Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, March 11, 2019

Input Tax Credit (ITC) in case of Sales Promotion Activities

The GST Department has recently offered great relief to the FMCG industry by clarifying on a few matters with respect to supply of free articles under schemes such as "Buy One, Get One", where ITC was not being allowed in proportion to the free supplies made by such companies.

The details are as follows.

A. Free Sample and Gifts (No ITC): 

It is a common practice in trade and industry, such as, garment industries which often provide free sample or gifts to increase sales volume and to attract customers without any consideration.

According to section 7(1)(a) of said Act, supply made without any consideration shall be not treated as supply under GST (except in case of activities mentioned in Schedule I of the said Act).

It is clarified that input tax credit shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration.

However, where the activity of distribution of gifts or free samples falls within the scope of ‘supply’ on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC.

B. Buy One Get One Free Offer (ITC Available):

Offers like ‘buy one soap and get one free’, are actually not an individual supply of free goods but a case where a single price is charged for two or more individual supplies. Taxability of such supply will be dependent upon whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of the said Act.

It is also clarified that ITC shall be available to the supplier for the inputs, input service and capital goods used in relation to supply of goods or service or both as part of such offers.

C. Discounts on the Face of Invoice or Pre-determined (Reduced from Taxable Value):

Sometimes, suppliers give discounts which increase with the increase in purchase volume. For example, 10% discount on purchase of more than Rs. 5000 and 15% discount on purchase of more than Rs. 10000. Such discounts are often given in the invoice itself.

Suppliers also give periodic discounts, generally at end of the season or at the year end. The discounted amount would be excluded to determine the value of supply. Such discounts are passed by the supplier by issuing credit notes.

It has been clarified in this regard that ITC shall be available to the supplier for the inputs, input service and capital goods used in relation to supply of goods or service or both as part of such offers.

D. Secondary Discount (Not Deducted from Taxable Value):

When discount is provided after sale it is termed as secondary discount. For example, M/s A supplies 10000 packets of biscuits to M/s B at Rs. 10/- per packet. Afterwards, M/s A re-values it at Rs. 9/- per packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per packet.

Discounts in cases such as these do not fulfill the conditions laid out in section 15(3)(b) of the Act. It has been clarified in this regard that financial / commercial credit notes can be issued by the supplier even if they don’t fulfill the conditions under the aforementioned section, i.e. credit notes can be issued as a commercial transaction between two contracting parties.

It is also clarified that such secondary discounts shall not be excluded while determining the value of supply since they are not known at the time of supply, and there is no impact on availability or otherwise of ITC in the hands of supplier in this case.

Compiled by:

Shivam Tiwari
Articled Assistant
GST Team
Sandeep Ahuja & Co.

Saturday, March 9, 2019

Completion of Audit Training Workshop

A few Articled Assistants of Sandeep Ahuja & Co. completed a training workshop on Internal Audits on 9th March, 2019 at the Gurgaon office of the firm.

Left to Right (Standing): Ritik Chandel, Saino Susan Varghese, Robin Singh Dhama, Kriti Makker, Amit Soam, Megha Bansal, Vijay Raghav, Pushkar Tayal, Shivam Tiwari, Mayur Sahni, Tanveer Alam, Sahil Sardana, Shivangi Jain, Piyush, Akash Arora, Kashika Ahuja, Aditya Harsh, Lovely Sharma, Harshit Singh

Partners (Sitting): Sarthak Ahuja, Surekha Ahuja, Sandeep Ahuja

Thursday, March 7, 2019

March 2019 - Due Date Calendar

7th March 2019: Income Tax TDS/TCS payment for the month of February 2019.

10th March 2019: Monthly GST-TDS/TCS payment in form GSTR-7 for the month of February 2019 under GST.

11th March 2019: GST Filing of returns by registered person with aggregate turnover more than 1.50 crores (GSTR-1) for February 2019.

15th March 2019: Due date for forth and last installment/ entire amount of advance tax for Assessee having presumptive basis income,

15th March 2019: Due date for PF and ESIC payment.

20th March 2019: GST monthly return for the month of February 2019 (GSTR-3B) 

25th March 2019: Due date for filing monthly return of PF

30th March 2019: Challan cum statement for TDS u/s 194 IA for immovable property and 194 IB for rent payment for February 2019.

31st March 2019: Due date for filing of GSTR 3B and 1 from July 2017 to September 2018 without late fees

31st March 2019: Due date for filing of ITC 4 under GST for claiming Input tax credit on goods sent for job works for the period July 2017 to December 2018.

31st March 2019: Last date for linking Aadhar with PAN.

Tuesday, February 26, 2019

INC-22A: Active Company Tagging Identities and Verification (ACTIVE)

About the Form

The Central Government, vide notification dated 21st February 2019, notified the Companies (Incorporation) Amendment Rules, 2019, in which Rule 25A has been inserted which states that every company incorporated on or before the 31st December, 2017 shall file the particulars of the company and its registered office, in e-Form ACTIVE, i.e. Form INC-22A

Applicability of Form INC-22A

Every company incorporated on or before the 31st December, 2017 shall file the particulars of the company and its registered office, in e-Form ACTIVE.

However, the Companies which have not filed its financial statements or annual returns (i.e., AOC-4 and MGT-7) shall be restricted from filing INC-22A.

And, the companies that have been struck off or amalgamated or dissolved or under process of striking off or under liquidation as recorded in the register are not required to fill e-Form ACTIVE.

Information required to be furnished in Form INC-22A
1. CIN of the Company
2. OTP sent on the email id of the company
3. List of Directors as on date of filing
4. Details of Statutory Auditors
5. Details of Cost Auditor, Company Secretary and CFO of the company, if applicable
6. Details of the Managing Director or CEO or Manager or Whole-time Director of the company
7. Details of form AOC-4/AOC-4(XBRL) and MGT-7 for FY 2017-18 (SRN)

The form shall be digitally signed by one director in case of OPC, and, in case companies other than OPC, form shall be signed by one director and one KMP or two directors.

The eForm shall also be digitally signed by a Chartered Accountant/ Cost Accountant or a Company Secretary in whole-time practice.

Due Date to file Form INC-22A

The companies, required to file in e-Form ACTIVE, shall file it on or before 25th April 2019.

Consequences of late filing or Non-filing

Late Filing: In case company does not file eForm INC-22A within the time limit, filing of eForm shall be allowed with a fee of Rs. 10,000.

Non-Filing: In case company does not file eForm INC-22A, the Company shall be marked as “ACTIVE-non-compliant” on or after 26th April, 2019. Also, request for recording the following event-based information or changes shall not be accepted by the Registrar from such companies, unless the form is filed:
a. SH-07 (Change in Authorized Capital);
b. PAS-03 (Change in Paid-up Capital);
c. DIR-12 (Changes in Director except cessation);
d. INC-22 (Change in Registered Office);
e. INC-28 (Amalgamation, de-merger)

Attachment required to file Form INC-22A

Photograph of Registered Office showing external building and inside office, also showing therein at least one director/KMP who has affixed his/her Digital Signature to this form.

Friday, February 15, 2019

Taxation in India of Digital Businesses by Non Residents

Update based on the PIB Press Release dated 12-Feb-2019.

To address the challenges posed by the Non Resident enterprises  conducting their business through digital means in the India remotely, the following measures have been taken under the existing law:

a)  A new levy viz. 'Equalisation Levy' was introduced by the Finance Act, 2016 for taxation of the digital economy based on OECD Base Erosion and Profit Shifting (BEPS) suggested measures.
b)  Presently, the levy is charged @ 6% of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment ('PE') in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India, where the aggregate amount of such consideration exceeds one lakh rupees (Rs.100000) in a previous year.
c)   The Equalization Levy tax collection exceeded Rs. 550 crore for FY 2017-18.

2. Significant Economic Presence” OF NON RESIDENTS IN INDIA-
a) Section 9(1)(i) of the Income-tax Act, 1961 as amended introduced the concept of "Significant Economic Presence" (SEP) for establishing "business connection" in the case of non-resident in India. Accordingly, significant economic presence shall mean–

  1. Based on Amount: Any transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeds the amount as may be prescribed; or

  1. Based on number of Interactions: Systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means.
(Suggestions/comments of stakeholders and the general public are invited to prescribe the thresholds to establish SEP of a non-resident in India )

3. GAAR Applicability: If digital businesses operated by non-residents are structured to artificially avoid establishment of a "business connection" or "permanent establishment" in India, including by way of claiming the activities carried out in India to be preparatory or auxiliary in nature, the GAAR provisions under the Income-tax Act may become applicable to the income of such digital businesses in India.

4. TAX based on significant economic presence (SEP) on non residents’ income earned by digital businesses IN DTAA & NON DTAA JURISDICTION-

i.  If India does not have DTAA - Tax is expected to increase tax collection by establishing business connection .

ii. If India already has a  DTAA - However if Non resident operating out of jurisdictions with which India already has a DTAA, Tax based on SEP will only be effective after renegotiation of such DTAA which will be based on international consensus.