DVAT further extended Due date for return filing of Quarter ended 31.12.16

On 17.03.17 DVAT date has been further extended to 31.03.2017 for filing of DVAT return in DVAT-16, DVAT-17 & DVAT-48 for Quarter ended on 31.12.2016 vide notification no.28 dated 17.03.17
On 08.03.17 vide Circular No.26 again DVAT  last date for filing of  Return in Form 16, 17 & 48 for Q-3, 2016-17 has been further extended to 17.03.2017
Last date to file DVAT-16, DVAT-17 & DVAT-48 for Q3 of 2016-17 further extended to 8th March,2017.
DVAT has further extended the due date for online filing of return in Form DVAT-16, DVAT-17 and DVAT-48 alongwith enclosures  for 3rd quarter i.e Quarter ended on 31st Dec,2016 to 28th Feb,2017

Relaxation in TCS u/s 206C to Jewellers where cash sale of Jewellery Exceeding Rs 5, 00,000

Prior to Finance Act, 2017, Jewellers were required to collect TCS as per provisions of Section 206C where Cash sale of jewellery exceeds Rs. 5, 00,000 & for Bullion Rs. 2, 00,000.

Finance Act 2017.

I. Insertion of Section 269ST:  Finance Act, 2017 has inserted Section 269ST, which prohibits cash transactions for sale of goods or services for an amount exceeding Rs. 3, 00,000 w.r.t. any person in   a single day or transaction. 

II. Penalty for Contravention: A penalty of 100% of the amount of  sale shall be levied if proceeds of such sale of goods/services have been received in cash & exceeds Rs. 3,00,000 as per Section 271DA inserted vide Finance Act,2017.

III. Relief for Jewellers wrt. sale of jewellery only: Keeping in view the abovementioned sections, Section 206C has been amended accordingly jewellers will no longer be required to collect TCS on sale of jewellery where sale consideration exceeds Rs.5, 00,000. w.e.f. April 1,2017.

IV. No Relief in case of sale of Bullion: However, Jewellers are still required to collect TCS in case of sale of bullion where sale consideration exceeds Rs. 2, 00,000 as per the provisions of Section 206C since Finance Act 2017 has made amendment only in respect of "Sale of Jewellery" not "Sale of Bullion" by jewellers.

Cntributed by Tanveer Alam CA Finalist at Sandeep Ahuja & co 

Guidance for filing response to Cash Deposit Compliance queries for deposit during Demonetization Period- Part –II

The Income tax department has sent mails to all assesses where cash deposit compliance was required to be submitted as per information sent by banks to the income tax department. Now date for such submission has been extended to 15.02.2017. In continuation to our earlier post Now we are trying to answer other queries received and FAQs issued by the department.

·         Modification of Cash Deposit Amount

ü  If the cash deposit amount displayed is not correct mention the correct amount under A.5. Such cases may be sent to the information source for confirmation.

ü  The cash deposit includes both specified bank notes as well as other currency ( Old and New)  irrespective of the denomination.

ü  Bank account pertaining  is reported more than once on efiling portal the details for one account may be submitted and an amount of zero can be mentioned in the amount column of the repeated account and the remarks “duplicate bank account” may be entered in the remark column.

·         Explanations of Source of Cash Deposits

ü  If cash is from more than one category, the source of cash may be assigned in sequential manner as follows:

a) Cash withdrawn from bank account (Refer B.3)

b) Cash received from identifiable persons (with PAN) (Refer B.4)

c) Cash received from identifiable persons (without PAN) (Refer B.5)

d) Cash received from un-identifiable persons (Refer B.6)

e) Cash out of receipts exempt from tax (Refer B.2)

f) Cash out of earlier income or savings (Refer B.1)

g) Cash Disclosed/To be disclosed under PMGKY (Refer B.7)

Adopting other sequence may result in case being selected for verification based on risk criteria.

ü  Cash deposit is out of cash in hand as on 8th November 2016 the source of cash may be assigned under sequential manner as follows:

 a) Cash withdrawn from bank (B.3)

b) Cash received from identifiable persons (with PAN) (B.4)

c) Cash received from identifiable persons (without PAN) (B.5)

d) Cash received from un-identifiable persons (B.6)

e) Cash out of receipts exempt from tax (B.2)

f) Cash out of earlier income or savings (B.1)

g) Cash Disclosed/To be disclosed under PMGKY (B.7)

Adopting other sequence may result in case being selected for verification based on risk criteria.

ü  Cash out of earlier income or savings

a)                         For an individual having no business income, cash out of earlier income or savings means cash out of savings as on 8th November 2016.

b)                         For Business Income the cash balance as on 31.03.16 can be taken as cash out of earlier income or savings.

ü  Cash deposited out of withdrawal from bank accounts the dates and other details for withdrawal(s) from other bank accounts can be specified in the remarks column of B.3.

ü  Cash out of receipts exempt from tax is to be used for taxpayers not involved in business and cash deposited out of exempt income e.g. agricultural income.

ü  Cash deposited by entities having exempt income e.g. charitable trust can follow the sequential order for the source of cash deposits  as given hereunder:

a)      Cash withdrawn from bank account (B.3)

b)      Cash received from identifiable persons (with PAN) (B.4)

c)       Cash received from identifiable persons (without PAN) (B.5)

d)      Cash received from un-identifiable persons (B.6)

e)      Cash out of earlier income or savings (Refer B.1) – closing cash balance as on 31st March 2016

Adopting other sequence may result in case being selected for verification based on risk criteria.

ü  Cash deposited out of cash sales of business the cash may be assigned under various categories in sequential manner as follows:

a)      Cash received from identifiable persons (with PAN) (B.4)

b)      Cash received from identifiable persons (without PAN) (B.5)

c)       Cash received from un-identifiable persons (B.6)

d)      Cash out of earlier income or savings (B.1) - closing cash balance as on 31st March 2016.

 The taxpayer is advised to provide the details of identifiable person (with PAN) to reduce the chances of the case being selected for verification. Adopting other sequence may result in case being selected for verification based on risk criteria.

ü  Cash Deposit by Professionals e.g doctors having cash receipts on daily basis the cash may be assigned under various categories in sequential manner as follows

a) Cash received from identifiable persons (with PAN) (B.4)

b) Cash received from identifiable persons (without PAN) (B.5)

c) Cash received from un-identifiable persons (B.6)

 The taxpayer is advised to provide the details of identifiable person (with PAN) to reduce the chances of the case being selected for verification. In case of cash receipts of Rs. 20,000/- or more from a single person, it is expected that the details are provided either in B.4 or B.5, as the case may be.

ü  Cash from tuition fees, tailoring etc  being professional or business income in nature is to be reported as ‘cash sales’ under ‘Nature of Transaction’ and same sequence of B.4, B.5 or B.6 is to be followed.

ü  Cash deposited out of gifts received should necessarily be filled in row B.4, B.5 or B.6 in the response option form. The taxpayer is advised to provide the details of identifiable person (with PAN) to reduce the chances of the case being selected for verification. In case of cash receipts of Rs. 20,000/- or more from a single person, the details are to be provided either in B.4 or B.5.

ü  Cash salary/ advance salary  received then the name and respective details of the employer from whom salary/advance salary in cash has been received may be provided in B.4 or B.5.

ü  Cash deposited out of cash declared under Income Declaration Scheme, 2016 the cash deposited should be entered under “Cash out of earlier income or savings” (B.1) and in remarks column the particulars of such declaration filed should be mentioned.

·         Uploading data using CSV

ü  The details of identifiable persons (with or without PAN) from whom cash has been received can be provided on the online portal in a CSV format file.

ü  All the mandatory are to be provided and no blank rows in the CSV file can be uploaded.

·         Revision of Response

ü  After submission if someone wants to revise / to modify or change response or explanation provided can re-submit the response.

·         Verification of Response

ü  All cases will not be selected for verification.

ü  If selected for verification then may provide additional information.

ü  The cases selected for verification will be communicated on E mail for further information.

ü  The nature of business will be considered while assessing the response.

Relaxation from deduction of tax at higher rate under section 206AA

Section 206(7)(ii) & Rule 37BB & 37BC: No Mandatory requirement of PAN for Non Residents.

Finance Act 2016 has liberalized the provisions of Section 206AA by inserting provisions of Section 206(7)(ii) which provides that provisions of Section 206AA shall not apply to Non residents  subject to such conditions as may be prescribed. Such amendment was made with the intension of  simplifying the taxation for NRIs,  Foreign Companies  and Foreign Nationals.

This is a very welcome provision and Rule 37BC being effective retrospectively has relieved the assesses making payments to Non residents for deduction of Tax at Source at a lower rate as specified in DTAA  and not as per overriding section 206AA where rate of withholding tax is @20% in case of no PAN.

Section 206AA shall apply notwithstanding anything contained in other provisions of the Act any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

Non Applicability of Certificates u/s 197 for non deduction or deduction of TDS at a lower rate:

Form 15G/15H for lower deduction/ NIL As per Section 197, no Certificate [15G/15H] shall be granted unless the application form for such Certificate u/s 197  contains the PAN of the applicant.

Therefore, in the absence of PAN  no Form 15G or 15H u/s 194 can be issued to a deductee

Invalid PAN to be treated as if no PAN has been provided by the Deductee & provisions of Section 206AA shall be applicable.

Provisions Before 24th June 2016:

Before 24 June 2016, the provisions of Section 206AA apply uniformly in respect of all the persons whether resident or non resident who were to receive income on which Tax is deductible at source.

In case of failure to furnish PAN by such deductees,  a higher rate of tax upto 20% was deducted as described above.

Confusion between Tax rate as per DTAA & Section 206AA

Section 206AA covered both Residents as well as non residents for tax deduction at source. However, No clarification was provided as to whether Rate of Tax as per DTAA or Tax rate as per Section 206AA were to be applicable for payments to Non Residents. 

Further, Mandatory requirement of obtaining PAN in India drew negative response from International Business Community since Non residents were also required to Obtain Pan in India.

Section 206AA as amended by CBDT Notification No. 53/2016 read with rule 37BC inserted w.e.f. 24 June 2016.

For the purpose of eliminating above mentioned anamolies , providing necessary clarifications & Pursuant to recommendation of first report of Income Tax simplification Committee, Finance Act 2016 has liberalized the provisions of Section 206AA by inserting provisions of Section 206(7)(ii) which provides that provisions of Section 206AA shall not apply to Non residents  subject to such conditions as may be prescribed.

The provision of Section 206AA shall not apply to a Non resident, not being a company, or to foreign company in respect of :

Section 206(7)(ii) provides that provisions of Section 206AA shall not apply to payments to Non Residents which is not a Company or Foreign Company in respect of:

 (i)  Payment of interest on Long Term Bonds as referred in Section 194LC:  There is no requirement to provide PAN No. where income is taxable under section 194LC.

(ii)  Any other payments subject to such conditions as may be prescribed:  For this purpose Rule 37BC has been inserted.

Rule 37BC  inserted w.e.f. 24th June 2016.

As per this rule, Provisions of Section 206AA shall not be apply to Non Residents except "Company" or "Foreign Company". Payments on which Section 206AA shall not be applicable has also been defined as follows:

a)         Payment in the nature of Interest,

b)         Payment in the nature of Royalty

c)         Payment in the nature of Technical services.

d)        Payment for transfer of Capital asset.

Apart from above payments, Section 206AA shall continue to apply to other type of payments such as Salary, Pension, Business profits, director remuneration, fees of sports persons etc.

Documentary Requirements under Rule 37BC.

However, following information needs to be submitted by non Resident deductee for the purpose of claiming the benefit bestowed upon Non residents by Rule 31BC:

a)         Tax Residency Certificate of Non Resident in any country outside India.

b)        Tax Identification No. of the country in which such person is the resident or any other Unique identification no. by which such person is identified by the Government of that country.

c)         Name ,Email , Contact No. & Address of the Nonresident in the territory outside India.

Section 206AA shall continue to apply in case of failure to furnish the abovementioned information by the Non resident deductee.

Clarification: Benefit of Rule 37BC is available only in case where Non Resident does not have a PAN. However, If the non resident having a valid PAN but does not furnish the same, then benefit of Rule 37BC shall not be available.  

Retrospective Applicability of Rule 37BC:

Rectification of TDS Demands relating to lower deduction TDS due to non availability of PAN:

Rule 37BC has been made applicable with retrospective effect. Accordingly, Deductors whose TDS demands have been outstanding in respect of Deduction of TDS at a lower rate prior to 24 June 2016, may now get their demands rectified by claiming the benefit of Rule 37BC subject to fulfillment of conditions as mentioned above.

PAN still required for filing return:

However, the current position is that while PAN is not required at tax withholding stage (i.e. Section 206AA shall not apply even if Non Resident does not have PAN) but Return Filing requirement for  Non Residents still exists & Income Tax Return cannot be filed without PAN.

Thus, while PAN is not required at tax withholding stage, PAN is still required for filing Income Tax Return by Non Residents & Failure to file return attracts penalty u/s 271F & prosecution u/s 266CC.

ITR Filing by Non Residents Redundant: Normally TDS deducted is the final tax payable by Non Residents & information regarding payments to no residents is transmitted on a real time basis to Income Tax Deptt.on real time basis through compliance u/s 195(6) & Rule 33BB 915CA/CB) & therefore Return filing by Non residents does not serve any real purpose for the Revenue authorities.

The real benefit of Rule 37BC shall only  be available to Non Residents only if Government relieves the Non residents from Filing of Income Tax Return in cases where payer has deducted TDS & has also reported the same in Form 3CA & 3CB. 

Contributed by : Tanveer Alam CA Finalist at Sandeep Ahuja & co

Service tax applicability and amendments on Tour and Travel operators - Release II

Applicability of Service Tax on Tour & Travel Operator

Who is a “Tour Operator” under the Service Tax Laws?

Tour operator means any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours.

What is the value of taxable service provided by a tour operator?

The value of taxable service provided by a tour operator to a client is the gross amount charged by such operator from the client for services in relation to a tour and includes the charges for any accommodation, food or any other facilities provided in relation to such tour.

I. Amendment in services of a tour operator:

Prior to 12 January 2017, tour operators, tours Operators have an option to discharge his Service tax liability as follows:

Particulars of Service	Abatement Rate	Taxable Portion	Conditions
Service of solely booking accommodation for tourist	90%	10%	1. No CENVAT credit on inputs  has been claimed 2. Bill should indicate the service charges as well as accommodation charges.
Package tour Services(planning &  arranging tours)	70%	30%
Services Other Than above two mentioned above.	70%	30%

However, w.e.f. 12 Jan. 2017, Ministry of Finance vide Notification No.4/2017-ST, tour operator services shall be allowed an abatement of 40% & Service Tax shall be payable on the balance 60%. Details are as follows:

Particulars of  Services	Abatement Rate	Taxable Portion	Conditions:
Tour Operator Services	40%	60%	1. No CENVAT Credit on input services have been availed. 2.   The invoice issued for must indicate that it is inclusive of accommodation charges as well as transportation charges required for such tour.

Who is an Air Travel Agent? Are his services chargeable to Service Tax?

An “Air Travel Agent” is any person engaged in providing any service connected with the booking of passage for travel by air.

Any service provided or to be provided to any person, by an air travel agent in relation to booking of passage for travel by air is a taxable service.

Difference between Tour Operator & Air Travel Agent.

Tour operator plans & arranges the tour but travel agent only books the tickets & gets commission & brokerage for selling those tickets. The words plans & arranges are important & differentiates between Tour operator & Travel Agent.

II. Air Travel Agents:

(A) Change in Rate of Tax under compounding scheme for Air Travel Agent.

Earlier the Air travel Agents were liable to discharge their ST liability as follows:

S. No.	Description of Services	Prior to Amendment	Amended vide as per Notification No. 5/2015-ST Dated March 1, 2015.
1	Domestic Bookings	0.6% of Domestic Booking + SBC & KKC	0.7% of Domestic Booking + SBC & KKC
2	International Bookings	1.2% of International Booking + SBC & KKC	1.4% of International Bookings+ SBC & KKC

     (B)    Abatement system applicable to Air Travel Agents.

Prior to 1st April 2016, air travel agents were liable to discharge their Service Tax liability as follows:

Description of services	Abatement Allowed	Taxable Value	Condition for Abatement
Transportation of passenger by Air, with or without accompanied belongings	40%	60%	1.No CENVAT Credit has not been availed

However, as per Notification No. 8/2015-ST dated 1st April 2015; classification of services as well as rate of abatement has been amended.

Description of services	Abatement Allowed	Taxable Value	Conditions for Abatement
Transportation of passenger by Air, with or without accompanied belongings: (i) Economy Class (ii) Other Than Economy Class			No CENVAT Credit of services used for providing taxable service has been has been availed.
	40%	60%
	60%	40%

Summarized & Amended Provisions of Service Tax relating to Tour Operators & Air Travel Agents.

The abovementioned amendments and notifications can be summarized as follows:

S. No.	Taxable Service	Abatement % Age	Taxable Value	Conditions	Statutory Reference
I. Tour Operators
a.	Services by a Tour Operator	40%	60%	1. No CENVAT Credit for input services & Capital goods have been claimed. 2. The bill issued for this purpose indicates that it is inclusive of all charges of accomodation as well as transportation charges required for such tour.	S. No. 1 of Notification No. 4/2017-Service Tax dated 12th January 2017.
II. Air Travel Agents
a.	Compounding Scheme	Option to pay service tax at flat rate* on ‘basic fare’ @ 0.7 % in case of domestic booking and 1.4% in case of international booking – plus SBC	NA	1. No restriction on availability of CENVAT Credit. ** Option, once exercised, will apply uniformly in respect of all the bookings of passage for travel by air made during the financial year.	* Notification No. 5/2015 dated 1st March 2015 (applicable)   Union Budget 2016. (applicable from 1st April 2016) Rule 6(7) of Service Tax Rules amended b y Notification No. 5/2015-ST  dated 1March,2015
b.	Normal Abatement Method	(i) Economy Class: 60% (ii)Other Than  Economy Class: 40%	40% 60%	1. No CENVAT Credit has been availed claimed.	S. No. 11(iii) Notification No. 8/2015 dated 1st March 2015
c.	Transportation of passenger with or without accompanied belongings by air embarking or terminating in a regional connectivity scheme airport	(iii) Transportation of passengers by Air embarking or terminating in a regional connectivity scheme airport.	10%	1. No CENVAT Credit has been availed claimed.	S. No.1 (a) Notification No. 38/2016-ST dated 30th Aug. 2016

** Option to claim CENVAT Credit: There is no explicit clarification as to whether an air travel agent providing air travel services can claim CENVAT Credit of input services availed for providing such services.

In our Opinion, it is upto Air Travel agent to decide whether to claim CENVAT Credit on input services or not, since, law is silent on this point.

Contributed by : Tanveer Alam ( CA Finalist) at Sandeep Ahuja & Co