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Arjuna: Dear Krishna, After Laxmipujan, on Padva, New Year is starting. Many new business ventures and activities are inaugurated on this auspicious occasion. In Diwali festival this day have a great importance. Krishna, please explain, for starting new activity or business, which tax regulations are to be followed?

Lord Krishna: Wow, Arjuna, on the eve of Diwali, all are happy and joyful. For starting new business ventures Padva is one of the best day. Listen carefully, for starting new business various registrations are required under different Tax laws. Further while starting new business, take care that the rules and regulations are properly followed; otherwise one may suffer from financial penalties. Now listen, some tax regulations which are to be followed:

1. First of all, one should decide the constitution of the business, for e.g. Proprietorship, Partnership, LLP, Company etc. If one has to start Partnership Firm, then will have to take registered Partnership Deed according to Indian Partnership Act. To Start Company or LLP, one has to get registered under Companies Act. Further now, as per new Companies Act, one can also start “One Man Company.” Which is a new concept and helpful to individuals.

2. Next Step is “Shop Act License”. After starting new business within a period of 30 days, one will have to take “Shop Act License”. While obtaining registration accurate information such as name of the business, place, type, etc. should be given.   

3. As per Income Tax Act every tax payer is required to take “PAN” (Permanent Account Number). PAN of Individual, Partnership Firm, Partners, Company, Directors, etc. is necessary for starting new business. After obtaining PAN, one can start banking transactions. Once PAN obtained, if business entity is required to deduct Tax Deduction at Source then “TAN” can be taken from Income Tax Department.

4. After getting PAN under Income Tax Act, “TIN” (Tax Identification Number) of Maharashtra Value Added Tax Act i.e. MVAT can be taken. If sales exceeded Rs. 5 Lakhs or goods of more than Rs. 1 Lakh imported or taxable sales or purchases made for more than Rs. 10,000, MVAT TIN is compulsory. Further Voluntary Registration can be taken by paying in Advance of Rs. 25,000/- and paying fees of Rs. 5,000/-. Further if purchase or sales is done from or to outside state, then registration under “Central Sales Tax” shall be obtained from Sales Tax Department.

5. If turnover of Service provided by an person exceeds Rs. 9 Lakh in a year, then registration under “Service Tax” is required to be obtained from Central Excise Department. Voluntary registration can be obtained.

6. If the turnover of manufacturing business exceeded Rs. 1.5 crore then, registration under “Excise Duty” is required to be obtained from Central Excise Dept. Voluntary registration can be obtained.

7. To Import goods from outside the country, registration under “Customs Duty” is required and same can be obtained from Central Excise and Customs Dept.

8. Now, new tax in lieu of Octroi i.e. “Local Body Tax” (LBT) registration will have to be taken, if the business is established within boundaries of 17 Municipal Corporation of Maharashtra State.

9. Further Registration under “Profession Tax” will have to be taken from The Sales Tax Department for oneself. Further registration under “Employee’s Profession Tax” may be taken, if deduction is to be made from employee’s salary.

10. Registration under “Provident Fund’ is required to be taken when numbers of employees are more than 20 in a business entity.

11. If business of hotel, food, etc. is starting then the registration will have to be taken under Food and Drug License.

Arjuna: Oh, Gopala, it seems for businessman, it is very difficult journey to start new business. However every citizen should follow the regulations.

Lord Krishna: While starting any activity, one has to work hard. Further if, in business, Tax laws are followed everyone will be benefitted. For being successful in the business leadership, patience, capital is required. Also note that bankers can finance new businesses, only after passing through various financial and legal compliances. In Diwali or on any good occasion “Shubh Labh” is written. These word itself covey that “Good deeds will results in profit”. Further on the occasion of this “Dipawali”, “One should keep flame of knowledge enlighten and be engaged in good deeds forever”.

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Category Income Tax, Other Articles by - CA Umesh Sharma 



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