APRIL TAX JOURNAL 2020 · 17 Amendments proposed in the Finance Bill 2020 passed by Lok Sabha 42 18...

APRIL 2020

APRIL

2020 TAX JOURNAL

INDEX

SN Description Page Nos.

1 Relief provided by FM due to lockdown - extension of various

dates.

1

2 Changes for the company after budget 2020 6

3 How Personal taxes creates more hassles after Budget 2020. 8

4 Tax on Dividend. 11

5 Buy-back Tax amendments could exanimate the Buy-back Process 13

6 T he Direct-tax Vivad Se Vishwas Bill, 2020 15

7 FAQ on Section 269SU 18

8 Impact of Lockdown on Cashless Economy 20

9 Penalty for Fake Input Tax Credit as per Finance Bill , 2020 21

10 Blocking GST Credit - is Legal or Illegal 22

11 History of E Way Bill 25

12 GST Input credit - Be ready for more Chaos 28

13 Questionable Policies of Government. 29

14 TDS Rate Chart For Financial Year 2020-21 and Assessment Year

2021-22

31

15 TCS Rate Chart For Assessment year 2020-21 and Assessment

year 2021-22

38

16 TP Compliance Chart For FY 2019-20 (AY 020-21) 40

17 Amendments proposed in the Finance Bill 2020 passed by Lok

Sabha

42

18 Clause wise comparison of CARO 2016 and CARO 2020

67

19 Direct Tax News 72

20 Indirect Tax News 73

21 International Tax News 75

22 Tax on Media 76

1

EXTENSION AND RELIEF MEASURES ANNOUNCED BY FINANCE MINISTER ON 24-MARCH-2020

WHILE THE NATION IS UNDER LOCK DOWN TO FIGHT SPREAD OF CORONA VIRUS

The Hon’ble Finance Minister Smt. Nirmala Sitharaman announced much awaited compliance relief packages in view of the coronavirus pandemic. She also said that the government is working on an economic package to deal with the impact of the coronavirus pandemic on the economy and will make an announcement soon. There were lots of compliance reliefs in her announcements. The same has been dealt below-

Direct Taxes

Act SN Particulars Existing Revised Conditions

Income Tax

1 Belated Returns and Revised Returns for F.Y. 2018-19 (A.Y. 2019-20)

31st March 2020 30th June 2020 -

2 Interest Rate for late payment for above [F.Y. 2018-19 (A.Y. 2019-20)]

12% p.a. 9% p.a. Only applicable from 20th March 2020 onwards

3 Late deposit of TDS 12% p.a. 9% p.a. Only up to 30th June 2020

4 For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT

12 % / 18% p.a. (1% /1.5% p.m.)

9% p.a. (0.75% p.m.)

Payment is made between 20th March 2020 and 30th June 2020

Late Fee/ Penalty as Applicable

No Late Fee/ No Penalty

5 Due Date for linking PAN with Aadhar


6 Vivad se Vishwas scheme 31st March 2020 30th June 2020 (no additional 10% amount)

7 Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including- investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law

where the time limit is expiring

between 20th March 2020 to

29th June 2020

30th June 2020

2

Extension of due date of filing belated/ revised returns for FY 2018-19

The government has extended the due date for filing tax returns for FY 2018-19 (AY 2019-

20) to 30th June, 2020. As per the existing tax provisions, the last date of filing the

belated/ revised tax returns for the said period is 31st March, 2020.

However, for delayed payments made till 30th June, interest would be charged at a

reduced rate from 12% to 9% pa. This means that in case any tax is still payable for FY

2018-19, interest will be charged at 9% instead of 12% for the period starting from 20th

March until the date of payment of tax or 30th June, 2020 whichever is earlier.

This amendment would certainly give huge sigh of relief to the taxpayers and will go a

long way in helping businesses to comply in due course in these challenging times. Had

there been no extension of deadline for filing the tax returns, the taxpayers would have

lost the opportunity to file unless the tax authorities specifically catch hold of them. The

authorities may also allege non filing as willful failure and may lead to penal consequences

under the tax provisions.

Vivaad se Vishwaas Scheme [VSVS]

This is a direct tax scheme announced in the Budget 2020, for settling the tax dispute

between the taxpayers and tax department. The scheme is extended to 30th June and

those availing the scheme will not be required to pay 10 per cent interest on principal as

mandated under existing rules. The extension of the deadline means that taxpayers can

now settle their tax dispute without paying any penalty and interest.

This is a welcome move in view of the fact that the law came into effect only on 17th March

after the Cabinet approved the changes to the initial scheme and the online forms were

issued only on 18th March. The taxpayers would have had only 12 days till the deadline i.e.

31st March, 2020. There would have been procedural issues in completing the process

within 31st March even if a taxpayer does his part of compliance on day 1 at every stage as

per the scheme.

3

Extension in time limit of various compliances

The Hon’ble Finance Minister has extended compliance deadline to 30th June 2020

wherever the time limit was expiring between 20th March to 29th June, 2020.

The above would be applicable for various compliances like filing of appeals, investing in

savings instruments or investments for rollover benefit of capital gains tax benefit under

various laws administered by the revenue department. Moreover, the time limit for

issuance of notices, intimations and completion of proceedings by the tax authorities has

also been extended.

Reduced charge of interest

The Hon’ble Finance Minister has announced reduction in interest cost i.e. 9% instead of

prevailing 12%/18% p.a. in case of delay in payments of advanced tax, self-assessment

tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between 20th March 2020

and 30 June 2020.

It means that the date of last instalment of advance tax payment i.e. 15th March is not

extended but the interest for delayed deposit of advance tax due on 15th March will now

be computed at 9 per cent instead of 12 per cent for the period starting March 20 until

June 30, 2020.

Similarly, delayed deposit of TDS may be paid up to June 30, 2020 with interest at 9 per

cent instead of 12 per cent/ 18 per cent for the period from March 20, 2020 to date of

payment or June 30, 2020, whichever is earlier.

Linking of Aadhaar- PAN

The last date of mandatory linking of Aadhaar with PAN got extended from 31st March to

30th June, 2020.

4

Indirect Taxes:


GST 1 Date for opting for composition scheme and last date for making payment for quarter ending 31st March 2020 for composition dealers

30th June 2020 -

2 Due Date for GSTR-3B for supplies made in the months of February, March and April: If a company’s turnover is less than ₹5 crore then on late payment of taxes

11th/ 22nd,24th of the following

month

30th June 2020 -

Interest, Penalty and Late Fees as

applicable

no interest, no late fees and no penalty

3 Due Date for GSTR-1/ GSTR-3B for supplies made in the months of February, March and April: If a company’s turnover is more than ₹5 crore then on late payment of taxes

10th/20th of the following month

30th June 2020 Compliance is done on or before 30th June 2020

No Interest if tax is paid by

04/04/20 (for Feb’20)

05/05/20 (for Mar’20)

04/06/20 (for Apr’20)

Interest, Penalty and Late Fees as

applicable

Interest @9%p.a. after 15 days of due

date but no penalty or late

fees

4 Date for filing GST Annual Returns of FY 18-19


5 Payment date under Sabka Vishwas Scheme

31st March 2020 30th June 2020 (no additional 10% amount)

-

7 Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws



29th June 2020

30th June 2020 -

Customs 1 24X7 Custom Clearance till end of 30th

June, 2020 -

2 Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws



29th June 2020

30th June 2020 -

5

(Extension of timelines for various compliance and procedures will be given.

Detailed notifications will be issued by Ministry of Commerce.)

Company Law


MCA 1 Moratorium: Late filing during a period from 01st

April 2020 to 30th

September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date,

Additional Fees applicable

No additional fees

Reduces the Compliance & Financial burden of companies/ LLPs at large.

-

Also enables long-standing non-compliant companies/LLPs to make a ‘fresh start’

2 Holding board meetings every quarter

4 board meetings every year such that there is not more than 120

days between each meeting

Gap between board meetings extended by 60

days each quarter

Only for First 2 Quarters of FY 2020-2021

3 CARO 2020 Applicable from FY 2019-20

Applicable from

FY 2020-21

CARO 2016 will still be applicable for FY 2019-20

4 A single board meeting is held for independent directors in the FY 2019-20

Violation under Company Law

No Violation -

5 Deadlines for maintaining Deposit Reserve of 20% and DebentureRedemption Investment of 15%

30th April 2020 30th June 2020 -

7 Director to qualify as a resident of India for FY 2019- 20

182 days No condition Only for FY 2019- 20

8 For newly incorporated companies’ deadline for Declaration of Commencement

6 months 1 year -

Financial Services: Reliefs for three months until 30th June 2020.

1. Debit cardholders to withdraw cash for free from any other banks’ ATM for 3 months 2. Waiver of minimum balance fee

3. Reduced bank charges for digital trade transactions for all trade finance consumers

6

Changes for the company after budget 2020.

In the below article, we try to summarize the budget 2020 proposals which will have an impact on the

operation of companies. The first impact is levying tax on Dividend Income. This change will have

several impacts on the company. The below points to summarize the impact.

Dividend Income is no more exempt and hence taxable at the rate of 22 or 30 percent as

applicable. This will increase the tax expense of the company.

There is no more need to pay dividend distribution tax on dividend payment. This step

will reduce the compliances for the company.

Since the dividend is no more exempt income, there cannot be any further disallowance

under section 14A of the Income-tax act. However 14A still applicable for other exempted

income. This will reduce the quantum of litigation for the companies.

Due to taxation of dividend income, there is a need to reconsider the decision of

movement of tax policy to section 115BAA of the Income-tax act as under old tax regime

dividend is taxable @ 30 percent and under the new regime of section 115BAA, the dividend

is taxable @ 22 percent.

There will be TDS on dividend Income. Further, companies require to deduct TDS @ 10

percent while making dividend Income to their resident shareholder and TDS @ 20 per cent to

their non-resident shareholder. The non-resident shareholder can take benefit of double tax

avoidance agreement which will reduce the deduction of TDS. Further, there will be no TDS

on domestic shareholders if the annual dividend payout to him is less than 5000 in a

year. Hence, companies now require to make sure that they able to deduct correct TDS for

their various shareholders.

Further, no deduction of expenditure against dividend income will be allowed under

section 57 except interest which will not exceed 20percent of dividend income.

Benefit of section 80M of the Income-tax act will be available to a company in respect of

dividend income received by it during the previous year and distributed by it, one month

before the due date of filing return

Another major impact on the companies is towards their payroll process. As per section 192 of the

Income-tax Act, Companies being employer, require to compute Income tax of all their employees

and deduct TDS and deposit the same to the government. There are two major changes proposed for

individual taxation. The first one introduction of section 115BAC where employees have the option to

select every year among two tax slab and the second one is taxing contribution to NPS,

superannuation and Provided fund over and above employer contribution exceeds Rs. 7,50,000/-

. Thus, now computing Income tax of employees is no more a simple task. Due to the introduction of

section 115BAC, there will be confusion amongst the employees about their decision and ultimately

they will trouble the only payroll of the company. The government should step in and provide some

way out which provide some better way out to do the compliances.

7

Given below few more budget proposals which have impacts on companies.

Companies opting for new tax regime under new section 115BAA and 115BAB can

claim only deduction under section 80JJA and 80M from chapter VIA. Thus there will be

no benefit of section 80G can be claimed even though there is the compulsion to do CSR

expenses.

The due date of tax audit has been delinked from due date of filing return of

Income. Thus, in case of Transfer pricing case, the due date of filing all kinds of reports

will be October 31 and income tax return can be filed before November 30.

TDS on FTS (few cases or other than professional) reduced under section 194J to 2

percent.

It is proposed to provide that stay under the first proviso to section 254(2A) shouldn‟t

be provided by ITAT unless assessee deposits or furnish security for at least 20 percent of

the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of

this Act. The stay cannot exceed 365 days. This step will increase the quantum of bogus

demand by the tax department as now tax officer can easily collect 20 percent of demand

and to do that they will do bogus demands. The government should reconsider its

decision.

Amend clause (c) and (cd) of section 140 of the Act so as to enable any other person,

as may be prescribed by the Board to verify the return of income in the cases of a company

and a limited liability partnership.

Power Generation included as eligible for a lower corporate tax rate of 15 percent

under section 115BAB.

TDS on e-commerce payment to e-commerce participant at the rate of 1 percent.

TCS at the rate of 0.1 percent will be applicable on the sale of goods if total sales to

one person is more than Rs 50 lakhs by a person having turnover of more than Rs 10

crore. In this regard, government requires to provide clarification for export of goods

as if TCS were collected from export of goods then it will discourage exports from

India. Further, on sale of goods, GST is already applicable and additional burden of

TCS will increase the cost of running the business.

Finally we can conclude that in this budget, due to tax on dividend and TCS on sale of goods,

the companies will increase their tax cost. Their compliance will be more complicated due to

TDS on salary and dividend and at last litigation also will be increased as companies will not

able to get stay on their bogus tax demand. The government should understand the pain point

of doing business in India and take necessary steps to reduce hardship for companies.

8

How Personal taxes creates more hassles after Budget 2020.

In the Budget Speech of 2020, The Finance Minister (FM) proclaimed before the nation that she will

simplify the process of taxation of Individuals and also reduce their tax expense. In this regard, she

provided right to choose by Individual taxpayer to either select conventional tax slab with all

exemptions and deductions or else go with new reduce slab without any exemptions or

deductions. Given below the new tax slab rate with various exemptions.

Total Income Conventional

Tax Rate

New Tax

Rate

Up to 2,50,000 - -

250,001 to 500,000 5% 5%

500,000 to 750,000 20% 10%

750,001 to 10,0000 20% 15%

10,00,001 to 12,50,000 30% 20%

12,50,001 to 15,00,000 30% 25%

15,00,001 & above 30% 30%

Rebate of Rs. 12500 under section

87A for income less than Rs.

500,000

Available Available

Deduction under chapter VIA

which includes 80 C, 80G and 80D.

(other than 80CCD(2) and 80JJA)

Available Not Available

HRA under section 10(13A)


Allowance under section 10(14).

(Conveyance allowance allowed)


LTA under section 10(5)


Interest on house property u/s 24(b)


Standard deduction of 50K Available Not Available

Thus by providing this kind of option the Individuals are now required to find out under which option

his tax expense will be lower. In respect of captioned tax rate options following is my observation.

There is no standard formula available which can determine which option is good for the

taxpayer. Each individual comes with different background and has different abilities to claim

exemption and deductions. Hence it‟s very difficult for any ordinary individual to decide its

option and left with no choice to consult tax professional.

The new option demoralize saving habits amongst individuals and accordingly there will

be de-motivation to purchase any Life insurance policies, making an investment in PPF or

9

NPS. This also demoralizes the purchase of new house property and also making a donation.

One of the conditions of availing new tax rates is that Individual has the option to choose

every year the option in case they don‟t have business income. In case of an individual having

a business income, the selection of opting new tax rate will be valid for all subsequent years

and hence he cannot go back to conventional tax rate slab in any subsequent years.

Here people must know that dealing in share speculation is a business activity and not

investment activity. Thus employees who are dealing in such activities must re-consider their

decision as they cannot go back to the old tax scheme.

In a nutshell, the Individual tax structure is now more complex than it used to be. People who don‟t

have knowledge of tax laws or having limited knowledge will not be in a position to take any decision

which results in increasing the dependency on tax professionals.

Further, the employer requires to withhold Taxes (TDS) on the salary income earned by their

employees. At present, there is no software available, which has the ability to support such multi-

option tax structure and deduct TDS. The FM should come forward and remove all these practical

difficulties.

The FM also put a ceiling on employer contribution to NPS, Superannuation and Provided Fund

(PF). Earlier there was celling of Rs. 150,000 on Superannuation which means employer

contribution beyond Rs. 1,50,000 will be included in taxable income. However, no such celling was

there for NPS and PF and any amount contributed by the employer towards NPS and PF were

exempted in the hands of the employee. Now from April 2020, for all the three scheme, the

maximum ceiling of employer contribution is Rs. 750,000/-. Hence any contribution exceeding will

be taxable in the hands of an employee even though he is yet to receive the income in his bank

account. Further, there will be taxation on withdrawals also. Also, any acceleration due to income

earned by this funds over and above the limit of Rs. 7,50,000 will be taxable. In the one hand, it

causes hardship to employees and on the other hand, it is difficult for employers to compute the same

as they have to do TDS calculations as well.

Given below a few more proposals which will cause hardship to Individual taxpayer.

Dividend Income is no more exempt and now taxable.

Scope of Indian residency being accelerated by removing test of 730 days and reducing a

minimum number of stay in India to 120 days in a year from 182 days. Also, the condition of

7 years has been extended to 9 years. Following table illustrate the variance.

10

Particulars Existing provision Proposed provision in Budget

2020

Resident in India [Section 6(1)]

Satisfy atleast one of the below 2 basic conditions:

No Change

(a). In India for a period of 182 days or more

( c). In India for a period of 60 days or more during the previous year and 365 days or more during the 4 years immediately preceding previous years

Explanation 1 (b) to 6(1) ( c) In the case of an individual,— In the case of an individual,—

being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, if he stays in India for a period of 182 days or more during the previous year and 365 days or more during the 4 years immediately preceding previous years

being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, if he stays in India for a period of 120 days or more during the previous year and 365 days or more during the 4 years immediately preceding previous years

Resident and not ordinarily resident [Section 6(6)]

A person is said to be "not ordinarily resident" in India in any previous year if such person is—

(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or (b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.

(a) an individual who has been a non-resident in India in seven out of the ten previous years preceding that year. (b) a Hindu undivided family whose manager has been a non-resident in India in seven out of the ten previous years preceding that year

There will be Tax collected at source on foreign remittance and overseas tour. Thus

individuals will pay more while making such payments.

From the above looks like FM is making tax more complicated and expensive for the individuals and

hence it is advised to review the decision made by Government.

11

Tax on Dividend.

According to the Indian Income Tax Act, domestic companies declaring dividend out of its residual

profits are required to pay dividend distribution tax (DDT) under section 115 O of the Income-tax act.

The shareholder will receive their share of profit after the payment of DDT and same is tax-exempted

in the hands of investors under section 10(34) of the Income-tax act. From last two years

shareholders who are receiving dividend more than Ten Lakhs are now require to pay tax @ Ten

percent on the dividend income earned over and above Rs. Ten Lakhs. Not only this, there are

different ranges of surcharge on tax for different slabs

The foreign companies who were having subsidiaries in India are also required to pay DDT when

they repatriate the profits earned from India and require to pay tax in their home country. There is no

foreign tax credit available to the DDT paid in India and hence repartition of profit from India will

always considered as an exorbitant model as they are paying taxes on the same income in two

different countries, which ultimately deterrent foreign investment in India.

As per Indian Budget 2020 announced by Finance minister on February 1, 2020, the Dividend Income

is no more exempt under section 10(34) and also DDT under section 115 O has been abrogate. Hence

April 2020 onwards, Companies declaring dividends shall not be required to pay DDT while making

dividend payment to shareholders and shareholders are now entail to pay tax on their dividend

Income based on their tax slab.

From the above proclamation, the foreign companies unequivocally gets advantage as the maximum

tax payable in India comes to 20% on dividend income. With the former advantage, they will get the

FTC of the taxes to withhold in India. However, the domestic investors or shareholders are in

confused situation as they are not able to make out whether taxing dividend income and abolishing

DDT benefits them or not. In this regard, in the below table, we have tabulated the scenarios of

various income group as their tax rates are different. In the below table, we have considered profit

after tax of 1000 units and DDT on the same comes to 203.60.

WITH DDT DIVIDEND TAX

Tax Rate of Domestic Individuals Tax

Rate

Tax on

divide

nd

Total

DDT and

tax paid

Effective

Tax rate

on

dividend

Tax on dividend paid Effective Tax

rate on

dividend

Tax

Saving/

(Loss)

Income less than 10 Lakhs

20.80%

- 205.55 20.56% 208.00 20.80% -0.24%

Income less than 50 Lakhs &

dividend Income less than 10 Lakhs

31.20%

- 205.55 20.56% 312.00 31.20% -10.64%

Income less than 50 Lakhs & Dividend earned more than 10

Lakhs 31.20%

81.58 287.14 28.71% 312.00 31.20% -2.49%

Income between 50 Lakhs to 100 Lakhs 34.32%

89.74 295.29 29.53% 343.20 34.32% -4.79%


93.82 299.37 29.94% 358.80 35.88% -5.94%


101.98 307.53 30.75% 390.00 39.00% -8.25%

Income above 500 Lakhs

42.74%

111.77 317.32 31.73% 427.44 42.74% -11.01%

12

Tax Rate of Domestic

Companies & Others

Turnover less than 400 Crores.

29.12%

- 205.55 20.56% 291.20 29.12% -8.56%

Turnover more than 400 Crores.

34.94%

- 205.55 20.56% 349.44 34.94% -14.39%

Section 115BAA

25.17%

- 205.55 20.56% 251.68 25.17% -4.61%

Tax Rate of Foreign Investor

20.00%

- 205.55 20.56% 200.00 20.00% 0.56%

From the analysis of the above table, the following can be concluded.

(a) Domestic companies and Individuals are going to pay more tax on their dividend Income.

(b) Foreign investors gets benefit as they able to take credit of taxes withhold in India.

Hence, the decision of removing DDT and taxing dividend Income going to have negative impact on

domestic investment.

Also, there is a need to deduct TDS under section 194 or 194 K @ Ten percent on domestic dividend

payouts more than Rs. 5000 per annum. In case, shareholders who do not provide PAN, are eligible

for TDS deduction @ Twenty percent. In case of dividend payment to foreign shareholders, the TDS

deduction will be done under section 195 and the applicable tax rate on dividend payout to non-

residents under section 115A is Twenty percent. However, the benefit of DTAA is available if the

foreign shareholder provides the tax residency certificate or Indian PAN. Following are the few

beneficial tax rates available in the DTAA in respect of dividend income.

(i) Mauritius –Five percent

(ii) Singapore –Ten percent

(iii) United Kingdom –Ten percent

(iv) Unites States of America – Fifteen percent

Further, the non-resident shareholder are not required to file any tax return in India in respect of their

dividend income after deduction of TDS under section 195 and they will get the FTC in their home

country for the taxes withheld in India.

With the above-mentioned change in law, the business model of a limited company is now better than

other models like LLP. Same can be understood from the below table.

Parameter Company Branch of foreign Co LLP

Headline tax on profit 25.17% 43.68% 34.94%

Tax on repartition of

Profit

5% to 21.84% Not Taxable Not Taxable

Effective Tax Rate 28.91% to

36.39%

43.68% 34.94%

Tax on Exit 10.92% Not Applicable 21.84%.

13

Buy-back Tax amendments could exanimate the Buy-back Process

There are multiple ways by which companies can restructure their capital. Each process has its own

advantages and disadvantages. The various benefits that buy-back of shares provide led to the

Government introducing it as a concept of the year 1998. Some of them are listed below:

(a) Buy-back of shares helps a firm be more flexible in reversing decisions or split the buy-back

through longer periods, unlike cash dividends paid by a company

(b) Cash dividends require continuous payments in future, but buy-back of shares is a one-time

payment. Naturally, a firm holding excess cash deposits with no viable way of re-investing may

consider repurchasing its shares in place of paying cash dividends

(c) Buy-back of shares increases the controlling capacity of the firm, as the number of shares

publically available is reduced

(d) Buy-back helps shareholders in need of cash and who are willing to sell their shares to

accommodate the same. On a similar note, shareholders who do not require immediate cash may hold

on to it for the future

In short, buy-back of shares helps firms provide cash to the desired shareholders and also provides

flexibility in the time period of holding for existing shareholders.

In addendum to the reasons above, the following benefits are why buy-back would be preferred over

regular cash dividends:

(a) Nature of Cash Flows:

When cash flows are in a stable condition, cash dividends would be preferred over buy-back of

shares. However, in situations when cash flow timings are unstable, it is better to re-purchase shares

than to give out cash dividends

(b) Under-valuation of Shares:

Buy-back of shares is appropriate particularly when the market value of a share is less than its face

value, i.e. when the shares are undervalued. If that is the case, the firm may achieve two goals:

(i) If the shares are undervalued, the existing or remaining shareholders will enjoy some

benefits if the firm purchases shares at a lower value

(ii) News of this re-purchase will reach capital markets and lead to them reacting upon hearing

so

(c) Uncertainty of Further Investment:

Buy-back of shares can be treated as an investment of surplus cash, which , provides maximum

benefit to the remaining shareholders as investments. When share prices are undervalued, the

management should consider re-purchasing its own share at a reduced price

14

(d) As a financing decision

Buy-back of shares increases the financial leverage of a firm. It does so by reducing the amount of

paid-up capital having the same amount of debt financing. A firm may change its capital structure

after repurchasing of shares and issuing debt after ascertaining the capital mix between debt and

equity. Thus, buy-back of shares is a valid approach towards changing the capital structure or

financial leverage of a company.

Based on the advantages stated above, it can be easily concluded that buy-back is a mutually

beneficial process for the company, existing shareholders, and for shareholders exiting. Furthermore,

any gains earned by shareholders were taxable in the hands of the shareholders alone. For unlisted

shares, these gains were taxed as short term capital gain or long term capital gain depending on the

period they were held for by the exiting shareholders. For listed shares, since Securities Transaction

Tax was being paid, the long term capital gain was exempt till March 2018, after which they also

become taxable in the hands of shareholders. Hence buy-back is also advantageous for the

government as they are getting tax on profits earned by the shareholders.

In recent times, the Government considered buy-back as a tool to evade dividend distribution tax and

accordingly introduced section 115QA as a remedy. After which, buy-back was first made applicable

on unlisted shares and then on listed shares. Accordingly, now in case of buy-back, shareholders are

not required to pay tax on their gains. Instead, companies are now required to pay tax on the

difference between the issue and buy-back prices. Thus, due to the introduction of buy-back tax, the

tax incidence of shareholders has been shifted to companies initiating the buy-back, making the

process more expensive and complicated.

The buy-back tax cost could discourage companies from opting for the buy-back process and missing

out on the advantages listed above. Earlier, the Government could receive their revenue from the

shareholders and now they‟re collecting it from the companies instead. As such, there is no significant

benefit other than reducing the tax collected from N shareholders, by collecting it directly from the

company.

The Government may have eased the tax collection process for the buy-back process, but they now

risk alienating companies from initiating it. It would be advisable for them to reconsider this

approach.

15

T he Direct-tax Vivad Se Vishwas Bill, 2020

Background

- Finance ministry witnessed huge success in resolving Indirect Tax dispute through the Indirect

dispute resolution scheme which was introduced last year. On similar lines, the Government

has now introduced similar scheme for speedy resolution of direct tax related pendency.

- India has close to 4.83 lakh pending direct-tax litigation cases at various appellate forums i.e.,

Commissioner of Income-tax (Appeals) („CIT(A)‟), Income-tax Appellate Tribunal („ITAT‟),

High Court and Supreme Court.

- The scheme aims to offer one-time option to the eligible taxpayer to settle direct tax disputes.

As per finance ministry, the amount of tax arrears disputed in appeals is Rs.9.32 lakh crores.

- The Direct-tax Vivad Se Vishwas, Bill,2020 („Scheme‟) has been introduced with aim of

closure of these litigations pending as on 31st January 2020.

- Under the Scheme, the taxpayer has to make an application in a prescribed form with the

designated authority („DA‟). On acceptance of application and payment of tax determined, the

taxpayer can enjoy complete immunity from prosecution and relief from payment of interest

and penalty.

- The Scheme will be effective from the date of President‟s assent.

Coverage

- Payment to be made under the proposed Scheme

Issues covered Amount payable

under by 31st

March 2020

Amount payable under

the scheme after 1st

April 2020 till the last

date

Issues involving

disputed tax, interest

and penalty thereon

Entire amount of disputed

tax only (complete waiver

of interest and penalty

levied/ leviable)

Entire amount of disputed

tax plus 10% of disputed

tax

Matters

involving

disputed penalty,

interest and fees

25% of disputed

penalty/interest/

fee

30 of disputed

penalty/interest/

fee

- Upon payment of such tax under the Scheme, taxpayer shall not be liable to any interest or penalty under the Income-Tax Act.

- Once the declaration is made, such issues shall not be reopened in any other proceeding under

Income-Tax Act or under any other law for time being in force or under any agreement entered

into by India with any other country or territory outside India.

16

Exclusions from the scheme

- Scheme cannot be availed by taxpayer in relation to following:

- assessment year where assessment has been made pursuant to search proceedings;

- assessment year where prosecution has been instituted on or before the date of filing of

declaration;

- tax arrears involving undisclosed income or asset located outside India;

- tax arrears relating to assessment or reassessment made on the basis of information

received under the DTAA;

- tax arrears where CIT (Appeals) has issued notice of enhancement on or before 31st

January 2020;

- The Scheme is not available to taxpayer against whom detention order has been made under

specified Acts like Conservation of Foreign Exchange and Prevention of Smuggling Activities

Act, 1974

- Further, the Scheme is also not available to taxpayer against whom prosecution for any offence

punishable under the provisions of the Indian Penal Code, the Unlawful Activities (Prevention)

Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prevention of

Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, the Prohibition of Benami

Property Transactions Act, 1988 or for the purpose of enforcement of any civil liability has been

instituted on or before the filing of the declaration or such person has been convicted of any

such offence punishable under any of those Acts;

- The scheme would also not apply to taxpayer notified under section 3 of the Special Court (Trial

of Offences Relating to Transactions in Securities) Act, 1992 on or before the filing of

declaration.

Process

- Taxpayer to file application to the DA;

- Within 15 days of date of receipt of declaration, the DA shall grant certificate to taxpayer giving

details of tax arrears and amount payable;

- The taxpayer shall within 15 days from receipt of the certificate should make payment and

intimate the same to DA;

- Subsequent to receipt of intimation of payment, the DA shall pass an order;

- The taxpayer‟s appeals pending before ITAT/ CIT(A) shall deemed to be withdrawn from date

of issue of certificate under the scheme;

- In respect of appeals/ writs pending before High Court/ Supreme Court, the taxpayer shall

withdraw the same and file proof of same with DA along with the declaration.

17

- Any arbitration, conciliation and mediation initiated, the taxpayer shall withdraw the same and file

proof of same with DA along with the declaration.

Conclusion

- Any order passed by DA determining the amount payable under Scheme shall be conclusive as to the

matters stated therein and no matter covered by such order shall be reopened in any other proceeding.

- DA cannot not institute any proceedings in respect of an offence or levy any penalty/charge/interest in

respect of tax arrears.

- Amount paid under the Scheme shall not be refundable under any circumstances

18

FAQ on section 269SU

In line with the government‟s push for digital transactions, Finance (No. 2) Act, 2019 had inserted a new

section 269SU (which has come into force from 1st Nov 2019)

Accordingly, “specified person” / businesses shall mandatorily provide facilities for accepting payments

through prescribed electronic modes.

The Central Board of Direct Taxes (CBDT) has recently issued Circular no. 32 ]of 2019 dated 30th

December 2019 and Notification No.105/2019 dated 30th December 2019) wherein CBDT has prescribed

electronic modes for accepting payments in accordance with newly inserted Section 269SU of the Income-

tax Act, 1961 („the Act‟) read with Rule 119AA of the Income-tax Rules, 1962 („the Rules‟).

What it means is that, if your business has a turnover of INR 50 Crores for the financial year 2019-20, the

below modes of receiving moneys from customers need to be ready and available as at 30th

January 2020.

Penalties: As per section 271DB - penalty of Rs 5000 per day in case of failure by the specified person to

comply with the provisions of Sec. 269SU

FAQs

Who is a specified person?

every person carrying on business, if his total sales, turnover or gross receipts, as the case may be, in

business exceeds INR 50 Crs during the immediately preceding previous year

What are the electronic modes to be implemented?

1. Debit Card powered by RuPay,

2. Unified Payments Interface (UPI) (BHIM-UPI) and

3. Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM- UPI QR Code)

Is it mandatory to implement all the 3 electronic modes by 31st Jan 2020?

Yes, it is mandatory to comply and enable all the 3 modes as specified in the CBDT notification

19

Is this applicable for B2B as well as B2C considering the fact that in B2B space, there might be not be

any payments through UPI and debit card route?

The circular does not differentiate between B2B and B2C and it appears to be applicable to all, though the

specified 3 methods of payment may be redundant in the B2B scenario.

Generally in case of B2B, the established mode of payment/ banking channels are generally used as the

value of transactions are high. However, it appears that this section is applicable without any exception

Is this applicable for B2B as well as B2C ?

The circular does not differentiate between B2B and B2C and it appears to be applicable to all, though the

specified 3 methods of payment may be redundant in the B2B scenario.

Generally in case of B2B, the established mode of payment/ banking channels are generally used as the

value of transactions are high. However, it appears that this section is applicable without any exceptions

Is this applicable for FY 2019-20?

As per the provisions of section 269SU threshold limit of Rs.50 Crs turnover need to be applied to

immediately preceding previous year. In case the turnover is less than Rs. 50 Crs in FY 2018-19 and more

than Rs.50 Crs in FY 2019-20, then the abovementioned electronic modes of payments need to be facilitated

with immediate effect from 1st April 2020.

There is no clear guideline for this in the circular and as we understand further clarifications are sought for.

20

Impact of Lockdown on Cashless Economy

In the last few years, the Government of India has been pushing for a cashless economy, as they consider

this approach as one of the major drivers curbing black money. There are multiple ways by which a person

can make online payments without any hassles. In fact, today most people prefer to make online payments

over cash payments. It is safe to say that the concept of online payment is gaining popularity among Indians.

Furthermore, to curb cash payments the Government introduced the following restrictions through Income

Tax laws:

Section 40A(3) - Any business payment in cash exceeding Rs. 10,000/- will attract disallowances

Section 269SS & 269T - Acceptance of loan and repayment of the loan in cash exceeding Rs.

20,000/- will attract penalty under section 271D and 271E

269ST - Receipts in cash exceeding Rs. 200,000/- attract a penalty equivalent to the sum received in

cash

It was smooth sailing until 15 March, 2020, when the Government of India declared a lockdown on 22

March 2020 to combat the rising COVID-19 cases. Due to this lockdown, most businesses were closed

sparing pharmaceuticals, grocery stores, milk and vegetable sellers and other bare necessities. People are

naturally flocking to these stores as they want to ensure they have all the necessary provisions. In order to do

so, they seek out any and all kinds of vendors, be it big or small. This would cause an increase in the volume

of cash transactions as select retailers will not accept any online payments.

The Government of India has extended this lockdown for three weeks starting from 25 March 2020. Based

on observations from the previous curfew on 22nd

, the following may be the outcome of the extended

lockdown:

With banks being closed, customers will not be able to deposit any cash in their accounts. Retailers

may end up with big cash balances, due to sales which they cannot deposit into their accounts as

banks will be closed. If they are unable to make any online payments to their wholesale suppliers due

to insufficient funds in their accounts, they are left with no choice but cash payments towards their

suppliers. This could result in the following tax laws violations:

a. Payments made by retailers being disallowed under section 40A(3)

b. Payments received by suppliers possibly being subject to penalty under section 269ST

There will be high demand for cash; ATMs may run out of cash if there is no infrastructure to refill

sufficient monies into the machines. Peoples with cash in bank may not be able to receive sufficient

cash for their daily needs. This could lead to a situation wherein people opt for taking advances and

repaying them in cash. A move which leads to violation of section 269SS and 269T of Income Tax

laws

It is safe to say that there may multiple situations wherein people risk violating these tax rules only

because they are trying to survive. The Government of India proposed a number of generous relaxations

in tax laws during this lockdown, but they haven‟t covered the penal consequences of cash payment. In

such challenging times, it is our humble request that policymakers look into the genuine hardship that

may occur and try easing the laws to help mitigate any suffering.

21

Penalty for Fake Input Tax Credit as per Finance Bill , 2020

In the recent past after the launch of Goods & Services Tax (GST), several cases of fraudulent input tax

credit (ITC) claim have been caught by the GST authorities. In these cases, fake invoices are obtained by

suppliers registered under GST to fraudulently claim ITC and reduce their GST liability.

These invoices are found to be issued by racketeers who do not actually carry on any business or profession.

They only issue invoices without actually supplying any goods or services. The GST shown to have been

charged on such invoices is neither paid nor is intended to be paid. Such fraudulent arrangements deserve to

be dealt with harsher provisions under the Act.

Therefore, it is proposed to introduce a new provision in the Act to provide for a levy of penalty on a person,

if it is found during any proceeding under the Act that in the books of accounts maintained by him there is a

(i) false entry or (ii) any entry relevant for computation of total income of such person has been omitted to

evade tax liability.

The penalty payable by such person shall be equal to the aggregate amount of false entries or omitted entry.

It is also propose to provide that any other person, who causes in any manner a person to make or cause to

make a false entry or omits or causes to omit any entry, shall also pay by way of penalty a sum which is

equal to the aggregate amounts of such false entries or omitted entry.

The false entries is proposed to include use or intention to use –

(a) forged or falsified documents such as a false invoice or, in general, a false piece of documentary

evidence; or

(b) invoice in respect of supply or receipt of goods or services or both issued by the person or any other

person without actual supply or receipt of such goods or services or both; or

(c) invoice in respect of supply or receipt of goods or services or both to or from a person who do not exist.

This amendment will take effect from 1st April,2020.

22

Blocking GST Credit - is Legal or Illegal.

The concept of self-assessment in tax administration was introduced in India with an expectation to usher in a new era

of trust-based partnership with the assessees leading to greater facilitation of compliant assessees.

“Circular Trading”, “Fake Bill issue”, “enhanced bill” unfortunately are methods of tax evasion not new in India.

Under GST bogus invoices are raised without any actual supply of goods or services or both in several stages

culminating finally in no supply or part supply. In some cases materials are sold in cash to the unorganised or those

who do not avail ITC [ Residential Housing or Hotel Industry] and the bill without supply is given to the tax evaders

who wish to claim credit[ Commercial construction or hotels availing ITC. At times in Circular / fake bill trading, the

goods manufactured/ imported without paying due taxes are supplied to the customer and a fake invoice is provided to

cover the same quantity. Based on such bogus invoices, the registered persons who were recipients were claiming

ITC.

There are 2 categories of recipients:

a) those who are involved in claiming ITC for goods not received or short received. These are the persons who need

to be bought to book. There is a move to make them equally responsible which is good.

b) those who buy goods duly received from market from traders and pay for the same. They are not aware of how the

trader is paying his tax. They cannot and should not be made responsible.

Reports were issued by the Government that there were `11,251 crores of ITC fraud due to circular trading in F.Y

2018-19. To curb availment of ITC on fake invoices and circular trading the Government is proposing a series of

amendments to the law through rule where the legal validity would be questioned by the bona fide compliant tax

payers. A good instrument to a bad musician would ruin the music, pari materia, a good law with bad implementation

would ruin the law, make ease of doing business difficult and also end up in avoidable litigation.

Method of implementation has been the area lacking. This time around suggestion is to provide clarity and awareness

about the types of evasion including FAQs where the scenarios where the availment of ITC would be treated as

fraudulent and where not made clear with illustrations. This would aid compliant tax payer to be vigilant and guard

against goods supplied properly along with fake invoices with ITC.

In this article, we would analyse the amendment made in the CGST rules, 2017 by inserting Rule 86A to curb the fake

invoices and circular trading.

Amendment in CGST Rules

In the month of December 2019, CBIC vide notification no.75/2019 C.T dated 26th December 2019 had inserted Rule

86A which empowers the commissioner or any other officer authorised by him not below Assistant

commissioner(herein referred as “Proper Officer”) having REASON TO BELIEVE that ITC has been availed

FRAUDULENTLY or INELIGIBLE in as much as –

a. Credit availed on invoices issued by registered person who found to be non-existence or not conducting any

business from the registered place of business;

b. Credit availed on invoices issued without any receipt of goods or services; (Circular Trading);

c. Credit availed on invoices in respect of which tax has not been paid to the Government; (2A vs 3B)

d. Availment of credit without any documents prescribed under section 16 r/w rule 36;

e. Person availing credit found to be non-existent or not to be conducting any business from the registered place of

business;

23

With reasons to be recorded in writing, deny the registered person neither to use the electronic credit ledger to pay off

his liability nor to claim refund of such unutilised amount.

Once the credit ledger has been blocked, then the registered person has to prove that the conditions aforementioned do

not exist to the proper officer. He may on satisfaction allow the registered person to use the credit ledger.

Once the restriction i.e. denial is imposed on the registered person such restriction holds goods for a period of one year

from the date of such restriction.

Analysis of such amendment

1. The generally accepted principles of the law are that “Rules cannot override the Act” and rule cannot operate

independently, it has to be read along with the Act. However, in relation to rule 86A, none of the provisions of the Act

provides the power for such rule. In case of Intercontinental Consultants and Technocrats Private Limited v. Union

of India 2018(10) G.S.T.L 401 (S.C) it was held that – rules cannot go beyond the statute, in case of conflict with the

main enactment, the rule has to give way. Further, rules are framed for achieving the purpose behind the statute.

2. Once the credit entitled to be taken as per section 16 of CGST Act, 2017 has been availed becomes an indefeasible

right of the registered person. The department does not have built in powers / authority to stop a registered person

from availing and utilising the credit under the law. However, they may recover, deny the refund of availment of

ineligible credit through the proceedings prescribed under the law. Once the credit has been legally availed in the

returns, it becomes the righteous property of the assessee. Further Article 300A of Constitution of India provides that -

No person shall be deprived of his property saved by the authority of law unless it is in accordance of the law

3. The amendment fails to provide the procedure to be followed by the proper officer for enforcing his powers

conferred under the newly inserted rule which may create havoc in the trade & industry.

4. The language used in rule 86A can lead to interpretational disputes. For instances,

a. In reference to word reason to believe, there several settled cases under Income Tax Act to infer the actual

meaning. The belief should be in a good faith, it can‟t be a pretence, further the reasons to make such belief should be

objective i.e. there should be proper evidences with the officer to believe stronger than the satisfaction. There should a

written evidence in the internal files. [ One can get a copy under RTI to confirm if there is a doubt about it]

b. In reference to the word Fraud – the intention to evade tax is built in the word. Further a positive act with the

intention to evade the tax has to be established – Case law reference – Cosmic Dye Chemicals vs. CCEx, Bombay

1995 (75) ELT 721 (SC), CCE v Chemphar Drugs and Liniments 1989 (40) ELT 276 (SC).

Assuming even if the rule is backed with the provision from the Act, the above cited reference would give a clarity

that for invoking actions as per the rule, the officer has to collect proper evidences to have a belief that the registered

person has done a positive act with an intention to evade tax.

Important to note that the powers of the rule as per the first condition cannot be enforced on registered person who

have not availed input tax credit other than in fraudulent manner.

5. Further, rule prescribes the procedure that the proper officer would block the electronic credit ledger for utilisation

for payment of tax or for claiming refund and subsequently, the registered person has to prove to the officer that such

conditions prescribed under rule 86A do not exist and the such restriction imposed by the proper officer would be

valid for one year from the date of such restriction. The rationale provided in the rule is squarely invalid and the

recovery proceedings cannot be initiated prior to following the principles of natural justice. Case laws in this regard

are The Union of India vs Mrs. Prashanthi (Kar), Dabur India Ltd. v. State of Uttar Pradesh — 1990 (49) E.L.T. 3

(S.C.), L.C. Infra Projects Pvt Ltd Vs UOI 2019 (28) G.S.T.L. 3 (Kar.), Godavari Commodities Ltd VS UOI 2019-

TIOL-2818-HC-JHARKHAND-GST.

24

6. The conditions a, b, d, e aforementioned seems quite reasonable for the case of availment of credit with mala fide

intention which has to be identified by the proper officer with proper evidences prior to proceeding enforcing the

power conferred under the rule which is unconstitutional and invalid provision in our view.

7. However, the condition c - “Credit availed on invoices in respect of which tax has not been paid to the

Government” – seems to be impossible condition to be kept track off by the registered person. When the Government

itself of incapable ( with the entire IT infrastructure in place) to implement the envisaged return process as per the law,

expecting the tax payer to keep track of payment of tax by the supplier seems to impossible – Force Majeure

clause may be considered and the such condition could be omitted for satisfying conditions to take input tax credit –

principle can be implied that a contract to do an impossible act is void. Court would rule that impossibilities cannot be

enforced.

8. Inserting this condition in rule 86A would disrupt the business since the revenue would start blocking the

electronic credit ledger for frivolous reasons like non-matching of ITC as per 2A and 3B. There can be several

genuine reasons that 2A and 3B may not match. Further, 2A does not provide conclusive evidence that the supplier

has paid such tax to Government.

9. Such condition would lead to issuance of bulk notices by the department to the assessees and blocking of credit

ledger without even analysing the genuine reasons of difference which creates more room for harassment by the

department towards compliant taxpayers.

10. The Government should give importance in IT infrastructure i.e. Risk management system in order to categorise

the risk prone taxpayers and intended restrictions can be imposed on risk prone taxpayers. The general small-medium

taxpayer has to be let free to concentrate actually on their business. Tax has to be levied on business and the business

should not be carried on in order to pay tax.

Conclusion

The department is implementing restrictions through rules without considering ground realities of type of action

possible by officers and the fact that honest tax compliant assessees should not be harassed. The Rule 36(4) whereas is

under section 43A which is not yet notified!! The intention of the Government is bona fide to curb usage of fake bills

and prosecute the tax evaders. However, implementation of these kinds of unviable and unconstitutional restrictions

would affect the major compliant taxpayers. The cost of the lock should not exceed the value of the item which it

should protect. The present restriction imposed on all taxpayers would definitely disrupt the business and lead to

avoidable cost. Further, providing more and more powers, discretion to errant officers would lead to a reversal from

self-assessment and a backward step.

The tax has to be collected from people like honeybee extracts nectar from flowers without harming it. Continuous

imposing of such restrictions would eventually lead to invoking of Article 19 of Constitution of India which provides

the freedom to freedom of practicing any profession or to carry on any occupation, trade or business subject to

reasonable restriction imposed by laws and Article 21 of Constitution of India which provides “No person shall be

deprived of his life or personal liberty except according to procedure established by law.

25

History of E Way Bill

Introduction

It is said that the month of „January‟ is named after the Roman God of Beginnings, Janus. Janus is usually depicted with

two faces, one on each side of the head. One may wonder whether the positioning of the heads is meant to signify a

glance at both the past and the future at the same time. Whether or not the God signifies so, no doubt that the

beginning of a new calendar year is an important time to reflect on the past, learn from the rights and wrongs and commit

to change in the year to come. For businesses, tax consultants and other stakeholders who have had around three years

to settle down in the Goods and Services Tax (GST) regime, it is a time to provide constructive feedback to the

Government so that changes, if any, can be brought about through the Annual Financial Statement, also popularly

referred to as „the Union Budget of India‟.

On our part, we feel that this is a right time to highlight an area in the GST law which allows businesses to be subject

to excessive penalizing in return for what some may consider as minor slipups. It is the intention of this article to highlight

few plausible changes that can be carried out to the electronic way bill mechanism under GST so as to facilitate a

more transparent and business friendly process.

Way Bill - Historical Perspective

First and foremost, it is relevant to consider the history that led to the existence of the electronic way bill. After all,

as Edmund Burke once said, “those who don‟t know history are destined to repeat it.”

Prior to the introduction of the GST regime, every State had its own enactment that granted the powers to levy Value

Added Tax (VAT) on sale of goods within their territory. These VAT enactments contained a provision that required

the owner or person in charge of goods to obtain a permit for movement in and out of the States.

The Hon‟ble Supreme Court in the case ofSodhi Transport Co. 1986 AIR 1099, is a landmark ruling in the context

of Transit Pass. The Hon‟ble Supreme Court held that when the statute employed the phrase “failing which it shall

be presumed that the goods carried thereby have been sold within the State by the owner or person-in-charge of the

vehicle”, it only required authorities to raise a rebuttable presumption that the goods had been sold in the State as the

transit pass was not handed over to the officer at the check post. At the same time, it was recognized that this

presumption, in no way foreclosed the opportunity that the owner/transporter of the goods had to establish that the goods

had in fact been disposed of in a different way, other than by way of sale within the State.

Although the Apex Court rightly identified the true effect of the statutory provision, in reality, owners and transporters

of goods continued to face litigation and many genuine cases were subject to large amounts of taxes and penalties.

It was expected that the GST regime would put an end to the road permit system and inspector raj and ensure a seamless

movement of goods across the country. In fact, the GST Council accepted proposals of a task force which

recommended abolition of the permit system considering the entry tax and value added tax regimes had been brought to

an end. Although the Government piggy backed on the idea during the implementation stage of the taxation regime and

everybody witnessed many a news report on the dismantling of the border check posts, an allegedly new concept,

disguised as the electronic way bill (EWB) was introduced a year after the birth of the GST regime. A flyer circulated by

the CBEC claimed that the – “E-waybill is a mechanism to ensure that goods being transported comply with the GST

Law and is an effective tool to track movement of goods and check tax evasion”. Sound familiar?

26

A learning from the jurisprudence

Any person who has researched on cases reported under GST would have surely noticed that the most common judgements

reported pertained to challenges against orders of detention issued due to errors in generated EWBs under Section 129 and

130 of the CGST Act.

What is interesting in these judgements are the kinds of errors committed that ensued into litigations. Few reported

judgments that resulted in detention/seizure of the goods are tabulated hereinbelow: -

Sl.No. Judgement Nature of Error committed

1. Caterpillar India Pvt Ltd.

Goods were un-accompanied by valid EWBs. Validity of the Bill

generated had expired due to delay in police permission being granted to

cause the movement.

2. Ganga Industries Goods detained on the basis that the date of the tax invoice mentioned in

the EWB was different from the date mentioned on the tax invoice.

3. Sarvottam Rolling Mills Pvt. Ltd.

Goods seized one hour after expiry of EWB. The goods had reached the

destination in time but on account of no entry, the vehicle could not enter

the city. In the meantime, the detention order was passed.

4. Rajavat Steels

The ground for seizing the goods was that the Truck number mentioned in

the invoice, EWB and weigh slip was U.P.-78-DN 7983 while it should

have been U.P.-78-DN 7938.

5. Sabitha Riyaz

Distance in EWB recorded as 280 instead of 2800 kms.

On a perusal of the above judgements, it is apparent that mostly, mere procedural and minor infractions that did not

involve fraud/suppression, led to detention of goods which ultimately increased litigations.

Another interesting twist to the issue occurs when proper officers deem fit to insist on payment of not just an amount

equal to 100% tax and penalty applicable to the goods detained in terms of Section 129, but also demand payment of a

fine in lieu of confiscation equal to the value of goods under Section 130. A real-life incident of such predisposition can

be witnessed through the facts of a recent judgement of the Hon‟ble Gujarat High Court in the case of Synergy

Fertichem Pvt. Ltd vs. State of Gujarat.

The Hon‟ble High Court while analyzing the simultaneous application of both Section 129 and Section 130 recognized

that Section 129 operates in the fields of detention, seizure and release of goods/conveyances in transit, whilst,

Section 130 dealt with confiscation of goods/ conveyance and levy of tax, penalty and fine thereof. The Hon‟ble High

Court, thus, came to the conclusion that the two provisions are mutually exclusive and independent of each other.

As regards Section 130, the Hon‟ble High Court noted that since the provision employed the phrase „with an intent to

evade the payment of tax‟, authorities can invoke the same only when a definite intent to evade payment of tax is

established. Accordingly, it was held that even at the stage of detention and seizure itself or after the tax and penalty is

paid by the owner of the goods in terms of Section 129, if there exists incriminating evidence of tax evasion, action

under Section 130 of the CGST Act can also be initiated.

Even though the Hon‟ble High Court concluded so, what is interesting, is a passing observation made by the

Hon‟ble Judges. Relevant excerpt from the judgement is as follows :-

All that we intend to say is that, in a given situation, the authorities should adopt a practical approach to resolve the

dispute rather than enter into a long-drawn litigation. The Government should strive hard to ensure that the litigation

arising from the new tax regime gets minimized over a period of time.

https://idt.taxsutra.com/sites/idt.taxsutra.com/files/webform/TS-956-HC-2018(ALL)-NT-Ganga%20Industries.pdf

http://gstsutra.com/news/7463/HC-Directs-release-of-goods-detained-one-hour-after-e-way-bill-expiry

http://gstsutra.com/news/7186/HC-Orders-release-of-goods-seized-for-mere-typographical-error-in-e-way-bill

27

A simpler solution in the offing? – Conclusion

The authors humbly hold in high regard, the passing observations of the Hon‟ble High Court. It is indeed felt that a

simpler solution to resolve matters pertaining to detention and confiscation of goods is the need of the hour. Few

recommendations are as follows.

Introducing the concept of „Rebuttable Presumption‟ - It is noted that CBEC themselves have recognized that

the purpose of introducing the EWB mechanism is to check tax evasion. However, unlike the erstwhile VAT

laws which required officers to proceed on the basis of a rebuttable presumption as interpreted by the Apex Court

in the case of Sodhi Transport Co. (supra), Section 129 of the CGST Act does not grant space for officers to

proceed on the basis of such a presumption that so long as tax has been paid on the goods transported, initiation

of action against the owner/person-charge of goods should be avoided. Suitable amendments to the Act and

issuance of a circular instructing officers to not initiate action so long as the concerned persons are able to prove

that the applicable taxes have been paid, may be carried out. Such a magnanimous and less pedantic approach

would go a long way in radically reducing the number of detentions and seizures under the Act and would wean

out cases of detention on the basis of mere technical errors, such as the ones discussed in detail above.

Adjustment of Taxes paid against output liabilities- A suitable amendment to CGST Act can be carried out to

allow adjustment of taxes paid under Section 129 of the CGST Act against output liabilities arising in respect of the

supply of the goods that were detained. In the present framework, the concerned persons may be faced with a

double whammy by virtue of being liable to remit 100% tax twice, once, for the release of detained goods and

second, for discharging their output liabilities, over and above payment of penalties.

Reduced penalties for non-supply movements - As regards goods moved for reasons other than by way of

supply, i.e., under the cover of a delivery challan, a separate legal provision may be introduced to only levy a

general penalty on the concerned persons for committing errors and contravening the provisions of the Act/Rules,

as long as the said persons are able to establish to the relevant officers that the goods have in fact been disposed of

in a method other than by way of supply.

Distinct provisions for different offences - Separate penal provisions can be introduced for offences,

depending upon their severity. Levy of 100% tax and penalty on all persons contravening the provisions of the

Act/Rules, irrespective of the seriousness of the offence is arbitrary and excessive. A person who transports

goods without generating an EWB and a person who has committed a clerical error by mentioning an incorrect

vehicle number on the EWB cannot be seen on the same footing. Such a provision is violative of Articles 14 and

19(1)(g) of Constitution of India as recognized by the Hon‟ble Supreme Court in the case of Shree Bhagwati

Steel Rolling Mills 2015 (326)

E.L.T. 209 (S.C.).

Introduction of a dispute resolution mechanism - An efficient dispute resolution mechanism in all States and

Union Territories can be introduced specifically for handling matters pertaining to detention and confiscation of

goods. The law can be amended to mandate closure of the such matters within a prescribed time limit, to ensure,

speedy redressal of such matters.

If some of the ideas put forth through this article are in fact implemented, it would go a long way in actually making the

GST law, Good and Simple while also ensuring ease of doing business in India. It would also silence few voices who feel

that the EWB mechanism is just old wine in a new bottle.

28

GST Input credit - Be ready for more Chaos.

In respect of GST return, following being announced by FM on 24 March 2020.

1 Due Date for

GSTR-3B for

supplies made in

the months of

February, March

and April: If a

company‟s

turnover is less

than ₹5 crore then

on late payment of

taxes

(Company A)

11th/ 22nd,24th of

the following

month

30th June 2020 -

Interest, Penalty and Late Fees as applicable no interest, no late fees and no penalty

2 Due Date for

GSTR-1/ GSTR-

3B for supplies

made in the

months of

February, March

and April: If a

company‟s

turnover is more

than ₹5 crore then

on late payment of

taxes

(Company B)

11th/20th of the

following month 30th June 2020 Compliance is

done on or before

30th June 2020

No Interest if tax

is paid by

➔ 04/04/20 (for

Feb‟20)

➔ 05/05/20 (for

Mar‟20)

➔ 04/06/20 (for

Apr‟20)

Following impact can be noticed in case of Company B due to above-mentioned changes.

(a) Company B required to make GST payment on or before May 5, 2020 and June 4, 2020 for GST of month

ending March and April.

(b) Most of their vendors i.e Company A falls below turnover less than 5 Cr and hence looks like they will not

file their GSTR-1 before June 30, 2020.

(c) If they don‟t file GST -1 return before our GST payment due date, then Company B going to see massive

mismatch of Input credit for the month ending March and April. Mismatch means GST input as per books

and GSTR-2A.

(d) AT present, there is no relaxation of from rule of 110% means input claimed cannot exceed 110% of input

appearing in the GSTR-2A.

(e) Hence, Company B can expect huge shortage in the GST input credit for next 2 months and due to 110%

rule, they have to pay additional GST input credit.

The Government should announce a solution to escape this chaos.

29

Questionable Policies of Government.

The Ministry of Finance has multiple objectives. One of these objectives is to simplify the compliance

process for the taxpayer. While ostensibly attempting to do so, policymakers sometimes at times end up

achieving the contrary and add to the complexities that already burden the hapless taxpayer. A case in point

are the new rules aimed to curb tax evasion. These guidelines have only resulted in creating further hardship

for all taxpayers of the country.

The inability to provide input returns on time in the case of GTN Since GSTN has resulted in a few

instances of the falsified claim. The GST council introduced measures such as restricting the amount of

input credit claims to a cap of 110% of the input return and reflected in the GSTR 2A. After this move, the

maximum input that can be claimed by any taxpayer will be 10% more than the input credit available in

GSTR 2A. As a result of this change, taxpayers must make payments in case there is any shortfall in

monthly GSTR 2A. The motivation for the introduction of these rules by the GST council is to reduce

claims based on falsified inputs. Credits on account of input are available to the taxpayer only when the

vendor uploads the correct details of invoices in the GST Portal called GSTR 1. Thus if vendors fail to

upload accurate invoices on time at GST Portal, the taxpayer will not get the benefit of input credit. Further,

for vendors whose turnover less than Rs. 15 Mn, the requirement to pay tax is monthly, but the need to

upload tax return is quarterly. Thus taxpayer cannot get any monthly input credit in the following three

scenarios.

1. Vendors files GSTR 1 every quarter

2. Vendors don‟t file or delay in filing GSTR 1

3. Vendors register GSTR 1 with incorrect details

Hence, the genuine taxpayer stands deprived of the eligible input credit as a result of the imprudent rules that

restricting input credit. Additionally, the taxpayer has the burden to maintain the complete reconciliation of

input credit available in GSTR 2A with his books on a real-time basis. These requirements result in

increasing the difficulty of already the harried taxpayer.

To promote the digital economy and to stop cash or parallel economy, the government has introduced new

laws in the previous year's budget. These new laws mandate that three payment options for taxpayers having

more than Rs 500 Mn. The payment options are:

1. Debit Card powered by RuPay

2. Unified Payments Interface (UPI)(BHIM-UPI)

3. Unified Payments Interface Quick Response Code (BHIM-UPIQRCode)

In the event, taxpayers are unable to provide the above-mentioned payment options, they are liable to pay a

penalty of Rs. 5000 per day.

Ironically, while on the one hand, the government is driving the march toward a cashless economy, and on

the other several government agencies deal only in cash, an example of which are city buses owned by the

state transport department. Their turnover of these corporations is far more than Rs 500 Mn. The

government should first make sure that all government agencies are doing cashless transactions. Further, the

new law should be made applicable to retail traders in addition to all other businesses. The daily maximum

limit of UPI transactions is Rs. 2 Lakhs and in the case of „Business to Business‟ dealings. The quantum of

each sale will typically exceed Rs. 2 Lakh. Thus businesses where transaction value more than Rs. 2 Lakh

require to provide above payment options to their customer even though it will find no practical use. One

30

expects that the policymakers thoroughly assess these implications and issues and perhaps restrict the scope

to cover only the retail trade.

The GST portal is not able to take the load on the last date of monthly return even after the passage of close

to three years since its launch. The taxpayer and their consultants continue to struggle to file monthly GST

return due to the operational inefficiency of the GSTN system. Instead of making efforts to upgrade the

technology of GSTN, the government seems to come out with more unusable ideas. They had taken a view

to apply different due dates for India for North and South India treating them as two separate

regions. Consequently, GST is no more one nation and one tax. It is multiple due dates for multiple states

with different procedures and norms.

It is our humble appeal to The Honourable Prime minister and Finance minister to pay heed to make policies

that are practical and reduce the burden of the taxpayers and encourage compliance. We are hopeful that the

government will consider such inputs and commit to simplifying the tax compliance process and alleviate

the hardships faced by the taxpayer.

31

TDS Rate Chart For Financial Year 2020-21 and Assessment Year 2021-22:

Section Particulars

TDS Rate

Individual/

HUF (Indian

Resident)(in

%)

TDS Rate

for (NRI)

in India

(in %)

Domestic

Company

(in %)

Other

than

domestic

Company

(in %)

192 Payment of salary Normal Slab

Rate

Normal

Slab Rate – –

192A

Payment of accumulated balance of

Provident fund which is taxable in the

hands of an employee. Monetary

Limit – Rs. 50,000

10 10.40 – –

193 Interest on Securities

– –

a.

any debentures or securities for

money issued by or on behalf of any

local authority or a corporation

established by a Central, State or

Provincial Act;

10 – 10 –

b.

debentures issued by a company

where such debentures are listed on

a recognised stock exchange in

accordance with the Securities

Contracts (Regulation) Act, 1956

(42 of 1956) and any rules made

thereunder;

10 – 10 –

c.

any security of the Central or State

Government;

(Monetary Limit – Rs 10,000)

10 – 10 –

d. interest on any other security 10 – 10 –

194 Dividend (monetary limit- Rs 5000)

10

(W.e.f.

01.04.2020

–

10

(W.e.f.

01.04.2020)

–

194A

An Income by way of interest other

than “Interest on securities”


10 – 10 –

194B

Income by way of winnings from

lotteries, crossword puzzles, card

games and other games of any sort


30 31.20 30 31.20

194BB Income by way of winnings from 30 31.20 30 31.20

https://taxguru.in/sebi/securities-contracts-regulation-act-1956-amended-finance-act-2015.html

https://taxguru.in/sebi/securities-contracts-regulation-act-1956-amended-finance-act-2015.html

32

horse races (Monetary Limit – Rs

10,000)

194C

A Payment to contractor/sub-

contractor (Monetary Limit – Rs

30,000 per contract or Rs 1,00,000

for aggregate amount during the

year)

a. HUF/Individuals 1 – 1 –

b. Others 2 – 2 –

194D Insurance commission

(Monetary Limit – Rs 15,000) 5 – 10 –

194DA

A Payment in respect of life insurance

policy w.e.f. 1/9/2019, the tax shall be

deducted on the amount of income

comprised in insurance pay-out

(Monetary Limit – Rs 1,00,000)

5 – 5 –

194E Payment to non-resident sportsmen /

sports association – 20.80 – 20.80

194EE

A Payment in respect of deposit

under National Savings scheme


10 10.40 10 –

194F

Payment on account of repurchase of

unit by Mutual Fund or Unit Trust of

India

20 20.80 20 –

194G

Commission, etc., on sale of lottery

tickets


5 5.20 5 5.20

194H Commission or brokerage

(Monetary Limit – Rs 15,000) 5 – 5 –

194-I Rent

(Monetary Limit – Rs 2,40,000)

a. Plant & Machinery 2 – 2 –

b. Land or building or furniture or

fitting 10 – 10 –

194-IA

Payment on transfer of certain

immovable property other than

agricultural land

(Monetary Limit – Consideration

exceeding Rs 50,00,000)

1 – 1 –

33

194-IB

A Payment of rent by individual or

HUF not liable to tax audit

(Monetary Limit – Rent for the

month or part of the month

exceeds Rs 50,000)

5 – – –

194-IC

Payment of monetary consideration

under Joint Development

Agreements

10 – 10 –

194J

A Payment for fees for Technical

services, Professional services or

royalty etc.

(Monetary Limit –Rs 30,000 p.a)

a. Fee for technical services

2

(w.e.f.

01.04.2020)

–

2

(w.e.f.

01.04.2020)

–

b. Fee in other all cases as per Section

194J 10 – 10 –

194K

Payment of any income in respect of:

a) Units of a Mutual Fund as per

Section 10(23D)

b) The Units from the administrator

c) Units from specified company

10

(W.e.f

01/04/2020)

– 10 –

194LA

A Payment of compensation on

acquisition of certain immovable

property

(Monetary Limit –Rs 2,50,000 p.a.)

10 – 10 –

194LB Payment of interest on infrastructure

debt fund – 5.20

5.20

194LBA(1)

Business trust shall deduct tax while

distributing, any interest received or

receivable by it from a SPV or any

income received from renting or

leasing or letting out any real estate

asset owned directly by it, to its unit

holders.

10 – 10 –

194LBA(2)

A Business trust shall deduct tax

while distributing any interest income

received or receivable by it from a

SPV to its unit holders.

– 5.20 – 5.20

34

194LBA(3)

Business trust shall deduct tax while

distributing any income received

from renting or leasing or letting out

any real estate asset owned directly

by it to its unit holders.

– 31.20 – 41.6

194LBB

Investment fund paying an income to

a unit holder [other than income

which is exempt under Section

10(23FBB)]

10 31.20 10 41.6

194LBC

Income in respect of investment

made in a securitisation trust

(specified in Explanation of section

115 TCA)

25% in case

of Individual

or HUF 30%

in case of

other

resident

person

31.20 10 41.6

194LC

Payment of interest by an Indian

Company or a business trust in

respect of money borrowed in

foreign currency under a loan

agreement or by way of issue of

long-term bonds (including long-

term infrastructure bond)

Note: Now TDS at concessional rate

of 5% will be applicable for

borrowings made after April 1, 2020

but before July 1, 2023.

– 5.20 – 5.20

194LD

A Payment of interest on rupee

denominated bond of an Indian

Company or Government securities

to a Foreign Institutional Investor or a

Qualified Foreign Investor

Note: Now TDS at concessional rate

of 5% will be applicable for

borrowings made after April 1, 2020

but before July 1, 2023.

– 5.20 – 5.20

194M

Payment of commission (not being

insurance commission), brokerage,

contractual fee, professional fee to a

resident person by an Individual or a

HUF who are not liable to deduct TDS

under section 194C, 194H, or 194J.

5 – 5 –

35

194N

Cash withdrawal in excess of Rs. 1

crore during the previous year from

one or more account maintained by a

person with a banking company, co-

operative society engaged in

business of banking or a post office

2 – 2 –

194-O

Applicable for E-Commerce operator

for sale of goods or provision of

service facilitated by it through its

digital or electronic facility or

platform.

1

(w.e.f.

01.04.2020)

–

1

(w.e.f.

01.04.2020)

–

195 Payment of any other sum to a Non-

resident

a.

An Income in respect of investment

made by a Non-resident Indian

Citizen

– 20.80 – –

b.

Income by way of long-term capital

gains referred to in Section 115E in

case of a Non-resident Indian Citizen

– 10.40 –

c.

An Income by way of long-term

capital gains referred to in sub-clause

(iii) of clause (c) of sub-Section (1) of

Section 112

– 10.40 – 10.40

d. Income by way of long-term capital

gains as referred to in Section 112A – 10.40 – 10.40

e.

An Income by way of short-term

capital gains referred to in Section

111A

– 15.60 – 15.60

f.

Any other income by way of long-

term capital gains [not being long-

term capital gains referred to in

clauses 10(33), 10(36) and 112A

– 20.80 – 20.80

g.

Income by way of interest payable by

Government or an Indian concern on

moneys borrowed or debt incurred

by Government or the Indian concern

in foreign currency (not being income

by way of interest referred to in

Section 194LB or Section 194LC)

– 20.80

20.80

h. The Income by way of royalty payable

by Government or an Indian concern – 10.40 – 10.40

https://taxguru.in/income-tax/tax-long-term-capital-gain-income-tax-act-1961.html

https://taxguru.in/income-tax/tax-long-term-capital-gain-income-tax-act-1961.html

https://taxguru.in/income-tax/provisions-short-term-capital-gain-examples.html

https://taxguru.in/income-tax/provisions-short-term-capital-gain-examples.html

36

in pursuance of an agreement made

by it with the Government or the

Indian concern where such royalty is

in consideration for the transfer of all

or any rights (including the granting

of a licence) in respect of copyright in

any book on a subject referred to in

the first proviso to sub-section (1A)

of Section 115A of the Income-tax

Act, to the Indian concern, or in

respect of any computer software

referred to in the second proviso to

sub-section (1A) of Section 115A of

the Income-tax Act, to a person

resident in India

i.

Income by way of royalty [not being

royalty of the nature referred to point

g) above E] payable by Government

or an Indian concern in pursuance of

an agreement made by it with the

Government or the Indian concern

and where such agreement is with an

Indian concern, the agreement is

approved by the Central Government

or where it relates to a matter

included in the industrial policy, for

the time being in force, of the

Government of India, the agreement

is in accordance with that policy

– 10.40 – –

A) Where the agreement is made

after the 31st day of march,1961 but

before 1st April 1976

– – – 52

B) Where the agreement is made

after the 31st March, 1976 – – – 10.40

j

Income by way of fees for technical

services payable by Government or

an Indian concern in pursuance of an

agreement made by it with the

Government or the Indian concern

and where such agreement is with an

Indian concern, the agreement is

approved by the Central Government

or where it relates to a matter

– 10.40 – –

37

included in the industrial policy, for

the time being in force, of the

Government of India, the agreement

is in accordance with that policy

A) Where the agreement is made

after the 29th February 1964 but

before 1st April 1976

– – – 52

B) Where the agreement is made

after the 31st March, 1976 – – – 10.40

k. Any other income – 31.20 – 41.60

196B

Income from units (including long-

term capital gain on transfer of such

units) to an offshore fund

– 10.40 – 10.40

196C

The Income from foreign currency

bonds or GDR of an Indian company

(including long-term capital gain on

transfer of such bonds or GDR)

– 10.40 – 10.40

196D

Income of foreign Institutional

Investors from securities (not being

dividend or capital gain arising from

such securities)

– 20.80 – 20.80

38

TCS Rate Chart For Assessment year 2020-21 and Assessment year

2021-22

Section Particulars TCS Rates (in %) (AY 2020-21)

TCS Rates (in %) (AY 2021-22)

206C(1) Sale of the following:

a) Alcoholic Liquor for Human Consumption 1% 1%

b) Tendu leaves 5% 5%

c) Timber obtained under a forest lease 2.5% 2.5%

d) Timber obtained by any mode other than under a forest lease

2.5% 2.5%

e) Any other forest produce not being timber or tendu leaves

2.5% 2.5%

f) Scrap 1% 1%

g) Minerals, being coal or lignite or iron ore 1% 1%

206C(1C) Grant of lease or license of the following:

a) Parking lot 2% 2%

b) Toll Plaza 2% 2%

c) Mining and quarrying (Other than mining and quarrying of mineral oil, petroleum and natural gas)

2% 2%

206C(1F) Sale of the motor vehicle of the value exceeding Rs. 10 lakh whether payment is received by cheque or by any other mode

1% 1%

206C(1G)(a) TCS on foreign remittance through Liberalised Remittance Scheme (LRS) (This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/04/2020) (Please refer Note 1 for in depth explanation of this new section)

NA 5% (10% for non PAN or Aadhaar cases)

206C(1G)(b) TCS on selling of overseas tour package (This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/04/2020) (Please refer Note 2 for in depth explanation of this new section)

NA 5% (10% for non PAN or Aadhaar cases)

206C(1H) TCS on sale of any goods [except goods on NA 0.1%

https://taxguru.in/income-tax/tcs-remittance-through-lrs-foreign-tour-package-sell-sale-goods.html

https://taxguru.in/income-tax/tcs-remittance-through-lrs-foreign-tour-package-sell-sale-goods.html

39

which TCS applicable as per Section 206C (1), 206C (1F) and 206C (1G)] (This Section is inserted by Finance Act, 2020 which is proposed to be applicable from 01/04/2020) (Please refer Note 3 for in depth explanation of this new section)

(1% for non PAN or Aadhaar cases)

Notes:

1. Section 206C(1G)(a) – TCS on foreign remittance through Liberalised Remittance Scheme (LRS)

An authorised dealer receiving an amount or an aggregate of amounts of seven lakh rupees or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of five per cent.

In non-PAN/Aadhaar cases the rate shall be ten per cent.

40

TP COMPLIANCE CHART FOR FY 2019-20 (AY 020-21)

Activity Section/R

ule Form No. Old

Deadline New Deadline

Remarks

Transfer Pricing Audit

Section 92E (Rule 10E)

Form 3CEB 30-Nov-2020

31-Oct-2020 Amended by Finance Bill, 2020

Transfer Pricing Study- Documentation

Section 92D (Rule 10D)

- 30-Nov-2020

31-Oct-2020 -

Return of Income (Having applicability of Transfer Pricing Provisions)

Section 139 (ITR-1)- For Resident Individualincome having less than 50 Lakh and Agriculture Income upto 5000.

(ITR-2)-For Individual & HUF whose income more than 50 Lakh.

(ITR-3)-For Individual & HUF carry Profession Business.

(ITR-4)-For Individual, HUF & partnership Firm (Other than LLP) having income from business& profession.

(ITR-5)-For Firms, LLP, AOP, BOP, AJP, Business trust and Investment Fund.

(ITR-6)-For Companies having income from charitable or religious purpose(Filed Electronically Only).

(ITR-7)-For person & company required to furnish u/s 139 (4A), 139 (4B), 139 (4C), 139 (4D), 139 (4E) & 139 (4F).

30-Nov-2020

30-Nov-2020 No Change

Master File Section 92D (4)

(Rule 10DA)

Form 3CEAA

30-Nov-2020

30-Nov-2020 No Change

41

Intimation by a designated Constituent Entity

Section 92D (4)

(Rule 10DA)

Form 3CEAB

31-Oct-2020 31-Oct-2020 No Change

Intimation by Designated Constituent Entity

Section 286 (1)

(Rule 10DB)

Form 3CEAC

Two months prior to the due date for furnishing of CBCR-Form

3CEAD

Two months prior to the due date for furnishing of CBCR-Form

3CEAD

No Change

CbCR Section 286 (2) & (4) (Rule 10DB)

Form 3CEAD

12 months from the end of reporting Accounting Year

12 months from the end of reporting Accounting Year

No Change

Note 1: Accounting Year means

I. a previous year, in a case where the parent entity is resident in India; or II. an annual accounting period, with respect to which the parent entity of the

international group prepares its financial statements under any law for the time being in force or the applicable accounting standards of the country or territory of which such entity is resident, in any other case;

Note 2: Reporting Accounting Year means the accounting year in respect of which the financial and operational results are required to be reflected in the report referred to in sub-sections (2) and (4).

42

Amendments proposed in the Finance Bill 2020 passed by Lok Sabha

The Finance Bill, 2020 was introduced in the lower house of the Parliament on 1st February, 2020 wherein various/ significant changes in the Income Tax Act, 1961 („the Act‟) were proposed

by the Hon‟ble Finance Minister.

Recently, on 23rd March 2020, the lower house of the Parliament has passed the aforesaid Bill with certain amendments to the proposed changes in the Finance Bill.

To understand the amendments better and for the sake of convenience, we have tabulated the existing provisions, the proposed amendment in the Finance Bill introduced on 1st February 2020

and the effect of recent amendments hereunder:

S. No of

Amend-

ment

Section

amended

Existing provisions of

the Income-tax Act, 1961

Amendment proposed in

Finance Bill 2020

Amendment finally passed by Lok Sabha Remarks, if any

1 2(15A) Section 2(15A) of the Act

defines “Chief

Commissioner" to mean a

person appointed to be a

Chief Commissioner of

Income-tax or a Principal

Chief Commissioner of

Income-tax under sub-

section (1) of section 117.

- It is proposed to insert “Principal Director General of

Income-tax” and “Director General of Income-tax”

within the definition of Chief Commissioner.

The scope of Chief Commissioner has been

widened to include Pr. DGIT and DGIT.

2-4 6 Section 6(1) of the Act

provides parameters for

The Finance Bill reduced

the number of days for

In clause (b) to Explanation 1, it is proposed to include

an additional criteria that an Indian citizen or person of

As a consequence of the amendment, 120 days

criteria shall only apply to an Indian citizen or

43

S. No of

Amend-

ment

Section

amended




Finance Bill 2020


treating an individual as

Indian resident in a

previous year. Clause (c)

to section 6(1) thereof

provides that an

individual will be an

Indian Resident if he:

- has been in India for

overall period of 365

days or more within 4

years preceding that

year; and

- is in India for overall

period of 60 days or

more in that year.

Further, Explanation 1(b)

to said sub-section

provides that an Indian

citizen or a person of

Indian origin shall be

Indian resident if he is in

India for 182 days instead

of 60 days in that year.

visiting India to 120 days

from existing 182 days.

Indian origin, having total income other than income

from foreign sources*, exceeding Rs.15 lakhs during

previous year shall be considered as resident of India

subject to the person being in India for 120 days (instead

of 60 days) in that year

* Explanation to section 6 defines „Income from foreign

source‟ to mean income which accrues/ arises outside

India (except income derived from business controlled

in or profession set up in India)

person of Indian origin whose total income (other

than income from foreign sources*) exceeds Rs.15

lakhs during the year.

44

S. No of

Amend-

ment

Section

amended




Finance Bill 2020


- Sub-section (1A) was

proposed to be inserted

providing that

“an Indian citizen shall be

deemed to be resident in

India in any previous

year, if he is not liable to

tax in any other country or

territory by reason of his

domicile or residence or

any other criteria of

similar nature.”

The sub-section has been passed with below

modification:

“An Indian citizen having total income, other than

income from foreign sources*, exceeding Rs.15 lakhs,

shall be deemed to be resident in India in any previous

year, if he is not liable to tax in any other country or

territory by reason of his domicile or residence or any

other criteria of similar nature.”

The provision, therefore, now applies only to those

Indian citizens whose total income exceeds Rs.15

lakhs (excluding income from foreign sources*)

during the previous year.

-

Clause (a) to section 6(6)

of the Act provides that a

person shall be “not

ordinarily resident” in a

previous year if the person

is an individual who:

- has been non-resident

in nine out of the ten

previous years

preceding that year,

The Finance Bill proposed

that a person shall be “not

ordinarily resident” in a

previous year if the person

is an individual/ manager

of HUF who has been

non-resident in seven out

of the ten previous years

preceding that year.

Following situations have been included under “not

ordinarily residents‟ by inserting clause (c) and (d) to

section 6(6) of the Act:

Clause (c)

„A citizen of India, or person of Indian origin, having

total income, other than income from foreign sources*,

exceeding Rs.15 lakhs, during the previous year as

referred in clause (b) to Explanation 1 of section 6(1),

who has been in India for period amounting to 120 days

The provisions of Act prevailing before

introduction of the Finance Bill, continue to remain

in force.

Further, definition of „not ordinarily resident‟ has

been extended to include following situations:

(a) An Indian citizen or person of Indian origin,

whose total income (excluding income from

foreign source*) exceeds Rs.15 lakhs during

the previous year and if the person has been in

India for more than 120 days but less than 182

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or

- has during the seven

previous years

preceding that year

been in India for an

overall period of 729

days or less.

Clause (b) to section 6(6)

of the Act contains similar

provision for the HUF.

or more but less than 182 days‟

Clause (d)

„a citizen of India who is deemed to be resident in India

under clause (1A).‟

days;

(b) An Indian citizen deemed as resident under sub-

section (1A) earning total income (excluding

income from foreign source*) in excess of

Rs.15 lakhs and such person is not liable to tax

in any country or jurisdiction during a year.

For stateless persons who were proposed to be

brought within the Indian tax framework, a

clarification was issued by CBDT on 02-02-

2020 that in case an Indian citizen becomes

deemed resident of India under this proposed

provision, the income earned outside India by

him shall not be taxed in India unless it is

derived from an Indian business or profession.

It was thus, clarified that this amendment

would not affect Indian bona fide workers in

other countries such as Middle East and such

individuals will only be liable to tax only on

income sourced in India.

(c) Accordingly in order to give effect to the

clarification, Indian citizen and person of

Indian origin who is in India for more than 120

days but less than 182 days and stateless

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person, have now been classified as „Resident

but Not Ordinarily Resident‟, and consequently

they would be taxable in India only on their

Indian sourced income and worldwide income

that is derived from a business controlled in or

a profession set up in India. By categorisation

of such persons as RNOR, it can be said that

such persons will not be taxed on global

income unless the income is derived from a

business controlled in or a profession set up in

India.

5-7 10(23C) - No amendment proposed

initially

New Explanation inserted after third proviso to section

10(23C) to provide: “For the removal of doubts, it is

hereby clarified that for the purposes of this proviso, the

income of the fund or trust or institution or any

university or other educational institution or any

hospital or other medical institution, shall not include

income in the form of voluntary contributions made with

a specific direction that they shall form part of the

corpus of such fund or trust or institution or any

university or other educational institution or any

hospital or other medical institution:”

The said Explanation clarifies that corpus donations

shall not be regarded as income of the institutions

availing exemption under section 10(23C).

This amendment is intended to bring institutions

registered under section 10(23C) at par with trusts

or institutions registered under section 12A/ 12AA/

12AB.

8 & 17 10(23C) Vide Finance Act, 2018, No amendment proposed The twelfth proviso to section 10(23C) has now been The corpus donation by institutions registered under

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& 11 provisions of section

10(23C) of the Act was

amended by way of

insertion of twelfth

proviso thereto, to provide

that any amount paid by

an institution registered

under section 10(23C) to

any trust or institution

registered under section

12AA as „corpus

donation‟, shall not be

treated as application of

income of such institution.

initially amended, to provide that any amount paid by an

institution registered under section 10(23C) to other

similar institutions registered under the said section [i.e.,

u/s 10(23C)] as „corpus donation‟, shall not be treated as

application of income of such institution.

Similar amendment has been made in section 11 of the

Act also, by amending Explanation 2 to the said section,

to provide that any amount paid by a trust/ institution

registered under section 12AA to other institution

registered under section 10(23C) of the Act as „corpus

donation‟, shall not be treated as application of income

of such institution.

section 10(23C) to another such entity shall not be

considered as application of income.

Similarly, corpus donations by trust/institution

registered under section 12AA to institutions

registered under section 10(23C) of the Act shall

also not be allowed as application of income.

However, voluntary contributions (not in the nature

of corpus contribution) will continue to be allowed

as application.

The amendment nullifies various decisions holding

that even corpus donations tantamount to

application of income. [Refer: CIT vs. Shri Ram

Memorial Foundation: 269 ITR 35 (Del.) and CIT

v. Sarladevi Sarabhai Trust (No. 2): 172 ITR 698

(Guj.)]

9 10(23FD) Existing provisions of

section 10(23FD)

provides exemption in

respect of any distributed

income (in terms of

section 115UA) received

by a unit holder from a business trust. However,

No amendment proposed

initially

Section 10(23FD) has now been amended to provide

that no exemption shall be allowed under the said

section, in respect of „dividend‟ income [in terms of

section 115-O(7) - in case where the SPV has not

exercised the option u/s 115BAA], as provided in clause

(b) of section 10(23FC) of the Act.

The amendment now provides that no exemption

shall available to a unit holder of business trust in

respect of dividend income received from SPV, if

such SPV has not exercised the option of section

115BAA of the Act.

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specific exclusion was

provided in respect of

income in the nature of

„interest‟ received/

receivable from a special

purpose vehicle (SPV) as

provided in clause (a) of

section 10(23FC) of the

Act.

10-13 10(23FE) - New clause (23FE)

inserted in Finance Bill,

2020 in section 10, to

exempt from tax any

income of a “specified

person”, in the nature of

dividend, interest, or long

term capital gains arising

from investment made in

India.

The Finance Bill, 2020 (as passed by the Lok Sabha),

has expanded the scope of section 10(23FE), to include

within its ambit, „Alternative Investment Funds‟ and

Pension fund created or established under the law of a

foreign country.

The definition of „specified person‟ as provided in

section 10(23FE) has been expanded, to provide

that exemption under the said section shall be

available even if investment in infrastructure

companies is made through Alternative Investment

Funds (AIFs).

Further, exemption under section 10(23FE) has also

been made available to Pension fund created or

established under the law of a foreign country.

The amended provision also provides that

investment should be made during the period

between 01-04-2020 to 31-03-2024, to clarify that

no exemption shall be available in respect of

income arising from investment made before 01-04-

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2020.

A proviso has been inserted to withdraw the

exemption if specified persons subsequently fails to

satisfy the conditions on basis of which exemption

was claimed in earlier years.

14 10(34) - “Provided further that

nothing contained in this

clause shall apply to any income by way of

dividend received on or

after 1st day of April, 2020”

“Provided further that nothing contained in this clause

shall apply to any income by way of dividend received

on or after 1st day of April, 2020 other than the dividend

on which tax under section 115-O and section 115BBDA, wherever applicable has been paid;”

The amendment takes care of anomaly and clarifies

that dividend received on or after 01-04-2020 shall

continue to be exempt if tax has already been paid

on such dividend under section 115-O or section

115BBDA, as the case may be.

19-20 92CB Safe Harbour provisions

contained in section 92CB

of the Act were hitherto

applicable only for

determination of arm‟s

length price of

international transactions.

Sub-section (1) of section

92CB of the Act was

proposed to be amended

to expand its scope to the

determination of income

deemed to accrue or arise

in the hands of a non-

resident from business

connection in India in

terms of clause (i) of subsection (1) of section 9

In line with the proposed amendment in the Finance

Bill, the definition of “Safe Harbour” contained in

explanation to sub-section (2) of section 92CB of the

Act is amended to mean “circumstances in which the

income-tax authorities shall accept the transfer price or

income, deemed to accrue or arise under clause (i) of

sub section (1) of section 9, as the case may be, declared

by the assessee”.

Amendment to modify the definition of the term

“Safe Harbour” to provide that income deemed to

accrue or arise under section 9(1)(i) declared under

the Safe Harbour Rules shall be accepted by the

income tax authorities.

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of the Act.

The rates prescribed under

the Safe Harbour

regulations were proposed

to be made applicable for

determination of income

deemed to accrue or arise

in the hands of the non-

resident

21 115A Clause (BA) in sub-

section (1) to section

115A of the Act provides

that interest incomes

received by a non-resident

person, prescribed in

section 10(47), 194LC,

194LD and 194LBA(2) of

the Act shall be taxable at

the rate of 5%

- It is now proposed to exclude the income referred in

section 194LC, 194LD and 194LBA(2) of the Act from

the purview of taxation @5%.

Interest income referred in above sections shall now be

taxable at the rate provided in the respective provisions.

The TDS rate prescribed under sections 194LC and

194LD is presently 5% which is applicable on the

interest payable on the money borrowed or

investment made before 01-07-2020 (extended to

01-07-2023 vide Finance Bill, 2020). In certain

cases, the rate of TDS is reduced to 4% for new

borrowings which are made after the sunset date.

Likewise, as per sub-section (3) of section 194LBA

of the Act, tax is levied at rates in force.

To avoid any conflict, section 115A is being

amended to align rate of TDS with the rates

prescribed in the specific provisions.

22 115BAA The Taxation Law

(Amendment) Act, 2019

The Finance Bill, 2020

had proposed to allow

The present amendment seeks to provide the date of

applicability of provisions with effect from 01-04-2021,

Since dividend is taxable from assessment year

2021-22, to remove any ambiguity, the date of

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had inserted section

115BAA and 115BAB to

provide domestic

companies with an option

to be taxed at

concessional tax rates

with effect from 01-04-

2020. One of the

conditions to be fulfilled

for opting for lower tax

rate was non-availability

of deductions under

Chapter-VIA, other than

under section 80JJAA or

section 80LA of the Act.

deduction, to the domestic

companies opting for the

concessional rates, under

newly inserted section

80M of the Act as well,

which provides deduction

in case of inter-corporate

dividends.

i.e. assessment year 2021-22 onwards. applicability of amendment allowing deduction

under section 80M has now been clarified.

23 115BAB Refer comments in S. No. 22

24-25 115BAC Section is a new insertion

by Finance Bill, 2020.

Under the existing

scheme, taxation was

based on regular slab

rates.

Section 115BAC inserted

w.e.f. AY 2021-22

provided option to

individuals/ HUFs to pay

tax concessional rates

subject to satisfaction of

certain conditions.

Vide the recent amendment to the Bill, the persons

having income from profession has been placed at par

with persons having business income.

Persons having income from business or profession

have one-time option to opt for concessional rate.

The said option can only be withdrawn once in

subsequent year(s).

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Concessional rate was

proposed to be not

applicable unless option is

exercised in the form and

manner as prescribed:

- Person having

business income: one-

time option to be

exercised before due

date u/s 139(1);

- Person not having

business income: can

opt for option with

return u/s 139(1) for

each year.

Benefit of concessional

taxation can be

withdrawn by person

having business income

only once and such person

shall never be eligible to

exercise such option unless he ceases to have

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business income.

26-27 194A Section 194A(3)(iii)(f)

provides that no tax shall

be deducted from interest

income credited to

institutions, AOP or

association/ bodies as

notified by CG.

- The proposed amendment seeks to prohibit issuance of

any notification under clause (f) of section 194A(3)(iii)

after 1.2.2020.

However, a new subsection (5) has been inserted

authorizing CG to notify persons, payment to whom

payment of interest other than securities would not

subjected to deduction of tax at source or would require

deduction at lower rate.

CG may notify entities payment to whom would

require lower/ no deduction of tax at source u/s

194A.

28 194J Section 194C provides for

deduction of withholding

tax at the rate of 2% on

payments made to a

resident for carrying out

any „work‟.

Section 194J provides for

deduction of withholding

tax at the rate of 10% on

payments made to a

resident towards, inter

alia, “fees for technical

services”.

To avoid controversy as to

the nature of service

would fall under section

194C or 194J, proposed

amendment to latter

section provided that the

payment made by way of

„fees for technical

services‟ shall be

subjected to withholding

tax @ 2%, which is pari-

materia to the rate of TDS

contained u/s 194C.

The proposed TDS rate of 2% under section 194J is

proposed to be extended to royalty being consideration

for sale, distribution, or exhibition of cinematographic

films.

Beneficial lower rate of 2% TDS is extended to

royalty relating to sale, distribution and exhibition

of cinematographic films.

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29 194K - Finance Bill introduced

new section 194K

providing for tax

deduction at source

@10% qua income

received by a resident in

respect of, inter alia, units

of a mutual fund, if the

same exceeds or is likely

to exceed Rs.5,000.

It is proposed to provide that the said section is also not

applicable in cases where income paid is in the nature of

capital gains.

Capital gains income from units of mutual funds

shall not be subjected to TDS u/s 194K.

The proposed amendment shall remove hardship of

deduction of tax on capital gains arising from

redemption of units, which would have been

difficult for the deductor to calculate.

30 194LBA Said section provides for

deduction of tax on

interest payable by

business trust to its unit

holders.

Amendment was proposed

in section 194LBA to

provide for tax deduction

@10% by business trust

on dividend income

received from special

purpose vehicles (SPV),

paid to unit holder.

Provides no tax shall be deducted by business trust on

dividend income received from SPV, paid to unit holder,

if the SPV referred to in the said clause has not

exercised the option of concessional tax rate u/s

115BAA

-

31 194N Levy of TDS @ 2% on

cash payments made

during the year, of sum

exceeding Rs.1 crore from

an account maintained

- The existing section is substituted to additionally

provide that in case where recipient of cash has not filed

the return of income until due date u/s 139(1), for

preceding three years, the provision of section 194N

would apply so that tax would be deducted:

- Widens the scope of section 194N to promote

cashless economy.

- Stringent provisions putting burden on non-

compliant deductees.

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with a banking company,

or a co-operative society

carrying on banking

business, or a post office.

- @ 2% for sum exceeding Rs.20 lakh upto Rs.1 crore;

- @ 5% on amounts exceeding Rs.1 crore.

The CG may notify the recipients in whose case the

aforesaid rates may not apply or reduced rates be

applicable.

- Would increase compliance burden on banking

companies as they would be required to check

return compliance by the deductees on cash

withdrawal.

Would also be applicable if return for preceding

three years filed by deductees belatedly u/s 139(4)

32-33 194O New insertion by the

Finance Bill, 2020.

Section 194-O inserted

w.e.f. AY 2021-22

provided for deduction of

tax from the payment

made by an e-commerce

operator to e-commerce

participant for the sale of

goods or provision of

services through a digital

or electronic facility or

platform facilitated by it.

It is proposed to remove the words “and is responsible

for paying to e-commerce participant” from the

definition of e-commerce operator.

Simultaneously, sub-section (6) has been inserted to

clarify that for the purpose of this section e-commerce

operator shall be deemed to be responsible for paying to

e-commerce participant.

Further, it has been proposed to empower the CBDT to

issue guidelines for removing the difficulties arising in

giving effect to the provisions of section 194-O. Each

such guideline shall be laid before each House of

Parliament and would be binding on the Income-tax

authorities and the e-commerce operator.

Presently, as per the definition of „e-commerce

operator‟, the scope of the proposed section was

limited to cases wherein the operator is a person,

responsible to make payment to the participants. On

the other hand, the Explanation appeared to have

expanded the scope of the main section by bringing

to tax net such transactions wherein the purchaser

makes payment to the supplier thereof directly, in

respect of sale of goods/services facilitated by the

operator.

The amendment seeks to remove any ambiguity and

reinforces applicability of TCS provisions on direct

payments made by a customer to the e-commerce

participant.

34 197A Section 197A(1F)

provides that no tax shall

be deducted from

- The proposed amendment seeks to empower the CG to

notify the specified payments even for „deduction of tax

Section 197A(1F) provides that no tax shall be

deducted from specified payments credited to

institutions, AOP or association/ bodies as notified

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specified payments

credited to institutions,

AOP or association/

bodies as notified by CG.

at lower rates‟.

The provision also enlarges the class of persons, which

may be notified by the CG.

by CG.

35-41 206C Applicability of TCS provisions [S.No. 35]

It is proposed to defer the applicability of amendments in section 206C of the Act from 01-04-2020 to 01-10-2020. This amendment is intended to allow enough time to

the assessees for ensuring preparedness of compliances under the newly inserted provisions.

TCS on LRS [S.No. 36-37]

Presently, the proposed amendment mandated an authorised dealer to collect the tax from a person remitting amount out of India under LRS arise only when the amount

or aggregate of such amount remitted during the year is Rs. 7 lakh or more. However, it was not specified in the proposed sub-section (1G) whether authorized dealer

shall be required to collect tax on the entire amount or only on the amount in excess of Rs. 7 lakh.

In this respect, a new proviso is inserted in sub-section (1G) to provide that tax shall be collected only on the amount in excess of Rs. 7 lakh except where the remittance

has been made for overseas tour program package.

TCS on currency remitted for overseas tour package [S.No. 37]

In terms of the proposed amendment, in case of an overseas tour program package, the seller of such package was required to collect tax from the buyer at the rate of 5%

irrespective of the amount he receives from the buyer for such package. No threshold limit has been proposed where a buyer directly makes payment to the seller of the

overseas tour program package.

As overseas travel is also covered under LRS. Consequently, a buyer may make payment to the seller indirectly through an authorized dealer, where TCS provision

apply only when the amount to be remitted out of India is Rs. 7 lakh or more, thereby avoiding TCS provisions upto payment of Rs.7 lakh.

To remove the window of advantage available to buyers making payment for overseas travel to a seller through an authorized dealer, sub-section (1G) is further

amended to provide that an authorised dealer shall be required to collect tax from the buyer of overseas tour program package irrespective of the amount to be remitted

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out of India for that purpose. Therefore, the authorised dealer shall be required to collect tax even if the amount or aggregate the amounts being remitted by the buyer for

the overseas tour package in a financial year is less than Rs. 7 lakh.

As per the aforesaid provision, a situation may arise where a buyer of an overseas tour program package makes payment to the seller through an authorized dealer and

accordingly both seller and the authorized dealer may collect tax from the buyer on the same amount which results in the double collection of tax. To remove this

ambiguity, a proviso has been inserted under sub-section (1G) to provide that the authorised dealer shall not collect the tax on an amount in respect of which the tax has

already been collected by the seller.

TCS on remittance of education loan [S.No. 37]

Sub-section (1G) has been further amended to provide a rate of 0.5% for collection of tax by an authorised dealer where the amount being remitted out of India is a loan,

which is obtained from a banking company (including any bank or banking institution) or any other financial institution notified by the Central Government for section

80E of the Act, for the purpose of pursuing any education. In such cases, TCS provisions would apply on the amount exceeding Rs. 7 lakh.

TCS on sale of goods [S.No. 38-40]

Sub-section (1H) of section 206C has been amended to provide that no tax shall be required to be collected in respect of goods exported out of India and goods imported

into India.

Insertion of sub-section (1I) and (1J) [S.No. 41]

It is proposed to empower the CBDT to issue guidelines for removing the difficulties arising in giving effect to the provisions of section 206C of the Act. Each such

guideline shall be laid before each House of Parliament and would be binding on the Income-tax authorities and on the person liable to collect TCS.

42 FA 2002 This amendment relates to provisions of the Finance Act, 2001 dealing with Additional Excise Duty.

43 DDT Section 115-O of the Act

provides for additional

income-tax chargeable @

In the Finance Bill, 2020,

it was proposed that any

dividend income/ income

Section 195 of the Act provides that tax on any amount

paid to non-resident shall be deducted at „rates in force‟

provided in the Part-II of the First Schedule.

The amendment brought by the Lok Sabha in

Finance Bill, 2020, takes out „dividends paid to

non-resident persons and foreign company‟ from

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15% (plus surcharge and

cess) on dividends

declared, distributed or

paid by domestic

companies, commonly

known as Dividend

Distribution Tax

(“DDT”).

from units, shall be

taxable in the hands of

recipients of such income

and that DDT shall be

abolished.

Simultaneous amendment

was proposed in sections

10(34) & 10(35) of the

Act to abolish the

exemption in the hands of

recipients of

aforementioned

distributed income

received on or after

01.04.2020.

Similarly, section

115BBDA providing for

taxation of dividend

income in excess of Rs.10

lakhs in the hands of

specified assessee was

proposed to be amended

to apply only to profits

distributed by a domestic

In the First Schedule, „dividends paid to non-resident

persons and foreign company‟ falls under the

„residuary‟ clause, thereby providing for withholding

rate of 30%/ 40%.

However, dividend received by a non-resident person or

a foreign company is taxable at the special rate of 20%

as provided under section 115A of the Act. Even under

the DTAAs entered into with different countries, the tax

rate varies from 5% to 15%.

Since no amendment was proposed in Finance Bill,

2020 providing for a specific rate of TDS in respect of

payment of dividend to non-residents, in the amended

Finance Bill, 2020 passed by Lok Sabha, it is provided

to include specific rate of 20% in Part-II of the First

Schedule for tax deduction at source on dividends paid

to any non-resident person or a foreign company.

The abovementioned TDS rate of 20% shall be further

increased by surcharge and cess, as applicable.

Accordingly, rate of TDS from payment of dividend to

non-resident or a foreign company provided under the

IT Act, including applicable surcharge plus cess, is

tabulated as under:

(I) Any person other than a foreign company:

the „residuary‟ clause under Part-II of the First

Schedule, wherein tax would have been required to

be withheld at the higher rate of 30%/ 40% by

specifically providing for TDS @ 20%, thereby,

reducing the hardship that may have been caused to

non-residents who otherwise are liable to pay tax on

dividend income at the rate of 20% or where benefit

of DTAA is available, at lower rates of 5%/ 10%/

15% as provided in the respective DTAAs.

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company on or before

31.03.2020.

It was also proposed to

amend section 194 of the

Act to provide that tax at

the rate of 10% has to be

deducted on dividend paid

to a resident.

The Finance Bill, 2020

amended the provisions of

sections 115-O, 10(34)

and 115BBDA, such that

any dividend received by

a shareholder on or after

01.04.2020 would be

taxable in his hands and

that the Company would

not be liable to pay DDT

on amount of dividend

declared, distributed or

paid on or after

01.04.2020.

If amount of dividend does not exceed INR 50

Lakhs- 20.80%

If amount of dividend exceeds INR 50 Lakhs but

does not exceed INR 1 Crore- 22.88%

If amount of dividend exceeds INR 1 Crore-

23.92%

(II) Foreign company:

If amount of dividend does not exceed INR 1

Crore- 20.80%

If amount of dividend exceeds INR 1 Crore but

does not exceed INR 10 Crore- 21.216%

If amount of dividend exceeds INR 10 Crore-

21.84%

18 80M The provision was Finance Bill, 2020 To address the concerns of the taxpayers and investor The provision was omitted by the Finance Act,

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omitted by the Finance

Act, 2003 w.e.f.

01.04.2004 and does not

form part of Income-tax

Act, 1961 at present.

proposed paradigm shift

in the taxation of dividend

income/ income from

units by abolishing DDT

and imposing liability on

the shareholders to pay

tax on such dividend

income by removing

consequent exemption

provided in the hands of

recipients of such income.

Finance Bill, 2020,

further, proposed to

introduce new section

80M providing for

removal of cascading

effect by allowing

deduction in respect of

amount of dividend

received by a domestic

company from another

domestic company, not

exceeding dividend

distributed by first

mentioned company on or

community, as a rationalization measure, further

amendment has been proposed to allow deduction

under section 80M to a domestic company in respect of

dividend received from a foreign company or a business

trust, in addition to dividend received from a domestic

company, provided it distributes dividend to its

shareholders before the due date.

2003 w.e.f. 01.04.2004 and does not form part of

Income-tax Act, 1961 at present.

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before the due date.

For the purposes of newly

inserted section 80M, due

date has been defined to

mean the date one month

prior to the date for

furnishing return of

income under section

139(1) of the Act.

44 FA 2018 This amendment relates to declaration under Provisional Collection of Taxes Act, 1931

45-59 Eq. Levy Equalization Levy was

introduced by the Finance

Act, 2016 w.e.f.

01.06.2016. Presently,

Equalization Levy is

required to be deducted @

6% of the consideration

for online advertisement

received or receivable by

a non-resident from:

a person resident in

India and carrying on


in Finance Bill, 2020.

The scope of Equalization Levy is proposed to be

extended to cover, in addition to consideration for

online advertisement, consideration received or

receivable for e-commerce supply or services made or

provided or facilitated by an e-commerce operator on or

after 01.04.2020 to the following persons:

(a) A person who is resident in India;

(b) A person who buys such goods or services or both

using IP address located in India;

c) A non-resident person in the following

circumstances:

The proposed amendment expanding the reach and

scope of Equalization Levy to supply of goods and

services appears contrary to the Government‟s

stated position, that the levy was only a temporary

measure and will have a direct impact on number of

offshore business models providing goods and

services digitally or electronically.

Since the burden to pay the Equalization Levy is

now on the non-resident e-commerce operators,

unlike Equalization Levy on online advertisements

on which the levy was required to be deposited by

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business or profession;

or

non-resident having

Permanent

Establishment („PE‟)

in India.

Sale of advertisement which targets a customer

who is resident in India or a customer who

accesses the advertisement through internet

protocol address located in India; and

Sale of data collected from a person who is

resident in India or from a person who uses

internet protocol address located in India.

the resident payer by way of withholding, it will be

a challenge for the Indian tax authorities to ensure

that such non-resident e-commerce operators pay

the Equalization Levy on a quarterly basis and that

statements are furnished and all compliances are

adhered with. Further, for the e-commerce operators

as well, doing business in India would certainly

become higher and more burdensome.

The proposed amendment, as presently worded, is

subjective and open to varying interpretations.

Absence of the meaning of „person resident in

India‟, whether resident for tax purposes or

otherwise, for the purposes of bringing the

transaction within the ambit of Equalization Levy

and absence of conditions to test whether an

advertisement „targets‟ a customer who is resident

in India is likely to lead to unnecessary litigation.

The expansion of scope of Equalization Levy,

further, is likely to increase the tax burden for the

non-resident e-commerce operators as the eligibility

of such levy for credit against taxes paid by the

non-resident e-commerce operator in the home

jurisdiction is uncertain, leading to risk of double

In respect of aforesaid consideration received or

receivable by an e-commerce operator, Equalization

Levy has been introduced @ 2%.

E-commerce operator is defined to mean a non-resident

who owns, operates or manages digital or electronic

facility or platform for online sale of goods or online

provision of services or both.

E-commerce supply or services is defined as under:

a) Online sale of goods owned by the e-commerce

operator;

b) Online provision of services provided by the e-

commerce operator;

c) Online sale of goods or provision of services or

both facilitated by the e-commerce operator; or

d) Any combination of above activities.

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It is, further, provided that Equalization Levy shall not

be levied on an e-commerce operator in the following

three situations:

1. Where the e-commerce operator has a PE in India

and the e-commerce supply or service is effectively

connected with such PE;

2. Where the e-commerce operator is liable to

Equalization Levy in respect of online

advertisement;

3. Where the sale, turnover or gross receipts of the e-

commerce operator from e-commerce supply or

services made or provided or facilitated to the

persons mentioned above is less than Rs. 2 crore on

an aggregate basis, during the previous year.

The obligation to deposit the Equalization Levy in the

case of e-commerce supply or services rests on the e-

commerce operator. Unlike the case of Equalization

Levy for online advertisements, the obligation does not

lie on the payer to deduct at source.

In terms of section 166A inserted by the Lok Sabha by

way of amendment in Finance Act, 2016, the e-

commerce operator is required to deposit Equalization

Levy to the credit of the Central Government quarterly.

taxation. For example, Article 2 of the Indo-US Tax

Treaty provides that taxes paid in India include “the

income-tax including any surcharge

thereon,…………, imposed under the Income-tax

Act and surtax”……“The Convention shall

apply also to any identical or substantially similar

taxes which are imposed after the date of

signature of the Convention in addition to, or in

place of, the existing taxes”. Under the said Treaty,

issue may arise as to whether the phrase “identical

or substantially similar taxes” includes Equalization

Levy?

With rate of taxation of the non-resident taxpayers

@ 40%, the Equalization Levy @ 2% of the sale

amount presupposes a profit margin of 5% from

such supply or sale of services by the e-commerce

operator.

64

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The due dates for deposit are specified as under:

Date of ending of quarter Due date

of FY

30th June 7th July

30th September 7th October

31st December 7th January

31st March 31st March

Amendments are further proposed in the relevant

sections of Finance Act, 2016 to provide for the

following:

Levy of simple interest @ 1% for every month or

part of month in case e-commerce operator fails to

deposit Equalization Levy to the credit of the

Central Government by the due date;

Levy of penalty of an amount equal to the amount of

Equalization Levy that the e-commerce operator

failed to pay where he fails to pay whole or any part

of the Equalization Levy required to be paid by him;

65

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Statement of Equalization Levy to be prepared and filed with the assessing officer or with any other

authority or agency authorized by the Board in this

behalf, on or before 30th June of the financial year

immediately following the financial year in which

Equalization Levy is chargeable;

Belated or revised statement can be filed at any time

before the expiry of 2 years from the end of the

financial year in which e-commerce supply or

services were made or facilitated.

Consequential amendments have also been introduced to

maintain parity between provisions relating to

Equalization Levy in respect of online advertisements

and e-commerce supply or services.

16 10(50) Section 10(50) of the

Income-tax Act, 1961, as

it presently stands,

provides that income in

respect of which

Equalization Levy has

been charged in terms of

Chapter VIII of Finance

Act, 2016 shall be exempt


in Finance Bill, 2020.

By virtue of the amendment scope of Equalization Levy

is now proposed to be extended to include consideration

received or receivable for e-commerce supply or

services made or provided or facilitated by an e-

commerce operator on or after 01.04.2020 to specified

persons.

Consequent amendment has been proposed in section

10(50) of the Act to exempt income received by an e-

commerce operator from e-commerce supply or services

Since charge of Equalization Levy on e-commerce

operators has been introduced w.e.f. 01.04.2020, the

exemption under section 10(50) of the Act should

also have been provided w.e.f. 01.04.2020 and not

01.04.2021. There appears to be a typographical

error to this effect.

66

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from income-tax in the

hands of the recipient of

income.

made or provided or facilitated on or after 01.04.2021,

on which Equalization Levy has been charged.

67

C lause wise comparison of CARO 2016 and CARO 2020

CARO 2016 CARO 2020 Nature of Change Clause

No Matter

Clause

No Matter

i (a) Whether the company is maintaining proper records showing full particulars,

including quantitative details and situation of fixed assets i (a) (A)

Whether the company is maintaining proper records showing full particulars, including

quantitative details and situation of Property, Plant and Equipment; No Change

- - i (a) (B) Whether the company is maintaining proper records showing full particulars of

intangible assets; New Sub Clause Added

i (b)

Whether these fixed assets have been physically verified by the management at

reasonable intervals; whether any material discrepancies were noticed on such

verification and if so, whether the same have been properly dealt with in the books

of account;

i (b)

Whether these Property, Plant and Equipment have been physically verified by the

management at reasonable intervals; whether any material discrepancies were noticed

on such verification and if so, whether the same have been properly dealt with in the

books of account;

No Change

i (c)

Whether the title deeds of immovable properties are held in the name of the

company. If not, provide the details thereof;

i (c)

Whether the title deeds of all the immovable properties (other than properties where

the company is the lessee and the lease agreements are duly executed in favour of the

lessee) disclosed in the financial statements are held in the name of the company, if not,

provide the details thereof

Clarification given for Non Disclosure

of Properties taken on Lease by the

Lessee

-

-

i (d)

Whether the company has revalued its Property, Plant and Equipment (including Right of

Use assets) or intangible assets or both during the year and, if so, whether the

revaluation is based on the valuation by a Registered Valuer; specify the amount of

change, if change is 10% or more in the aggregate of the net carrying value of each class

of Property, Plant and Equipment or intangible assets;

New Sub Clause Added

-

-

i (e)

Whether any proceedings have been initiated or are pending against the company for

holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45

of 1988) and rules made thereunder, if so, whether the company has appropriately

disclosed the details in its financial statements;


ii

Whether physical verification of inventory has been conducted at reasonable

intervals by the management and whether any material discrepancies were noticed

and if so, whether they have been properly dealt with in the books of account;

ii (a)

Whether physical verification of inventory has been conducted at reasonable intervals

by the management and whether, in the opinion of the auditor, the coverage and

procedure of such verification by the management is appropriate; whether any

discrepancies of 10% or more in the aggregate for each class of inventory were noticed

and if so, whether they have been properly dealt with in the books of account;

Auditor has to specifically comment

on coverage and procedure

adopted. Also Materiality has been

defined as 10% or more in each class

of Inventory

-

-

ii (b)

Whether during any point of time of the year, the company has been sanctioned

working capital limits in excess of five crore rupees, in aggregate, from banks or financial

institutions on the basis of security of current assets; whether the quarterly returns or

statements filed by the company with such banks or financial institutions are in

agreement with the books of account of the Company, if not, give details;


iii

Whether the company has granted any loans, secured or unsecured to companies,

firms, Limited Liability Partnerships or other parties covered in the register

maintained under section 189 of the Companies Act, 2013. If so,

iii

Whether during the year the company has made investments in, provided any

guarantee or security or granted any loans or advances in the nature of loans, secured or

unsecured, to companies, firms, Limited Liability Partnerships or any other parties, if so,-

-

-

(a)

whether during the year the company has provided loans or provided advances in the

nature of loans, or stood guarantee, or provided security to any other entity [not

applicable to companies whose principal business is to give loans], if so, indicate-


68


No Matter

Clause

No Matter

-

-

A

The aggregate amount during the year, and balance outstanding at the balance sheet

date with respect to such loans or advances and guarantees or security to subsidiaries,

joint ventures and associates;


-

-

B

The aggregate amount during the year, and balance outstanding at the balance sheet

date with respect to such loans or advances and guarantees or security to parties other

than subsidiaries, joint ventures and associates;


(a)

Whether the terms and conditions of the grant of such loans are not prejudicial to

the company’s interest;

(b)

Whether the investments made, guarantees provided, security given and the terms and

conditions of the grant of all loans and advances in the nature of loans and guarantees

provided are not prejudicial to the company’s interest;

Investment, Guarantee & Security

Given has been covered now

(b)

Whether the schedule of repayment of principal and payment of interest has been

stipulated and whether the repayments or receipts are regular;

(c)

In respect of loans and advances in the nature of loans, whether the schedule of

repayment of principal and payment of interest has been stipulated and whether the

repayments or receipts are regular;

No Change

(c)

If the amount is overdue, state the total amount overdue for more than ninety

days, and whether reasonable steps have been taken by the company for recovery

of the principal and interest;

(d)

If the amount is overdue, state the total amount overdue for more than ninety days, and

whether reasonable steps have been taken by the company for recovery of the principal

and interest;

No Change

-

-

(e)

Whether any loan or advance in the nature of loan granted which has fallen due during

the year, has been renewed or extended or fresh loans granted to settle the overdues of

existing loans given to the same parties, if so, specify the aggregate amount of such dues

renewed or extended or settled by fresh loans and the percentage of the aggregate to

the total loans or advances in the nature of loans granted during the year [not applicable

to companies whose principal business is to give loans];


-

-

(f)

Whether the company has granted any loans or advances in the nature of loans either

repayable on demand or without specifying any terms or period of repayment, if so,

specify the aggregate amount, percentage thereof to the total loans granted, aggregate

amount of loans granted to Promoters, related parties as defined in clause (76) of

section 2 of the Companies Act, 2013;


iv

In respect of loans, investments, guarantees, and security whether provisions of

section 185 and 186 of the Companies Act, 2013 have been complied with. If not,

provide the details thereof.

iv

In respect of loans, investments, guarantees, and security, whether provisions of

sections 185 and 186 of the Companies Act have been complied with, if not, provide the

details thereof;

No Change

v

In case, the company has accepted deposits, whether the directives issued by the

Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant

provisions of the Companies Act, 2013 and the rules framed thereunder, where

applicable, have been complied with? If not, the nature of such contraventions be

stated; If an order has been passed by Company Law Board or National Company

Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether

the same has been complied with or not?

v

In respect of deposits accepted by the company or amounts which are deemed to be

deposits, whether the directives issued by the Reserve Bank of India and the provisions

of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules

made thereunder, where applicable, have been complied with, if not, the nature of such

contraventions be stated; if an order has been passed by Company Law Board or

National Company Law Tribunal or Reserve Bank of India or any court or any other

tribunal, whether the same has been complied with or not;

Reporting on Deemed Deposits

covered now

vi

Whether maintenance of cost records has been specified by the Central

Government under sub-section (1) of section 148 of the Companies Act, 2013 and

whether such accounts and records have been so made and maintained.

vi

Whether maintenance of cost records has been specified by the Central Government

under sub-section (1) of section 148 of the Companies Act and whether such accounts

and records have been so made and maintained;

No Change

69


No Matter

Clause

No Matter

vii (a)

Whether the company is regular in depositing undisputed statutory dues including

provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty

of customs, duty of excise, value added tax, cess and any other statutory dues to

the appropriate authorities and if not, the extent of the arrears of outstanding

statutory dues as on the last day of the financial year concerned for a period of

more than six months from the date they became payable, shall be indicated;

vii (a)

Whether the company is regular in depositing undisputed statutory dues including

Goods and Services Tax, provident fund, employees' state insurance, income-tax, sales-

tax, service tax, duty of customs, duty of excise, value added tax, cess and any other

statutory dues to the appropriate authorities and if not, the extent of the arrears of

outstanding statutory dues as on the last day of the financial year concerned for a period

of more than six months from the date they became payable, shall be indicated;

No Change

vii (b)

Where dues of income tax or sales tax or service tax or duty of customs or duty of

excise or value added tax have not been deposited on account of any dispute, then

the amounts involved and the forum where dispute is pending shall be mentioned.

vii (b)

Where statutory dues referred to in sub-clause (a) have not been deposited on account

of any dispute, then the amounts involved and the forum where dispute is pending shall

be mentioned

No Change

-

-

viii

Whether any transactions not recorded in the books of account have been surrendered

of disclosed as income during the year in the tax assessments under the Income Tax Act,

1961, if so, whether the previously unrecorded income has been properly recorded in

the books of account during the year;

New Clause Added

viii

Whether the company has defaulted in repayment of loans or borrowing to a

financial institution, bank, Government or dues to debenture holders? If yes, the

period and the amount of default to be reported (in case of defaults to banks,

financial institutions, and Government, lender wise details to be provided).

ix (a)

Whether the company has defaulted in repayment of loans or other borrowings or in the

payment of interest thereon to any lender, if yes, the period and the amount of default

to be reported in the format given

Word Any Lender has been

substituted in place of financial

institution, bank, Government or

dues to debenture holders

- - ix (b) Whether the company is a declared wilful defaulter by any bank or financial institution

or other lender; New Sub Clause Added

-

-

ix (c)

Whether term loans were applied for the purpose for which the loans were obtained; if

not, the amount of loan so diverted and the purpose for which it is used may be

reported;

Term Loan removed from Old Clause

ix and added here in form of Sub

Clause

- - ix (d) Whether funds raised on short term basis have been utilised for long term purposes, if

yes, the nature and amount to be indicated; New Sub Clause Added

-

-

ix (e)

Whether the company has taken any funds from any entity or person on account of or

to meet the obligations of its subsidiaries, associates or joint ventures, if so, details

thereof with nature of such transactions and the amount in each case;


-

-

ix (f)

Whether the company has raised loans during the year on the pledge of securities held

in its subsidiaries, joint ventures or associate companies, if so, give details thereof and

also report if the company has defaulted in repayment of such loans raised;


ix

Whether moneys raised by way of initial public offer or further public offer

(including debt instruments) and term loans were applied for the purposes for

which those are raised. If not, the details together with delays or default and

subsequent rectification, if any, as may be applicable, be reported;

x (a)

Whether moneys raised by way of initial public offer or further public offer (including

debt instruments) during the year were applied for the purposes for which those are

raised, if not, the details together with delays or default and subsequent rectification, if

any, as may be applicable, be reported;

Term Loan removed from here and

covered in Para ix (c)

70


No Matter

Clause

No Matter

-

-

x (b)

Whether the company has made any preferential allotment or private placement of

shares or convertible debentures (fully, partially or optionally convertible) during the

year and if so, whether the requirements of section 42 and section 62 of the Companies

Act, 2013 have been complied with and the funds raised have been used for the

purposes for which the funds were raised, if not, provide details in respect of amount

involved and nature of non-compliance;

Shifted from Clause xiv of CARO

2016 to Clause x(b) of CARO 2020

x

Whether any fraud by the company or any fraud on the Company by its officers or

employees has been noticed or reported during the year; If yes, the nature and the

amount involved is to be indicated;

xi (a)

Whether any fraud by the company or any fraud on the company has been noticed or

reported during the year, if yes, the nature and the amount involved is to be indicated;

Word by its officers or employees

has bee removed

-

-

xi (b)

Whether any report under sub-section (12) of Section 143 of the Companies Act has

been filed by the auditors in Form ADT-4 as prescribed under rule 13 of Companies

(Audit and Auditors) Rules, 2014 with the Central Government;


- - xi (c) Whether the auditor has considered whistle-blower complaints, if any, received during

the year by the company; New Sub Clause Added

xi

Whether managerial remuneration has been paid or provided in accordance with

the requisite approvals mandated by the provisions of section 197 read with

Schedule V to the Companies Act? If not, state the amount involved and steps

taken by the company for securing refund of the same;

-

-

Clause Deleted

xii (a) Whether the Nidhi Company has complied with the Net Owned Funds to Deposits

in the ratio of 1: 20 to meet out the liability; xii (a)

Whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the

ratio of 1: 20 to meet out the liability; No Change

xii (b)

Whether the Nidhi Company is maintaining ten per cent. unencumbered term

deposits as specified in the Nidhi Rules, 2014 to meet out the liability;

xii (b)

Whether the Nidhi Company is maintaining ten per cent. unencumbered term deposits

as specified in the Nidhi Rules, 2014 to meet out the liability;

No Change

- - xii (c) Whether there has been any default in payment of interest on deposits or repayment

thereof for any period and if so, the details thereof; New Sub Clause Added

xiii

Whether all transactions with the related parties are in compliance with sections

177 and 188 of Companies Act, 2013 where applicable and the details have been

disclosed in the Financial Statements etc., as required by the applicable accounting

standards;

xiii

Whether all transactions with the related parties are in compliance with sections 177

and 188 of Companies Act where applicable and the details have been disclosed in the

financial statements, etc., as required by the applicable accounting standards;

No Change

xiv

Whether the company has made any preferential allotment or private placement

of shares or fully or partly convertible debentures during the year under review and

if so, as to whether the requirement of section 42 of theCompanies Act, 2013 have

been complied with and the amount raised have been used for the purposes for

which the funds were raised. If not, provide the details in respect of the amount

involved and nature of non-compliance;

-

-

Shifted to Clause x(b) of CARO 2020

from Clause xiv of CARO 2016

- - xiv (a) Whether the company has an internal audit system commensurate with the size and

nature of its business; New Clause Added

- - xiv (b) Whether the reports of the Internal Auditors for the period under audit were considered

by the statutory auditor; New Clause Added

71


No Matter

Clause

No Matter

xv

Whether the company has entered into any non-cash transactions with directors or

persons connected with him and if so, whether the provisions of section 192 of

Companies Act, 2013 have been complied with;

xv

Whether the company has entered into any non-cash transactions with directors or

persons connected with him and if so, whether the provisions of section 192 of

Companies Act have been complied with;

No Change

xvi

Whether the company is required to be registered under section 45-IA of the

Reserve Bank of India Act, 1934 and if so, whether the registration has been

obtained.

xvi (a)

Whether the company is required to be registered under section 45-IA of the Reserve

Bank of India Act, 1934 and if so, whether the registration has been obtained;

No Change

-

-

xvi (b)

Whethe the company has conducted any Non-Banking Financial of Housing Finance

activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India

as per the Reserve Bank of India Act 1934;


-

-

xvi (c)

Whether the company is a Core Investment Company (CIC) as defined in the regulations

made by the Reserve Bank of India, if so, whether it continues to fulfil the criteria of a

CIC, and in case the company is an exempted or unregistered CIC, whether it continues

to fulfil such criteria;


- - xvi (d) Whether the Group has more than one CIC as part of the Group, if yes, indicate the

number of CICs which are part of the Group; New Sub Clause Added

- - xvii Whether the company has incurred cash losses in the financial year and in the

immediately preceding financial year, if so, state the amount of cash losses; New Clause Added

-

-

xviii

Whether there has been any resignation of the statutory auditors during the year, if so,

whether the auditor has taken into consideration the issues, objections or concerns

raised by the outgoing auditors;

New Clause Added

-

-

xix

On the basis of the financial ratios, ageing and expected dates of realisation of financial

assets and payment of financial liabilities, other information accompanying the financial

statements, the auditor’s knowledge of the Board of Directors and management plans,

whether the auditor is of the opinion that no material uncertainty exists as on the date

of the audit report that company is capable of meeting its liabilities existing at the date

of balance sheet as and when they fall due within a period of one year from the balance

sheet date;

New Clause Added

-

-

xx (a)

Whether, in respect of other than ongoing projects, the company has transferred

unspent amount to a Fund specified in Schedule VII to the Companies Act within a

period of six months of the expiry of the financial year in compliance with second proviso

to sub-section (5) of section 135 of the said Act;

New Clause Added

-

-

xx (b)

Whether any amount remaining unspent under sub-section (5) of section 135 of the

Companies Act, pursuant to any ongoing project, has been transferred to special

account in compliance with the provision of sub-section (6) of section 135 of the said

Act;

New Clause Added

-

-

xxi

Whether there have been any qualifications or adverse remarks by the respective

auditors in the Companies (Auditor’s Report) Order (CARO) reports of the companies

included in the consolidated financial statements, if yes, indicate the details of the

companies and the paragraph numbers of the CARO report containing the qualifications

or adverse remarks.

New Clause Added

Direct Tax News.

• CBDT notifies two income tax return forms (ITR-1 Sahaj and ITR-4 Sugam) for tax year 2019-20 • CBDT further relaxes the time limit to file compounding application for past offences to 31 January 2020 • CBDT publishes draft of new Form 15E for making online application for lower withholding on payments to non-

residents • Bangalore Tribunal denies capital gains exemption on share buyback from 99.99% parent.

• Government reduced Cash Loan acceptance and repayment limit from Rs.20,000 to Rs.10,000 in aggregate. It also

reduced Limit of all expenses in aggregate to Rs 10,000 in cash vide gazette notification dated 29/01/202. • Vivad se Vishwas bill introduced in Lok sabha on 05-02-2020. • CBDT Issues clarification on the new residency provisions of NRI. Accordingly only income earned in India is

taxable. • CBDT also issues clarification of TDS on profit earned from mutual fund from the newly inserted section 194K.

Accordingly TDS will be deducted on dividend and not on capital gains. • Rule 21AE and Form 10-IC notified for opting new tax regime under section 115BAA and 115 BAB

• CBDT notifies that FPIs can apply for PAN through Common Application Form • Tribunal allows set-off of business losses against dividend income received from specified foreign company taxable

at special rates (TATA Motors).

72

Indirect Tax News

• One-time and final Extension of Sabka Vishwas (Legacy Dispute Resolution) Scheme has been extended up to 15 January 2020.

• Extension of due date for filing GSTR 9 and GSTR 9C to 31 January 2020 vide Removal of Difficulties of Order No.10/2019 - Central Tax. The Same further extended till 7th February 2020.

• Blocking of e-way bill in case of non-filing of GSTR 1 w.e.f 11 January 2020.

• Aadhar authentication is now mandatory for taking new GST registration.

• CBIC have made stringent rules for non-filers of GST returns including attachment of Bank accounts or cancellation of Registration as part of Standard Operating Procedures (SOP). SOP for non-filers of return to be followed vide Circular 129/48/2019 dated 24 December 2019

• RCM applicability on renting of motor vehicle in case supplier is non company and charging GST @ 5%.

• CBIC clarifies Social Welfare Surcharge to be paid in cash and not through duty credit scripts

• Ministry of Commerce and Industry has issued two Trade Notices on classification of imported goods under ‘Others’ category at the 8 digit HSN code

• Madras high court in the case of GE T &D India Limited held that service tax is not applicable on Notice pay recovery.

• HC strikes down levy of Integrated tax on inbound ocean freight under GST

• Integration of E-waybill portal with Vahan System of Transport Department

• CBIC Introduces machine release of goods.

• HC holds destination of goods relevant for determining place of supply under GST

• The recent integration of the E-way Bill system with the VAHAN System of the Transport Department. The vehicle number entered in the e-way bill will now be verified with the digitized data of the Registered Vehicles in India in the VAHAN System

73

GST Council update (meeting held on 14th March 2020).

• Interest to be charged on Net Cash Liability (retrospective amendment from 01.07.2017)

• Existing filing of GSTR-3B and GSTR-1 to be continued to 30.09.2020. • Relaxation for filing of GSTR-9C (Reconciliation Statement) for the FY 2018-19 up-to aggregate turnover of Rs. 5 crores. • Due date for filing the GSTR-9 and GSTR-9C for FY 2018-19 to be extended to 30.06.2020. • Late fees to be waived for delayed filing of GSTR-9 and GSTR-9C *for *FY 2017-18 and 2018-19 for taxpayers with*

aggregate turnover less than Rs. 2 crores.* • One time measure proposed for filing of application for revocation of cancellation of registration up to 30.06.2020

(applicable to cancelled registration till 14.03.2020). • For FY 2019-20, requirement of filing of GSTR-1 to be waived off for the persons who could not opt for special

composition scheme under notification No. 2/2019-CT (Rate) (in form CMP-02). • Approval given for “Know your Supplier” scheme. • Dates for implementation of e-invoicing and QR Code to be extended to 01.10.2020. • Extension of the time to finalize e-Wallet scheme up to 31.03.2021. • Extension of the present exemptions from IGST and Cess on the imports made under the AA/EPCG/EOU schemes up to

31.03.2021. • Allow for refund to be sanctioned in both cash and credit in case of excess payment of tax.

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International Tax News

• Turkey introduces 7.5% digital service tax as a part of expenditure taxes law.

• US & China's 1st Phase of Trade Deal finally is in place. Deal includes IP protection & enforcement, ending of forced technology transfer among others.

• The Italy Government has passed the New Value Added Tax (VAT) Measures. VAT measures which include postponement of VAT rate increase. The standard VAT of 22% and reduced VAT rate of 4%, 5% and will continue to prevail the year 2020. The rates are expected to increase from 2021 where the ordinary rate will rise to 25% in 2021 and 26.5% in 2022 and the reduced rate of 10% will be increased to 12%. Reduced rates of 4% and 5% will remain the same.

• Chile propose 19% VAT on foreign online services. Zimbabwe also proposed the same.

• Uzbekistan has implemented new VAT rules related to taxation of e-service.

• DST will go ahead with effect from April 1, 2020 in UK.

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APRIL TAX JOURNAL 2020 · 17 Amendments proposed in the Finance Bill 2020 passed by Lok Sabha 42 18...

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