law government also needs
to protect interest of domestic players, ensure inferior
goods are not dumped in the country despite
protecting country’s revenue. Here under GST
regime, there is no incentive for tax planning even by
related parties at one stage as it would get taxed in
subsequent stage.
Central excise law in India is the oldest surviving
indirect tax levy in India, but the valuation principles
are still far from being settled. Safe harbor provisions
(likewise Income tax) have been provided to reduce
the litigation in the past. E.g. Rule 8 of excise valuation
rules prescribes, that where the excisable goods are
used by the manufacturer wholly or partly for
in-house consumption in the manufacturing of other
goods, the valuation of goods meant for in‑house
consumption must be completed at 110% of the cost
of production. Compounded levy schemes based upon
installed capacity of production have also been
provided to eliminate the need for transaction
valuations.
Under GST, it would have been made some sense if
lawmaker’s intent would have to double check the
transaction price between related parties; but how
fruitful this exercise is – to question transaction price
between unrelated parties. The draft law questions the
reasonability of price transacted even between
unrelated parties. Unless the tax officer has got the
evidence of receipt of unreported consideration,
keeping of such provisions of rejection of value are
drastic provisions for business. Imagine a situation,
where you supply goods or services at a negotiated
price and pay GST on such price and a day after
completion of your transaction, GST officer negates
this price. There is remotest probability that buyer
will bear the additional tax on price valued by GST
officer. So, the risk lies with seller / dealer only.
“May god save the ease of doing business campaign in
our country. “
Can one imagine a world where any computer
software or any laid out rules are able to arrive at real
transaction prices? This could have been possible in
case of homogeneous goods to some extent but it is
quite an uphill task in case of today’s innovative
product and services. Business is not a science in 21st
century, business is symptomatic of our failure to
efficiently harvest, distribute and replenish resources.
It’s a progression from mystery to heuristic. Let the
service provider be free to decide the price of his
offerings, it’s not an algorithm or a software code.
Model GST law has opened up can of worms of
bureaucracy and litigation by questioning the
transaction between unrelated parties. Will
administrators be ever able to derive an amicable
approach to judge prices of goods or services?
Likewise, present customs and excise laws, we seem to
be entering back to the era of long list of disputed
valuation litigations. Let’s hope the second draft and
further rules on the subject addresses the concern.
Valuations under GST
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Offences and penalties under GST
CA. Sanjeev Singhal
Offences are most important part of any ACT which
provide stick to the Act for it smooth functioning
and implementation
66. Offences and penalties
1. Where a taxable person who -
i) supplies any goods and/or services without issue
of any invoice or issues an incorrect or false
invoice with regard to any such supply;
ii) issues any invoice or bill without supply of goods
and/or services in violation of the provisions of
this Act, or the rules made there under;
iii) collects any amount as tax but fails to pay the
same to the credit of the appropriate
Government beyond a period of three months
from the date on which such payment becomes
due;
iv) collects any tax in contravention of the provisions
of this Act but fails to pay the same to the credit
of the appropriate Government beyond a period
of three months from the date on which such
payment becomes due;
v) fails to deduct the tax in terms of sub-section (1)
of section 37, or deducts an amount which is less
than the amount required to be deducted under
the said sub-section, or where he fails to pay to
the credit of the appropriate Government under
sub-section (2) thereof, the amount deducted as
tax;
Section -37(1) Tax Deducted at Source
[to deduct tax at the rate of one percent from the
payment made or credited to the supplier
[hereinafter referred to in this section as “the
deductee”] of taxable goods and/or services, notified
by the Central or a State Government on the
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recommendations of the Council, where the total
value of such supply, under a contract, exceeds
rupees ten lakh]
va) fails to collect tax in terms of sub-section (1) of
section 43C, or collects an amount which is less than
the amount required to be collected under the said
sub-section, or where he fails to pay to the credit of
the appropriate Government under sub-section (4)
thereof, the amount collected as tax;
43C. Collection of tax at source
(1) Notwithstanding anything to the contrary
contained in the Act or in any contract,
arrangement or memorandum of understanding,
every electronic commerce operator
(hereinafter referred to in this section as the
“operator”) shall, at the time of credit of any
amount to the account of the supplier of goods
and/or services or at the time of payment of
any amount in cash or by any other mode,
whichever is earlier, collect an amount, out of
the amount payable or paid to the supplier,
representing consideration towards the supply
of goods and /or services made through it,
calculated at such rate as may be notified in this
behalf by the Central/State Government on the
recommendation of the Council.
(vi) takes and/or utilizes input tax credit without
actual receipt of goods and/or services either
fully or partially, in violation of the provisions
of this Act, or the rules made there under;
(vii) fraudulently obtains refund of any CGST/SGST
under this Act;
(viii) takes or distributes input tax credit in violation
of section 17, or the rules made There under;
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(ix) falsifies or substitutes financial records or produces
fake accounts and/or documents or furnishes any
false information or return with an intention to
evade payment of tax due under this Act;
(x) is liable to be registered under this Act but fails to
obtain registration;
(xi) furnishes any false information with regard to
particulars specified as mandatory, either at the time
of applying for registration, or subsequently;
(xii) obstructs or prevents any officer in discharge of his
duties under the Act;
(xiii) transports any taxable goods without the cover of
documents as may be specified in this behalf;
(xiv) suppresses his turnover leading to evasion of tax
under this Act;
(xv) fails to keep, maintain or retain books of account
and other documents in accordance with the
provisions of this Act or the rules made there
under;
(xvi) fails to furnish information and/or documents
called for by a CGST/SGST officer in accordance
with the provisions of this Act or rules made there
under or furnishes false information and/or
documents during any proceedings under this Act;
(xvii) supplies, transports or stores any goods which he
has reason to believe are liable to confiscation under
this Act;
(xviii) issues any invoice or document by using the
identification number of another taxable person;
(xix) tampers with, or destroys any material evidence;
(xx) disposes off or tampers with any goods that have
been detained, seized, or attached under this Act;
There shall be penalty of rupees ten thousand or an
amount equivalent to the tax evaded or the tax not
deducted or short deducted or deducted but not paid
to the Government or input tax credit availed of or
passed on or distributed irregularly, or the refund
claimed fraudulently, as the case may be, whichever is
higher.
(2) Any registered taxable person who repeatedly
makes short payment of tax shall be liable to a
penalty of rupees ten thousand or ten percent of
the tax short paid, whichever is higher.
Explanation.- For the purposes of this
sub-section, a taxable person shall be deemed to
have made short payments ‘repeatedly’, if there
were short payments in three returns during any
six consecutive tax periods.
(3) Any person who
(a) aids or abets any of the offences specified in
clauses (i) to (xx) of sub-section (1) above;
(b) acquires possession of, or in any way concerns
himself in transporting, removing, depositing,
keeping, concealing, supplying, or purchasing or
in any other manner deals with any goods which
he knows or has reason to believe are liable to
confiscation under this Act or the rules made
there under;
(c) receives or is in any way concerned with the
supply of, or in any other manner deals with any
supply of services which he knows or has reason
to believe are in contravention of any provisions
of this Act or the rules made there under;
(d) fails to appear before the CGST/SGST officer,
when issued with a summon for appearance to
give evidence or produce a document in an
enquiry;
(e) fails to issue invoice in accordance with the
provisions of this Act or rules made There
under, or fails to account for an invoice in his
books of account; shall be liable to a penalty
which may extend to rupees twenty five
thousand.
67. General penalty
Any person, who contravenes any of the provisions
of this Act or any rules made There under for which
no penalty is separately provided for in this Act,
shall be liable to a penalty which may extend to
rupees twenty five thousand.
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Offences and penalties under GST
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ERP Readiness for GST
CA. Rohit Chopra
Being Government looks focused in getting GST
implemented by 01st April 2016, IT department/
companies also have to get themselves ready for the
changes they have to carry out in the system
mappings. Processes which is being mapped before
GST has to be revisited and new processes has to be
implemented to cover the statutory requirements of
GST.
All the major players in the market are preparing
themselves in parallel to Government and have already
initiated necessary developments to be carried out in
their respective ERPs based on the Draft Model of
GST released by the Government. JIT technique is
being used in such a way that by the time complete
rules related to GST are laid down, they should be
ready with the base so that delta can be configured
within the shortest duration of time.
In Sync with this, SAP (the market player of ERP) has
already released various basic notes which talks about
GST in the era of SAP. On a broader level, on the
basis of model received, following changes seems to be
carried out by the companies in there ERP software’s:-
1. System Upgrade: - Stack update has to carry out
to make the system compatible with GST. This will
help companies in easy adaptation of the new
changes in there system which will be released by
SAP in form of patches. Further condition based
tax procedures (TAXINN) is suggested by SAP to
its customers & if they are working with formula
based tax procedures (TAXINJ), they have to do
the necessary migration to change the procedure
from TAXINJ to TAXINN. Migration in itself is a
mini project & will take around 10-12 weeks to
implement.
2. Master Data: - As per the model released every
company has to get himself registered in each
state of operation. These numbers has to be
maintained in the system for each legal entity
against each state (business place). This number
than has to be printed on the various invoices as
well. Further for each vendor & customer
operating with the company, his GST
registration number has to be maintained in the
master data record. Further each material has to
be updated with its HSN number and every
service master has to be updated with SAC
(Service Account Code) number. SAP has
already specified fields where these numbers has
to be maintained. Even separate master data
should be created for every region (state) of
supply.
3. Configuration Changes: - There will be lots of
configuration changes which has to be carried
out in the system to make it compatible with
GST ACT. Various existing configuration has to
be deleted/blocked prospectively. All Print out
form need to changes as per GST compliance.
As most of applicable Indirect taxes would be
subsumed under GST, tax master (including
input and output rates as well as input and
output tax condition types) would have to be
fully revised. Every customer need to Identify as
B2B or B2C customer that will be configured in
Customer group field, to comply with GST
return filing.
4. Process Mapping: - Changes by mean of
introduction to new process/BPR of existing
processes has to be carried out in the system.
Even some new processes has to be introduced
in the system which were not exist previously
e.g. on payment of advance against Purchase
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Orders, tax impacts has to be considered as
well as tax invoice has to be generated in the
system. Stock transfer which so far is making
no accounting impact, now has to be valuated
& tax impacts has to be considered on the
value. In GST Regime Job Work may be
treated as Sales & Purchase. To claim tax
adjustments for debit note/credit note,
reference to original invoice is mandatory and
has to be mapped in the system.
5. Tax Accounting: - Being reporting has to be at
State level, necessary accounting of taxes has
to be done at State Level. This will impact the
Chart of Accounts for the company as it will
lead to increase in the number of GL accounts
of their Trial Balance. A company which is
being operated in 24 States of India now has
to create 6 GL accounts for each state (2 each
for CGST/SGST/IGST, one for receivable &
one for payable), resulting into approx. 144
new GL accounts.
6. Returns/Registers : - Existing market players
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ERP Readiness for GST
which supports companies in extracting returns/
supporting data for return filling are also making
necessary changes to come out with the output of
necessary returns from the system i.e. GSTR1,
GSTR2, GSTR3…..GSTR8. Along with that
business is expected auto extraction of ITC
Ledger, Cash Ledger & Tax Ledger from the
system to ease there compliance work as well as
necessary reconciliation they have to carry out.
Focus is to make system communicate with GSTN
Portal for necessary data verification and
reconciliation.
7. Migration: - Open Sales return/ Purchase Return/
Credit Note/ Discounts etc. needs to be deal for
transition period. Cut over Strategy will be
devised as per SAP proposed Solution. SAP is
working on designing a Solution on cutover
strategy for transferring the old credit to GST Tax
Components (Clarity on credit transfer awaited)
and for transition period.
8. Still there are bundle of things needs further
clarity from Government, which will be cleared
on the release of detailed rules which may further
lead to other changes as well in the system.
Gurgaon Chartered Accountants, a newsletter owned by Gurgaon Branch of NIRC of ICAI is normally published in the first week of every month. Non Receipt of any issue should be notified within one month. Articles in interest of profession and management skills are welcome. Views expressed by contributors are their own and may not be in concurrence with Gurgaon Branch of NIRC of ICAI and the branch does not take any responsibility of views expressed by contributors. Gurgaon Branch is not responsible in any manner of any result of the action taken on the basis of advertisements published in the newsletter. Rights & copying of articles or write ups is not allowed without permission of Editorial Committee.
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Deductions do not go liberal with Courts
CA. Gopal Nathani
In the computation of income the assessee’s claim
various deductions and exemption under the Act.
Such benefits are however available subject to
fulfillment of conditions provided in the relevant
section. It may so happen that the assessee may not
technically meet such conditions in the relevant year
for uncontrollable factors by reasons of which the
claims for deductions/exemptions may come under
question. For instance in the context of grant of
relief u/s 54/54F an assessee may reinvest into
property in joint names or that he may fail to
reinvest all the amounts within the prescribed period
or that he may fail to deposit the unutilized amount
into deposit account with a scheduled bank. The AO
in such instances may not accept the claim ex facie
and it is only that the Tribunal or the Courts may
have to be approached by an assessee.
For instance the Delhi High Court in CIT v. Ravinder
Kumar Arora (2012) 342ITR38 held that section 54F of
the Income-tax Act, 1961, is a beneficial provision
which should be interpreted liberally in favour of the
exemption/deduction to the taxpayer and deduction
should not be denied on a hyper technical ground so
that in this case it is held that the conditions
stipulated in section 54F stood fulfilled even when
house is given to have been purchased in joint names
of the assessee and his wife. Not to mention that in
another instance in D Devadass v ITO ( 2016) 48ITR
(Trib) 613 the Chennai bench held that the exemption
u/s 54F is exclusive to be claimed by the assessee
which could not be clubbed or applied to the blood
relation or family members so that the assessee is
held deprived of exemption u/s 54F for having made
reinvestment into house in the name of his daughter.
The bench went by the Bombay High Court ruling in
the decision of Prakash v. ITO [2009] 312 ITR 40 than
by any beneficial interpretation to assessee’s
advantage.
The Bombay High Court in their recent ruling in
Humayun Suleman Merchant v. Chief Commissioner
of Income tax and another however stressed on the
point that the decision of one High Court is not a
binding precedent upon another High Court and at
best can only have persuasive value so that the
assessee in this case was declined exemption u/s 54F
for his failing to bank the unutilized amount of capital
gains in specified bank deposit before due date
notwithstanding the Karnataka High Court decision
favouring the assessee. On the very question
whether an assessee could be denied exemption
under section 54F on the ground that he did not
deposit the said amount in capital gains account
scheme before the due date prescribed under section
139(1) the Karnataka High Court held therein that:
"As is clear from Sub-section (4) in the event of the
assessee not investing the capital gains either in
purchasing the residential house or in constructing a
residential house within the period stipulated in
Section 54F(1), if the assessee wants the benefit of
Section 54F, then he should deposit the said capital
gains in an account which is duly notified by the
Central Government. In other words if he want of
claim exemption from payment of income tax by
retaining the cash, then the said amount is to be in-
vested in the said account. If the intention is not to
retain cash but to invest in construction or any pur-
chase of the property and if such investment is made
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EXEMPTION PROVISIONS DO NOT GO LIBERAL WITH COURTS ALWAYS- HOUSING RELIEFS
BOMBAY HIGH COURT ON STRICTER INTERPRETATION
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Deductions do not go liberal with Courts
within the period stipulated therein, then Section 54F
(4) is not at all attracted and therefore the contention
that the assessee has not deposited the amount in the
Bank account as stipulated and therefore, he is not
entitled to the benefit even though he has invested
the money in construction is also not correct."
In distinguishing the Karnataka High Court decision
the Bombay High Court held that the entire basis for
their decision was the intent of the parties and that in
interpreting a fiscal statute one must have regard to
the strict letter of law and intent can never override
the plain and unambiguous letter of the law.
Moreover according to the Bombay High Court
the decision in K Ramachandra Rao (supra) was
rendered sub-silentio, i.e., no argument was made
with regard to the requirement of deposit in notified
bank account in terms of section 54F (4) of the Act
before the due date as provided in section 139(1) of
the Act.
The Bombay High Court also distinguished Delhi
High Court decision in Ravinder Kumar Arora which
went by the analogy that liberal /beneficial
construction should be given to the provisions of
section 54F of the Act as its object was to encourage
the housing sector which would result in the benefit
being extended to the assessee.
The High Court also referred to Gauhati High Court
decision in CIT v Rajesh Kumar Jalan (2006)
286ITR274 which proceeded on beneficial
interpretation over the stricter interpretation to hold
a view that due date for assessee to invest amount of
capital gains in purchase/construction of new
residential asset or investment in capital gains scheme
under section 54F refers to 'extended due date'
under section 139(4). No so long ago the Bombay
High Court in Vodafone India Services P Ltd. v.
Union of India and others (2014) 368ITR1 also held
that while interpreting a fiscal or taxing statute, the
intent or purpose is irrelevant and the words of the
taxing statute have to be interpreted strictly. In the
case of taxing statutes, in the absence of the
provision by itself being susceptible to two or more
meanings, it is not permissible to forgo the strict
rules of interpretation while construing it.
Thus, it is almost certain that in taking benefit of
exemption the assessee must meet the conditions of
the given section and not just make a claim
simplicitor by mere reference to beneficial interpre-
tation of the provision by any Court other than juris-
dictional High Court as he may lend in difficulty at
later stage.
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Gurgaon Chartered Accountants, a newsletter owned by Gurgaon Branch of NIRC of ICAI is normally published in the first week of every month. Non Receipt of any issue should be notified within one month. Articles in interest of profession and management skills are welcome. Views expressed by contributors are their own and may not be in concurrence with Gurgaon Branch of NIRC of ICAI and the branch does not take any responsibility of views expressed by contributors. Gurgaon Branch is not responsible in any manner of any result of the action taken on the basis of advertisements published in the newsletter. Rights & copying of articles or write ups is not allowed without permission of Editorial Committee.
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Assessment in GST- a repetition avoided
CA. Ram Akshya Rout
Goods & Service tax (GST) is one of the biggest and
historical indirect tax reform in India. It is going to
replace the existing cumbersome indirect tax
structures. We know that many indirect taxes,
almost 17 types of taxes are going to be merged into
one tax i.e. GST. The summary of taxes merged are
given below for ready references:
Central Excise duty, Duties of Excise (Medicinal and
Toilet Preparations), Additional Duties of Excise
(Goods of Special Importance), Additional Duties
of Excise (Textiles and Textile Products), Additional
Duties of Customs (commonly known as CVD),
Special Additional Duty of Customs (SAD), Service
Tax, Central Sales Tax, Cesses and surcharges
insofar as far as they relate to supply of goods or
services.
State VAT, Purchase Tax, Luxury Tax, Entry Tax
(All forms), Entertainment Tax (not levied by the
local bodies), Taxes on advertisements, Taxes on
lotteries, betting and gambling, State cesses and
surcharges insofar as far as they relate to supply of
goods or services.
It is to be noted that apart from above, any other
taxes, cess and surcharge as recommended by the
GST Council will be subsumed into GST.
Assessment is defined separately in different indirect
tax laws like Excise, Custom, Service tax, VAT laws
of different States and other laws. However, the
ultimate goal and purpose is similar. It means
determination of correct tax liability under the
respective law. Assessment of tax is always
considered to be a very important function in tax
laws.
As per the model GST law published, the Govt. has
tried to restrict the types of assessment provisions in
GST unlike existing laws where various types of
assessments have created a kind of havoc amongst
assessees. The draft model GST law defines the term
assessment as under:
“Assessment means determination of tax liability
under this Act and includes self-assessment,
re-assessment, provisional assessment, summary
assessment and best judgement assessment.”
As per the Central Excise Act, 1944, “assessment in-
cludes self-assessment of duty made by the assessees
and provisional assessment under rule 7”. The service
tax law also provides for self-assessment, provisional
assessment and best judgement assessment. The VAT
law of different States have also provided similar
provisions except kinds of assessment for the same
period. Under the VAT law, there is ‘regular
assessment’ in almost all the States apart from
self-assessment and return scrutiny.
Basis the draft Model GST Law, we can derive that
the law makers have taken care about the
unnecessary and unwanted harassment of genuine
assesses in the name of ‘regular assessments’ which
takes place normally within two to three years from
the end of the financial years. The provisions with
regard to the assessment are given in Chapter XII of
draft Model GST Law. The types of assessments
mentioned under the said chapter are as under:
Self-assessment
Provisional assessment
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CENTRAL TAXES & DUTIES
STATE TAXES & DUTIES
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GST- a way forward for logistic industry
Scrutiny of returns
Assessment of non-filers of return
Assessment of unregistered persons
Summary assessment in certain special cases like
where there is evidence with proper officer of
non-payment of tax by the assessees
Thus, we can feel comfort that there is no hassle of
regular assessment for large assessees in GST
regime. Further, the selection of assessees for the
scrutiny assessment will be through GSTN
randomly. It is expected that only 3 to 5 percent of
total assessees shall be taken for scrutiny by the
authorities and remaining will be closed by GSTN
itself. We know the pain of various assessments
done by the tax authorities under existing Excise,
VAT and service tax laws respectively. We have
even observed that some assessments are extended
beyond the deadline/limitation period in the name
of non availment of information or documents. The
worst cases of such types of ignorance comes in
State VAT laws.
As far as self-assessment is concerned, it is related
with the filing of returns and calculation of tax
liabilities for the period of return being filed. The
law makers have considered even scrutiny of returns
as a sort of assessment in GST. This is a welcome
step. The stakeholders should appreciate this move.
The provisional assessment is to be done where the
assessees is not able to determine the value of goods
and/or services or the rate of tax applicable thereto.
If provisional assessment is done, it is bound to
finalise the provisional assessment later on and thus,
Final assessment will take place. The assessment of
the assessees who are non-filers of return as well as
assessment of those who are liable for registration
but not obtained registration is a special category of
assessment. The tax liability of such assessees would
be determined to the best of his judgement taking
into consideration all the materials and facts
available. These best judgement assessments are
bound to happen to ensure compliance of the law.
The summary assessment will take place in special
cases where there is concrete evidence of tax liability
of a person which has come to his notice. The Order
will be passed by the proper officer after assessing
the tax liability of such person to protect the interest
of revenue.
Thus, we can reach to the conclusion that the Govt.
intention is not to harass the genuine tax payers in
GST. The selection of tax payers for scrutiny
assessment must be dependent upon various
parameters including turnover during the year,
quantum of taxes deposited, compliance rating etc.
The non-duplication of scrutiny/assessment in GST
regime might be a step towards good governance.
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Gurgaon Chartered Accountants, a newsletter owned by Gurgaon Branch of NIRC of ICAI is normally published in the first week of every month. Non Receipt of any issue should be notified within one month. Articles in interest of profession and management skills are welcome. Views expressed by contributors are their own and may not be in concurrence with Gurgaon Branch of NIRC of ICAI and the branch does not take any responsibility of views expressed by contributors. Gurgaon Branch is not responsible in any manner of any result of the action taken on the basis of advertisements published in the newsletter. Rights & copying of articles or write ups is not allowed without permission of Editorial Committee.
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Glimpses
Workshop on Place of Supply under Model GST Law
Topic : Place of Supply under Model GST Law
Audience : Members
Led By : CA Sundeep Gupta
Date & Day : 07th October 2016, Friday
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Glimpses
Seminar on “Information Technology & Audit & GST Features In Tally “
Topic : “Information Technology & Audit & GST Features In Tally “
Audience : Members
Led By : MR. MITTAL SHARMA, MR. SAURABH SRIVASTAVA
Date & Day : 22nd October 2016, Saturday
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Glimpses
“Inter Branch Cricket Tournament “
“Inter Branch Cricket Tournament “ Date & Day : 05th - 06th November 2016, Saturday & Sunday
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Overview of ‘Lite Bite Foods’ and Validity
Corporate tie-up
‘Lite Bite Foods’ is one of the largest & most dynamic Food & Beverage retail company in the country, with over
14 core brands & 6 Franchise brands under its umbrella. We have 95 operational outlets in India, Bangkok,
Singapore, Abu Dhabi, Dubai & United States of America & with a plan of opening 31 new outlets company aims
to become one of the largest Food & Beverage players in India by 2016. Currently we have a strong presence in
Malls, High Streets, Airports, Multiplexes, Office complexes, Hotels and other high footfall locations.
Our awarded hero brands are Punjab Grill, Zambar, Fresco Co, Asia 7, Street Foods By Punjab Grill, Baker Street,
Artful Baker, Pino’s, Flamez & Roasted, Naashto, American Tandoor, Savour (Outdoor Catering Brand), Clink,
Bottoms Up. We also run Franchise stores of Subway, KFC, Pizza Hut, Burger King, and Café Istanbul.
We invite all are members to avail this opportunity at their restaurants.
1. Fine Dining Restaurants& Casual Dining Restaurants will offer 15% discount on food & soft beverage. The
restaurant covered under this policy will be:
a) Punjab Grill
b) Asia Seven
c) Zambar- Coastal Kitchen
d) Fresc co
e) Bottoms Up
2. Quick Service Restaurants will offer 10% discount on food. The restaurant covered under thispolicy will be:
a) Baker Street
b) Pino’s
c) Street Foods by Punjab Grill
d) Subway
e) Asia Seven Express
f) Zambar Express
All Discount OFFER(s) are NOT applicable on Festivals and Public Holidays.
All Discount applicable on Saturdays and Sundays also.
Discounts are only applicable on showing valid Membership Card/CA logo visiting card at the time on Dining.
The menu prices at Outlets are subject to change without any prior notice.
The conditions mentioned on the menu are applicable.
The Terms and Conditions offered will be as follows:
Other applicable Conditions:
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Corporate tie-up
Taxes and other Govt. levies are applicable.
No other offers, exemptions or discount schemes can be clubbed with this corporate offer.
Discounts are not applicable on Hard drinks & MRP products.
Discount are not applicable at Airport/ railway/ Metro outlets.
Mode of Payment-Cash / Credit Cards.
S.No Outlet Name Location Outlet
Landline No. Address
1 ASIA 7 Ambience Mall 0124-4665571 Shop No. 318, 3rd Floor, Next to Food Court, Ambience Mall, Gurgaon.
2 BAKER STREET Ambience Mall 0124-4665567 Shop No.16, Food Union, 3rd Floor, Ambience Mall, Gurgaon.
3 FRESC CO Ambience Mall 0124-4665572 Shop No. 317, 3rd Floor, Next to Food Court, Am-bience Mall, Gurgaon.
4 PINO'S Ambience Mall 0124-4665495 Shop No. 14, 3rd Floor, Food Union, Ambience Mall, Gurgaon.
5 PUNJAB GRILL Ambience Mall 0124-4665478 Shop No. 319, 3rd Floor, Next to Food Court, Am-bience Mall, Gurgaon.
6 SF by PG Ambience Mall 0124-4665513 Shop No. 02, 3rd Floor, Food Union, Ambience Mall, Gurgaon.
7 SF by PG MGF Metropolitan Mall
0124-4222238 Shop No. 05, 3rd Floor, Food Court, MGF Metropolitan Mall, Gurgaon.
8 SF by PG (Delivery Only)
Udyog Vihar 0124-4236633 Plot - 317 Udyog Vihar Phase - 4 Gurgaon
9 SUBWAY Ambience Mall 0124-4665515 Shop No. 04, 3rd Floor, Food Union, Ambience Mall, Gurgaon.
10 SUBWAY DT Mega Mall 0124-4015577 3rd Floor, Food Court, DT Mega Mall, Gurgaon.
11 SUBWAY Cyber Green 0124-4016962 Ground Floor, Food Court, Cybergreen Tower, DLF Phase-III, Gurgaon.
12 SUBWAY Fortis Hospital 0124-4039728 Fortis Hospital Sector 44, Gurgaon Haryana
13 ZAMBAR Ambience Mall 0124-4665639 Shop No. 310, 3rd Floor, Next to Food Court, Am-bience Mall, Gurgaon.
14 ZAMBAR Cyber Hub 91-8130450438 Ground Floor, Cyber Hub, Cyber City, Gurgaon
Gurgaon Chartered Accountants, a newsletter owned by Gurgaon Branch of NIRC of ICAI is normally published in the first week of every month. Non Receipt of any issue should be notified within one month. Articles in interest of profession and management skills are welcome. Views expressed by contributors are their own and may not be in concurrence with Gurgaon Branch of NIRC of ICAI and the branch does not take any responsibility of views expressed by contributors. Gurgaon Branch is not responsible in any manner of any result of the action taken on the basis of advertisements published in the newsletter. Rights & copying of articles or write ups is not allowed without permission of Editorial Committee.
30
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Administration
Gurgaon Branch Managing Committee for the Session 2016-19
Name Contact No. Designation E-mail
CA. NAVEEN GARG 9911283111 CHAIRMAN [email protected]
CA. RAKESH K. AGARWAL 9310630306 VICE– CHAIRMAN [email protected]
CA. ARUN AGGARWAL 9891338830 SECRETARY [email protected]
CA. MANISH GOYAL 9910812727 TREASURER [email protected]
CA. SANDEEP GARG 9818798009 EXECUTIVE MEMBER [email protected]
CA. LALIT AGGARWAL 9999565491 EXECUTIVE MEMBER [email protected]
CA. AMIT GUPTA EXECUTIVE MEMBER 9654346350 [email protected]
CA. VIPUL JAIN EXECUTIVE MEMBER 9711537400 [email protected]
For the Financial Year 2016-17 the branch has constituted a Study Group for conducting the programs. The details of membership fee for which are as follows:
* Fee is applicable for the period April 2016 to March 2017
Please note that Study Group members shall not be required to pay any fee for attending the seminars organized by the Branch during the financial year 2016-17.
Members are requested to enroll for the Membership of the Study group by sending a cheque in favour of “Gurgaon Branch of NIRC of ICAI” at Plot No. 60 - A, Sector-18, 3rd Floor, Gurgaon.
Feedback & Suggestions
Gurgaon Branch will be happy to receive the feedback from you regarding the seminars/workshops and other activities organized by branch.
You may please send feedback at-
Gurgaon Branch of NIRC of ICAI requests the members & students to come forward & share the articles (Professional & other) to be published in the upcoming newsletter. The submissions may be sent to [email protected] with the subject line (Article Newsletter).
Particulars Fee Per Member
For Individual Member Rs.5000/-*
For five or more declared members from any organization i.e. names of the Members to be declared at the time of payment with the fee (payment will be made with a single cheque only)
Rs.4500/-*
Regarding Email Subject line
Seminars/Workshops [email protected] Sub: Seminar_____
Others [email protected]
Feedback_____
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Advertisement
Gurgaon Branch of NIRC of ICAI Plot No-60A, 3rd Floor, Sector-18, Gurgaon, Haryana.
Phone : 0124- 4268867 | Email : [email protected] | Website : www.icaigurgaon.org
Disclaimer: Gurgaon Chartered Accountants, a newsletter owned by Gurgaon Branch of NIRC of ICAI is normally published in the first week of every month. Non Receipt of any issue should be notified within one month. Articles in interest of profession and management skills are welcome. Views expressed by contributors are their own and may not be in concurrence with Gurgaon Branch of NIRC of ICAI and the branch does not take any responsibility of views expressed by contributors. Gurgaon Branch is not responsible in any manner of any result of the action taken on the basis of advertisements published in the newsletter. Rights & copying of articles or write ups is not allowed without permission of Editorial Committee.
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