NOVEMBER 2020

GST Updates

1. E-invoicing mandatory for companies with revenue over Rs 100 crore from 1st January, 2021

Previously, businesses used to generate invoices through various software’s, and the details of these invoices were manually uploaded in the GSTR-1 return. The invoice information was thereafter reflected in GSTR-2A for the recipients for viewing only. On the other hand, the consignor or transporters had to generate e way bill by again importing the invoices in excel or JSON manually. The GST Council, in its 35th meeting, decided to implement a system of e-invoicing, which would be applicable to specified categories of persons. The concept of GST e-invoice generation system was taken into consideration for the reduction in GST evasion.

2. Is any late fee leviable if GSTR 1 is not filed within the due dates mentioned above?

Section 47 of the CGST Act pertains to levy of late fees under GST. According to Section 47(1), Anyregistered person who fails to furnish the details of outward or inward supplies requiredunder section 37 or section 38 or returns required under section 39 or section 45 by the due dateshall pay a late fee of Rs 200 (Rs 100 under CGST and Rs 100 under SGST/UTGST) for every dayduring which such failure continues subject to a maximum amount of Rs 5000

Therefore, if any taxpayer does not file GSTR 1 by the due dates, he/she will be liable to pay late fees of Rs 200 (Rs 100 under CGST and Rs 100 under SGST/UTGST) for every day during which such failure continues subject to a maximum amount of Rs 5000.

It is also important to remember that, if the registered taxpayer fails to file NIL Return on or before the due date, he shall be liable to pay late fees of Rs 50 for every day during which such failure continues under CGST Act. Similar provisions exist under the SGST Act, 2017. Thus, a late fee of Rs.100 per day (Rs. 50 under CGST law + Rs. 50 under State / Union Territory GST law) would be levied as per CGST Act, 2017 and State / Union Territory GST Act, 2017.

Income tax updates

1. GST data in Form 26AS as few Taxpayers show crores of turnover in GST and doesn’t pay a single rupee of income tax says Govt

• - In a statement, the Department of Revenue ( DoR) reiterated that there will be no extra compliance burden on the taxpayers for GST turnover displayed in the Form 26AS, which is an annual consolidated tax statement that can be accessed from the income-tax website by taxpayers using their Permanent Account Number (PAN).


• - The department was responding to queries made in certain sections of social media that the taxpayer will now be required to reconcile the GST turnover uploaded in the form 26AS with the turnover shown by him in the income tax return and this would increase the compliance burden of the taxpayers.


• - CBDT authorizes Income-tax authorities to upload information relating to GST return in Form 26AS of Income Tax.

The GST turnover is being shown in 26AS just for the information of taxpayer. DoR acknowledged that there may be some differences in GSTR-3Bs filed and the GST shown in the Form 26AS but it can’t happen that a person shows turnover of crores of rupees in GST and doesn’t pay a single rupee of income tax. There are quite a few such cases that have been detected in data analytics

DoR acknowledged that there may be some difference in GSTR-3Bs (summary input output forms under the GST regime) filed and GST shown in Form 26SAS. However, it can’t happen that a person shows turnover of crores of rupees in GST and does not pay a single rupee in income tax, the department said in a statement. It mentioned that that the notified income tax return for the current AY 2020-21 already requires reporting of GST outward supplies in the Schedule GST. Therefore, the information displayed in Form 26AS would provide ease of compliance to taxpayers in filling the Schedule GST.

Also, the display of information should be seen as an important step in the direction of “Transparent Taxation – Honouring the Honest,” the department said.

The revenue department has noticed that many unscrupulous persons are trying to avail or pass on input tax credit fraudulently by generating fake invoices and has already formulated a strategy for identifying these fake invoice generators which inter alia takes into account the income tax profiles of the suspected fake invoice generators.

These persons in most of the cases never file their income tax returns or disclose very meagre taxable income in the income tax return.

Miscellaneous updates

1. Hiring New Employees from 1 October 2020? Know how to get subsidy from Govt under new scheme

AtmaNirbhar Bharat Rozgar Yojana announced to incentivise job creation in the nation

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The COVID-19 crisis led to a spike in the country’s unemployment rate. Analysts have been warning about the spectre of unemployment ever since the country was put under a lockdown on March 25 by Prime Minister Narendra Modi to arrest the spread of the coronavirus infections. Scenes of migrants fleeing urban centres including Delhi and Mumbai only confirmed the long-held concerns on their employment as the economic activity came to a grinding halt. In September 2020, India saw an unemployment rate of over 6%.

This was a significant improvement from the previous months. A damaging impact on an economy as large as India’s caused due a total lockdown was imminent. Unemployment went up to 23% in May 2020. This was possibly a result of a decrease in demand as well as the disruption of workforce faced by companies.

Earlier, the Prime Minister’s Rozgar Protsahan Yojana (PMRPY) was implemented up to March 31, 2019 to incentivize formalisation and creation of new employment. Under this scheme, total benefit of Rs 8,300 crore has been given to 1,52,899 establishment covering 1,21,69,960 beneficiaries.

Further, in order to curb the unemployment and issue and to provide a major boost to employment generation in the country in the formal sector post the pandemic, the government launched a new job creation scheme under Atmanirbhar 3.0. The newly launched AatmaNirbhar Bharat Rozgar Yojana will incentivize job creation in the country by providing subsidy for two years in respect of newly eligible employees engaged on or after October 1, 2020 under the scheme.

This scheme is effective from 1st October, 2020 and will be operational till 30th June, 2021. It is said to be similar to the Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) which was announced in August 2016.

A. Who will the Scheme be applicable to?

The scheme will be applicable to:
EPFO registered establishments if they take in new employees or those who lost jobs earlier.
Any new employee joining employment in EPFO registered establishments on monthly wages less than Rs 15,000.
EPF members drawing monthly wage of less than Rs 15,000 who made exit from employment during COVID-19 pandemic from 1st March, 2020, to 30th September, 2020, and is employed on or after 1st October, 2020.

B. What establishments will be eligible to avail this Scheme?

1. - Establishments registered with EPFO if they add new employees compared to reference base of employees as in September 2020 as under will be eligible for this Scheme:


2. - Minimum of two new employees if the reference base is 50 employees or less


3. - Minimum of five new employees if the reference base is more than 50 employees


4. - Establishments registering with EPFO after the commencement of scheme will get subsidy for all new employees.

C. How will subsidy be provided under this Scheme?

Central Government will provide subsidy for two years in respect of new eligible employees engaged on or after 1st October, 2020, at the following scale:
- Establishment employing up to 1,000 employees: Employee’s contribution (12% of wages) and employer’s contribution (12% of wages) totalling 24% of wages.

- Establishments employing more than 1,000 employees: Only employee’s EPF contributions (12% of EPF wages)

The subsidy support will get credited upfront in Aadhaar seeded EPFO account (UAN) of the eligible new employee The scheme is expected to provide dual benefit. While on one hand, the scheme is expected to encourage the employers and business establishments to increase the number of workers hired, on the other hand, the scheme will help a large number of job seekers find employment in EPFO-registered establishments.

2. RBI discontinue 17 returns/reports in FEMA to improve the ease of doing business and reduce the cost of compliance

With a view to improve the ease of doing business and reduce the cost of compliance, the existing forms and reports prescribed under FEMA, 1999, were reviewed by the Reserve Bank. Accordingly, it has been decided to discontinue the 17 returns/reports as listed with immediate effect.

Sl.No	Name of Report	Reporting Entity	Frequency
1	Category-wise transaction where the amount exceeds USD 5000 per transaction	AD Category-II	Monthly
2	Category-wise, transaction-wise statement where the amount exceeds USD 25,000 per transaction	AD Category- II	Monthly
3	Statement of Purchase transactions of USD 10,000 and above (including transactions of their franchisees)	FFMCs and AD Category- II	Monthly
4	Extension of Liaison Offices (LOs)	AD Category-I banks	As and when extension is granted
5	Extension of Project Offices (POs)	AD Category-I banks	As and when extension is granted
6	FII/FPI daily: Daily inflow/outflow of foreign fund on account of investment by FPIs	AD banks	Daily
7	FII/FPI Return (Monthly): Data relating to actual inflow /outflow of remittances on account of investments by Foreign Institutional Investors (FIIs) in the Indian Capital market	AD Category-I banks	Monthly
8	FVCI reporting: Inflows/outflows of remittances on account of investments by Foreign Venture Capital Investor (FVCIs) and Market value of Investments made by FVCIs	AD Category-I banks/Custodian banks	Monthly
9	Reporting of Inflow/Outflow details in respect of Mutual Fund by Asset Management Companies	Asset Management Companies	Quarterly
10	Market value of FII Investment in India on fortnightly basis	AD Category-I banks	Fortnightly
11	Market value of FII Investment in India on Monthly basis	AD Category-I banks	AD Category-I banks
12	FII holdings as percentage of floating stock	FII holdings as percentage of floating stock	Monthly
13	Form DRR for Issue/transfer of sponsored/unsponsored Depository Receipts (DRs)-Hardcopy@	Custodian	At the time of issue/transfer of depository receipts
14	ADR/GDR Movement Report- two way fungibility	AD Category-I banks	Monthly
15	Repatriation of Sales proceeds of underlying shares represented by FCCBs/GDRs/ ADRs	Custodian	Monthly
16	GDR/ADR underlying shares issued, re deposited and released monthly reporting	Custodian	Monthly
17	Monitoring of disinvestments by Overseas Corporate Bodies	AD banks	Monthly

@ Please note that it is only the hardcopy filing of form DRR that has been discontinued. The domestic custodian may continue to report the form DRR on FIRMS application in terms of Regulation 4 (5) of FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.

The Master Direction – Reporting under Foreign Exchange Management Act, 1999 dated January 01, 2016, shall accordingly be updated to reflect the above changes. AD banks may bring the contents of this circular to the notice of their constituents.

INTEREST WAIVER SCHEME- NEW GUIDELINES

In this Article, we will understand about Government’s new guidelines to implement the new Interest Waiver Scheme, the eligibility criteria and other important details about the Scheme.

Scheme Announcement:

This Scheme was introduced by Ministry of Finance on October 23rd 2020 for certain categories of loans up to Rs 2 crore.

RBI’s Moratorium on Loans:

On account of the pandemic and Nationwide lockdown imposed, businesses were struggling without operations, and RBI as part of its various measures, announced a three-month moratorium on loans, enabling borrowers to defer payments on EMIs and other loans repayments. This three-month time frame was further extended till 31st of August 2020.

Why Interest Waiver Scheme?

Various individuals and corporate borrowers had raised concerns and filed petitions seeking relief on Interest Payments. Hence the scheme was brought into provide some relief amid the economic impact of COVID-19.

What is the Scheme all about?

In this scheme eligible borrowers will be granted an ex-gratia payment of the difference between the compound interest and simple interest for the six-month moratorium period. The instalments which were due between the period March 1, 2020 and August 31, 2020 are covered in this Scheme.

Eligible Borrowers

Loans up to Rs 2 crores in the categories mentioned below are eligible:

• • MSME Loans
• • Education Loans
• • Credit Card Dues
• • Housing Loans
• • Automobile Loans
• • Personal Loans to Professionals, Consumer Durable Purchase

Eligibility Criteria

• • Loan should be Standard Asset and not a Non-Performing Assets as on February 29,2020
• • The ex-gratia payment will be made to the borrower irrespective of whether the borrower opted for partial, full or no moratorium.
• • Rate of Interest prevailing on Feb 29 will be taken into consideration for the purposes of calculation and no Interest Change after that will be considered.
• • Lender should be a banking company, public sector bank, co-operative bank or regional rural bank, All India Financial Institution, Non-Banking Financial Company, Housing Finance Company.

Scheme Payment

The difference between compound interest and simple interest will be credited to the borrower’s loan account for the period between March 1,2020 and August 31,2020.

How does it benefit the Borrowers?

For a borrower who has opted for a 6-month moratorium, the Interest Portion would be generally added to the outstanding principal component and the new EMI would be calculated for the remaining loan tenure. Since usually Interest is calculate using compounding formula by banks, the borrower ends up paying Interest on accrued interest.

In the waiver scheme, the borrower has to pay only a simple interest. The difference between compound interest and simple interest will be borne by the Government.

Borrowers with older loans will benefit less than those who have just started repaying their loans. This is usually because the proportion of Interest payments is more in a new loan than an older loan which service principal repayments at the end of the tenure.

How does it benefit borrowers who did not opt for Moratorium?

The plan is to reward the borrowers who did not opt for a moratorium and made timely payments irrespective of the hardship caused due to Pandemic by reducing the outstanding loan amount of the borrower by the notional amount of interest on interest calculated as per scheme.

CONCLUSION

As per the Scheme the ex-gratia payment had to be credited to the loan account of the borrower by 5th November. This scheme was to bring about relief to a major number of middle-income borrowers. Its has been estimated that the total value of such relief by the government would be around Rs 5000 crore to Rs 7000 crore with an assumption that 30%-40% of overall loans of banks and NBFCs became eligible.

Special Measure under Companies Act, 2013 and LLP Act,2008 in view of COVID-19 outbreak

Exemption from Non-Compliance of minimum residency of Directors/Partners:

Existing provisions from the Act:

E-Invoicing – The Recipient Outlook

The Government vide notification no. 61 /2020 CT- dated 30.07.2020 notified that a registered person with an aggregate turnover in a financial year exceeds rupees 500 crores is liable to generate e-invoice.

For e-invoice generation, notified suppliers shall get their documents registered on the Government designated system i.e. Invoice Registration Portal (IRP). Once registered, IRP would send back a unique invoice reference number (IRN), a QR Code, and full invoice data, verified and digitally signed.

The invoice issued by the notified supplier without being registered at the IRP portal will be considered as an invalid invoice and Input Tax Credit is not available to the recipient on an invalid invoice. Thus, the consequences of non-compliance by the supplier will cost the recipient their Input Tax Credit.

The question here is how the recipient will know if the supplier is covered under the e-invoicing mandate. NIC Portal has provided the way for a recipient to verify the enablement of the supplier and check the validity of the e-invoice issued by the supplier.

The question here is how the recipient will know if the supplier is covered under the e-invoicing mandate. NIC Portal has provided the way for a recipient to verify the enablement of the supplier and check the validity of the e-invoice issued by the supplier.

Let us now see the steps to verify the status of the supplier covered under e-invoicing.

1. Go to the e-invoice portal: http://einvoice1.gst.gov.in.
2. Click E-Invoice Status of Taxpayer on Search Tab.

3. On clicking E-invoice Status of Taxpayer, the following screen will be displayed. Enter the GSTIN Number of the supplier and it will show whether the supplier is enabled or not. With this verification process, the recipient will come to know that the enabled supplier is covered under the e-invoicing mandate.

At present, the GSTIN wise status verification mechanism is available on the NIC portal. Whereas, the turnover applicability is at the PAN level. Since GSTIN itself includes the PAN and hence check for one GSTIN could imply all GSTINs that belong to the PAN are also enabled.

An e-invoice will be considered valid once an IRN is generated for the same. However, printing IRN on the invoice is not a mandatory requirement as QR code will have IRN Number embedded on it. Printing QR code on the final invoice is mandatory. Thus, when the taxpayer is on the receiving side of the invoice cycle, having a QR Code duly signed by IRP on an invoice will be necessary for him to claim ITC.

The e-invoice portal provides a facility / an App to the recipient or any third person to check the correctness/validity of e-invoice issued to them. The recipient can verify the authenticity or the correctness of the e-invoice by uploading the signed JSON file or Signed QR Code into the e-invoice system. The option ‘Verify Signed Invoice’ under the Search option can be selected and the signed JSON file can be uploaded and verified.

Similarly, the QR Code Verify app may be downloaded and used to verify the QR Code printed on the Invoice. The App can be downloaded by clicking on Help/Tools/QR Code verify App. E-Invoice can be scanned and verified from mobile with the downloaded App.

The recipient shall note the following points while verifying the e-invoice:

1. E-invoicing mandate covers Tax Invoice, Debit Note, and Credit Notes. Any other document issued by the supplier will not have IRN.
2. The feature (API) to get full invoice details by providing IRN can be triggered only by the supplier. The recipients cannot get the signed invoice data from the NIC system. Once the e-invoice data is pushed to GSTR 1, the recipients can obtain data from GSTR 2A.
3. There is a certain type of taxpayers and certain industries that have been given exemption from IRN generation. The recipient is required to be updated on such exemption notifications etc. The recipient has to ensure that their internal systems and supplier masters identify SEZ Units and SEZ Developers as separate types as SEZ units are exempted from IRN whereas SEZ Developers are covered under e-invoicing.

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INCOME TAX RELIEF FOR DEVELOPERS & HOME BUYERS

On November 12, 2020, our Hon’ble Finance Minister Mrs. Nirmala Sitharaman has announced a very important Income Tax relief for Real estate developers and Home buyers as part of Atmanirbhar 3.0 to raise the demand in the Real estate sector.

As per the provisions of the Income Tax Act, when a developer sells a land or building held by him as stock-in-hand, at a price lesser than the stamp duty value, he is liable to pay tax on the stamp duty value and not on the consideration received (Sec.43CA). And also the buyer when he receives an immovable property for a consideration which is lesser than the stamp duty value, he is liable to pay tax on the differential value between the stamp duty value and the consideration paid under income from other sources (Sec.56(2)(x)). Whereas, there will be situations wherein the stamp duty value fixed by the authorities could be much higher than the fair market value of the property. Hence, in Finance Act, 2018 a differential rate of 5% is introduced, i.e, if the difference between the stamp duty value and consideration is lesser than 5%, then both the developer and the buyer is not required to pay tax on the differential value. Currently this safe harbor rate is 10% as increased in the Finance Act, 2020.

Example:

If a real estate developer sells a residential building at Rs.60 Lakhs and the value fixed by the authorities for payment of Stamp duty is Rs.70 Lakhs, the seller while computing his income under PGBP, must consider Rs.70 Lakhs as income from selling the unit. And the buyer also has to pay tax on the difference of Rs.10 Lakhs under income from other sources.

In this case, if the stamp duty value was fixed at Rs. 65 Lakhs, the developer shall consider the selling price as Rs.60 Lakhs itself and the buyer also need not pay tax on the differential amount of Rs.5 Lakhs as the difference between the Stamp duty value and the Consideration is lesser than the 10% allowed in the Act.

Relief:

In the current scenario, due to the ongoing pandemic, there is further decline in the prices of residential units. Hence, to incentivize people to buy homes and bring down the excessive inventory in the hands of developers, the government has decided to “increase the differential rate from 10 per cent to 20 per cent under Section 43(CA) of the IT Act till June 30, 2021 and as a result, buyers of these units also will get tax relief of up to 20 per cent under Section 56(2)(x) of IT Act. This is applicable for the first-time buyers of houses costing up to ₹ 2 crore this will be available from the date of announcement (i.e., 12th November 2020) till June 30, 2021. The necessary amendment to the provisions of the Act will be made in due course."

As a result, developers who wish to clear their inventories can reduce the prices upto 83.33% of the Circle rate without any fear of having to pay additional tax on the circle rate. And the buyers shall also get the relief when they buy houses at a price lesser than the circle rate. The tax relief will help the middle class which wants to buy when the housing sector is sitting on inventories, the finance minister emphasized.

It must be noted that the relief is applicable only for first time home buyers and available only upto 30th of June, 2021. Given the situation of ongoing pandemic, we shall expect an extension to the applicability of this relief beyond 30th June, 2021.