E-Newsletter “Weekly Taxation Newsletter”

Dear Readers,

We are delighted to share our 106^th E-Newsletter “Weekly Taxation Newsletter” dated 28^th March, 2023 from 21^st March, 2023 to 27^th March, 2023 with you. This E – Newsletter is a weekly reference / compilation of interesting and latest news related to tax including upcoming Timelines / Due Dates, Notifications / Press Information, Case Laws, International Taxation etc.                        

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Due Dates under IT Act 1961

Sl.	Compliance Particulars	Due Dates
1	​​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of February, 2023.	30.03.2023
2.	​​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of February, 2023.	30.03.2023
3	​​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194M in the month of February, 2023​.	30.03.2023
4	​Country-By-Country Report in Form No. 3CEAD for the previous year 2021-22 by a parent entity or the alternate reporting entity, resident in India, in respect of the international group of which it is a constituent of such group.​	31.03.2023
5	​​Country-By-Country Report in Form No. 3CEAD for a reporting accounting year (assuming reporting accounting year is April 1, 2021 to March 31, 2022) by a constituent entity, resident in India, in respect of the international group of which it is a constituent if the parent entity is not obliged to file report under section 286(2) or the parent entity is resident of a country with which India does not have an agreement for exchange of the report etc.	31.03.2023
6	​​Uploading of statement [Form 67], of foreign income offered to tax and tax deducted or paid on such income in previous year 2021-22, to claim foreign tax credit [if return of income has been furnished within the time specified under section 139(1) or section 139(4).	31.03.2023

Under the GST, 2017

B. GST Refund:

Form No.	Compliance Particulars	Due Date
RFD -10	Refund of Tax to Certain Persons	18 Months after the end of quarter for which refund is to be claimed

Weekly Departmental Updates: Income Tax

1. No LTCG tax benefit on these debt mutual funds from April 1: Five important queries answered

The central government has made changes in the taxation of debt mutual funds while passing the Finance Bill, 2023 in Lok Sabha today. Here is a look at how this change will impact you.

What is the change made in debt mutual fund taxation?

As per the amendments made in Budget 2023, no benefit of indexation for the calculation of long term capital gains on debt mutual funds will be available for investments made on or after April 1, 2023. However, only those debt mutual funds will lose this benefit where equity investments in such mutual funds do not exceed 35%.

Thus, from April 1, 2023, these debt mutual fund schemes will be taxed at income tax rates applicable to your income. This brings taxation parity between 100% debt mutual fund schemes and bank fixed deposits. The Budget is yet to be passed in the Rajya Sabha.

Currently, debt-oriented mutual fund schemes have to invest a minimum of 65% of their corpus in debt securities to comply with Sebi regulations.

What is taxation of debt mutual fund till FY 2022-23?

Till March 31, 2023, income tax laws allow taxation of these debt mutual fund schemes on the basis of a holding period. If the debt mutual fund scheme unit is redeemed on or before the completion of 36 months (three years), then the gains on the units are called short-term capital gains. These short-term capital gains are taxed at tax rates applicable to your income. However, if the holding period exceeds 36 months, then gains are called long-term capital gains (LTCG). These long-term capital gains are taxed at 20% with an indexation benefit.

What debt mutual fund investors can do now?

If an individual investors wants to avail the tax benefit of indexation, then they have a small window to invest in debt mutual funds till March 31, 2023. The investments made in debt mutual funds till March 31, 2023 (provided they are able to get the NAV of this date), will continue to get the indexation benefit till the investments are redeemed from mutual funds.

What other mutual fund categories are impacted?

Apart from this, indexation benefit will not be available in the case of LTCG on gold mutual funds, international equity mutual funds, fund of funds and hybrid mutual funds as well. Currently, LTCG is applicable on gold if the holding period exceeds 36 months. The same is the case for international equity and other mutual fund categories (except equity mutual funds) as well.

• To read more Click Here

2. Self employed vs salaried: What are the tax benefits under NPS? Explained

The National Pension System (NPS) is an India-based voluntary based contribution retirement savings plan governed by the Pension Fund Regulatory and Development Authority (PFRDA). The NPS also provides subscribers with tax incentives under the Income Tax Act of 1961. Contributions made towards the scheme are deductible under Section 80C of the Act, up to a maximum of Rs. 1.5 lakh per year. In addition, contributions to the NPS are eligible for an additional deduction of up to Rs. 50,000 per year under Section 80CCD(1B). Under NPS, both salaried and self-employed individuals are eligible for tax benefits within 80C and above. Employees who participate in the Corporate NPS plan receive additional tax advantages under Section 80CCD (2) of the Income Tax Act of 1961. Hence, for those who are salaried or self-employed and want to know about the tax benefits accessible, here is an explainer compiled from several industry professionals based on an exclusive interview.

Tax Benefits by way of deduction with respect to Employee’s Contribution:

Section 80CCD of the IT Act provides for deduction on contributions to pension scheme notified by Central Government.

Any employee contributing to NPS would be eligible to claim a deduction u/s 80CCD(1) of the IT Act. Such deduction is firstly restricted to 10% of the salary of such employee and further subjected to the threshold limit of Rs. 1,50,000. Where the eligible taxpayer is self-employed, a deduction is firstly restricted to 20% of the Gross Total Income (GTI) of self-employed persons and further subjected to the threshold limit of Rs. 1,50,000.

Accordingly, the maximum deduction claimed by any employee or self-employed person with respect to their contribution would be clubbed along with their other investment-linked deductions u/s 80C of the IT Act and contribution to certain pension fund u/s 80CCC of the IT Act and the maximum deduction which can be claimed under these sections would be for a combined amount of Rs. 1,50,000 per financial year.

Tax Benefits by way of Deduction with respect to Employer’s Contribution:

With regards to the employer’s contribution, the NPS contribution made by the employer would first be taxable under the head ‘Salary’ in the hands of the employee and thereafter the employee may claim deduction u/s 80CCD(2) of the IT Act. Such deduction would be restricted to 10% of the salary in case of private sector employees whereas the same would be restricted to 14% of the salary in case of central as well as state government employees.

• To read more Click Here

3. Do You Know How Much Cash A Person Can Store In Their House?

In India, with the advent of digital transactions, citizens are adapting to the new normal. On the flip side, there is still a majority of Indians who rely on and trust the traditional method of keeping money at home. Are you one of those? You can be but do you know, there are certain restrictions on the amount that can be stored in a house? If you are a businessman then keeping cash at home can be quite common but what if income tax officials raid your residence? If you want to protect yourself and your family then read further to know.

According to the Income Tax act, there is no bar on the amount of money stored in the house. But in case of an income tax raid, a person should present the source of the money. Especially the money should not be unaccounted for in income. If your documents do not match the amount of money kept in the house then income tax officials can penalise you. In such circumstances, income tax personnel will seize the unaccounted money and the fine can be up to 137% of the total money.

As per the Central Board of Direct Taxation, it is necessary to show PAN numbers and details for depositing or withdrawing more than Rs 50,000 at a time. If an account holder deposits Rs 20 lakh in cash in a year, then he/ she is liable to show PAN and Aadhaar information.

Any Indian citizen can come under the scrutiny of the investigating agency if the purchase or sale of assets is completed via cash of more than Rs 30 lakh. During the payment of a credit-debit card, if a cardholder pays more than one lakh rupees at a time, then there can be an investigation against the person.

• To read more Click Here

4. Taxation of dividend-paying stocks, bonus shares and share buybacks

To reward their long-term investors, several corporations have recently announced stock dividends, share buybacks, and the issue of bonus shares. However, one should be aware that because these benefits are seen as income by the shareholders, they are subject to income tax. Let’s examine the taxation of dividend-paying stocks, share buybacks, and bonus shares.

Tax on equities that pay dividend or interim dividend

According to financial experts, an intermediate or final dividend is an extra income earned by a stock market investor that does not need the sale of portfolio shares. As a consequence, it is seen as extra income by the investors, and at the time of filing an income tax return (ITR), it is added to one’s yearly income. Income tax is then assessed depending on the taxpayer’s tax bracket after this addition.

Bonus share tax

Bonus shares have no tax repercussions for shareholders. Yet, the bonus ratio affects how much the market price per share changes.

Tax on Share Buybacks

Every domestic firm that buys back its own shares is subject to tax at a rate of 20% plus a surcharge of 12% plus any relevant cess, according to Section 115QA of the IT Act. Buyback is subject to a 20% corporate tax on the difference between the share’s issue price and the repurchase price. It is a dispensation in the shareholder’s favour.

How are taxes applied to equities that pay dividend, bonus shares, and share buybacks calculated?

In the case of dividend-paying equities, investors must pay taxes based on their income tax bracket.

As previously noted, the business-level income tax rate of 20% plus cess is used in the event of share buybacks. Moreover, bonus shares have no tax consequences.

How are bonus shares taxed?

Bonus shares should not be included in ITR filings, and when it comes to share buybacks, ITR filings should consist of this information as Exempt Income.

Income tax regulations apply to bonus share sales. The corporation awards current shareholders bonus shares in proportion to their existing shares. For bonus shares, the holding term is calculated from the date of allotment until the date of sale. When bonus shares are sold, tax is charged at the same rate as it is on regular shares.

Tax is computed when bonus shares are sold. The cost of the bonus share would be the stock’s closing price on January 31, 2018, if the bonus shares were given before that date. The price of the bonus shares would be zero if they were issued after January 31, 2018.

• To read more: Read full at Click Here

5. Will PAN-Aadhaar linking last date get extended?

The PAN-Aadhaar linking deadline has been repeatedly extended by the Central Board of Direct Taxes (CBDT). Those who have not yet linked the two ID proofs can still do so before March 31, 2023 (by paying a penalty amount); otherwise, their PAN will become inoperative as of April 1, 2023.

The deadline for linking PAN and Aadhaar was March 31, 2022, however was extended till June 30, 2022, at a charge of Rs. 500. This was once more extended till March 31, 2023, but with a Rs 1,000 fee. Thus, there are now extremely less opportunities for further extension. Therefore, it is advised that you link your PAN and Aadhaar by March 31, 2023, at the latest.

There have been many warnings for the deadline to link Permanent Account Numbers (PANs) with Aadhaar by the government, there are very bleak chances of extension as according to tax experts.

How to link Pan-Aadhaar with penalty

• Step:1 Visit e-Filing portal Home page and click on Link Aadhaar in Quick Links section.
• Step:2 Enter your PAN and Aadhaar Number
• Step:3 Click on Continue to Pay Through e-Pay Tax.
• Step:4 Enter your PAN, Confirm PAN and Mobile number to receive OTP
• Step:5 Post OTP verification, you will be redirected to e-Pay Tax page.
• Step:6 Click on Proceed on the Income Tax Tile.
• Step:7 Select AY as 2023-24 and type of Payment as Other Receipts and click Continue.
• Step:8(a) Applicable amount will be pre-filled against Others.
• Alternatively, If you have a Bank account which is not listed for payment through e-Pay Tax, please follow the steps as under:
• Step:8b(i) Click on hyperlink given below on e-Pay tax page to redirect to Protean (NSDL) portal
• Step:8b(ii) You will be redirected to Protean portal. Click Proceed under Challan No./ITNS 280
• Step:8b(iii) Select Tax applicable as 0021 and Type of Payment as 500
• Step:8 b (iv) Provide other mandatory details and Proceed.

Please select the Assessment Year 2023-24 for making late fee payment for Aadhaar PAN Linkage.

After paying the fees, you can use the e-Filing Portal to link your Aadhaar number to your PAN. Log in to the income tax website, then click Link Aadhaar in the Profile Area under the Link Aadhaar to PAN option. To read more: Click Here

• Important Circulars and Notifications:

Sl.	Particulars of the Notification(s)	File No. / Circular No.	Notification Link(s)
1	NA		Click Here

Weekly Departmental updates GST:

• GST Updates

1. Nod for setting up of GST Appellate Tribunals, to help in reducing appeals

The Centre will soon set up appellate tribunals for resolving disputes linked to the Goods and Services Tax (GST) with finance minister Nirmala Sitharaman moving amendments in the Finance Bill on Friday for setting up such entities.

According to the Finance Bill, which was approved by the Lok Sabha on Friday, the government will set up a principal bench of the appellate tribunal in New Delhi which will consist of a president, a judicial member and two technical members representing the Centre and state. It also said that on the request of states, state benches will be set up, which will include two judicial members, and two technical members representing the Centre and state.  In February, revenue secretary Sanjay Malhotra had said that while one member will decide cases with disputes of up to Rs 50 lakh, cases above the threshold will be adjudicated by one technical member and one judicial member.

“The amendments relating to the constitution of the GST Appellate Tribunals would result in several matters, which otherwise would be before the HCs, being referred to the GSTAT. Businesses should start preparing for matters where an appeal is to be filed before the tribunal as there is likely to be a large number of cases that would be filed soon,” said MS Mani, partner at consulting firm Deloitte India.

• (Read more at: Click Here)

2. Lok Sabha clears forming GST Appellate Tribunal

The Lok Sabha on Friday passed Finance Bill, 2023 with 64 amendments, including one that seeks to set up the much-awaited GST Appellate Tribunal (GSTAT), which will deal with tax disputes, and also lessen the burden on the higher judiciary, which has repeatedly sought the institution of such a body.

While moving the Bill in the House amid sloganeering by the opposition, Union finance minister Nirmala Sitharaman termed it one of three major amendments– the other two mentioned during her short speech were constitution of a panel on National Pension System (NPS) and bringing credit card expenses on foreign tours under the tax net.

“One amendment [in the Finance Bill] is for the GST Council, which is establishing the tribunal,” she said. The constitution of GSTAT has been pending since the new indirect tax regime was launched in July 1, 2017. The amended Finance Bill, 2023 proposed substitution of section 109 of the Central GST Act in order to facilitate creation of the GSTAT and its benches. It did not, however, mentioned any deadline. “The Government shall, on the recommendations of the Council, by notification, establish with effect from such date as may be specified therein, an Appellate Tribunal known as the Goods and Services Tax Appellate Tribunal for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority,” it said.

Experts called the creation of the tribunal a delayed but a major move to make the GST regime more efficient. In line with the GST law, the Union Cabinet in 2019 cleared a proposal to set up GSTAT and its regional benches, but it could not be operationalised due to differences among members over its constitution. The council is the apex federal body on GST matters, headed by the Union finance minister, with states represented through their respective finance ministers. Their decisions are often unanimous.

• (Read more at: Click Here)

3. GST on transportation services – navigating through turbulent waters

GST on services by way of transportation of goods by aircraft / vessel is certainly on a roller-coaster ride these days. The story began in September 2022, when the GST exemption pertaining to goods transportation services witnessed a sunset from 1 October 2022 onwards.

This resulted in taxing the transportation of export cargo by the Indian transporters / freight forwarders, liable to Integrated GST (IGST). This created a lot of buzz amongst the exporters as well as the Indian transporters /freight forwarders. Consequently, owing to the hardships faced, various associations and trade bodies filed representations before the Government against such withdrawal of GST exemption.

The following challenges were being faced by the Indian transporters / freight forwarders: a) As per the GST law, the place of supply for export cargo was the destination of such goods, i.e., place outside of India. Due to this, question arose as to whether the exporters in India could claim input tax credit (ITC) of the GST so collected by the transporters / freight forwarders since it was believed that such credit could only be taken at the place of supply. The exporters, nevertheless, took a chance and rightly so, as principally it did not make sense to deny the benefit of ITC which culminated into refund to exporters when exports are zero-rated.

Given this, the CBIC, pursuant to the decision in 48 th GST Council meeting, cleared the air on point a) above by issuing a clarification that ITC shall be eligible even if the place of supply was outside India. This is also being provided the legislative blessing by way of an amendment through the Finance Bill, 2023.

Accordingly, it can be observed that hitherto, the export transactions where the location of both the transporter / freight forwarder as well as the service recipient was in India, straightaway attracted IGST irrespective of the location of the recipient. Going forward, such transactions shall attract CGST + SGST or IGST, basis the location of recipient.

This amendment, however, did not resolve the larger issue which was impacting the logistics industry adversely. The stakeholders in the Government were in no mood to re-introduce the exemption allowed till September 2022.

• To read more Click Here

4. GST relief for hotels, restaurants soon? Govt to change GST structure? EXCLUSIVE

The hotel and restaurant industry could get a relief in GST soon as the Ministry of Finance is actively considering the proposal to provide relaxation in the current GST structure. The Good and Services Tax (GST) on the hotel and restaurant industry could be increased to 12 per cent from 5 per cent, with input tax credit (ITC) benefit.

The industry has been requesting the Centre to change the current GST structure in order to provide relief considering their increased input cost. The hotel and restaurant industry has asked for relief due to location-based differences. At present, hotels and restaurants attract 5 per cent GST without ITC benefits.

ITC is a mechanism to avoid cascading of taxes. Cascading of taxes, in simple language, is ‘tax on tax’. Under the present system of taxation, credit of taxes being levied by Central Government is not available as set-off for payment of taxes levied by State Governments, and vice versa.

In June last year, the GST Council announced that hotel rooms below Rs 1,000 will attract 12 per cent GST. Hotel rooms below Rs 1,000 were earlier exempt from GST and those above the threshold were charged 12 per cent tax. To read more Click Here

5. Goa CM Pramod Sawant: Budget to have new schemes under GST, VAT

Chief minister Pramod Sawant on Thursday assured stakeholders to introduce new schemes under Goods and Services Tax (GST) and Value Added Tax (VAT). He said that the budget will be an inclusive one considering all types of industries. Sawant said that the demands of all stakeholders cannot be fulfilled considering the state’s revenue.

The CM, who also holds the finance portfolio, said that this budget will focus on Swayampurna Goa. He said that in the next two days meetings with all associations will be completed and the exercise to finalise the budget will be completed.

The chief minister said that some of the associations have suggested reforms for ease of doing business, while some suggested new schemes under GST and VAT, some others sought exemption in collection of previous year’s VAT.

Sawant said that representatives from the entertainment sector, hotel and liquor associations have demanded that the state should introduce an entertainment policy and an advertising policy. To read more Click Here

Important Notifications under Excise / Custom/ GST:

• GST Updates

Sl. No.	Particulars of the Notification(s)	File No. / Circular No.	Notification Link(s)
1	Advisory for the taxpayer wishing to register as “One Person Company” in GST	GST Updates 574	Click Here
2	HSN Code Reporting in e-Invoice on IRPs Portal	GST Updates 576	Click Here

Custom / Excise Updates

Links	Notification Particulars
Click Here	Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022 , to increase the Special Additional Excise Duty on Diesel.
Click Here	Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to reduce the Special Additional Excise Duty on production of Petroleum Crude.
Click Here	Appointment of Common Adjudicating Authority in respect of M/s Lawson Tours and Travels (India) Pvt. Ltd.
Click Here	Payment of Service Tax by the Department of Posts and Ministry of Railways by way of book adjustment -reg.

Important Case-laws

• Income Tax

1. Central Board of Direct Taxes v. Satya Narain Shukla

W.P.(C) NO. 5547 OF 2017, CM NO. 23333 OF 2017, dated : 19-02-2018], Bench : VIBHU BAKHRU, J.

Sections 24, read with section 8 of the Right to Information Act, 2005 and section 119 of the Income-tax Act, 1961 – Act not to apply in certain organisation – Director General of Income-tax (Investigation) – Respondent had submitted list of some MPs and MLAs to Election Commission alleging that their assets had increased more than five fold after previous election – Respondent sought verification to bring about a higher level of transparency; however, no specific or general allegations of corruption were advanced – Election Commission of India had already forwarded affidavits submitted by MPs and MLAs disclosing their assets for verification to CBDT and CBDT had forwarded same to Directorate General of Income-tax (Investigation) for verification and outcome of such verification was shared directly by Directorate General of Income-tax (Investigation) with Election Commission of India – Any further action had to be followed up by an assessment order – HELD: CBDT is not one of offices or public organizations which are specified under Second Schedule; but, Directorate General of Income-tax (Investigation) is; thus, any information received from Directorate General of Income-tax (Investigation) by any Public Authority would also fall within exclusionary provisions of section 24(1) – Verification of affidavits filed by MPs and MLAs to Election Commission could not be equated with an investigation as referred to in section 8(1)(h) and since no investigation was under way which would be impeded, disclosure could not be denied – Otherwise, since in instant case, no specific or general allegations of corruption were advanced by respondent, it was not possible to accept that information as sought for by respondent would fall within purview of Act [Paras 14 and 21]

• (Source: Click Here)

2. Case Title: Pr. Commissioner Of Income Tax Central V. Abhisar BUILDWELL P. LTD| C.A. No. 6580/2021 and connected cases

• S.153A Income Tax Act| Can Assessments Be Reopened If No Incriminating Material Is Found During Search? Supreme Court Reserves Judgment

The Supreme Court on Thursday reserved its judgment on whether in an assessment under section 153A of the Income Tax Act, besides the incriminating material found during search, such materials which the Assessing Officer has on hand and the third party records available can be relied on to assess total income, or whether the assessment has to confined only to the incriminating material seized during the search. The Court also discussed the issue whether there is no incriminating material seized during the search, then those assessments be reopened and reassessed under Section 153A.

The bench of Justices M. R. Shah and Sudhanshu Dhulia was hearing a string of pleas on this issue arising on account of conflicting High Court judgments. On Wednesday, ASG Venkataraman had made submissions for the revenue.

Even without 147, even under 153A, the moment the word ‘reassess’ is used, in Kelvinator’s case, the three-judge bench came to the conclusion that the word ‘reassess’ means that de hors the words ‘reason to believe’, power to reassess is distinct from the power to review. Therefore, at the moment the power to reassess is there, two consequences follow, as laid down by the three-judge bench- one, there cannot be a change of opinion, and two, there must be tangible material”.

ASG N. Venkataraman, for the Revenue: “Your Lordships can very well say that it is not supposed to be a roving enquiry. That is not my case. It also does not permit change of opinion. That is also not our case. Change of opinion is review alone. But assessment based on materials we already have is not review. That is only reassessment”.

Justice Shah to the ASG: “His submission is that in case of a completed assessment, there cannot be two assessments, one under 143 and another under 153A. Suppose some further material is found during a search, during the assessment under 153A, not undisclosed income but incriminating material, then that can be said to be reassessment but not assessment”

Senior Advocate Arvind Datar, also for some of the assessees: “If assessment is pending or reassessment is pending and a search takes place, then everything is at large before the officer. He can assess or reassess the income. If the assessment is closed, then he does not have the power to redo it. If there is no search under 132, 153A cannot take place. Search under 132 is presupposed by assessment under 150 3A. The supreme court has held that a search is a serious invasion of a person’s privacy and strict provisions must be followed. So see 132- ‘has reason to believe that a person to whom summons were issued has not produced the documents’; ‘a person to whom summons have been issued will not produce documents’; ‘any person is in possession of money, bullion, jewellery or any other valuable article or thing and such thing represents wholly or partly income or property for the purpose of income tax act hereinafter referred to as undisclosed income or property’. 99% cases will come under this third point. They come for search, they find gold, cash etc. Now look at the scheme of the act. A search is carried out by an authorised officer. Authorised officer is different from assessing officer. The way the scheme works is suppose, there is a raid on the house of Mr X, authorised officer comes, they find cash, jewellery, bullion etc, they find some incriminating material that cash has been paid to Y and Z. They find incriminating material qua Y and Z. X may be in Chennai and Y and Z may be in Delhi and Ahmedabad. As authorised officer has 60 days time to provisionally attach, complete the search, enquiry etc, then he hands over the incriminating material to the assessing officer who has the jurisdiction over Mr X in Chennai. So far as Y and Z in Delhi and Ahmedabad are concerned, it is sent to the jurisdictional assessing officer in Delhi and Ahmedabad. Then they continue to do the assessment thereafter.

After 132 is finished, now we go to 153A. In the earlier regime, prior to 2003, assessment was one channela search takes place in the house of Mr X, they find Y and Z also. Qua Y and Z, they will make an assessment for a block period. In 158BD, there was no provision for Abatement. It said it will be in addition to regular assessment”.

• To read in details: Click Here

Important Case-laws

• GST Cases:

1. 28% GST Payable On Supply PVC Floor Mats For Cars: AAR

The Gujarat Authority for Advance Ruling (AAR) has ruled that 28% GST is payable on the supply of PVC floor mats for cars.

The two-member bench of Amit Kumar Mishra and Milind Kavatkar has observed that the floor mats used for four-wheel motor vehicles (cars) supplied by the applicant are principally for use in motor vehicles.

The applicant is in the business of manufacturing and supplying floor mats for four-wheel motor vehicles (cars). The floor mats are essentially made of PVC material.

The applicant sought an advance ruling in respect of the appropriate classification and rate of GST applicable to the supply of PVC floor mats (cars) under the CGST and SGST.

The AAR noted that CTH 390410 clearly provides that it covers items by the description of polyvinyl chloride, not mixed with any other substances. This not being the case in the goods manufactured by the applicant, the question of the PVC mat of the applicant falling within the ambit of 390410 does not arise. As is evident, for the goods to fall within the ambit of 390 I to 3914, they have to be in primary form. The goods in relation to waste, parts, and scrap, as well as semi-manufactured items and articles, would appropriately have to be classified from CTH 3915 onward. Hence, the goods manufactured by the applicant, i.e., PVC floor mats for motor vehicles, would not fall within the ambit of CTH 3904.

The AAR held that PVC floor mats for use in cars supplied by the applicant are classifiable under CTH 8708.

• Reference: Click Here

2. No GST on cash discount for early payments by dealer, rules M.P. AAR

Incentive for early cash payment by the dealer will not attract GST ruled the Madhya Pradesh’s Authority for Advance Ruling (AAR) as technically, such issue comes under the category of secondary or post-sales discount

This is contrary to earlier rulings by Kerala AAR.

In the present matter, the applicant, Rajesh Gupta (Proprietor of M/S Mahaveer Prasad Mohanlal), is wholesale trading of rice and pulses and dealer of ‘India Gate Basmati Rice.’ The supplier offers him a cash discount if payment is made before the due date or within certain days from the invoice date. Then, there is a target incentive.

The applicant sought advance rulings on whether he can avail the Input Tax Credit (ITC) of the full GST charged on the invoice of the supply or a proportionate reversal of the same is required in case of post-purchase cash discount (for early payment of supply invoices(bills) given by the supplier of goods to the applicant without adjustment of GST) or Incentive/schemes (provided through credit note without adjustment of GST by the supplier). He also wanted to know whether GST will be applicable on cash discount incentives/schemes offered by suppliers to the applicant through credit notes without adjustment of GST.

It also held that since the amount received in the form of the credit note is a discount and not a supply by the applicant to the supplier, no GST is leviable on the receiver on cash discount/incentive/schemes offered by the supplier to the applicant through credit note against supply without adjustment of GST.

Earlier, Kerala AAR (in the matter of Santhosh Distributor) had held that GST to be applicable on the amount received by the distributor as reimbursement of discount/rebate from the principal company. This was later upheld by AAAR.

According to Harpreet Singh, Partner, Indirect taxes at KPMG in India, because of the conditions attached for claiming post-sale discount deduction under GST, the same has been a bone of contention between the authorities and taxpayers. This case law has rightly concluded that where GST is not reversed/ deducted on discount through commercial credit notes, the same should not entail any GST implications. “There have been rulings in the past, where recipient of incentives have been held to be liable to GST on the amounts received by them, treating the same as consideration for supply of services. This ruling has rightfully negated that logic,” adds Singh. To read more: Click Here

International Taxation  Corner (ITC)

1. From UAE to Bahrain, 7 countries that have no income tax

The tax season is here and while we all are burdened with taxes, there are countries with no income tax at all. You read that right! There are other sources of revenue to fund their government – mining, oil production, tourism, etc. The countries on this list are scenic and would surely make you want to shift. Take a look:

UAE (United Arab Emirates)

UAE, located at the eastern end of the Arabian Peninsula, is a thriving economy – From healthcare facilities to the education system, UAE has the best facilities for its residents.

That’s not all, there’s no income tax in UAE. You read it right! The residents do not have to pay any tax on their personal income while living a high quality of life. Corporate tax on oil companies and foreign banks is the major source of revenue for the country.

Monaco

Situated on the Mediterranean Sea, Monaco is the second smallest country in the world. The country does not collect any capital gains taxes nor levy any wealth taxes. Monaco is one of the most expensive countries to live in.

Qatar

An oil-rich nation, Qatar is located in the Persian Gulf. Employed individuals do not have to pay taxes on their salaries, wages, and allowances. But an individual is taxed if they have generated qualifying Qatar-source income.

Bahrain

Bahrain, a small archipelago consisting of 50 natural islands and 22 artificial islands is another oil-rich country where you do not have to pay personal tax. There are no taxes on estates, sales, or capital gains either. High taxes are levied on businesses that operate in the oil and gas sector. The country also generates its income from the profits made from the extraction or refinement of fossil fuels.

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2. UAE corporate tax and its effect on foreign investment

The UAE’s business policies have always centred around promoting economic growth, diversification and entrepreneurship. This blueprint has enabled the country to move away from its traditional reliance on oil and gas revenues and successfully diversify into areas such as tourism, real estate, construction, finance and technology. The country now boasts the second-largest economy in the Middle East, with an estimated value of $415 billion.

The absence of a federal corporate income tax (CIT, or CT) in the UAE has historically been one of the country’s key selling points for foreign investors, so the introduction of a corporate tax regime, effective from 1 June 2023, has prompted many to ask what its effects will be and how it will influence the UAE economy.

How will the introduction of corporate tax affect the country’s appeal to foreign investors?

While the introduction of corporate tax in the UAE may be seen as a dilution of the country’s appeal to foreign investors, it’s important to look at the broader picture to get a full understanding of its effects.

The worldwide average statutory corporate income tax rate, measured across 180 jurisdictions, is 23.37 percent, and 25.43 percent when weighted by gross domestic product (GDP).

In this context, the UAE’s 9 percent rate makes it the country with the joint third lowest corporate tax rate in the world and one of only three Organisation for Economic Co-operation and Development (OECD) member states among the 20 countries with the world’s lowest corporate tax rates.

This demonstrates the UAE’s success in reconciling its obligations and commitment to the OECD with its desire to continue to make the country an attractive investment destination. It has succeeded in finding the delicate balance between honouring its commitment to the global minimum effective tax rate established by the OECD and maintaining investor interest and confidence.

Impact on the UAE economy and a stronger model to support Foreign Direct Investment (FDI)

The introduction of corporate tax in the UAE is a major step towards the country’s diversification goals. Establishing this new revenue stream will allow it to further reduce its reliance on oil revenues and fund other projects beyond the energy industry.

Increased spending on infrastructure projects, such as transportation networks, water and electricity supply systems, and telecommunications networks, will enable the government to help support the growth of other sectors of the economy and create new demand and opportunities for overseas investment.

Corporate tax revenues will also provide the necessary funds to further develop initiatives to support small and medium-sized enterprises (SMEs). Increased spending on accelerator programmes such as Dubai’s Future Accelerators and Abu Dhabi’s Hub 71 will provide the critical resources and support startups and early-stage companies need to help them succeed.

Implications of corporate tax for cross-border trade

The UAE’s 9 percent CT rate on taxable profits above AED375,000 makes it one of the world’s most competitive corporate tax rates. Its introduction ensures that the UAE remains aligned with international standards and requirements while retaining a competitive advantage over other global markets. It also ensures that businesses in the UAE continue to benefit from the country’s extensive network of double taxation treaties.

The UAE has over 100 agreements in place with trade partners around the world. These treaties guard against the possibility of being taxed twice on the same source of income and provide transparency between member countries on taxation related to cross-border trade and investment.

For prospective investors in the UAE, these agreements help to optimise their revenue generation by providing tax relief. For businesses with a multinational presence, they provide much needed clarity on where their tax obligations lie while providing the security they are fully compliant with current international regulations.

Concluding thoughts

In the current climate of global instability and the scrutiny of tax evasion, the UAE’s introduction of corporate tax and involvement in the OECD’s base erosion and profit shifting (BEPS) project is a clear sign of the country’s efforts to promote economic growth, trade and investment. The new corporate tax regime will bring increased transparency in terms of tax compliance and accountability and provide investors with greater confidence in the UAE’s regulatory framework. To read more Click Here

Knowledge Bucket for NRI’s

1. A PAN card is required for a Non-Resident Indian (NRI) who earns taxable income in India — in order to file income tax returns.
2. Any NRI can apply for a PAN by submitting Form No. 49A along with the required documents and fees to a PAN application centre such as UTIITSL or Protean (formerly NSDL eGov). It can also be applied online through the UTIITSL or Protean websites (formerly NSDL eGov).
3. Who can apply for NRI PAN card:

– NRIs who have taxable income in India.

– NRIs interested in investing in mutual funds.

-NRIs who buy and sell stocks through a depository or a broker.

-NRIs looking to buy property in India for reasons other than trading.

4. Online PAN application process for NRIs:

– Go to the online TIN portal and select “Apply Online”.

-Under “Application Type,” select Form 49A for NRIs of Indian citizenship and Form 49AA for those of foreign citizenship.

-Fill in other required details, enter the captcha and hit “Submit”.

-The following page will take you to the NRI PAN card application form. Fill it out completely, upload necessary documents and your signature, and submit.

-To finish the process, complete your transaction on the payment page.

-After completing the above steps for an NRI online PAN card application, you will be given an acknowledgement slip with a 15-digit number. This number will allow you to check the status of your application later.

5. Offline PAN application process for NRIs

• NRIs who are unable to apply for a PAN card online can complete the process offline by following these steps.
• Go to your nearest IT PAN service centre or TIN facilitation centres, such as UTI or NSDL, to obtain the appropriate application form.
• Fill out the form, sign it, attach copies of relevant documents, and submit.
• After the process is complete, you will be given an acknowledgement slip. It should be noted that you can pay the NRI PAN card fees via the demand draft

Do you know ??

1. Section 56 of the Income-tax Act includes a special provision which states that a privately held company issuing shares at a higher price than the audited fair market value is subject to a tax which is chargeable to the amount received in excess.
2. Taxpayers earning just a little above the Rs 7 lakh income tax rebate limit in the new concessional regime could be in for a relief. The income tax authorities are understood to be looking at whether such taxpayers whose taxable income is just a tad over the Rs 7 lakh limit can also get the tax benefit.
3. The Union government imposed a 30% tax on crypto profits in the 2022 budget. A 1% TDS on sales was also introduced. The current regulations will impact your overall earnings from cryptocurrencies due to taxation imposed.
4. On March 7, 2023, the Union government brought the crypto sector under the provisions of the Prevention of Anti-money Laundering Act, 2002 (PMLA). As per the Act, crypto entities will be ‘obligated’ to record transaction and client data, monitor compliance, and report suspicious activities. This is a recognition of the growing importance of the sector and need for accurate activity tracking. This does indicate that the government is not planning to ‘ban’ the sector, as some speculate.
5. Panvel Municipal Corporation (PMC) has managed to collect ₹220 crore property tax so far, as the financial year comes to an end.The collection comes in the wake of notices issued, incentives announced and awareness campaigns by the civic body

Disclaimer:

Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information. *(We consider various sources including ET, BS, HT, Taxmann etc.)

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