SEPTEMBER 2020

GST Updates

1. System computed values of GSTR-1 Statement (Monthly filers), made available in Form GSTR-3B, as PDF statement on GST Portal

A pdf statement has been made available to taxpayers, filing monthly GSTR-1 statement, with system computed values of Table 3 of Form GSTR-3B. This PDF will be prepared on the basis of the values reported by them, in their GSTR-1 statement, for the said tax period.

Note: This facility will also be provided to quarterly GSTR-1 filers in due course of time. This PDF will be available on their GSTR-3B dashboard, from tax period of August 2020 onwards, containing the information of GSTR-1 filed by them on or after 4th September 2020. This will make filing of their Form GSTR-3B easier for them.

This facility is provided to all taxpayers registered as a Normal taxpayer, SEZ Developer, SEZ unit and casual taxpayer. Tables of Form GSTR 3B will be Auto-Drafted in pdf statement: Following Tables of Form GSTR-3B will be auto drafted, on basis of values reported in GSTR-1 statement, for the said period:

1. 3.1(a) - Outward taxable supplies (other than zero rated, nil rated and exempted)
2. 3.1(b) - Outward taxable supplies (zero rated)
3. 3.1(c) - Other outward supplies (Nil rated, exempted)
4. 3.1(e) - Non-GST outward supplies
5. 3.2 - Supplies made to un-registered persons
6. 3.2 - Supplies made to composition taxable persons
7. 3.2 – Supplies made to UIN holders

In this, following points may be noted:

In case, any of the above values is negative as per GSTR-1 statement, those figures would be mentioned as Zero in the auto-drafted PDF and will not be carried forward to next period.

Turnover & tax are computed after taking into account credit notes, debit notes, amendments and advances, if any.

Only filed GSTR-1 statements are considered for auto-population of the values in Form GSTR-3B.

This PDF is only for assistance of taxpayers to get the auto drafted values of Table 3 of their Form GSTR 3B (as per their filed GSTR 1 statement). Taxpayers, however, are required to verify & file their Form GSTR-3B, with correct values.

2. New functionalities made available for TCS and Composition taxpayers

TA. Provision to make amendment, multiple times, in Table 4 of Form GSTR-8 Earlier, if no action was taken on TCS details, auto-populated in TDS/TCS credit form, by the supplier or if the same were rejected by them in the said form, the TCS (e-commerce operators) could amend the details only once. Based on requests received from stakeholders, the restriction of amending the transaction details only once, in the table 4 (i.e. amendment table) of Form GSTR-8, has now been removed. Thus, details of table 4 (i.e. amendment table) of Form GSTR-8, can now be amended multiple times, by e-commerce operators liable to collect tax at source under section 52, while filing their Form GSTR-8.

B. TCS facility extended to composition taxpayers The taxpayers under composition scheme, who are permitted to make supplies through E-Commerce Operators, e.g. Restaurant Services, will now be able to view and take necessary actions in their TDS/TCS credit received form.

E-commerce operators would now be able to add GSTIN of such composition suppliers, in their Form GSTR-8 and file the Form.

The amount of tax collected at source, reported by E Commerce Operators in their Form GSTR-8, will now be populated to ‘TDS /TCS credit received’ form of respective composition taxpayers.

The amount so reported by e-commerce operators will now be available to respective composition taxpayers, for accepting or rejecting the same, in their ‘TDS and TCS credit received’ form.

1. For accepted transactions, the amount would be credited to cash ledger of composition taxpayers, after successful filing of ‘TDS/ TCS Credit received’ form.
2. For rejected transactions, the amount would be shown to e-commerce operators for correction.

Income tax updates

What is new in the Form 26AS

From an Annual Tax Statement, the new Form has now become an Annual Information Statement. The old Form contained information only about details of tax deducted at source (TDS) against your PAN, tax collected at source (TCS) on your PAN and details of other taxes paid. The new Form 26AS has two parts: Part A and Part B

Part A of the Form contains general information about the tax payer against the following fields:

1. Permanent Account Number
2. Aadhaar Number
3. Name
4. Date of Birth/Incorporation
5. Mobile number
6. Email address
7. Address

It is important to note that the new Form contains a field for mobile number and email address of the tax payer which hitherto was not captured. This indicates the importance of the mobile number and email address in the scheme of things where all correspondence with the tax authorities will be done only through a faceless mechanism.

Part B of the Form contains the following information:

1. Information relating to tax deducted or collected at source
2. Information relating to specified financial transactions (SFT)
3. Information relating to payment of taxes
4. Information relating to demand and refund
5. Information relating to pending proceedings
6. Information relating to completed proceedings
7. Any other information in relation to sub-rule (2) of rule 114-I

Information against point numbers 1, 3 and 4 continue to be the same as in the earlier form and therefore the focus of this article is on the information sought to be disclosed in the Form against other items that have been inserted.

Verification of details in 26AS vis-à-vis TDS certificates

While 26AS is your tax passbook but just like a bank passbook, it could have unintended errors. Therefore, while preparing your ITR you must tally the income details and tax deducted shown in the Form 26AS with the details as per your records. If there is a mismatch in either the quantum of income or the TDS then this should be brought to the notice of the deductor who would have to revise the TDS return by the deductor or even as a result of an incorrect PAN inadvertently being given by you to the deductor.

Information relating to specified financial transactions

Rule 114E of the Rules read with Section 285BA of the Income-tax Act casts an obligation on different categories of persons to report certain financial transactions carried on by a class of persons. Basis this report furnished by different categories of persons mentioned in the Rule, a statement of financial transactions carried out by a person during a particular year will be collated and be a part of the Form 26AS of the tax payer.

MCA recent developments:

Company incorporations hit 7-year high of 16,487 in July In one of the clearest signs of a pick-up in business sentiment, company incorporations touched a seven-year high of 16,487 in July, or 530 a day, according to data from the ministry of corporate affairs. The figure was a 50% increase from a year earlier. Officials said filings for new company registrations continue to rise in August. “This is not a declining trend. In the month of August also, the filings are increasing, not only companies but LLPs also. For Ease of Doing Business Working towards this goal and to improve the ease of doing business, the ministry will launch version 3.0 of the MCA21 in September next year. “The third phase is about data analytics,” the official said, outlining the changes envisaged for the platform. Artificial intelligence and machine learning will be incorporated into the vast repository of the MCA21 registry. This will ease compliance and strengthen enforcement. “There will be less manual intervention, more analysis through alerts and red flags for compliance,” the official said, adding that e-adjudication facilities through the Registrar of Companies will be made available. The ministry is considering using the technology to identify when a company might default on its payment obligations.

OPENING OF CURRENT ACCOUNT BY BANKS- RBI’s NEW REGULATIONS

RBI issues instructions to banks through Circulars. One such circular DOR.No.BP.BC/7/21.04.048/2020-21 dated August 6th 2020 was issued recently to bring about discipline in the Manner of Opening of Current Account by all scheduled commercial banks and payment banks. RBI felt the need for regulating and bringing about more discipline in the opening of current accounts and hence reviewed the already existing regulations and brought out the necessary changes as follows: .

1. 1) No Current account should be opened if the Customer is already having Credit facilities (CC/OD) from any bank already. All collections and payments of the customer to be routed through the CC/OD account only.

BANK’s EXPOSURE TO A BORRROWER LESS THAN 10% of OVERALL EXPOSURE TO BANKING SYSTEM:

1. Credits to CC/OD account freely permitted
2. Debit from CC/OD account of such bank can ONLY be for the Credit of CC/OD account of that borrower with a bank having 10 or more percent of exposure of the banking system.
3. Fund can be remitted from this bank to the other bank at a frequency agreed between the bank and the borrower.
4. Credit balance in CC/OD accounts cannot be used as margin for availing any non-fund-based credit facilities.
5. In case of multiple banks having more than 10% exposure, the bank to which funds should be transferred may be decided mutually between the banker and the borrower.

NORMS FOR OPENING CURRENT ACCOUNT:

In case a borrower does not have CC/OD in any bank, Current Account can be opened as follows:

SCENARIO	CONDITIONS FOR CURRENT ACCOUNT
Exposure to banking system more than 50 crores	Escrow mechanism to be in place. No restriction on “Collection accounts” by lending banks- but amounts to be transferred from these to Escrow accounts at a frequency mutually agreed. Balance in such collection accounts not to be used as margin for availing non-fund-based credit facilities. No restriction on credits to Collection Accounts, but debits limited to transfer to escrow account. Non-Lending Banks not to open Current Account for such borrowers.
Exposure to banking system 5 crores to 50 crores	No restriction on opening current accounts by lending banks. Non-lending banks can open only Collections Accounts as mentioned above.
Exposure to banking system less than 5 crores	Current accounts can be opened subject to obtaining a declaration that the customer will inform the bank whenever their exposure exceeds 5 crores. When such limit exceeds, provisions as mentioned above respectively will apply.
No exposure to banking system	No restriction on opening current accounts

Banks should monitor the Current Accounts regularly (atleast on a quarterly basis) to check the exposure of the borrower to the banking system and if respective conditions are fulfilled.

TERM LOANS ROUTING MECHANISM:

1. Term Loan drawal should not be routed through current account.
2. Since Term Loans are granted for specific purposes, fund should be directly paid to the supplier of goods and services.

For existing current accounts and OD/CC accounts, Banks shall ensure compliance to these guidelines within a period of 3 months from the date of this circular- which is November 6th 2020.

Due to the ongoing COVID-19 crisis, the due date for holding the Annual General Meeting for the financial year ended 31.3.2020 has been extended by 3 months for all companies.

As per the provisions of the Companies Act, 2013, every company other than an OPC shall hold Annual general Meetings in each year and the company must hold the AGM within a period of six months from the end of the financial year. In case of first AGM, it shall be held within a period of nine months from the date of end of the first financial year for the Company.

Previously the Ministry of Corporate Affairs have issued notifications and guidelines for conducting the General meetings through Video conferencing and other modes. Whereas for the companies to hold their general meetings through video conferencing and other modes, preparation of financial statements by the Management of Company and the completion of audit of the accounts of the Company is necessary for the company to issue notice for holding the AGM.

With the pandemic and lockdown restrictions across the country, the companies are facing difficulties in preparing the financial statements and auditors completing the audit of the financial statements. And the MCA in the past month has issued a clarification stating that those companies who are finding it difficult to hold AGM may apply for extension of time period for holding the AGM with the respective ROC in form GNL-1.

Subsequently, the MCA has provided the relief stating that the timeline for conducting the AGM has been extended by 3 months from the date, the AGM ought to have been held, i.e., if the AGM ought to have been held by 30th of September,2020, the due date is extended up to 31st of December,2020. The extension is not provided for conducting the first AGM of the Company, as the due date for the conducting the first AGM is nine months from the end of the financial year, which will be already 31st of December’2020 and hence, no further extension is provided to those companies which are holding it’s first AGM.

Further, the companies are not required to file Form GNL-1 for seeking extension. The applications filed in Form No. GNL-1 for the extension of AGM, which was rejected or where the approval for extension of AGM up to 3 months from the due date of the AGM, shall be deemed to have been granted without any further action on the part of the company.

It has to be noted that as per Section 96(1) of Companies Act, 2013, there shall be not more than 15 months of time period between two consecutive Annual General Meetings. Hence, though the timeline for holding AGM is available up to 31st of December, 2020, the 15 months time period from the date of the previous AGM cannot be extended. Thus, if the previous Annual General meeting was held on 20th of September, 2019, the date before which the AGM for this year, to be held is 20th of December,2020.

Equalisation Levy

Over the last decade, Information Technology has gone through an exponential expansion phase in India and globally. This has led to an increase in the supply and procurement of digital services. Consequently, this has given rise to various new business models, where there is a heavy reliance on digital and telecommunication networks.

As a result, the new business models have come with a set of new tax challenges in terms of nexus, characterization and valuation of data and user contribution. The combination of inadequacy of physical presence-based nexus rules in the existing tax treaties and the possibility of taxing such payments as royalty or fee for technical services creates a fertile ground for tax disputes.

Equalisation Levy on Specified Services

Charge

To bring in clarity in this regard, the government introduced vide Budget 2016, the equalisation levy to give effect to one of the recommendations of the BEPS (Base Erosion and Profit Shifting) Action Plan.

As per Section 165(1) of Income Tax act, Equalisation Levy shall be levied at rate of 6% of the amount of consideration for any specified service received or receivable by a person, being a non-resident from

• (i) a person resident in India and carrying on business or profession; or
• h(ii) a non-resident having a permanent establishment in India.

The equalisation levy under sub-section (1) shall not be charged, where

• The non-resident providing the specified service has a permanent establishment in India and the specified service is effectively connected with such permanent establishment;
• The aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or
• Where the payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession.

"specified service" means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf;

Collection & recovery

The amount of equalisation levy so deducted by the payer has to be paid to the credit of the government by 7th day of the month following the month in which the equalisation levy is deducted.

Even if equalisation levy is not deducted, the payer is liable to pay the levy to the credit of central government.

Equalisation Levy on E-commerce Supply of Services

Charge

The Finance Act 2020 has newly inserted the section 165A to enhance the scope of the Equalisation Levy to be levied on an e-commerce operator on e-commerce supply and services with effect from 1st April 2020. An equalisation levy under section 165A(1) shall be charged at the rate of 2% of the amount of consideration received or receivable by an e-commerce operator from e-commerce supply or services made or provided or facilitated by it—

1. To a person resident in India; or
2. To a non-resident in the specified circumstances as referred to in sub-section (3); or
3. To a person who buys such goods or services or both using internet protocol address located in India.

The equalisation levy under sub-section (1) shall not be charged

1. To a person resident in India; or
2. To a non-resident in the specified circumstances as referred to in sub-section (3); or
3. To a person who buys such goods or services or both using internet protocol address located in India.

The equalisation levy under sub-section (1) shall not be charged

1. where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India and such e-commerce supply or services is effectively connected with such permanent establishment;
2. where the equalisation levy is leviable under section 165; or
3. sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in sub-section (1) is less than two crore rupees during the previous year.

"specified circumstances" mean

1. sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India; and
2. sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India.
3. "e-commerce operator" means a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both;

"e-commerce supply or services" means—

1. online sale of goods owned by the e-commerce operator; or
2. online provision of services provided by the e-commerce operator; or
3. online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
4. any combination of activities listed in clause (i), (ii) or clause (iii)

Collection & recovery

The equalisation levy shall be paid by every e commerce operator to the credit of government quarterly within the following due dates:

Date of ending of quarter	Due Date
30th June	7th July
30th September	7th October
31st December	7th January
31st March	31st March

Furnishing of Annual Statement

Equalisation levy annual statement (Form No 1) shall be furnished on or before 30th June of immediately following Financial Year.

Interest

Simple interest is charged at 1% of the outstanding levy for every month or part thereof is delayed.

Situation	Penalty (in addition to paying equalisation levy and interest)
Failure to deduct equalisation levy (wholly or partly)	A penalty equal to amount of equalisation levy
Failure to deposit with government	Rs. 1000 for each day of default (not to exceed amount of equalisation levy)
Failure to furnish statement	Rs. 100 for each day of default

Income Tax Exemption

1. o When equalisation levy is deducted under the above provisions, income of the recipient non- resident is exempt under section10(50).
2. o Income from the above activities in the hands of e-commerce operator is exempt under section 10(50) with effect from the assessment year 2021-22.

Prosecution

If a false statement has been filed then the person may be subjected to imprisonment of a term up to 3 years and a fine.

Insertion of New Section 194 O for Levy of TDS @ 1% on e-Commerce Transactions

Section 194 O has been inserted to widen the tax base by brining in e-commerce participants to deduct TDS @ 1%.

• TDS needs to be deducted by E-commerce Operator at 1% on the gross amount of such sales or services or both. • The TDS shall be deducted at the time of credit od sale or service or both to the account of an e-commerce participant or at the time of payment thereof to e-commerce participant whichever is earlier.

• For the purposes of this sub-section, any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant for the sale of goods or provision of services or both, facilitated by an e-commerce operator, shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sale or services for the purpose of deduction of income-tax under this sub-section.

• The sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator shall not be subjected to provision of this section, if the gross amount of sales or services or both of such individual or HUF, through e-commerce operator, during the previous year does not exceed five lakh rupees and such e-commerce participant has furnished his Permanent Account Number (PAN) or Aadhaar number to the e-commerce operator.

• A transaction in respect of which tax has been deducted by the e-commerce operator under this section or which is not liable to deduction under the exemption discussed in the previous bullet, there shall not be further liability on that transaction for TDS under any other provision of Chapter XVII-B of the Act. This is to provide clarity so that same transaction is not subjected to TDS more than once. However, it has been clarified that this exemption will not apply to any amount received or receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale of goods or services referred to in sub-section (1) of the proposed section.

"electronic commerce" means the supply of goods or services or both, including digital products, over digital or electronic network; "e-commerce operator" means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce; "e-commerce participant" means a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce;

"services" includes "fees for technical services" and fees for "professional services", as defined in the Explanation to section 194J.

Examples

1. M/s XYZ Pvt Ltd, an Indian Company, has availed the online advertisement services of Google for its business promotion and has made a payment of Rs. 5,00,000/- to Google towards these online advertisement services. As per provisions of section 165, M/s XYZ Pvt Ltd shall be required to deduct an equalization levy @ 6% from the payment of Rs. 5,00,000/- to Google, i.e. Rs. 30,000/- shall be deducted and deposited by M/s XYZ Pvt Ltd as equalization levy and Google shall receive the payment of Rs. 4,70,000/-.

2. Amazon receives a consideration of Rs. 100 crores towards the e-commerce supply of goods and services in its Indian market place amazon.in, (which in our example is not to be considered as its PE in India), to Indian Residents during the previous year 2020-21. Thus, by virtue of the newly inserted section 165A of the Finance Act,2016 Amazon shall be required to deposit an equalisation levy @ 2% on its total turnover of Rs 100 crores from the e-commerce supply of goods and services to the Indian Residents, i.e Rs. 2 crores with the Exchequer in India.

3. Mr. S, (recipient of services), a tax practitioner, orders his favorite pizza of Dominos (e-commerce participant), on Zomato (e-commerce operator) and makes the online payment of Rs. 300/-. In this e-commerce transaction, the payment of Rs. 300/- being made by an individual Mr. S, (recipient of services), directly to Dominos (e-commerce participant), shall be deemed to be amount credited or paid by Zomato (e-commerce operator) to Dominos (e-commerce participant) and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax. Dominos, furnishes its PAN/Aadhar Card to Zomato.

Zomato (e-commerce operator), shall be required to deduct TDS of Rs. 3/- @ 1 % u/s 194O, on Rs. 300/-, and deposit the said amount of TDS with the Exchequer, just like any other TDS and Dominos (e-commerce participant) can claim the credit of this TDS u/s 194O in its Return of Income.

Conclusion

The above discussions on the newly inserted legislative provisions and the equalisation levy on digital/e-commerce platform by non-resident e-commerce operators clearly indicates the intention of the government in determining the possibility of introduction of ‘Source Rule’ based Digital Tax, on the big non-resident e-commerce players, having no physical presence in India.

GST Registration through AADHAR

1. Aadhaar Authentication process has been introduced, for the persons applying for GST registration as Normal Taxpayer/ Composition/ Casual Taxable Person/ Input Service Distributor (ISD)/ SEZ Developer/ SEZ Unit etc, in Form GST REG 01.

Type of Business	Person who should undergo e-KYC authentication of their Aadhar Number
Proprietary Concern	Individual Authorized Signatory
Partnership Firm/LLP	Managing and Authorized partners
Hindu Undivided Family	Karta
Company	Authorized Signatory being Managing Director or any other person

In case the above-mentioned Individuals are not citizens of India, then GST registration would be granted only on physical verification of principal place of business

2. Applicants, who, either do not provide Aadhaar, while applying for new registration or whose Aadhar authentication fails in validation, would be subjected to onsite physical verification by the tax department.

3. Whether Aadhar Authentication required for existing registration (already registered)

Subsection 6(A) of section 25 of CGST Act, requires every registered person shall undergo authentication, or furnish proof of possession of Aadhaar number, in such form and manner and within such time as may be prescribed.

Till date no form and manner are prescribed for an already registered person, the same is yet to be introduced. Once the manner and form are prescribed the same will be required to be done by an already registered entity.

4. Timelines for grant of registration

Situation	Time limit for grant of registration
Successful authentication of Aadhaar	03 working daysfrom date of submitting an application
Aadhar authentication is not opted for Or if authentication fails in validation And no SCN is issued within 21 days by tax official	Registration will be deemed approved
Physical Verification Notice in Form GST REG-03 issued within 21 days of submission of application. Note: Date of submission of application will be deemed to be after 15 days of submission of part B of Reg-1 as per rule 8(4A), hence the overall period for the issue of notice will get extended to 36 days (15 days plus 21 days)	After uploading the report which is 15 days from the date of verification and there is no other clarification pending Registration to be granted within seven working days from date of receipt of clarification as per sub-rule 5(d) of rule 9 of CGST act.

Tax Officer can issue SCN within the period specified for grant of registration, like in cases of successful Aadhar authentication i.e. 03 working days, or in cases when taxpayer do not opt to provide Aadhaar or when Aadhar authentication fails i.e. 21 working days. Applicants can submit their reply within 07 working days from issue of SCN.

5. Process of Aadhar Authentication

step 1: On the submission of the application for registration, an authentication link shall be sent to the registered mobile number and email ID mentioned in the application. Step 2: Click on the link. A window opens up where the user must enter the Aadhaar number and the OTP received on mobile number and the email. A confirmation message will be displayed for successful authentication. Applicant can access the link again for authentication by navigating to My Saved Applications > Aadhaar Authentication Status > RESEND VERIFICATION LINK