An Analysis of Direct Tax Proposals and GST 2019-2020

 UNION BUDGET 2019-2020- HIGHLIGHTS OF THE FINANCE (NO. 2) BILL, 2019

The Union Budget presented, in the Second Innings of Government led by the Prime Minister Shri Narendra Modi, by the Finance Minister Smt. Nirmala Sitharaman on the 5^th July 2019; took most by surprise when they did not find the radical financial and fiscal reforms widely anticipated (like introduction of succession tax or estate duty or relaxation of domestic taxation) but instead found a substantial increase in the Surcharge for the Super-Rich  and slew of measures to attract foreign investments both by way of Foreign Direct Investments (the “FDI”) and the Foreign Portfolio Investments (the “FPI”) to kick start the transformation of the Indian Economy to make it US $ 5 Trillion in the next 5 years.

Pleases find in the ensuring paragraphs analysis of the nitty-gritty of the tax proposals contained in the Finance (No. 2) Bill, 2019.

It has been our endeavor to highlight the tax proposals which could possibly have a bearing on your money that you take home.

As an annual event, we once again make effort in this note to elucidate and analyze the major and important amendments proposed in the Direct Tax and Goods and Service Tax with their implications; and are sure that the same would be handy to you.

As of date, these are proposals only, and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2020-2021 relevant to Financial Year 2019-2020, unless specifically provided otherwise.

I. DIRECT TAXES

Amendments proposed under the Income-tax Act, 1961 (hereafter referred to as “the Act”).

A. Rates of Tax

1. Basic Exemption Limit, Income Slabs and Cess unaltered; Surcharge increased for Individuals, HUF, Association of Persons, Body of Individuals and Artificial juridical person having income above Two Crores:

Income thresholds, basic tax rates and Cess

The rates of Basic Tax and Cess as well as the Basic Exemption Limits and income slabs have been kept unaltered for all Assessee other than Company.

The applicable Basic Exemption and Income Slabs as well as basic tax rates, are given in the below Table for your ready reference:

Assessee	Basic exemption and Income Slabs for Financial Year 2019-20
	Total Income	Tax Rate
All Individuals, HUF, AOP and BOI (except those stated below)	upto Rs.2,50,000/-	Nil
	Rs.2,50,001/- to Rs.5,00,000/-	5% of income above Rs.2,50,001/-
	Rs.5,00,001/- to Rs.10,00,000/-	Rs.12,500/- plus 20% of income above Rs.5,00,001/-
	Above Rs.10,00,000/-	Rs.1,12,500/- plus 30% of income above Rs.10,00,001/-
Individuals, being resident, and above 60 years upto the age of 80 years	upto Rs.3,00,000/-	Nil
	Rs.3,00,001/- to Rs.5,00,000/-	5% of income above Rs.3,00,001/-
	Rs.5,00,001/- to Rs.10,00,000/-	Rs.10,000/- plus 20% of income above Rs.5,00,001/-
	Above Rs.10,00,000/-	Rs.1,10,000/- plus 30% of income above Rs.10,00,001/-
Individuals, being resident, and age 80 years and above	upto Rs.5,00,000/-	Nil
	Rs.5,00,001/- to Rs.10,00,000/-	20% of income above Rs.5,00,001/-
	Above Rs.10,00,000/-	Rs.1,00,000/- plus 30% of income above Rs.10,00,001/-

Surcharge

Further, the rate of Surcharge for all other Assessee, is kept unaltered (with marginal relief).

The Finance Minister has proposed an increased Surcharge @ 25% in case of Individuals, HUF’s, AOP’s BOI’s and Artificial juridical person having Total Income in excess of Rupees Two Crore but below Rupees Five Crore. However, marginal relief would be allowed to ensure that the additional tax and surcharge payable on excess of income over Rs. Two Crore is limited to the amount by which the income exceeds Rs. Two Crore.

Further, the Surcharge @ 37% is proposed for above Assessees having Total Income in excess of Rupees Five Crore (with marginal relief).

2. Increase in Turnover threshold for reduced Rate of Corporate Tax:

The Finance Minister has proposed to extend the benefit of reduced Corporate Tax of 25% (plus Surcharge and Cess, as applicable) for domestic companies having Turnover or Gross Receipts less than Rs.400 Crores in the Financial Year 2017-18.

B. Measures impacting Individuals, HUF’s and Small Businesses

3. Gift made to a person outside India deemed to accrue or arise in India:

To put to rest the controversy of taxation of receipts of gifts in hands of non-residents, the Finance Minister has proposed to insert new Clause (vii) to Section 9(1) to provide that any gift received by a non-resident from resident on or after 5th July, 2019 shall be deemed to accrue/ arise in India and thereby bringing such receipts into the tax net. However, the benefit of exceptions provided in fourth proviso to Section 56(2)(x) continue to apply in such cases. Also, the relevant article of applicable DTAA shall continue to apply for such gifts.

4. Extension of Deduction under section 54GB of the Act in respect of investment of Capital gain on residential property.

Hitherto, the Deduction under Section 54GB of the Act was only available upto 31^st March 2019 in respect of investment of the proceeds of Long Term Capital Gain arising from transfer of a residential property by subscribing to the equity shares of an eligible Company.

This deduction is now extended by another two years i.e. upto 31^st March 2021. Further, the condition of minimum shareholding of 50% of share capital or voting rights has been reduced to 25% and the condition restricting transfer of new asset being computer or computer software is relaxed to three years from the current five years.

5. Incentives to save more under National Pension Scheme (‘NPS’):

To promote higher savings and deduction claimable by the Government employees the employer contribution allowable for deduction under this section which was restricted to 10% of the Salary is now increased to 14 % of Salary. Further, any amount the Government employees invests under the National Pension Scheme would be allowable as a deduction under section 80CCD.

To attract more savings through NPS, the Finance Minister has proposed amendment in Section 10(12A) of the Act to provide that 60% of the total amount payable at the time of closure or opting out of the scheme would be exempt.

6. Incentives to tax payers to invest in Affordable Housing Projects:

The Finance Minister has proposed to insert a new section 80EEA so as to allow a deduction upto Rs.1,50,000/- in respect of interest on loan taken for a residential house property from a financial institution during the current financial year for purchase of a property whose stamp duty value does not exceed Rs. Forty-Five Lakhs and the Assessee does not own a residential house at the time of availing the loan.

We await clarification as to whether the above deduction would be available to Assesse if he/ she owns another residential Property after sanction of the above loan.

Corresponding amendment is also proposed in Section 80-IBA of the Act, which provides incentive to developer of ‘affordable houses’ to align with the definition prescribed under GST law.

7. Incentives to tax payers for moving to Electric Vehicles:

To mobilize spending on electric vehicles, the Finance Minister has also proposed to provide a deduction of Rs.1,50,000/- in respect of interest on loan taken for purchase of Electric Vehicle as prescribed in Section 80EEB.

8. Reaching out to high spenders to file income tax returns and for claiming Refund Due:

In order to ensure that persons entering into certain high value transactions do furnish their return of income, it is proposed to amend section 139 of the Act so as to provide that a person shall be mandatorily required to file his return of income, if during the previous year, the person:

(i) has deposited amounts exceeding Rs. One Crore in one or more Current Account maintained with any bank;

(ii) has incurred expenditure of exceeding Rs. Two Lakhs for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure exceeding Rs. One Lakh towards consumption of electricity; or

(iv) fulfils such other prescribed conditions, as may be prescribed;

(v) has claimed exemptions under Section 54 ,54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act.

Further, it is also proposed to provide that every claim of Refund shall be made by an Assessee by furnishing the Return of Income.

9. Tracking of transactions through PAN/Aadhar Number:

In order to have certain high expenditure transactions be tracked an amendment has been proposed in section 139A of the Act wherein the person could have the Aadhar number be mentioned for such transactions in case the person does not have a PAN.

Further in case a person who has a PAN has not linked his Aadhar number before the notified date then the PAN allotted to the person would be made in operative.

(The above amendments would be effective from 1^st September, 2019.)

10. Relief for Arrears of salary under Section 89:

In order to mitigate the hardships faced by the persons claiming relief under section 89 of the Act in computation of their tax liability it is proposed to amend Section 140A, 143, 234A, 234B and 234C of the Act to provide that relief under section 89 of the Act would be taken cognizance of for computing the tax liability.

One wonders as to how would the Assessee now be able to claim the refunds for the taxes demanded and paid incorrectly relating to Assessment Year 2007-08 onwards as the time limit for filing revised returns has already elapsed.

(The above amendment would be effective from Assessment Year 2007-08 onwards.)

11. Rationalizing TDS on Life Insurance proceeds not exempt under section 10(10D):

In order to make sure that the income on proceeds on Life Insurance Policy which are not exempt under Section 10(10D) of the Act are offered to tax appropriately, an amendment is proposed to Section 194DA of the Act wherein the TDS would now be done @ 5% of the income from the policy as earlier rate of 1% on the entire amount of the Policy proceeds.

(The above amendment would be effective from 1^st September, 2019.)

12. Clarification regarding TDS on Purchase of Immovable Property:

Section 194IA of the Act provides for TDS to be deducted on immovable property wherein the consideration exceeds Rupees Fifty Lakhs. It is now proposed to clarify that all amounts/ charges like club membership fees, Car parking fees or any fees which are incidental to transfer of the immovable property shall require deduction of tax at source under this section.

(The above amendment is proposed from 1^st September 2019.)

13. Expanding the scope of TDS provisions:

Section 194M of the Act is proposed to be inserted for payments made by Individuals and HUF (other than those currently covered under section 194C /194J of the Act) to a resident for carrying out any work or by way of Fees for professional services exceeding Rupees Fifty Lakhs in a financial year, shall at the time of credit or payment to the payee whichever is earlier deduct TDS at the rate of 5%. Tax deducted by the individuals and HUF shall be deposited using their PAN and requirement of obtaining TAN is not attracted in such case.

Consequential amendment is proposed in Section 197 of the Act to enable recipients of the above income to apply for a Lower Deduction Certificate.

There apart, another new Section 194N is proposed to be inserted to provide for TDS @ 2% on cash withdrawal made by any person in excess of Rupees One Crore in a year from any Bank or post office.

Further, the government has notified/ would notify class of persons to whom this requirement would not apply.

14. Online filing of Application for Lower Deduction in case of payment to Non Residents:

In order to track the TDS under section 195(2) of the Act to be made from the income accruing to Non- Resident on the income from certain transactions wherein the resident payer considers that the whole amount being paid to the Non-resident would not be taxable it is proposed that the forms and manner of making such application by online mode shall be prescribed, which currently is being done manually by the Assessing officer.

(This would be effective from 1^st November 2019.)

15. Relief for Non-deduction of TDS to Non Resident under Section 40 and 201 of the Act:

As per the provisions of Section 201 of the Act in case a person fails to deduct tax at source as per the provisions of the Act or fails to pay the same after deducting the same is considered as an Assessee in Default.

Amendments are being proposed in Section 201 and Section 40 of the Act so as to bring parity in tax treatment in respect of failure to deduct tax on payments due to non-resident vis-a-vis the existing provisions regarding payments to resident deductees, if the specified conditions are satisfied.

(This shall take effect from 1^st September, 2019)

16. Capturing Income on which no TDS is done:

In order to move to achieving the objective of the Government to provide Asessee’s with prefilled data of income of a person; an amendment is being proposed to Section 206A of the Act wherein banks including cooperative banks, companies etc. would have to file certain details in respect of income paid to residents wherein no tax has been deducted at source at such intervals as may be prescribed.

We are moving towards an era when the government would compile the details of your income and you would only have to vet the same by saying whether you are agreeable to the same or not and whether you are offering any additional income.

(The amendment would take effect from 1^st September, 2019.)

C. Compliance, Governance and Rationalization

17. Relaxation in conditions of special taxation regime for offshore funds:

With the intention of giving boost to Fund management activities in India, the Finance Minister has proposed to remove certain deterrents by proposing to amend Section 9A of the Act, so as to provide that:

a) Condition of minimum corpus of the Fund being Rs.ne Hundred Crore shall have to be fulfilled by the end of a period of six months from the end of the month of establishment or at the end of previous year, whichever is later; and

b) the remuneration paid by the Fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the amount calculated in a manner which would be prescribed separately.

(The above amendments are applicable retrospectively and would take effect from Assessment Year 2019-20.)

18. Exemption from application of Deeming Fair Market Value of unlisted shares:

To avoid genuine hardship in certain cases where the consideration for transfer of shares is approved by certain authorities and the person transferring the share has no control over such determination; it is proposed to amend Sections 56(2)(x) and 50CA of the Act appropriately to empower the Board to prescribe transactions undertaken by certain class of persons to which the provisions of section shall not be applicable.

19. Cancellation of registration of the Trust or Institution:

In order to ensure that the Trust or institution do not deviate from their objects, it is proposed to amend section 12AA of the Income-tax Act, to provide that:

• at the time of granting the registration to a trust or institution, the Principal Commissioner or the Commissioner shall also satisfy himself about the compliance of the trust or institution to requirements of any other law which is material for the purpose of achieving its objects;
• subsequently if it is noticed that the trust or institution has violated requirements of any other law which was material for the purpose of achieving its objects, and the order, has either not been disputed or has attained finality, then Principal Commissioner or Commissioner may cancel the registration of such trust or institution after affording a reasonable opportunity of being heard.

(This shall take effect from 1^st September, 2019)

20. Pass-through of Losses in cases of Category-I and Category-II Alternative Investment Fund:

In order to remove the genuine difficulty faced by Category-I and Category-II AIF’s, the Finance Minister has proposed to following amendment in Section 115UB:

a) the business loss of the investment fund, if any, shall be allowed to be carried forward and it shall be set-off by it in accordance with the provisions of Chapter VI and it shall not be passed onto the unit holder;

b) the loss other than business loss, if any, shall also be ignored for the purposes of pass through to its unit holders, if such loss has arisen in respect of a unit which has not been held by the unit holder for a period of atleast twelve months;

c) the loss other than business loss, if any, accumulated at the level of investment fund as on 31^st March, 2019, shall be deemed to be the loss of a unit holder who held the unit on 31^st March, 2019 in respect of the investments made by him in the investment fund and allowed to be carried forward by him for the remaining period calculated from the year in which the loss had occurred for the first time taking that year as the first year and it shall be set-off by him in accordance with the provisions of Chapter VI;

d) the loss so deemed in the hands of unit holders shall not be available to the investment fund for the purposes of Chapter VI.

21. Rationalization of provisions relating to maintenance of information and documents by certain persons:

It is clarified that the requirement in Section 92D of the Act, to provide that the information and document to be kept and maintained by a Constituent Entity of an International Group, and filing of required form, shall be applicable even when there is no international transaction undertaken by such Constituent Entity.

Further, it is also proposed to provide that information shall be furnished by the constituent entity of an international group to the prescribed authority.

D. Mobilization of Resources

22. Additional Income Tax on Buyback of shares by listed companies:

In order to curb tax avoidance practice adopted by the listed companies, on buy-back of shares from shareholders the Finance Minister has proposed to be cover all buybacks on or after 5^th July, 2019 by listed as well as unlisted companies under the provision of section 115QA of the Act. What happens to buybacks announced earlier and the transfer dates are after 5^th July, 2019.

Is it for buybacks announced after 5^th July, 2019? This would have the cash flow of the company go haywire.

Consequential exemption under Section 10(34A) is proposed to be extended to all shareholders of the listed company on which additional income -tax has been paid by the Company.

(This shall take effect from 1^st September, 2019)

23. Rationalization of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015:

To clarify the intent of the Black Money law, the Finance Minister has proposed to amend the definition of “assessee’ to include therein a non-resident or resident but not ordinarily resident who was resident in India either in the previous year to which the foreign sourced income relates or in the previous year in which the undisclosed asset located outside India was acquired.

Further it is also proposed to apply provisions of Income-tax Act relating to power of Joint Commissioner to issue directions for the guidance of the Assessing Officer with necessary modifications. It has also been clarified that Commissioner (Appeals) has power to either enhance or reduce the penalty under the Black Money law.

24. Rationalization of the Income Declaration Scheme, 2016:

In order to address genuine concern of the Income declarants, The Finance Minister has proposed to provide that where the any tax, surcharge and penalty, has not been paid within the due date, then Central Government may by notification prescribe the class of persons who may make the payment of such amount on or before a notified date, along with the interest at the rate of one per cent of every month; to get benefit of the Income Declaration Scheme, 2016.

Further, the Central Government may also notify the class of persons to whom the amount of tax, surcharge and penalty, paid in excess of the amount payable under the Scheme shall be refundable

(This shall take effect retrospectively from 1^st June 2016)

25. Rationalizing the provisions of the Prohibition of Benami Property Transactions Act:

In the Budget, the Finance Minister has made various amendments to clarify the intent and effectively initiate proceedings and recovery under the Prohibition of Benami Property Transactions Act.

(This shall take effect from 1^st September, 2019)

E. Futuristic Measures-promoting investments and clarity on taxation

26. Interest income of a non-resident arising from Rupee Denominated Bonds-Exempt-Clarification in law:

In order to give legal effect to the announcement made in Press release dated 17^th September, 2018 that interest payable by an Indian company or a business trust to a non-resident, including a foreign company, on Rupee denominated Bonds issued outside India during the period from September 17, 2018 to March 31, 2019 shall be exempt from tax, the Finance Minister has proposed consequential amendment to this effect in Section 10.

27. Incentives to International Financial Services Centre:

In order to further promote the development of world class financial infrastructure in India, and bring the International Financial Services Centre (‘IFSC’) at par other countries, following additional benefits are proposed by the Finance Minister:

• Tax-neutral transfer of certain securities by SEBI registered Category III Alternative Investment Fund (‘AIF’) in IFSC, of which all the unit holders are non-resident, are not regarded as transfer subject to fulfillment of specified conditions;
• Interest payable by a unit located in IFSC to a non-resident in respect of monies borrowed by it on or after 1st September, 2019 now exempt;
• Dividend paid out of current or accumulated income derived from operations in IFSC after 1st April 2017 shall not be subject to Dividend Distribution Tax;
• No tax on income distributed, on or after 1^st September, 2019, by a Mutual Fund of which all the unit holders are non-residents and which fulfills certain other specified conditions;
• Deduction of 100% of profits from IFSC for Ten consecutive years out of fifteen years, at option of the Assessee, from the year in which necessary permission was obtained.
• Benefit of deduction of Section 80LA available to IFSC by making consequential amendment in Section 115A.

28. Incentives to Non-Banking Finance Companies:

To provide level playing field to certain categories of Non-Banking Finance Companies (‘NBFC’s) which are adequately regulated, as compared to banks and public financial institutions it is proposed to amend section 43D of the Act to provide that interest income in relation to certain categories of bad or doubtful debts would be taxed in the year of receipt or credit to profit and loss account, whichever is earlier.

Consequential amendment is proposed in Section 43B to provide that deduction for interest on any loan or advances from a specified NBFCs would be allowed only if it is actually paid on or before the due date of furnishing the return of income under section 139 of the relevant previous year or in the year of actual payment.

29. Incentives to Start-up Companies:

To further facilitate ease of doing business in the case of an eligible start-up, the Finance Minister has proposed to amend Section 79 to provide that loss incurred in any earlier in the case of closely held eligible start-up, shall be allowed to be carried forward and set off against the income of the previous year if all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred, continue to hold those shares on the last day of previous year in which loss is set-off.

30. Incentive for Category-II Alternative Investment Fund:

In order to extend the benefit of non-applicability of provisions of Section 56(2)(viib) of the Act  i.e. issue of shares at premium; on the funds received by venture capital undertakings from Category II AIF, it is proposed to make suitable amendment in the section.

Further, it is also proposed that in case the Company does not comply with the specified conditions on the basis of which exemption from applicability of above Section is granted, then the relevant income would be subjected to taxation in the year of failure compliance with the conditions.

31. Rationalization of penalty provisions relating to under-reported income:

In order to provide for manner of computing the quantum of penalty in a case where the person has under-reported income and furnished his return for the first time under section 148 of the Act, it is proposed to suitably amend the provisions of section 270A of the Act.

(This shall take effect from 1^st April, 2017)

For example, if Mr. A files his Return of Income declaring total income of Rs. 5,00,000/-  for the first time under section 148 for Assessment Year 2017-18 then penalty may be levied on Mr.A in accordance with provisions of section 270A on Rs. 2,50,000/- (Rs. 5,00,000/- less basic threshold limit of Rs. 2,50,000/-) Now, if re-assessment is done of Mr. A and Total Income assessed is Rs. 12,50,000/- then this is the case of under reporting of income and penalty may be levied in accordance with provisions of section 270A on Rs. 10,00,000/- (Rs. 12,50,000/- less basic threshold limit of Rs. 2,50,000/-)

32. Rationalization of the provisions of section 276CC:

The existing provisions do not provide for taking into account Tax Collected at Source (‘TCS’) and Self-Assessment Tax(‘SAT’) for the purposes of determining the tax liability. Since the intent of said provision has always been to take into account pre-paid taxes, while determining the tax payable, it is proposed to amend the said section so as to make the legislative intention clear and to include the SAT, if any, paid before the expiry of the assessment year, and TCS for the purpose of determining tax liability.

Further, the existing threshold limit of tax payable is proposed to be increased from Rupees Three thousand to Rupees Ten thousand.

F. Easing of compliance burden and dealing with the Department

 33. Clarification with regard to power of the Assessing Officer in respect of modified return of income filed in pursuance to Advance Pricing Agreement (APA):

In order to give effect to the Advance Pricing Agreement (‘APA’), Section 92CD provides for mechanism, including filing of modified return of income by the taxpayer and manner of completion of assessments by the Assessing Officer having regard to terms of the APA.

Further, it is now clarified that in cases where assessment or reassessment has already been completed and modified return of income has been filed by the tax payer under sub-section (1) of said section, the Assessing Officers shall pass an order modifying the total income of the relevant assessment year determined in such assessment or reassessment, having regard to and in accordance with the APA.

(This will take effect from 1^st day of September, 2019.)

34. Clarification on Secondary Adjustment and giving an option to Assessee to make one-time payment:

In order to address such concerns and to make the secondary adjustment regime more effective and easy to comply with, it is proposed to amend section 92CE of the Act so as to provide that:

a) the condition of threshold of one crore rupees and of the primary adjustment made upto assessment year 2016-17 are alternate conditions;

b) the assessee shall be required to calculate interest on the excess money or part thereof;

c) the provision of this section shall apply to the agreements which have been signed on or after 1^st April, 2017; however, no refund of the taxes already paid till date under the pre amended section would be allowed;

d) the excess money may be repatriated from any of the associated enterprises of the assessee which is not resident in India;

e) in a case where the excess money or part thereof has not been repatriated in time, the assessee will have the option to pay additional income-tax at the rate of eighteen per cent on such excess money or part thereof in addition to the existing requirement of calculation of interest till the date of payment of this additional tax. The additional tax is proposed to be increased by a surcharge of twelve per cent;

f) the tax so paid shall be the final payment of tax and no credit shall be allowed in respect of the amount of tax so paid;

g) the deduction in respect of the amount on which such tax has been paid, shall not be allowed under any other provision of this Act; and

h) if the assessee pays the additional income-tax, he will not be required to make secondary adjustment or compute interest from the date of payment of such tax.

(The amendments proposed in para (i) to (iv) above will take effect retrospectively from the 1^st April 2018 and will, accordingly, apply in relation to the Assessment Year 2018-19 and subsequent assessment years.)

35.  Promoting Less Cash Economy:

In order to prohibit cash transactions and allow/encourage payment or receipt only through account payee cheque, account payee draft or ECS through a Bank, the Finance Minister has proposed various amendments so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account.

Further, every person carrying on business and having turnover or gross receipts exceeding Rs.50 Crores in the preceding year is required to provide a facility for accepting payments through prescribed electronic modes.

Also, Consequential penal provisions for non-compliance with the above requirement are also provided with effect from 1^st November 2019.

36. Clarificatry Amendments:

• Presently, for the Presently for tax-neutral demergers, resulting company is required to record the assets and liabilities of the undertaking at book value. Now, it is proposed to allow the resulting company to record the assets and liabilities at fair value in order to comply with applicable Indian Accounting Standards.
• For the purpose of filing country by country reporting report, the Accounting Year for an alternate reporting entity resident in India shall be the same as followed by ultimate parent entity.

(This will take effect from 1^st April, 2017.)

II. INDIRECT TAXES

The amendments proposed by the Finance Minister with respect to Goods and Service Tax are discussed herein below:

1. Constitution of National Appellate Authority for Advance Rulings (“NAAAR”):

Finance Bill 2019, introduced NAAAR which will be constituted from such date as may be notified.

An appeal can be filed before NAAAR in case of conflicting advance rulings pronounced in two or more States / Union Territories. Such appeals can be filed either by an officer authorized by the Commissioner within 90 days or by the taxpayer within 30 days from the date the last conflicting advance ruling is communicated to the applicant and to the officer respectively.

NAAAR shall issue an order within a period of 90 days from the date of filing of appeal Advance ruling pronounced by the NAAAR shall be binding on-

‒ the applicant and all registered persons having the same PAN;

‒ All concerned officers in respect of the applicant and all registered persons having same PAN

Amendment in Composition Scheme:

New sub-section 2A in section 10 of the CGST Act inserted to bring in an alternative composition scheme for supplier of services or mixed suppliers who were not eligible for the earlier composition scheme and having an annual turnover in preceding financial year up to Rs 50 lakhs in the preceding financial year, subject to certain conditions – The Scheme was introduced w.e.f. 1^st April 2019 vide Notification No. 2/2019 – Central Tax (Rate) dated 7 March 2019.

Further, explanation is being added to Section 10 to clarify that:

a. for computing the aggregate turnover to determine eligibility for the composition scheme, value of exempt supplies services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account; and

b. However, the aggregate turnover shall include the value of supplies made by a person from 1^st April of a financial year up to the date he becomes liable for registration under GST.

3. Increase in the Threshold Limit of aggregate turnover for obtaining the registration:

The threshold limit of aggregate turnover for registration for exclusive supplier of goods is increased from Twenty Lakh rupees to Forty Lakh rupees.

As per further explanation, if the person is engaged in exempt supply of services provided by way of extending deposits, loans or advances and in consideration received interest or discount then that person will be still considered as the engaged in the supply of goods.

4. Aadhar Authentication is mandatory in the procedure for registration to registered persons as well as by fresh registrants:

Every registered person, unless exempted, is required to authenticate or furnish proof of possession of Aadhar number, failing which the registration allotted shall be deemed to be invalid

Going forward such authentication or furnishing of proof of possession of Aadhar number shall also be applicable for obtaining new registration, unless exempted.

5. Amendment in provisions related to furnishing of returns to align with new return filing system:

Changes to section 39 (furnishing of returns), which were made earlier by CGST Amendment Act, 2018 but not made effective till date, have been brought in to align it with the new return filing system that is rolled out.

6. Interest to be levied on net GST liability discharged though Electronic Cash Ledger:

In case of late payment of tax, interest shall be computed only on the net GST liability, paid by debiting the Electronic Cash Ledger.

This benefit shall not be available where GST return is furnished after commencement of recovery proceedings for such tax period.

7. Commissioner empowered to issue extension Notification for Annual Return (GSTR-9):

Commissioner has been empowered to issue notification/instructions /directions to extend the time limit for furnishing the annual return upon the recommendation of GST Council.

8. Simplifying Electronic Cash Ledger:

Tax, interest, penalty, fee or any other amount lying in the Electronic Cash Ledger can be transferred to the heads for IGST, CGST, SGST, UTGST or Cess subject to the conditions, restrictions and in the manner to be prescribed.

In case IGST / CGST amount lying in Electronic Cash Ledger is transferred to SGST or UTGST head, the Government shall transfer to State / UT tax account an equivalent amount in the manner to be prescribed.

9. Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:

A dispute resolution mechanism called Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (“Scheme”) is proposed. The Scheme has been introduced with an objective to put to rest disputes relating to pending tax dues as declared by a declarant, pertaining to Service tax, Excise Duty, Education Cess, Secondary and Higher Education Cess, Swacch Bharat Cess, Krishi Kalyan Cess and other indirect taxes and Cess. The Scheme is to be effective from a date to be notified.

(Compiled By Partners of ‘B. S. Shah & Co., Chartered Accountant’ Namely (i) Bhupendra Shah -B.Com., L.L.B. (SP.), A.C.S., F.C.A. (ii) N. Krishnakumar- B.Com., F.C.A., Grad CWA and (iii) Shreyam Shah -B.Com. A.C.A.,DISA)