Surcharge: The amount of Income-Tax computed as above, shall be increased by:
- Surcharge @ 10% of such Income-Tax if taxable income > Rs.50 Lacsupto Rs.1 Crore.
- Surcharge @ 15% of such Income-Tax if taxable income >Rs. 1 Crore.

Cess: “Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” has been proposed be discontinued. However, a new cess, by the name of “Health and Education Cess” has been proposed to be levied at the rate of four per cent on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such cess.

Rebate: The rebate under Section 87A being Rs. 2,500/- for the Individual resident assessee, whose Taxable Total Income does not exceed Rs. 3,50,000/- shall continue to be the same as was in financial year 2017-18.

1. Firms: Tax rate 30%. Cess @ 4%, Surcharge @ 12% if Taxable Income exceeds Rs. 1 Crore.

1. Domestic Company: Tax rate 30%. Cess @ 4% on tax.

Taxable Income	Surcharge
UptoRs. 1 crore	NIL
>Rs. 1 crore	7 per cent
Rs. 10 Crores or above	12 per cent

1. Foreign Company: Tax rate 40%. Cess @ 4% on tax

Taxable Income	Surcharge
UptoRs. 1 crore	NIL
>Rs. 1 crore	2 per cent
Rs. 10 Crores or above	5 per cent

Marginal Relief on Surcharge:
- In case of Individuals/HUF the amount payable as Income Tax and Surcharge on Total Income exceeding Rs 50 Lacs (or Rs. 1 Crore) shall not exceed the tax payable on Total Income ofRs. 50 Lacs (or Rs. 1 Crore) by more than the amount of Income that exceeds Rs. 50 Lacs (or Rs. 1 Crore). Similarly, in the case of certain companies, theamount payable as Income Tax and Surcharge on Total Income exceeding Rs 1 Crore (or Rs. 10 Crore) shall not exceed the tax payableon Total Income of exceeding Rs. 1 Crore (or Rs. 10 Crore) by more than the amount of Income that exceeds Rs. 1 Crore (or Rs. 10 Crore).

1. Tax Rates for Certain domestic Companies:

In case of domestic company, the rate of income-tax shall be 25 per cent (plus surcharge and cess) of the total income if the total turnover or gross receipts of the previous year 2016-17 does not exceed two hundred and fifty crore rupees.

Comments:

It is proposed to amend section 115BA wherein it is clarified that the provisions of section 115BA is restricted to the income from the business of manufacturing/ production/ research/distribution and other income which are taxed at scheduler rates shall continue to be so taxed.

As per the existing provisions of clause (12A) of Section 10, 40% of the maturity proceeds/pre maturity amount received by employee subscribers to the National Pension Scheme was exempt. In order to extend the exemption to non salaried individuals, amendment has been proposed in the said clause to bring parity between all subscribers. The said amendment shall take effect from 1st April 2019.

(Maturity corpus to the extent of 60% can be withdrawn as a lump sum on maturity at age 60, but if the subscriber exits from NPS before he turns 60, then only up to 20 percent of the corpus can be withdrawn.)

1. Deductions Under Chapter VI-A
It is proposed to increase the monetary limit for deductions in respect of health insurance premium and medical treatment under section 80D of the Act from Rs 30,000/- to Rs 50,000/- for senior citizen (60 years and above). In case of single premium health insurance policies having cover of more than one year, it is proposed that the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit.

It is proposed to increase the monetary limit for deduction to senior citizens for medical treatment of specified diseases under section 80DDB of the Act in the following manner:
- in case of very senior citizen (80 years and above)from Rs 80,000/- to Rs 1,00,000/-
- in case of senior citizen (60 years or more but below the age of 80 years)from Rs 60,000/- to Rs 1,00,000/-

It is proposed to insert a new section 80TTB so as to allow a deduction uptoRs 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases. It is also proposed to amend section 194A so as to raise the threshold for deduction of tax at source on interest income for senior citizens from Rs 10,000/- to Rs 50,000/-.

Interest on deposits includes deposits with

a banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act)

a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or

a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898,

Section 80AC is proposed to be amended which states that entire class of deductions under the heading “C.—Deductions in respect of certain incomes” contained in Chapter VIA onwards, shall not be allowed unless the return of income is filed by the due date specified U/s 139(1) of the Act.

1. Amendments proposed to encourage start-ups
In order to improve the effectiveness of the scheme for promoting start ups in India, it is proposed to make following changes in Section 80-IAC of the Act for the start ups:—

The benefit would also be available to start ups incorporated on or after the 1^st day of April 2019 but before the 1st day of April, 2021;

The requirement of the turnover not exceeding Rs 25 Crore would apply to seven previous years commencing from the date of incorporation;

The definition of eligible business has been expanded to provide that the benefit would be available if it is engaged in innovation, development or improvement of products or processes or services, or a scalable business model with a high potential of employment generation or wealth creation.

The amendment will take effect, from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years.

1. Amendments to promote Farm Producer Companies
It is proposed to extend benefit of 100% deduction U/s 80P to Farm Producer Companies (FPC) having a total turnover uptoRs 100 Crore, whose income may include-

the marketing of agricultural produce grown by its members, or
the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or
the processing of the agricultural produce of its members

It shall be applicable for a period of 5 years commencing from F.Y. 2018-19.

WIDENING AND DEEPENING OF TAX BASE

New regime for taxation of long term capital gains on listed equity shares and equity oriented mutual fund units
1. Under the existing provisions of Section 10(38), long term capital gains on transfer of equity share of a company or of a unit of an equity oriented fund and business trust is exempt from taxation, if the transaction of sale is liable to Securities Transaction Tax (STT).
2. Further an amendment to the said section was introduced by the Finance Act, 2017 w.e.f. 01.04.2018 to provide that exemption under this section shall be available on transfer of equity shares acquired on or after 1.10.2004 if such acquisition was subjected to STT, except on certain acquisitions made on or after 01.10.2004 where STT was not leviable, as may be notified by the Central Government in this regard (which have been notified vide CBDT Notification no. 43/2017 dated 5^th June, 2017)
3. In order to widen the tax base, it is now proposed to withdraw the said tax exemption on long term capital gains on transfer of equity share of a company or of a unit of an equity oriented fund or business trust made on or after 1^st April, 2018.
4. It is proposed to insert a new Section 112A to provide for tax payable on such long term capital gains subjected to STT and exceeding rupees one lac,on sale of equity share,unit of equity oriented mutual fund and unit of a business trust (except for transaction undertaken on a recognised stock exchange located in any International Financial Services Center on which the consideration is received or receivable in foreign currency). It has also been provided that the acquisition of such listed equity shares should also have been subjected to STT, except for certain acquisitions as the Central Government may notify.
5. The tax payable on such gains is proposed to be at ten per cent without indexation. No deduction under Chapter VIA or rebate under Section 87A shall be allowed on such gains. However, the benefit of exemption limit shall still be available to resident individuals or HUF where their total income includes such gains.
6. The cost of acquisition of such equity shares or units acquired before 1^st February, 2018 shall be higher of –

the actual cost of acquisition; and
the fair market value (i.e. in case of listed equity shares, the highest price as on 31^st January, 2018 or any day immediately preceding such date is the same was not traded on 31^st January, 2018 and in case of unit not listed on a recognised stock exchange, the NAV as on 31^st January, 2018) or their sale consideration, whichever is lower.

1. This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

Comments:

Witnessing a buoyant capital market, this amendment seeks to widen the tax base for the ensuing year while keeping the unrealised appreciation in value till 31^st January, 2018 untaxed.
The proposed amendment can be illustrated with an example as under:

Listed equity shares sold on or before 31.03.2018 - Tax on LTCG – NIL(exempt)

Listed equity shares purchased before 31.01.2018 and sold after 31.03.2018

Purchase price = Rs. 100

Highest traded price as on 31.01.2018 =Rs. 120

Sale price =Rs. 150

Total LTCG (150 less 100) =Rs. 50

LTCG taxable @ 10% =Rs. 30

Listed equity shares acquired after 1.2.2018 and held for 12 months – LTGC taxable @ 10%

The provision aims at discouraging bonus stripping.
STT had been introduced when tax on long term capital gains on listed equity shares was sought to be exempted. Now, it is proposed to introduce tax on such gains, however, consequentially STT has not been withdrawn.
The concessional rate of ten percent will be applicable on long term capital gains on transfer of listed equity shares only if acquisition of such shares has been subjected to STT, except for certain acquisitions as the Central Government may notify. Certain acquisitions made on or after 01.10.2004 where STT was not leviable were notified for the purpose of the Section 10(38) vide Notification no. 43/2017 dated 5th June, 2017. One may expect a Notification on similar lines to come from CBDT for the purpose of Section 112A.
The proposed amendment to Section 10(38) shall have an effect of including the entire long term capital gain arising on sale of such securities to the total income of the assessee, out of which gains exceeding rupees one lac are proposed to be taxed in accordance with Section 112A and the balance as per the applicable slab rate/rates applicable. However, this does not seem to be the intention of the Legislature and this appears to be an unintended drafting error.
Long term capital losses on sale of such securities will now be available for set off against long term capital gains.
On the withdrawal of exemption on long term capital gains, Section 14A may have no applicability.

Dividend distribution tax on dividend payouts to unit holders in an equity oriented fund

1. Under the existing provisions of Section 115R, any amount of income distributed by a Mutual Fund to its unit holders is chargeable to tax at the rate specified therein. However, in respect of any income distributed to a unit holder by equity oriented funds, nodistribution tax is levied.

1. It is proposed to amend Section 115R to levy a tax at the rate of ten per cent on income distributed to a unit holder by equity oriented funds.
2. This amendment will take effect from 1st April, 2019 and will, accordingly apply in relation to the assessment year 2019-20 and subsequent assessment years.

Comments:

This amendment seeks to widen the tax base. However, such income continues to remain exempt in the hands of the recipients.

Relief from liability of Minimum Alternate Tax (MAT)
1. Section 115JB inter alia provides for reduction of brought forward loss (excluding unabsorbed depreciation) or unabsorbed depreciation, whichever is lower, as per books of accounts ,in the computation of book profits. Consequentially, when the loss brought forward or unabsorbed depreciation is NIL, no deduction is allowed.
2. One of the landmark reforms by the Government was the introduction of the Insolvency and Bankruptcy Code, 2016 (“IBC”) to consolidate and amend the laws relating to reorganization and insolvency resolutions of corporates for maximizing the value of assets.
3. The existing provisions relating to deduction of lower of brought forward loss or unabsorbed depreciation was a barrier to rehabilitating companies seeking insolvency resolution.
4. Section 115JB provided for reduction of profits of sick industrial company for the assessment year commencing on and from the assessment year in which the company had become a sick industrial company under Section 17(1) of SICA, 1985 and ending with the assessment year during which the entire net worth of the company became equal to or exceeded the accumulated losses. No similar provision exists for companies seeking insolvency resolution.
5. The CBDT vide a Press Release dated 6^th January, 2018 had took note of the hardship faced by such companies and therefore, provided for set off of the total loss brought forward including unabsorbed depreciation from computation of book profits w.e.f A.Y. 2018-19, and further provided that appropriate legislative amendment in case of a company against which as application for corporate insolvency resolution has been admitted by the adjudicating authority (NCLT) under Section 7 or 9 or 10 of IBC will be made in due course.
6. Section 7, 9 and 10 of IBC provides for initiation of corporate insolvency resolution process against the defaulting corporate debtor before NCLT by a financial creditor(s), operational creditor(s) and the corporate debtor himself respectively.
7. It is proposed to amend Section 115JB to provide that the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit in case of a company whose application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the NCLT.
8. This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.
9. It is also proposed in Section 115JB of the Act to provide that the provisions of the said section 115JB of shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in the said sections. This amendment will take effect, retrospectively from 1st April, 2001 and will, accordingly, apply in relation to the assessment year 2001-02 and subsequent assessment years.

Comments:

This is a welcomed amendment providing relief to companies in distress from applicability of MAT and will also enable faster resolution for such companies. The benefit is not extended to any other company especially those which are undergoing other forms of debt restructuring.

Benefit of carry forward and set off of losses
1. Section 79 provides that carry forward and set off of losses in a closely held company (being company, other than a company in which public are substantially interested) shall be allowed only if there is continuity in the beneficial owner of the shares carrying not less than 51 percent of the voting power, on the last day of the year or years in which the loss was incurred.
2. Generally, in case of a company seeking insolvency resolution under Insolvency and Bankruptcy Code, 2016, the beneficial ownership of shares undergoes a change beyond the permissible limit under section 79, resulting in a hurdle for restructuring and rehabilitation of such companies.
3. It is therefore proposed to relax the existing provisions of Section 79 to provide that the said provision shall not apply where a change in shareholding takes place in a previous year pursuant to a resolution approved under the Insolvency and Bankruptcy Code, 2016, after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner.
4. This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to the assessment year 2018-19 and subsequent assessment years.

Comments:

This is also a welcomed amendment and will benefit the buyers of such companies, whose resolution plan has been approved under the Insolvency and Bankruptcy Code, 2016. It however may be noted that many of the companies undergoing insolvency resolution are listed companies and the provisions of Section 79 are not applicable to them.

Taxation of long-term capital gains in the case of Foreign Institutional Investor
1. The existing provisions of section 115AD of the Act inter alia, provide that where the total income of a Foreign Institutional Investor (FII) includes income by way of long-term capital gains arising from the transfer of certain securities, such capital gains shall be chargeable to tax at the rate of ten per cent. However, long term capital gains arising from transfer of long term capital asset being equity shares of a company or a unit of equity oriented fund or a unit of business trusts, is exempt under Section 10(38).
2. Consequent upon the exemption under Section 10(38) being proposed to be withdrawn, it is proposed to amend Section 115AD to provide that long term capital gain on transfer of listed equity share or units of equity oriented fund or business trust exceeding one lakh rupees, shall be taxed at the rate of ten percent.
3. This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

Comments:

The proposed amendment seeks to keep the FIIs at par with the domestic investors.

Tax treatment of transactions in respect of trading in agricultural commodity derivatives
1. Under the existing provisions of section 43(5) as amended by the Finance Act, 2014, an eligible transaction in respect of commodity derivatives carried out in a recognized association chargeable to commodities transaction tax is not deemed to be speculative transaction.
2. Agricultural commodity derivatives were not subject to Commodities Transaction Tax (CTT) and therefore, were not excluded from the ambit of speculative transactions.
3. It is now proposed to amend Section 43(5) to exclude transaction in respect of trading in agricultural commodity derivatives not subject to CTT from the ambit of speculative transactions.
4. This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

Comments:

It is welcomed amendment and now profit in trading in agricultural commodity derivatives will be taxed as non-speculative business profit and losses if any in such transactions will be available for set off against business profits.

Rationalisation of the provisions relating to Commodity Transaction Tax
1. At present, “taxable commodities transaction” is defined under Section 116(7) of the Finance Act, 2013 to mean a transaction of sale of commodity derivatives in respect of commodities, other than agricultural commodities, traded in recognised association.
2. Section 117 of the Finance Act, 2013 provides the rate at which a commodities transaction tax in respect of every commodities transaction, being sale of commodity derivative shall be chargeable to tax and such tax shall be payable by the seller.
3. Section 118 of the Finance Act, 2013 provides the value of taxable commodities transactions, being commodity derivative and chargeable under section 117 of the Finance Act, 2013.
4. It is now proposed to amend the definition to include “options in commodity futures”. It is further proposed to amend Section 117 so as to prescribe the rate at which sale of an option on commodity derivative shall be chargeable and such tax shall be payable by the seller, and further to prescribe the rate at which sale of an option on commodity derivative, where option is exercised, shall be chargeable and such tax shall be payable by the purchaser.
5. It is further proposed to amend the provisions of section 118 so as to include the value of taxable commodities transaction, being option on commodities, chargeable under section 117 of the Finance Act, 2013, in the said section.
6. This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to the assessment year 2018-19 and subsequent assessment years.

Comments:

This amendment seeks to align the definition of “taxable commodities transaction” with instruments allowed for transaction in commodity.

Presumptive income under section 44AE in case of goods carriage

1. Under the existing provisions of Section 44AE higher of Rs. 7500/- p.m. or part thereof or the actual amount claimed is deemed to be income chargeable under Section 44AE. This scheme is applicable uniformly to all classes of goods carriages irrespective of their tonnage capacity provided the assessee does not own more than 10 goods carriages at any time during the previous year.
2. This allowed the transporters owning heavy / large capacity vehicles upto 10 goods carriages to avail the same benefit.
3. With a view to eliminate this disparity, it is proposed to amend Section 44AE where in case of heavy goods vehicle with more than 12MT gross vehicle weight higher of Rs. 1000/- per MT of gross vehicle weight or unladen weight, per month or part thereof or the actual amount claimed shall be deemed to be income chargeable under Section 44AE.
4. These amendments will take effect from 1st April, 2018.

Comments:

The existing section intends to give benefits to small transporters which to some extent are also enjoyed by the large capacity goods carriage owners. This proposed amendment will bring back the principle of tax equity, where the heavy goods vehicle owners will be charged higher than the small transporters.
For instance, for a heavy goods vehicle having gross vehicle weight of say, 15 MT, higher of Rs. 15,000/- per monthor part thereof or the actual amount claimed shall be deemed to be income chargeable under Section 44AE.

Pan mandatory for any entity entering into a financial transaction of Rs. 2.5 lakh or more
1. Existing provisions

The existing provisions of Section 139A inter-alia provides that every person specified therein and who has not been allotted a permanent account number shall apply to the Assessing Officer for allotment of a Permanent Account Number (PAN).
1. Budget proposals
This amendment in section 139A is being done in order to facilitate the use of PAN as Unique Entity Number (UEN) for non-individual entities. It is being proposed that every person, not being an individual, which enters into a financial transaction of an amount aggregating to two lakh and fifty thousand rupees or more in a financial year shall be required to apply to the Assessing Officer for allotment of PAN.

Further in order to link the financial transactions with the natural persons also, it is proposed that the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer or any person competent to act on behalf of such entities shall also apply to the Assessing Officer for allotment of PAN.

This amendment will take effect from lst April, 2018.

Comments:

In view of the proposed change, PAN has virtually become mandatory for everyone holding any office of an entity which is carrying any kind of economic activity where the aggregate value of all financial transaction during the financial year exceeds Rs. 250,000. The word financial transaction has not been specifically defined in the provision but will include any kind of transaction involving money or money’s worth.

“Business connection” to include “Significant Economic presence”
1. The scope of existing provisions of clause (i) of section 9(1) is restrictive as it essentially provides for physical presence based nexus rule for taxation of business income of the non-resident in India. Therefore, emerging business models such as digitized businesses, which do not require physical presence of itself or any agent in India, is not covered within the said Section.
2. It is proposed to insert a new Explanation 2A in clause (i) of sub-section (1) of Section 9 so as to provide that the significant economic presence of a non-resident in India shall constitute “business connection” of the non-resident in India and the “significant economic presence” for this purpose, shall mean—

any transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or
systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means.

1. It is further proposed to provide that the transactions or activities shall constitute significant economic presence in India, whether or not the non-resident has a residence or place of business in India or renders services in India. It is also proposed to provide that only so much of income as is attributable to the transactions or activities referred to in clause (a) or clause (b) shall be deemed to accrue or arise in India.
2. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent years

Comments:

The proposed amendment in the domestic law will enable India to negotiate for inclusion of the new nexus rule in the form of 'significant economic presence' in the Double Taxation Avoidance Agreements. It may be clarified that the aforesaid conditions stated above are mutually exclusive. The threshold of “revenue” and the “users” in India will be decided after consultation with the stakeholders. Further, it is also clarified that unless corresponding modifications to PE rules are made in the DTAAs, the cross border business profits will continue to be taxed as per the existing treaty rules.

Scope of business connection enlarged in line with modified PE rule as per MLI
1. Existing provisions

Under the existing provisions of Explanation 2 to Section 9(1)(i), the term “business connection” includes business activities carried on by the non-resident through dependent agents. The scope is para materiasimilar to the provisions relating to dependant agent permanent establishment (DAPE) in India’s DTAA.
In terms of DAPE rules in the DTAA, if any person acting on behalf of the non-resident, is habitually authorised to conclude contracts for the non-resident, then such agent would constitute a PE in the source country. However, in many cases, it was observed that though the resident person used to play an active role in negotiating the contracts but did not conclude the contract. This was done with a view to avoid establishing a PE in the source country.
Further, under Article 5(4) of the DTAAs, a PE is deemed not to exist when a place of business is engaged solely in certain activities such as maintenance of stocks of goods for storage, display, delivery or processing, purchasing of goods or merchandise, collection of information. This exclusion applies only when these activities are preparatory or auxiliary in relation to the business as a whole.
1. Budget proposals
It is proposed to amend the provision of section 9 of the Act so as to align them with the provisions in the DTAA (as modified by Multilateral Instrument). Explanation 2 to Section 9(1)(i) is proposed to be amended to provide that “business connection” shall also include any business activities carried through a person who, acting on behalf of the non-resident, habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by the non-resident.

It is further proposed that the contracts should be-

in the name of the non-resident; or
for the transfer of the ownership of, or for the granting of the right to use, property owned by that non-resident or that the non-resident has the right to use; or
for the provision of services by that non-resident.

Comments:

The proposed amendment is a consequence of Article 12 of the Multilateral Instrument (MLI) to which India is a signatory. The MLI will automatically modify India’s bilateral tax treaties covered by MLI, where treaty partner has also opted for Article 12.
Article 12 of MLI is based on suggestion made by OECD under BEPS Action Plan 7 wherein it reviewed the definition of PE with a view to preventing avoidance of payment of tax by circumventing the existing PE definition by way of commissionaire arrangements or fragmentation of business activities.
In order to tackle such tax avoidance scheme, the BEPS Action plan 7 recommended modifications to paragraph (5) of Article 5 to provide that an agent would include not only a person who habitually concludes contracts on behalf of the non-resident, but also a person who habitually plays a principal role leading to the conclusion of contracts. Similarly, Action Plan 7 also recommended the introduction of an anti-fragmentation rule as per paragraph 4.1 of Article 5 of OECD Model tax conventions, 2017 so as to prevent the tax payer from resorting to fragmentation of functions which are otherwise a whole activity in order to avail the benefit of exemption under paragraph 4 of Article 5 of DTAAs.
Since, the provisions of the domestic law being narrower in scope, are more beneficial than the provisions in the DTAAs, as modified by MLI, such wider provisions in the DTAAs are ineffective. Accordingly, the amendment is proposed to ensure parity in the treatment of business connection/ PE under the Income Tax Act/ Treaty.

Measures to promote International Financial Services Centre (IFSC)
1. In order promote the development of world class financial infrastructure in India, it proposed to amend Section 47. The said section provides that certain transfers of capital assets are not to be regarded as transfer for the purposes of section 45 of the Income-tax Act. It is proposed to insert a new clause (viiab) in the said section so as to provide that any transfer of a capital asset, being bond or Global Depository Receipt referred to in sub-section (1) of section 115AC or rupee denominated bond of an Indian company or derivative, made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency, shall not be regarded as transfer.
2. Section 115JC of the Actprovides for alternate minimum tax at the rate of 18.50 percent of adjusted total income in the case of a non-corporate person. In order to promote IFSC, it is further proposed to amend the section 115JC so as to provide that in case of a unit located in an IFSC, the alternate minimum tax under section 115JC shall be charged at the rate of 9 percent.Consequential amendment in section 115JF is also proposed to be made.
3. This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent years.
Deemed Dividend – Widening of Scope and Applicability of Dividend Distribution Tax (DDT)
1. Section 2(22) of the Act defines “dividend” to include distribution of accumulated profits (whether capitalized or not) to its shareholders by a company, whether it is in the nature of -

release of all or any of its assets,
issue of debentures in any form (with or without interest) or distribution of bonus to its preference shareholders,
distribution of proceeds on liquidation,
on the reduction of capital, or
in the case of an unlisted company, any loan or advance given to a shareholder having shareholding of 10% or above, or to a concern in which such shareholder holds substantial interest (exceeding 20% of shareholding or interest) or any payment by such company on behalf of or for the individual benefit of such shareholder.
1. The taxable income being deemed dividend is restricted to the amount of accumulated profits as defined in Explanation 2 to the aforesaid section.
2. There have been instances such as in case of amalgamation that the amalgamated company used to give loans or issue bonus debentures to its certain shareholders. Such company used to claim that since the accumulated profits did not represent that of the amalgamated company, such loans or issue of bonus debentures were not covered under the ambit of this section.
3. Now, it is proposed to insert a new Explanation 2A in clause (22) of section 2 of the Act to widen the scope of the term ‘accumulated profits’ so as to provide that in the case of an amalgamated company, accumulated profits, whether capitalised or not, or losses as the case may be, shall be increased by the accumulated profits of the amalgamating company, whether capitalized or not, on the date of amalgamation.
4. The impact of the aforesaid amendment is that if loans or bonus debentures are issued to certain shareholders of the amalgamated company out of accumulated profits being transferred to the amalgamated company, such loans or bonus debentures may be treated as deemed dividend.
5. At present, there is no dividend distribution tax on deemed dividends. It is proposed to delete the Explanation to Chapter XII-D occurring after section 115Q of the Act so as to bring deemed dividends also under the scope of dividend distribution tax under section 115-O. Further, such deemed dividend is proposed to be taxed at the rate of 30 per cent (without grossing up).
6. This amendment will take effect from 1st April, 2018 and will accordingly apply in relation to assessment year 2018-19 and subsequent assessment years.

Comments:

The issue whether a particular transaction in the nature of loan or advances can be covered within the ambit of deemed dividend has always been subject matter of litigations. One such issue is whether deemed dividend is taxable in the hands of the concern which is not a shareholder has also been a matter of debate before the Courts. The Special Bench of the Mumbai Tribunal in the case of Bhaumik Colour Private Limited held that in the absence of indication in section 2(22)(e) to extend the legal fiction to a case of loan or advance to a non shareholder, such loan or advance cannot be taxed as deemed dividend in the hands of non shareholder. The decision of Special Bench has been affirmed by the Bombay High Court in Universal Medicare Private Limited and Delhi High Court in Ankitech Private Limited. Recently the Supreme Court in the case of Madhur Housing and Development Company Limited (order passed on 20.10.2017) has held that deemed dividend is not taxable in the hands of the loan recipient concern if such concern is not a shareholder of the lender company.
In another recent development in the case of CIT vs. Ankitech Private Limited,, the Supreme Court has referred the case to a larger bench for reconsideration. In that case, two judge bench of Supreme Court observed that deemed dividend can only attract on a person who is beneficial owner of shares. It was observed that in case of a trust, it may be a case, that though the trust is a beneficial owner of share, but it is not a legal owner. It was observed that in such case, there cannot be a universal law that unless a person is a legal owner, provisions of s.2(22)(e) will not attract. The Supreme Court ultimately held that Ankitech’s judgement (Supra) requires reconsideration.
Thus we find that there has been a number of litigations in respect of deemed dividend. Though the litigations used to be in the hands of the recipient. With the proposed amendment, now the tax implications in the form of Dividend Distribution tax shall be in the hands of the company giving loans etc and not in the hands of recipient. Thus, it will be the duty of the company concerned to take its own interpretation and decide whether to pay dividend distribution tax. Previously, since the tax impact was on the recipient, there was not much due diligence required on part of the company, though TDS provisions on deemed dividend was applicable even in the past.

Applicability of section 40(a)(ia) and 40A(3) for entities registered u/s 10(23C) or 12AA
1. At present, there are no restrictions on payments made in cash by charitable or religious trusts or institutions. The disallowance u/s 40(A)(3) didn’t attract on them. There are no disallowances u/s 40(a)(ia) if such trusts or institutions do not deduct tax at source under Chapter XVII-B of the Act.
2. It is proposed to insert a new Explanation to the section 11 to provide that for the purposes of determining the application of income under the provisions of sub-section (1) of the said section, the provisions of sub-clause (ia) of clause (a) of section 40, and of sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.
3. It is also proposed to insert a similar proviso in clause (23C) of section 10 so as to provide similar restriction as above on the entities exempt under sub-clauses (iv), (v), (vi) or (via) of said clause.
4. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent years.

Comments:

In some of the recent judgments mentioned below, it has been observed that the provisions of section 40(a)(ia) or 40A(3) does not apply to charitable or religious trusts or institutions registered under section 10(23C) or 12AA:

Balaji Technical Education Society, Panchkula, Chandigarh ITAT
Mahatma Gandhi Seva Mandir, Mumbai ITAT

Now with the proposed amendment, these judgements will not hold good for Assessment Year 2019-20 onwards.

The proposed amendment will even apply to smaller trusts and institutions even if they are not carrying on any activities in the nature of trade, commerce or business.
The proposed amendment may make it practically difficult for certain trusts or institutions to operate. For instance, there may be trusts which is setting up relief centre in a calamity struck area and may be required to pay in cash for help in the affected area. Consequent to the proposed amendment, such cash expenditure beyond the prescribed limits will not be treated as application of income.
There may be instances that a trust or institution may be engaged in constructing toilets in remote village areas which is not served by any bank. Clause (g) of Rule 6DD allows payment in cash (exceeding the prescribed limit) if such place is not served by any bank. However, similar immunity is not provided under section 40(a)(ia). Thus, this amendment may affect functioning of such trust in remote areas.
In our opinion, the proposed amendment in its present form is very harsh and its applicability should be restricted to only such trusts or institutions which are engaged in the activities in the nature of trade, commerce or business.

Tax Incentives

Incentive for employment generation

1. Under the existing provisions of Section 80JJAA, a deduction of 30% is allowed in addition to normal deduction of 100% in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year.
2. This minimum period of employment is relaxed to 150 days in the case of apparel industry. In order to encourage creation of new employment, it is proposed to extend this relaxation to footwear and leather industry also.
3. Further, it is also proposed to rationalize this deduction of 30% by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year.
4. These amendments will take effect from 1st April, 2018.

Comments:

This is a welcome relaxation given to footwear and leather industry.
This amendment will allow the assessee to avail deduction under this section in the subsequent year even if the new employees do not fulfil the employment criteria of 240/150 days in the first year subject to them fulfilling the said criteria in the subsequent year.
For instance, if the new employee was employed for say, 100 days in the first year but is employed for 240/150 days or more in the subsequent year, the deduction shall be available.

Rationalisation Measures

Rationalisation of section 276CC relating to prosecution for failure to furnish return

1. Under the existing provisions of Section 276CC, if a person wilfully fails to furnish in due time the return of income which he is required to furnish, he shall be punishable with imprisonment for a term, as specified therein, with fine.
2. This section further provides that a person shall not be proceeded against under the said section for failure to furnish return for any assessment year commencing on or after the 1st day of April, 1975, if the tax payable by him on the total income determined on regular assessment as reduced by the advance tax, if any, paid and any tax deducted at source, does not exceed Rs. 3,000/-.
3. In order to prevent abuse of the said proviso by shell companies or by companies holding Benami properties, it is proposed to amend the provisions of the said sub-clause so as to provide that the said sub-clause shall not apply in respect of a company.
4. This amendment will take effect from 1st April, 2018.

Comments:

This is a welcome amendment as it will now bind companies not filing returns with/without malafide intentions to file return or face prosecution.

Tax Neutral Transfers
1. Under the existing provisions of Section 56(2)(x) transfer from capital asset by a company to its subsidiary and vice versa as mentioned in Section 47(iv) and (v) was taxable under Section 56.
2. In order to further facilitate the transaction of money or property between a wholly owned subsidiary company and its holding company, it is proposed to amend the section 56 so as to exclude such transfer from its scope.
3. This amendment will take effect from 1st April, 2018.

Comments:

With this amendment transfer of capital asset by a parent company to its wholly owned Indian subsidiary company and transfer by wholly owned subsidiary company to its Indian holding Company is becomes an exempt transfer and therefore not taxable under the provisions of the Act.

Rationalization of the provisions of section 54EC
1. Existing provisions

Section 54EC of the Act currently provides that capital gain, arising from the transfer of a long-term capital asset, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, shall not be charged to tax subject to certain conditions specified in the said section.

The section also provides that “long-term specified asset” for making any investment under the section on or after the 01.04.07 means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India or by the Rural Electrification Corporation Limited; or any other bond notified by the Central Government in this behalf.

1. Budget proposals
In order to rationalise the provisions of section 54EC of the Act and to restrict the scope of the section only to capital gains arising from long-term capital assets, being land or building or both and to make available funds at the disposal of eligible bond issuing company for more than three years, it is proposed to amend the section 54EC so as to provide that capital gain arising from the transfer of a long-term capital asset, being land or building or both, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, the capital gain shall not be charged to tax subject to certain conditions specified in this section.

Clause (ba) of the Explanation to the said section clarifying expression" long-term specified asset" is proposed to be amended so as to enlarge the holding period of such capital asset to 5 years from 3 years in respect of such bonds issued on or after 1st April,2018.

This amendment will apply in relation to A.Y. 2019-20 onwards.

Comments:

Most people, in order to avoid the tax on LTCG arising from sale of their house, invest in the bonds of Rural Electrification Corporation (REC) or National Highways Authority of India (NHAI) or any other bonds as notified by the Central Government. The maximum limit for investing in these bonds is Rs 50 lakh. Currently, the interest paid on these bonds is 5.25 per cent per annum. Since the period of holding of such bonds is proposed to be increased from 3 years to 5 years, liquidity for a person would get blocked for 5 years for a meagre rate of return.
By means of this amendment what has been proposed is to withdraw exemption hitherto available in respect of all other capital assets such as shares, jewellery, plants, bonds etc. The Finance Bill 2018 proposes to restrict the claim to land and building without proposing any amendment to section 2(14) dealing with the term "capital asset". This may lead to litigations in case where the capital asset transferred is in form of any tenancy rights or any other rights in land and building.

Tax Deduction at Source on 7.75% GOI Savings (Taxable Bonds), 2018
1. Existing Provisions

Government of India introduced 8% Savings (Taxable) Bonds, 2003 in 2003. Under the existing law, the interest received by the investor is taxable. Further the payer is liable to deduct tax at source under section 193 of the Act at the time of payment or credit of such interest in excess of rupees ten thousand to a resident.

1. Budget Proposals
Government intends to discontinue the existing 8% Savings (Taxable) Bonds, 2003 with a new 7.75% GOI Savings (Taxable) Bonds, 2018. The interest received under the new bonds will continue to be taxed as in the case of the earlier once.Budget 2018 has proposed that no tax will be deducted at source from the interest earned on the newly launched 7.75 percent GOI Savings (Taxable) Bonds, if the interest amount is less than or equal to Rs 10,000 during a financial year.This amendment will take effect from 1st April, 2018.

Comments:

This is good news for those looking to invest in these fixed income instruments. These bonds were introduced in January in lieu of the 8% Savings (Taxable) Bonds, 2003, having a lock-in period of 7 years.

Rationalisation of provisions relating to Country-by-Country Report
1. Section 286 of the Act contains provisions relating to specific reporting regime in the form of Country-by-Country Report (CbCR) in respect of an international group. Section 286(2) of the said section provides that the parent entity or the alternate reporting entity of an international group which is resident in India shall furnish a report in respect of the international group on or before the due date specified under Section 139(1) for furnishing of return of income of the relevant accounting year.
2. It is proposed to amend the Section 286(2) so as to provide that the said report for every reporting accounting year shall be furnished within a period of twelve months from the end of said reporting accounting year.
3. It is further proposed to amend Section 286(3) to give reference therein of the report to be furnished under Section 286(4).
4. It is also proposed to amend Section 286(4) so as to provide incase of a constituent entity, resident in India, whose parent entity is outside India that,—

(a) report of the nature referred to in sub-section (2) shall be furnished within the period specified in sub-section (2); and

(b) an additional condition for filing of report by said entity in a case where a country or territory, of which the parent entity is resident, is not obligated to file the report of the nature referred to in sub-section (2).

1. It is also proposed to amend Section 286(5) so as to provide that the due date for furnishing of such report by said entity with the tax authority of the country or territory of which such entity is resident, would be the due date specified by that country or territory.
2. It is also proposed to consequentially substitute clause (b) of Section 286(9) so as to provide that the term "agreement" would mean a combination of,—(i) an agreement referred to in section 90(1) or section of section 90A(1); and (ii) an agreement as may be notified by the Central Government for exchange of the report referred to in sub-section (2) and subsection (4).
3. It is also proposed to consequentially amend clause (j) of Section 286(9) so as to also make reference to the report referred to in sub-section (4).
4. These amendments are clarificatory in nature and will take effect retrospectively from1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.

Comments:

The proposed amendments are clarificatory in nature.

Exemption of income of Foreign Company from sale of leftover stock of crude oil on termination of agreement or arrangement
1. Section 10(48B) provides that any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil, if any, from a facility in India after the expiry of the agreement or arrangement as referred to under clause (48A) shall be exempt subject to such conditions as may be notified by the Central Government in this behalf.
2. It is proposed to amend the said clause (48B) to provide that such exemption shall also be available on the termination of the agreement or the arrangement, subject to the conditions as may be notified.
3. This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to assessment year 2019-2020 and subsequent years.

Royalty and FTS payment by NTRO to a non-resident to be tax-exempt
1. Section 195 requires a person to deduct tax at the time of payment or credit to a non-resident.Given the business exigencies of the National Technical Research Organisation (NTRO), it is proposed to amend section 10 so as to provide that the income arising to non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the NTRO will be exempt from income tax. Consequently, NTRO will not be required to deduct tax at source on such payments.
2. This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent assessment years.
Prima-facie adjustments during processing of return of income
1. Section 143(1)(a) of the Act provides that at the time of processing of return, the total income or loss shall be computed after making the adjustments specified in sub-clauses (iii) to (vi) thereof.
2. Sub-clause (vi) of the said clause provides power for adjustment in respect of addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return.
3. It is proposed to insert a new proviso to the said clause to provide that no adjustment under sub-clause (vi) of the said clause shall be made in respect of any return furnished for the assessment year commencing on the first day of April, 2018.

Comments:

Subclause (iii) to (vi) was inserted in section 143(1)(a) by Finance Act, 2016. The sub clause (vi) had far reaching implications because this clause gave power to CPC to make addition of income on the basis of comparison between Form 26AS vis a vis Return of Income. Now let us analyse certain situations; There may be a case, wherein an assessee may have received advance on which TDS was deducted. Such advance may not have been offered as income in the return of income. The present clause may have treated the difference in TDS as per 26AS and return as mismatch, and the corresponding income may be added in the intimation.
There can be another instance wherein a deductee has wrongly mentioned a different PAN while uploading his TDS Return. In that case, Form 26AS may have captured some data not related to the assessee. Now, this could have also been a subject matter of prima facie adjustment by CPC.
Keeping in mind these kind of adjustments which could have been done by the CPC and the hardship that could have been caused consequently, CBDT came out with a recent instruction no. 9/2017 dated 11/10/2017 wherein the manner of making adjustments in section 143(1)(a) by virtue of clause (vi) was clarified and restricted.
Now the proposed amendment has specifically provided that the aforesaid clause (vi) shall not be applicable for returns for assessment years 2018-19 and onwards.

Rationalization of Deeming Income by adopting Stamp Duty Value u/s 43CA, 50C and 56
1. At present, while taxing income from capital gains (section 50C), business profits (section 43CA) and other sources (section 56) arising out of transactions in immovable property, the sale consideration or stamp duty value, whichever is higher is adopted. The difference is taxed as income both in the hands of the purchaser and the seller.
2. It is proposed to provide that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration.
3. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

Comments:

Almost all pre budget memorandums sent by Chambers of Commerce / Institutes have referred to the hardship faced by the assessee because of deeming provisions of section 43CA, 50C and 56. In many places, the Stamp Duty Value (SDV) is significantly higher than the actual Fair Market Value. Because of deeming provisions, the stamp duty value is considered as transaction value. The scope of such deemed provisions has been increasing over the years. The provisions are now applicable for all purchase and sale of immovable property, whether as a capital asset or as a business asset. The provisions are now applicable for all classes of assessee.
The draconian provisions have been encouraging structuring of real estate transactions in such a manner to circumvent increased tax liabilities arising on account of adoption of SDV. For example, having agreed to sell the property at Rs. 80 lakhs as against the value of Rs. 100 lakhs considered for SDV, a transaction may be structured to record the transaction value at Rs. 100 lakhs with a rebate of Rs. 20 lakhs.
The proposed amendment providing that the SDV will not be adopted if the difference is less than 5% of the sales consideration, may not give the desired results which was warranted in the present circumstances.

Conversion of Stock in Trade into Capital Asset
1. Section 45 of the Act, inter alia, provides that capital gains arising from a conversion of capital asset into stock-in-trade shall be chargeable to tax. However, in cases where the stock in trade is converted into, or treated as, capital asset, the existing law does not provide for its taxability.
2. It is proposed to amend the provisions of
  - section 28 so as to provide that any profit or gains arising from conversion of inventory into capital asset or its treatment as capital asset shall be charged to tax as business income. It is also proposed to provide that the fair market value of the inventory on the date of conversion or treatment determined in the prescribed manner, shall be deemed to be the full value of the consideration received or accruing as a result of such conversion or treatment,
  - clause (24) of section 2 so as to include such fair market value in the definition of income,
  - section 49 so as to provide that for the purposes of computation of capital gains arising on transfer of such capital assets, the fair market value on the date of conversion shall be the cost of acquisition,
  - clause (42A) of section 2 so as to provide that the period of holding of such capital asset shall be reckoned from the date of conversion or treatment.
3. These amendments will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

Comments:

To illustrate the proposed amendment with an example, suppose an assessee may be holding some listed shares as stock-in-trade (acquired in 2005 at a cost of Rs. 10 lakhs). Now, it intends to sell such shares in Financial Year 2017-18 when the market price is Rs. 200 lakhs. If it sells such shares as a stock in trade, it is liable to pay tax @ 30% on profit of Rs. 190 lakhs. Now, if the assessee had converted such stock in trade into capital asset in Financial Year 2015-16 (when the market price was Rs. 150 lakhs), then there may not have been any tax liability either on the date of conversion or on the date of sale.
There have been divergent views of Courts on the issue. One view has been that when stock in trade is converted into capital asset, the holding period shall be calculated after excluding the period for which the asset was held as stock in trade prior to such conversion. This view was upheld in the case of CIT vs Abhinandan Inv.Ltd. [2015] (Delhi) and Deensons Trading Co. Private Limited [2017] (Chennai). However, the contrary view was held in CIT vs. Bright Star Investments Private Limited [2008] (Mumbai) wherein it was held that the holding period is to be construed from the original date of acquisition of stock in trade.
The proposed amendment puts this issue to rest by specifically mentioning that the date of conversion into capital asset shall be treated as the date of acquisition of the capital asset for the purpose of calculating the period of holding.
However, in all the aforesaid judgements the cost of acquisition of the stock in trade was deemed to be the cost of acquisition of the capital asset. There have been divergent views only with respect to date of acquisition as mentioned above.
Now, in view of the proposed amendment, the assessee will be liable to pay tax on the date of conversion of stock in trade into capital asset. Thus, had this conversion happened in Financial Year 2018-19, the assessee would have been liable to pay tax on the difference between the Fair Market Value (on the date of conversion) and the cost as business income.
Thus, the proposed amendment is to discourage the practice adopted by some assessees to avoid payment of taxes by showing conversion from stock in trade into investments.
Though the method of calculation of Fair Market Value has not been defined, but it is reasonably expected that Rule 11UA/11UB may be prescribed.

Rationalization of the provisions of section 115BBE
1. Section 115BBE provides for tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D at a higher rate of sixty percent.
2. Sub-section (2) of said section provides that no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any provision of the Act in computing his income referred to in clause (a) of sub-section (1).
3. It is proposed to amend the said sub-section (2) so as to also include income referred to in clause (b) of sub-section (1).
4. This amendment will take effect retrospectively from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.

Comments:

The section 115BBE, ever since its introduction and specially after the Taxation Laws (Second Amendment) Act, 2016 has been one of the most talked about provision. There have been significant amendments in this section ever since its introduction. However, the amendment in the present Finance Bill is more of a clarificatory nature and may not be considered as significant.
Irrespective of whether the case of the assessee is covered under the clause (a) or clause (b), the rate of tax is 60% plus surcharge plus cess. Surcharge on such tax is 25% of such tax, i.e., 15% of the income and the cess for A.Y. 2019-20 is 4% of tax plus surcharge. Thus the effective rate of tax comes to 78%, if the assessee voluntary offers in the return. Otherwise, there can be further penal implication u/s 271AAC.

Rationalisation of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
1. Section 46 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 provides for the procedure for imposing penalty.
2. Sub-section (4) of the said section provides that an order imposing a penalty shall be made with the approval of the Joint Commissioner, in the circumstances specified therein.
3. The Assistant Director or the Deputy Director, investigating a case of undisclosed foreign income or asset, can also be assigned the concurrent jurisdiction of the Assessing Officer and, therefore, can also initiate penalty. However, the said authorities shall require approval of the superior officers of the rank of Joint Director or Additional Director for imposition of penalty.
4. It is proposed to amend the said sub-section so as to provide that the Joint Director shall also be vested with the power to approve an order imposing a penalty. It is also proposed to amend clause (b) of the said sub-section so as to include reference to the Assistant Director and Deputy Director therein.
5. Section 55 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 provides for institution of proceedings for an offence under that Act.
6. Sub-section (1) of the said section provides that a person shall not be proceeded against for an offence under section 49 to section 53 except with the sanction of the Principal Commissioner or Commissioner or the Commissioner (Appeals).
7. Sub-section (2) of the said section provides that the Principal Chief Commissioner or the Chief Commissioner may issue such instructions, or directions, to the tax authorities referred to in sub-section (1), as he may think fit for the institution of proceedings.
8. It is proposed to amend the said sub-section so as to empower the Principal Director General or the Director General also to issue instructions or directions to the tax authorities under the said sub-section.
9. It is also proposed to amend the marginal heading of the said section accordingly so as to include the reference of Principal Director General or Director General.
10. These amendments will take effect from 1st April, 2018.

Comments:

Most of the penalty provisions under the Income Tax Act require approval from Range Heads. For instance, the range head of ADIT / DDIT are JDIT / Addl DIT and the range head of ACIT / DCIT are JCIT / Addl CIT respectively. Similar has been the situation in the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for operational purposes. However for penalty provisions, there was an unintentional provision that the range heads were only JCIT / Addl CIT even for all cases. The proposed amendment is merely procedural in nature and does not have any significant implication.

ICDS

ICDS Amendments

1. By Notification No. 87 of 2016 dated 29-9-2016, the CBDT notified the ten ICDS which were required to be followed by all the assessees following mercantile system of accounting, for the purposes of computation of income chargeable under the head 'Profits and Gains of business or profession' and 'income from other sources' for the assessment year 2017-18 and the subsequent years, i.e., applicable with effect from 1-4-2016. The preamble to each of the ten ICDS clearly mentioned that the ICDS is not for the purposes of maintenance of books of account.
2. The Circular No. 10 of 2017 issued by the CBDT on 23-3-2017 is titled 'Clarifications on IncomeComputation and Disclosure Standards (ICDS) notified under section 145 (2).' The Circularacknowledges that it had been brought to the notice of the CBDT that some of the ICDS may require'amendment/ clarification for proper implementation.' The matter was then referred to the Committeewhich, after duly consulting the stakeholders recommended a two-fold approach for theimplementation of ICDS. One was to amend the ICDS itself,the other was to issue clarifications byway of FAQs. Thus Circular No. 10/2017 was in the form of FAQs, which was again an overreach of the powers of the executive.
3. The Delhi High Court in a writ filed by the Chamber of Tax Consultants vide its Order dated 8th November 2017 on the ultra vires of the various provisions of the ICDS held as follows:

- "Section 145 (2), as amended, has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. The power to enact a validation law is an essential legislative power that can be exercised, in the context of the Act, only by the Parliament and not by the executive. If Section 145 (2) of the Act as amended is not so read down it would be ultra vires the Act and Article 141 read with Article 144 and 265 of the Constitution……"

- The ICDS is not meant to overrule the provisions of the Act, the Rules thereunder and thejudicial precedents applicable thereto as they stand.

- ICDS I which does away with the concept of 'prudence' is contrary to the Act and bindingjudicial precedents and is therefore unsustainable in law.

- ICDS II pertaining to valuation of inventories and eliminates the distinction between acontinuing partnership business after dissolution from one which is discontinued upondissolution is contrary to the decision of the Supreme Court in Shakthi Trading Co. (supra). Itfails to acknowledge that the valuation of inventory at market value upon settlement of accountsof the outgoing partner is distinct from valuation of the inventory in the books of the businesswhich is continuing. ICDS II is held to be ultra vires the Act and struck down as such.

- The treatment to retention money under Paragraph 10 (a) in ICDS-III will have to bedetermined on a case to case basis by applying settled principles of accrual of income. Bydeploying ICDS-III in a manner that seeks to bring to tax the retention money, the receipt ofwhich is uncertain/conditional, at the earliest possible stage, irrespective of the facts, therespondents would be acting contrary to the settled position in law as explained in thedecisionsreferred to in para 68 and to that extent para 10 (a) of ICDS III would be rendered ultra vires.

- Para 12 of ICDS III read with para 5 of ICDS IX, dealing with borrowing costs, whichmakes it clear that no incidental income can be reduced from borrowing cost. This is contrary tothe decision of the Supreme Court in Bokaro Steel Ltd. (supra) and is therefore struck down.

- Para 5 of ICDS-IV requires an Assessee to recognize income from export incentive in the yearof making of the claim if there is 'reasonable certainty' of its ultimate collection. This is contraryto the decision of the Supreme Court in Excel Industries Ltd. (supra), and is, therefore, ultravires the Act and struck down as such.

- As far as para 6 of ICDS IV is concerned, the proportionate completion method as well as thecontract completion method have been recognized as valid method of accounting under themercantile system of accounting by the Supreme Court in Bilhari Investment (P.) Ltd. (supra)and this Court in Manish Build Well (P.) Ltd. and Paras Buildtech India (P.) Ltd. (supra).Therefore, to the extent that para 6 of ICDS-IV permits only one of the methods, i.e.,proportionate completion method, it is contrary to the above decisions, held to be ultra vires theAct and struck down as such.

- Para 8 (1) of ICDS IV is not been shown to be contrary to any judicial precedent. There is alsono challenge to section 36(1) (vii) of the Act. Accordingly, para 8 (1) of ICDS-IV is held to benot ultra vires the Act. Its validity is upheld.

- ICDS-VI which states that marked to marketloss/gain in case of foreign currency derivatives held for trading or speculation purposes are notto be allowed, is not in consonance with the ratio laid down by the Supreme Court in SutlejCotton Mills Limited. (supra), insofar as it relates to marked to market loss arising out offorward exchange contracts held for trading or speculation purposes. It is, therefore, held to beultra vires the Act and struck down as such.

- ICDS VII which provides that recognition of government grants cannot be postponed beyondthe date of accrual receipt, being in conflict with the accrual system of accounting. To thatextent it is held to be ultra vires the Act and struck down as such.

- ICDS VIII pertains to valuation of securities. For those entities not governed by the RBI towhom Part A of ICDS VIII is applicable, the accounting prescribed by the AS has to befollowed which is different from the ICDS. In effect, such entities will be required to maintainseparate records for income tax purposes for every year since the closing value of the securitieswould be valued separately for income tax purposes and for accounting purposes. To this extentPart A of ICDS VIII is held to be ultra vires the Act and is struck down as such.

1. In order to bring certainty in the wake of recent judicial pronouncements on the issue of applicability of ICDS, it is proposed to:
amend section 36 of the Act to provide that marked to market loss or other expected loss as computed in the manner provided in income computation and disclosure standards notified under sub-section (2) of section 145, shall be allowed deduction.

amend 40A of the Act to provide that no deduction or allowance in respect of marked to market loss or other expected loss shall be allowed except as allowable under newly inserted clause (xviii) of sub-section(1) of section 36.

insert a new section 43AA in the Act to provide that, subject to the provisions of section 43A, any gain or loss arising on account of effects of changes in foreign exchange rates in respect of specified foreign currency transactions shall be treated as income or loss, which shall be computed in the manner provided in ICDS as notified under sub-section (2) of section 145.

insert a new section 43CB in the Act to provide that profits arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method except for certain service contracts, and that the contract revenue shall include retention money, and contract cost shall not be reduced by incidental interest, dividend and capital gains.

amend section 145A of the Act to provide that, for the purpose of determining the income chargeable under the head “Profits and gains of business or profession:

the valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided in income computation and disclosure standards notified under (2) of section 145.
the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation.
inventory being securities not listed, or listed but not quoted, on a recognised stock exchange, shall be valued at actual cost initially recognised in the manner provided in income computation and disclosure standards notified under (2) of section 145.
inventory being listed securities, shall be valued at lower of actual cost or net realisable value in the manner provided in income computation and disclosure standards notified under (2) of section 145 and for this purpose the comparison of actual cost and net realisable value shall be done category-wise.

insert a new section 145B in the Act to provide that-

interest received by an assessee on compensation or on enhanced compensation, shall be deemed to be the income of the year in which it is received.
the claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved.
income referred to in sub-clause (xviii) of clause (24) of section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year.

1. It is proposed to bring the amendments retrospectively with effect from 1^st April, 2017 i,e. the date on which the ICDS was made effective and will, accordingly, apply in relation to assessment year 2017-18 and subsequent assessment years. The reason cited for the retrospective amendment is that alarge number of taxpayers have already complied with the provisions of ICDS for computing income for assessment year 2017-18 and thus regularise the compliance with the notified ICDS to prevent any further inconvenience to them.

Comments:

Professionals firmly believe that the principle of ease of doing business should be followed holistically and there should be only one set of accounting standards and different departments of the Government should work for “one nation, one standard” like the Government has created history by successfully creating and implementing much awaited GST law “one nation, one tax regime”. The notified ICDS followed by the Delhi High Court judgement and followed by the proposed amendments in Finance Bill, 2018 has more questions than answers and it is expected that number of litigations are in the offing.
The proposalsrun contrary to the concept of accrual as laid down by the Apex Court in E.D. Sasoon and Co. vs. CIT [1954 AIR 470] dated 14th May, 1954 and Godhra Electricity Ltd. vs. CIT [1997] 225 ITR 746 (SC) and may again be subjected to judicial test in the time to come.

Improving effectiveness of tax administration

New Scheme for Scrutiny Assessment
1. Existing Provisions

Section 143 of the Act provides for the procedure for assessment. Sub-section (3) of the said section empowers the Assessing Officer to make, by an order in writing, an assessment of total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.
1. Budget Proposals
It is proposed to prescribe a new scheme for the purpose of making assessments so as to impart greater transparency and accountability, by eliminating the interface between the Assessing Officer and the assessee, optimal utilization of the resources, and introduction of team-based assessment.

It is proposed to amend Section 143, by inserting a new sub-section (3A), after sub-section (3), enabling the Central Government to prescribe the aforementioned new scheme for scrutiny assessments. The proposed sub-section (3A) reads as follows:

"(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) so as to impart greater efficiency, transparency and accountability by––

(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;

(b) optimizing utilisation of the resources through economies of scale and functional specialisation;

It is further proposed to insert sub-section (3B) in the said section, enabling the Central Government to direct, that any of the provisions of this Act relating to assessment may be altered/modified as may be specified therein.

It is also proposed to insert sub-section (3C) in the said section, to provide that every notification issued under the sub-section (3A) and sub-section (3B), shall be laid before each House of Parliament.

Comments:

Under the existing scheme, the Assessing officer is the supreme authority to make the assessment of income through his assessment order, leaving scope for biased/prejudiced additions/disallowances and sometimes unreasonably high pitched assessments. This naturally leads to unwanted litigations both at revenue and assessee's end. Such an assessment is aimed at minimising the scope for corruption and discretion by revenue authorities. It will simplify assessment proceedings to a great extent.
A dynamic jurisdiction assessment implies that a taxpayer in Delhi, for instance, could be assessed by a tax officer randomly selected by the online system of the tax department and located in any other part of the country. The current government has been steadfast in its approach to eliminate the intervention of government and ensure maximum governance.

OTHERS

Exemption to specified income of class of body, authority, Board, Trust or Commission in certain cases
1. Clause 46 of section 10 of the Act empowers the Central Government to exempt, by notification, specified income arising to a body or authority or Board or Trust or Commission, if-

(a) they are not engaged in any commercial activity;

(b) they are established or constituted by or under a Central, State or Provincial Act or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public.

1. Under the existing provisions, the Central Government is required to notify each case separately even if they belong to the same class of cases. Consequently, the whole process of approval is considerably delayed. Accordingly, it is proposed to amend the said clause so as to enable the Central Government to also exempt, by notification, a class of such body or authority or Board or Trust or Commission (by whatever name called).
2. This amendment will take effect from 1st April, 2018.
Penalty for failure to furnish statement of financial transaction or reportable account
1. Section 271FA of the Act provides that if a person who is required to furnish the statement of financial transaction or reportable account under sub-section (1) of section 285BA, fails to furnish such statement within the prescribed time, he shall be liable to pay penalty of one hundred rupees for every day of default.
2. The proviso to the said section further provides that in case such person fails to furnish the statement of financial transaction or reportable account within the period specified in the notice issued under sub-section (5) of section 285BA, he shall be liable to pay penalty of five hundred rupees for every day of default.
3. In order to ensure compliance of the reporting obligations under section 285BA, it is proposed to amend the section 271FA so as to increase the penalty leviable from one hundred rupees to five hundred rupees and from five hundred rupees to one thousand rupees, for each day of continuing default.
4. These amendments will take effect from 1st April, 2018.
Amendments to the structure of Authority for Advance Rulings
1. Section 245-O provides for the constitution of an Authority for Advance Rulings, and constitution of its benches, for giving advance rulings under Chapter XIX-B of the Act or under Chapter V of the Customs Act, 1962 or under Chapter IIIA of the Central Excise Act, 1944 or under Chapter VA of the Finance Act, 1994.
2. In view of the proposed constitution of new Customs Authority for Advance Ruling under section 28EA of the Customs Act, it is proposed to amend the provisions of section 245-O so as to provide that such Authority shall cease to act as an Authority for Advance Rulings, and shall act as an Appellate Authority for the purpose of Chapter V of the Customs Act, 1962 from the date ofappointment of Customs Authority for Advance Rulings under section 28EA of the Customs Act, 1962.
3. It is further proposed that such Authority shall not admit any appeal against any ruling or order passed earlier by it in thecapacity of Authority for Advance ruling after the date of appointment of Customs Authority for Advance Rulings under section 28EAof the Customs Act, 1962.
4. In order to avoid overlapping, it is also proposed that where the Authority is dealing with an application seeking advance rulingin the matters of the Act, the Revenue Member shall be the Member referred to in sub-clause (i) of clause (c) ofsub-section (3).
5. These amendments will take effect from 1st April, 2018.
Appeal against penalty imposed by Commissioner (Appeals) under section 271J
1. Section 253 of the Act inter-alia provides that any assessee aggrieved by any of the orders mentioned in sub-section (1) of the said section may appeal to the Appellate Tribunal against such order.
2. It is proposed to amend clause (a) of the said sub-section so as to also make an order passed by a Commissioner (Appeals) under section 271J appealable before the Appellate Tribunal.
3. This amendment will take effect from lst April, 2018.

Amendments to the Prevention of Money Laundering Act, 2002

Corporate fraud included in Scheduled Offence under PMLA
1. Section 447 of Companies Act is being included as Scheduled offence under PMLA so that Registrar of Companies in suitable cases would be able to report such cases for action by ED under PMLA provisions.
2. Section 447 of Companies Act deal with “Punishment for fraud”. The term “fraud” is a commonly used one, but the new law for company has a clear explanation for the term “fraud”, which is explained below:

“fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders, or its creditors, or any other person, whether or not there is any wrongful gains or wrongful loss.

1. Interestingly, the law also explains the terms “any wrongful gain or wrongful loss”, which runs as under:

“wrongful gain” means the gain by unlawful means of property to which a person gaining is not legally entitled.

“wrongful loss” means the loss by unlawful means of property to which a person losing is not legally entitled.

1. Thus, as per section 447, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in fraud but which may extend to three times of the amount involved in the fraud. Where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

B. INDIRECT TAX PROPOSALS

Changes related to Customs affecting IGST
1. Exemption has been proposed of integrated tax leviable under section 3(7) of Customs Tariff Act, 1975 on aircrafts, aircraft engines and other aircraft parts imported under cross-border lease during the period from 1st July 2017 to 7th July 2017 subject to payment of IGST leviable under section 5(1) of IGST Act, 2017 on the said supply. Through this proposal the exemption is being given retrospective effect as Notification No. 50/2017- Customs, amended by Notification No. 65/2017- Customs had already provided such exemption w.e.f. 8th July 2017.
2. Refund of any integrated tax which has been paid can be claimed after filing of refund application within a period of 6 months from the date on which Finance Bill, 2018 receives assent of the President.
Proposals involving change in Excise Duty Rates
1. Levy of Road and Infrastructure Cess on motor spirit commonly known as petrol and high speed diesel oil @ Rs. 8 per litre [Earlier NIL].
2. Abolition of Additional Duty of Excise (Road Cess) on motor spirit commonly known as petrol and high speed diesel oil [Earlier Rs. 6 per litre].
3. Basic Excise duty on petrol and diesel (branded and unbranded) has been reduced by Rs. 2 per litre.
4. Road and Infrastructure Cess on petrol and diesel manufactured in and cleared from 4 specified refineries located in the North-East has been proposed @ Rs. 4 per litre. [Earlier NIL].

Service Tax
1. Services provided or agreed to be provided by the Naval Group Insurance Fund by way of life insurance to personnel of Coast Guard, under the Group Insurance Schemes of the Central Government, are proposed to be exempted from service tax for the period commencing from the 10th September, 2004 and ending with the 30th June, 2017.
2. Services provided or agreed to be provided by the Goods and Services Tax Network (GSTN) to the Central Government or State Governments or Union territories administration, are proposed to be exempted from service tax for the period commencing from 28th March, 2013 and ending with the 30th June, 2017.
3. Consideration paid to the Government in the form of Government’s share of profit petroleum in respect of services provided or agreed to be provided by the Government by way of grant of license or lease to explore or mine petroleum crude or natural gas or both, is proposed to be exempted from service tax for the period commencing from 1st April, 2016 and ending with the 30th June, 2017.

C.RECENT GST UPDATES

E-Waybill Mechanism
1. E-way bill is an electronic document generated on the GST portal evidencing movement of goods. E-way bill is a mechanism to ensure that goods being transported comply with the GST Law and is an effective tool to track movement of goods and check tax evasion.
2. The Central Government vide Notification No.74/2017 dated 29-12-2017 has notified 1st day of February, 2018, as the date from which the provisions of E-way bill system as notified in Notification No. 27/2017 – Central Tax dated 30^th August, 2017 shall come into force.
3. As per the decision taken by the GST Council in its 24^th meeting held on 16-12-2017, the trial run for implementation of nation wise E-Way Bill system was already in progress from 16^th to 31^st January, 2018. The Rules for implementation of nationwide e-way Bill system for Inter-State movement of goods on a compulsory basis has been notified with effect from 1st February, 2018. This will bring uniformity across the States for seamless inter-State movement of goods. While the states have already been given the option to choose the relevant date (on or before 01-06-2018) from which E-way will be effected for intra state movement of goods, only 13 states as on 25-01-2018 have issued notification for introducing E-way bill w.e.f 01-02-2018 for intra state movement of goods having consignment value exceeding Rs. 50,000/-.
4. The Uniform System of e-way Bill for inter-State as well as intra-State movement will be implemented across the country by 1st June, 2018.
5. Forms to be furnished for generating E-way bill

Forms	Particulars
GST EWB – 01	Information to be furnished prior to commencement of goods and generation of E-way bill.
GST EWB – 02	For generation of consolidated E-way bill in case multiple consignments are to be transported in one conveyance
GST EWB – 03	Report to be furnished by proper officer in respect of inspection and verification of goods in transit within 24 hrs of inspection and final report within 3 days of such inspection.
GST EWB – 04	Information to be uploaded by the transporter, where a vehicle has been intercepted and detained for a period exceeding thirty minutes.

1. Who shall generate E-way Bill

E-way bill is to be generated by the consignor or consignee himself if the transportation is being done in own/hired conveyance or by railways by air or by Vessel. If the goods are handed over to a transporter for transportation by road, E-way bill is to be generated by the Transporter. Where neither the consignor nor consignee generates the e-way bill and the value of goods is more than Rs.50,000/- it shall be the responsibility of the transporter to generate it.

Further, it has been provided that where goods are sent by a principal located in one State to a job worker located in any other State, the e-way bill shall be generated by the principal irrespective of the value of the consignment.

Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN) shall be made available to the supplier, the recipient and the transporter on the common portal.

E-way bill is to be issued irrespective of whether the movement of goods is caused by reasons of supply or otherwise. In respect of transportation for reasons other than supply, movement could be in view of export/import, job-work, SKD or CKD, recipient not known, line sales, sales returns, exhibition or fairs, for own use, sale on approval basis etc.

1. Documents to be carried by a person in charge of a conveyance
Invoice or bill of supply or delivery challan and
copy of the e-way bill or the e-way bill number

1. Validity of E-way bill or consolidated E-way bill

Distance	Validity Period
Upto 100 Kms	One Day
For every 100 km or part thereof thereafter	One additional day

Note: The e-way bill generated under Rule 138 of the Goods and Services Tax Rules of any State shall be valid in every State and Union territory.

1. E-way bill is not required to be generated:
where the goods being transported are specified in Annexure to Rule 138(14);
where the goods are being transported by a non-motorised conveyance;
where the goods are being transported from the port, airport, aircargo complex and land customs station to an inland container depot or a container freight station for clearance by Customs; and
in respect of movement of goods within such areas as are notified under clause (d) of sub-rule (14) of rule 138 of the Goods and Services Tax Rules of the concerned State.

1. As per latest information available applicability of E-way Bill has been extended upto date to be notified. However, an official notification to that effect is awaited.

Time Limit for filing Returns
1. The time limits for filing of various returns under GST have undergone a lot of changes by way of notifications. As on date, the revised time limits for filing of various returns under GST have been summarized herein under:

FORM GSTR 1 : Details of outward supply effected during the period Notification No. 71/2017 – Central Tax Notification No. 72/2017 – Central Tax
Type of Taxpayer	Period	Last Date
Quarterly Furnishing for Taxpayers with aggregate turnover upto Rs. 1.5 crores	July – September, 2017	10^th January, 2018
	October – December, 2017	15^th February, 2018
	January – March, 2018	30^th April, 2018
Monthly Furnishing for Taxpayers with aggregate turnover in excess Rs. 1.5 crores	July – November, 2017	10^th January, 2018
	December, 2017	10^th February, 2018
	January, 2018	10^th March, 2018
	February, 2018	10^th April, 2018
	March, 2018	10^th May, 2018

FORM GSTR 4 : Quarterly Return for persons opting for Composition Scheme Notification No. 59/2017 – Central Tax
Period	Last Date
July – September, 2017	24^th December, 2017
October – December, 2017	18^th January, 2018
January – March, 2018	18^th April, 2018

FORM GSTR 5 : Return by a Non-Resident Taxable Person Notification No. 68/2017 – Central Tax
Period	Last Date
July – December, 2017	31^st January, 2018
January, 2018	20^th February, 2018
February, 2018	20^th March, 2018
March, 2018	20^th April, 2018

FORM GSTR 5A : Return by a Person supplying OIDAR services Notification No. 69/2017 – Central Tax
Period	Last Date
July – December, 2017	31^st January, 2018
January, 2018	20^th February, 2018
February, 2018	20^th March, 2018
March, 2018	20^th April, 2018

FORM GSTR 6 : Return by a Input Service Distributor Notification No. 8/2018 – Central Tax
Period	Last Date
July, 2017 – February, 2018	31^st March, 2018
March, 2018	13^th April, 2018

Waiver of Late Fees on Delayed Filing of Returns
1. The late fees for delayed filing of return under the GST Act were initially kept at Rs. 100/- per day under Central Goods and Service Tax Act and Rs. 100/- per day under State Goods and Service Tax Act.
2. Subsequently, the ministry has come up with various notifications for effecting an overall reduction in the late fees on various returns and forms under the GST Acts at Rs. 10/- per day where there is no tax payable under the Act and at Rs. 25/- per day otherwise each under CGST Act and SGST Act.
Changes related to Composition Scheme
1. The threshold limit for availing the option of choosing composition scheme was initially set at Rs. 75 lakhs (Rs. 50 lakhs for special category states). However, the threshold limit has been subsequently increased and it was last amended and increased to Rs. 150 lakhs (Rs. 100 lakhs for special category states).
2. Initially manufacturers opting for composition scheme were to pay taxes at the rate of 2 percent of their turnover. However, vide Notification No 1/2018 dated 1/1/2018, the rate of tax under the composition scheme for manufacturers have been reduced to 1 percent of their turnover.
3. In case of traders, initially tax at the rate of 1 percent was payable on aggregate turnover (including exempt and nil rated goods). However, vide Notification No 1/2018 dated 1/1/2018, it was notified that for the purpose of calculating tax payable under composition scheme, the turnover of only taxable goods shall be considered. Therefore, the traders registered under the composition scheme shall now be liable to pay tax only on their taxable turnover of goods.
4. The time limit for filing FORM GST ITC-03 for intimation of stock lying as on the date of opting of composition schemehas been increased from the old time limit of 90 days to 180 days from the day when person opting for composition scheme commenced payment of tax under the scheme.

Changes to related to Joint Development Agreements
1. With transfer of rights in land being taxed under GST, there was hardship on landowners and developers entering into joint development agreement whereby the GST on the transfer of development rights was leviable at the time the joint development agreement was entered. This resulted in cash flow impact on the developer who had to pay GST upfront and take credit of the same to be adjusted at a later stage.
2. To remove this hardship, the Government vide its Notification No 4/2018 – Central Tax (Rate) has taken up the specific case of Transfer of Development Rights (TDR). It is specified that in case of supply of services by transferor of development rights who received consideration in form of construction service of complex etc. and the developer who supplies construction service against consideration in form of TDR, the liability to pay GST shall arise for both parties at the time when the said developer transfers possession or the right in the constructed complex, building or civil structure, to the person supplying development rights.
3. An important thing to note in this regard is that the both the landowner and the developer are eligible to take Input Tax Credit of the GST charged on each other at the time when the developer transfers possession or the right in the constructed complex, building or civil structure, to the landowner. However, by the time the same happens, a major portion of the revenue from the project would have been realised and GST on the same would have been collected and paid.
4. In such a scenario, the fate of the accumulated ITC balance, if any, created as a result of this GST charged on each other for both the developer and the landowner shall be a cause of concern and might become a reason for unnecessary blockage of funds of both the parties.

Cancellation of Registration
1. The persons who were liable to be registered under the provisions of the erstwhile Acts but were not required to be registered under the GST Act had to compulsorily migrate to GST and then apply for cancellation of registration in Form GST REG 29. The last date for filing this form was extended to 31^stMarch, 2018 from 31^st December, 2017. Therefore, anyone who could not file this form in time can now file the same within 31^st March, 2018.
2. Further, the CGST Rules imposed a restriction on a registered person under GST to prohibit it from applying for cancellation for a period of one year from the effective date of restriction. This restriction has been done away with. In effect, in case of voluntary registration, the registered person may apply for cancellation of registration even before expiry of one year from the effective date of registration.

Change with respect to Input Service Distributor
1. It has been notified that a registered person having same PAN and state code as an ISD may transfer the credit of common services to ISD. [Notification No. 3/2018-Central Tax, dated 23rd January 2018].

Extension of Benefit of Refund on ITC Availed for Export of Goods
1. The benefit of refund of ITC availed in respect of inputs received for export of goods and ITC in respect of other inputs and input services to the extent used in making such export of goods has been extended to supplies received on which supplier has availed benefit of Notification no. 78/2017-Customs and 79/2017-Customs.
2. Earlier, refund of ITC on supplies received from the supplier claiming benefit of only Notification no. 40/2017-Central Tax (Rate) and 41/2017- Integrated Tax (Rate) were allowed.
Reverse Charge on Renting of Immovable Property by Government
1. The Government’s Notification No. 3/2018- Central Tax (Rate) has brought services by Central Government, State Government, UT or local authority by way of renting of immovable property to a registered person into the ambit of Reverse Charge. Therefore, w.e.f. 25th January 2018, a registered person shall be liable to pay GST on such service.

Refund of IGST paid on Export of Services
1. With respect to services, it has now been provided that application for refund of IGST paid on services exported shall be filed in FORM GST RFD-01.
2. Earlier, there was no specific mention of services under the rules.

Extension of Restriction on Refund of IGST paid on Export of Goods or Services
1. A restriction has been put into place for any exporter of goods or services claiming refund of IGST paid on such exports that such exporter should not have received supplies on which the supplier has availed the benefit of Notification no. 48/2017-Central Tax, 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate).
2. Now Notification No. 78/2017-Customs and 79/2017-Customs have also been added to the list of such notifications. Therefore, if an exporter of goods or services has received supplies on which supplier has availed benefit of the aforementioned notifications, then such exporter shall not be allowed refund of IGST paid on such exports.