Every service provider in India is aware of service tax and many have at some point dealt with a penalty for late filing of service tax return. For those who are not aware, service tax is an indirect tax that is levied on the services provided by any service provider. Consumers are responsible for paying this service tax which is included in the invoice, and service providers are responsible for collecting it and paying it through the service tax return.
Our second part in the GST FAQs series deals with the Composition Scheme which was introduced under the Goods and Services Act keeping the best interests of small businesses in mind. SMEs often face the challenges of maintaining various compliances with the statutory bodies of the country in a timely manner.
Composition Scheme permits the taxpayer to choose for making GST payments as a fixed percent of the business turnover rather than paying those taxes under regular norms of the GST law.
Previously we discussed the parameters of determining a company to be considered as engaged in “active business outside India” and the POEM guidance associated with it. Today we talk about the guidelines for those companies that are not engaged in active business outside India.
POEM Guidance for companies not engaged in active business outside India
For companies not engaged in active business outside India, a two-stage process for the determination of Place of Effective Management is provided as follows:
In our previous post, we discussed the idea of Place of Effective Management and how it came into existence. Today we will be focusing on the POEM guidance for companies that are engaged in active business outside India.
Determination of “active business outside India”
A company shall be considered as engaged in “active business outside India” if the passive income is not more than 50% of its total income; and if the following conditions are met –
The idea of Place of Effective Management or POEM was first introduced in the Finance Act 2015 for the purpose of determining the residential status of foreign businesses. As per the act, any business having its place of effective management in India will be considered as an Indian resident and accordingly, it’s global income will be taxable in India.17
But the Finance Act was missing the entire criteria and process for determining the place of effective management. For this purpose, the Central Board of Direct Taxes (CBDT) introduced the Guiding Principles for determination of Place of Effective Management (POEM) of a Company.
You have always dreamt of starting a business of your own and finally, you got the right business idea which you are very enthusiastic and pumped up about. What’s the next step after this? What do all successful entrepreneurs have in common that makes them turn their small startup businesses into multi-million dollar companies? Well, one common advice that all these entrepreneurs would suggest is to have a sound financial plan for your business.
Planning is bringing the future into the present so that you can do something about it now.
Section 15 of the CGST Act and Determination of Value of Supply, CGST Rules, 2017 contains the provisions related to the valuation in GST for the supply of goods or services made in different circumstances and to different persons.
Valuation in GST
Every fiscal statue makes provision for the determination of value as the tax which is normally payable on ad-valorem basis. In GST also, the tax is payable on ad-valorem basis i.e percentage of value of the supply of goods or services.
Section 35 of the CGST Act and “Accounts and Records” Rules (hereinafter referred to as rules) provide that every registered person shall keep and maintain all records at his principal place of business. It has cast the responsibility on the owner or operator of warehouse or godown or any other place used for storage of goods and on every transporter to maintain specified records.
It also provides that every registered person whose turnover during a financial year exceeds Rs 1 crore shall get his accounts audited by a chartered accountant or a cost accountant.
On 28th June 2017, under sub-section (1) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government notified the CGST rate schedule applicable to goods. This notification shall come into force with effect from the 1st day of July 2017.
As per the Goods and Services Tax Regime, both Central GST (CGST) and State GST (SGST) will be levied on all supplies that are intra-State in nature. For supplies that are inter-State, Integrated GST (IGST) will be levied on it. The revenue generated on the same will be shared by both the Central and State Government.