CA. Viral ShahChairman98243 62211

CA. Arpan DodiaVice-Chaimram98983 83530

CA. Dhiren ParikhSecretary93762 11099

CA. Kejal PandyaTreasurer98259 77220

CA. Pradeep AgrawalEx-officio98985 60967

CA. Yash BhattImm. Past Chairman99243 88339

CA. Utpal ShahCommittee Member &Study Circle Convener98250 28960

CA. Hitesh AgrawalCommittee Member99980 28737

CA. Krunal BrahmbhattCommittee Member78748 11551

CA. Vinod PahilwaniCommittee Member98980 78176

CA. Viral ShahCA. Krunal BrahmbhattCA. Priyanka ThakkarCA. Jigita Shah

EditorialTeam

Chairman Message

Volume - XII January 2017

Dear Professional Colleague,

New is the year; New are the hopes; New is the resolution; New are

the spirits; and New are my warm wishes for a promising and

fulfilling New Year 2017!

HAPPY NEW YEAR

Post Demonetization, though experts predict a sizable dent to

growth in the final two quarters of fiscal 2017, but I am sure India

will rejoin the ranks of the fastest growing major economies in the

world next fiscal year.

The effect of Demonetization is being felt everywhere and at

Baroda Branch too and therefore Baroda Branch had organized

lecture meeting on How to use E-Wallet, Public Program on

Effects of Demonetization. Baroda Branch has also come up with

PayTM QR Code which is put up at the reception for making

cashless transaction.

During the month of December, Baroda Branch also organized

Work shop on GST, Joint program with M.S. University on GST

Unplugged, Lecture meeting on World Economy and Vs. World

Economy, Changing orders, Awareness Program on Pradhan

Mantri Garib Kalyan Yogna 2016, Communication for Desired

Result through Social Media and of course Monthly series on Tax

Clinic. Baroda Branch had conducted program on Basics of

Accounts for Vadodara Municipal

Corporation Employees jointly with VMC

which was well appreciated. The event

was graced by Ms. Jigishaben Sheth,

Chairperson, Standing Committee of

Vadodara Municipal Corporation.

On 1st December, Baroda Branch

entered its Golden Jubilee year

and I congratulate every

member of Baroda Branch

specially the stalwarts who have been part of this golden journey.

Baroda Branch has organized 26th Residential Refresher Course

at Aamby Valley, Lonawala wherein talk on Professional

Excellence, Internal Financial Controls & Corporate Governance:

Changing role of Auditors & Audit Committee, Valuation of

Intangibles – different Paradigm is planned followed by Group

Discussion on Direct Tax and Accounts and Audit and Issues on

FEMA and Company Law.

Before I sign off, I again wish a happy new year to all on behalf of

Team Baroda with the desire that we keep achieving greater

heights.

Chairman

CA. Viral Shah

Co

nt

en

ts Forth Coming Events

Direct Tax Updates

Service Tax Updates

Judicial Decision on Excise & Service Tax

The Nature Of Money And Wealth Creation

Anti-profiteering Measure & GST

GST Updates

Pradhan Mantri Garib Kalyan Yojana, 2016

Due Date Planner

Memory Lane

02

02

03

04

05

06

07

09

10

11

2

FORTHCOMING EVENTSBRANCH EVENTS

26th RRC Itinerary

Date & Day Time Schedule

04.01.2017,Wednesday Assembly at

Baroda RailwayStation

05.01.2017,

Thursday

10.00 a.m. Arrival at Aambey Valley

01.30 to 02.00 p.m. Inaugural Session

02.00 to 04.00 p.m. Professional Excellency byMr. Bashesh Gala,Management Guru

04.15 to 05.30 p.m. Internal Financial Controls &Corporate Governance:Changing role of Auditors &Audit Committee byCA. Sanjeev Shah

07.00 to 10.00 p.m. Evening Get to Gather

06.01.2017,

Friday 09.00 to 09.45 a.m. Group Discussion on IncomeTax by CA. N. C. Hegde

09.45 to 10.30 a.m. Group Discussion onAccounts & Audit byCA. Himanshu Kishnadwala

10.30 to 10.45 a.m. Comfort Break

10.45 to 12.15 p.m. Issues on FEMA byCA. N. C. Hegde

12.30 to 02.30 p.m. Analyses of Group DiscussionCA. N. C. Hegde &CA. Himanshu Kishnadwala

02.30 to 03.30 p.m. Lunch

07.00 to 10.00 p.m. Evening Get to Gather

07.01.2017,

Saturday Critical Issues on CompaniesAct with reference to Pvt. Ltd.Co by CA. D G KurundWadkar

Valuation of Intangibles –different Paradigm byCA. Bharat Gajjar

12.45 to 01.30 p.m. Check out

01.30 to 03.00 p.m. Lunch at Aambey Valley

04.30 to 07.00 Leisure time at Lonavala

07.30 p.m. Assemble at Rly. Station forDeparture Baroda byAhmedabad Express(11050)

09.00 p.m. Departure for Lonavala by INDPUNE Express (22944) fromBaroda Rly. Station.

06.45 a.m. Arrival at Lonavala

07.15 to 08.30 a.m Breakfast at Lonavala

08.00 to 09.00 a.m. Breakfast

08.00 to 09.00 a.m. Break Fast

09.30 to 11.00 a.m.

11.15 to 12.45 p.m.

p.m.

STUDY CIRCLEDate :

Time :

Topic :

Faculty :

Fees :

Venue :

16.01.2017

6.00 to 8.00 pm

Ammendment to Existing Accounting Standards

Overview of Ind AS.

CA. Pareen Shah

Rs. 200/- (for non CPE members)

ICAI Bhawan, Vadodara

Date :

Time :

Topic :

Faculty :

Fees :

Venue :

27.01.2017

6.00 to 8.00 pm

Information Security in CA Office

CA.

Rs. 200/- (for non CPE members)

ICAI Bhawan, Vadodara

Amar Doshi, Vadodara

CPEHRS.2

CPEHRS.2

DIRECT TAX UPDATESCA. Narendra Hindocha

1. New Scheme for undisclosed income

New Scheme for declaration of undisclosed income in theform of cash or deposit in a bank account came into effectfrom 17th December,2016. Declarations can be filed upto31st March, 2017. The declaration is to cover income for allassessment years upto Assessment Year 2017-18.

The scheme is introduced by making amendments in theFinance Act 2016 and is described as Taxation And InvestmentRegime For Pradhan Mantri Garib Kalyan Yojana, 2016.

The person desirous of availing the same is required to fileDeclaration in Form 1 to the jurisdictional Commissioner inpaper form or electronic form verified by code orelectronically with digital signature.

The form requires details of tax to be paid at 30%, surcharge at33% of tax and penalty at 10% of income, aggregating to49.90%.

The form also requires details of deposit under Pradhan MantriGarib Kalyan Deposit Scheme 2016 at 25% of incomerounded off to next Rs.100/-, to be made with any bank insingle transaction. Deposit to be made with Application inForm II while certificate of deposit will be received in Form I.Nomination to be made in Form III. Deposit is refundable after4 years without interest.

Declaration to be in Form 1 and the Commissioner to issuecertificate in Form2.

Persons having unaccounted income and not availing thescheme are threatened with greater damages by amendmentsmade in Income-tax Act in Sections 115BBE, 271AAB and271AAC. As explained in press release, such personsdeclaring such income in a normal Return of income will facetax, surcharge and cess adding upto 77.25%. Persons notdeclaring such income in return to face additional damage of10% by way of penalty. Also there will be 200% penalty under

3

section 270A and prosecution in appropriate cases. In search cases, the penalty willbe 30% of income if admitted by assessee and 60% if not admitted by assessee.

The scheme will leave only about 25% of income in the hands of the declarantimmediately and another 25% after 4 years. I believe the scheme would have beenmuch more effective if there was no penalty and the need to make a deposit and wasintroduced and marketed promptly before the taxpayers starting attempts to findloopholes to convert the demonetised currency. Many more things could have beendone by that would be being wise after the event.

Section 44AD provides for presumption of income at 8% of turnover in cases ofindividuals, firms and HUFs engaged in most businesses. To promote transactions bybanking channels, the Government took decision to reduce the rate from 8% to 6% inrespect of receipts through banking channels for only one Assessment Year 2017-18.The necessary amendment is proposed to be made in Finance Act 2017

When our Branch building was constructed, donations were given by members tomeet the cost of the building. At that time, the members were wondering whether suchcontribution would be allowable as revenue expenditure or whether deduction undersection 80G would be allowable. In the case of M/S. B.K. Khare And Company Vs.ACIT, before the Mumbai Bench of Income Tax Appellate Tribunal in ITANo.4500/Mum/2014, it was held that contribution made by a CA firm to the a branch ofICAI towards construction of administrative building is allowable u/s 37(1).

It is very common that an assessee files application for approval of Gratuity fund but noaction is taken by the Income-tax Department for many years. In the meanwhile, theAssessing Officer, in case he notices that the fund is not approved, will disallowcontribution to the fund or contribution directly to the Life Insurance Corporation ofIndia towards the relative policy. Such disallowance is also often confirmed in appealwhile the Department does not move the matter of approval any further. Reading thedecision in case of Commissioner of Income-tax v. Jaipur Thar Gramin Bank reportedat (2016) 388 ITR 228, it would appear that the claim was allowed by theCommissioner(Appeals), the Tribunal and the Rajasthan High Court. It was held thatthe assessee could not be made to suffer for the inaction of the authorities and theAssessing Officer ought not to have disallowed the claims of contribution to gratuityscheme merely because the Commissioner had not granted the approval to thegratuity scheme.

Treatment of premiums for and maturity amounts received from Keyman insurancepolicies have been a subject matter of litigation, legislastive amendments andclarifications for many years. In the latest on the subject, the CBDT issued a circulardated 22nd November, 2016 stating that premium paid by the firm on the KeymanInsurance Policy of a partner, to safeguard the firm against a disruption of thebusiness, is an admissible expenditure under section 37 of the Act. The next issuecould be the effects of assignment of policy and maturity amount received thereafter.There could also be an issue whether the premium was to safeguard the firm against adisruption of the business or there was a different purpose as the non-payment ofpremium would not disrupt the business. I am doubtful if Income-tax law can operatewithout controversial issues.

Another issue relating to such policies decided by Ahmedabad Bench of ITAT is thatpremium for such policy in respect of persons who are not directors may be

2. Tax benefit to promote use of banking channels

3. Building contribution to ICAI Branch

4. Gratuity fund not approved

5. Keyman insurance policy

disallowed when they are not keymen.Banpal Oil Chem P. Ltd. v. Asst. CIT(Ahd) 51 ITR (Trib) 477. Hence theissue whether the policyholder iskeyman becomes relevant.

SERVICE TAX UPDATESCA. Manilal Parsiya

The Central Government vide

Seeks to amend

notification No. 20/2014-ST dated 16th

September, 2014 so as to provide exclusive

jurisdiction to LTU-Bangalore with respect

to online information and database access

or retrieval services provided or agreed to be

provided by a person located in non-taxable

territory and received by a ‘non-assessee

online recipient’.

The Central Government vide

Seeks to amend

Place of Provision of Services Rules, 2012

so as to exclude 'online information and

database access or retrieval services' from

the definition of 'telecommunication

services'.

The Central Government vide

Seeks to amend Entry 63

of the exemption notification No. 25/2012-

ST dated 20.06.2012 so as to exempt

services by an acquiring bank, to any

person in relation to settlement of an amount

up to two thousand rupees in a single

transaction transacted through credit card,

debit card, charge card or other payment

card service.

The Central Government vide

Seeks to insert

proviso in Rule 4C(1) of Service Tax Rules,

1994 so as to allow a person located in non

taxable ter r i tor y providing onl ine

information and database access or

retrieval services to a non-assessee online

recipient to issue online invoices not

authenticated by means of a digital

signature for a period up to 31st January,

2017.

Notification

No. 50/2016-ST [F.No. 354/149/2016-

TRU] dated 22.11.2016

Notification

No. 51/2016-ST [F.No. 354/149/2016-

TRU] dated 30.11.2016

Notification

No. 52/2016-ST [F.No. 356/21/2016-TRU]

dated 09.11.2016

Notification

No. 53/2016-ST [F.No. 354/149/2016-

TRU] dated 19.12.2016

4

JUDICIAL DECISION ONEXCISE AND SERVICE TAX

CA. Anirudh Sonpal

I. MANUFACTURE & DUTY LIABILITY

1.1 The assessee is engaged inmanufacture of motor vehicles andpar ts thereof; various types ofscrap/waste of packing materialremaining after removal of inputstherefrom and scrap of grindingsludge and used/mixed oil and effluentwater are not liable to duty since theseare not generated on account ofmanufacture.

1.2 When defective fans which had beendismantled, are reassembled, afterremoval of defective parts, repairedand replaced as new one by reusingremaining workable parts, it is a caseof mere repairs and service and samecannot be said to be 'manufacture' asdefined under Section 2(f) ofCEA,1944.

1.3 The appellant is a manufacturer ofexcisable dry battery cells and hasused paper and paper boards, onwhich cenvat credit has been availed;for intermediate production aftersome processing. During thisprocess, some waste and scrap isgenerated which is cleared forproduction and on which the revenueauthorities demanded duty. TheHonourable Tribunal observed that theappellant is not engaged in themanufacture of any paper or paperboard, which were their inputsprocured after payment of duty andthese inputs were put to intended usein appellant's factory, and in such asituation, it is not tenable to hold thatappellant was engaged in themanufacture of waste and scrap ofpaper on which excise duty can belevied.

[ Maruti Suzuki India Ltd vs CCE –

Chandigarh Cestat]

[CCE vs Metro Appliances Ltd –

Allahabad HC]

[Panasonic Energy India Company Ltd

vs CCE – Delhi Cestat]

II. VALUATIONS & EXEMPTIONS

III. CENVAT CREDIT

2.1 Refund of excise duty can be granted on the basis of credit notes issued towardsturnover discount. The revenue authorities had denied the refund since the credit notefor discount was raised post clearance of the goods; however, the HonourableSupreme Court held that since the discount was known to the dealer at the time ofpurchase, the same will not form part of the value and hence refund can be granted ofexcise duty paid before deducting the discount from the value. The HonourableSupreme Court further observed that though the assessee is entitled to claim thededuction of the turnover discount, the refund shall accrue to the assessee only afterconsidering the principle of unjust enrichment.

2.2 When the appellant collected from their purchasers cost of transportation in excess ofwhat was incurred by them, the excess so collected is a profit on transportation andthe same is not liable to be included in the assessable value of the goods u/s 4 of theCEA, 1944.

2.3 Cost of advertising, marketing, publicity incurred by the dealers from their margincannot be included in the assessable value of the vehicle manufactured.

2.4 For deciding eligibility to SSI-exemption Notification, turnover is to be computed asfollows: (a) value of non-excisable and exempted excisable goods is to be excluded;(b) value is to be computed at transaction value, as per Central Excise Act andvaluation rules; and (c) value of goods liable to duty based on retail sale price, is to becomputed after giving benefit of abatement from retail sale price.

3.1 The appellant generates electricity within its factory premises for captive use in themanufacture of the final product viz. sponge iron and surplus electricity generated iswheeled out to Chhattisgarh Grid on payment of consideration. Since cenvat credittaken on the input, input services and capital goods were not fully utilized in themanufacture of the final product and some quantity of the generated electricity iswheeled out from the factory, the revenue authorities objected to the availment of entireamount of cenvat credit. The Honourable Tribunal, while remanding back the matter,observed that electricity is neither 'nil' rated nor exempted from payment of CentralExcise duty and therefore, electricity cannot be considered as 'exempted goods' as perthe definition contained in Rule 2(d) of CCR; accordingly, embargo created in Rule 6ibid has no application for payment of amount of 6% on the electricity wheeled outfrom the factory; however, as some portion of generated electricity has been sold bythe appellant to the grid on payment of consideration, proportionate cenvat creditattributable to the electricity wheeled out from the factory will not be available for thecenvat benefit.

3.2 Supply of excisable goods without excise duty payment to SEZ unit/Developer againstLetter of Undertaking for their authorized operation has to be treated as 'export' and notas 'exempted goods' for the purposes of Rule 6(3) of CCR, 2004; consequently theprovisions of sub-rule (1), (2), (3) and (4) were not applicable against supply of saidgoods.

[CCE vs Addison & Co Ltd – SC LB]

[S M Shankarrao Mohite Patil Ssk Ltd vs CCE – Mumbai Cestat]

[CCE vs Mahindra & Mahindra Ltd – Mumbai Cestat]

[Wenger & Company vs CCE – Delhi Cestat]

[Topworth Steels & Power Ltd vs CCE&ST – Delhi Cestat]

[CCE&ST vs Rolaster Pvt Ltd - Bangalore Cestat]

5

THE NATURE OF MONEY AND WEALTH CREATIONCompiled by CA. Bimal R. Bhatt

Money is not just a material entity. The material form of money is the outer expression ofsome deeper forces of universal and human Nature. For a truly efficient and productivecreation of wealth, which leads to the enrichment of life, we have to understand the truenature of money and its implications for wealth creation. This article examines the processof wealth creation in the light of a deeper insight into the nature of money.

Circulating interchange; quality of economic life.

The historians of money trace its roots to the barter system of interchange of goods andservices by the producers. Later, with the advent of the middleman or intermediary betweenthe producer and the consumer, came the currency note as a symbol and indicator for thevalue of the interchange. So the first character of money is interchange. And when we probefurther and ask what is the deeper cause of this interchange we will hit upon one of thefundamental laws of life: interdependence. We are all part of an interacting, interdependentand interlinked unity of life. So no individual or collective human organism can be fullyindependent. Every human organism will have something, which others don’t have, and lacksomething, which others possess, this creates the need for interchange. This constant andrepeated interchange driven by this law of interdependence creates a circulating force in thevital life of humanity. Here comes the second character of money, circulation. A fluid force ofcirculating interchange is the essential nature of the money-force. Thus we can see thatmoney is a universal force proceeding from a universal law of life.

Thus the essential nature of money is a fluid force of circulating interchange. More itcirculates, more it grows. According to modern monetary theory, quantity of money in aneconomic system depends on the velocity of circulation of money. So for increasing theprosperity of a community the money-force should never remain frozen for too long; itshould always remain liquid, in a state of constant flow and circulation.

The concept of “Cash Flow” in financial management is very much in sync with the nature ofmoney. Cash reserves of a company should be neither too high nor too low and must bealways in a state of flow and never be static or frozen. The most important part of thiscirculation or flow is spending. The money force has to be always in a state of generousspending to create wealth for the society. As the Mother of Sri Aurobindo Ashram points out,that the money-force “is alive only when it circulates. If you want to keep it up, it decays. It isas if you wanted to enclose water in a vase to keep it always, after sometime your waterwould be absolutely putrefied. With money it is the same” and therefore “the first thing to dowhen one has money is to give it and money is valuable only when one has spent it.” Thisdoesn’t mean saving or holding cash reserve has to be neglected. But the main emphasishas to be on generous spending to create wealth for the society with a certain rhythms orbalance between saving, spending, receiving, holding, production, creation, profit andrecycling or in other words a rhythmic liquidity. A free and large and generous spending andreceiving, constantly ploughing back the return and profit for a progressive increase in theproductivity, richness and well-being of the material life with an intuitive understanding of theright rhythm between the various functions, facets and stages of the flow and process of themoney-force – this is the mentality or attitude which leads to a progressive prosperity.

In a psychological perspective, money is an instrument for the satisfaction of human need ordesire. No one seeks money, except a few foolish misers, for its own sake. We seek moneybecause it fulfills some human need or desire. The nature of this need or desire changes aswe progress in the path of human evolution. In the early stages of human development whenwe are predominantly physical beings we seek for the basic needs of our body like food,

Key Perspectives

Circulating Interchange

clothing, shelter, survival.

When these basic needs are reasonablysatisfied we seek for a better enjoyment oflife or a more efficient and productiveutilization of life or for power and masteryover life. As we progress further, and growin our mental, moral and spiritualdevelopment we seek for knowledge,values, and ideals or for some form of innerfulfillment. We use money as an instrumentfor the fulfillment of these evolving needs ordesi re for enjoyment, ef f ic iency,productivity, power, mastery, knowledge orinner fulfillment.

Thus, Money or the financial force has threedimensions. First is the material dimension,which is the currency note or dollar; secondis the vital dimension, which is thecirculating force, created by the interchangeof goods and services; third is thepsychological dimension made of desire forfulfillment. In a quantitative sense, thevelocity of circulation of the vital forcebehind money is an important factor in theprosperity of a community. The more itcirculates, and faster, the more it grows. Butfor a balanced prosperity it must be aproductive circulation which adds tangiblewealth to the community or fulfill legitimatehuman needs and not a speculativecirculation which fills the pockets of a fewfinancial manipulators.

In a qualitative perspective, the nature of theeconomic life of a community dependsmainly on the psychological dimension,which means the nature of the needs,desires and motives of people. When theneeds are predominantly physical, as inmost of the tribal communities the economyis simple and primitive. If the desires aremainly material or sensuous enjoyment andthe driving motives are the greed for wealth,power, enjoyment or self-interest ofindividual and collective ego, the quality ofthe economic life still remains gross, thoughless primitive and simple.

If the technological and pragmatic mind ofthe community is well-developed, theeconomy may be more efficient andproductive, but if the desires and motives ofpeople are material, sensuous and

The Quality of Economic Life

6

exclusively centered around the competitiveself-interest and greed of the individual andcollective ego of the vital being in man, thenit will not lead to any qualitativeimprovement in the economic life; it will alsobe subjected to all the turmoil, turbulenceand instability of this part of our humannature, ful l of scams, meltdown,depressions, swings in “sentiments”leading to irrational booms and busts in thestock-market.

The economy acquires stability, balanceand qualitative upliftment only when it isregulated and governed by the highermental, moral, aesthetic and spiritual naturein us, which seeks for truth, beauty,harmony and goodness. However, theseuniversal values of the higher self in us haveto take a form which is appropriate to theunique and intrinsic nature of the economiclife of the community. The seeking for truthwill take the form of greater honesty,transparency and integrity in all financialtransactions. The other aspect of truth is toseek for the deepest, highest and the holistictruth, law and purpose of business,commerce and finance and regulate theeconomic life according to this greater andtruer knowledge. The quest for beauty andharmony must lead to a more beautiful andharmonious equipment and organization ofthe material and economic life of the societyand a more balanced financial system. Theaspiration for goodness will manifest itselfas a generous flow of funds to the task oferadication of poverty and inequality,creating social capital, ecologicalsustainability and to all activities which leadto the mental, moral, aesthetic and spiritualgrowth of the individual or the collectivity.(Source:Fourth Dimension Inc.)

Compiled CA. Abhay Desai

ANTI-PROFITEERINGMEASURE & GST

Some people may try to take undueadvantage by increasing the prices of goodsor services or not reducing the prices due toreduction in cost due to admissibility ofcredits or lowering of tax rates at the time ofimplementation of GST. To combat thisbehavior anti-profiteering measures areoften resorted too by the Government to

check undue increase in the prices of goods and services. Countries like Australia and morerecently Malaysia have introduced such measures during transition to GST. Although intentcannot be disputed, execution of such measures will be a major challenge.

The word "Profiteering" was introduced in 1919 into an Act of Parliament (U.K.), and thusmay be said to have obtained official recognition as part of the English language. It hadbecome current colloquially quite early in the World War. The following implicit definition wasgiven by Sir Auckland Geddes (as president of the Board of Trade) in Parliament on thesecond reading of the Profiteering bill (1919): - " To profiteer is to make an unreasonablylarge profit, all the circumstances of the case being considered, by the sale to one's fellowcitizens of an article which is one or one of a kind in common use by the public, or is material,machinery, or accessories used in the production thereof." Hence to profiteer is to make anunreasonably large profit. An Anti-profiteering measure thus implies measure by way ofimposing penalty by the Government on businesses not passing benefits to end consumerson implementation of GST and thus earning unreasonable profits in the process.

Anti-profiteering measures are temporary measures applicable to meet peculiarcircumstances. In theory such measures are required only for a short duration. It is onlyduring the limited period after introduction of GST that such measures are needed as duringthat period consumers are not aware about the cost structure of the sellers and the impact ofGST on the same and hence sellers may try to take the advantage of such ignorance ofconsumer. However practically wherever such measures have been introduced for a limitedperiod, the same have been extended. In Malaysia, such measures were initially applicablefrom 02.01.2015 to 30.06.2016. Said period has been extended upto 31.12.2016.Moreover it is also proposed to introduce a new anti-profiteering mechanism on the expiry ofexisting mechanism on 31.12.2016. Even Australia had extended the original period for theapplication of such measures.

Determination of unreasonable margin will depend on the formula adopted by theGovernment. Different formula will yield a different result depending on the parametersconsidered. Hence execution of anti-profiteering measures have been a challenge in all thejurisdictions where it has been implemented. As an example, Malaysia is in the process ofchanging the existing mechanism of determining unreasonable profits on the basis of stockkeeping units (SKU). Why is it a challenge to determine unreasonable margins ?

Margins of any enterprise is a difference between selling price and cost. Pricing is a complex

juggling act between competing interests from 3Cs – company, customers & competitors.

Government will be adding fourth C – compliance – with the implementation of GST. GST will

have effect on the liquidity of an enterprise as well as cost of compliance (mainly up

gradation cost of IT infrastructure). Till the effects of these factors are crystallized,

companies may opt for higher margin to protect the future uncertainty. Company’s owning

brands possesses pricing power over the customers. Hence as per law of economics they

may not want to pass the benefits to the end customer. Also actions taken by the competitors

will also guide the change in margins. Over and above these, pure demand and supply drives

the margins of many industries (mainly commodity companies). Hence the point being a

change in margins in GST era as compared to pre-GST era may not be only due to

implementation of GST. Many factors over and above GST play a vital role in determination of

margins. Without excluding the effect of these factors, it will not be possible for the

Government to decide whether the margins are unreasonable or not so as to apply the anti-

profiteering measures.

Sec. 163 of the second version of draft CGST/SGST Law released on 26.11.2016 contains

WHAT IS AN ANTI-PROFITEERING MEASURE

DURATION OF SUCH MEASURES

EXECUTION WILL BE A BIGGEST CHALLENGE

ANTI-PROFITEERING UNDER GST IN INDIA

7

provisions related to anti-profiteering measures. As per draft law, the Central Government

may by law constitute an Authority, or entrust an existing Authority constituted under any

law, to examine whether input tax credits availed by any registered taxable person or the

reduction in the price on account of any reduction in the tax rate have actually resulted in a

commensurate reduction in the price of the said goods and/or services supplied by him. The

Authority shall exercise such functions and have such powers, including those for

imposition of penalty, as may be prescribed in cases where it finds that the price being

charged has not been reduced as aforesaid.

As per draft law, benefit of admissibility of credit or reduction in rate of tax applicable on

particular goods or services must be passed to the customer by making a commensurate

reduction in the price. As noted above, a price may not undergo a change even if there is

reduction in rate of tax or admissibility of credit as other factors such as demand & supply,

escalation in other costs, competitor’s policy, etc. shall play an equally vital role. Hence it

remains to be seen as to how the formula shall be designed to exclude the effect of such

unrelated factors. Another striking point of the draft law is that there is no mention of time

period upto which such measures shall continue. Without any end limits, such measures

shall cause unnecessary harassment to the trade and industry.

If this provision is made a part of final Law which is passed by the Legislators, at the

minimum a business will have to properly document the workings for revisions in the prices

along with consequent impact on the margins. Care should to taken to effectively document

the changes in prices due to admissibility of input tax credits or change in the rates of tax to

ensure compliance.

Revenue Secretary Hasmukh Adhia has stressed that the clause (“anti-profiteering

provision”) is an enabling provision in case it is noticed that intended benefits of a GST law

are not being passed on to consumers. The government has no plans to set up an inspection

machinery and no punishment has been prescribed. In our view if the said provisions are

made part of final law, penalties (though no punishment) will be prescribed for violation as

otherwise it will not be effective. Whether such provision will be good for the consumers or

will lead to harassment of the companies will depend on the formula which the Government

adopts to calculate the unreasonable margin. Subjective principles and not straight jacket

formula (as adopted by Malaysia) will go a long way in avoiding unnecessary disputes.

WHAT NEEDS TO BE DONE

SILVER LINING

Compiled CA. Siddharthsinh Jadeja

GST UPDATES

Section 167 – Credit Transfer

Today, I would like to discuss one of the provisions from Chapter XXVII i.e. from TransitionalProvisions, since I think before even going to GST regime first question would arise abouthow to transfer credit from old regime to new regime. If we discuss about credit transfer fromold regime to new regime then in that case one of the most important Section would to

discuss would be section 167 which talksabout “Amount of CENVAT credit carriedforward in a return to be allowed as input taxcredit” Let’s see what this section is allabout by first looking on bare act portion ofthe section.

A registered taxable person, other than aperson opting to pay tax under section 9,shall be entitled to take, in his electroniccredit ledger, the amount of cenvat creditcarried forward in the return relating to theperiod ending with the day immediatelypreceding the appointed day, furnished, byhim under the earlier law in such manner asmay be prescribed:

PROVIDED that the registered taxableperson shall not be allowed to take creditunless the said amount is admissible asinput tax credit under this Act.

(1) A registered taxable person, otherthan a person opting to pay tax undersection 9, shall be entitled to take, inhis electronic credit ledger, credit ofthe amount of Value Added Tax [andEntry Tax] carried forward in the areturn relating to the period endingwith the day immediately precedingthe appointed day, furnished, by himunder the earlier law, not later thanninety days after the said day, in suchmanner as may be prescribed:

PROVIDED that the registered taxableperson shall not be allowed to takecredit unless the said amount isadmissible as input tax credit underthis Act:

PROVIDED FURTHER that so much ofthe said credit as is attributable to anyclaim related to section 3, sub-section(3) of section 5, section 6 or section6A of the Central Sales Tax Act, 1956(74 of 1956) that is not substantiatedin the manner, and within the period,prescribed in rule 12 of the CentralSales Tax (Registration and Turnover)Rules, 1957 shall not be eligible to becredited to the electronic credit

Sec. 167. Amount of CENVAT credit

carried forward in a return to be allowed

as input tax credit.

(CGST Law)

8

ledger:PROVIDED ALSO that anamount equivalent to the creditspecified in the second proviso shallbe refunded under the earlier laww h e n t h e s a i d c l a i m s a r esubstant ia ted in the mannerprescribed in rule 12 of the CentralSales Tax (Registration and Turnover)Rules, 1957.

(2) The amount of credit under the secondproviso to sub-section (1) shall becalculated in such manner as may beprescribed.

Let’s try to understand the same now,

• Firstly I would discuss provisionsrelating to transfer of CENVAT Credit toGST Portal (Electronic Credit Ledger)post migration under CGST Law

• We can see the flow in which creditcan be transferred from old regime tonew GST regime on the appointed day.Points to consider while transferringcredit to GST.

Credit transfer process will start postmigration to GST.

Process would be manual.

Only credit shown in last return wouldbe transferred, so balance of credit inbooks or RG or other records wouldnot be of any use.

Credit can be transferred only afterfilling return under old law. (Careshould be taken in such last return thaton credit remains Unavailed)

Those who want advantage ofComposition Levy under Section 9cannot transfer the credit.

Such transferred credit should also be

(SGST Law)

Author’s Comment:-

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eligible under GST regime.

Now, let’s see provisions under SGST Law

• Secondly I would discussprovisions relating to transfer ofVAT and Entry Tax Credit to GSTPor tal (Electronic CreditLedger) post migration underSGST Law

• We can see the flow in whichcredit can be transferred fromold regime to new GST regimeon the appointed day. Points toconsider while transferring credit to GST.

Credit transfer process will start post migration to GST.

Process would be manual.

Only credit shown in last return would be transferred, so balance of credit in books orRG or other records would not be of any use.

Credit can be transferred only after filling return under old law. (Care should be taken insuch last return that on credit remains Unavailed)

Those who want advantage of Composition Levy under Section 9 cannot transfer thecredit.

Such transferred credit should also be eligible under GST regime.

In addition to above points, there are some other key points which I think would requirefurther special attention

One of the primary condition is return has to be filed within 90 days after the said day,such condition is not there in CGST Law. So if someone fails to file VAT return within 90days he would not be able to transfer the credit of VAT or Entry Tax.

Another very important second proviso inserted to the Section 167 (1) – SGST Law inrevised model law, which is relating to CST Claims. It says that so far as any claimrelating to Form C, F, I, H, E-I, E-II or any such other form is not substantiated i.e. notconfirmed, credit as is attributable shall not be able to be credited to the electroniccredit ledger.

For example, if Mr. A of Gujarat has sold goods worth Rs. 1,00,000/- to Mr. B ofMaharashtra and Mr. B has confirmed that he will provide Form C, so as per currentprovisions under CST, Mr. A will charge CST @ 2%, now if in future Mr. B will not beable to provide Form C, then Mr. A would be required to pay CST @ 5%, Now onappointed day for whatever number of transaction, for which such forms are notrealized from buyer then such transaction would be claim not substantiated and suchperson would not be able to transfer such amount of VAT credit to electronic creditledger, as attributable to such transactions for which still Forms are yet to receive.

Now, after keeping restriction on such non substantiated transactions letter on if foundthat claims are substantiated in the manner prescribed in rule 12 of the Central Salestax Rules, 1957 i.e. all the required forms have been duly received, then amountequivalent to the credit which earlier was not allowed to be get transferred in electroniccredit ledger, shall be refunded.

For example, on appointed day M/s. ASM Ltd of Vadodara has vat credit of Rs.1,00,000/- as closing credit balance in return relating to the period ending with the day

Author’s Comment:-

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9

immediately preceding the appointed day but in the same period M/s. ASM Ltd hadalso sold goods worth Rs. 10,00,000/- (excluding tax) to M/s. KAP Ltd of Mumbaiagainst Form C by charging 2% CST but still Form C is yet to receive from KAP Ltd.

Now, in above example since Form C is yet to receive from KAP Ltd, amount of VATCredit to the extent of Rs. 30,000 {Rs. 10,00,000 X 3% (5% - 2%)} to be treated asclaim not substantiated the only credit of Rs. 70,000 ( Rs.1,00,000 – Rs. 30,000 )would be transferred to electronic credit ledger. If letter on M/s. KAP Ltd provides FromC to M/s. ASM Ltd then M/s. ASM Ltd need to file refund claim under CST to get Rs.30,000 back from the authorities.

This probably is the reason to keep time limit of 90 days for filling of VAT return fortransfer of VAT credit to electronic credit ledger.

So, what we can conclude out of this, in my opinion on the day for transfer of credit I shouldbe ready with any one of following two

1. All the necessary form to substantiate claims under CST OR

2. Working of total reversal of credit to be made to the extend such claims notsubstantiated.

For any Further Clarification, Kindly contact author : siddharth@caasm.co.in

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Conclusion:

PRADHAN MANTRI GARIB KALYAN YOJANA, 2016

Introduction

Scope of the Scheme

Tax, surcharge, penalty & deposit under the Scheme

1. The Taxation Laws (Second Amendment) Act, 2016 has been enacted by Parliamenton15.12.2016. The said Act has inter alia amended the provisions of Finance Act, 2016 andinserted a new Chapter on, ‘The Taxation and Investment Regime for Pradhan Mantri GaribKalyan Yojana, 2016 (hereinafter ‘the Scheme’) in the Finance Act, 2016.

2. The Scheme provides an opportunity to persons having undisclosed income in the form ofcash or deposit in an account maintained with a specified entity (which includes banks,post office etc.) to declare such income and pay tax, surcharge and penalty totaling in allto 49.9 per cent. of such declared income. Besides, the Scheme provides that amandatory deposit of not less than 25% of such income shall be made in the PradhanMantri Garib Kalyan Deposit Scheme, 2016(hereinafter ‘the PMGKY Deposit Scheme’)which has separately been notified by the Department of Economic Affairs. The Schemehas commenced on 17.12.2016 and shall remain open for declarations/deposit upto31.03.2017.

3. A declaration under the aforesaid Scheme may be made in respect of any income in theform of cash or deposit in an account maintained by the person with a specified entity,chargeable to tax under the Income-tax Act for any assessment year commencing on orbefore the 1st day of April, 2017. No deduction in respect of any expenditure or allowance2 or set-off of any loss shall be allowed against the income in respect of which a validdeclaration is made under the Scheme.

4. The person making a declaration under the Scheme would be liable to pay tax at the rate ofthirty per cent. of the undisclosed income as increased by surcharge to be called thePradhan Mantri Garib Kalyan Cess calculated at the rate of thirty-three per cent. of suchtax. In addition, penalty at the rate of ten per cent. of the undisclosed income shall bepayable.

The declarant shall also be required to deposit an amount not less than twenty-five percent. of the undisclosed income in the PMGKY Deposit Scheme. The deposit shall bear nointerest and the amount deposited shall have a lock-in period of four years.

Time limits for declaration and makingpayment

Form for declaration

Filing of declaration

Declaration not eligible in certain cases

5. A declaration under the Scheme can bemade anytime on or after 17thDecember, 2016 but on or before 31stMarch, 2017. The tax, surcharge andpenalty payable under the Scheme anddeposit to be made in the DepositScheme, shall be paid/made beforefiling of declaration under the Scheme.The declaration shall be accompaniedwith proof of payment made in respectof tax, surcharge and penalty payableunder the Scheme and proof of depositmade in the PMGKY Deposit Scheme.

6. A declaration under the Scheme inForm-1 as prescribed in the Rules maybe made at any time on or before31.03.2017. After such declaration hasbeen furnished, the notified PrincipalCIT/ CIT will issue an acknowledgmentin Form-2 to the declarant within 30days from the end of the month in whichthe declaration under Form-1 is made.

7. A declaration under the Scheme can befiled:

(I) Electronical ly under digitals i g n a t u r e w i t h C I T ( C P C )Bengaluru or jur isdict ionalPrincipal CIT/CIT notified undersection 120 of the Income-tax Act,1961.

(ii) Electronically through ElectronicVerification Code (EVC) or in printform with jurisdictional PrincipalCIT /CIT notified under section 120of the Income-tax Act, 1961.

8. The provisions of this Scheme shall notapply—

(a) in relation to any person in respect ofwhom an order of detention has beenmade under the Conservation ofForeign Exchange and Prevention ofSmuggling Activities Act, 1974 subjectto the conditions specified under theScheme.

(b) in relation to prosecution for anyoffence punishable under Chapter IX orChapter XVII of the Indian Penal Code,the Narcotic Drugs and Psychotropic

10

Important Due Dates for January, 2017 CA. Abhijit J. Kotecha

DATES COMPLIANCE PERIOD

06-Jan-17 Excise Duty E-Payment (for NON SSI & SSI) Dec.'16

Service Tax E-payment - Companies, Co.op.societies, Trust etc.

Service Tax E-payment - Individual, Proprietor / Partnership Firm / LLP Oct.'16 - Dec.'16

07-Jan-17 TDS payment / E-payment Dec.'16

10-Jan-17 Excise Returns - (Monthly Return by Large Units / Return by EOU / Monthly return of receipt &

consumption of each of Principal Inputs) - ER-1 / ER-2 / ER-6

Excise Returns - (Assessees availing SSI concession / Assessees paying 1% / 2% excise duty and not

manufacturing any other goods) - ER - 3 / ER - 8

14-Jan-17 VAT / CST E-return - Monthly / Quarterly Nov. '16

15-Jan-17 Excise Returns - (Quarterly return by first and second stage Registered Dealers) Oct.'16 - Dec.'16

Payment of Professional Tax / PF Payment Dec.' 16

Corporate Governance Report - filing with Stock Exchange Oct.'16 - Dec.'16

21-Jan-17 Shareholding pattern - filing with Stock Exchange Oct.'16 - Dec.'16

ESIC Payment Dec.'16

22-Jan-17 VAT / CST payment / E-payment - Quarterly Cases / Lumpsum Cases Oct.'16 - Dec.'16

VAT / CST payment / E-payment - Monthly Cases / Lumpsum Cases Dec.'16

25-Jan-17 PF Return (Monthly) Dec.' 16

30-Jan-17 TDS (for other than Salary cases) / TCS Certificate issuance Oct.'16 - Dec.'16

TDS E-payment cum statement U/s 194IA Dec.'16

Security Reconcilation Audit for Listed Companies (Filing with Stock Exchange) Oct.'16 - Dec.'16

Uploading VAT Audit Report Fin. Yr. : 15-16

31-Jan-17 Completion of Migration from VAT / Excise / Service Tax... To... GST

TDS / TCS Return Oct.'16 - Dec.'16

Dec.'16

Oct.'16 - Dec.'16

Substances Act, 1985, the UnlawfulActivities (Prevention) Act, 1967, thePrevention of Corruption Act, 1988, theProhibition of Benami Proper tyTransactions Act, 1988 and thePrevention of Money-Laundering Act,2002;

(c) to any person notified under section 3 ofthe Special Court (Trial of OffencesRelating to Transactions in Securities)Act, 1992;

(d) in relation to any undisclosed foreignincome and asset which is chargeableto tax under the Black Money(Undisclosed Foreign Income andAssets) and Imposition of Tax Act,2015.

9. A declaration shall be void and shall bedeemed never to have been madewhere a declaration has been made by

Circumstances where declaration shall beinvalid

misrepresentation or suppression of facts or without payment of tax and surcharge orpenalty or without depositing the requisite amount in the PMGKY Deposit Scheme, and insuch cases all the provisions of the Income-tax Act, including penalties and prosecutions,shall apply accordingly.

10. Any tax, surcharge or penalty paid under the Scheme shall not be refundable under anycircumstances.

11. Where a valid declaration as detailed above has been made, the following consequenceswill follow:

(a) The amount of undisclosed income declared shall not be included in the total income ofthe declarant under the Income-tax Act for any assessment year;

(b) A declarant under this Scheme shall not be entitled, in respect of undisclosed income orany amount of tax and surcharge paid thereon, to re-open any assessment orreassessment made under the Income-tax Act or the Wealth-tax Act, 1957, or to claim anyset-off or relief in any appeal, reference or other proceeding in relation to any suchassessment or reassessment

(c) The contents of the declaration shall not be admissible in evidence against the declarantfor the purpose of any proceeding under any Act other than the Acts referred in Para- 8above.

Tax, etc., not refundable

Effect of valid declaration

11

Public Program on “How to use

E- Wallet” on 17.12.2016

CA. Puneet Jain

BRANCH EVENTS

Memory Lane

Public Program on “Effects of Demonetization” Jointly

organises with The M.S. Uni., Baroda on 22 12 2016Tax Clinic on 22.12.2016

CA. Manish G Shah & CA. Narendra Hindocha

Training workshop Jointly organized by Baroda Branch of WIRC of ICAI & Vadodara Municipal Corporation (VMC) on 20.12.2016

CA. Amit C Shah CA. Dhruvank ParikhCA. Nirav ShahCA. Sanjay JoshiDr. Jigishaben Sheth

Public Program on GST Unplugged jointly Organises withThe M.S. University, Baroda on 23.12.2016

Lecture meeting on Indian Economy Vs. World ChangingOrders on 24.12.2016

CA. Ankit Shah

Awareness Program on Pradhan Mantri Garib Kalyan Yojana 2016(PMGKY)jointly with Central Gujarat Chamber of Tax Consultants (CGCTC) on 29.12.2016

Lecture Meeting on “Communication for desired response(Social Media)” jointly with Baroda CPE Study Circle on 31.12.2016

CA. Animesh Bhatt

CA. Vinod Pahilwani

STU

DY

CIR

CLE Office Automation 09.12.2016

CA. Amar Shah

Recent Judicial Pronouncements on Capital Gain and others Underthe Income Tax Act on 20.12.2016

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Workshop on GST

16.12.2016 18.12.2016

CA. Varun Fitter Shri M. K. Kedia Mr. Sanjay Saraswat

23.12.2016 25.12.2016

CA. Dhruvank Parikh CA. Anirudh Sonpal

30-31.12.2016

CA. Abhay Desai