Non filing of IT and Annual return

Happy Independence Day!

Team of Zappy Consults wish you all a very happy Independence Day!

In a liberalised nation like India, people always think to escape from the little mandatory restrictions that they have to follow. Is it easy to escape from the mandatory compliances? Will it cost anything by avoiding certain mandates? Come let’s see in the below section. The Legal Term for the month and the summary of Notifications by MCA, SEBI, RBI and IT Department will follow the article as always.

Saranya Deivasigamani,
CEO

Effect of Non-Compliance

We have many of our clients asking – Can we skip this compliance? Can we skip this payment? We have not started any business till date do we still need to make this payment? Everyone are interested in getting away from the compliance and many are not aware what all compliances are mandatory for them and what are not.

In this section, we would see what are all the adverse effects of non-compliance of all mandatory compliances that a Company or LLP should do every year.

Income Tax Compliances

Every Company and LLP should file the Income Tax Return every year disregards with the Income Tax is paid (payable) or not, business carried or not, income earned or not. The Income Tax Department has taken efforts to identify the non-filers and certain action against them. Let us see what are the compliances and the effect on non-compliance under Income Tax.

The Income-Tax Department has implemented the Non-Filers Monitoring System (NMS) as a pilot project to prioritise action on non-filers with potential tax liabilities. The number of non-filers has been thrown up by NMS. The Non-filers Monitoring System (NMS) is a pilot project to prioritise action on non-filers with potential tax liabilities. Data analysis was carried out to identify non-filers about whom specific information was available in various sources such as Annual Information Return (AIR), Centralised Information Branch (CIB), TDS/TCS Statement, etc. The identified non-filers are informed by SMS, e-mails and letters in batches. Every LLP have to file the Income Tax Returns for the year. In simple words LLP is a separate legal entity so with the partner’s income tax return has to file the LLP Income tax return. It is a form where they show the LLP Income and calculate the tax liability & pay the taxes to the government of India. LLP have to calculate their tax liability from their financial statements for the year. Mostly Income Tax Return the last date is 31st July in this year for the Individual and legal entities but in the case where Audit is required, the last date for filing Income Tax returns is 30th September. If the LLP has not carried any business during the year ended, the LLP has to file a NIL IT RETURN with Income Tax Authorities.

Filing the income tax return after the due date invites some consequences which are as follows:

In case there are some taxes yet to be paid, the filing of income tax return after the due date will attract interest @ 1% per month and part thereof up to the date of filing of the return, on such unpaid tax amount. This interest will be charged only if there is any tax payable.
A Company will not be allowed to carry forward certain losses if they are filing the income tax return after the deadline.
A Company may lose interest on refund u/s 244A as delay in filing is attributable for the period by which they have filed a late return.
A Company may be charged a penalty of . 5,000 if file the income tax return after the expiry of one year of the financial year for which they are filing the income tax return.
Late returns are not allowed to be revised as compared to a return filed on time which can be revised indefinite times. So late returns are required to be filed with extra consciousness.

ROC / ROS Compliances

Every Company and LLP should file its Balance Sheet, Profit and Loss, Cash Flow and Annual Return to the Registrar of Companies (ROC) or the Registrar of States (ROS) where it was registered through Ministry of Corporate Affairs’ website.

The Consequences for not filing annual return was serious. If a Company fails to file its annual return, it is punishable with a fine which shall not be less than . 50,000 but which may extend to . 5 lakhs. Also, every Director of the Company who is in default shall be punishable with imprisonment for a term which may extend to six months or with a fine which shall not be less than . 50,000 but which may extend to . 5 lakhs, or both.

If the annual return of a Company is not filed continuously for three financial years, then any Director of such Company would be disqualified and would not be eligible for appointment as a Director of any other Company for a period of five years from the date on which defaulting Company failed to file annual return.

In addition to above, to ensure proper Corporate Governance and Compliance if provisions of the Companies Act, the following action would be implemented:

No other e-filing of the Company would be accepted by ROC from Director of defaulting Companies for any other Company also.
Company Secretaries and Auditor of defaulting Companies would not be allowed to sign and certify the filing with the MCA-21 system, till the defect is rectified.
Members of ICSI, ICAI, and ICWAI must not issue any certificates to such defaulting Companies.
Action will be taken against defaulting Companies and their director in default in coordination with RBI and SEBI.

If there is a delay in filing form no.8 and 11 of LLP, then LLP will have to pay a penalty as applicable on today’s date. If the filing is not done within stipulated time, there is a penalty of . 100 per day till it complies. LLP cannot close or wind up without filing Annual Accounts. So if LLP doesn’t file on time, then LLP turns into unlimited statutory liability till the day it complies.

The provisions of the Act require LLPs to file the documents like Statement of Account and Solvency (SAS) and Annual Return (AR) i.e. Form 8 and Form 11 within the time specifically indicated in relevant provisions. The LLP Act contains provisions for compounding of offences which are punishable with fine only.

Further, for defaults/non-compliance on procedural matters such as time limits for filing requirements provisions have been made for charging default fees (on daily basis) in a non-discretionary manner. To avoid all the dangerous consequences of heavy penalty, it would be advisable to comply on time within stipulated due date of filing.

If the Limited Liability Partnership fails to file an annual return, it shall be punishable with fine which shall not be less than . 25000 but which may extend to .5,00,000. The designated partner of such limited liability partnership shall be punishable with fine which shall not be less than . 10,000 but which may extend to . 1,00,000. Delayed filing will also lead to severe additional fees that increases to . 200 everyday

Legal Term

In forma pauperis

(in form-ah paw-purr-iss) adj. or adv. Latin for “in the form of a pauper,”a referring to a party to a lawsuit who gets filing fees waived by filing a declaration of lack of funds (has no money to pay). These declarations are most often found in divorces by young marrieds or poor defendants who have been sued.

MCA Updates

Companies (Incorporation) Third Amendment Rules, 2016 and Companies (Accounts) Amendment Rules, 2016 were notified on 27.07.2016 and will come in effect as on the date of publishing in the Official Gazette.

National Company Law Tribunal Rules, 2016 and National Company Law Appellate Tribunal Rules, 2016 were notified on 21.07.2016 and will come in effect as on the date of publishing in the Official Gazette.

Companies Share Capital and Debentures Third Amendment Rules, 2016 was notified on 19.07.2016 and will come in effect as on the date of publishing in the Official Gazette.

SEBI Updates

Revised Formats for Financial Results and Implementation of Ind AS by listed entities which have listed their debt securities and/or non-cumulative redeemable preference shares.

RBI Updates

Implementation of Indian Accounting Standards (Ind AS).
Guidelines for Relief Measures by NBFCs in areas affected by Natural Calamities released.
Master Direction – Lending to Micro, Small & Medium Enterprises (MSME) Sector

Income Tax Updates

Amendment of the Income-tax Rules-seeking PAN details of trustees and others in case of registration of trusts – modifications of Form 10A under Rule 17A.

Swatch Bharat Pakhwada

Busy with payment of tax and returns!

July is always a busy month for all the Tax Consultants where they try to file all the returns of all clients in time to avoid the late fees, interests and penalties. Amidst of our routine, this time, we have few Cess added to the taxes collected by the Central Government.

In our July edition, we will be seeing in detail about Swachh Bharat Cess. Why this cess has been introduced and what are all the benefits that we can get out of this cess and to whom all this cess is applicable. As usual, the Legal Term for the month and the summary of Notifications by MCA, SEBI, RBI and IT Department will follow this article.

Saranya Deivasigamani,
CEO

Swachh Bharat Cess (SB Cess)

We all know that the government has imposed Swachh Bharat Cess (SB Cess) to make clean India. Even provisions were made in the Finance Bill’ 2015 to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services. In this section, we will see what all the key points, objectives, benefits and details about this cess.

Objectives of Swachh Bharat Cess

Swachh Bharat Cess is introduced to achieve the following objects:

To Change people’s attitude and create awareness among people towards the importance of cleanliness and good sanitation system.
To introduce, modern and scientific municipal solid waste management practices.
For the betterment of Indian economy.
To develop the rural areas by developing the sanitation system.
To prevent inflectional diseases like Diarrhea, Cholera, etc.
Eradicate manual scavenging.
To construct toilets for community and houses to eliminate open defection.

Benefits of Swachh Bharat Cess

There are many benefits other than clean India drive which includes the following major areas such as –

Health – As per WHO report, due to unhygienic conditions, every Indian is losing thousands of rupees every year, which is a big financial loss to every Indian. Swachh Bharat Mission will help in improving health and to reduce this financial loss.
Productivity – Improvement in health will result into improvement in productivity of every individual because high productivity means high earning. We hope a healthy India will soon be turned into a developed nation.
FDI (Foreign Direct Investment) – In today’s scenario, our nations desperately need ‘Foreign Direct Investment’. Hence, Swachh Bharat Mission helps in attracting FDI.
Tourism – 5% of Indians can get employment through tourism as all know that, cleanliness is a big hurdle in it. Foreign tourists are very particular about hygienic conditions, with improvements; we can attract more foreign travellers to India that will help in bringing foreign currency, which will boost GDP of the nation. Impact of SB cess under different scenario is discussed below:
Negative List and Mega Exemption List – As discussed, SB cess would be leviable on the value of taxable services. Hence, all services covered under negative list and wholly exempt services would be out of the preview of SB cess.
Abatement – Important thing to be noted down is the benefit of abatement would not be available to SB cess. Abatement notification no. 26/2012 is only applicable on Section 66B; Section 66B covers service tax rate of 14%, not SB cess. Hence, abatement notification is not applicable on SB cess, and this cess will be leviable on total value and not abated value.
Reverse Charge provisions – As per 119(5) of Finance Act, 2015, provision of Chapter V of Finance Act, 2015 would be applicable on SB cess; hence reverse charge mechanism will be applicable on SB cess.

CENVAT

Although the fact that the provision of Chapter V would be applicable on SB cess, still separate amendment requires under CCR, 2004 to avail the CENVAT of SB cess or to utilise existing canvas to pay SB cess. Till the time no clarification received from Government

CENVAT cannot be utilised for payment of SB cess and
CENVAT credit of SB cess is also not available.

Applicability of Swachh Bharat Cess (SBC) – Date & Tax Rates

This Cess (SBC) is applicable only to taxable services. This cess is leviable on the value of services, thus, the effective rate of service tax would be 14.5% w.e.f. 15.11.2015. This cess will not be applicable on non-taxable services including the exempted services. This cess is to be disclosed separately on the invoice and paid separately.

Service Provider

The cess is to be collected and paid by any service provider:

who is presently collecting and paying Service Tax and
who may be required to collect Service Tax in the future (i.e. when the value of taxable services provided exceeds Rs. 10 Lakhs)

In the following situations there shall be no levy of SBC for a service provider:

If the service has already been provided as on 15th Nov. 2015: Either the bill should have been raised before 15th Nov. 2015or the payment should have been received before 15th Nov. 2015
If the service has not been provided as on 15th Nov. 2015: Both the bill should have been raised and the payment should have been received before 15th Nov. 2015

In any other situation, there shall be levy of SBC along with Service Tax

The impact of introduction of SBC on different situations is as follows as per Rule 4 of Point of Taxation Rules, 2011 (the cut-off date being 15th November 2015):

Date of Completion of Service	Date of Issuance of Invoice	Date of Receipt of Payment	Effective Rate of Service Tax
Before 15/11/2015	After 15/11/2015	After 15/11/2015	14.5%
Before 15/11/2015	Before 15/11/2015	After 15/11/2015	14%
Before 15/11/2015	After 15/11/2015	Before 15/11/2015	14%>
After 15/11/2015	Before 15/11/2015	After 15/11/2015	14.5%
After 15/11/2015	Before 15/11/2015	Before 15/11/2015	14%
After 15/11/2015	After 15/11/2015	Before 15/11/2015	14.5%

As per the latest Notification 23/2015 – Service Tax (ST) Dated 12th Nov’ 2015, Swachh Bharat Cess shall be leviable only on the specified percentage of taxable value. Thus, it is accepted in favour of the assessee. It is further clarified that the SBC on the services covered under Service Tax Valuation Rules’ 2006 shall be only of the taxable value. The effective rate would be as follows:-

Services	Effective Rate
Works Contract Services	5.8% / 10.15%
Money Changing	0.145%
Restaurant & Outdoor Catering	5.8% / 8.7%

Service Recipient

SBC would be applicable on all taxable services. Hence, even if a service is falling under Reverse Charge mechanism, the service recipient is liable to pay SBC. Moreover, unlike service provider, service recipient cannot go for exemption of Rs. 10 Lakhs under Small Service Provider Exemption Notification – 33/2012.

There are many private initiatives that are coming out to support the success of Swachh Bharat. However, the private sector whether it is individuals or corporate entities has to think ahead and spend their precious time and funds far beyond their CSR budgets to achieve real change. And change on a scale that can actually make a difference to people’s lives.

Legal Term

Appurtenant

Adjective. pertaining to something that attaches. In real property law, this describes any right or restriction which goes with that property, such as an easement to gain access across the neighbour’s parcel or a covenant (agreement) against blocking the neighbour’s view. Thus, there are references to an appurtenant easement or appurtenant covenant.

MCA Updates

eForm AOC-04 for filing Annual Financial Statement is likely to be amended w.r.t filing of CSR expenditure details. The revised AOC-04 eForm is likely to be available on MCA portal by 3rd week of Jul-2016.
Forms FC-2, FC-4, MGT-10, SH-7 and Refund Form were recently revised.
In the Companies Act, 2013, Section 139 has been amended.
Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016, Companies (Acceptance of Deposits) Amendment Rules, 2016, The Companies (Authorised to Register) Amendment Rules, 2016, Companies (Corporate Social Responsibility Policy) Amendment Rules, 2016 has been amended.

SEBI Updates

Formats for Financial Results and Implementation of Ind-AS by Listed Entities has been revised.
Clarification regarding grandfathering of ODI issuers and modification of has been made.

RBI Updates

Master Direction – Reserve Bank of India (Financial Statements of All India Financial Institutions – Presentation, Disclosure and Reporting) Directions, 2016.

Income Tax Updates

In Income Tax Rules, 1962, rule 128 Foreign Tax Credit, and 37BC. Relaxation from deduction of tax at higher rate under section 206AA has been included.

NCLT, NCLAT

Long wait is over

At last, NCLT is constituted and is effective from this June. Our long lasting wait is over and we are having the fruit on hand to taste now. Hope all the practical complexities in relation to CLB, BIFR and High Court matters are solved in a single place with simplest procedures without any bias. As it is NCLT season, this time, we will have a look at its constitution and scope of services; a Practicing Company Secretary (PCS) enjoys under the tribunal. Also our usual Legal Terms and News Bites that contains notification and updates of MCA, SEBI, RBI and IT Department will follow in its usual section.

Saranya Deivasigamani,
CEO

All about NCLT

It has been more than 14 years that we first heard about National Company Law Tribunal [NCLT] & National Company Law Appellate Tribunal [NCLAT]. But now by MCA Notification dated 1st June, 2016 in exercise of the powers conferred by section 408 of the Companies Act, 2013 (18 of 2013), the Central Government hereby constitutes the National Company Law Tribunal to exercise and discharge the powers and functions as are, or may be, conferred on it by or under the said Act with effect from the 1st day of June, 2016. The Companies (Second Amendment) Act, 2002 provides for the setting up of a National Company Law Tribunal and Appellate Tribunal to replace the existing Company Law Board and Board for Industrial and Financial Reconstruction. The setting up of NCLT as a specialised institution for corporate justice is based on the recommendations of the Justice Eradi Committee on Law Relating to Insolvency and Winding up of Companies. NCLT can be called as Mega Tribunal. Because NCLT will consolidate the corporate jurisdiction of the followings:

Company Law Board.
The Board for Industrial and Financial Reconstruction
The Appellate Authority for Industrial and Financial Reconstruction
Jurisdiction and powers relating to winding up restructuring and other such provisions, vested in the High Courts.

Powers of NCLT

The proposed NCLT will have judicial and technical experts who will handle all matters presently being handled by CLB, Company Court and Board of Industrial and Financial Reconstruction (BIFR) with much wider jurisdiction regarding the scope of the subjects. Other powers:

Most of the powers of the Company Law Board under the Companies Act, 1956.
All the powers of BIFR for revival and rehabilitation of sick industrial companies;
Power of High Court in the matters of mergers, demergers, amalgamations, winding up, etc.;
Power to order repayment of deposits accepted by Non-Banking Financial Companies as provided in section 45QA of the Reserve Bank of India Act, 1934;
Power to wind up companies;
Power to Review its own orders.

Administration of NCLT and NCLAT

Section 415 to Section 433 (both inclusive) has also come into force. These sections deal with the administration of NCLT and NCLAT.
Sec 415. Acting President and Chairperson of Tribunal or Appellate Tribunal.
Sec 416. The resignation of Members.
Sec 417. Removal of Members.
Sec 418. The staff of Tribunal and Appellate Tribunal.
Sec 419. Benches of Tribunal.
Sec 420. Orders of Tribunal.
Sec 421. Appeal from Orders of Tribunal.
Sec 422. Expeditious disposal by Tribunal and Appellate Tribunal.
Sec 423. Appeal to Supreme Court.
Sec 424. Procedure before Tribunal and Appellate Tribunal.
Sec 425. Power to punish for contempt.
Sec 426. Delegation of powers.
Sec 427. President, Members, officers, etc., to be public servants.
Sec 428. Protection of action taken in good faith.
Sec 429. Power to seek the assistance of Chief Metropolitan Magistrate, etc.
Sec 430. Civil court not to have jurisdiction.
Sec 431. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings.
Sec 432. Right to legal representation.
Sec 433. Limitation.

Constitution of NCLT and NCLAT:

NCLT & NCLAT Consist:

There are two classes of members to the National Company Law Tribunal; Judicial Members and Technical Members.
The Tribunal shall be headed by the President while the Appellate Tribunal by Chairperson.
NCLAT not exceeding eleven members for hearing appeals against the orders of the Tribunal
National Company Law Appellate Tribunal, constituting of a Chairperson and not exceeding eleven members for hearing appeals against the orders of the Tribunal.

Qualification: (President/Member of NCLT)

President	Judicial Member	Technical Member
Is/has been Judge of High Court ≥ five years	Is/has been Judge of High Court (any period)	Has Member of Indian Corporate Law Service /Indian Legal Service ≥ 15 years (out of 15 years at least three years to be in the pay scale of Joint Secretary to GOI or equivalent post)
	Is/has been District Judge at least five years	Is/has been Practising Chartered Accountant at least15 years
	Has been Advocate of court held a judicial office or as member of a tribunal at least ten years	Is/has been Practicing Cost Accountant at least 15 years
		Is/has been Practising Company Secretary at least 15 years
		Person with proven ability, integrity and standing to have special knowledge and experience ≥ 15 years (in below mentioned specified areas)
		Presiding Officer of Labour Court/ Tribunal/ National Tribunal (under Industrial Disputes Act, 1947) at least five years

Eligibility NCLT

In the case of President shall hold office until he attains the age of 67 years.
In case of Member age at least, 50 years shall hold office until he attains age of 65 years

Eligibility NCLAT

In the case of President shall hold office until he attains the age of 70 years.
In case of Member age at least, 50 years shall hold office until he attains age of 67 years

Scope of services for Practicing Company Secretaries (PCS) under NCLT:

The establishment of NCLT/NCLAT shall offer various opportunities to Practicing Company Secretaries as they have been authorised to appear before the Tribunal/ Appellate Tribunal. Therefore, Practicing Company Secretaries would for the first time be eligible to appear for matters which were hitherto dealt with by the High Court viz. mergers, amalgamations under Section 391-394 and winding up proceedings under the Companies Act, 1956. Areas opened up for company secretaries in practice under NCLT are briefly stated hereunder: PCS as Member of NCLT: A Practicing Company Secretary can be appointed as a Technical Member of NCLT, provided he has 15 years working experience as a secretary in whole-time practice. Appearance before National Company Law Appellate: Tribunal As stated earlier a Practicing Company Secretary has been authorised to appear before National Company Law Appellate Tribunal. Insolvency Process: Currently, the law does not support effective participation of professionals and experts in the Insolvency process. There is no shortage of quality professionals in India. Disciplines of chartered accountancy, company secretaryship, cost and works accountancy, law, etc. can act as feeder streams, providing high-quality professionals for this new activity. In fact, private professionals can play a meaningful role in all aspects of the process. Thus, in view of vast opportunities emerging with the establishment of NCLT, the PCS should standardise their competencies with the global benchmarks to provide value added services in assisting the Tribunal in dispensation of justice and speedier disposal of matters like merger, amalgamation, restructuring, revival and rehabilitation of sick companies and winding up of companies.

Legal Term

T.R.O.

Noun: Legal slang for temporary restraining order.

MCA Updates

The Central Government has notified the constitution of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) on 1st June, 2016. The Company Law Board (CLB) stands dissolved with the constitution of these bodies.
Forms NDH-2, FC-3, MSC-3, INC-24, INC-3, CHG-8, CHG-9 and SH-9 were recently revised on MCA21 Company Forms.
LLP Forms Form 2A, Form 4, Form 4A, Form 5, Form 23, Form 31 and Form 32 were recently revised on MCA21 LLP Forms

SEBI Updates

Section 30 of SEBI read with Regulation 6A of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, and Section 25 of the Depositories Act, 1996 (22 of 1996), the Board hereby makes the following Regulations to further amend the SEBI (Depositories and Participants) Regulations, 1996, has been modified.

RBI Updates

Amendments made in Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015 .
Amendments made in Foreign Exchange Management Act, 1999 (FEMA) Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules) – Compounding of Contraventions under FEMA, 1999.
Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of advance remittance for exports and migration of old XOS data
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Seventh Amendment) Regulations, 2016

Income Tax Updates

In Income Tax Rules, 1962, in rule 29B, in rule 31 A, and 8D,- (I) for sub-rule (2), has been modified.

Budget 2016 highlight-CENVAT

Opportunities all over

Opportunities are spread all over. Choosing the right opportunity in right time will lead to a successful growth. Budget 2016 provides various opportunities to the businesses under various sector. For past two months, we were seeing about the Budget Highlights in general and specific changes made in Service Tax. Now it is time to look into opportunities provided to doing business across the nation. Yes, in this edition, we will be seeing the Budget 2016 Highlighting the factors affecting the CENVAT, along with our usual Legal Terms and News Bites that contains notification and updates of MCA, SEBI, RBI and IT Department.

Saranya Deivasigamani,
CEO

Budget 2016 Highlights – CENVAT

Following are the major changes proposed in CENVAT by Union Budget 2016-17. Most of the notifications will be effective from the date of enactment of Finance Act 2016 while the others are on mentioned date.

Amendments related to Capital Goods

Wagons of subheading 8606 92 included in the definition of capital goods
The Capital goods used in an office located within the factory is also eligible for CENVAT Credit.
CENVAT credit on inputs and capital goods used for pumping of water, for captive use in the factory, is being allowed even where such capital goods are installed outside the factory.
All capital goods having a value up to .10,000/- per piece are being included in the definition of input.

Amendments related to Inputs send to Job worker

Manufacturer of final products is being allowed to take CENVAT credit of tools of Chapter 82 of the Central Excise Tariff in addition to credit on jigs, fixtures, moulds & dies when intended to be used in the premises of job-worker or another manufacturer who manufactures the goods as per the specification of the manufacturer of final products.
It is also being provided that a manufacturer can send jigs, fixtures, moulds & dies goods directly to such other manufacturer or job-worker without bringing the same to his premises.
The permission given by an Assistant Commissioner or Deputy Commissioner to a manufacturer of the final products for sending Inputs or partially processed inputs can be sent outside the factory to a job-worker and clearance therefrom on payment of duty is valid for 3 financial years.

CENVAT Credit Eligibility

Radio Frequency Spectrum, Mines etc.: CENVAT credit of Service Tax paid on the amount charged for assignment by Government or any other person of a natural resource such as radio-frequency spectrum, mines etc. shall be spread over the period of time for which the rights have been assigned.
Where the manufacturer of goods or provider of output service further assigns such right to use assigned to him by the Government or any other person, in any financial year, to another person against a consideration, balance CENVAT credit not exceeding the service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year. It is also being provided that CENVAT credit of annual or monthly user charges payable in respect of such assignment shall be allowed in the same financial year.
Infrastructure CESS: CENVAT credit cannot be utilised for payment of Infrastructure CESS. Further, no credit of this CESS would be available under the Credit Rules.

Amendments to Rule 6

Rule 6(1): The existing principle that CENVAT credit shall not be allowed on such quantity of input and input services as is used in or in relation to manufacture of exempted goods and exempted service. The procedure for calculation of a credit not allowed is provided in sub-rules (2) and (3), for two different situations.
Rule 6(2): A manufacturer who exclusively manufactures exempted goods for their clearance up to the place of removal or a service provider who exclusively provides exempted services shall pay (i.e. reverse) the entire credit and effectively not be eligible for credit of any inputs and input services used.
Rule 6(3): When a manufacturer manufactures two classes of goods for clearance up to the place of removal, namely, exempted goods and final products excluding exempted goods or when a provider of output services provides two classes of services, namely exempted services and output services excluding exempted services, then the provider or the manufacturer of the output service shall exercise one of the two options, namely,
- Pay an amount equal to 6% of value of the exempted goods and 7% of value of the exempted services, subject to a maximum of the total credit taken or
- Pay an amount as determined under sub-rule (3A).
Rule 6 (3A) : The procedure and conditions for calculation of credit allowed and credit not allowed and such credit not allowed shall be paid, provisionally for each month. Intimation in writing to the Superintendent of Central Excise is necessary. The four key steps for calculating the credit required to be paid are :-
- No credit of inputs or input services used exclusively in manufacture of exempted goods or for provision of exempted services shall be available;
- Full credit of input or input services used exclusively in final products excluding exempted goods or output services excluding exempted services shall be available;
- Credit left thereafter is common credit and shall be attributed towards exempted goods and exempted services by multiplying the common credit with the ratio of value of exempted goods manufactured or exempted services provided to the total turnover of exempted and non-exempted goods and exempted and non-exempted services in the previous financial year;
- Final reconciliation and adjustments are provided for after close of the financial year by 30th June of the succeeding financial year, as provided in the existing rule.
New sub-rule (3AA): A manufacturer or a provider of output service, who has failed to follow the procedure of giving prior intimation, may be allowed by a Central Excise officer, competent to adjudicate such case, to follow the procedure and pay the amount prescribed subject to payment of interest calculated at the rate of 15% p.a.
New sub-rule (3AB) (transitional provision): The existing rule 6 of CCR would continue to be in operation up to 30.06.2016, for the units who are required to discharge the obligation in respect of the financial year 2015-16.
Rule 6(3B): Allow banks and other financial institutions to reverse credit in respect of exempted services on an actual basis in addition to the option of 50% reversal.
Explanations 3 and 4 are being inserted in rule 6, sub-rule (1) so as provide for reversal of CENVAT Credit on inputs/input services which have been commonly used in providing taxable output service and an activity which is not a ‘service’ under the Finance Act, 1994.
Rule 6(4): No CENVAT credit shall be allowed on capital goods if the same are used for the manufacture of exempted goods or provision of exempted service for two years from the date of commencement of commercial production or provision of service.
Rule 6(7): Credits are taken on inputs and input services used in providing a service by way of “transportation of goods by a vessel from customs station of clearance in India to a place outside India” shall not be required to be reversed by the shipping lines.

Document to Avail CENVAT Credit

Now an invoice issued by a service provider for clearance of inputs or capitals goods shall also be a valid document for availing CENVAT credit.
New Return for Service Provider
Now Provider of Output Services Also requires filing an Annual Return for each financial year, by the 30th day of November of the succeeding year in the form as specified by a notification by the Board.
CENVAT Utilization Steps
Rule 14 (2) omitted. There was a procedure based on FIFO method for determining whether a particular credit has been utilised.
Amendments related to Input Service Distributor (ISD)
Definition of “Input Service Distributor” has been changed by including the ‘Outsourced Manufacturing Unit’ to which such distributor can transfer CENVAT Credit.
The outsourced Mfg. unit shall maintain a separate account for input service credit received from each ISD.
These amendments will come into effect from 01-04-2016. Therefore, CENVAT credit up to 31-03-2016 would not be transferred to outsourced Mfg. unit.
New Rule 7B: Manufacturers with multiple manufacturing units can maintain a common warehouse for inputs and distribute inputs with credits to the individual manufacturing units. A further manufacturer having one or more factories allowed to take credit on inputs received under the cover of an invoice issued by a warehouse of the said manufacturer.

Legal Term

Laches

Laches is a defense to a proceeding in which a plaintiff seeks equitable relief.

MCA Updates

Forms INC-7, GNL-1 and GNL-4 were recently updated on MCA21 Company Forms page. Forms INC-7, GNL-1 and GNL-4 were recently updated on MCA21 Company Forms page.
Sub-section (1) of section 458 of the companies Act(18 of 2013) has been notified on 29 April.
Clarification to companies (AS) Amendment Rules, 2016 – GC 4/2016
Section 396 of CA 2013 – Jurisdiction of the state of Telangana – 26 April.

SEBI Updates

Guidelines for Public Issue of Units of InvITs
Investment Policy, Liquid Assets for the purpose of Calculation of Net Worth of a Clearing Corporation and Transfer of Profits
Amendment to Circular No. CIR/CFD/DIL3/18/2015 dated Dec 31, 2015
Revised Formats under SEBI (SAST) Regulations, 2011
Disclosure of Proprietary Trading by Commodity Derivatives Broker to Client and Pro – account Trading terminal
Electronic book mechanism for issuance of debt securities on private placement basis.

RBI Updates

Foreign Exchange Management (Remittance of Assets) Regulations, 2016
Rationalization and reporting of ODI Forms
Establishment of BO/LO/PO in India.

Income Tax Updates

In exercise of the powers conferred by section 35, read with section 295 of the Income-tax Act, 1961 (43 of 1961).
26C. Furnishing of evidence of claims by employee for deduction of tax under section 192.