KGS. Good, better, best. Never let it rest. Till your good is better and your better is best St Jerome INTEGRITY FIRST

Transcription

1 Good, better, best. Never let it rest. Till your good is better and your better is best St Jerome INTEGRITY FIRST

2 Cost INDEX S. No. Topic 1. Deemed Public Company 2. Analysis of GDP Growth rate of India 3. GST Impact on CA/CS/CMA Professionals 4. FAQ s on brief analysis of Krishi Kalyan Cess 5. Start up of the month - Srjna

3 Deemed Public Company This article aims to explain Public Company Restrictions on company Effects of the provision Conclusion CA Chandan Kumar and Arihant Jain

4 DEEMED PUBLIC COMPANY 1) HISTORY The Companies Act, 1956 provides for two kinds of Companies: Private and Public. However, prior to amendment of the Act in the year 2000 by Companies (Amendment) Act, 2000 w.e.f. 13th December 2000, one more type of Companies prevailed, i.e., Deemed Public Companies. Section 43A of Companies Act, 1956 which has been repealed by the Amendment Act, provided the situations when a private company would be wearing the outfit of a public company and required registration as a deemed public company. 2) Definition of Public Company Public company means a company which (a) is not a private company; (b) has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, as may be prescribed; Provided that a company which is a subsidiary of a company, not being a privatecompany, shall be deemed to be public company for the purposes of this Act evenwhere such subsidiary company continues to be a private company in its articles. Explanation: However, except clause 71 of Section 2, the Act is silent on nature, characteristics and conversion of such private companies into deemed public Company being the subsidiaries of public companies. In this article, I have tried to ascertain the nature of such private companies and have expressed my views on whether such private companies require re-registration or conversion on becoming subsidiaries of public companies. By virtue of proviso of Section 2(71) of the Companies Act, 2013 a private company is, for the purposes of the Act, deemed to be a public company, if it is subsidiary of public Company. 3) Deemed Public? How to check? Check points: 1. Subsidiary of a Public Company 2. Continue with the restrictions mentioned in clause 68 of section 2

5 As per provision of Deemed Public Company if a private Limited Company is subsidiary of Public Company will be considered as Deemed Public Company. Date of becoming a deemed Limited Company: The private company becomes deemed limited immediately upon, became subsidiary of public Company. In 2006, in case of Hillcrest Realty Sdn. Bhdv.Hotel Queen Road (P.) Ltd., the Company Law Board, Delhi Bench held at para 36 that "all the provisions in the Articles to maintain the basic characteristics of a private company in terms of section 3(1)(iii) will continue to govern the affairs of the company even though it is a subsidiary of a public company". It was held by the Delhi CLB Bench that the basic characteristics of a private company in terms of section 3(1)(iii) do not get altered just because it is a subsidiary of a public company in view of fiction in terms of section 3(1)(iv)(c) that it is a public company. It was further held by the Bench that it may be a public company in terms of other provisions of the Act but not with reference to its basic characteristics. 4) Restrictions for Deemed Public Company All the provisions of Public Company applicable on deemed public Company except following below given restriction as mentioned in Article of Association of Company: 1. Restricts the right to Transfer its shares; 2. Limits the number of its Members to Two Hundred: 3. Prohibits any Invitation to The Public to subscribe for any securities of the company; Along with provisions applicable on public Company it has to comply with the restriction mentioned above. Note: It is a well-accepted principle that 'what is not there in the law cannot be imported into the law'. Therefore, a private company which becomes a public company by virtue of being a subsidiary of a public company: May retain the restrictions in its articles as applicable to a private company and therefore, constitutionally, be a private company; May retain its name as a private company; Since, due to its parentage, the company acquires a public interest status, such company cannot be entitled to the privileges of a private company. Maximum No. of member can t be exceed ) Effects of becoming Deemed Public Company As mentioned above, due to its nature, private companies enjoy several relaxations and several sections have exempted private companies from the regulatory regime of the Act unless such private companies are the subsidiaries of public companies. All the Provision applicable on public Company under the Act except mentioned above will be applicable on Deemed Public Company. New Compliance requirements on Private Company once its became Public Company: I. Elimination of Privileges: Now Private Limited Company not allowed to avail the privileges given to it s under the Act and under the exemption given by notification of Ministry dated 05th June, Example:

6 Section 185 Section Section 197 Section 73(2) Acceptance of deposit from relative of Director Section 160, 162, 180, 188(1), 67, Deemed Public Company are not allowed to give loan, guarantee, investment, securities to directors and person interested in directors even after fulfilling all the condition given in exemption notification. Provision of Section will apply on the deemed public company instead of the relaxation mentioned in its Article of Association. For payment of remuneration to directors Company required to follow the provisions and limits given under Section 197 For acceptance of deposit from members private company not required to comply with the conditions of clause (a)-(e) of Section 73(2). But in case of deemed public Company its required to comply with the conditions of clause (a)-(e) of Section 73(2). Deemed Public Company can t accept deposits from the relative of directors until unless its comply with the provision of Section 73 Company required to comply with the provision of these section also. II. Encumber Compliances: This Private Limited Company required to Comply will the many new provisions which were not applicable on it s up to the time it was purely private limited Company. Some examples are given below: Section 203 Section 149 Section 177/178 Section 139(2) Section 204 Key Managerial Personnel s provisions will be applicable on the Private Limited Company i.e. if Company have turnover more than 10 crores required to appoint KMP s. If Company fall into the limits given under section 149 then company required to appoint Independent Director, Women Director If Company fall into the limits given under section 149 then Company required to constitute the Audit Committee and Nomination & Remuneration Committee Rotation of auditor will also applicable on Deemed Public Company. Secretarial Audit will also applicable on Deemed Public Company if its fall under the limits of Section 204. All other sections of the Companies Act with are applicable on Public Limited Company became applicable on Private Limited Company. 6) CONCLUSION When a private company becomes a subsidiary of public company, it comes under the definition of 'public companies' as provided in section 2(71) of the Act. Such change in the status of the company is by operation of law, and not based on discretion of the company. There is nothing in the law mandating the company to change its incorporeal status. a private company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under the Act, and the Act shall apply to the company as if it were not a private company. The section clarifies the legislative intent that such companies may retain their registered corporate shell of a private company but will be subjected to the discipline governing public companies. Some general effects of conversion: 1. Where a private company becomes a public company by virtue of this section, any subsidiary of such company, if it was private company previously, will also become a public company, 2. all the provisions such as those of sections 196,197 & 203 would have to be complied with.

7 Analysis of GDP Growth rate of India This article aims to Analyse GDP Growth Rate Examines the impact of GDP Growth Rate CA Kunal Jain & Shweta Tripathi

8 Analysis of GDP Growth rate of India What is 'Gross Domestic Product - GDP' Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well. GDP includes all private and public consumption, government outlays, investments and exports minus imports that occur within a defined territory. Put simply, GDP is a broad measurement of a nation s overall economic activity. Gross domestic product can be calculated using the following formula: GDP = C + G + I + NX Where, C = all private consumption, or consumer spending, in a nation's economy, G = the sum of government spending, I = sum of all the country's investment, including businesses capital expenditures and, NX = is the nation's total net exports, calculated as total exports minus total imports (NX = Exports - Imports) GDP Growth Rate: -The Indian economy expanded7.9 percent year-on-year in the first three months of 2016, higher than a downwardly revised 7.2 percent growth in the previous quarter and much better than market expectations of a 7.5 percent increase. It is the best performance in six quarters as the farm sector rebounded and grew 2.3 percent and manufacturing jumped 9.3 percent. Considering full 2015/2016 year (April to March), the GDP in India advanced 7.6 percent, higher than 7.2 percent in the previous year. GDP Annual Growth Rate in India averaged 6.07 percent from 1951 until 2016, reaching an all time high of percent in the first quarter of 2010 and a record low of percent in the fourth quarter of GDP Annual Growth Rate in India is reported by the Ministry of Statistics and Programme Implementation (MOSPI).

9 Impact of GDP Growth Rate: By industry, the most important and the fastest growing sector of Indian economy are services. Trade, hotels, transport and communication; financing, insurance, real estate and business services and community, social and personal services account for more than 60 percent of GDP. Agriculture, forestry and fishing constitute around 12 percent of the output, but employs more than 50 percent of the labor force. Manufacturing accounts for 15 percent of GDP, Construction for another 8 percent and mining, quarrying, electricity, gas and water supply for the remaining 5 percent. Private consumption growth accelerated to 8.3 percent from 8.2 percent in the previous quarter, while, Government spending went up 2.9 percent, slowing slightly from a 3 percent growth in Q Gross fixed capital formation shrank 1.9 percent, following a 1.2 percent growth in the previous period and stocks increased 5.6 percent, slowing from a 7.6 percent gain in Q Exports declined 1.9 percent, following an 8.9 percent drop in the previous quarter and imports went down 1.6 percent after falling 6.4 percent. On the production side, the gross value added for agriculture, forestry and fishery went up 2.3 percent, rebounding from a 1 percent drop in the previous period; Gross value added accelerated for mining and quarrying (up 8.6 percent from 7.1 percent); Utilities (up 9.3 percent from 5.6 percent) and Trade, hotels, transport and communication (up 9.9 percent from 9.2 percent) but, Slowed for manufacturing (up 9.3 percent from 11.5 percent); construction (up 4.5 percent from 4.6 percent), financing, insurance and real estate (up 9.1 percent from 10.5 percent.

10 GST Impact on CA/CS/CMA Professionals This article aims to Explain the Impact of GST On Different Professionals Highlight the Roles of these Professionals List the various requirements to be complied CA Jackie Verma & Madhav Khandelwal

11 GST Impact on CA /CS /CMA Professionals Taxable Event Supply a. The taxable event for levy of GST shall be supply of goods and/or services. The term supply is defined inclusively to cover general supply and deemed supply. b. General supply includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made for a consideration. c. Deemed supply includes specified transactions made without consideration. Impact: Supply of services by CA, CS and CMA for a consideration shall be leviable to GST. Nature of Supply Inter-state vs. Intra-state supplies a. Central GST (CGST) and State GST (SGST) will be leviable on intra-state supplies and Integrated GST (IGST) will be leviable on inter-state supplies. IGST will be summation of CGST and SGST. b. Supply of goods and/or services shall be Inter-state if location of supplier and place of supply are in different States. Otherwise, the supply will be Intra-state. Location of supplier is generally the registered place of business. Place of Supply of services generally is the location of service receiver. Impact: Accordingly, if service provider and service receiver are located within a state, the same will be Intra-state supply liable to CGST/SGST. However, if service receiver is located in a different state, the transaction will be Inter-state supply liable to IGST. Time of Supply and Valuation The provisions relating to time of supply and valuation are more or less on the same lines as existing in the current service tax regime. Impact: a. Accordingly, time of supply of services shall be date of invoice or date of receipt of payment, whichever is earlier. In case invoice is not issued within prescribed time, time of supply will shift to the date of completion of service. b. The value of service shall be the price actually paid or payable for supply. Place Where Tax to be Deposited Taxable person is one who carries on business at any place in India and who is liable to be registered. Person is liable to be registered in the State from where supplies are made. Impact: Tax is to be deposited in the State from where supply is made by the supplier. There are no clear provisions to determine the place from where supplied are made.

12 Registration Every office of chartered in different state has to take separate registration. There is no concept of centralized registration as of now. Existing taxpayers will be granted registration on provisional basis valid for 6 months. Input Tax Credit a. Input Tax Credit (ITC) is available in respect of inputs, capital goods and input services. There is a negative list of items on which no ITC is available. b. ITC is available only on provisional basis until the supplier makes the tax payment and files a valid return. There will be matching of supplier and receiver data and credit will be confirmed only after such matching. Where the data is not matched and where the supplier has not made the tax payment, the ITC shall be reversed with interest. c. Interest is from the date of wrong availment or utilization. Returns Professionals like CA, CS and CMA are liable to file GSTR 1 (Statement of outward supplies), GSTR 2 (Statement of inward supplies), GSTR 3 (Statement of final tax) and GSTR 8 (Annual return). Further, they may also be required to file GSTR 7 (Statement of TDS). Payment of Taxes Prioritization rule has been inserted for payment of taxes whereby taxes for the current period cannot be paid until the taxes/interest/late-fee/penalty in relation to returns of previous tax periods have not been deposited. Transitional Provisions Amount of CENVAT credit carried forward in a service tax return will be allowed as ITC under GST. However such carry forward is allowed only if the credit is admissible in terms of the ITC provisions of the GST Law. Detailed procedure in this regard will be framed in the Rules to Draft GST Law.

13 FAQ s on brief analysis of Krishi Kalyan Cess This article aims to: Provide answers to frequently asked questions on new levy of Krishi Kalyan Cess Garima Sharma & Divya Gupta Garima Sharma & Divya Gupta

14 Frequently Asked Questions On brief analysis of Krishi Kalyan Cess Introduction Budget 2016 has proposed to impose a new cess namely Krishi Kalyan Cess (KKC) that gives additional burden to taxpayers (including individuals).to finance and promote initiatives to improve agriculture, Clause 158 of the Bill seeks to insert new Chapter-VI so as to levy a cess known as Krishi Kalyan Cess (at 0.5 per cent) with effect from June 1, 2016 in addition to any cess or service tax. Given below are a set of frequently asked questions on the new levy, which may give a clear picture regarding Krishi Kalyan Cess. Q1. What is Krishi Kalyan Cess (KKC)? In order to finance and promote the welfare of farmers and development of agriculture, the Central Government has levied Krishi Kalyan Cess (KKC) at the rate of 0.5% on the value of taxable service Q2. What would be the effective rate of KKC and service tax post KKC? KKC would be applicable at the rate of 0.5% and the effective rate of service tax post KKC would be 15% (14% Service Tax + 0.5% Swachh Bharat Cess + 0.5% Krishi Kalyan Cess). Q3. Is there a separate accounting code for payment of KKC? Yes, Circular No. 194/04/2016-ST dated 26th May, 2016 has prescribed the minor head of KKC as 507- Krishi Kalyan Cess. Please find the new sub-heads below: Sl No Krishi Kalyan Cess (Minor Head) Tax Collection Other Receipts (Interest) Deduct Refunds Penalties Q4. What will be the point of taxation ( POT ) for determination of KKC taxability for a service provider? POT in case of new levy on services shall be governed by Rule 5 of Point of Taxation Rules, 2011 ( the POTR ). As per Rule 5 read with explanations inserted vide Notification No. 10/2016-ST dated March 1, 2016, only in following two situations (given below), the KKC shall not be payable and in all other cases, KKC is to be paid: Invoice issued and payment received against such invoice before such service becomes taxable i.e. prior to June 1, 2016 Payment received before the service becomes taxable i.e. prior to June 1, 2016 and invoice has been issued within 14 days of the date when the service is taxed for the first time. S. No. Date of applicability of KKC Date of Invoice Date of Payment Received Applicability of KKC NO YES NO YES YES

15 Q5. What will be the POT for determination of KKC liability in case of service receiver under Reverse Charge Mechanism? POT in case of Reverse Charge is determined in accordance with Rule 7 of the POTR. In terms of Rule 7 of the POTR, point of taxation under reverse charge (except associated enterprises located outside India), shall be as under: Payment made within 3 months Date of payment; Payment not made within 3 months Date immediately following the end of 3 months In case of associated enterprises, where the person providing the service is located outside India, POT shall be earlier of the following: Date of debit in the books of account of service receiver; Date of Payment: Recently a proviso has been inserted in the said rule vide Notification No. 21/2016-ST dated March 30, 2016, which provides that where there is change in the liability or extent of liability of Service tax to be paid under Reverse Charge, the POT will be determined as under: Service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the POT shall be the date of issuance of invoice. Date of Invoice Date of Payment Point of Taxation KKC Applicable NO NO NO NO YES YES Analysis of Erstwhile Rule 7 vs. Amended Rule 7: Date service of Date invoice (DOI) of Date of payment (DOP) Applicability of KKC As per erstwhile Rule POT-DOP: KKC applicable As per amended Rule POT-DOI: KKC not applicable

16 Q6. Please explain how liability to pay KKC would be determined for both service provider (under Forward Charge) and service receiver (under Reverse Charge), when services have been provided on May 20, 2016 and invoice issued on May 25, 2016 but the payment was made on June 4, 2016? The POT for new levy in case of service provider is governed by Rule 5 of the POTR, POT in case of service receiver liable to pay Service tax under Reverse Charge is governed by Rule 7 of the POTR. A comparative analysis of liability to pay KKC in the hands of service provider (under Forward Charge) and service receiver (under Reverse Charge) is given as under: Service Provider Vs. Service Receiver: Anomaly Date service of Date invoice (DOI) of Date of payment (DOP) Applicable Rule Applicability of KKC Liability of SP under forward charge Liability of SR under reverse charge Rule 5(a) of the POTR Rule 7 of the POTR KKC applicable POT shall be DOI: KKC not applicable Q7. Whether Cenvat credit of the KKC is available? The Central Government vide Notification No. 28/2016-CE (N.T.) dated May 26, 2016, has amended Rule 3 of the Credit Rules to provide that: A provider of output service shall be allowed to take Cenvat credit of the KKC on taxable services leviable under Section 161 of the Act; Cenvat credit of any duty specified in Rule 3(1) of the Cenvat Credit Rules, 2004 ( the Credit Rules ) shall not be utilised for payment of KKC; Cenvat credit in respect of KKC shall be utilised only towards payment of KKC. Q8. Whether the Cenvat credit of KKC is available to a Manufacturer? No, the Cenvat credit of KKC is not available to manufacturer. In terms of amended Rule 3 of the Credit Rules, Cenvat credit of KKC paid on input services shall be allowed to be used for payment of the KKC on taxable services provided by a service provider. Q9. Can the Cenvat credit of Service tax be used for payment of KKC? No, Cenvat credit of Service tax cannot be used for payment of KKC. Only Cenvat credit of KKC paid on input services shall be allowed to be used for payment of the KKC on taxable services provided by a service provider. Q10. Whether KKC would be required to be mentioned separately in invoice? KKC would be levied, charged, collected and paid to Government independent of service tax. This needs to be charged separately on the invoice, accounted for separately in the books of account and paid separately under separate accounting code which would be notified shortly. KKC may be charged separately after service tax as a different line item in invoice. In absence, the same could be demanded by the Central Excise officer.

17 Start-up of the month: SRJNA This article aims to explain Business of the company. Investments secured by the company. USP of the start-up. Achievements of the start-up.

18 Introduction: Startup of the month: SRJNA SRJNA is a hybrid education model using real & virtual teaching aids to impart 5D classroom experiential learning and smart online assessment platform with deep analytics for K-10 students, teachers and parents. Their main objective is to empower teachers through technology based teaching. SRJNA, a brand of Elation Edtech Pvt Ltd, was initiated by 4 alumni of IITs and XLRI and is now a team of 15 enthusiasts who want to make a disruptive change in school education. The founders believe that 'True learning comes when it's being experienced'. They came up with 200+ innovative, economically feasible & portable subject learning physical models to Progressive Schools. The product was launched in April, 2015 and is now used by 10+ schools in Delhi NCR, Gujarat and Rajasthan. Founders: Sharad Bansal, CEO Vivek Pathak, MD OP Goadara, COO Kapil Arya, CTO Investment: In the month of September 2015, Elation Edtech P Ltd that operates under the brand name srjna received an investment of USD 65,000 from RAIN (Rajasthan Angel Investors Network) and Individual Angel Investors. After achieving the targets successfully, they are looking forward for their second round of investment in next one or two months. USP: Mapped with curriculums of CBSE, ICSE, Cambridge IGCSE, IB and State Board(I-X) Research-oriented interactive based program Reducing the time and efforts of teachers through technology aids Certification Teachers training Achievements: Part of top 20 startups selected (out of 1913) in CIIE-Pune Based Accelerator Program of Innovate for Digital India Challenge, an initiative by Govt. of India. Ranked 2nd in Top 6 innovator award (Trending Startups) by IIT Delhi Alumni Association Among top 10 Education startups in StartEdu 1A by Unitus Seed Funds Bagged 1st Prize in Tech4Raj by TIE Rajasthan & Startup Oasis. Recent Announcements: In the month of April, they launched the Prepkin assessment engine for teachers and students to create, practice share and analyze tests on just a single click. Here teachers customize the tests as per their needs and students get real life problems based on experimental learning. Planning to launch its own tinkering lab in a month, promoting the government initiative, Atal Tinkering Labs. It aims to foster curiosity, creativity and imagination in young minds. Ms. Suniti Sharma, Principal, Maharani Gayatri Devi School Jaipur: I like their apparent passion and dedication when they address students. Working towards the future. Testimonials Ms. Poonam Chaubey, Principal, Greater Valley School, Greater Noida: Their methodology of teaching through practical models is unique and effective. The students get to understand more. Ms. Bindu Sehgal, Principal, DPS Vasant Kunj: The models are good, innovative, simple and can be used to explain related concept in easy way. Also this is the preferred way of learning.

19 Contact Us Contact Name Mobile Mr. Anuj Somani Mr. Bhuvnesh Maheshwari Head office: Branch Offices: Network Offices: DELHI MUMBAI BANGALORE Delite Cinema Hall GHAZIABAD BHOPAL 3 rd Floor, Gate No. 2, New Delhi, India GURGAON BUBNESHWAR SILIGURI CHENNAI CHENNAI KOLKATA Disclaimer This material and the information contained herein prepared by the authors is of a general nature and does not exhaustively deal with the subject discussed. Although the authors have put their earnest effort in providing accurate and appropriate information, the article is not intended to be relied upon as the sole basis for any decision which may affect you or your business. The authors recommend you take professional advice before acting on specific issues. is neither responsible for any views, opinions and statements made by the authors nor is liable for consequences, if any, arising from actions based on such views or opinion.