Legal Update DIRECT TAXES. (Matter on Direct Taxes has been contributed by the Direct Taxes Committee of the ICAI)

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1 Circulars/Notifications Given below are the important Circulars and Notifications issued by the CBDT, CBEC, FEMA, MCA, SEBI, RBI during the last month for information and use of members. Readers are requested to use the citation/website or weblink to access the full text of desired circular/notification. You are requested to please submit your feedback and suggestions on the column at DIRECT TAXES (Matter on Direct Taxes has been contributed by the Direct Taxes Committee of the ICAI) I. NOTIFICATIONS 1. Rules in respect of Fund Manager Regime under Section 9A of the Income-tax Act, 1961-Notification No. 14/2016, dated Section 9A of the Income-tax Act, 1961 provides for special taxation regime with effect from to facilitate location of fund managers of off shore funds in India. Under this regime, the fund management activity carried-out through an eligible fund manager in India by an eligible investment fund does not constitute business connection in India of the fund and also does not lead to the residence of the fund in India. The Rules for operationalisation of the provisions of Section 9A of the Act have been inserted in the Income-tax Rules, 1961 vide this Notification. These rules, inter alia, provide for: A pre-approval mechanism under which a fund can seek approval at its option from CBDT and once approved, benefit of Section 9A would not be denied unless approval is withdrawn under limited circumstances. Determination of number of members and the participation interest in the fund by looking through the entity where the investment in the fund has been made directly by an institutional entity. Relaxation from investor diversification condition in the period of eighteen months or final closing of the fund whichever is earlier, in setting up phase of the fund and in one year period in the winding up phase of the fund. Eligibility of the fund will not be impacted in case of temporary non-fulfilment of investor diversification conditions for period up to 90 days. Eligibility of the fund will not be impacted in case of any delay in furnishing the statement of activity, if delay does not exceed a period of ninety days. A fund shall be said to be controlling or managing a business carried out by any entity, if the fund directly or indirectly holds twenty six percent of voting right. The eligibility of the fund will be impacted only if the remuneration paid or payable by the fund to the fund manager has been determined to be not at arm s length price for a period of three previous years in succession; or for any three out of the preceding four previous years. A chance transfer pricing adjustment will not impact the eligibility. The said Rules shall come into force from the date of their publication in the Official Gazette. 2. Method of determination of period of holding of capital assets in certain cases - Notification No. 18/2016, dated Section 2(42A) provides for the meaning of the term "short-term capital asset" as a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer. Explanation 1 to Section 2(42A) provides for inclusion/exclusion of certain periods in respect of specified transactions listed thereunder for the purpose of determination of the period of holding of asset. In exercise of the powers conferred by Section 2, read with Section 295, the CBDT has inserted a new Rule 8AA in the Income-tax Rules, The new rule provides for method of determination of period of holding of capital assets, other than the capital assets mentioned in clause (i) of the Explanation 1 to Section 2(42A). Specifically, in the case of a capital asset, being a share or debenture of a company, which becomes the property of the assessee in the circumstances mentioned in Section 47(x), there shall be included the period for which the bond, debenture, debenture-stock or deposit certificate, as the case may be, was held by the assessee prior to the conversion. The said rule shall come into force w.e.f Note: Section 47(x) provides that any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificates in THE CHARTERED ACCOUNTANT MAY

2 1534 any form, of a company into shares or debentures of that company shall not be regarded as transfer for the purposes of levy of capital gains tax. 3. Investment in Stock certificate as defined in the Sovereign Gold Bonds Scheme, 2015 notified as eligible form of investment by a charitable trust Notification No. 21/2016, dated Section 11(2)(b) provides that where eighty-five per cent of the income is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided, inter alia, the money so accumulated or set apart is invested or deposited in the forms or modes as specified in Section 11(5). Rule 17C provides for the various forms or modes of investment or deposits by a charitable or religious trust or institution. Vide this notification, Rule 17C has been amended to include Investment in Stock Certificate [as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015, published in the Official Gazette vide notification number G.S.R. 827(E), dated the 30 th October, 2015] as an eligible form/ mode of investment. The amended Rule shall come into force on the date of their publication in the Official Gazette. 4. Income Tax Return forms for Assessment Year notified Notification No. 24/2016, dated The CBDT has notified the forms for filing of Income-tax returns for Assessment Year These return forms, namely ITR-1 (Sahaj), ITR-2, ITR-2A, ITR-3, ITR-4, ITR-4S (Sugam), ITR-5, ITR- 6, ITR-7 are available on the official website of the Department, With the passage of Finance Bill, 2015, wealthtax is no longer leviable with effect from assessment year Taxpayers are, therefore, not required to file a wealth tax return from assessment year onwards. While abolishing the charge of Wealth-tax, the Finance Minister also announced that information which was required to be furnished in the return of wealth will now form a part of the Income-tax return. Individuals and HUFs with income above a specified limit, filing returns in ITR-3 and ITR-4 are already required to furnish information of their assets and liabilities in their annual return of income. With Assessment Year , individuals and HUFs filing their returns of income in ITR-1, ITR-2, ITR-2A and ITR-4S, having income exceeding R50 lakh will now be required to furnish information regarding assets and liabilities in Schedule-AL of the relevant ITR form. These changes in ITR forms are in tune with the announcement made in the Budget Speech Further, Rule 12 has been amended to provide that Firm other than a limited liability partnership firm deriving business income where such income is computed in accordance with Section 44AD or 44AE is also an eligible assessee to file ITR 4S. Also, assessees required to file return under Section 139(4F) i.e. every investment fund referred to in Section 115UB, which is not required to furnish return of income or loss under any other provisions of Section 139, shall furnish the return of income in respect of its income or loss in every previous year in form ITR 7. The Notification shall come into force with effect from the 1 st day of April, Procedure for registration and submission of statement as per clause (k) of sub section (1) of section 285BA of Income-tax Act, 1961 read with Sub rule (7) of Rule 114G of Income-tax Rules, 1962 Notification No. 4/2016, dated As per Rule 114G(10)(a) of the Income-tax Rules, 1962, every reporting financial institution shall communicate to the Principal Director General of Income-tax (Systems) the name, designation and communication details of the Designated Director and the Principal Officer. As per Rule 114G(9)(a), the statement referred to in Rule 114G(7) shall be furnished through online transmission of electronic data to a server designated for this purpose under the digital signature in accordance with the data structure specified in this regard by the Principal Director General of Income-tax (Systems). Further as per Rule 114G(9)(b), Principal Director General of Income Tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies. In exercise of the powers delegated by the CBDT under sub-rule (9)(a) and 9(b) of Rule 114G, the 30 THE CHARTERED ACCOUNTANT MAY

3 1535 Principal Director General of Income-tax (Systems) has laid down the following procedures: a) Generation of ITDREIN: The reporting financial institution is required to get registered with the Income Tax Department by logging in to the e-filing website ( incometaxindiaefiling.gov.in/) with the log in ID used for the purpose of filing the Income Tax Return of the reporting financial institution. A link to register reporting financial institution has been provided under "My Account>Manage ITDREIN". The reporting financial institution is required to apply for different ITDREIN for different reporting entity categories. Once ITDREIN is generated, the reporting entity will receive a confirmation on the registered ID and SMS at registered mobile number. There will be no option to de-activate ITDREIN, once ITDREIN is created. b) Submission of details of reporting entity: After generation of ITDREIN, the reporting financial institution will be required to submit details of the reporting entity on the screen. Once registered, the reporting entity will have an option to edit the details. c) Registration of designated director and principal officer: After submission of reporting entity details, the reporting financial institution will be required to submit the details of designated director and principal officer. The designated director and principal officer will receive a confirmation with an activation link. An SMS along with OTP (One time Password) will also be sent to the registered Mobile Number. For completion of registration, the designated director and principal officer should click on the Activation link, enter the Mobile PIN (OTP), Password and Confirm Password and click on Activate Button. On success, the registration will be complete. d) Submission of Form 61B: Every reporting financial institution is required to submit the Statement of Reportable Account in Form 61B or submit Nil statement. The prescribed schema for Form 61B and a utility to prepare XML file can be downloaded from the e-filing website home page under forms (other than ITR) tab. The designated director is required to THE CHARTERED ACCOUNTANT MAY

4 1536 login to the e-filing website with the ITDREIN, PAN (of the designated director) and password. The form is required to be submitted using a Digital Signature Certificate of the designated director. e) Submission of Nil statement: In case nil statement is to be submitted, the option to submit Nil statement is required to be selected. The designated director will then be required to submit a declaration with respect to preexisting accounts (As defined in Rule 114H(2) (h)) and new accounts (As defined in Rule 114H(2)(d)). The declaration is required to be submitted using a Digital Signature Certificate. f) Existing registered entities: The reporting financial institutions that are already registered as a reporting entity for Form 61B with the Income tax Department will be able to view the ITDREIN details after logging in to the e-filing under "My Account>Manage ITDREIN". will be sent to the designated director for the activation of its access. Once activated, it will be able to view the existing form 61B/nil statement and will be able to upload 61B/nil statement. In view of the changes as mentioned above, the procedures prescribed in Notification 3 dated 25 th August, 2015 and Notification No 4 dated 4 th September, 2015 stands withdrawn forthwith. 6. Electronic Verification Code (EVC) for electronically filed Form of Appeal to Commissioner (Appeals) Notification No. 5/2016, dated In exercise of the powers conferred by Section 249(1) read with Section 295 of the Income-tax Act, 1961, the CBDT has substituted rule 45 of the Income-tax Rules, 1962 vide Notification No. 11/2016 dated the 1 st March, In the said rules, in Appendix-II, for Form No. 35, a new Form No. 35 has been substituted. The manner of furnishing the new Form No. 35 has been prescribed by rule 45(2). Rule 45(5) empowers the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) to (i) specify the procedure for electronic filing of Form No. 35 and documents; (ii) specify the data structure, standard and manner of generation of electronic verification code referred to in rule 45(2) for the purpose of verification of person furnishing the said form; and (iii) be responsible for formulating and implementing appropriate security, archival and retrieval of policies in relation to the said form so furnished. In exercise of the powers delegated by the CBDT vide said Notification the Principal Director General of Income-tax (Systems) has laid down the procedures, data structure and standard of Electronic Verification Code (EVC) as under: (a) The Electronic Verification Code (EVC) would verify the identity of the person furnishing the form (hereinafter called 'Verifier') and would be generated on the e-filing website incometaxindiaefiling.gov.in or as otherwise indicated. As specified in rule 45(3), the Verifier shall be the person who is authorised to verify the return of income under Section 140 of the Act as applicable to the assessee. Where the Verifier represents an entity (i.e. HUF/Firm/ AOP etc.) then the Verifier should be registered in the e-filing website as a Principal Contact of the entity. (b) The EVC generation process may vary based on the risk category of the assessee (the term 'assessee' is as defined in Section 2(7) of the Act), the method of accessing the e-filing website or interface with third party authenticating entity. The EVC would be unique for an Assessee-PAN or Assessee-TAN and will not be valid for any other PAN or TAN, as the case may be, at the time of furnishing of the form. One EVC can be used to validate one form of the assessee irrespective of the assessment year. The EVC will be stored against the Assessee- PAN along with other verification details. The EVC will be valid for 72 hours or as otherwise specified. The Verifier may use more than one mode to obtain EVC and can generate the EVC multiple times. (c) The mode of generation of EVC, Validation of EVC and Data Structure of EVC shall be same as specified by the Notification No. 2/2015 dated 13 th July, 2015 and the Notification No. 1/2016 dated 19 th January, 2016 issued by the Principal Director General of Income-tax (Systems). (d) The mode and process for generation and validation of EVC and its use may be modified, deleted or added by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) as and when it is expedient to do so. The complete text of the above Notifications can be downloaded from the link below: incometaxindia.gov.in/pages/communications/ notifications.aspx 32 THE CHARTERED ACCOUNTANT MAY

5 1537 II. CIRCULAR 1. Modification of Instruction No. 9/2006 dealing with remedial action on revenue audit objections not accepted by department Circular No. 08/2016, Dated The guidelines and procedure for attending to objections raised in the course of audit of assessment work by the Comptroller and Auditor General of India (Revenue Audit) are laid down in the Instruction No. 9 of 2006 issued by the CBDT. The Instruction inter-alia mandates the initiation of remedial action in case the Revenue Audit Objection is not accepted by the Department. The CBDT has considered the effect of such remedial action and its ultimate fate in appeal and decided to modify the existing instruction for dealing with remedial action on Revenue Audit objections that are not accepted by the Department. The Circular provides for deletion of para 4 and para 5 of the said Instruction and replacing them with fresh guidelines and procedures for dealing with Revenue Audit objections. The modified Instruction will avoid creation of un-collectible demand and reduce litigation with the assessee in such cases where the Department itself finds the Revenue Audit objection not acceptable. It is another step in the direction of a non-adversarial tax regime. The detailed circulars can be downloaded from the link below: Pages/communications/circulars.aspx III. Press Releases/Instructions/Office Memorandum 1. Report of the Committee on Taxation to examine the business models for e-commerce-press Release, dated A Committee on Taxation of e-commerce was constituted by the CBDT to examine the business models for e-commerce, identify the direct tax issues in relation to e-commerce transactions and suggest an approach to deal with these issues. The Committee included officers of the CBDT, representatives from the industry, the ICAI and tax experts. The Report of the Committee was received by the Government and taken into consideration in the preparation of Finance Bill, The said Report provides the view of the Committee on issues related to taxation of e-commerce and recent international developments in this area. The Report is available on the website of the Income Tax Department in. THE CHARTERED ACCOUNTANT MAY

6 Request to taxpayers to avail facility for online rectification-press Release, dated The Income-tax Act, 1961 provides the taxpayer with an option to seek rectification of mistakes apparent from record under Section 154 of the Act. The e-filing portal of the Income Tax Department provides the utility for online filing and tracking of rectification requests. Taxpayers who are not satisfied with the outcome of processing of their Income Tax Return by the Centralised Processing Centre, Bengaluru can avail of the facility of online filing and tracking of rectification requests available on In case of any mistake in data entry of Tax payment or TDS details, taxpayer can select the Rectification Request Type->Taxpayer is correcting data for Tax Credit mismatch only and use the option of pre-filling the correct details for the relevant Assessment Year while submitting the rectification request. In case of data entry mistake in any other Schedule or omission of any details, taxpayer can select the option Taxpayer is correcting Data in Rectification and the reason for seeking rectification. In any other case taxpayer can select the option No further Data Correction Required, Reprocess the case where the mistake in processing may have occurred due to non-reporting of TDS by deductor etc. A detailed user manual for filing online rectification is available at: efiling/portal/staticpdf/rectifcation_manual. pdf? With this utility a taxpayer can also the monitor the status of disposal of rectification request. CPC, Bengaluru has already processed 6,53,763 online rectification requests in F.Y till 29 th February CBDT is committed to ensuring accuracy in processing of returns and determination of refunds and seeks the active cooperation of taxpayers in ensuring correctness of data while submitting the return or rectification request. 3. Release of new functionality to taxpayers to secure their E-filing account-press Release, dated The Income Tax Department has from time to time issued advisories regarding the need to avoid phishing s and to carefully protect the passwords, OTPs and not share them with others. In order to ensure that taxpayers are able to secure their E-filing account against any fraudulent attempts, the Income Tax Department has introduced a new facility called the E-filing Vault. In order to use this facility, taxpayers can log in to their E-filing Account and under their profile page select E-filing Vault higher security. Taxpayers can then select to login with any one or multiple options of the higher security methods namely using Aadhaar linkage to generate OTP, Login through Net-Banking or Login using Digital Signature Certificate (DSC). Once this has been done, any future attempt to login will require the additional check of OTP using Aadhaar or the taxpayers will have to login using net banking or login using DSC. By using this facility, taxpayers can prevent anyone from logging in even if in the past they shared the user id and password. The dual factor authorisation ensures higher degree of security compared to the simple User id and Password. Similarly, taxpayers can also select how their password can be reset. Once the taxpayer has selected reset password using any one or multiple options of the higher security methods namely using Aadhaar linkage to generate OTP, Login through Net-Banking or Login using Digital Signature Certificate (DSC), then no other person will be able to reset taxpayer s password even if the secret answer or E-filing OTP etc is known. Additional EVC options using ATM, Bank Account Validation or Demat Account Validations are shortly going to be introduced and these options will also be available for the higher level of security for login as well as resetting of password. Income Tax Department strongly advises all taxpayers to use a strong password (combination of at least one uppercase, one special character and one numeral) and select the E-filing Vault option to add an additional layer of security to the their E-filing Account to login and resetting of password. 4. Record setting year for taxpayer services, issue of refunds by CBDT-Press Release, dated The CBDT has achieved significant success in delivery of taxpayer services in Financial Year , a record setting year in delivery of taxpayer services. The Centralized Processing Centre (CPC) at Bengaluru processed more than 4.14 crore 34 THE CHARTERED ACCOUNTANT MAY

7 1539 Income Tax returns, an increase of over 35% over the previous year. The CPC also issued over 1.61 crore refunds above R100 to taxpayers, an increase of more than 47% over the previous year. The CPC issued refunds to the tune of R37,870 crore in an automated manner of which 67% were issued within 30 days. This demonstrates CBDT s commitment to faster and more efficient taxpayer service while saving costs on account of interest outgo. During the current financial year, the Income Tax Department has issued refunds of over R1,17,000 crores. This figure is likely to further increase as banks reconcile the accounts. CBDT requests taxpayers who have not received their refunds to immediately check whether they have submitted their ITR-Verification (ITR-V) form to CPC Bengaluru. They may also check whether have responded to any notice under Section 245 regarding outstanding tax arrears, or notice under Section 139 (9) regarding any defect in their return. Taxpayers can also electronically verify their return using Electronic Verification Code (EVC) instead of submitting ITR-V by post so that the process is completed faster. Almost 79 lakh taxpayers have used this facility. Taxpayers also reposed faith in CBDT s e-governance initiatives by electronically filing a whopping 4.34 crore Income Tax returns in FY representing an increase of over 26.83% over the previous year. In addition, over lakh other online forms were filed with an increase of nearly 100% compared to the previous year. The CBDT is committed to ensuring world class taxpayer services through its e-governance programs and increasing the coverage and scope of electronic filing and processing of various forms and applications. 5. Release of E-filing of Income Tax Returns (ITR) and other forms-press Release, dated In pursuance of the Notification of the Income Tax Returns (ITR) for AY on March 30 th, 2016, the CBDT has released the electronic filing of ITRs 1 and 4S on its website gov.in. THE CHARTERED ACCOUNTANT MAY

8 1540 Online filing of Appeal before Commissioner (Appeal) using newly notified Form 35 has been enabled for taxpayers mandated to E-file their returns using Digital Signature Certificate. Electronic Verification Code (EVC) option will be available shortly for other category of taxpayers. Reference may be made to Notification 11/2016 dated March 1, 2016 for the various categories of taxpayers required to file appeal online. In pursuance of Notification No 93/2016 dated 16 th Dec 2015, effective from 1 st April 2016, the following forms have been substituted by new forms and are now available for E-filing: (i) Form 15CA-payments to a non-resident not being a company, or to a foreign company, (ii) Form 15CB-Certificate of an accountant, (iii) Form 15CC -Quarterly statement Vide Notification No. 3/2016 dated 14 th Jan 2016, the CBDT had substituted with effect from 1 April 2016, Forms 9A (Application for exercise of option under clause (2) of the Explanation to sub- Section (1) of Section 11 of the Income-tax Act, 1961) and Form 10 (Statement to be furnished to the Assessing Officer/Prescribed Authority under sub-section (2) of Section 11 of the Income-tax Act, 1961). These forms can be filed online using Digital Signature Certificate on the Income Tax Department s e-filing website. EVC option will be available shortly. INDIRECT TAXES (Matter on Indirect Taxes has been contributed by the Indirect Taxes Committee of the ICAI) A. SERVICE TAX 1. Point of Taxation in case of change in the liability or extent of liability under Reverse Charge to be Date of Invoice CBEC vide Notification No. 21/2016-Service Tax, Dated: March 30, 2016 has inserted a proviso in Rule 7 of Point of Taxation Rules, 2011 to provide that where there is a change in provisions relating to the services taxed under reverse charge/partial reverse charge (service taken out of reverse charge application or change in % payable by recipient under reverse charge) but the service has already been provided, invoice has been issued and the payment has not been received, then in such cases the point of taxation would be the date of issuance of invoice. [Notification No. 21/2016-Service Tax, Dated: March 30, 2016] 2. Certain services exempted when provided by Government or a local authority Central Government vide Notification No. 22/2016-Service Tax, dated April 13, 2016 has provided the following amendments in Notification No. No.25/2012-Service Tax, dated the 20 th June, 2012 i.e. under Mega Exemption: Insertion/Amendment* Exemption of certain services provided by Government or a local authority: of Entry No. 39* To any function entrusted to a municipality under article 243W of the Constitution. 54 To another Government or local authority. 55 By way of issuance of passport, visa, driving license, birth certificate or death certificate. 56 When the gross amount charged for such services does not exceed R5,000. However, in case where continuous supply of services then gross amount charged does not exceed R5,000 in a financial year. 57 Tolerating non-performance of a contract where consideration is in the form of fines or liquidated damages is payable. 58 Services required under any law for- registration or testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large. 59 By way of assignment of right to use natural resources to an individual farmer for the purposes of agriculture. 60 By governmental authority also by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution. 61 Assignment of right to use any natural resource where such right to use was assigned before the 1 st April, This exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments. 36 THE CHARTERED ACCOUNTANT MAY

9 1541 Insertion/Amendment* Exemption of certain services provided by Government or a local authority: of Entry No. 62 Allowing a business entity to operate as a telecom service provider or use radio frequency spectrum during the financial year on payment of license fee or spectrum user charges. 63 Deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT). For Entry No. 54 & 56: These entries will not apply to the following services specified under clause (a) of Negative List: Speed Post Express parcel Postal & Rural life insurance [Notification No. 22/2016-Service Tax, dated April 13, 2016] 3. Inclusion of interest amount or other consideration payable to Government or a local authority by a business entity Clause (iv) of Rule 6(2) of Service Tax (Determination of Value) Rules, 2006 provides for exclusion of interest on delayed payment of any consideration for the provision of services or sale of property (movable or immovable) while determining the value of taxable services. Central Government vide Notification No. 23/2016-Service Tax, dated April 13, 2016 has inserted proviso under the said clause to state that the above exclusion shall not apply to any service provided by Government or a local authority to a business entity where payment for the service is allowed to be deferred on payment of interest or any other consideration. [Notification No. 23/2016-Service Tax, dated April 13, 2016] THE CHARTERED ACCOUNTANT MAY

10 Point of Taxation under reverse charge when services are provided by Government or local authority to any business entity The following proviso has been inserted under Rule 7 (i.e. point of taxation in case of reverse charge) of Point of Taxation Rules, 2011 vide Notification No. 24/2016-Service Tax, date: April 13, 2016 which shall come into force from the date of its publication in the Official Gazette: In case where the services are provided by the Government or local authority to any business entity then the point of taxation shall be the earlier of the dates on which- any payment is demanded in part or full as specified in the invoice, bill, challan or any other document issued or payment for such services is made. [Notification No. 24/2016-Service Tax, date: April 13, 2016] 5. Clarification levy of Service Tax on the services provided by Government or a local authority to business entities Central Government (TRU) vide Circular No. 192/02/2016-Service Tax, dated April 13, 2016 has provided following clarifications for various issues related to levy of service tax on the services provided by Government or Local Authority to business entities: It clarifies that taxes, cesses or duties levied are not consideration for any service provided and hence not leviable to Service Tax. Fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to Service Tax. Activities undertaken by Government or a local authority against a consideration constitute a service and hence liable to Service Tax. Various illustrations explaining how the CENVAT Credit is to be availed on Service Tax paid for assignment of right to use natural resources have also been provided under the said circular. [Circular No. 192/02/2016-Service Tax, dated April 13, 2016] B. CENVAT CREDIT RULES 6. Amendments in Rule 4 of CENVAT Credit Rules, 2004 CBEC vide Notification No. 24/2016-Central Excise (N.T.), dated April 13, 2016 has provided following amendments in Rule 4(7) (Conditions for allowing CENVAT Credit) of CENVAT Credit Rules, 2004: The manufacturer or the service provider shall not take CENVAT credit after 1 year of the date of issuance of invoice/bill/challan except in case of services provided by Government, local authority or any other person by way of assignment of right to use any natural resource. CENVAT Credit of service tax shall be spread evenly over a period of 3 years on the one-time charges payable in full up front or in installments for the service of assignment of the right to use any natural resource by the Government, local authority or any other person. Earlier vide Notification No. 13/2016-Central Excise (N.T.) dated, March 01, 2016, the CENVAT Credit had to be spread over the period for which the right to use was assigned. [Notification No. 24/2016-Central Excise (N.T.), dated April 13, 2016] 7. Amendment in Rule 6 of CENVAT Credit Rules Rule 6 of CENVAT Credit Rules relating to reversal of credit was amended vide Notification No. 13/2016- Central Excise (NT), Dated: March 1, 2016 to provide that a manufacturer/provider of output service manufacturing/providing taxable as well as exempted goods/services may 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 available in the account of the assessee at the end of the period to which the payment relates. However, para h(iii) of Annexure II of F. No. 334/8/2016-TRU dated 29 th February 2016 has explained this amendment by stating that the option to pay an amount equal to 6% of value of the exempted goods and 7% of value of the exempted services is subject to a maximum of the total credit taken or pay an amount as determined under subrule (3A). Now, the Central Government has issued Notification No. 23/2016-Central Excise (N.T.), Dated: April 1, 2016 and inserted an amendment to Rule 6(3) of CENVAT Credit Rules to provide that the cap on the said reversal required will be subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period. 38 THE CHARTERED ACCOUNTANT MAY

11 1543 Further, Rule 7B of CENVAT Credit Rules has also been amended to provide that for distribution of credit on inputs by warehouse of manufacturer, the manufacturer must receive inputs under cover of Documents specified in Rule 9. Prior to this amendment, the warehouse could pass on credit of inputs received under cover of invoice issued under Central Excise Rules, 2002 only. With this amendment, credit can be passed even on imported inputs and inputs received from dealers. [Notification No. 23/2016-Central Excise (N.T.), Dated: April 1, 2016] C. CENTRAL EXCISE 8. Constitution of sub-committee of the High Level Committee for Imposition of Central Excise duty on jewellery CBEC vide Circular No. 1021/9/2016-CX, Dated: March 21, 2016 has provided that in order to tackle the issues related to compliance procedure for the excise duty, including records to be maintained, forms to be filled including Form 12AA, operating procedures and any other issued that may be relevant, a Sub-Committee of the High Level Committee to Interact with Trade & Industry on Tax Laws has been constituted. It would be chaired by Sh. Ashok Lahiri with 3 industry representatives, legal expert, one officer nominated by Ministry of Commerce & Industry and CBEC representative(s). The Sub-Committee will submit its report within 60 days of its constitution. The key guidelines for jewellers include: Payment of excise based on first sale invoice value CBEC not to challenge valuation of product given in the invoice (weight of gold and carat weight of diamonds and precious gemstone is mentioned on invoice) Excise officials not to visit shops/residence/ manufacturing unit No arrests or criminal prosecution No search and seizure of stock Exporters to be allowed on self-declaration on submission of LUT with need to ratify with excise. THE CHARTERED ACCOUNTANT MAY

12 1544 Exporters will be allowed to export on selfdeclaration and submission of LUT to customs without the need to get LUT ratified by central excise. Prevailing system will continue. The registration of the establishment with the central excise department can be taken within 60 days from 1 st March, However, the liability for payment of central excise duty will be with effect from 1 st March, 2016, and as a special case for the month of March, 2016, the assessee jewellers will be permitted to make payment of excise duty along with the payment of excise duty for the month of April, [Circular No. 1021/9/2016-CX, Dated: March 21, 2016] 9. Regarding adjudication of Show Cause Notices issued on the basis of CERA/CRA objection The CBEC vide Circular No. 1023/11/2016-CX dated April 8, 2016 has provided the detailed guidelines to be followed while adjudicating the Show Cause Notices issued on the basis of audit objections of Central Excise Revenue Audit (CERA) and Customs Revenue Audit (CRA), which is receipt audit wing of the Comptroller and Auditor General of India. Further, the procedure for dealing with audit objections raised by CERA/CRA has also been prescribed. [Circular No. 1023/11/2016-CX dated April 8, 2016] D. CUSTOMS 10. Clarification regarding other persons used in Section 28 (Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded) of the Customs Act, 1962 Section 28 provides for provision of deemed conclusion of proceedings which was introduced to bring closure to the cases where the dues to the Government could be realised without going through the process of adjudication and to cut the protracted litigation. CBEC vide Circular No. 11/2016-CUSTOMS, Dated: March 15, 2016 has clarified the word other persons used in sub-section (2) & sub-section (6) of Section 28 as below: The provision of deemed conclusion is contingent upon the person to whom a SCN has been issued for paying up all the dues of duty, interest and penalty. Therefore, other persons imply persons to whom no demand of duty is envisaged with notice. Other persons who happen to be co-noticees in the SCN would be benefitted by the deemed closure in cases the compliance of conditions mentioned under said sub-sections in Section 28 has been fulfilled by the main noticee. Further, all such cases where proceedings reach closure stage under the provisions of Section 28, an order to the effect must be invariably issued by the concerned adjudicating authority. [Circular No. 11/2016-CUSTOMS, Dated: March 15, 2016] 11. Amendments in Customs (Fees For Rendering Services by Customs Officers) Regulations, 1998 CBEC vide Notification No. 46/2016-CUSTOMS (N.T.), Dated: April 01, 2016 has amended Regulation 3 of Customs (Fees For Rendering Services by Customs Officers) Regulations, 1998 to provide that where the working hours in respect of clearance of cargo in Customs ports or Customs airports, has been prescribed as twenty- four hours on all days for customs clearance, no fee shall be leviable in such locations for the services rendered by Appraisers Superintendent Customs Preventive and Superintendent Central Excise/ Air Customs Officers, Examiners Preventive Officers and Inspectors of Central Excise/ Class IV Staff. [Notification No. 46/2016-CUSTOMS (N.T.), Dated: April 01, 2016] E. VALUE ADDED TAX RAJASTHAN VAT: 12. Effective date for filing Form EL-1, EL-2 and EL-3 has been extended from to The Rajasthan Government has extended the effective date, for furnishing the information of every month or part thereof in Form EL-1, EL-2 and EL-3 to the Assistant Commissioner/CTO, within 15 days from the end of the relevant month through www. rajtax.gov.in to These Forms are to be filed by the following persons effecting transactions with in the State of Rajasthan through electronic media: (i) (ii) person effecting sale or purchase; or transports, receives for transportation or delivers goods; or (iii) receives any amount for the goods sold or purchased [Notification No. F.16(708)TAX/CCT/2015/7669 Dated 15 th March, 2016] 40 THE CHARTERED ACCOUNTANT MAY

13 Amendments made in amnesty scheme Following amendments have been made by the Rajasthan Government vide Notification No. F.12(11)FD/Tax/ dated 30 th March, 2016 in amnesty scheme: Earlier this Scheme was effective upto but now the date has been extended upto An application for rectification in respect of any demand which is pending before the assessing authority shall be disposed of within 7 days of submission of AS-I or upto (earlier it was ), whichever is earlier. For availing the benefit of amnesty scheme, an application in Form AS-I has to be submitted to assessing authority upto (earlier ) along with the details of tax payment/ penalty/interest and proof of withdrawal of case if any. [Notification No. F.12(11)FD/Tax/ dated 30 th March, 2016] 14. Amendment in the Rajasthan Value Added Tax Act, 2003 Following Sections of Rajasthan Value Added Tax have been amended vide Act No. 5 of 2016: Section 2 (Definitions)- Capital Goods It has been clarified that generating set for generation of electrical energy to be used in manufacturing shall be treated as capital goods. Section 13 (Authority competent to grant registration) Intimation regarding change in principal place of business outside the territorial jurisdiction of the present assessing authority shall be given within 30 days as against earlier period of 60 days. However, if the permission in not granted within 30 days from the date of the application then it shall be deemed to have been granted. Section 24 (Assessments) A proviso has been inserted under sub-section (5) providing that the assessment for the year shall be made up to THE CHARTERED ACCOUNTANT MAY

14 1546 Section 33 (Rectification of a mistake) Under sub-section (3) the period of 1 year for the rectification of mistake has been reduced to 6 months from the date of presentation of application to the assessing authority. Further, the application pending before assessing authority on shall be disposed of within or within 1 year from the date of presentation, whichever is earlier. Section 51A (Power of State Government to waive penalty and interest in certain cases) Now State Government has been empowered to reduce or waive late fee payable for any period by any class of dealers in addition to penalty and interest. Section 53 (Refund) A sub-section (3A) has been inserted providing that the Commissioner of VAT has been empowered to grant refund in cases where tax amount has been wrongly deposited or in excess of the amount due. [Act No. 5 of 2016] DELHI VAT: 15. Extension of date for filing Form GE-II for the first 3 quarters of FY upto Delhi Government has extended the date for filing Form GE-II for the first 3 quarters of current FY (i.e to ; to and to ) from to Online Form GE-II is to be furnished on quarterly basis by all Government Entities including Corporation or Board having their offices in Delhi for the purchases affected by them, for consumption or use by them, from the dealers registered and having a valid TIN/ Registration Number. [Notification No. F.3(619)/Policy/VAT/2016/ dated 15 th March, 2016] 16. Extension of date for filing Form CR-II for the first 3 quarters of FY upto The date for filing Form CR-II has been extended from to for the first 3 quarters of current FY (i.e to ; to and to ). Online Form CR-II is required to be furnished on quarterly basis for providing the details of transactions of delivering goods having value more than Rs. 10,000 at the doorsteps of their clients by all firms/companies engaged in the business of courier activities and having their offices functioning within the National Capital Territory of Delhi. [Notification No. F.3(628)/Policy/VAT/2016/ PF/ dated 15 th March, 2016] 17. Procedure for sealing & de-sealing of premises The Delhi Government vide Circular No. 43 of F.3(645)/Policy/VAT/2016/ dated has prescribed the manner for surveys to be conducted by survey teams which are headed by an officer of the level of AC/VATO which is as follows: The survey team can seize incriminating documents and any other unaccounted papers found during search for which a proper acknowledgement is to be given to the dealer. If the dealer refuses to cooperate, then the premises can be sealed & can be de-sealed only after furnishing the security. Sometimes the survey team may not be able to complete the task due to inadequate staff even after normal business hours. In such situations, the team can abandon the search operation in consultation with his supervisory officer & the premises should be locked and a seal/mark may also be affixed as a security measure. Further, security guard may also be posted if considered necessary & the survey can be resumed next day. In this way, business of the dealer remains unaffected. [The above circular is issued in supersession of Circular No. 41 of F.3(645)/Policy/ VAT/2016/ dated 16 th March, 2016] 18. Assessment of Enforcement Survey/Seizure Cases by respective ward officers The Honourable High Court of Delhi in a recent judgment has advocated avoidance of multiplicity of authorities. Accordingly, it has been decided to assign the assessment of all cases, pursuant to Enforcement surveys, to Ward Officers concerned except cases, for which proceedings has been transferred by the Commissioner through a separate order. Accordingly, all officers with whom such cases are lying pending as on date, are directed to transfer the aforesaid cases to the concerned Ward Officers immediately. After assignment, Ward authorities shall ensure that assessments are completed within the time frame specified. [Circular No. 42 of F.3(651)/Policy/ VAT/2016/ dated 19 th March, 2016] 42 THE CHARTERED ACCOUNTANT MAY

15 VAT deduction at source in respect of works contract- advisory to Govt. department All the government departments have been advised to deduct tax at the source and deposit the same with the Trade & Taxes Department. This Circular has been issued considering the fact that some of the Government Departments are carrying out works contract activities by assigning various departmental contracts to the contractors without deducting any tax at source. Further, failure to deduct and remit would tantamount to non-compliance of the law attracting penal provisions. It may be noted that presently tax is deducted at the rate of 4% in case of registered dealer and 6% in case the contractor is unregistered. The same is to be deposited within 15 days following the month in which such deduction is made. [Circular No. F.3(654)/Policy/VAT/2016/ dated 28 th March, 2016] WEST BENGAL VAT: 20. One-day registration for all dealers The one-day registration scheme has already been in service since Now with immediate effect, it has been provided to extend this scheme for all new registration applications under both West Bengal VAT Act & CST Act. The registration shall be granted within next working day of furnishing hard copy of completed application along with necessary documents including application fees and security payment details. To avail this facility the dealer will have to follow the following steps:- Apply online for VAT Registration along with Uploading the following scanned documents:- - Trade license(s) - PAN of firm - PAN of owner - Residential proof - Security paid challan Uploading of security payment (GRN) details. Submit the signed hard copies of the following before the registering authority: Acknowledgement Application form All supporting documents including above scanned documents, application fees and security paid challan After successful receipt of the hard copies, the application shall be granted within next working day of receiving it. In case of any deficiency, the matter shall be informed through . In case of rejection of application, the security paid challan can be used against fresh application. [Circular No 02/2016 dated 15 th March, 2016] 21. Claim of ITC in case of sale-purchase mismatch Due to wrong filing of annexures to the returns like entering wrong TIN, etc. causing undue hardship to the purchaser for claiming CENVAT Credit. It has been clarified that the dealers must verify the quarterwise sale-purchase mismatch list for each quarter available in "Dealer Profile" on in and revise the returns within 6 months from the last date for submission of the original return for the respective quarter, if necessary otherwise demand notice may be issued to the purchasers. [Circular No 04/2016 dated 4th April, 2016] 22. Amendment in Rules of Maharashtra Value Added Tax Rules, 2005 Following Rules have been amended vide Notification No. VAT. 1516/C.R. 53/Taxation-1. dated 1 st April, 2016 which is in force from : Rule 52B (Set-off in respect of certain goods) If the claimant dealer has purchased mobile phone or cellular handset i.e. telephones for cellular network or for other wireless network then he shall be entitled to claim set-off only to the extent of aggregate of the taxes paid or payable under CST Act, 1956 on the inter-state resale of the corresponding goods and the taxes paid on the purchases of said goods if they are resold locally. Earlier, the above provision was only for goods covered under entries 13 and 14 of schedule 'D'. Rule 53 (Reduction in set-off) Sub-rule (11) has been inserted providing that the claimant dealer who is engaged in the business of transferring the right to use of passenger motor vehicles for any purpose can claim set-off of tax paid on motor vehicles purchased only to the extent of tax payable on such transfer of right to use. Further, the set off shall be claimed in the period in which such right to use has been transferred. Rule 54 (Non-admissibility of set-off) As per the old law no set-off shall be admissible for purchases of passenger motor vehicles which are treated as capital assets and parts, components and accessories thereof. Now it has been clarified that the above provision shall not apply to the claimant THE CHARTERED ACCOUNTANT MAY

16 1548 dealer who is engaged in the business of transferring the right to use in the said vehicles for any purpose. [Notification No. VAT. 1516/C.R. 53/Taxation-1. dated 1 st April, 2016] KARNATAKA VAT: 23. Amendments made in Karnataka Value added Tax, 2003 Following amendments have been made by Karnataka act No. 06 of 2016 effective from : Section 10 (Output tax, input tax and net tax) A sub-section has been inserted stating that input tax deducted by a registered dealer to calculate net tax payable shall be provisional in the case of a dealer who fails to furnish or furnishes incorrect and incomplete particulars in a return. However, the jurisdictional authority shall assess net tax by disallowing input tax claimed and shall also issue a demand notice. Further, where an assessment has been made and the dealer subsequently furnishes correct or complete return then the jurisdictional authority shall withdraw the assessment order. However, the dealer shall still be liable to pay penalty. Section 31 (Accounts) A proviso has been inserted to provide that dealers who are required to get their books of accounts audited (i.e. if total turnover exceeds R100 lakh in a year) shall submit a copy of audited statement of accounts electronically through the website notified by the Commissioner. Section 38 (Assessment of Tax) The prescribed authority may now make an assessment on a registered dealer to the best of his judgement where the return furnished is incorrect or incomplete and shall also advise the dealer to pay the tax assessed within 10 days from the date of service of such assessment order on the dealer. Section 72 (Penalties relating to returns and assessment) Sub-Section (2A) has been inserted to provide that a dealer who has furnished a revised return which understates his tax liability or overstates the claim for tax credit by more than 5% of his actual then he liable to a penalty equal to 10% of the amount of such tax under or overstated only after he has been given the opportunity of showing cause in writing against penalty imposed. Sub-Section (3B) has been inserted to provide that a dealer who fails to submit a copy of the audited statement of accounts and documents as informed in the notice issued to him shall be liable to a penalty of R50 for each day of such default. [Karnataka act No. 06 of 2016] HARYANA VAT: 24. Haryana Budget Highlights Following proposals have been made in budget: An amnesty scheme has been proposed to be introduced for granting relief from tax, interest, penalty & other dues from registered dealers, whose goods have been lost or destroyed during the reservation agitation in February, A Submit Bill, Get Prize Scheme has been proposed to encourage the customers to obtain bill/invoice for the goods purchased. It will enhance compliance on the part of seller resulting in increase in revenue for the State. CHHATTISGARH VAT: 25. Time extension for disposal of assessment cases of & Chhattisgarh Government vide Notification No. F /2016/CT/V (19). dated 22 nd March, 2016 has extended the due dates for completion of assessment and reassessment proceedings for every dealer which are as follows: Should have been completed by Earlier Extended Due Date Revised Extended Due Date [Notification No. F /2016/CT/V (19). dated 22 nd March, 2016] 26. Amendments made in Chhattisgarh Value Added Tax Rules, 2006 to be effective from Following Rules have been amended vide Notification No.F-10-17/2016/CT/V (28) dated 31 st March, 2016 in Chhattisgarh Value Added Tax Rules, 2006 effective from : Rule 22 (Revised Returns) A new clause has been inserted to provide that the statement which is required to be furnished with the return may be revised within 1 month from the last date of filing of such return. A new Form 18 has to be filled along with the existing Form 17 for filing of the said revised return. 44 THE CHARTERED ACCOUNTANT MAY

17 1549 Rule 35 (Payment of Tax with returns) Tax Earlier Provision Proposed Provision Amount Less than Pay 100% tax Pay minimum 90% of R50000 per amount quarterly quarterly tax payable quarter or R2 lakhs per annum within 30 days of expiry of the quarter within 15 days of expiry of the quarter and pay balance tax within 30 days of R50000 to R25 lakhs per quarter or R2 lakhs to R1 crore per annum R25 lakhs and above per quarter or R1 crore and above per annum Pay on or before the 10 th of the 2 nd and 3 rd month respectively, of every quarter, an amount specified in Rule 35 & the balance amount of tax due for a quarter shall be paid on or before the date prescribed for furnishing for such return. expiry of the quarter. Pay on or before the 10 th of the 2 nd and 3 rd month respectively, of every quarter, an amount specified in Rule 35 & pay 90% of balance amount due for a quarter within 15 days of expiry of the quarter and pay the remaining balance amount of tax within 30 days of expiry of the quarter. A new Rule 77A (Compounding of Offences) has been inserted providing that: The applicants shall make an application for compounding of offence to the prescribed authority and shall produce the proof of deposit of tax amount along with the application. The authority shall pass an order within 3 months from the date of receipt of the application. Further order of rejection of application shall be passed only after giving an opportunity of being heard to the applicant. Order for compounding an offence shall be in writing specifying the offence committed, quantum of money to be deposited. Order served on the dealer shall be final i.e. not appealable. The dealer shall deposit the balance amount payable within 30 days of receipt of order. However, if payment of tax is not made within stipulated time then the order shall be treated as ineffective and void. [Notification F-10-17/2016/CT/V (28) dated 31 st March, 2016] 27. Exemption for works contract has been extended from to The Chhattisgarh Government has extended the already existing exemption (as follows) in respect of works contracts till : Class of Person Extent of Exemption Condition for Exemption Registered The amount to The dealer dealers under be deducted by a has to obtain taking works contracts involving supply of goods person letting out works contracts towards the tax payable shall be at the rate of composition if it is less than 2%. permission to make payment in lump sum by way of composition against the payable tax. [Notification No.F-10-17/2016/CT/V (30) dated 31 st March, 2016] MADHYA PRADESH VAT: 28. Amendments made in Madhya Pradesh VAT Act, 2002 Following amendments have been made in Madhya Pradesh VAT Act, 2002: Section 9 (Levy of Tax)- Revision in Scheduled -II A new proviso has been inserted empowering the State Government for fixing the minimum amount of tax on the basis of weight, volume measurement or unit, in respect of goods specified in Part IIIA of Schedule II which are Diesel, petrol, natural gas, tendu leaves, timber, liquor, cigars, cigarettes, pan masala, telephone, etc. Section 18 (Returns)- Rate of interest has been increased The maximum rate of interest has been enhanced from 1.5% pm to 2% pm on the differential amount of tax between tax paid in returns & tax as per the accounts. Interest is to be paid from the date the tax so payable had become due to the date of its payment or to the date of order of assessment, whichever is earlier. Section 26 (Deduction and payment of tax in certain cases)- VAT deduction at source Tax at source is required to be deducted by department of Central/State Government, PSUs, Municipality & Municipal Corporations, Authority Constituted under any law for the time being in force or Public Limited Company on payment made to any dealer for supplying goods in pursuance to a contract between such dealer and the person making such purchases. Further, State Government by notification may exempt any person or class of persons from the above provision. THE CHARTERED ACCOUNTANT MAY

18 1550 The rate of tax deducted at source has been increased from 2% to 3% for a works contract of value exceeding R3 lakh involving sale of goods in respect of a contractor who has opted for payment of taxes under the composition scheme. However, the rate of tax deduction at 2% shall continue in case of a contractor opting to pay taxes under the regular scheme. The following persons will mandatorily deduct tax while awarding a works contract- Authority constituted under a law relating to local authority including a Gram Panchayat, a Janapad Panchayat and a Zilla Panchayat (instead of Municipality and Municipal Corporation) All recognised Dental colleges and hospitals associated to such dental colleges, All recognised Medical colleges and hospitals associated to such Medical colleges, All recognised universities. A new Section 28A (Provisional attachment to protect revenue in certain cases) has been inserted as specified below: If during the course of an inquiry where tax evasion is suspected, and the Commissioner is of view that it is necessary to protect the interest of the revenue then he may by an order in writing provisionally attach any money by specifying the amount. Such order may be revoked if the dealer furnishes a bank guarantee. Further, the dealer shall be personally liable to pay the amount so attached until the order has not been revoked or has not ceased to have effect. Provisional attachment shall cease after the expiry of 1 year from the date of service of the order. However, the Commissioner may extend the period after taking into consideration of the fact that the total period of extension shall not in any case exceed 2 years. Commissioner may confirm, modify or revoke the order after giving a reasonable opportunity of being heard to the dealer for the application made within 15 days of the date of service of the order or the order extending the period. An appeal against above order passed shall lie with the Appellate Board. Section 34 (Power to set aside an ex parte order) The decision regarding setting aside an ex-parte order shall be taken within 60 days from the date of filing an application made by the dealer to the assessing authority for setting aside the order and reopening the case. [Madhya Pradesh ACT No. 14 of 2016] HIMACHAL PRADESH VAT: 29. Electronic Declaration of tax invoices/bills/ cash memos for intra-state movement of goods - Amendment in Rule 61B of Himachal Pradesh Value Added Tax Rules, 2005 Himachal Pradesh Government vide Notification No. EXN-F(10)-7/2011- Vol I dated 28 th March, 2016 has made it mandatory for e-declaration in Form VAT- XXVI by dealers before dispatching taxable goods of value aggregating R30,000/- or more in the course of inter-state transactions. Further, this e-declaration shall also be furnished by a single registered dealer who dispatches goods in a single vehicle to multiple purchasers valuing more than R30,000/- within the State of Himachal Pradesh. The class of dealer or the goods on which this notification would be applicable will be notified by the State Government. [Notification No. EXN-F(10)-7/2011- Vol I dated 28 th March, 2016] 30. Amendments proposed in Himachal Pradesh Value Added Tax Act, 2005 Following amendments have been proposed in Himachal Pradesh Value Added Tax Act, 2005 vide Bill No. 7 of 2016: Section 11 (Input Tax Credit) Situation where Earlier Penalty Penalty dealer- Falsely claims ITC in his returns Twice of such claim or credit Proposed Amount equal to such claim or credit Claims incorrect 50% of such 25% of such ITC in the return claim or credit claim or credit Section 14A (Application for grant of Provisional Registration Certificate) has been proposed to be inserted which provides that: Any person can apply for registration by online application along with scanned copies of the prescribed documents. The Provisional Registration Certificate (RC) shall be granted within 3 working days of receipt of application. Afterwards, applicant may be directed to produce evidence and documents and also the accounts relating to the business for 46 THE CHARTERED ACCOUNTANT MAY

19 1551 verification. On being satisfied, the prescribed authority shall issue a Permanent RC within 30 days from the date of receipt of application. However, prescribed authority may reject the application & cancel the Provisional RC within 30 days of receipt of application if it is satisfied that the particulars given are incorrect or that the applicant has misrepresented certain facts only after giving an opportunity of being heard to the applicant. Section 16 (Payment of tax and returns) Particulars Failure/ dealay to file monthly returns Earlier penalty when annual tax liability is more than R20 lakhs Proposed Penalty R1,000 per day R1,000 per day subject to maximum of R50,000 Further, where a dealer has closed down his business or has left the business without getting his RC cancelled then the Assessing Authority shall suspend the RC immediately and thereafter no further incremental penalty shall be imposed. Section 27A (Special provision for settlement of pendency and arrears) has been proposed to provide a Settlement Scheme for cases of a particular period where the dealer could not submit the statutory forms required for assessment. The Scheme will allow for waiver of the tax amount, interest and penalty. Section 49A (Advance Ruling) has been proposed to be inserted providing that: An 'Advance Ruling Authority (ARA)' is constituted to clarify the rate of tax or the eligibility to tax of any transaction or eligibility of deduction of input tax or liability of deduction of tax at source. Any registered dealer can make an application accompanied by proof of fee payment. The Authority after examining may either admit or reject the application. Further, the application shall not be accepted where the question raised: - is already pending or - relates to a transaction which is designed apparently for the avoidance of tax. Moreover, no application shall be rejected unless an opportunity of being heard is given and reasons for such rejection shall be recorded in the order. The order shall be passed within 90 days of the receipt of application. A copy of every order shall be sent to the applicant and the officer concerned. [Bill No. 7 of 2016] NAGALAND VAT: 31. Compulsory filing of e-return w.e.f Nagaland Government has provided for mandatory e-filing of VAT return through "Tax Soft" for all the registered dealers i.e. only e-returns will be accepted w.e.f [Notification NO.CT/LEG/CR/128/2006 dated 29 th March, 2016] JAMMU & KASHMIR VAT: 32. Exemption period extended for hotels, lodges & guest houses upto The Jammu & Kashmir Government has extended the exemption from payment of tax by hotels, lodges and guest houses providing lodging facilities from to [Notification No. SRO 109 dated 31 st March, 2016] 33. Extension in date for remission of tax from to The Jammu & Kashmir Government has extended the date for remission of tax from to i.e. remission of tax will be available to small, medium and large scale industrial units upto or till the State adopts the GST Act, whichever is earlier after fulfilling the conditions specified in Notification No. SRO 91, dated 16 th March, [Notification No. SRO 110, dated 31 st March, 2016] 34. Online filing of returns along with payment from 1 st quarter of onwards It has now been provided under J&K Value Added Tax Act, 2005 to file online returns along with payment from 1 st quarter and onwards by the registered dealers having gross annual turnover of R 20 lakhs & above. The above provision has also been provided in Jammu & Kashmir General Sales Tax Act, 1962 vide Notification No. 02 of 2016, dated 31 st March, [Notification No. 03 of 2016, dated 31 st March, 2016] UTTARAKHAND VAT: 35. Annual Return for FY can be filed upto without late fees The Uttarakhand Government vide Notification No. THE CHARTERED ACCOUNTANT MAY

20 /2016/19(120)/XXVII(8)/2012 dated 30 th March, 2016 has provided that annual return for FY may be filed upto without payment of any late fees. It may be noted that the due date for filing of the annual return for the year was [Notification No. 257/2016/19(120)/XXVII(8)/2012 dated 30 th March, 2016] 36. Amendments made in Uttarakhand Value Added Tax Act, 2005 Following Sections of Uttarakhand Value Added Tax Act, 2005 have been amended by Uttarakhand Finance Act, 2016 : Section 17: (Procedure for registration) Any opening/closing of bank account of dealer shall be required to inform within 30 days, which is not mentioned in the application of registration. Section 25(9): Tax Audit & its Assessment Clause (e) has been substituted by stating that the officer conducting the tax audit shall now have no powers to make extracts or copies for other documents, inventory of stock. Clause (f) has been substituted providing that The tax audit authority after considering all the evidence collected in course of the proceeding may:- - Confirm the order which has already been passed or - Set aside the order and reassess the turnover and tax of the dealer or - Assess the amount of tax due if no assessment has been made so far; No such assessment or reassessment shall be made unless a reasonable opportunity of being heard has been given to the dealer. Further, not more than 3 adjournments shall be granted for hearing of the case. Section 29 (heading has been changed to Assessment of the Turnover not Assessed or Assessed at lesser rate during the year ) Sub-section (1) has been substituted providing that Assessing Authority can make assessment in every case were they have a reason to believe that the whole or any part of turnover or tax has: (a) escaped assessment; or (b) been under assessed; or (c) been assessed at a rate lower than the rate at which it is assessable; or (d) been wrongly allowed any exemption or deduction therefrom; or (dd-new clause) During Assessment rebate or concession has been allowed on the basis of submitted declaration form or certificate but such declaration form or certificate is found to be false or wrong afterwards; or (e) been wrongly allowed any tax credit therein, Sub-Section (4) has been amended by providing that now the Commissioner is not authorised to make reassessment after the expiry of 4 years from the date of the order sought to be reassessed. Section 34 (Payment & Recovery of Tax) A sub-section (17A) has been inserted stating that if a person fails to pay the amount due to a dealer or money held for or on account of a dealer to the Assessing Authority then he shall be liable to pay an amount not exceeding the amount due as penalty. A Section 34A (Tax to be first Charge) has been inserted providing that any amount of tax, penalty or other amount payable by a dealer or other person shall be first charged on the property of the dealer or such person. Section 51 (First Appeal) A sub-section (4A) has been inserted providing that: Following appeals shall Condition: Furnish a be entertained- Ex-parte Order Any other order (except ex-parte order) or penalty Any declaration form or certificate of turnover of concession or rebate, which is being rejected or not produced before the Assessing Authority proof of payment of- 5% of amount of disputed tax or penalty or R1 lakh ; whichever is less 20% of the amount of disputed tax/ penalty etc. or R5 lakhs ; whichever is less 10% of the amount at general rate of tax payable on the amount of the turnover of such declaration form or certificate, rejected or not produced Section 58 (Offences & Penalties) The maximum penalty amount has been increased from R2,000 to R10,000 for each default where the dealer refuses or neglects to furnish any information which may be in his knowledge or possession or furnishes information which is false in any material particulars. 48 THE CHARTERED ACCOUNTANT MAY

21 1553 Section 61 (Period for which Accounts to be retained) Every dealer shall now preserve all accounts required to be maintained by him for a period of 8 years (earlier it was 6 years) after the close of the assessment or till the assessment or reassessment or any other proceedings for such assessment year is completed, whichever is later. Section 31 (Power to set aside an Order of Assessment) & sub-ssection (6) of Section 32 (Period of Limitation for making Assessment or Reassessment) have been deleted. [Notification No. 103/XXXVI(3)/2016/15(1)2016 dated 31 st March, 2016] PUNJAB VAT: 37. Issuance of provisional registration number immediately on receipt of registration application by Punjab Bureau of Investment Promotion A proviso has been inserted under Rule 3(1) providing that the Punjab Bureau of Investment Promotion on receipt of a registration application shall immediately issue a provisional registration number & send the application to the concerned designated officer for further enquiry. The designated officer after being satisfied shall issue the registration certificate (RC) & send the same to the Bureau for handing over the same & the permanent TIN to the applicant within 7 days from the date of his application. [Notification No. G.S.R.28/P.A.8/2005/S.70/Amd. (58)/2016 dated 31 st March, 2016] GUJARAT VAT: 38. Amendment made in Gujarat Value Added Tax Act, 2003 Section 7 (Levy of tax on turnover of sales and rates of tax) has been amended by Gujarat Act No. 6 of 2016 effective from which provides that the State Government has been authorised to add to or omit from or amend or modify Schedule III so as to levy tax on the basis of price, weight, volume, measurement or unit, or reduce or enhance the tax rate in respect of any goods specified in Schedule III. Hitherto, the State Government had the power to reduce the tax rate, omit or amend any entry in Schedule III but was not authorised to enhance the tax rate. [Gujarat Act No. 6 of 2016] BIHAR VAT: 39. Amendments made in Bihar Value Added Tax Act, 2005 Following amendments have been made by Bihar Act 4, 2016: Section 3A (Surcharge) The rate of surcharge has been increased from 20% to 30% i.e. every dealer liable to pay tax shall also pay a surcharge on the goods specified in Schedule IV at a rate not exceeding 30% of the total amount of tax payable by him. Section 14 (Rate of Tax) Tax at the rate of 14.5% (earlier 13.5%) shall be payable on the sale price of the goods not specified in the Schedules I, II, III and IV. Section 70 (Interest on delayed refunds) The time period of 90 days has been reduced to 60 days. When the amount of refund is not refunded or the refund application is not rejected within 60 days, then simple 6% p.a. or part thereof shall be paid to the dealer calculated from the date immediately following the expiry of 60 days to the date of the refund. If the delay in grating refund within 60 days is attributable to the applicant then such period of delay shall be excluded from the period for which interest is payable. When the amount becomes refundable by virtue of an order of the Tribunal/ High Court/ Supreme Court then interest shall be payable from the date immediately following the expiry of 60 days from the date of receipt of order by the officer to the date of refund. [Bihar Act 4, 2016] FEMA (Matter on FEMA has been contributed by CA Manoj Shah, Mumbai and CA. Hinesh Doshi, Mumbai) A. Diamond Dollar Account Reporting Mechanism A.P. (DIR Series) Circular No. 54 dated March 23, 2016 With a view to liberalise the procedure, the requirement of AD Bank to submit quarterly reports giving details of the name and address of the firm/ company in whose name the Diamond Dollar Account is opened, along with the date of opening/ closing the Diamond Dollar Account to Reserve THE CHARTERED ACCOUNTANT MAY