Wednesday, April 26, 2017

Due date of Uploading ST-3 for half year ended on 31.03.2017 extended to 30.04.2017

CBEC has extended the due date for filing of Service Tax return for the half year 2 of Financial year 2016-17 i.e half year ended on 31.03.2017 from 25.04.17 to 30.04.17 due to non- availability of easy or smooth website of ACES for uploading ST-3

Friday, April 21, 2017

Impact of GST on Working Capital Requirements for Exporters

Under GST the exporters are effected a lot because of Custom Set Off to all importers and tax payments or duty payments for goods to be exported. Brief summary is as under:
1. Restriction on Procurement of Duty paid Inputs for Exports outside India.
The proposed GST structure stipulates that all the applicable duties must be paid at the time of procuring inputs irrespective of the fact whether such inputs are to be utilized for export of Goods or services or otherwise.  
Import of Raw Materials only with Payment of Input Duties.
(a) Current Indirect Tax Regime :  An exporter can procure raw materials without any payment of duty as allowed under Advance Authorization Scheme.
As per Export Promotion Capital Goods Scheme, capital goods can be sourced from overseas without paying any duty provided such importer of capital goods shall have to export goods six times the value of duty saved on such import of machinery during the next six years.
(b) Proposed GST Regime : Option  to procure Duty free inputs for export of goods not available under GST Regime.
This structural shifts in GST regime will significantly increase the working capital requirements due to payments of input duties resulting in blocking of much needed cash for the enterprises. This  situation can be understood through the examples mentioned below : 
Example I :  An exporter wants to import raw material from USA.
        i.            Payment of Import Duties @ 20% (assume):
                TOTAL Custom Duties leviable @ 24%.
      ii.            Current Indirect Regime: As per advance authorization scheme, no Custom duties shall be payable by the exporter .
    iii.            Under Proposed GST Regime:  Only exemption in respect of Basic Custom Duty @7% shall be allowed to exporter & exporter will be liable to  pay IGST on such import.
The exporter shall get refund of such duties paid but only after export consideration has been realized i.e. working capital requirement of exporter has been increased by the amount of Duty paid on inputs till the time refund has been received by the exporter.  
Increase in Finance Costs  : If cost of capital is assumed to be 12% then, the exporter will further incur an additional interest cost of 1.56% (i.e. 12% of 13% IGST paid on Import), thereby further increasing burden of interest on the  exporter.
i.e.  around 14 % of the value of export will be blocked for the period of refund months leading to an increase in working capital requirement of exporters.
Example II: Import of capital goods from outside India by an Exporter.
If the exporter decides to import Machinery from outside India, then such an exporter shall have to pay import duty of around 15% (let's assume) on such machinery which will be blocked for a period of 6 years i.e. the time allowed under Export Promotion Under Capital Goods Scheme for meeting the export requirement of 6 times of the amount of the duty saved which was the case under Pre GST regime.
Increase In Borrowing & Finance Costs: Now for  an capital import value of INR. 1000, if the exporter takes a loan @ 12% for paying 15% IGST along with cost of asset, the  exporter will now have to borrow more to import capital goods leading to higher interest payments & strain on financial resources of exporter.   
Accordingly , we can conclude that working capital requirements of exporters are definitely set to increase with the requirement of payment of input duties to the supplier which were exempted earlier.
2. GST Applicability on Stock Transfers also: Under current regime, stock transfers are not subject to tax. However, as per model GST law, stock transfers are deemed as supplies & GST will be applicable on them. However, GST paid at this stage will be available as credit only when goods are finally sold to the ultimate consumer, thereby straining the cash flow positions of the domestic suppliers.   
3. Options available to exporters for claiming benefit of Duties/Taxes paid on inputs.
It has always been the policy of the Govt. to promote export of goods. Consequently, export goods are not burdened with any type of the taxes & duties on procurement of goods for the purpose of exports.
Under the Current Indirect Tax regime, exporter can avail any of the following options :
        I.            Duty Free Procurement of Goods: Procurement of Duty free goods for the purpose of manufacture of goods  which are exported without payment of any export Duty. This Option is no longer available under proposed GST regime.
      II.            Claim refund of Duty paid on Inputs: Procurement of Duty Paid inputs used in manufacture of goods for the purpose of export of goods outside India without payment of Duty. The Duty paid on inputs shall be claimed as refund once goods are exported & payment is duly received in convertible foreign exchange.
    III.            Rebate Claim of Duty: Procurement of Duty paid inputs & avail CENVAT Credit in respect of such goods. Export goods are manufactured, cleared on payment of duty  after utilizing the CENVAT Credit. Unutilized Credit is then requested by filing a Rebate Claim of Duty.

Under Proposed GST Regime, Option to procure Duty Free inputs have been done away with.
Thus, under proposed GST regime, exporters will be left with Option II & III mentioned above leading to an increase  in working capital requirements of the exporters.
Extent of Increase in Working Capital Requirements: An exporter  shall have to arrange additional finance for payment of duties on inputs & such finance shall be blocked till the time  refund has been received by the Exporter in case of Option II.
Whereas in case of Option III, exporter can utilize the duties paid on inputs for payment of Output Duty & any remaining Input Credit of Duties shall be refunded to the Exporter by filing an application for Rebate.  
Accordingly , it can be deduced from the  above hypothesis that Option II ,i.e. Procurement of duty paid inputs , export of goods without payment of duty  & claiming refund of duty, requires more working capital on part of exporters since under Option II  working capital for an amount equal to Input duties paid by exporter shall be blocked till the time refund is received.
4. Provisions Relating to Refund under Model GST Law
Processing of refunds has been made a 100% online process is expected to be a faster & smoother process. All data relating to refunds have to be uploaded electronically thereby resulting in  faster scrutinization & verification of refunds.
4(i). Process of Refund under GST:
a.     Application form GST RFD-1 shall be filed electronically through GSTN portal.
b.    An acknowledgement of application in Form  GST RFD-2 shall be generated through common portal electronically clearly indicating date of filing claim for refund.
c.     If any deficiencies are noticed in such application, such deficiencies shall be communicated to applicant in Form GST RFD-3 through GSTN Portal electronically.
d.    Provisional Refund: In case of exporters, an order of provisional refund in Form GST RFD-4 shall be granted within a period of 7 days of acknowledgement of application.
e.    Final Order of Refund : The amount of refund to which the applicant is entitled shall be issued in Form GST RFD -5.
f.     Order of Adjustment of Refund against outstanding demand or dues: An order in Form GST RFD -6 giving details of such adjustment shall be issued to applicant through common portal.
g.    Refund shall be credited electronically to the bank account of applicant via RTGS, ECS etc.
4(b). Time limit for making an application: As per model GST Law, an application for obtaining refund shall be made within  2 years from the relevant date.
4(c). Time limit for Grant of refund : Refund shall be granted within 90 days of receipt of an application for refund. If refund is not granted within the abovementioned time limit, then interest @ 6% shall be payable to the exporter in respect of such refund from the date of expiry of 90 days. 
No refund to be paid if amount of refund is less than INR 1,000.

 Contributed by Team GST at Sandeep Ahuja & Co

Wednesday, April 19, 2017

E-Way Bill for movement of Goods worth Rs.50000/- or more under GST

CBEC on 14th April, 2017 released Electronic Way (E-Way) Bill Rules. These rules require furnishing of information regarding any movement of goods in an online manner by generating an E-Way Bill.
Some of the Major features of E-way Bill Rules 2017 are as follows: 
Meaning of E-Way Bill: - E-way bill is an electronic way bill for movement of goods which can be generated on the  GSTN (common portal). A ‘movement’ of goods of more than Rs 50,000 in value cannot be made by a registered person without an e-way bill.
1. Information to be furnished before movement & transportation of goods  by way of generation of an E-Way Bill if the Value of consignment exceeds INR. 50,000.
An E-Way bill shall be generated  when there is :
  1. In relation to a ‘supply’
  2. For reasons other than a ‘supply’ i.e.  returns etc.
  3. Due to inward ‘supply’ from an unregistered person.
Basically supply means –
a.    Sale – sale of goods and payment made
b.    Transfer – say branch transfers
c.    Barter/Exchange – Payment by goods instead of money.
Therefore, e-way bills must be generated on the common portal for all types of movement of goods.
2.  Person Responsible for Generation of E-Way Bills & Forms for E-way bill Generation.
a.    Registered Person : When goods are transported by Registered persons only.
When goods are transported by consignor or consignee E-way bill shall be generated by Consignor/consignee  electronically after filling information in Part B of Form GST INS-01.
In this case it is not necessary that Goods are transported by consignor/consignee in his own vehicle. Goods may be transported in hired vehicles also.

b.    Transporter : When goods are handed over to transporter.
The registered person whether consignor or consignee shall furnish the information relating to transporter in Part B of Form GST INS-01 & E-Way bill shall be generated by transporter on the basis of information filled by registered person in Part A of Form GST INS-01.
Further, An E-Way bill has to be generated by transporter where an E-Way bill has not been generated by consigner as per provisions of Sub Rule (1) & value of consignment exceeds INR 50,000.
3. Generation of Unique E-Way bill Number (EBN)
On generation of the e-way bill on the common portal, a Unique E-Way Bill Number (EBN) shall be made available to the supplier, the recipient and the transporter on the common portal.

4. Option to generate E-Way Bill even if value of consignment does not exceed INR 50,000.
A registered person or the transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is less than fifty thousand rupees.

5. Consolidated E-Way Bill in respect of multiple consignments transported in a same carriage
The registered person shall enter the details of E-Way bills generated on the electronic portal  & generate a Consolidated E-Way bill in respect of such multiple consignments.

6. Transfer of goods from one conveyance to another by the Transporter.
Any transporter transferring goods from one conveyance to another in the course of transit shall, before such transfer and further movement of goods, a new E-Way bill shall be generated on the common portal in FORM GST INS-01 specifying therein the further  mode of transport.
This clause covers situation where goods are transported by one or more modes of transport including Rail or Road or Airways or in case of accidents requiring shifting of goods from one carriage top another.

7. Cancellation of E-Way Bill
An E-Way bill shall be cancelled within 24 hours of its generation if :
a. if goods are not being transported at all.
b. if goods are not being transported as per the specifications of E-Way bill
 The E-Way bill may be cancelled electronically on the common portal or through a facilitation centre notified by the Commissioner.

8. Period of Validity of E-Way Bill.
Validity of an E-way bill depends upon the  distance to be travelled by the goods. An E-way bill shall remain valid for period of time as mentioned below.
Distance travelled by Goods
Valid from
Less than 100 km
Time at which e-way bill is generated
1 day
100 km to 300 km
3 days
300 km to 500 km
5 days
500 km to 1000 km
10 days
1000 km or more
15 days

9. Documents & Devices to be carried by a Person In Charge of Conveyance.

The person in charge of a conveyance shall carry —
(a) the invoice or bill of supply or delivery challan, as the case may be; and
b) a copy of the e-way bill or the e-way bill number, either physically or mapped to RFID embedded on to the conveyance.
Invoice Reference Number  may be produced in lieu of Tax Invoice.
A registered person may obtain an Invoice Reference Number from the common portal by uploading on the portal , tax invoice issued by him in FORM GST INV-1, and produce the same for verification by the proper officer in lieu of the tax invoice and such number shall be valid for a period of thirty days from the date of uploading 

10. Embedded RFID with conveyance necessary for certain transporters.
The Commissioner may, by notification, require a class of transporters to obtain a unique RFID and get the said device embedded on to the conveyance and map the e-way bill to the RFID before movement of goods.
11. Verification of Documents & Conveyances.
In case of all Inter State or Intra State movement of goods, any conveyance may be intercepted by the Commissioner or any other officer authorized by him to verify the E-Way bill or E-way Bill no in physical form.
11(a). Commissioner shall  get RFID reader installed at places where verification of movement of goods is to be carried out.
11(b). Verification on Receipt of specific information relating to Tax Evasion.
In such cases, physical verification of conveyance can be conducted by any officer after obtaining approval of Commissioner or any other authorized by him in this behalf.
11(c). Physical Verification shall be conducted  only once if any, during the course of transit.
Where physical verification of a consignment being transported in a conveyance has taken place in a state, then such consignment shall not be stopped for physical verification at any place in same state unless any specific information regarding tax evasion is made available subsequently. 
12. Detention of vehicle exceeding 30 minutes.
Reporting in Form GST INS -04: If a vehicle has been intercepted for inspection of consignment, for a period exceeding  30 minutes, the transporter may upload the information about such detention in Form GST INS-04.
Such reporting facility regarding  detention & stoppage of vehicle is a welcome provision in GST Rules  & shall imply more accountability for tax officials & a moral check on unnecessary harassment of transport operators &  traders.
Synopsis:  As per GST Rules, Information regarding transportation or movement of goods from whether Inter-State or Intra State shall be furnished to Tax authorities by generation of E-way Bills. This will lead to a complete shift in the methods of how goods are move or transported across India. However, such reporting  requirements will definitely take a toll on small traders who are less acquainted with digital mode of working & will lead to their harassment at the hands of tax officials.

The proposed E-way rules also empower the tax officials to stop & verify any consignment at any time under authorization from the Commissioner. Any discrepancy in E-way bill may lead to detention of entire consignment. Therefore, an increased burden of compliance has been imposed on traders to exercise & follow such rules. However, provisions like verification of consignment only once in a  state & facility to report detention of vehicle on the online portal has definitely been incorporated keeping in mind the ease & hassle free operation of traders.     

Contributed by Tanveer Alam at Sandeep Ahuja & Co  

Saturday, April 15, 2017

Cash transactions, restrictions, penalities and clarifications by CBDT with FAQs effective from 01.04.2017

SECTION  269ST OF THE INCOME-TAX ACT, 1961 inserted vide Finance Act, 2017
5th April 2017 the Central Govt notified that the provision of section 269ST shall not apply to receipt by any person from an entity referred to in sub-clause (b) of clause (i) of the proviso to section 269ST and such notification be effective from 1st day of April, 2017.
i.e. , restriction on cash transactions shall not apply to withdrawal of cash by a person from banks,  Co-operative Banks or Post offices. i.e. A person can withdraw cash in excess of INR. 2,00,000 from Banks, Co-Operative banks or Post Offices without any restriction u/s 269 ST.
Ministry of Finance has issued a Press Release on 05th April, 2017.
Various steps to curb black money by discouraging cash transaction and by promoting digital economy have been introduced by Finance Act 2017.
         i.            Restriction on cash transaction by sections 269ST & 271DA newly inserted to the Income-tax Act.
       ii.            Providing that no person (other than those specified therein) shall receive an amount of two lakh rupees or more,
(a)     in aggregate from a person in a day;
) in respect of a single transaction; or
in respect of transactions relating to one event or occasion from a person,
(b)     otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
      iii.            Providing for penalty of a sum equal to the amount of such receipt in contravention of such provision
     iv.            Such restriction is not applicable to any receipt by Government, banking company, post office savings bank or co-operative bank & also that the restriction on cash transaction shall not apply to withdrawal of cash from a bank, co-operative bank or a post office savings bank.
       v.            Any capital expenditure in cash exceeding rupees ten thousand shall not be eligible for claiming depreciation allowance or investment-linked deduction.
     vi.            The limit on revenue expenditure in cash has been reduced from Rs.20,000 to Rs.10,000.
    vii.            The rate of presumptive taxation has been reduced from 8% to 6% for the amount of turnover realized through cheque/digital mode  to promote digital payments in case of small unorganized businesses,
  viii.            Restriction on receipt of cash donation up to Rs. 2000 has been provided on political parties for availing exemption from Income-tax.
     ix.            Any donation in cash exceeding Rs.2000 to a charitable institution shall not be allowed as a deduction under the Income-tax Act.
PENALTY  Provisions for "Cash" receipts [Section 271DA]

Section 271DA the newly inserted section effective from 1-4-2017 provides for penalty for failure to comply with provisions of section 269ST.
As per Section 271DA  provides as follows:

If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt.

Any such penalty shall be imposed by the Joint Commissioner.

The penalty shall not be imposable if such person proves that there were "good and sufficient" reasons for the contravention.

If  a person receives any amount in contravention of this section u/s 269ST, he shall be liable for penalty , a sum equal to the amount of such receipt.  Any penalty imposable under this section shall be imposed by Joint Commissioner.

It has also been provided that penalty shall not be imposable if such person proves that there were good and sufficient reasons for the contravention.

No definition of good & sufficient reasons.
Perhaps this needs some clarification or suitable amendment in section 271D so as to bring out clearly what all reasons are covered under this expression of good and sufficient reasons.

The reason is good and sufficient or not has to be seen from the perspective of the recipient. For Example LIC of India accepts cash or draft in case the payer's cheque has been returned unpaid due to insufficient funds.

The Time limit for initiating of penalty proceeding
There is no time limit mentioned for initiation of penalty proceedings but it should be reasonable after the contravention of such provisions. Section 273A(4) authorizes only Joint Commissioners to reduce or waive any penalty payable by an assessee, subject to satisfaction of the conditions specified in it or where satisfied for the reasonableness of good and sufficient cause for such contravention.

Non Appeal ability of Penalty imposed by the Joint Commissioner under Section 271DA.
I. Before Tribunal.
Section 253(1)(a) which provides for appeal to the Tribunal against order passed by CIT(A) has not been amended to cover an order under section 271DA. So Penalty Order under Section 271DA is not appealable before Tribunal.
II. Before CIT(A).
Section 246A. (1) Any assessee [or any deductor] aggrieved by any of the following orders (whether made before or after the appointed day) may appeal to the Commissioner (Appeals) against —
(q) an order imposing a penalty under Chapter XXI;
Since, penalty u/s 271DA is an order under Chapter XXI and unless the recipient is an assessee, he cannot file an appeal against the penalty order.
Section 246A does not apply due to the following reasons:

Section 246 applies to penalty order on a person in his capacity of
           i.            Assessee.
         ii.            Deductor .

Here, the person penalized does not receive the penalty order in the capacity of an assessee so the order is not appealable.
Conclusion: It may be that till any further amendment is done or in the absence of prohibition clause for an appeal against an order under section 271DA, the benefit of doubt is given to the assessee and an appeal against pending order under section 271DA  may be allowed.
Case I:
Cash Receipts (INR) in respect of same sale transaction on different dates.
Sale Invoice (INR) Issued on April 1,2017



Cash received on

a.       April 2,2017

b.      April 4,2017

c.       April 6,2017

d.      April 8,2017













Received through Bank Tfr., Account Payee Cheque or DD.




Total Cash Received




Whether Section 269ST Applicable

since total receipts  in respect of sale transaction on 1st April 2017 exceeds threshold limit of INR. 2,00,000 u/s 169ST.

Not Applicable,
Since Total Cash receipts does not exceed threshold limit of INR. 2,00,000 u/s 269ST.

since total receipts  in respect of sale transaction on 1st April 2017 are equal to threshold limit of INR. 2,00,000 u/s 169ST.

Penalty leviable u/s 271DA




Case II:
Cash Received on same event / occasion i.e. Marriage/Birthday etc.

Situation I:
Cash Received
Situation II:
Cash Received
Cash Gift from A
Cash Gift from B
Cash Gift from C

Total Cash Received



Whether Section 269ST Applicable

Not Applicable since total amount received from a person does not exceed INR. 2,00,000.

Applicable, since total amount received from a person exceed INR. 2,00,000.

Penalty Leviable u/s 271DA


This condition shall be examined on the basis of total cash receipts from a person on a same event or occasion such as Birthday, Marriage, Anniversaries etc. Therefore, even though total cash receipts from all on an event/occasion may be higher than INR 2,00,000 but Section 269ST shall be attracted only when cash receipts from a person on a same event/occasion exceed INR 2,00,000.

Penalty in respect of Gifts also: As per Income Tax Act, Gift u/s 56  received from relatives are exempt without any ceiling limit . However, with introduction of Section 269ST, cash gifts in exceeding INR 2,00,000 shall be liable for Penalty @100% of the amount received even though it is otherwise exempt under Income Tax Act,1961.  

This clause covers situations where in the event like marriage, payments are received for different categories like catering, decoration, marriage hall etc. All these transactions must be lower than specified limit of INR 2,00,000 otherwise penalty @ 100% of the amount of receipt shall be attracted u/s 271DA.

Frequently asked questions with respect to cash transactions under Section 269ST & 271DA.
1. Section 269 ST is applicable on Whom ?
Ans. Section 269 ST is applicable on all persons whether  a  Company, LLP, Partnership Firm,  HUF's , Trust etc , except the following :
         i.            Government
       ii.            Any banking company
      iii.            Post office savings banks
     iv.            Co-operative banks
       v.            Any other person as notified by the Central Government
2.  What types of receipts are covered u/s 269 ST?
Ans.  All types of receipts are covered whether Capital or Revenue u/s 269ST. However, those receipts where payment made by the other party is covered u/s 269SS, then Section 269St will not be applicable on such transactions.
3.  Does Section 269 ST prescribe any Penalty on Payer of cash exceeding INR 2,00,000?
Ans. Section 269ST impacts the payee only not the payer. It is the payee or recipient who is made liable for violation of section 269ST in the form of penalty u/s 271D @ 100% of the amount. Section 269 ST does not prescribe any penalty for making payments above threshold limit of INR 2,00,000 as explained in  Case II of Example.
4.  Whether  Section 269 ST will be applicable even if a person provides two different services  to a same Person for a consideration exceeding INR 2,00,000 & the same is received in cash.
 Ans. If a person has provided different services to a same person in respect of same event occasion for a consideration exceeding INR  2,00,000 & same is received in cash, then such a transaction shall be covered u/s 269ST & Penalty will be leviable u/s 271DA for receipt of cash exceeding INR 2,00,000.
Even, if a person provides different services to a same person in respect of separate events/ occasions then also Section 269ST will be applicable & penalty will be leviable u/s 271DA.
5. Whether any drawings of cash from Banks, Cooperative Banks or Post Office Savings Bank attract  provisions of Section 269ST & 271DA?
Ans. As per CBDT Press Release dated 5th April, 2017, restriction u/s 269ST shall not apply to withdrawal of cash from Bank, Cooperative Banks or a Post Office Savings Bank Account.
6. Can a person receive gifts from relatives on occasion of marriage exceeding INR 2,00,000 which were otherwise exempt under Income Tax Act,1961 without attracting the provisions of Section 269ST?
Ans. All gifts received by a person  from relatives are exempt from tax. However, after April 1, 2017 , all cash gifts received by a person exceeding INR 2,00,000 will attract Provisions of Section 269ST & a penalty of 100% of the  amount of receipt shall be leviable u/s 271DA.
This means that a person can receive gift of any amount from a relative as defined under section 56. But with the introduction of section 269ST one limitation will be imposed on cash gifts received even from relatives exceeding  Rs. 2 Lakhs in respect of single event or occasion.   
7.  If once penalty is imposed u/s 271DA, can an appeal against such order be made?

Ans.  As per Section 246A, penalty  u/s 271DA is an order under Chapter XXI and if the recipient is an assessee, he can file an appeal against the penalty order. However, there is no explicit prohibition on appeal against a penalty order u/s 271DA. Therefore, an appeal can be made against an order u/s 246A.
Contributed by Tanveer Alam ( CA Finalist at Sandeep Ahuja & Co.)