April 8, 2020 / Goods and Services Tax (GST)

Govt to Vet GST, Income Tax and Transfer Pricing Filings to Find Leakage

The government is planning to compare data filed by companies with different departments to detect discrepancies and check whether there’s been any leakage in tax collected, raising the prospect of even greater scrutiny, said people with knowledge of the matter. Goods and services tax (GST) returns, income tax filings and transfer pricing submissions will be analysed and synchronised in a manner that hasn’t been possible before, they said.
Multinationals including banks, fast-moving consumer goods (FMCG) companies, tech firms and automobile manufacturers fear that such cross-referencing of data will lead to increased scrutiny and eventually higher tax outgo.
Such comparisons weren’t possible earlier as the data wasn’t uniform nor was it organised in manner that would allow such matching. It was also the case that various departments didn’t ordinarily share data.

Freebies may be Freed of GST Payment Burden
Buy one and get one, free samples and additional quantities for the same price — the mainstay of marketing for FMCG, pharmaceutical and textile companies and food and retail chains may no longer be taxed.
Tax authorities had sent notices to companies in these sectors that had offered such freebies, which had become taxable after the goods and services tax was rolled out last year.
A panel of officials under the GST Council, the decision-making body of the tax, has favoured doing away with GST on freebies. The final call on the issue will be taken by the Council, a government official told ET. The Law Review Committee said in a report submitted to the Council that the total consideration paid for such goods should be chargeable to GST and input tax credit should not be denied in such cases.
Essentially, the price paid by the consumer for the goods would be considered for the levy of GST, even though one item may have come free with another. By that logic, the input taxes on both items would be available to be set off against the final tax.
Direct tax law report in late September
The term of the Arbind Modi task force on framing new direct tax law has been extended by another month, sources said. The draft direct tax law is unlikely to suggest wide sweeping overhaul of corporate or income taxes.
It will focus on better administration through improvements in revenue targeting, data collection, and tax intelligence and use of technology.
The panel has been given more time by Finance Minister Arun Jaitley, who is of the view that such important planned reforms need more deliberations before they are up for legislation.
EX-factory sales may attract IGST
The government may soon announce that integrated goods and services tax (IGST) will be imposed on ex-factory sales which happen in one state and the buying company is located in another state. Also, the next GST Council meeting, slated for September, may take up the issue of double taxation for goods imported on the basis of cost, insurance and freight (CIF). Since GST is destination-based, tax is imposed in the state where the goods are bought. But, if a buyer, say in Gujarat, decides to buy goods from the seller’s factory in Maharashtra, it becomes a complicated matter whether the tax will be imposed in Maharashtra or Gujarat. The government is likely to say that IGST will be imposed in such a situation, sources said.
GST disclosure norms in Tax Audit Report
The Central Board of Direct Taxes, Ministry of Finance vide G.S.R. 666(E) dated 20th July, 2018 notified the Income-tax (8th Amendment) Rules, 2018 vide which amendments/new insertions were made in Appendix II, in Form No. 3CD. Form 3CD is the part of Tax Audit Report issued by a Chartered Accountant in respect of Tax Audit carried out as per Section 44AB of the Income-tax Act, 1961.
Accounting for future bad loans dents NBFC financials
Non-banking financial companies appear to be feeling some heat because of new accounting rules.
The Indian Accounting Standard (Ind AS) norms now require NBFCs to provide for losses on bad loans by anticipating future losses, as opposed to waiting for loans to go bad as was the case under the earlier system.
The Reserve Bank of India has postponed the implementation of the norms for banks by a year, however, NBFCs have to follow it from the June quarter onwards. This provision for future bad loans has already resulted in a hit of at least Rs.30 billion so far, shows a Business Standard analysis.
L&T Finance Holdings (LTFH) mentioned that it accounted for Rs.18 billion against its reserves during the transition to the new accounting new norms. It already had provisions of Rs 12 billion under the old accounting standards as of March 2018.
Tax audit under presumptive taxation scheme not included in specified no. of tax audit assignments: ICAI
The Institute of Chartered Accountant of India (ICAI) has informed that audits conducted under Section 44AD, 44ADA and 44AE of the Income-tax Act, 1961 shall not be taken into account for the purpose of reckoning the “specified number of tax audit assignments”.