AMNESTY LIKELY FOR ASSETS CONCEALED ABROAD

AMNESTY LIKELY FOR ASSETS CONCEALED ABROAD

The Government may offer an “Offshore Voluntary Compliance Scheme” for undisclosed bank accounts and assets held abroad. “With so many ways to get information, this is the right time to think about such a scheme,” said a senior Finance Ministry official. He, however, clarified that the tax authorities may not insist on the money being brought back into the country or invested in specific areas. However, “the Government may consider levying a penalty at the minimum rate of 100 per cent,” the official said. The penalty rate on tax dues ranges from 100-300 per cent The broad contours of the scheme will be similar to the various Voluntary Disclosure Information Schemes (VDIS) offered for undisclosed incomes/assets held in India. But the authorities may not ask for disclosure of the money's source.

NO immunity from prosecution

Also, payment of tax and penalty would not give any immunity from criminal prosecution, the official clarified. An expert group, headed by the Central Board of Direct Tax (CBDT), had suggested an amnesty scheme for undisclosed accounts and assets held by resident Indians abroad. But since information about such accounts was not readily available, it was felt that such a scheme would not be feasible. Suggestions for such a scheme were also made during the meeting between the Finance Minister and top industrialists on August 1. According to the official, once the tax authorities get information from the Organisation for Economic Co-operation and Development, the Income Tax Overseas Unit, the Tax Information Exchange Agreement and media reports, it will approach the person concerned, who can refuse to accept the fact, but only if he/she has evidence. If the information is proved correct, a tax demand will be raised. And, if the person concerned refuses to pay, he/she can be prosecuted.

The Government has signed a tax information exchange agreement with five nations, including Cayman Islands and the Bahamas. Of these, four are in place and 17 more are expected to be signed. So far, nine VDISs have been floated, starting in 1951; the last one was in 1997. The last scheme is estimated to have collected Rs 10,100 crore as tax.

Courtesy - www.thehindubusinessline.com

SERVICE TAX PRIMER

A small write up on some basic aspects of service tax is given below:

Which is Act governing Service Tax?

The Service tax is governed by The Finance Act, 1994, as amended from time to time. This is the only tax law which has no separate Act. However, under the provisions of The Finance Act, 1994, several rules are enacted like, Service Tax Rules, 1994, Cenvat Credit Rules, 2004, Service Tax (Determination of Value) Rules, 2006, Export of Service Rules, 2005, etc. Some of the provisions of Central Excise Act, 1944 are also made applicable to service tax especially in respect of assessment, recovery of tax, penalty, appeals etc.

Service tax is applicable only on the 117 services specified in the Act and your service does not fall in any of those services, you are out of purview of service tax.

Who should take registration under Service Tax Law?

Section 69 of the Finance Act, 1994 gives the power to the Central Government to specify the persons who are liable to take registration under Service Tax. Accordingly, the Government by Notification No. 26/2005, specified that all input service distributors and all other persons whose aggregate value of taxable service in a year exceeds Rs. 9 Lakhs should take a registration. This means that you have to take registration immediately on your turnover crosses Rs. 9 Lakhs, though you have to collect and pay service tax only if your turnover exceeds Rs. 10 Lakhs.

How can I take the registration?

To take registration, you have to submit the application in Form ST-1 with your constitution document (Memorandum of Association or Partnership Deed, as the case may be), copy of PAN card, proof of address, and proof of identity for directors etc. However, these requirements can vary from range to range, as some range superintend may ask more documents for registration. There is no specified list of documents.

Now the registration is also made electronic. For that you go to www.aces.gov.in and register online. In that case, you have to take a print out of the form after submission and deliver to the range superintendent with the required attachments.

Registration should be taken within 30 days from the date of providing taxable service or date of reaching the threshold limit of Rs. 9 Lakhs turnover.

Service tax registration is given for each premises or offices from where an assessee is providing taxable services and raising invoices for the same.

If you have multiple branches at multiple location and you plan centralised billing, you can take a centralised registration.

A single registration is sufficient, even if the applicant is providing more than one taxable services. But he has to mention all the services being provided in the application form.

What are the statutory obligations, once you are registered under Service Tax?

The service provider is required to collect the service tax from the service receivers and remit to the Central Government. The major statutory obligations are given below:

1.      To collect the service tax due and remit the same within the due date to the Government - Companies have to remit the service tax on a monthly basis and all other assessees have to remit on quarterly basis. The due date is 5^th of the succeeding month for companies and 5^th of the month succeeding the quarter in the case of all others. (In the case of electronic payment, 6^th). But in the case of the last month/quarter, the due date is 31^st March, for all cases.

2.      To file the half yearly service tax return within 25^th of the month following the half year- This means you have to file the return in Form ST-3 on or before 25^th of October and 25^th of April, every year.

3.      You have to file the return even if you do not have any taxable services during the period, so long as your registration is active.

Who is liable to pay Service tax?

Generally, service tax is payable by service provider.

But in the case of Goods Transport Agency (GTA), import of services, Sponsorship Services and in the case of agents of mutual fund and insurance, service tax is payable by service receiver. This is called “Reverse Charge Mechanism.”

What are the consequences of not filing the return?

Non-filing of return will attract heavy penalty as per the amendment made in the last budget. The penalty is at the rate of Rs. 100/- per day of default subject to a maximum of Rs. 20,000/-

Further, if it is proved that the default is made knowingly, the department can impose prosecution proceedings also.

Though I took, the registration, my turnover is below the threshold limit. What should I do?

In this case, the assessee has 3 options:

1.      He can continue to collect the service tax, remit the same in time and file the half yearly returns in time, just like any regular assessee. OR

2.      File the half yearly returns in time showing the turnover which is below the threshold limit of Rs. 10 Lakhs as exempted turnover. In this case, he will not be liable to pay any service tax, provided, he has not collected service tax from his clients.

3.      He can surrender the registration and escape from the procedural requirements. He can surrender the registration on line in www.aces.gov.in and return the certificate in original to the jurisdictional Superintend.

I took the registration, but I could not start the business. What should I do? Can I cancel by registration?

If you have not started your business and there are no immediate plans to start it also, you can surrender your registration as per point no. 3 above.

What is CENVAT Credit?

CENVAT Credit is a mechanism by which assessee will get credit of some of the duties and taxes paid for providing taxable services. It is governed by Cenvat Credit Rules, 2004.

A service provider can take credit of service tax paid on input services, excise duty paid on input materials, Additional Duty of Customs leviable under section 3 of Customs Tariff Act on imported inputs and excise duty paid on capital goods. This credit can be set off against his service tax liability and the balance amount only has to be remitted.

He has to give the details of cenvat credit taken and utilised in the half yearly returns.

If the output service is exported, the service provider can claim refund of the accumulated Cenvat Credit.

Should I issue an invoice?

Yes; as per Rule 4A of Service Tax Rules, 1994, every service provider is bound to raise an invoice within 14 days from the date of completion of taxable service.

There is no prescribed format for invoices. But the invoice should contain at least the following details:

• Serial Number
• Name, address and registration number of the service provider
• Name and address of the service receiver
• Description, classification and value of taxable service provided
• The amount of service tax payable – showing separately, the service tax, Education Cess and Secondary and Higher Education Cess

Service tax should be mandatorily shown in the invoice separately. This will help the service receiver to avail the Cenvat credit of the same.

What is the value of taxable services?

As per the Service Tax (Determination of Value) Rules, 2006, the ‘Value of Taxable Service’ means the gross amount received by the service provider for the taxable service provided of to be provided by him.

Tax is payable on the on reimbursement of expenses which are part of service, but not on payments made by service provider as ‘pure agent’ of service receiver.

For certain specified services, a specified percentage of abatement is given from the total value of services.

Rate of service tax and interest on delayed payment

Service tax is payable at the rate of 10% on the value of taxable services. In addition to this, Education Cess at 2% and Secondary and Higher Education Cess at 1% (on the service tax) is payable,  making the total service tax rate to 10.30%.

In case of works contract, instead of paying 10%, assessee has the option to pay 4% on the gross value of contract including the value of materials.

The interest payable on delay in remittance on service tax is:

• 15% in the case of assessees whose turnover in a year is Rs. 60 lacs or less; and
• 18% in other cases

In addition to the interest, assessee will be liable for penalty provisions also.

Penalties under Service Tax

Penalty for major offences imposable on:

• Non-registration or delay in registration – RS. 200/- per day – minimum Rs. 5000/-
• Penalty for late payment of service tax – minimum Rs. 200/- day or 2% of the tax payable, whichever is higher.
• Non filing or delay in filing – Rs. 100/- day subject to a maximum of Rs. 20,000/-
• Suppression of Value of Taxable Services – 200% of tax payable

Defaulters beware!!! Three more credit information Companies .....

We were aware of CIBIL which has become the nightmare of defaulters. Now the Govt. has given license to 3 more credit information Companies viz. M/s Experian Credit Information Company of India Pvt. Ltd. M/s Equifax Credit Information Services Pvt. Ltd. and M/s High Mark Credit Information Services Pvt. Ltd. under the Credit Information Companies (Regulation) Act, 2005.

RBI has in its cicular dated 05.09.2011, directed all banks and financial institutions to submit the quarterly list of suit-filed accounts of Rs.1 crore and above, classified as doubtful or loss, and wilful defaulters of Rs. 25 lakhs or more to CIBIL and/or any other credit information companies.

So the credit information exchange market is getting hotter!!!!

The full text of circular is given below:

SUBMISSION OF CREDIT INFORMATION TO CREDIT INFORMATION COMPANIES - DEFAULTERS OF RS. 1 CRORE AND ABOVE AND WILFUL DEFAULTERS OF RS. 25 LAKH AND ABOVE - DISSEMINATION OF CREDIT INFORMATION OF SUIT-FILED ACCOUNTS

CIRCULAR NO. DBOD.NO. CID.BC.30/20.16.042/2011-12, DATED 5-9-2011 

Please refer to our Circulars DBOD.No.DL.BC.111/20.16.001/2001-02, dated June 4, 2002 regarding submission of credit information to Credit Information Bureau (India) Ltd. (CIBIL) and DBOD No. DL.BC.95/20.16.002/2003-04, dated June 17, 2004 regarding the Dissemination of Credit Information - Role of CIBIL.

2. As you are aware, Certificate of Registration (CoR) has since been issued to 3 Credit Information Companies (CICs), viz., M/s Experian Credit Information Company of India Pvt. Ltd. M/s Equifax Credit Information Services Pvt. Ltd. and M/s High Mark Credit Information Services Pvt. Ltd. to commence the business of credit information under the Credit Information Companies (Regulation) Act, 2005.

3. You are advised to submit the quarterly list of suit-filed accounts of Rs.1 crore and above, classified as doubtful or loss, to CIBIL and/or any other credit information company which has obtained CoR from RBI and of which your bank is a member.

4. In terms of Para 2.9 of Master Circular on Wilful Defaulters dated July 1, 2011, Banks/FIs have already been advised to submit the list of suit-filed accounts of wilful defaulters of Rs. 25 lakh and above as at end-March, June, September and December every year to CIBIL and/or any other credit information company which has obtained CoR from RBI and of which that bank is a member.

5. Further, we advise that the above CICs have been advised to disseminate credit information covering data supplied by banks/FIs on such suit-filed accounts on their respective websites.

PPF Limit is increased to Rs. 1 Lakh

One of the best investment options for a taxpayer, mixing high returns and tax benefits is Public Provident Fund. However the investment per person was limited to Rs. 70,000/- and the Govt now increased the limit to Rs. 1 lac. Readers may remember that the investment in PPF will qualify for deduction under section 80C of the Income Tax Act.

The relevant Press Release is given below:

PRESS RELEASE, DATED 6-9-2011

The Committee on Comprehensive Review of National Small Savings Fund (NSSF) headed by Deputy Governor, RBI has recommended revision of certain provisions of PPF Scheme, 1968 and benchmarking of interest rates on various small savings schemes with the secondary market yields on Central Government securities of comparable maturities with suitable spread.

The Committee has recommended increasing the deposit limit under PPF Scheme from existing Rs. 70,000 to Rs. 1 lakh per annum and fixing of rate of interest on advances against deposits in PPF scheme at 2 percentage points as against the prevailing interest rate on such advances at 1 per cent.

The Committee has further recommended benchmarking interest rate on small saving schemes to interest rate on Government securities of similar maturities with a positive spread of 25 basis points on all schemes except for 50 basis points for 10 year NSC and 100 basis point for Senior citizens Savings Scheme. Recommendations of the Committee have been referred to State Governments and concerned Ministries/Departments of Central Government for their comments.

This information was given by the Minister of State for Finance Shri Namo Narain Meena in a written reply to a question raised in Rajya Sabha today.

Foreclosure charges for Home Loans banned

Press Information Bureau

Government of India

Ministry of Finance

06-September-2011 18:09 IST

Levy of Penalty on Foreclosure of Home Loans

Government, in May 2010, advised Public Sector Banks, Indian Banks’ Association and National Housing Bank that no pre-payment charges may be levied by the lending institutions when the loan amount is paid by the borrowers out of their own funds; and if any pre-payment charges are to be imposed on housing loans, the same need to be reasonable and transparent and not out of line with the average cost of providing these services.

The Public Sector Banks (PSBs) have reported that by and large they do not levy any pre-payment charges when the amount is paid by the borrowers from their own sources.

In general, own funds means funds generated through ‘own sources’ and not through borrowings by any lender. Prepayment of loan by a borrower can take place on account of (i) takeover of his / her loan by other lender, and (ii) out of their own sources. In the first case, the borrower often gets their existing loan refinanced by other lender, if the interest rate offered by other lending institution in the market was lower and attractive.

In terms of RBI guidelines, in the context of granting greater functional autonomy to banks, freedom has been given to scheduled commercial banks, including public sector banks, private sector banks and foreign banks, on all operational matters pertaining to banking transactions.

This information was given by the Minister of State for Finance Shri Namo Narain Meena in a written reply to a question raised in Rajya Sabha today.

Please tax us more !

One of the most extraordinary developments in recent weeks is the demand for higher taxes from rich Westerners.

Earlier this month, 16 business leaders and wealthy individuals in France signed a petition asking the French government to increase tax rates on people like them. One of the many suggestions was an exceptional tax equal to 3% of their income that would be imposed till the budget deficit in their country was reduced to 3% of the gross domestic product. “At a time when the public finances deficit and the prospect of a worsening state debt threaten the future of France and Europe, and when the government is asking everyone to show their solidarity, it seems necessary for us to contribute to this,” they wrote.


Earlier, billionaire investor Warren Buffett had argued in an op-ed published in The New York Times that it is time the US government took away more from the super rich. “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice,” Buffett argued. “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” he wrote.

Buffett and the French petitioners have used terms such as solidarity and shared sacrifice that are usually part of the lexicon of the Left. Whether their call is a truly enlightened move or a cynical ploy to defend them against public ire at a time of great economic distress is unclear to me. But the calls have come from business people who have built their wealth in activities that have not faced popular anger. In short, they are not bankers or hedge fund managers.

Either way, it is worth speculating whether the great tide of tax cuts that swept over the globe over the past 25 years is about to recede. Most Western economies face a fiscal crisis, and have to maintain the complex balance between spending more right now to reignite growth and put in place policies that will help them put public finances in order in the future. The current austerity debates are focused on spending cuts. How soon before higher taxes are put on the table for consideration?

In India, the marginal tax rate—or the tax paid on the last rupee earned by an individual—had climbed to a ridiculous 97.5% during the high noon of Indira Gandhi’s tryst with socialism. Tax rates of income and wealth have fallen dramatically since then, creating stronger incentives for people to work harder and also declare their income. The tax code has also been cleaned up, with fewer tax slabs, exemptions and distortions. The new Direct Tax Code—especially the original version proposed by the finance ministry during the tenure of P. Chidambaram— will take this process of tax reform forward.

Lower taxes and a more transparent tax code are definitely a positive for the Indian economy at its current stage of development. But there are signs that income inequality has been growing in India, though more gradually than many critics of globalization allege. My personal view is that some increase in inequality is inevitable in an era of high growth—an empirical reality first noticed by US economist Simon Kuznets many years ago—and is not a significant problem as long as the channels of opportunity and social mobility are robust.

The more significant political issue is the rise of a new class of super rich at the very top of the pyramid, whose wealth has multiplied because of the boom in equity prices since 1991. India currently has short-term capital gains taxes on shares that are lower than income taxes, does not tax long-term capital gains and has no inheritance tax. Most tax experts I spoke to say that these are valid incentives for the creation of wealth.
However, I recently met one of the finest Indian economists in the new generation. I shall not name him since we had an informal chat. He argues that it is regressive that the middle class should pay relatively higher income taxes and earn negative real returns on their preferred mode of savings, the bank deposit. (Of course, the middle class has its little tax subsidy, through the statutory and public provident funds that pay tax-free interest rates that are higher than those available in the market or with banks.)

The Indian business class has no need to be apologetic about the wealth it has created and the jobs it has generated. But signs of growing concentration of income and wealth among our home-grown billionaires could eventually lead to a political backlash, especially if more corruption scandals come to light. The more enlightened parts of the business community may have to follow the steps of Buffet and the French plutocrats, and reach out to the rest of society in a gesture of goodwill.

-  by Niranjan Rajadhyaksha, executive editor of Mint.


(Courtesy : Livemint.com)

Are you one of those privileged, who builds this nation?

Only 2.77 percent of India's population pay income tax

New Delhi, Aug 31 (IANS)

Just 2.77 percent of India's 1.21 billion people pay personal income tax, official data showed.

“The number of effective tax payers as on March 31, 2011 was 3,35,79,831 (33.57 million),” Minister of State for Finance S.S. Palanimanickam said in a written reply to a question in the Rajya Sabha Tuesday. This is just 2.77 percent of over 121 crore or 1.21 billion population of the country, The amount of direct tax collection rose to Rs.446,070 crore in 2010-11 from Rs.378,063 crore in the previous year, the minister said.

(Courtesy: Deccan Herald)