Registration under GST- Ground Study

Here is a dilemma if you have branches in different states, would you need to take registration for every branch or branches from supply is being made.

Second thought come to mind, if we receive service from an unregistered dealer in a non registered branch in a state but not making single supply from that branch, would we require to take registration for that branch or not as we have registered in other state and whether we are liable as the registration requirement is on PAN India Basis.

Lets Take an Example:

Assumption:   Single branch in a state.

Suppose i am a manufacturer in Haryana ('A'), and make supply of goods from haryana only and i am registered in Haryana. I have a rented office in Delhi (i.e. 'B') and procure order from that delhi Branch. But dont make any supply from Delhi.  But received supplies from Unregistered dealer in Delhi Office like rent, Maintenance and other petty expenses.

Now, Question Arises :

Q1. Whether i have to take registration for 'B' if i have registration for A for the reason i am receiving supplies from Unregistered dealer in B and i have a rented Fixed Establishment in Delhi.

I have tried to figure out whether the registration requirement arise in Branch B by relying on certain provisions:

Requirement of Registration: 

Section 22 (1) of CGST Act, 2017: Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh
rupees:

Q1(i): Now the question arises whether Delhi office is making any supply to Haryana. 

if we go by provision of Section 7: 

7. (1) For the purposes of this Act, the expression “supply” includes––

(a) all forms of supply of goods or services or both such as sale, transfer, barter,

exchange, licence, rental, lease or disposal made or agreed to be made for a consideration

by a person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or

furtherance of business;

(c) the activities specified in Schedule I, made or agreed to be made without a

consideration; and

(d) the activities to be treated as supply of goods or supply of services as

referred to in Schedule II.

Para 2 of Schedule I: 

Supply of goods or services or both between related persons or between distinct

persons as specified in section 25, when made in the course or furtherance of business:

So, we can say indirectly Delhi office procuring order for Haryana but as the same is for without any consideration it should not be treated as supply.

Q1(ii): Now the question arises whether the transaction is between related person or distinct person, so as to decide whether transaction can be called as a supply in terms of para 2 of Schedule I.

Transaction between Distinct Person:
Distinct Person:
A person who has obtained or is required to obtain more than one registration,
whether in one State or Union territory or more than one State or Union territory shall, in
respect of each such registration, be treated as distinct persons for the purposes of this

Act.

Persons can be called distinct person only if they both are registered. In the case delhi office is not registered it can not be said that they are distinct person. So, Haryana office and Delhi office are not distinct person. 

Transaction between Related Persons:

Related Person :

Explanation to Section 15 para (a) (v) persons shall be deemed to be “related persons” if–– one of them directly or indirectly controls the other;

By reading the definition of the Related person as per my views it should be taken in broad sense. It should be taken for two persons having different PAN. Definition of related persons talks about the 'person.' A person is a different entity. It should be taken at macro level and on person to person basis.

So, if a person (having same PAN) have different establishment then such person for its various establishment should be a distinct person or establishment of a distinct person, not a relative as they are not different person but they are same persons.      

So, as per my views Delhi office and Haryana Office are not related persons. But they are establishment of Distinct Persons.


Establishment of a Distinct Persons:

Sec 25 (5) Where a person who has obtained or is required to obtain registration in a State or
Union territory in respect of an establishment, has an establishment in another State or
Union territory, then such establishments shall be treated as establishments of distinct
persons for the purposes of this Act.


So, Haryana office and Delhi offices are establishment of Distinct persons.

So, Schedule I does not apply on the said transaction as they neither are relative nor they are distinct person instead they are treated establishment of a Distinct persons.

Conclusion:
So, as per my opinion that there is no supply by Delhi office to Haryana office. and we are not required to take registration.

Further, Delhi office is not required to pay tax on reverse charge on receipt of supply from unregistered dealer under section 9 (4) as delhi office is not registered. 

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Mandatory quoting of PAN above Rs. 2 Lakh Transaction.

Question : Is Quoting of PAN is mandatory above Rs. 200000/- Transaction? 


Answer:
With the recent amendment in Rule 114 B vide press release 15th December 2015, government has made quoting PAN mandatory above Rs. 200000/- transaction. Government ignore the compliance requirement of companies doing thousand of transactions a day. and many of them with the small persons such as contractors, agriculturist etc who do have PAN as they do not have income exceeding the maximum exemption limits. There can be multiple of cases where the taking PAN from the person is not certainly possible. Does this requirement pushing companies to limit their transaction and face difficulty in doing business smoothly. Does this requirement challenge the ease of business.

I have tried out to present some provision which are favorable to the businesses and supporting the Non mandatory PAN requirement:

1. Text of Sec 139A (1):

(1) Every person,—

 (i) if his total income or the total income of any other person in respect of which he is assessable under this Act during any previous year exceeded the maximum amount which is not chargeable to income-tax; or

(ii) carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed five lakh rupees in any previous year; or

(iii) who is required to furnish a return of income under sub-section (4A) of section 139; or

(iv) being an employer, who is required to furnish a return of fringe benefits under section 115WD,

and who has not been allotted a permanent account number shall, within such time, as may be prescribed, apply to the Assessing Officer for the allotment of a permanent account number.

2. Text of Press Release: 

Considering the representations, it has been decided that quoting of PAN will be required for transactions of an amount exceeding Rs.2 lakh regardless of the mode of payment.

3. Text of Proviso to Rule 114 B: 

Provided further that any person who does not have a permanent account number and who enters into any transaction specified in this rule, shall make a declaration in Form No. 60 giving therein the particulars of such transaction. 

Taking PAN is mandatory only for those who have income above the maximum exemption limit. But for quoting of PAN, having PAN no is mandatory. 

So, from collective reading of all the provision above, if the person (who do not have PAN/or is not bound to take PAN as per Sec 139A (1) ) furnishes form 60 as specified, the requirement of quoting PAN can be waived. 

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Sec 207, A critical analysis !!!

I would like to draw your attention on Sec 207 of Income tax Act.

Sec Text is as under:

207. (1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".

(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who—

(a) does not have any income chargeable under the head "Profits and gains of business or profession"; and

(b) is of the age of sixty years or more at any time during the previous year.

In Simple words Advance tax liability does not arise on senior citizen who does not have any income under Profit and gains of business and profession. 

Now, a question arise:

If an assessee is senior citizen and he is partner in Partnership firm and entitled to get profit from firm which is exempt under 10(2A) and not entitled to any remuneration and interest, Sec 207 apply on him and whether he is not liable to pay advance tax. ??

Answer is NO. He is not liable to pay any advance tax.

Analysis of Section 207: 

In Clause 2(a) of sec 207, the word used is 'CHARGEABLE'. But profit of the firm is not chargeable in the hands of partner.

So, if partner is senior citizen, he is NOT LIABLE to pay advance tax.  

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Posted in Income Tax Act 1961, Queries

Latest Tax and Accounts updates:

1. IAS (Ind AS) notified vide notification dated 16.02.2015. Link for such notification is :

http://www.mca.gov.in/Ministry/pdf/Notification_20022015.pdf

2. Removal of Minimum Export Price (MEP) on export of Potato 

3. ICAI Guidance Note on Accounting for Rate Regulated Activities. Link: http://220.227.161.86/25919asbrra170212.pdf 

4. FICCI introduced its Pre budget Memorandum 2015-16.

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Entry for property Transferred as gift by Partnership Firm ?

Query:

A partnership firm has given a Immovable property gift to 2 of its partners. A gift deed is made (with stamp duty value 30Lakh). But the cost of the property in the firm's Balance sheet is only Rs 2Lakh. The entry passed is
 partner's capital a/c 1...Dr Rs 100000
 partner's capital a/c 2 ...Dr Rs 100000 
To Property account. ..........Cr Rs 200000  

 If we pass the entry as above the capitals of the partners will be reduced. Since it is a gift for no consideration at all, why should the capital balances be reduced

Answer: 

As the firm has made gift deed, the entry should be as mentioned.

Further as per simple accounting concept, firm and individual partners are different entity.And this is loss to firm as it has transferred the property as gift. 

And loss will be ultimately debited in partners capital account. While computing the Income tax, if it would have been debited in p&l, the deduction of the same (Loss) could have not be claimed for income tax purposes. So, the effect would be the same in accounts though (Net P&L debit to capital A/c)

 While filing return of income, the same should be treated as capital gain in the return of firm.

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Posted in Accounts, Income Tax Act 1961, Queries

Set off mandatory in the succeeding year or not ?

Query: 

For a company Loss in A.Y. 2012-13 is rs . 12500 Profit in A.Y 2013-14 is Rs. 50000 but company failed to take the set off of the said loss And now, Profit in A.Y 2014-15 is Rs. 5,00,000 So can the company take the set off of the loss in current year. Loss in A.Y. 2012-13 is related to Loss from Business other than speculative business.

Answer

No, the company cannot setoff of the AY 2012-13 Loss in AY 2014-15. 

It is mandatoy to set off loss in the AY 2013-14. 

It is mandatory to set off loss in the AY 2013-14. It is mandatory to set off the carried forward losses in the immediately succeeding year, against the income of such succeeding year. Otherwise, the losses will get lapsed. Tyresoles v CIT 49 ITR 515 (Madras). 

So, Revise return of AY 2013-14 and get refund of tax paid in AY 2013-14.

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Posted in Income Tax Act 1961, Queries

Availability of Rebate U/s. 87A (Rs. 2000) for FY 2014-15 / AY 2015-16

Availability of Rebate U/s. 87A for FY 2014-15 / AY 2015-16:

Finance Act 2014 has increased Income Tax Exemption Limit by Rs. 50000/- for Individuals and Senior Citizens below the Age of 80 Years. Now Question arises was do Rebate of income-tax under section 87A as applicable for FY 2013-14 also available for FY 2014-15 and subsequent years.
Finance Act 2013 has introduced the rebate U/s. 87A and in this section it has not restricted the exemption to any particular Financial or Assessment year. Further in Recently Presented Budget 2014 by Finance Minister Arun Jaitley section 87A was not been amended.
So in our view Rebate U/s. 87A is Available to Resident Individuals , whose total income does not exceed 5 Lakh rupees in even for Financial Year 2014-14 and for Subsequent Years.
Extract of Section 87A is as follows :-
The following section 87A shall be inserted after section 87 by the Finance Act, 2013, w.e.f. 1-4-2014 :
Rebate of income-tax in case of certain individuals.
87A. An assessee, being an individual resident in India, whose total income does not exceed five hundred thousand rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of two thousand rupees, whichever is less.

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Posted in Amendments, Income Tax Act 1961