Tax Connect (With GST) - 91st Issue

Knowledge Partner: The Bengal Chamber of Commerce & Industry 91 st Issue: 23 Oct 2016 – 29 Oct 2016 TAX CONNECT ADVISORY SERVICES LLP Kolkata: 1, Old Court House Cor
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o House_ 1 st Floor, R.No.-13 (North), Kolkata- 700001 Gujarat: Quarter no. 3/174, Gujarat Refinery Township, Jawaharnagar, Vadodara- 391320 Contact: +919331042424; +919 831594980; +913322625203 Email: tb.chatterjee@yahoo.co.in; cavivekjalan@gmail.com TAX CONNECT INCOME TAX CENTRAL EXCISE SERVICE TAX CUSTOMS STATE TAXES Page 2 Tax Connect: 91st Issue 23 Oct 2016 – 29 Oct 2016 EDITORIAL Friends, Last week, the Centre proposed to impose an additional levy in the form of cess over and above Goods and Service Tax on the luxury and demerit goods like big cars, aerated beverages, tobacco products. This left the third meeting of GST Council on 19 October with undecided tax rate structure. The Cess is proposed as a means to finance the compensation it will have to pay to the States. The Council has decided to meet again in the first week of November where the tax structure is expected to be finalized after consensus is reached on funding the compensation. On the other hand, the Assam Government has already started with the process of collection of data in order to facilitate communication of GST registration number to the existing registered entities. The same has been done vide CIRCULAR No. 9/2016 on 13 October 2016 wherein detailed steps have been provided to be followed by a taxpayer for furnishing their details. Now, an update about the present taxes - In Central Excise, it was held by Hon’ble CESTAT of Mumbai that cenvat credit cannot be denied to the assessee merely, on the ground that the dealer was non- existent at the time of investigation. In Customs, three additional stations/routes have been specified for import and export of goods by land or inland water ways. Also, foreign currency exchange rates have been revised. In Income-Tax , the Government has specified that electronic mode is a valid mode of communication for issuance of Form-2 under IDS. Further, it has been clarified that assessee cannot file declaration under IDS for search and seizure conducted after 01.06.2016 but before making of declaration In Service Tax, it has been held by CESTAT New Delhi that if there is mutuality of interest between the Association and its Members, then any service to members by the Association is not a taxable service as foundational facts of existence of two legal entities (Service provider and service recipient) in such transaction is missing. The abovementioned notifications/circular and case laws have been detailed further in the bulletin. Just to reiterate that we remain available over a telecom or e-mail. Truly Yours Timir Baran Chatterjee M.Com, FCS, MBA (International Business)-IIFT, ACMA Vivek Jalan FCA, CIDT (ICAI), B. Com Page 3 Tax Connect: 91st Issue 23 Oct 2016 – 29 Oct 2016 SYNOPSIS S. NO. TOPICS PAGE NO. 1] GODDS & SERVICE TAX 4 Analysis GST IMPACT ON HOTELS AND RESTAURANTS 2] TAX CALENDAR 5 a) SERVICE TAX 6 Case Laws If there is mutuality of interest between the Association and its Members, then any service to members by the Association is not a taxable service as foundational facts of existence of two legal entities (Service provider and service recipient) in such transaction is missing. b) CENTRAL EXCISE 7 Case Laws The activity of packing refined edible oil received in tankers into small containe rs cannot be treated as manufacturing activity. Case Laws The cenvat credit cannot be denied to the assessee merely, on the ground that at the time of investigation, the dealer was non-existent. c) CUSTOMS 8 Notification/Circular Three additional stations/routes for import and export of goods by land or inl and water ways Notification/Circular Fixation of TV of edible oil, brass, poppy seed, areca nut, gold and sliver Notification/Circular Revision of exchange rate of foreign currencies into Rupee & vice versa d) INCOME TAX 9 Notification/Circular Reconstruction or splitting up to be treated as demerger on fulfillment of specified conditions Notification/Circular Special provisions for tax on distributed income of domestic company for buy-b ack of shares Notification/Circular Electronic mode to be valid mode of communication for issuance of Form-2 und er IDS Notification/Circular Search and seizure conducted after 01.06.2016 but before making of declaration under IDS: Assessee cannot file declaration 4] STATE TAXES 10 Notification/Circular Assam: Communication of provisional GST registration number (GSTIN) , Increase in rate of entry tax on certain commodities Bihar: Substitution of Form CH-I and insertion of FORM RT-IA, RT-IIIB for the registered developer, who has opted to pay compounding tax Haryana: Exempted 'technetium 99m generators' used in Diagnosis of cancer from VAT 5] IN STANDS - GST: MODEL LAW 2016 & BUSINESS PROCESSES : A TECHNICAL COMMENTARY 11 6] BOOK EXCLUSIVELY ON WORKS CONTRACT ( SERVICE TAX AND VAT) 12 Page 4 Tax Connect: 91st Issue 23 Oct 2016 – 29 Oct 2016 GOODS & SERVICE TAX (GST) GST IMPACT ON HOTELS AND RESTAURANTS  In the current tax regime multiple taxes in the form of Service tax, VAT and luxury tax are levied on hospitality and restaurant industry.  In restaurants, the taxes and service charges (generally 10%) covers about one-third of our bill amount. There is double taxation in the form of VAT and Service Tax being levied on the same transaction.  Most of the restaurants also charges service charges which is generally 10% of the bill amount.  For example: Food bill 4000 Service charge 10% 400 Taxable value for service Tax (40%) 2400 Service Tax @14% 336 Swacch Bharat cess @ 0.5% 12 KKC @0.5% 12 VAT (12.5%-14.5%) 580 Total taxes and charges 1340 Effective tax rate 34%  The effective tax rate is even higher if there is alcohol consumption which is subject to higher VAT rates.  In hotels, rooms with tariff above Rs 1,000 attracts service tax at 60% of room tariff (8.7%) and luxury tax (8-12%).  GST which is expected to get capped at 18%-20% shall have neutral impact on the hotel sector as presently service tax payable by hotels is around 8.7% and luxury tax at around 8-12% (depending on the state and type of service). Restaurants have to pay service tax at around 5.6% and VAT at around 12%-14.5%. However, under GST regime, the uniformity of tax rates, better utilization of input credit, reduction in double taxation, and benefits to end user in terms of lower prices shall give a significant boost to the hospitality and tourism industry. For global competence, the tax rate must be maintained under 10% else, the industry shall continue to suffer due to high taxation. Page 5 Tax Connect: 91st Issue 23 Oct 2016 – 29 Oct 2016 TAX CALENDAR Due date COMPLIANCES FROM 23 rd Oct , 2016 to 29 th Oct, 2016 STATUTE 25th Oct, 2016 Filing of monthly/quarterly VAT return Delhi (Quarterly, if filed online) Jharkhand (Monthly) Issuance of WCT certificate West Bengal VAT Act (Monthly) Mizoram VAT Act (Monthly) 28th Oct, 2016 Deposit of VAT of previous month Arunachal Pradesh VAT Act Filing of monthly/quarterly/annual VAT return Arunachal Pradesh (Monthly, if annual turnover>Rs. 1 crore), Arunachal Pradesh (Quarterly, if annual turnover