INDEX. S. No. Topic. Cost. 1. Expatriate Taxation. 2. Impact of GST on various sectors Analysis. 3. Startup India Action Plan: Key Highlights

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1 Don t worry about people stealing your ideas. If your ideas are any good, you ll have to ram them down people s throats. Howard Aiken INTEGRITY FIRST

2 Cost INDEX S. No. Topic 1. Expatriate Taxation 2. Impact of GST on various sectors Analysis 3. Startup India Action Plan: Key Highlights 4. Business Trust 5. Road map for applicability of Ind AS on banks, insurers and non-banking finance companies (NBFCs) - (Amendment)

3 Expatriate Taxation This article aims to explain Who are Expatriates Tax Incidence of Expats in India Income tax clearance certificate CA Digant Chadha & Arihant Jain

4 Expatriate Taxation 1) Who is an Expat or foreign national? An expatriate in India is someone who comes to live in India and is not a citizen of India. 2) Are expatriates liable to pay tax in India? Even though the expatriate is a citizen of a foreign country any income which is earned by him/her in India shall be taxable in India. This income may have been earned by working in India or by providing services in India. An income which is earned by an expatriate in India is taxable in India irrespective of the foreign national's citizenship or residential status. This payment may also be subjected to TDS (Tax Deducted at Source) in India. 3) Can foreign national take benefit of DTAA? Double Tax Avoidance Agreement or DTAA is an agreement between two countries to help avoid taxation of an income in both the countries. If income of an expatriate is taxable in India as well as another country, the expatriate can take the benefit of DTAA and avoid paying double tax on such income. 4) Taxability of Salary In case of foreign expatriate working in India, the remuneration received by him, assessable under the head Salaries, is deemed to be earned in India if it is payable to him for services rendered in India as provided in Section 9(1)(ii) of the Income Tax Act, The explanation to the aforesaid law clarifies that income in nature of salaries; payable for services rendered in India shall be regarded as income earned in India. Irrespective of the residential status of the expatriate employee, the amount received by him as salary, for services rendered in India shall be liable to tax in India being income accruing or arising in India, and also be subjected to TDS regardless of the place where salary is actually received. However, there are certain exceptions to the rule which are briefly discussed below:- 1. Remuneration of an employee of a foreign enterprise is exempt from tax if his stay in India is less than 90 days in aggregate during the financial year [Sec.10(6)(vi)]. This is subject to further relaxation under the provisions of Double Taxation Avoidance Agreement entered into by India with the respective country. 2. Remuneration received by a foreign expatriate as an official of an embassy or high commission or consulate or trade representative of a foreign state is exempt on reciprocal basis [Sec.10(6)(ii)]. 3. Remuneration from employment on a foreign ship provided the stay of the employee does not exceed 90 days in the financial year [Sec. 10(6)(viii)].

5 4. Training stipends received from foreign government (Sec. 10(6)(xi)). 5. Remuneration under co-operative technical assistance programme or technical assistance grants agreements (Sec. 10(8) & (10(8B)). Where salary of an expat is payable in foreign currency, the amount of tax deducted is to be calculated after converting the salary payable into Indian currency at the telegraphic transfer buying rate as adopted by State Bank of India on the date of deduction of tax. {Rule 26 read with Section 192(6) of Income Tax Act} It may be noted that this rule is applicable only for determination of Income Tax in TDS. However, in computing the salary income, the rate of conversion to be applied is the telegraphic transfer buying rate on the last day of the month in which the salary is due or is paid. {Rule 115 of Income Tax Rules}. 5) Income Tax Clearance Certificate An expatriate before leaving the territory of India is required to obtain a tax clearance certificate from a competent authority stating that he does not have any outstanding tax liability. Such a certificate is necessary in case the continuous presence in India exceeds 120 days. An application is to be made in a prescribed form to the Income Tax Authority having jurisdiction for assessment of the expatriate to grant a tax clearance certificate. This is to be exchanged for final tax clearance certificate from the foreign section of the Income Tax Department. Tax Clearance certificate is valid for a period of 1 month from the date of issue and is necessary to get a confirmed booking from an airline or travel agency and may be required to be produced before the customs authorities at the airport. How Can Help You? KG Somani & Co. has been engaged in the expatriates assignments for last 5 decades. As an overview of services following are the benefits you can get from us: 1) VISA Compliances 2) Social Security Compliances (Provident Fund and Pension Fund Compliances) 3) Income Tax Compliances 4) Issuance of Tax Clearance Certificate.

6 Sectoral Impact of GST This article aims to Provide insight about Goods and Service Tax Its impact on various sectors Garima Sharma & Divya Gupta

7 Impact of GST on various sectors-analysis What is Goods and Services Tax? The Goods and Services Tax Bill or GST Bill, officially known as The Constitution(One Hundred and Twenty-Second Amendment) Bill, 2014, proposes a national Value Added Tax to be implemented in India from June 2016."Goods and Services Tax" would be a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, to replace taxes levied by the Central and State governments. Goods and services tax would be levied and collected at each stage of sale or purchase of goods or services based on the input tax credit method. Taxes to be subsumed in GST CENTRAL GST STATE GST/ INTEGRATED GST Central Excise Duty Additional Excise Duty Service Tax Special Additional Duty of Customs Excise Duties-Medicinal & Toiletries Preparation Act VAT/Sales Tax Octroi & Entry Tax Purchase Tax, Luxury Tax Taxes on lottery, betting, gambling Entertainment Tax(other than tax levied by the local bodies) Manufacturing Sector: Positive IMPACT OF GST The manufacturing has a 15-16% share in the GDP in India generating approximately 1,79,537 crore in revenue for the Central Government. Any manufactured goods in India are subjected to excise duty followed by VAT, cumulatively accounting to around (18%- 24.5%) range as per the VAT implication. With GST being proposed to be introduced around (18%-22%) range coupled with reduced tax cascation benefit, the GST will be a welcome change for those dealing in Goods. Apart from the direct cost, many indirect shadow costs like reduced transportation cost due to reduced regulatory compliance, savings in transit time etc. will add to the synergy for the manufacturing sector. Even other macro economic incentives like Make in India movement is expected to have a positive effect on this sector. IT & Telecom Sector: Benefits available to Telecom sector are divided into three parts. First, the CENVAT credit which is currently not available or is under litigation, specifically on the expenses on the tower or the infrastructure that the telecom industry is using, that credit should be available under GST regime being a seamless tax regime. Secondly, the classification issue i.e. whether sale of SIM card is provision of service or supply of good would be put to rest as under GST regime there is standard rate. Thirdly, major benefit that the industry will foresee is the taxes, the local taxes that they are paying on the diesel which is the primary input used by the tower. Currently they are not available to the credit for the entire sector but once GST is applicable on petroleum sector, the said credit will be available.

8 There are some negative effects as well i.e. rise in tax rate from 14.5% to 18-20% as reported by Chief Economic Advisor would be a heavy burden on the consumers because ultimately on the bills consumers are paying, they would have to pay higher taxes. Secondly, the exemption available to distributors will be withdrawn as GST is no or less exemption regime. Entertainment & Hospitality Sector: Neutral The GST, once implemented, is expected to rationalise indirect tax structure and usher in seamless tax credit. However, the impact for the hotel sector is more likely to be neutral depending on the final GST rate. Since hotels/restaurants are mainly subject to service tax, VAT (state subject), luxury tax (state subject), the impact of GST would depend on the tax levied by various states. If the GST rate gets capped at 18%, the impact is likely to be neutral as presently service tax payable by hotels is around 8.7% and luxury tax at around 8-12% (depending on the state and type of service). Restaurants have to pay service tax at around 5.6% and VAT at around 12%-14.5%. Service Sector: The service sector is regulated by the Central Government with least interference from the State Governments. The usual Service Tax rate on supply of service was 12.36% until recently and is 14.5% since 15th November Thus, cumulatively any tax above the 14.5% mark will act as a deterrent for the industry due to a rate hike in providing services. With the average rate suggestions by Kelkar committee being 27% to a more optimistic assumption of 18% as per media reports, all the assumptions certainly seem to indicate an uphill rate hike. The services providers will have to take a conscious call on whether to assume the additional cost through their margins or raise the cumulative price of their services. Also, abatement enjoyed under the service tax regime may be discouraged under the GST regime adding to the woes of some service providers. A pertinent issue of GST implication on non tax territory specifically Jammu & Kashmir still remains under cloud. Real Estate: Positive Implementation of GST will result in reduction in property prices. At present, the developers pay various non creditable taxes like excise duty, customs duty, CST, entry tax, etc. on the procurement side, and the buyers pay service tax and VAT on purchase of residential units when booked prior to their completion. The proposed GST will replace these multiple taxes with a single tax and will also ensure smooth flow of credits through the chain. Hence, it is expected that GST will reduce the construction cost incurred by the developers and thereby help in reducing the current level of property prices. However, high GST rates will offset any possible gains on incremental credits. GST will also result in improved inflow of foreign funds in the real estate sector. Pharmaceuticals: Positive The biggest advantage to the industry would be that of reduction in transaction cost, with an immediate impact coming from the discontinuance of CST. The multistage taxation along with the inability to take full benefit of the CENVAT credit /refund has been an issue for the industry. With central GST expected to be a single rate for goods and services, going forward credit accumulation may not be an area of concern. Furthermore, if the legislation provides for carrying forward of the unutilised credit this would be an additional boost to the industry. Furthermore, the pharmaceutical sector currently enjoys various location based tax holidays on its manufacturing activities. Under the proposed structure of GST, such area based exemption will be done away with. However, taking into account past precedents suitable work around/refund process would be constituted to ensure that any existing hubs do not get impacted and continue to get the agreed benefits. GST would bring everything on a single and same platform for all. It would bring more transparency in the system. However, GST is not likely to impact financial or operational performance of the companies in a notable manner.

9 Banking, financial services & Insurance: The implementation of the Goods and Services Tax (GST) on banking and financial sector will have minimal impact on consumers. The new tax would only be imposed on fees in every banking transaction and not on the amount of the transaction. Cost of banking and insurance will increase with rise in tax rate from 14.5% to more than 20%. However, the impact on BFSI sector will be little as most of the activities carried out are exempted except for transactions that are based on fee only. The implementation of the GST would not affect the sector outright but it will impact loan growth. GST will lift GDP growth and increase the tax revenues. According to a study by National Council of Applied Economic Research (NCAER), a complete implementation of the GST could lift GDP growth by % for all future years. GST will also help in reducing taxation and filing costs and boost business profitability which will help to attract more investments in the economy and will result into higher GDP growth. Higher investments will lead to higher credit demand from the banks. CONCLUSION: GST as we see is a change, and any change as we see, is either an opportunity or a threat. The onus is now upon the business mangers to gauge this changing environment and appropriately extract positivity out of this change. Central Excise MANUFACTURING SECTOR BANKING, FINANCIAL SERVICES & INSURANCE REAL ESTATE ENTERTAINMENT & HOSPITALITY SECTOR GST SERVICE SECTOR PHARMACEUTICAL IT & TELECOM SECTOR

10 Startup India Action Plan: Key Highlights This article highlights The key aspects of the Startup India Action Plan CA Kunal Jain & Prateek Pathak

11 Startup India Action Plan: Key Highlights Compliance Regime based on Self-certification Government wants to reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low. Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years. Rolling-out of Mobile App and Portal Govt plans to roll out a Mobile app that will help startups quickly get off the ground. The app features will include registering Startups with relevant agencies of the Government though a single form. The app will also have features like tracking the status of Registration, downloading registration certificate, filing compliances, obtaining clearances and approvals among other things. Legal Support and Fast-tracking Patent Examination To promote awareness and adoption of IPRs by Startups, Government is taking various steps that includes fast-track examination of patent applications and rebate in fees. They will also help startups by providing panel of facilitators to assist in filing of IP applications and the cost will be borne by the Government. Relaxed Norms of Public Procurement for Startups Going forward, norms for Startups will be relaxed when they are applying for Tenders floated by PSU. Earlier, this was not possible as all tenders require either prior experience or prior turnover. Now, this will not be roadblock anymore. Faster Exit for Startups Government plans to make it easier for startups to close and exit their businesses incase they are winding up operations.

12 Providing Funding Support through a Fund of Funds While Government will not directly invest or fund startups, they will be doing it through Fund of Funds with a corpus of Rs. 10,000 Crore. The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups. Credit Guarantee Fund for Startups In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs, Government plans to provide credit guarantee comfort with flow of Venture Debt from the formal Banking System. Tax Exemption on Capital Gains Government plans to provide Tax exemptions to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government. Tax Exemption to Startups for 3 years In what could be termed as one of the most positive moves, exemption for Income tax shall be given on profits generated by startups for a period of first 3 years. Tax Exemption on Investments above Fair Market Value Currently, only the investments by venture capital funds in Startups are exempted from operations of provision under section 56(2). Now, the same shall be extended to investment made by incubators and angel investors in the Startups. Harnessing Private Sector Expertise for Incubator Setup Government intends to create a policy and framework for setting-up of incubators across the country in public private partnership. 35 new incubators in existing institutions will be setup along with funding support of 40% shall be provided by Central Government. Government will also provide grant of 50 percent for 35 new incubators established by private sector.

13 Business Trust This article highlights Business Trust: REIT & InVIT Objectives of Introduce Business Trust Working Model of Business Trust Taxation of Business Trust CA Puneet Mehra & Kunika Thakur

14 Business Trust Introduction Business Trust Concept of Business Trust has been introduced by Hon ble Finance Minister Shri Arun Jaitley through Finance Act, In India, Business Trust would operate as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The Securities and Exchange Board of India (SEBI) has notified regulations relating to two new categories of investment vehicles namely, the Real Estate Investment Trust (REIT) & Infrastructure Investment Trust (InvIT) on 26th September, These are SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, Real Estate Investment Trusts (REITS) have been successfully used as instruments for pooling of investment in several countries. REITs were created in the United States in Since then, many countries around the world have established REIT regimes. Meaning of Business Trust Section 2(13A) of Income Tax Act defines Business Trust as below: Business Trust means a trust registered as an Infrastructure Investment Trust or a Real Estate Investment Trust, the units of which are required to be listed on a recognized stock exchange, in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and notified by the Central Government in this behalf. Analysis Business Trust Real Estate Investment Trusts (REITs) Infrastructure Investment Trusts (InvITs). These trusts are like Mutual Funds that raise resources from many investors to be directly invested in realty or infrastructure projects. Distinctive Elements of the Income-Investment Model of REITs and InvITs (referred to as business trusts) The trust would raise capital by way of issue of units (to be listed on a recognized stock exchange) and can also raise debts directly both from resident as well as non-resident investors; The income bearing assets would be held by the trust by acquiring controlling or other specific interest in an Indian company (SPV) from the sponsor. Infrastructure Investment Trusts (InvITs) Infrastructure Investment Trusts make direct investment in infrastructure facilities which are yielding income e.g. Toll Road, Railways, Inland waterways, Airport, Urban public transport. InvITs will allow infrastructure developers to monetize specific assets, helping them use proceeds for completing projects of theirs stalled for want of funds. Structure of InvITs is quite similar to REITs. The main difference is InvITs make investment into infrastructure facilities whereas REITs make investment in commercial real estate properties.

15 Real Estate Investment Trusts (REITs) Real Estate Investment Trust (REIT) is a trust that owns and manages income generating developed properties and offers its unit to public investors. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands. Globally, REITs invest primarily in completed, revenue generating real estate assets and distribute major part of the earning among their investors. Typically, most of such investments are in completed properties which provide regular income to the investors from the rentals received from such properties. REITs are principally expected to invest in completed assets. Income would consist of rental income, interest income or capital gains arising from sale of real assets / shares of SPV. REITs are managed by professional managers which usually have diverse skill bases in property development, redevelopment, acquisitions, leasing and management etc. Listed REITs provide liquidity, thus providing easy exit to the investors. The country s largest real estate player, DLF and private equity players such as Blackstone have been planning to launch REITs. Objectives: To Introduce Concept of business Trust Reducing pressure on Banking System Making available fresh equity Attracting long term finance from foreign and domestic markets. Expansion of asset delivery Encouragement of Public Private Partnership (PPP) model Facilitation of securitization of income earning real estate assets via listing of Units of REITs and InVITs. Working Model of Business Trusts 1. Raising Capital The trust would raise capital by way of issue of units or by debt directly from residents and Non-resident Investors. 2. Investing in SPV The Income bearing assets would be held by the trust by acquiring controlling or other specific interest in an Indian Company (SPV).

16 3. Listing of units The Units issued by the trust will get listed in Stock exchange and will be governed by the SEBI guidelines Taxation of REITS and InvITs Dividends: (Tax- Exempt-Exempt) Company (SPV) distributing dividend to the business trust is subject to DDT. Dividend is exempt in the hands of the business trust. Dividend component of the income distributed by the business trust is treated as such in the hands of the unit holder and therefore is exempt in their hands. Interest: (Exempt-Exempt-Tax) Interest received by the business trust from any SPV is given a complete tax pass through status as under: Interest from SPV is not taxable in the hands of the business trust u/s 10(23FC). SPV is exempted from withholding tax on interest paid to the business trust as specifically excluded u/s 194A. Interest distributed by business trust is taxable in the hands of unit holders. Business trust will withhold tax on the interest component of the distributed income payable to the unit holders at the rate of 5 per cent for any nonresident unit holder and 10 per cent for a resident unit holder as per new TDS provision 194LBA. Capital Gains: The business trust is taxable on any capital gains earned by it on disposal of any assets at the applicable rate (depending upon whether the gains are short or long term) However, the capital gains component of the distributed income is exempt in the hands of the unit holders. Capital gains on transfer of units of the business trust by investors: Units of the business trust shall be listed on the stock exchange; LTCG on transfer of units would be exempt and STCG would be taxable at the rate of 15 per cent provided STT is paid on the transfer of such units. Tax implications in the unit holder s hands on exchange of SPVs shares with business trust units: Exchange of shares of SPV for units of a business trust is not regarded as taxable transfer by a specific exemption provided u/s 47. Consequently, taxability is deferred till the time of ultimate disposal of the units by the sponsor. At the time of ultimate disposal of the units of the business trust, the sponsor shall not be entitled to avail the concessional STT based capital gains tax regime. Further, the acquisition cost of the units to the unit holder shall be deemed to be the acquisition cost of the shares in the SPV. The holding period of shares shall also be included in the holding period of such units. Other Points: Any other income of the trust shall be taxable at the maximum marginal rate u/s 115UA According to the new amendment, units of business trusts are to be held for 36 months to consider as long term assets. The Business Trusts are required to file their return of incomes.

17 Road map for applicability of Ind AS on banks, insurers and non-banking finance companies (NBFCs) - (Amendment) This article aims to Applicability of Ind AS on the Banks, Insurers and NBFC Net worth Limit for applicability of Ind AS on NBFC CA Chandan Kumar

18 Road map for applicability of Ind AS on banks, insurers and non-banking finance companies (NBFCs) - (Amendment) (1) Existing situation As per the previous notification of MCA, there is no roadmap given for Banks, insurers and NBFC for the purpose of applicability of Ind AS. But there is an amendment and new roadmap laid down for the banks, insurers and non-banking finance companies (NBFCs) for application of Ind AS.The Centre has announced the much-awaited roadmap for implementing the Indian Accounting Standards (Ind AS) by banks, insurers and non-banking finance companies (NBFCs). (2) Applicability of Ind AS - (Effective date for Implementation) According to the roadmap, scheduled commercial banks (excluding regional rural banks) and insurers, will be required to prepare Ind AS-based financial statements for accounting periods beginning April 1, This would have to be done with comparatives ending March 31, 2018 or thereafter. Ind AS would be applicable to both consolidated financial statements. The roadmap would also apply to all-india termlending refinancing institutions, such as Exim Bank, NACAS, NHB and SIDBI, an official release said. The new roadmap is being implemented as a follow-up of the Budget announcement made by Finance Minister Arun Jaitley. Also, the Centre has now stipulated that commercial banks cannot voluntarily adopt Ind AS prior to the roadmap date. The roadmap also clarifies that holding company, subsidiary, joint venture and associate entities of commercial banks, insurers and NBFCs will also have to comply with the standards. (3) Some Exceptions for applicability Urban cooperative banks and regional rural banks are not required to apply Ind AS and can continue to comply with the existing standards for the present, the release added.

19 (4) Phases for implementation on NBFC NBFCs have been asked to prepare Ind AS-based financial statements in two phases. Under phase I, NBFCs having net worth of 500 crore or more would have to prepare the statements for accounting periods beginning April 1, Under phase II, NBFCs whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and have net worth less than 500 crores should prepare the statements from April 1, The same roadmap will apply to unlisted NBFCs having net worth of Rs. 250 crore or more, but less than Rs. 500 crores.

20 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.