There could be more measures in the offing for startups following the budget announcements. The government is working on another set of measures that could be rolled out soon to make it easier for them to do business in the country.
A new set of tax return forms, aimed at saving angel investors and startups from any questioning by tax officers, will be rolled out by September.
“We would be modifying the return forms, which will allow the system to check if the investment made in the startup is genuinely made by someone capable of making that kind of investment,” a senior government official said.
The move is in line with the e-verification for angel investors in the budget. E-verification seeks to help establish the identity of the investor and source of his funds. Consequently, funds raised by startups will not require any kind of scrutiny by the income-tax department.
The government has extended the tax benefit to category-II Alternative Investment Funds (AIFs). These would also, like category-1 AIFs, not face scrutiny on the valuation of shares held by them in startups.
EOUs can import from Pakistan without paying Customs duty
We are a 100 per cent EOU and manufacturer-exporter of textile readymade garments. We are getting garment orders from our buyer from USA and we have to import fabric from Pakistan. However, as per notification 5/2019-Cus dated February 16, 2019, duty of 200 per cent is applicable under new HS code no. 9806.00 for imports from Pakistan. Can we import fabric from Pakistan under the EOU scheme without paying duty?
As mentioned by you the said notification 5/2019 has inserted anew tariff entry at 98060000 for all goods originating in or imported from Pakistan. The 200 per cent duty is levied against that entry 98060000, which becomes part of the First Schedule to the Customs Tariff Act, 1975. As an EOU, you claim exemption on imported goods under notification no. 52/2003Cus dated March 31, 2003. That notification grants exemption on goods imported by EOUs from the whole of customs duty leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (besides other duties and taxes). Therefore, you can import fabric from Pakistan under the said notification 52/2003 without payment of duty. We are holding an EPCG authorisation. We did some job-work for an exporter by way of embroidery on garments and invoiced to the exporter for the job-work done.
Higher Surcharge to Impact 40% FPIs: Finmin Math
A quick analysis by the finance ministry shows that about 40% of foreign portfolio investors (FPIs) — those that follow the trust structure — will be impacted by the higher surcharge levied in the budget. The majority 60% of FPIs that use the corporate structure will not be impacted.The finance ministry is trying to ascertain why these FPIs, mostly coming in through tax havens, are using the trust structure and how this benefits them, a government source said. Any decision on this will need to consider that special dispensation for FPIs will distort the tax structure, the person said.
FPIs Mull Going ‘Corporate’, But Changing Won’t be Easy
At least 30 big-ticket foreign portfolio investors (FPIs) have reached out to their advisers, seeking advice on converting themselves from trusts and association of persons (AOPs) to corporates after the budget increased the surcharge on the super-rich, said two people aware of the developments.
The funds that have sought advice include two leading US-based mutual funds and a European hedge fund managing over US1 billion of assets in India.
Lawyers and tax consultants have warned FPIs against carrying out such a change in structure since that could invoke the provisions of domestic tax avoidance laws. As per the General Anti-Avoidance Rules (GAAR), tax implications cannot be the sole reason for a fund to make changes to its structure or jurisdiction. If invoked, GAAR could result in penalties and legal action against these funds.
Breather for Exporters as Centre to Pay ITC Refund for State GST
In a major relief to exporters, the Centre will now pay the input tax credit (ITC) refunds of state taxes, thereby reducing transaction time and costs, and manual interface in claim processing.As per industry, there is a huge difference in the amount claimed, state goods and services tax (SGST) sanction amount received from central tax authority and the amount actually disbursed.
“The central government has been authorised to pay the amount of refund towards state taxes to the taxpayers,” according to the 2019-20 budget.
At present, the taxpayers file refund claims with the central tax officer, who clears half the claims, and the rest are cleared by the state tax authorities, leading to higher time taken in claim processing and refund sanctioning.
Exporters also say that ITC refund is partly electronic and partly manual. The exporter files refund application at the portal, takes a printout along with acknowledgement and carries it to GST authorities in hard copy along with required documents, which too vary from authorities to authorities. The physical interface adds to the transaction time and cost.
Tax Incentive for affordable housing
The Finance (No.2) Bill, 2019 has many measures which are forward looking in the sense that some incentives are given to the taxpayers. At the same time it also contains a bundle of regulatory measures warranting strict adherence / compliance for enjoying the tax benefits provided therein.
One of the measures introduced in the Finance (No.2) Bill, 2019 is directed towards affordable housing. Two sections are the focus of this refresher viz. section 80EEA providing extra deduction for home buyers and section 80-IBA which is amended to enlarge the scope of incentive for housing projects. Thus the measures satisfy the personal taxpayers by giving extra deduction while computing total income and also provide incentive for housing projects by enlarging the towns and cities where the project is located.