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 30, 2015

MCA RELAXES PRIVATE COMPANIES FOR LOANS RECEIVED PRIOR TO 01.04.13 FROM DIRECTORS AND RELATIVES

Long awaited circular has been issued by MCA today for clarification on definition of deposits. With the introduction of section 74 which was notified on April 01, 2014, any deposit accepted by a Company had to be repaid in terms of section 74 (1) by 31st March,2015. Today MCA has clarified that amounts received prior to 1st April, 2014 by private companies from their members, directors or their relatives shall be considered as deposits under the Companies Act, 2013 because such receipts / advances were not treated as 'deposits' under section 58A of the Companies Act, 1956 and rules made there under.

It is further clarified that such amounts received by private companies prior to 1st April, 2014 shall not be treated as 'deposits' under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 but subject to the condition that  private company shall disclose, in the notes to its financial statement for the financial year commencing on or after 1st April, 2014 clearly specifying the figure along with the accounting head in which such amounts have been shown in the financial statement.

Any renewal or acceptance of fresh deposits on or after 1st April, 2014 shall, however, be in accordance with the provisions of Companies Act, 2013 and rules made there under.

Provisions of section 74 and its compliance before issue of Such Circular

Section 74 of the Act, 2013 provides that the in case of deposits accepted before the commencement of the Act, 2013, where the deposit or part thereof or interest thereon has remained unpaid on such commencement or where the deposit falls due after April 1, 2014, Company shall:

  • U/S 74(1) (a) File with the MCA a statement of deposit accepted and deposits remaining unpaid detailing the interest as well as the arrangement made for such repayment.
  • Before or on 31st March 2015 i.e within one year from such commencement or from the date on which sums are due, whichever is earlier to repay the amount outstanding with interest due there on.
Every company which has accepted deposits before the commencement of Act, 2013, to file DPT 4 with the MCA within 3 months from April 1, 2014 or from the date the deposits are falling due for payment. The details of all deposits accepted by the company and sums remaining unpaid on such deposits and the interest payable thereon along with the arrangements made for repayment are included in such form.

The due date for filing of DPT 4 was July 31, 2014 further extended up to August 31, 2014 to enable the companies to file the statements by way of General Circular no. 27/2014. Non-filing of such a statement is an offence and is punishable under Section 450 of the Act, 2013 and the Companies have to bear additional fee cost for completing the compliance by filing the DPT-4.

NOW MCA HAS RELAXED TO CERTAIN EXTENT BY NOT TAKING SUCH ADVANCES TAKEN PRIOR TO THE COMMENCEMENT OF COMPANIES ACT 2013, IN THE DEFINITION OF DEPOSITS AND ISSUED THE MOST AWAITED CIRCULAR NO.05/2015

Thursday, March 19, 2015

Consequences of Late Filing of Form MGT-14 and Condonation of Delay

As per Companies Act, 2013 it is mandatory for companies to inform the MCA about certain activities. Special Resolutions passed in the companies shall be filed with MCA in Form MGT-14, in which certified copies of such resolutions are to be attached.

Section 117 of the Companies Act, 2013 states that a copy of every resolution or agreement proposed in the meeting needs to be filed with the ROC within 30 days of passing the resolution.

List of resolutions to be filed with Form MGT-14 is divided in 4 categories:

  1. Under Section 117(3)
  2. Under Section 179(3)
  3. Provided as per Rule 8
  4. Miscellaneous Provisions

A detailed list of resolutions to be filed in Form MGT-14 is given here.

Filing of form MGT-14 is mandated by Section 117 of the Companies Act, 2013. Section 117(2) prescribes the penalty for non-filing of Form MGT-14. 

As per Section 117(2), if a company fails to file the resolution with Registrar of Companies within 30 days of passing resolution, the company shall be punishable with additional fees and fine as follows.

Additional Fees

The following table of additional fees shall be applicable for delays in filing of the form other than for increase in Nominal Share Capital.

Period Of Delay
Additional Fees
Upto 15 days (Sections 93, 139 and 157)
Equal to normal filing fees

More than 15 days and upto 30 days (Sections 93, 139 and 157) and upto 30 days in remaining forms.
2 times of normal filing fees

More than 30 days and upto 60 days
4 times of normal filing fees

More than 60 days and upto 90 days
6 times of normal filing fees

More than 90 days and upto 180 days
10 times of normal filing fees
More than 180 days and upto 270 days
12 times of normal filing fees
Note:
  1. Additional Fee or Late Filing Fee or Penalty is to be paid based on the number of days' delay in filing of Form MGT-14.
  2. Additional Fee is required to be paid with normal filing fees.
  3. For delay beyond 270 days, the second proviso to sub-section (1) of section 403 of the Act may be referred.
Penalty

If company fails to file E-form within 30 days + additional 270 days (total 300 days), then provision of Section 403(2) will be applicable.
  • The company shall be punishable with fine which shall not be less than Rs. 5,00,000 but which may extend to Rs. 25,00,000, and
  • Every office of the company who is in default, including liquidator of the company, if any, shall be punishable with fine which shall not be less than Rs. 1,00,000 but which may extend to Rs. 5,00,000.
But there is a way to save the company from a penalty of Rs. 5,00,000...

Compounding/Condonation of Delay under Section 460

Where any document or application required to be filed with the Registrar is not filed within the time specified, and a company has passed Special Resolution or Board Resolution but failed to file e-form MGT-14 in this respect beyond 300 days, it needs to file application for condonation of delay in FORM CG-1. The fees for condonation of delay is required to be paid with additional fees while filing the e-form MGT-14.

Two-step Process for Filing of Form in case of Delay beyond 300 Days

If Company fails to file MGT-14 within 300 days from the date of passing of resolution then following steps are to be followed:

Step 1: Authorize any Director or Secretary of the company in a Board Meeting to make application with Central Government u/s 460 for condonation of delay of filing of resolution. Prepare and submit an application for such condonation mentioning the facts of the resolution and the reason for non-filing within the stipulated time. Such an application shall be signed by any two Directors of the company.

Step 2: File Form CG-1

Saturday, March 14, 2015

Transfer of Shares in Indian Company by One Non-Resident to Another Non-Resident

Facts of the Case:
  • A non-resident company called ABC Ltd. incorporated in a tax haven (say, Mauritius) has shareholding of 25% in a private Indian company called ABC India Pvt. Ltd.
  • It wishes to transfer its shareholding in the Indian company to another company incorporated outside India (say, in Australia) called ABC Australia Ltd.
  • The consideration for transfer of shares is Rs. 1 million.
  • There is no tax on capital gains in the tax haven (in this case Mauritius, as per the India-Mauritius DTAA)

Questions:
  1. Can the Indian company refuse to acknowledge and register such transfer?
  2. What all procedures should be followed by ABC India Pvt. Ltd. to ensure compliance with various laws with respect to this share transfer from ABC Mauritius to ABC Australia?
  3. Will ABC India Pvt. Ltd. have to deduct any withholding taxes on the consideration received by ABC Mauritius, being an “Agent” of the latter as per the Income Tax Act?
Answer: Let us examine this case in light of the Companies Act 2013, the Stamp Duty laws, FEMA and RBI regulations, the Income Tax Act, 1961 and the India-Mauritius DTAA.

Companies Act, 2013

Can transfer of shares be restricted by other shareholders who hold 75% of the share capital?

The only restriction that can be placed on transfer of securities are those specified in any law or in the Articles of Association of the company. There is no general power to company to refuse the share transfer. [VB Rangaraj v. VB Gopalakrishnan 1991 AIR SCW 3020 = (1992) 1 SCC 160 = AIR 1992 SC 453]

Powers of Board to refuse transfer are only those specified in Articles. Board has no inherent or general powers to refuse a transfer [Hemangini Finance v. Tamilnadu Mercantile Bank Ltd. (1996) 22 CLA 108 (CLB)] The Articles cannot provide total prohibition on transfer. Further, the restriction on transfer should be fair and reasonable. However, regulations in Articles cannot be against provisions of any Act.

Relevant Extracts of Section 56 of the Companies Act, 2013

Section 56 (1): A company shall not register a transfer of securities of the company unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities.

Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.

Section 56(4): Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted within a period of one month from the date of receipt by the company of the instrument of transfer.

Relevant Extracts of Rule 11 of Companies (Share Capital & Debentures) Rules 2014

An instrument of transfer of securities held in physical form shall be in Form No. SH-4 (earlier Form 7B) and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty (60) days from the date of such execution.

Other Matters under Companies Act, 2013

Any transfer of shares should be in strict compliance with the Articles of Association, failing which the transfer is liable to be set aside [Satyanarayan Rathi v. Annamalaiar Textiles Pvt. Ltd. (1999) 19 SCL 56 = 95 Comp Cas 386 (CLB); Cruickshank Co. Ltd. v. Stridewell Leather Pvt. Ltd. (1996) 86 Cmp Cas 439 =4 SCL 202 (CLB); Chotoo Sud v. Bhagwan Finance Corporation Pvt. Ltd. (2006) 66 SCL 223 (CLB)]

In a private company, transfer of shares has to be in accordance with Articles of the company and transfer in violation of provisions of Articles would be void. [Stridewell Leathers v. Shoe Specialities Pvt. Ltd. (2001) 33 SCL 797 (CLB)]

The share transfer must be authorized by the Board of Directors, as all powers of company, except those specified in Act or Articles, are vested in Board. Authority can be delegated to one Director.
A security should be duly transferred or transmitted within one month from the date of receipt of instrument of transfer [Section 56(4)(c) of Companies Act, 2013]

In case of default, company is punishable with minimum fine of Rs. 25,000 which shall extend upto Rs. 5 lakhs. Every officer of the company who is in default is punishable with imprisonment of six months or fine which shall not be less than Rs. 10,000 but which may extend to Rs. 1 lakh, or both. [Section 56(4)(c) of Companies Act, 2013]

If the company fails to register the transfer within one month, the aggrieved person (transferee) can appeal to NCLT and NCLT can direct the company to register the transfer [Section 58(5) of Companies Act, 2013]. But the company can obviously refuse to register the transfer if the transfer is not as per the Articles of Association or the application is not duly stamped or for any other valid reason.

So long as the Transfer Deed is not registered, the transferee has not the perfected right of property which he would have if he had been the registered holder of the shares. Until the actual entry of name of transferee on the register, the transferor remains legal owner of the share. [LIC v. Escorts Ltd. (1986) 1 Comp LJ 91 = AIR 1986 SC 1370 = (1986) 1 SCC 264 = 59 Comp Cas 548]

A Transfer Deed is improper if:
  1. Document is not “duly stamped”
  2. Transfer deed is not signed by proper authority
  3. Signature of authorized person does not tally with signature available on record
  4. Original certificates not attached
  5. Instrument of Transfer not in prescribed Form SH-4
  6. Incomplete transfer deed
  7. Date stamp on transfer deed beyond limit
  8. Transfer deed submitted after book closure date

The Board may decline to recognize any instrument of transfer if:
  1. The instrument of transfer is not in the form as prescribed in rules;
  2. The instrument of transfer is not accompanied by the certificate of the shares to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer is not submitted (e.g. Power of Attorney, Board resolution, etc.)

Transfer of shares is complete between transferor and transferee only when instrument of transfer is signed and the share certificates are handed over. [Martin Castelino v. Alpha Omega Ship Management (2001) 33 SCL 210 (CLB)]

Transfer Deed can be signed by holder of Power of Attorney (PoA) on behalf of the transferor. Such PoA should be registered with the company beforehand or certified copy should be furnished along with the Transfer Deed. If PoA was already registered with company by submitting certified copy, its registration number and date of registration with the company shall be given on reverse of Transfer Deed at the place provided for that purpose in Form SH-4.

Transfer can be declined if it is in violation of Section 50 i.e. if Transfer Deed is not duly stamped or not lodged within prescribed time or if signature differs. [Hemagiri Finance v. Tamilnadu Mercantile Bank Ltd. (1996) 22 CLA 108 (CLB)]

Procedure for Registering Transfer or Refusal Thereof by the Board

Usually, the following steps are followed by a private company to give effect to the transfer of shares:
  1. Transferor should give a notice in writing for his intention to transfer his share to the company.
  2. Get the share transfer deed and transfer form in SH-4 duly executed both by the transferor and the transferee.
  3. The transfer deed should bear stamps according to the Indian Stamp Act and Stamp Duty Notification in force in the State concerned.
  4. The signatures of the transferor and the transferee in the share transfer deed must be witnessed by a person giving his signature, name and address.
  5. Relevant share certificate or allotment letter must be attached with the share transfer deed and delivered to the company.
  6. The share transfer deed should be deposited with the company within sixty (60) days from the date of such execution by or on behalf of the transferor and by or on behalf of the transferee.
  7. After receipt of share transfer deed, the Board shall consider the same. If the documentation for transfer of share is in order, board shall register the transfer by passing a resolution.

If a private company refuses to register transfer, it shall, within 30 days from date of lodgment of transfer deed send notice of refusal to the transferee and the transferor. The Board will have to give reasons for refusal to transfer, if it decides to refuse the transfer [Section 58 of Companies Act, 2013]
Right of refusal is not lost even if refusal is not communicated within prescribed period. However, penalty can be imposed. Further, transfer can be refused only for bona fide reasons and not arbitrarily or for collateral purposes. [Shailesh Prabhudas Mehta v. Calico Dyeing (1994) 80 Comp Cas 64]

Stamp Duty on Share Transfer Deed

Amount of Stamp Duty: Presently, the stamp duty payable is @25 Paise per Rs. 100 of consideration (and not on the basis of face value of shares). Therefore, for a consideration of Rs. 1 million the stamp duty amount will be Rs. 2,500/-

The term “duly stamped” means that the stamp should be of adequate value and crossed out if it is not an e-stamp.

If the share transfer deed does not bear the stamp payment as required, transfer cannot be recorded on basis of such transfer deed. Company can legitimately refuse to register such transfer deed.

FEMA Regulation/RBI Master Circular 

Relevant extracts of the RBI Master Circular No. 15/2014-15 dated 1st July, 2014 on Foreign Investments in India are reproduced below:

8B: Acquisition by way of transfer of existing shares by person resident in or outside India: Foreign investors can also invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents/NRIs for acquisition of shares by way of transfer in the following manner:

8 B.I: Transfer of shares by a Person resident outside India: Non Resident to Non-Resident (Sale/Gift): A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift, shares or convertible debentures to any person resident outside India (including NRIs but excluding OCBs).

Regulation 9 of The Foreign Exchange Management (Transfer of Security by a Person Resident outside India) Regulation 2000 states:

Transfer of shares and convertible debentures of an Indian company by a person resident outside India:-
(1) Subject to the provisions of sub-regulation (2), a person resident outside India holding the shares or debentures of an Indian company in accordance with these Regulations, may transfer the shares or debentures so held by him, in compliance with the conditions specified in the relevant Schedule of these regulations.
(2) (i) A person resident outside India, not being a non-resident Indian or an overseas corporate body, may transfer by way of sale, the shares or convertible debentures held by him to any person resident outside India:-
(ii) A non-resident Indian may transfer by way of sale or gift, the shares or convertible debentures held by him or it to another non-resident Indian.
Provided that the person to whom the shares are being transferred, in terms of Clauses (i) and (ii), has obtained prior permission of Central Government to acquire the shares if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied field in which the Indian company whose shares are being transferred is engaged.

Thus, from a bare perusal of the above stated provisions of Foreign Exchange Management (Transfer of Security by a Person Resident outside India) Regulation 2000, read with the Master Circular on Foreign Direct Investment, it is evident that there is no bar under Indian laws on the transfer of shares of an Indian Company by a non-resident to a non-resident. A general permission has been granted by the RBI for the said transaction.

Income Tax Regulations

Article 13 of the India-Mauritius Double Tax Avoidance Agreement (DTAA) on Capital Gains states:
  1. Gains from the alienation of immovable property, as defined in paragraph (2) of article 6, may be taxed in the Contracting State in which such property is situated.
  2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other State.
  3. Notwithstanding the provisions of paragraph (2) of this article, gains from the alienation of ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships and aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
  4. Gains derived by a resident of a Contracting State (Thomson Reuters Mauritius) from the alienation of any property other than those mentioned in paragraphs (1), (2) and (3) of this article shall be taxable only in that State (Mauritius).
  5. For the purposes of this article, the term "alienation" means the sale, exchange, transfer, or relinquishment of the property or the extinguishment of any rights therein or the compulsory acquisition thereof under any law in force in the respective Contracting States.

Keeping in mind the benefit of exemption from capital gains tax in India available on the basis of the India-Mauritius DTAA, and further, in light of the landmark judgment given by the Hon’ble Supreme Court in the Vodafone case which had similar facts, it can prima facie be stated that ABC India Pvt. Ltd. should not be liable to deduct withholding taxes on consideration received by ABC Mauritius Ltd.

However, in a country like India, such matters hold immense potential to attract the Income Tax Department and lead to litigation, where the contention of the Department is that the Indian company should have deducted withholding taxes on the capital gain made by the non-resident transferor. In such a scenario, the Indian company can safeguard itself by either taking an indemnity bond from the transferor, stating that the transferor will bear any expenses that may arise on the Indian company in case of any such litigation; or an Advance Ruling can be applied for on the matter by ABC India Pvt. Ltd. or ABC Mauritius Ltd.

Tuesday, March 3, 2015

Statutory Due Dates for March,2015

Date
Statutory Act
Applicable Form
Obligation
05/03/2015/06/03/2015
Service Tax
Challan No.GAR-7
Payment of Service Tax of Jan by Companies (MANDATORY E-PAYMENT in case tax amount exceeds one lakh in previous financial year) (6th for e- payment)
07/03/2015
Income Tax
Challan 281
Payment of TDS for month of Feb 2015
07/03/2015
Income Tax
F.No. 15G, 15H, 27C
Submission of forms received in Feb ‘2015 to IT Commissioner.
10/03/2015
Excise
ER-1
Return for Non SSI assessees for Feb 2015.
10/03/2015
Excise
ER-6
Return by units paying duty >1 crore (CENVAT +PLA) for Feb 2015.
10/03/2015
Excise
ER-2
Return for EOUs for Feb 2015.
15/03/2015
DVAT
DVAT 20
Deposit of DVAT TDS for Feb 2015.
15/03/2015
Provident Fund
E Challan Cum Return
E-Payment of PF for Feb 2015
15/03/2015
Income Tax
Challan 280
Payment of Final Installment of Advance Tax by the Assessee
21/03/2015
DVAT
DVAT 20 & Central
Deposit of VAT and CST for Feb 2015 (monthly tax period),   
22/03/2015
DVAT
DVAT 43
Issue of DVAT Certificate for deduction made in Feb 2015.
31/03/2015
Income Tax
ITR
Last date for filing of Income Tax Returns & Wealth Tax Returns  for Financial Year 2013-14
31/03/2015
Service Tax
GAR-7
Last date for the Payment of Service Tax(Monthly & Quarterly Cases)

Monday, March 2, 2015

Budget 2015: Highlights

The Finance Minister, Mr. Arun Jaitley, presented the Union Budget for 2015-16 on 28th February, 2015. We hereby present the highlights of the same for your quick perusal.

1. Income Tax


1.1 Individuals

1.1.1 No change in Income Tax Slab Rates. The old tax slabs continue, as reproduced hereunder.

Total Income (Rs.)
Tax Rate (AY 2016-17)
0 – 2,50,000
Nil
2,50,000 – 5,00,000
10%
5,00,000 – 10,00,000
20%
Above 10,00,000
30%


Basic Exemption Limit for Senior Citizens between the age of 60 to 80 years is Rs. 3,00,000, and that for Super Senior Citizens above the age of 80 years is Rs. 5,00,000.
Surcharge of 10% of Income Tax if Net Income exceeds Rs. 1 crore subject to Marginal Relief.
E. Cess of 2% and S.H.E. Cess of 1% on Income Tax and Surcharge continue.
Rebate u/s 87A for a resident individual whose income does not exceed Rs. 5,00,000 = 100% of Income Tax calculated before E.Cess or Rs. 2,000 whichever is less.

1.1.2 Additional Surcharge of 2% of the Income Tax has been levied on the Super Rich having Total Income exceeding Rs. 1 crore.
1.1.3 Section 80D: The deduction limit for spending on medical insurance premium has been raised from Rs. 15,000 to Rs. 25,000 for individuals and HUF, and from Rs. 20,000 to Rs. 30,000 for senior citizens.
1.1.4 Medical expenditure up to Rs. 30,000 to be allowed for super senior citizens (over 80 years) under Section 80D.
1.1.5 Section 80DDB: Limit of deduction raised to Rs. 80,000 for expenditure incurred on medical treatment of certain chronic and protracted diseases for super senior citizen (over 80 years). A prescription from a specialist doctor must be obtained for claiming this deduction.
1.1.6 Section 80DD and 80U: Limit of deduction on account of medical treatment of a dependent suffering from disability raised from Rs. 50,000 to Rs. 75,000. In case of severe disability, the limit has been raised from Rs. 1,00,000 to Rs. 1,25,000.
1.1.7 Section 80CCD: Additional deduction of Rs. 50,000 for contribution made towards National Pension Scheme, raising the limit to Rs. 1,50,000.
1.1.8 Sukanya Samriddhi Account Scheme: It is a small savings instrument for the welfare of a girl child, investment in which will be eligible for deduction under Section 80C. The interest accruing on the deposit and withdrawal as per the specified Rules will be exempt from tax.
1.1.9 Section 80G: 100% deduction in respect of donations made to the Swachh Bharat Kosh, the Clean Ganga Fund and the National Fund for Control of Drug Abuse.
1.1.10 Exemption limit of Transport Allowance doubled from Rs. 800 per month to Rs. 1600 per month. 


1.2 Corporate Assessees and Partnership Firms

1.2.1 Corporate Tax Rate proposed to be reduced from 30% to 25% over the next 4 years in a phased manner.

1.2.2 Certain exemptions may be withdrawn for corporate assessees, details of which will be announced in due time.

1.2.3 No change in tax rates for Partnership Firms.

1.2.4 The definition of “company resident in India” has been amended to provide that any company incorporated outside India shall be regarded as a resident in India in a previous year if its place of effective management, at any time during the year, is in India. Further, it is proposed to define the place of effective management to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are made.


1.3 Other Important Points 

1.3.1 Wealth Tax abolished.

1.3.2 Withholding Tax Rates on payments for Royalties and Fees for Technical Services have been reduced from 25% to 10%.

1.3.3 Threshold limit for applicability of Domestic Transfer Pricing provisions increased from Rs. 5 crores to Rs. 20 crores.

1.3.4 Quoting of PAN mandatory for all transactions above Rs. 1,00,000.

1.3.5 Cash acceptance of more than Rs 20,000 for purchase of immovable property to be prohibited.

1.3.6 Penalty of Rs. 1,00,000 to be imposed for incorrect particulars furnished in Form 15CA, 15CB for foreign remittances.

1.3.7 Advancement of “yoga” has been added in the definition of charitable activities allowed to be carried out by charitable trusts.

1.3.8 Activities carried out by Fund Managers of offshore funds in India shall not constitute a business connection of such offshore funds in India subject to the fulfillment of prescribed conditions. (This change has been proposed as many Fund Managers are carrying out their operations from outside India as till now, the presence of Fund Manager in India leads to the Fund being taxed as “resident in India” on the basis of control and management being in India.)

1.3.9 Implementation of GAAR postponed by 2 years and GST postponed by 1 year.


2.  Service Tax 

2.1 Rate of Service Tax on the value of all services is proposed to increase from existing 12.36% (including Education Cess and SHE Cess) to flat rate of 14% w.e.f. date of enactment of Finance Bill, 2015.

2.2 The definition of “consideration” has been amended to include “any reimbursable expenditure or cost incurred by the service provider and charged.”

2.3 It has been proposed that all services other than services specified in Section 66D(i) to (ii) when provided by Government, or a local authority to a business entity be charged to Service Tax. Thus making all services provided by the Government to a Business Entity taxable (effective date to be notified).

2.4 Further w.e.f. 1st April, 2015, services of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of certain specified building of Government, a local authority or a governmental authority have been made taxable in relation to following buildings: 
  • a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
  • a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
  • a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act.

2.4 For Travel Agents paying Service Tax as per Rule 6 of the Service Tax Rules, 2014, booking tickets for passenger travel by air, the rate of Service Tax has been increased from 0.6% to 0.7% of the Basic Fare in the case of domestic travel, and from 1.2% to 1.4% of the Basic Fare in the case of international bookings.

2.5 Exemption to folk artistes has been restricted and shall be available only when the consideration charged for such performance is not more than Rs. 1,00,000 and such service is not provided as a brand ambassador.

2.6 Services of transportation of foodstuff by rail or a vessel or a GTA has been restricted and shall now be available in relation to milk, salt and food grain including flours, pulses and rice. Accordingly, transportation of all other foodstuff including tea, coffee, jaggery, sugar, milk products, edible oil, etc. shall be taxable.

2.7 Services of transportation of goods of exporters by Goods Transport Agency (GTA) in a goods carriage from any container freight station or inland container depot or directly from the place of removal to a land customs station has been made exempt.

2.8 Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge from partial reverse charge mechanism.

2.9 The Central Government has been empowered to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% on the value of such taxable services.

2.10 Service Tax to be levied on the service provided by way of access to amusement facility providing fun or recreation in amusement parks and other such places. Further, service provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve is being exempted.

2.11 Services provided by mutual fund agents, mutual fund distributors and agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the exemption on such services.


3.  Other Important Points 

3.1 Central Excise duty raised to 12.5%.

3.2 Custom Duty to be reduced on 22 items.

3.3 The limit for availment of CENVAT credit extended to 1 year from the date of invoice.

3.4 In order to encourage digitization, the Government has allowed assesses to maintain records in electronic form subject to authentication through digital signatures.

3.5 Import tax on iron and steel increased to 15 percent from 10 percent.