Ajay Kumar Sharma & Assosiates

Ajay Kumar Sharma & Assosiates ajay kumar sharma & assosiates a chartered accountant firm based on shive shakti complex kukshi alir

20/08/2015

GST: Impact On Manufacturing

The manufacturing sector has been a major economic driver for many developing economies across the world, however, unlike most others, India’s manufacturing performance has been lacklustre. Even though India enjoys a favourable demographic and geographic position, it has not been able to capitalise on this advantage. Manufacturing in India has been plagued by a complex tax structure, inadequate infrastructure and bureaucracy, halving its ability to perform well on a global scale. With only a 16% share in GDP, India’s manufacturing sector has been close to stagnant for the last two decades. However, now manufacturing may be revived with the focused efforts of the new government. India, traditionally an agrarian economy, could even experience a paradigm shift from an agricultural economy to a manufacturing and service based economy.

The Indian government recognises the significance of the manufacturing sector in the country’s economic development and is taking prudent steps to increase investments in the sector. Following India’s desire to become a manufacturing hub, the government launched its much publicised “Make in India” initiative. A pet project of the Modi government, it proposes to provide domestic entrepreneurs and international players with various opportunities and transparency in the compliances required for investing and manufacturing in India.

The government also realises that becoming a manufacturing hub will need several strategic reforms to simplify manufacturing in India. One of the proposed reforms, in line with Make in India, is the implementation of the Goods and Services Tax (GST). The new GST regime will trigger a transformational shift from a complex multi-layered indirect taxation system to a unified indirect taxation system. GST will also propagate a positive change by ensuring cascading of taxes is reduced, thus leading to manufacturing synergy in India.

The new GST regime will be a modern tax reform which will usher in growth and opportunities for businesses in India. It will have a far-reaching impact on business avenues, compelling organisations to realign bottlenecks such as production cost, production time, supply chain, compliance, logistics, etc. with the changing indirect tax structure. Furthermore, all major business dynamics will have to be thoroughly analysed to assess the impact of GST on business.

Reduced Cost of Production

Manufacturing is a very competitive industry and reducing the cost of production while creating incremental value for customers remains a challenge for every business. The new GST regime will be greatly beneficial as a reduction in tax cascading may lead to a lower cost of production. Also, one of the major defects of the current indirect tax regime – the non-availability of tax credit of central/union taxes over state taxes and vice versa – could be eliminated by allowing unrestrictive tax credit under GST.

Hassle-free Supply Of Goods

State-border checkpoints, which are tasked with material scrutiny and location-based tax compliance, negatively impact the overall production and logistics time and account for roughly 60% of a truck’s transit time. These unproductive transit hours coupled with regulatory impediments reduce the efficiency of Indian manufacturers compared to their international counterparts. The new GST regime will unify the Indian market and assist the smooth flow of goods within the country. Although border checkpoints may not be done away with immediately, reduced compliance scrutiny at these checkpoints will reduce transport hassles.

Supply Chain Restructuring

Three specific aspects of GST – an additional 1% tax on supply of goods, the supply of goods and services to oneself, and input tax credit on inter-state sale – may propel the need for supply chain restructuring.

The additional 1% tax, envisaged as a replacement for Central Sales Tax, may not be available for credit, which will add to the cost burden in the price of products.

The terminology used in The Constitution (122nd Amendment) Bill, 2015 relates to “supply” and does not differentiate between “supply to oneself” and “supply from one person to another”. The Select Committee has specifically stated that the additional tax should only be applicable in cases where there is a consideration i.e. supply to self should not be covered within its ambit. Clarity regarding “supply” is expected from the GST Act, which is yet to be proposed by the GST Council. If such a shift materialises, it will warrant a redrawing of warehouse strategy to optimise organisational profits.

Availability of input tax credit on inter-state sale of goods and services may lead to warehouse re-engineering which can remove an extra level of warehousing in the supply chain, thereby leading to greater cost benefits.

Increased Compliance Requirement

While the new GST regime may offer many benefits to businesses, it also has a flip side. Taking a cue from the OECD’s guidelines for place of supply, which were released earlier this year, GST may lead to increased compliance requirements.

Area-based Exemptions

As GST would lead to the entire country being considered a common and unified market, the current area-based exemptions would become irrelevant. As we do not have a finalised GST Act in hand, whether or not these area-based exemptions would be available is a matter of concern. If these exemptions are discontinued, those who enrolled due to this incentive would be at a loss.

GST Rate

The GST regime may be perceived as a good indirect taxation system only if the tax rates proposed by the government do not exceed the revenue-neutral rate (RNR) expectation of the industry. If the GST rate is higher than expected (20–22%), it will negate every positive aspect of the new regime.

Although the proposed 122nd Amendment Bill is yet to pass through the Rajya Sabha (upper house of Parliament), the industry is eager with the expectation that GST may be applicable from 1 April 2016. Businesses are re-evaluating their strategies to align themselves with this change. On the other side, irrespective of the outcome of the GST Bill, every consumer, being on the receiving end of indirect taxes, is hoping the government proposes a lower RNR rate, which would help avoid inflationary pressure on product prices. In a nutshell, GST will have a far-reaching impact on the manufacturing sector as a whole once implemented in India.

09/06/2015

रिटर्न भरने का समय आ गया है। इस समय कंपनियां और नियोक्ता अपने कर्मचारियों को फॉर्म 16 जारी करना शुरू कर देते हैं। आम आयकरदाता अपने प्रपत्रों को संभालना शुरू कर देता है। सवाल उठता है कि आखिर आयकर की अदायगी करना क्यों जरूरी है? सबसे पहले तो अगर आप भारत के नागरिक हैं या प्रवासी भारतीय हैं और आपकी सकल आमदनी 2,50,000 रुपये से ज्यादा है तो आपके लिए आयकर रिटर्न भरना जरूरी है। हर एक जिम्मेदार नागरिक को आयकर रिटर्न दाखिल करना चाहिए। ऐसा नहीं होने पर आयकर विभाग की तरफ से नोटिस आने में अब ज्यादा देरी नहीं होती। इसके साथ ही आयकर रिटर्न भरने के और भी कई फायदे हैं। मसलन, अगर आप भारत से बाहर नौकरी के लिए अप्लाई कर रहे हैं तो आपके पास पिछले तीन वर्षों के रिटर्न का रिकॉर्ड होना चाहिए। आज कल तो तीन वर्षों के रिकॉर्ड को देख कर ही वीसा के लिए आवेदन स्वीकार किए जाते हैं। होम लोन के समय भी इसकी जरूरत होती है। बैंक कम से कम तीन वर्षों के आपके आय के रिकॉर्ड का हिसाब किताब लगाने के बाद ही आपको होम लोन देने के लिए तैयार होते हैं। यह बताता है कि आपकी आय कितनी रही है और कर्ज अदाएगी को लेकर आपकी क्या स्थिति है। कई बार ऐसा होता है कि दो वर्ष काम करने के बाद ही किसी को विदेश से ऑफर आ जाते हैं। जबकि उस व्यक्ति के पास सिर्फ दो वर्ष के ही रिटर्न फाइल के कागजात होते हैं। ऐसे में दो वर्ष पहले के वर्ष का भी आयकर रिटर्न दाखिल कर देना चाहिए। अगर कोई आयकर देनदारी होती है तो उसकी अदायगी दंड समेत करना सही होता है। देनदारी नहीं है तो भी अर्थदंड समेत रिटर्न भर देना चाहिए। जब आवेदन करें तो इसका साफ साफ जिक्र कर देना चाहिए कि आपने दो वर्ष पहले का रिटर्न अभी फाइल किया है। असलियत में कई बार ऐसा होता है कि आयकर सीमा से कम वेतन होने पर व्यक्ति रिटर्न फाइल करने को लेकर गंभीर नहीं होता है। लेकिन इस बीच अगर उसे विदेश जाने का मौका मिल गया तो रिटर्न नहीं भरे होने की वजह से उसकी संभावना पर पानी फिर सकता है। ऐसे में अगर निर्धारित सीमा से कम आय है तब भी निल रिटर्न भर देना चाहिए। इससे आयकर विभाग की नजर में भी आपका रिकॉर्ड बेहतर रहता है। निल रिटर्न अब तो सामान्य आयकर रिटर्न की तरह ही इलेक्ट्रॉनिक माध्यम से भरा जा सकता है। इनकमटैक्सइंडियाईफाइलिंग डॉट जीओवी डॉट इन वेबसाइट खोल कर कोई भी निल रिटर्न भी फाइल कर सकता है। इसके आय वाले हिस्से में आप आय लीजिए और फिर छूटों का विवरण दीजिए। आपके स्क्रीन में आ जाएगा कि आप पर कोई भी टैक्स देनदारी नहीं है। इसे आयकर विभाग में जमा करा दीजिए। इसकी एक कॉपी सीपीसी, बेंगलुरु को जरूर भेज देनी चाहिए।
Ca. ajay Sharma mob. 8435200170 office shive shakti complex basement alirajpur road kukshi. residence bhawriya

08/06/2015

Tax Updates: 27th May 2015

Even refund of excess self-assessment tax paid by assessee would be entitled to interest
Assessee would be entitled to interest under section 244A(1)(b) on amount of refund which was deposited by it by way of self assessment tax under section 140A
Section 244A, read with sections 140A and 154, of the Income-tax Act, 1961 – Refunds - Interest on Self assessment tax
[2015] 57 taxmann.. com 283 -HIGH COURT OF PUNJAB AND HARYANA -CIT v. Punjab Chemical & Crop Protection Ltd
Tax deducted at source, advance tax and also tax paid by way of self assessment, after its adjustment against tax liability of assessee on a regular assessment, loses its original character and becomes tax paid in pursuance of liability. Therefore, it could not be held that assessee was only entitled to interest on tax deducted at source or advance tax but not on self assessment tax paid under section 140A which was found to be paid in excess

Declaration of additional income pursuant to survey doesn’t invite penalty in absence of any concealment of facts
Where assessee, consequent to survey, declared additional income which was accepted by Assessing Officer, imposition of penalty under section 271(1)(c) was not justified
Section 271(1)(c), read with section 133A, of the Income-tax Act, 1961 - Penalty for concealment of income -declaration of income in Survey
[2015] 57 taxmann.. com 25 - ITAT MUMBAI -Vipul Life Sciences Ltd. v. DCIT
Consequent to survey, assessee offered additional amount and included it in its return in response to notice under section 148
There being difference in amount as declared in original return and as filed in response to notice under section 148
Assessing Officer initiated penalty proceedings and levied penalty
Fact that assessee had made purchases and recorded them in its books as well as stock books had not been disputed by Assessing Officer
It was held that since All relevant facts, material to computation of total income were duly furnished by assessee and no deficiencies in furnishing of such facts were pointed out by revenue authorities, therefore there could be no question of treating assessee as having concealed particulars of income or furnished inaccurate particulars of income and revenue authorities erred in imposing penalty under section 271(1)(c) on surrendered income
Words & Phrases : Term 'concealment of income' as occurring in section 271(1)(c) of the Income-tax Act, 1961

08/06/2015

Professional Updates: 3rd June 2015
No penalty on seizure of gold if assessee admitted that it was derived out of undisclosed income and paid taxes thereon

Section 271(1)(c), read with sections 69A and 271, of the Income-tax Act, 1961 – Penalty for concealment of income
Where assessee made statement regarding seized unaccounted gold and explained manner in which same was derived and treating its value as income paid tax, penalty was not to be levied under section 271(1)(c)
[2015] 57 taxmann . com 382 (Andhra Pradesh and Telangana)-HIGH COURT OF ANDHRA PRADESH AND TELANGANA -L. Giridharlal & Co. v. Income-tax Officer
Search was conducted in assessee's premises and gold was seized
Assessing Officer did not accept explanation of assessee regarding unaccounted gold and initiated penalty proceedings
However, it was found that assessee had made statements under section 132(4) regarding said gold and explained manner in which same was derived
Further, value of seized gold was treated as income of assessee and assessee paid tax thereon
It was held that assessee's case fitted into clause (2) of Explanation 5 of section 271(1) which brought immunity to assessee and, hence, penalty was not to be levied.
CASE REVIEW
Asstt. CIT v. Gebilal Kanhaialal, HUF [2012] 348 ITR 561/210 Taxman 244/25 taxmann.com 214 (SC) (para 10) followed.

No reassessment on basis of info received from DIT, Investigation without recording his own satisfaction by AO
Section 69, read with sections 11, 12, 147 and 148, of the Income-tax Act, 1961 - Unexplained investments , Unsecured loan
Where in reassessment, Assessing Officer made additions on account of unsecured loans merely on basis of information from DIT Investigation without recording his own satisfaction for issuing reassessment, reassessment was not valid
[2015] 57 taxmann . com 141 (Delhi - Trib.) -ITAT DELHI - Monarch Educational Society v. Income-tax Officer (Exemption)
Notice of reassessment was issued to assessee-trust on ground that assessee made accommodation entries and arranged funds through prohibited means
Assessing Officer issued notice under section 148 on basis of same material which was before him during original assessment
Assessing Officer simply reproduced details received from Director of Income-tax, Investigation and recorded his satisfaction without any verification and examination of information received and only mentioned that he had reason to believe that income chargeable to tax had escaped assessment
He made additions on account of unsecured loans which had not been mentioned in reasons recorded for issuance of notice - Whether reassessment was not valid
CASES REFERRED TO
Rajat-Export Import India (P.) Ltd. v. ITO [2012] 341 ITR 135/206 Taxman 50/18 taxmann.com 311 (Delhi) (para 12),
Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51/[2012] 20 taxmann.com 797 (Delhi) (para 13),
Jai Bharat Maruti Lal v. Asstt. CIT [2013] 351 ITR 342/215 Taxman 113 (Mag.)/33 taxmann.com 361 (Delhi) (para 13) and
Rashi Buildcon (P.) Ltd. [IT Appeal No. 407 (Agra) of 2012] (para 13).

Dominion over the property is sufficient to claim depreciation even if conveyance deed isn't yet executed
Section 32 of the Income-tax Act, 1961 – Depreciation Allowance-Leasehold buildings
Where conveyance deeds in respect of building taken on lease were yet to be executed in favour of assessee-company but assessee exercised dominion over property and it had right to occupy and use same, assessee would be treated as owner of said property to claim depreciation
[2015] 57 taxmann.com 223 (Delhi - Trib.) - ITAT DELHI - Indian Renewable Energy Development Agency Ltd. v. Joint Commissioner of Income-tax
Assessee claimed depreciation on office building and residential buildings
However, conveyance deeds in respect of these leasehold properties were yet to be executed in favour of assessee-company
It was held that where assessee exercised dominion over said property and it had right to occupy and use same, assessee would be treated as owner of said property to claim depreciation however, depreciation on cost of land, on which building was constructed was not allowable.

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