Clarification regarding transfer of Input Tax credit in case of “Death of sole proprietor

A registered Taxpayer can apply for transfer of Matched Input tax credit that is available in the Electronic credit ledger of taxpayer to another business/another registered taxpayer in case of transfer of business by way of merger/demerger/sale of business by filling of ITC declaration in FORM GST ITC‐02.

But some doubts had been raised about the transfer of credit specially in the case of death of Sole Proprietor for which clarification has been asked, which are as follows:‐
1. Whether transfer of business due to “Death of Sole Proprietor” includes in the meaning of “transfer of business” for the sake of transfer of unutilized Input Tax credit to transferee of business.
2. Further clarification has also been sought for procedure regarding filling of Form GST ITC‐02 in case of death of the Sole proprietor.
Government has issued Clarification through Circular No.‐96/15/2019‐GST on 28th of March, 2019.
Clarification for Point‐1:‐Transfer of Business due to “Death of Sole Proprietor” includes in the reason for Transfer of business for the sake of transfer of unutilized Input Tax credit to transferee of business?

Clause (a) of Subsection 1 of Section 29 provides the reason for transfer of business which includes:‐

1. Death of Proprietor,
2. Amalgamated with Other legal entity,
3. demerged or
4. Otherwise disposed off

As mentioned above Reason for Transfer of business clearly includes “Death of Sole proprietor”. Therefore, Unutilized Matched Input tax Credit of Registered Taxpayer can be transferred to another registered entity for the reason of “Death of Sole Proprietor”.
Conditions to be fulfilled for the transfer of Input tax credit to another registered entity due to change in ownership of business:‐

• In case of registered person undergoes sale, merger, de‐merger, Amalgamation, Lease or transfer, the institution or organization, must file an ITC declaration for transfer of ITC in Form GST ITC‐02
• The Transferor institution had matched the Unutilized amount of ITC in Electronic credit ledger
• The Transferee and Transferor both should be Registered Taxpayer under GST
• Transferor Must file all the GST returns of past periods
• All the pending transactions for the action of merging should either be accepted, rejected or modified and all liabilities of the returns filed by the transferor must be paid
• The transfer of business has to be with an accurate provision of transfer of liabilities which will be the stayed demands of tax, or with any litigation /recovery cases. It has to be accompanied by the certificate that is issued by the Chartered Accountant or Cost Accountant

Clarification for Point 2:‐Procedure for filling Form GST ITC‐02 in case of “Death of Sole Prioprietor”
`In case of death of sole proprietor, if the business is continued by any other person being the transferee/Successor, the unutilized ITC amount remains in the electronic credit ledger shall be transferred to the transferee as per the provisions and manner stated below:‐

• Registration of Transferor/Successor: ‐
  Transferor/Successor shall be liable to be registered with effect from the date of such transfer or Succession, where a business is transferred to another person for any reasons including death of proprietor. In other word while filling the Form GST REG‐1 electronically on common portal (http://www.gst.gov.in) the applicant is required to mention the reason to obtain registration as “death of the proprietor”.
• Cancellation of registration on account of death of proprietor:‐The legal heirs of the deceased sole proprietor is allowed to file FORM GST REG‐16(form for cancellation of registration) electronically on common portal on account of transfer of Business for reason of death of proprietor. While filling FORM GST REG‐16 following need to be mentioned
• – reason for cancellation as Death of the proprietor
• – The GSTIN of the transferee to whom the business has been transferred, to link the GSTIN of the transferee with The GSTIN of theTransferor
• Transfer of Input Tax credit along with the liability:‐ It is clarified in the circular that the transferee / successor shall be liable to pay any tax, interest or any penalty due from the transferor in cases of transfer of business due to death of sole proprietor.
• Manner of Transfer of Credit: In case of Transfer of business on account of “Death of Sole Proprietor” Following will be the procedure:‐
  1. The transferee / successor shall file FORM GST ITC‐02 in respect of the registration which is required to be cancelled on account of death of the sole proprietor
  2. FORM GST ITC‐02 is required to be filed by the transferee/successor before filing the application for cancellation of such registration
  3. Upon acceptance by the transferee / successor, the un‐utilized input tax credit specified in FORM GST ITC‐02 shall be credited to his electronic credit ledger.

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Angel tax relief to startups

Angel Tax refers to a money pool created by high net worth individuals or companies, generally called as angel investors, for investing in business startups. Various startups founder claimed that they received notice under section 56(2) (vii) (b) of Income Tax Act (“Act”) from Income Tax Department (“Department”) to pay taxes on angel funds raised by them. Entrepreneurs have raised their concern on such tax notices. However, India is likely to soon announce the concessions to shield startups from the angel taxes. The changes will be made to the conditions specified under section 56(2) (vii) (b) of the Act to remove any ambiguity and allow exemption for past as well as proposed investments that do not exceed INR 10 crores.

Meaning of angel tax
With an intention to promote entrepreneurship in India, government has loosened the condition for startups and investors to shield them from what has been called angel tax. Angel tax is a term referred to the income tax payable on capital raised by unlisted companies via issue of shares where the share price is seen in excess of the fair market values of the share sold. The excess realization is treated as income and taxed accordingly. This tax was introduced in the year 2012 Union Budget by the finance minister Pranab Mukherjee to seize and desist money laundering practices.

Relaxation on Angel Tax
In the latest development, the government has redefined the meaning of startups. The relaxations are made per the vision to boost the startup culture in India. The new rules are expected to catalyse business enterprises by exempting angel tax on the funds that they have received from the investors.
This move has opened paths for large conglomerates and alternative investment funds to invest in startups without getting taxed on valuations. The new bill will also allow startups to avail tax-free holiday up to three years during the 10-year period and the investment limit has been raised from 10 crores to Rs 25 crores for availing tax exemption. Now, with the higher exemption limit, the majority of the angel investment would wind up qualified for exclusion from the tax.

Current scenario
CBDT will soon be set for processing requests from startups and angel investors for exemption to speed up the process. DIPP will meet stakeholders to seek feedback in the first week of February 2019 to discuss all policy and implementation issues. New framework regarding the same will be announced on 16 February. Helping hand that is CBDT will set up cell to process exemptions applications. Latest notification issued by DIPP lays down a process for startups to obtain an exemption from angel tax.

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E-COMMERCE POLICY -CHANGES AND EFFEC

What is e – commerce ?
E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

What is E- Commerce Policy?
Policy of Foreign Direct Investment (FDI) in E-commerce sector as provided by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India in Para 5.2.15.2 of Consolidated Policy Circular 2017.(https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASE D_28.8.17.pdf)

What is e –commerce entity?




CHANGES IN E-COMMERCE POLICY







EARLIER(Consolidated FDI Policy Circular of 2017 )
Cashback and discriminating prices:- No such Clause

Now [As per Press Note No.- 2(2018 series) Applicable w.e.f.-1st February,2019]
Provision of services to any vendor or such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory. Cashback provided by group Companies of market place entity to buyer shall be fair and nondiscriminatory.

Essence
Low cashback and approximately equal prices for products. The policy prohibits ecommerce platforms from giving any preferential treatment to any supplier.

Effects of changes in Policy
Adverse Effects
1. Deep discounts disappears: Big online sales may disappear and one of the main method of attracting customers i.e. deep discounts on Flipkart or Amazon may not be usable now.
2. Buyers inconvenience :- Customers will now have to check other shopping websites and even may have to Switch to real shops. Now buyers may have to visit the traditional street side shop to get better prices and discounts.
3. End of Cashbacks:-the buyers whose buying decisions get affected on the basis of cashback available would have great impact as the guidelines imply the end of cashbacks.
4. End of exclusive deals:- New policy clearly prohibits E –commerce entity to force any vendor to sell products only on its platform. This clearly means end of ‘exclusive/prime deals’ which are generally run by Flipkart and Amazon India.
5. Lack of choice:-The new policy prohibits entities from selling its products on e-commerce platform, in which the e-commerce platform has an equity investment.This implies choice would be reduced due to this provision.

Gainers from New E-commerce policy:-
Retail stores: New guidelines restricts discounts and cashbacks will help Retail stores i.e.brick-andmortar retailer retain customers.

Small ecommerce companies:-To compete with giants like Amazon/Flipkart, smaller ecommerce companies don’t have enough money .These Small e –commerce Companies will stand to gain from the new norms .

Small sellers:-an ecommerce platform which provide any service– logistics, warehousing or easy financing options – will now have to offer to all sellers and no preference would be given to any particular seller.


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MSME(Micro ,Small & Medium) Enterprises Registration Process

Registration Process

• The SME (Small and Medium Scale Enterprises) owner needs to fill a one-page form(UDHYOG ADHAAR MEMORANDUM) that
  he can do either online or offline. For online registration, the applicant should visit the official website: http://www.msme.gov.in
• In this form, the MSME has to self-certify its existence, details of the business activity, bank account, ownership and
  employment details and other information
• no registration fees are required to be paid for this process
• After filling the details and uploading the same, the registration number would be generated and the same would be mailed
  to the email address given in the UAM(UDHYOG ADHAAR MEMORANDUM) which should contain unique UAN (Udyog Aadhaar
  Number)

Benefits of MSME Registratioin
Registration is NOT yet made mandatory by the Governmentbutitis beneficial to get one’s business registered under this because it provides a lot of benefits in terms of taxation , setting up the business , credit facilities, loans etc.

Following are the benefits of Registration of MSME:-
• FINANCIALS BENEFITS :
1. After registering MSME, the applicant will receive the benefits of all the government schemes such as an easy
loan, loan without guarantee, loans with subsidized rates of interest etc.
2. The applicant will receive financial support for participating in foreign expos to showcase their products
3. MSMEs there are no requirements of security money, earnest money, turnover requirement etc in the
government tenders
4. A hefty 50% subsidy on Patent registration

• STATUTORY SUPPORT :
http://1.As per section 15 of MSME Act,2006 Buyer from Micro & Small Enterprises(MSE) shall make payment within the
period agreed upon(not more than45 days).Also as per section 16,if buyer fails to make payment to MSE as required
in section 15 ,buyer shall be liable to pay compound interest with monthly rest to supplier from the date agreed
upon at 3 Times of bank rate notified by the The RBI.
2.RESERVATION POLICY: Reservation of products for exclusive manufacture in the small scale sector

• TAXATION BENEFITS :
1.Excise Exemption Scheme(Depending on business)
2. Presumptive taxation scheme under section 44AD of the Income Tax Act
3. A small-scale unit established in a backward area, under Section 80-HH, is allowed a deduction of 20 per cent on
its profits and gains subject to some conditions.

Some of the MSME schemes launched by the Government are:
• Performance and Credit Rating Scheme
The purpose of rating scheme is to provide a trusted third party opinion on the capabilities and creditworthiness of the micro & small enterprises (MSEs ) so as to create awareness amongst MSEs about the strengths and weakness of the irexisting operations. Rating fee payable by the MSEs is
subsidized by the Government to the extent of 75% subject to maximum ceiling of Rs. 40000/- based on the turn over of the unit.

• Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)
Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) jointly established a
Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in order to implement Credit Guarantee
Scheme for Micro and Small Enterprises. The corpus of CGTMSE is contributed by Government of India and SIDBI. 75% of the
loan amount to the bank is guaranteed by the Trust Fund. Collateral free loan up to a limit of ₹ 100 lakh is available for
individual MSE on payment of guarantee fee to bank by the MSE.

• Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)
CLCSS provides 15% subsidy for additional investment up to ₹ 1 cr for technology upgradation by MSEs. Technology
upgradation would ordinarily mean induction of state-of-the-art or near state-of-the- art technology. In the varying mosaic
of technology covering more than 7,500 products in the Indian small scale sector.

• Export Market Promotion (EMP)
Coir Board is implementing Export Market Promotion with a view to improve the export performance of Indian Coir Sector
through various export market promotion activities such as sponsoring delegations; participation in seminars and
conferences; organising participation in international fairs; undertaking generic publicity abroad; extending financial
assistance to Micro, Small and Medium Enterprises and Exporters; presenting Coir Industry Awards on an annual basis to
recognize the outstanding performance in the areas of export; domestic trade; R&D and functioning of units and societies.

• Bank Credit Facilitation-Schemes of National Small Industries Corporation (NSIC)
To meet the credit requirements of MSME units, NSIC has entered into a Memorandum of Understanding with various
Nationalized and Private Sector Banks. Through syndication with these banks, NSIC facilitates MSME in accessing credit
support (fund based or non-fund based limits) from the banks. NSIC assists MSMEs in completion of the documentation for
submitting the proposals to the banks and also does the follow up with the banks. These handholding support are provided
by NSIC without any cost to the MSMEs

• Statutory Compliance requirement After Registering as MSME:-
There is no such separate Statutory compliance to be fulfilled by Enterprises Registering as MSME.
• Renewal of Certificate for registering as MSME:-
There is no renewal requirement of certificate received for registering as MSME .

MSME registration in India

Forensic Auditing

Forensic Auditing involves conducting examination and evaluation of a firm’s or individual’s financial information and legalities for determining whether any fraud or negligence has taken place and if yes, to use the evidence collected during such Audit in the court of law.
Objective
The objective of FORENSIC AUDIT is to find the audit evidences which are legally tenable and in doing so the Corporate veil of the company can be disregarded.
Following points are considered

• Any Fraud or negligence took place?
• Is the effect material?
• Who are the responsible people?
• How much can be recovered?

Skills Required (Chartered accountant in India)
Following skills are required for an efficient and fruitful Forensic Audit

• Deep Knowledge of Accounting
• Proper Understanding of Auditing
• Required traits of Investigating
• Obvious should be distrusted
• Think differently and Develop an open mind

Critical Point Auditing
Purpose of critical point auditing is screening out the fraud or false transactions and events from the normal ones.
An analysis and evaluation of financial statements, books and records are conducted to find out :

• False credit to increase sales and corresponding debit entries.
• Inadequacies in Internal Control System of the organization.
• Cross debits and credits and inter account transfers

Propriety Audit
Main purpose of Propriety Audit is to determine the genuinity of the transactions in Government Account.
It means whether entire expenditure sanctioned by the government is actually required and need based and whether all the incomes arising on account of that are fairly and timely credited to the government account.
It aims at determining the Value for money, whether the economy and efficiency has been achieved in the transaction and unwanted, wasteful and unnecessary expenses have been ignored.
If anything objectionable or any fraudulent intension is recognized then people and organizations suspected to be behind that are questioned.
Case Studies
Based on Balance Sheet as on 30th June, 2002,showing erosion in net worth, Vivita Ltd. filed a reference U/S 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985. Secured creditors objected on the grounds, amongst others, that:
(a) Requisite number of directors did not attend the meeting of Board of Directors of the company held to decide on reference to BIFR.
(b) Company indulged in the following:-

• Gave a huge discount of Rs.6.48 crore without any explanation/justification.
• Company devalued its investments by 90% without explaining reasons for such a devaluation.
• Company had written off R s. 3.97 crore on account of foreign exchange fluctuations
• Addition to gross block included Rs.26 lakhs as land development expenses, actually not incurred, as per inspection carried out by banks.
• Depreciation increased by Rs.1.84 crore despite a fall in fixed assets

BIFR observed that the group companies (to which Vivita belonged) referred to BIFR, though engaged in different activities, adopted the pattern of reporting huge losses on slight fall in sales. Marginal fall in the sales and huge losses accompanied with large discounts in a single financial year was common to all the companies.
Vivita’s Explanation/representation and decision of BIFR

• Vivita stated huge discounts were offered to liquidate stock, as it feared trademark infringement proceedings by another company. BIFR did not accept this as sufficient evidence was not made available and hence heavy increase in discounts and losses were not allowed
• Devaluation of investments not admitted as Vivita Ltd failed to submit copy of B.O.D. resolution to ascertain whether it was long-term or short-term investment
• Explanation of Vivita Ltd as for increase in depreciation was acceptable
• Considering the market practice in the industry of taking advance from buyers and passing the same to the suppliers, BIFR noted that selling prices and the procurement prices are fixed in advance. BIFR set aside Vivita Ltd’s contention of losses in trading activities and ruled that losses of the company were overstated by Rs. 34.61 crore on account of increase in raw material consumption.
• As to increase in loans, details were not available, but in case of unsecured loans, BIFR observed that Vivita Ltd. had given preferential treatment in the payment of unsecured loans at the cost of secured loans.
• Regarding loss of Rs.40 crore on a marginal fall in the sales, Vivita has not submitted any explanation

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Auditing Services in India

Role of an auditor plays while doing auditing is important to acknowledgre, as audit is not only a statutory obligation. Auditing is all about evaluating and reviewing the effectiveness of a company's internal controls/policies and its operational programmes. Business scenario is to achieve objectives not only thinking of profitability but to maintain an effective system of internal controls.

Now again we have to decide, what will do best for auditing and who can be responsible, accountable to give reliable financial reporting of operations, can prevent fraud and misappropriation of assets. Certified audit firms in India do this job in organised way and contribute to a company's audit system. Both internal and independent auditors plays a important role in feeding company’s growth by showing true and fair financial picture of company.

Certified Internal Auditors(CIA) in India always put an effort to structure an effective audit system. This system facilitates corporate to detect irregular transactions, also it can supervise, monitor and promote operational productivity. Audit system by Internal auditor can maintain proper internal control through which organization can follow and attain corporate objectives. Certified Internal Auditors in India allows to assess the risk of material misstatement in a company's financial reports. Keeping check on company’s operations and even internal control checks can detect different types of fraud and other accounting irregularities. India Certified Audit Firms, allows us to design the internal controls so that any material irregularities can be detected easily in any circumstances. Without this system of internal controls, it is difficult for a company to create reliable financial reports for internal/external purposes. Thus, to determine or to allocate resources and to know which segment and product line of the corporate is making profit/losses, it is necessary to to have an effective and efficient Internal Control System.

Additionally, a good internal audit control check also can manage affairs of the business by letting them know the exact status of its assets and liabilities. Accordingly, an effective audit control by certified internal auditor of certified audit firm in India always helps to prevent debilitating misstatements in a company's records and reports. Strong and a well balance audit systems can help in reducing various types of risk like risk of misstatements in financial statements,information manipulation, misappropriation of assets and other related type of risks.

A Certified Auditor’s responsibility is to cross check all the material items and also to evaluate regulatory compliance, maintain two way communication between audit team and management, to provide recommendations for controlling deficiencies in organization operations, providing assurance for good corporate governance and help staff to understand the risk associated with non compliance.

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Need of Payroll Management

Payroll Preparation is really important and critical tasks for any business/company as it includes the calculation of the employee’s salary alongside withheld taxes as it involves entry of the minor details and a little mistake can be dangerous. Due to this, the businesses are looking the best Payroll Management Company so that they can take responsibilities for preparing the payroll.
We have a efficient team which provides the complete service of payroll management to the business and due to their expertise in the field; we can be the best possible solution for the task.

Need for the Payroll Management in India?
The basic needs of preparing a payroll as it is really important because every company needs to pay their employee every month and for this, they need to prepare the payroll also in every month.

Basic neccesities of Payroll
A Certified Auditor’s responsibility is to cross check all the material items and also to evaluate regulatory compliance, maintain two way communication between audit team and management, to provide recommendations for controlling deficiencies in organization operations, providing assurance for good corporate governance and help staff to understand the risk associated with non compliance.

A payroll includes database regarding the pay package of the each individual employee working in company.
It will also include the number of days the employee was present for work.
1. Overtime Done
2. Calculation of leave and absenteeism.
3. Calculation of PF/ESI along with withheld task and others.
4. Considering all these factors, the salary of the individual employee is calculated and paid.

Small error in the data,lead to different kind of consequences like delay in payment,incorrect calculation of withheld taxes and others, incorrect calculation of salary. This is why payroll management company's service can be considered as the boon for Small Medium Business(SMB).
Our online payroll services offers the expertise service of payroll tax consultant along with the precise preparation of the payroll and that is also with complete responsibility and guarantee.

Our expert team of the payroll tax consultant provides the simplest and best possible solutions for the needs of SMB's for the easy and timely processing of the salary and income tax return.Company can focus on other things rather than Payroll which will automatically help Company's business.

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