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Setting up Your Accounts-Part 1

by Sanjeev Archak Sanjeev Archak No Comments

When you are starting your business handling accounting and compliance can be daunting. There are a few  common mistakes that early stage businesses commit; of course with the right advice you can avoid these pitfalls. Part 1 of this blog looks at setting up your accounting system.

Open a Bank Account

It is best to open a current account for your business. This current account must be used to deposit all your sales income & paying all the business expenses. Of course there is a wide choice of banks to choose from, here are some factors to be kept in mind while choosing a bank account:

Bank charges: look at how much the bank charges for NEFT/RTGS, ATM Withdrawals, foreign currency receipts and payments, forex rates etc.

Minimum balance requirements: check the minimum balance requirements in the account. Also ease of operating the net banking must  be checked.

Mobile banking: choose a bank which offers mobile banking. This will save you a lot of time.

Separate Your Finances

There needs to be separation between yourself and the business. The individual and the business are not necessarily the same. How this works will depend on your legal structure:

For Sole Traders/Owners: if you’re a self-employed sole trader then your business and personal money are one and the same, legally speaking. But to manage your accounts, it’s still essential to have two separate bank accounts and to keep detailed financial records.

For Companies: a company is a legal person separate from its shareholders & directors. Companies are required to have bank accounts in company’s name.

Accounting for business and personal money separately allows you to have the best possible overview of how the business is faring – and is vital for tax purposes.

Keeping Tax Records

One can never escape taxes, as a business you will have to pay tax. It is a legal requirement, under GST & Income Tax Law, to have books of accounts. How much tax you have to pay depends on your legal structure. So as a business you must:

Know your tax liabilities: which depends on the legal structure of your business. Tax rates are different for companies & individuals.

Digitise your records: Income Tax Law requires you to maintain records for a minimum of seven years. Similar requirements are there in the Companies Act as well. So it is prudent to digitize your records.

Pay Taxes on Time: by paying taxes on time you will avoid payment of penalty. Let our experts at Integra Books help you with taxes.

Choose Cloud Accounting Software

Put your accounting on the cloud. A good cloud accounting software has the following features:

Ease of Use

Automation

Integration with other Apps

Zoho Books is a cloud accounting software which ticks these requirements. Zoho Books integrates with a whole range of Zoho Apps and will put your entire business on the cloud.

You can read a related blog here. Stay tuned for Part 2.

GST News-GST Interest: Delay in Payment of GST

by Sanjeev Archak Sanjeev Archak No Comments

Here is the latest GST News- GST Interest  on delayed payment of taxes.The Government has started sending out notices for recovery of interest on delayed payment of GST. GST interest has been on the radar of the GST department for a long time. This move comes after the GST collections have been below par this year. The, Central Board of Indirect Taxes and Customs (CBIC), which administers GST in the country, has issued a notification on 10.02.2020 requiring payment of interest.

Notices for payment of interest are being sent for the Financial Years 2017-18, 2018-19 and 2019-20. The CBIC estimates that Rs 45,996 crores remains unpaid to the Government on account of delayed payment of taxes.

Initially, the CBIC insisted that the interest be paid on the Gross Tax Liability (before setting off input credit). However, in a series of tweets the CBIC has clarified that the interest will apply on the Net Tax Liability (after setting off input credit). This is a relaxation given by the Government, despite the Telangana High Court ruling that interest can be charged on the Gross Tax as well.

Provisions of the GST Law

Section 50 of the CGST Act, empowers the Government to collect interest on tax dues. Tax dues are defined as tax payable without including interest, fees and penalty. However, the GST portal does not allow filing of returns without payment of tax. Hence, the Government imposes interest only after payment of taxes and not at the time of filing returns.

Rate of Interest

The rate of interest is 18% p.a.The interest is calculated from the date on which taxes become due till the payment of tax.  The calculation is done based on the net tax paid and the date of filing the return.

GST Return Details

Net Tax Paid

Total Interest

Return Month

Due Date

Date of Filing Return

Delay in Days

IGST

CGST

SGST

 Interest

IGST

CGST

SGST

Dec 19

20/01/2020

18/02/2020

29

100

100

100

18%

1.43

1.43

1.43

Nov 19

20/12/2020

18/02/2020

57

200

200

200

18%

5.62

5.62

5.62

Oct 19

20/11/2020

18/02/2020

90

200

200

200

18%

8.88

8.88

8.88

 

 

 

Total

500

500

500

 

15.93

15.93

15.93

How to pay interest?

The interest has to be paid after a notice has been received from the GST department. The notice so issued will contain the interest payable for every financial year. The interest on late payment of tax has to be paid  in Form DRC 03.This challan is available online on the GST portal. A copy of the challan has to be sent to the jurisdictional GST Officer. Further, such payment has to be made within 7 days of receiving the payment notice.

Final Thoughts

The levy of interest on delayed payment of tax is not new in India. Interest has been levied on delayed payment of income tax, service tax, and value added tax since long. It’s only now that the GST department has started the interest levy as well. However, on might argue that The GSTN requires a late fees payment of either Rs 100 or Rs 10 per day if returns are not filed on time. 

Delayed filing of returns will now incur fees for late filing as well as interest for delayed payment of taxes. Always file your returns on time. We can help. Get in touch today.

Penalties for Fake Invoices

by Sanjeev Archak Sanjeev Archak No Comments

Ever since the introduction of GST, input credit has become a focus point for most tax payers. GST was supposed to have automated the process claiming credit. However, this facility has not seen light of the day. Further, confounding the problems is the recent ruling imposing input credit restrictions. In October last year GST department mandated that  a tax payer will be able to claim only 10% of input credit if the vendor has not filed his returns. The Government was forced to bring in this rule as only a handful tax payers were filing GST 1 returns. Another major problem the Government is battling is that of fake GST invoices. In order to combat this problem the Government has announced penalties for using fake invoices. This penalty will be applied to both persons accepting & making the fake invoices.

Recent Budget Amendments

The Budget presented by the Finance Minister earlier this month has introduced a new Section called Section 271AAD in the Income Tax Act. This Section provides for penalty for:

  1. A false entry in the books of accounts
  2. Omitting entries in the books of accounts which are required to compute total income with an intention to evade tax

It is important to note that these penalties will be applicable from 01.04.2020. The Assessing Officer (the Income tax officer examining books & returns) is empowered to direct the tax payer to pay this penalty if he finds there are fake entries or omissions in the books of accounts.

What is the quantum of penalty?

The penalty shall be equal to the aggregate amount of such false entry or omitted entry.

What is a false entry?

False entry has been defined to include the use or intention to use:

  1. A false or forged document such as a false invoice or in general a false piece of documentary evidence
  2. An invoice for supply of goods or services where the actual goods or service has not been delivered
  3. Invoice from or to a person who does not exist

The definition is wide ranging one which includes even the “intention to use” and further it goes to include not just invoices but all other documentary evidence. This could include balance confirmations from vendors/customers or any other correspondence with business associates.

Who shall be liable to pay penalty?

The penalty shall be levied not only on the person using the false entry but also on the person providing such false entry.

This amendment has far reaching consequences. The Government has now synced both Income Tax and GST data bases so that there real time information sharing. If a tax payer gets found out for a false entry in an Income Tax proceeding, it is safe to assume that, he will be sent a notice under the GST law as well.

Suitable changes have been made to Section 122 & Section 132 of the IGST Act, which deal with penalties for improper invoicing and frauds. Apart from monetary fines, GST registration can also be cancelled by the authorities.

So every business owner needs to be vigilant and not indulge in unethical or fraudulent business practices. It is evident that penalties for fake invoices will be steep.

How to Manually File GST Refund Claims

by Sanjeev Archak Sanjeev Archak No Comments

The Government of India is introducing new policies for the benefit of the nation. Last year in November government introduced Demonetization to prevent hoarding of black money and in July 2017 it introduced Goods and Services Tax, a group of indirect taxes which replaced a lot of indirect taxes levied by State and Central Government. In November 2017 in order to simplify the process of GST refunds, Government introduced a Circular No. 17/17/2017 stating the process of –“How to Manually File GST Refund Claims”. Here I will help you to understand the procedure in a better and easy way.  Read more

GST FAQs on Composition Scheme

by Sanjeev Archak Sanjeev Archak No Comments

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.

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Valuation in GST – Rules for Supply of Goods or Services

by Sanjeev Archak Sanjeev Archak No Comments

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.

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Accounts and Records under GST

by Sanjeev Archak Sanjeev Archak No Comments

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.

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CGST Rate Schedule Notified By The Government

by Sanjeev Archak Sanjeev Archak No Comments

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.

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Ways to File an Appeal under GST

by Sanjeev Archak Sanjeev Archak No Comments

Previously, we spoke about the various Anti-Profiteering rules under GST Law. Today we will be talking about the ways of filing an appeal under GST regime.

Laws, in general, impose two kinds of obligations. The first obligation is related to tax and the second obligation is related to the procedure. Any registered taxpayer’s compliance with these two types of obligation is put to check by the various officers of the law.

Sometimes this entire process might lead to certain situations of non-compliance which further leads to a dispute between the taxpayer and the concerned tax officer. To put these disputes in check, there are appeal mechanisms set in place.

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