July 2017 paints industry

<Hyderabad » NewDelhi » Mumbai » Bangalore » Jalgaon » Navi Mumbai » Tirupati >
Raju and Prasad Chartered Accountants
Raju and Prasad Chartered Accountants
July 2017 Volume 4, Issue 5
FOCAL POINT
Newsletter from Raju and Prasad Chartered Accountants
Contact us:
Email : hyderabad@rajuandprasad.com
Website: www.rajuandprasad.com

Page 1Raju and Prasad Chartered Accountants
Dear Reader,
Our editorial comments for this month are on “ Farm Loan
Waiver, A Solution or Problem”.
This month we have covered ‘Paints Industry’ in our Industry
Review.
This time we have also included an article on GST written by
CA Avinash T Jain.
Please give your views and also send this newsletter to your
friends.
Regards
For Raju & Prasad
Chartered Accountants
M Siva Ram Prasad
Partner

Contents
Contents..................................................................................................................................................................................................2
Editorial....................................................................................................................................................................................................4
Farm Loan Waiver, A Solution or Problem................................................................................................ 4
Sectoral Deployment of Non-Food Gross Bank Credit outstanding for 2015-16 (Rs. In Billion)............. 5
NPAs outstanding for the year 2015-16................................................................................................................................................. 5
Solution ............................................................................................................................................................................................................................. 7
Industry Review ................................................................................................................................................................................9
Paints Industry.......................................................................................................................................................... 9
Background .................................................................................................................................................................................................................... 9
Decorative Paints.....................................................................................................................................................................................................10
Industrial Paints .......................................................................................................................................................................................................11
Status of the Industry .........................................................................................................................................................................................12
Exports.............................................................................................................................................................................................................................12
SWOT Analysis...........................................................................................................................................................................................................13
Goods and Service Tax.............................................................................................................................................................14
BACKGROUND ON GST.......................................................................................................................................................................................14
Why Constitutional Amendment?...............................................................................................................................................................15
Constitution of GST council.............................................................................................................................................................................15
Major defects in earlier Structure of Indirect Taxes:.................................................................................................................15
GST is a solution to get over the defects:..........................................................................................................................................16
Provisions made effective from 01-07-2017 ....................................................................................................................................17
Integration of Taxes under GST..................................................................................................................................................................18
EXCLUSIONS FROM GST ...................................................................................................................................................................................18
REGISTRATION UNDER GST ..........................................................................................................................................................................18
Liability to Register................................................................................................................................................................................................18
Casual Taxable Person/Non-Resident Person ..................................................................................................................................19
COMPOSITION LEVY .............................................................................................................................................................................................20
Restrictions:.................................................................................................................................................................................................................21
Nature of Supply......................................................................................................................................................................................................21
REVERSE CHARGE MECHANISM..................................................................................................................................................................21
MRP AFTER GST........................................................................................................................................................................................................22
Policy Watch......................................................................................................................................................................................24
Company Law ..........................................................................................................................................................24
Increase in the threshold limit on paid up share capital for private companies for restriction on
reappointment of Auditors...............................................................................................................................................................................24
RBI .................................................................................................................................................................................24
Increase in limits for investments by Foreign Portfolio Investors (FPIs) for the quarter July-
September, 2017.....................................................................................................................................................................................................24
Direct Tax...................................................................................................................................................................25
Class of persons or receipts which do not come under the purview of Section 269ST (Mode of
undertaking a transaction) of the Income Tax Act, 1961......................................................................................................25
SEBI...............................................................................................................................................................................25
Acceptance of E-PAN card for KYC compliance by Foreign Portfolio Investors (FPIs) ...................................25
Indirect Taxes..........................................................................................................................................................25

Due date for filing service tax returns for the quarter April-June, 2017 to be 15th
August, 2017......25
Exemption of Excise Duty on goods manufactured on or before 30th
June, 2017 but not cleared
from the factory of production before 1st
July, 2017................................................................................................................26
Verdicts.................................................................................................................................................................................................26
Direct Tax...................................................................................................................................................................26
Correction of PAN, in case wrongly quoted in TDS returns, allowed upto two alphabets and/or 2
numerical characters............................................................................................................................................................................................26
The right to use a place (rent) and the right to carry on a business (royalty), if not separated in
the license agreement, entire amount to be treated as rent under Section 194-I of Income Tax
Act,1961..........................................................................................................................................................................................................................27
Indirect Taxation ...................................................................................................................................................27
Activity of a Chit Fund company not to be treated as banking and other financial services under
section 65 of the Finance Act, 1994........................................................................................................................................................27
►►► PHOTOGRAPH OF THE MONTH............................................................................................................................28
Seagull taking off at Sewri Mudflats, Mumbai.................................................................................................................................28

Editorial
Farm Loan Waiver,
A Solution or Problem
Agriculture is a gamble with rains. In India the
farmer is either hit by a cyclone or drought or
a flood. This has a negative impact on growth
of agriculture, farm outputs and indebtedness
of the farmer who has no other go except
borrowing to sustain and recapture his
livelihood.
In early 20th century rural indebtedness was
mainly due to money lenders. In 1929 with
great depression, when the prices of
agricultural commodities had touched rock
bottom. The ministry in central provinces (C.P
and Berar) led by Dr.E.Raghavendra Rao
made the first ever Peasants Debt Relief Act,
1933 which was followed in letter and spirit by
states of Punjab,Bengal,Madras and Assam.
The debt burden and relief to the farmer are
not new in the country. The scene mostly

shifted to banking sector whether it is rural
banking or commercial banking. Still there are
money lenders who are providing credit
where banking has not reached the rural
areas.
The banks also have carved out schemes like
Agriculture Debt Waiver and Debt Relief
Scheme, 2008 (ADWDRS) for marginal and
small farmers giving relief for losses in natural
calamities as determined by State Level
Banking Committees (SLBC). The banks also
resort to restructuring of agriculture loans by
extending the repayment schedule and giving
certain waivers. The total outstanding loans to
agriculture sector by banks (2015-16) is Rs. 8829
billion. The NPA percentage of such loans is
ranging from 3.2% to 5%. The loans outstanding
for agriculture and allied activities stand at
13.5% of the total deployment of Rs. 65469
billion.
Sectoral Deployment of Non-Food Gross
Bank Credit outstanding for 2015-16 (Rs. In
Billion)
S.No. Sector Amount % of
total
credit
1 Agriculture
and Allied
Activities
8829 13.5 %
2 Industry MSME 4863 7.42 %
3 Industry Large
scale
22444 34.29 %
4 Services 15411 23.53 %
5 Personal Loans 13992 21.26 %
Total 65463 100 %
Source: Handbook on Indian Economy 2015-16, RBI
NPAs outstanding for the year 2015-16
S.No. Lender Amt (in
billion
Rs.)
% NPAs on
Gross
Advances
1 Public
Sector
Banks
2,785 5 %
2 Old Private
Sector
banks
52 1.9 %
3 New
Private
Sector
Banks
341 2.1 %
4 Foreign
Banks
108 3.2 %
Total 3,286 -
If the NPA percentage is taken at 5% of 8829
billion, it will work out to 442 billion out of this
small and marginal farmers may not be
significant compared to other loan waivers.
But the loan waivers should not create
indicipline. This should have a sytematic
approach.
The crux of the problem is the irrigated land in
the country which is 63,204 thousand hectares
in 1990-91. This has increased to 95,772
thousand hectares in 2013-14. The growth in
irrigated areas is 32,568 thousand hectares in
The ministry in central provinces (C.P and
Berar) led by Dr. E Raghavendra Rao made
the first ever Peasants Debt Relief Act, 1933
which was followed in letter and spirit by
states of Punjab, Bengal, Madras and Assam.

23 years i.e. around 1.4 lakh hectares increase
per annum on an average.
Out of the irrigated land only 24% is catered by
canals and 62% is by tube wells and other wells
which will become dry in case of failure of
rainfall. As a result the rain fed areas are about
65 % and can maximum grow one crop in a
year.
Source: ‘State of Indian Agriculture 2015-16’, Ministry of Agriculture and Farmers Welfare.
The major crops are depending on rain fed irrigation. The details given below give an overall picture.
Canals
24%
Tanks
3%
Tube-Wells
46%
Other Wells
16%
Other Sources
11%
Various Sources of Irrigation
0
5
10
15
20
25
30
35
40
45
MillionHectares
Crop
Rainfed Area
Irrigated Area
Source: ‘State of Indian Agriculture 2015-16’, Ministry of Agriculture and Farmers Welfare

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Why Debt Trap
For the farmer getting into debt trap, reasons
are many. Vagaries of weather, crop failure,
pests, lower yields, sudden price fall for
commodities, floods, cyclones or droughts.
The sensitive farmers do commit suicides. As
per National Crime Research Bureau Statistics
(NCRB). The farmer’s suicides are maximum in
the states of Madhya Pradesh, Maharashtra,
Karnataka, Telangana and Tamil Nadu.
Another dimension to this problem is the
suicides are more in cotton growing regions
and mainly due to indebtedness besides
certain social issues. The commercial crops like
cotton need more investment and prices
fluctuate due to global markets. The area
under cultivation increased over decades for
oilseeds and cotton which need higher
investment and the defaulting farmer does not
get loan for the next crop season. So, the loan
waivers are proposed by the state
governments.
Statistics on production of commercial crops (Production-million tonnes, Area-Million Hectares,
Yield- Kg per Hectare)
S.No. Crop 1959-60 2015-16
Production Area Yield Production Area Yield
1 Oil Seeds 6.56 13.95 470 25.3 26.16 968
2 Coffee (1970-
71)
110.23 0.14 814 348 0.63 876
3 Cotton Lint 3.68 730 86 30.15 11.87 432
4 Raw Jute &
Mesta
5.69 0.98 1049 10.47 0.79 2399
5 Sugarcane 77.82 2.14 36414 352.16 4.95 71095
6 Tea (1970-71) 419 0.35 1182 1233.14 0.57 2176
7 Tobacco 0.29 0.41 716 0.66 0.43 1542
Solution
 The problems are to be analyzed both for
wet land farmer and dry land farmer
separately and also based on the crop. In
case of perishables, cold chains and air
conditioned transport vehicles are
required along with some processing units
to process the yield in the region.
 The agricultural price receipt should be
treated as a negotiable instruments so that
“Agriculture is a gamble with rains”

the farmer discounts through a bank and
gets immediate liquidity.
 The credit should be in the hands of co-
operative sector, rural banks under the
expert guidance of NABARD who can
specialize in Agriculture Sector. Even
though the debt waiver is a necessity,
temporary relief like waiver of loans will not
provide solution instead they will create
more problems to the economy like fiscal
deficit, more borrowings by governments
increased tax burden, banks writing off of
bad debts and government recapitalizing
the banks.
 More thrust should be given to agriculture
infrastructure like cold chains, market
support, Minimum Support Price (MSP) on
the basis of cost of inputs plus 50% profit.
Bringing more land under irrigation,
educating farmers on alternative methods
of cultivation like drip irrigation, changing
the crop pattern, soil health management,
management of inputs like pesticides,
seeds, integrated nutrients management,
management of crop residue, water shed
management etc. Agriculture extension
services for farmers are to be intensified by
government agencies and education on
farming should be propagated by
responsible media.
 The banking side of the problem can be
solved by starting Agriculture Credit
Guarantee Corporation where loan to
small and marginal farmers can be insured
by banks and farmers can be charged with
the premium as a cost of the debt and
bankers can claim in case of default form
Credit Guarantee Corporations.
The economy depends on agriculture and
agro based industries. As per the report
released by Ministry of Agriculture and Farmers
Welfare, ‘State of Indian Agriculture 2015-16’,
the sector contributes 13.9% to the total GDP
and provides employment to around 54 % of
the total workforce. One sixth of the human
race is living in our country and depend on this
sector for food as well as livelihood.
This needs a long term solution and not a
seasonal approach.
-M Siva Ram Prasad
This needs a long term solution and not a
seasonal approach.

Industry Review
Paints Industry
Background
Paints and painting is an age old process.
Paints, pigments and resins were originally
vegetable based and made of grinding
certain materials and even semi-precious
stones. In the past major part of painting has
been white washing which is made out of
lime stone crushing, shell crushing and
mixing with water. The vegetable dyes were
used for rock paintings and also in dyeing
and printing on fabrics. Ajanta paintings and
Kalamkari prints are the standing examples
of history of paints and pigments in India.
White washing the houses and buildings is an
annual ritual in rural as well as urban India.
This not only keeps the building’s look but
also avoids insects, fungus etc.
The first plant in the paints industry was set up
in 1902 in Calcutta. The industry has grown
from basic lime stone process to linseed
based oil paints to synthetic paints.

The industry can be divided into two sectors,
decorative and industrial. It can be further
divided into primers, protective coatings,
anti-corrosive paints, binders, inner coatings
and outer coatings in each sector.
The industry is in cottage and small scale
sectors till it remained with oil paints. Medium
and large scale sectors presence came into
existence after the advent of synthetic
paints.
The decorative sector caters to the needs of
construction industry for wall coating of
exterior as well in interiors, coatings for
wooden objects, this sector includes the
primers protective coats and crack fillers.
The industrial paints sector caters to the
engineering, construction, industrial
products, automotive etc.
The paints contain resins as binder to form
the film, solvent to dissolve the binder and
coloring agent called pigment. In addition
there are additives like thickeners,
emulsifying agents, texturing agents etc. The
paints can be divided into water based and
oil based paints. Water and oil are
solvents/carriers. The classification
technically is based on resins like epoxy,
alkyd, acrylic, poly urethane, melamine,
polyester etc.
Decorative Paints
Water based paints are distempers
(combination of chalk and lime with or
without pigments), emulsion paints are with
emulsifying agents.
Emulsion paints are long lasting and stains
can be cleaned easily. These can be used
for interior as well as exterior paintings.
Enamel paints are oil based/alkyd (alkyd is a
combination of alcohol and acid) based.
They are used as wall paints and applied on
metallic objects and wooden objects. The
surfaces can be cleaned easily.
Varnishes and wood paints are coatings for
wooden surfaces. These paints are
protective as well as decorative.

Texture paints are paints which are used to
give texture to the surface by creating
special effects visually with rollers, brushes,
knifes, trowels etc.
Cement based paints are used for exterior
walls and concrete and masonry structures.
They act as protective as well as
decorative coats with less
sheen and are not long
lasting like other
exterior emulsion
paints. Aluminum based
paints are anti-corrosive and
rust resistant. These are mainly
used in engineering, construction
and also in industries where lubricants, oils
and chemicals are in contact with coated
surfaces.
Primers are applied to make the surface
smooth and it enhances the adhesion for
the coating. There are number of primers
and are used according to the surface as
well as the type of paint. Putties are also a
type of primers serving similar purpose and
are also used to fill the cracks. Red oxide is
also another primer for engineering
construction.
The paints are applied with brushes, rollers
and sprayers there are different finishes for
paintings like glossy, matty and semi-glossy.
Industrial Paints
The composition of industrial paints is similar
to that of decorative paints. Some paints
contain Volatile Organic Compounds
(VOC) or chemicals like glycol ethers,
alcohols as the carriers. The various types of
paints used in industrial sector are known
as the synthetic resins, well
known among them are
acrylic, epoxy,
polyester, poly
urethane, poly
tetra, flour
ethylene, ethylene
etc. These are used on
surfaces like metals, glass, fiber glass, ferrite,
plastics, ceramic, rubber and elastomer,
wood etc. The industrial paints sector can be
divided into high performance coating,
automobile coatings, powder coatings and
coil coatings. There are specialty paints
which are heat resistant, fire resistant, water
repellent, elastomeric (for stretchable
surface), electro resistant etc.
Manufacture of paints, varnishes and
similar coatings
Year Amt (Rs. In crores)
2011-12 34132.31
2012-13 31320.28
2013-14 34268.90
Source: Department of Chemicals and Petro-
Chemicals

Status of the Industry
India is the second largest market for paints
after China. Volume wise it is nearly 4 million
metric tonnes. The decorative paints have a
share of 60% to 70% of the market. Balance
is shared by industrial paints. The major
players are Asian Paints, Berger Paints, Dulux
Paints, Kansai Nerolac, NIPPON Paints, Jotun
Paints and Shalimar Paints with a host of
small and medium scale industries.
According to Indian Paints Association’s
study the industry is growing at a CAGR of
12.7 % of decorative paints market and 9.5%
in industrial paints. The size of Indian Paint
Market in 2014-15 was around Rs. 40500
crores and is expected to grow to Rs. 70875
crores by 2019-20. The per capita
consumption of paints is about 3.34 Kgs per
annum
Exports
Indian paints have export market and
companies like Asian Paints have started
their manufacturing units outside India.
India has exported paints, varnishes and
allied products to the tune of USD 594.73
million during the year 2015-16, on the other
hand it has imports of USD 1320.49 million as
per the annual report of Ministry of
Commerce 2016-17. The notable point is
that though the exports have decreased
from 2014-15 to 2015-16 by 11%, the exports
for the half year April to October, 2016 have
increased by 12% compared to the exports
made in the half year April to October of
2015, also the imports for the same periods
have reduced by 6%.
The prospects are good for the industry due
to country’s GDP growth, improvement in
the living standards, growth in the income
levels of middle class, growth in housing
sector, automobile sector and growth of
housing in rural areas.

SWOT Analysis
Market size and opportunities outweigh the weaknesses and threats. With latest technologies
and GST regime the industry can grow further.
- Team at Raju and Prasad
Strengths
•Market size for paints in India is the second largest in Asia.
Weaknesses
•The Per Capita consumption of paints is far lower (3.54 kg) compared to 15ks of world
average.
•The industry is in unorganized sector which accounts for nearly 30% of the production.
•Multiple taxation makes the pricing high.
•The industry is raw material intensive and many derivatives are petro based. Presently
the prices of petroleum products are in down trend but they are globally price sensitive.
•Certain ingredients are to be imported which are effected by foreign currency
fluctuations.
Opportunities
•The multiple taxation is expected to be solved with the introduction of GST.
•The growth in GDP and growth in rural economy offer new markets in construction
activity and auto mobiles.
Threats
•The inputs used in manufacture of paints are hazardous and contain mercury, lead
and chromium etc. The government policies to reduce Volatile Organic Compounds
(VOC) is another investment oriented effort for latest technologies.
•The market is not steady, as paints in the houses, automobiles or industrial uses are not
regular except in the case of paintings used for maintenance.

Goods and Service Tax
BACKGROUND ON GST
The structure of Indirect Tax was based on
three lists in Seventh Schedule to Constitution
of India, which came into effect on 26-01-
1950. These lists are mostly based on
Government of India Act, 1935. The provisions
were based on situation prevailing in 1935.
That structure had become outdated due to
changes in situations, technology, etc.
World has moved towards common Goods
and Services Tax (GST) long ago. However, so
far as India is concerned, GST is the tax for
twenty first century. It is rightly said that India is
like giant elephant. It takes time to start, but
once started, it is very difficult to stop it.
The idea of national GST was first mooted in
India by Kelkar Committee in year 2004. Dr.
Vijay Kelkar recommended national GST. The
first announcement for introduction of GST was
made in budget speech on 28-2-2006 by then
Finance Minister, P. Chidambaram. It was
proposed to introduce nationwide GST w.e.f.
01-04-2010.
This Target could not be achieved, mainly due
to political differences.

Various Steps were initiated towards
introduction of GST. Task of designing GST was
given to empowered committee of State
Finance Ministers. The first discussion paper
was released by Empowered Committee on
10th November, 2009. The Proposed GST law is
broadly on lines as indicated in the discussion
paper.
Why Constitutional Amendment?
Under the current regime, center levies excise
duty on manufacture, service tax on service
etc, while states levy VAT, Entry Tax, Luxury Tax
etc.
101st constitution amendment is required to
create a unified system of taxation by
subsuming existing indirect taxes and duties.
Assigning concurrent powers to center and
states to levy GST on all supply of goods or
services or both.
The constitutional Amendments have been
notified. These were made partly effective on
from 16-09-2016.
Section 19 of 101st Constitution Amendment
Act, 2016 allowed one year transition period of
one year for switching over to GST. Thus, in any
case GST had to be in place before 16-09-
2017.
Section 20 of 101st Constitution Amendment
Act, 2016 empowered President of India to
issue order for removal of difficulties. This
power includes adaptation or modification of
any provision of Constitution.
Constitution of GST council
GST Council is consisting of representatives
from the Centre as well as the States, which
has been constituted vide Notification No. SO
2957(E) dated on 15-09-2016. Union Finance
Minister is Chairman of Council. Following are
members of Council- (a) Union Minister of
State in-charge of Revenue or Finance and (b)
Minister in-charge of Finance or Taxation or
any other Minister nominated by each State
Government.
GST Council is Apex Constitutional Authority to
decide policies of GST. The GST council has
started work in right earnest and various
meetings of GST Council have already been
held. Various issues are being sorted out in the
meeting of GST Council.
One third of the voting power is held by the
Central Government and the rest two third is
held with state governments.
Major defects in earlier Structure of
Indirect Taxes:
 Same transaction was taxed both by
Central and State Government which
created confusion, litigation and double
taxation in many cases like AC restaurants,
works contract, software etc.
 Central Sales Tax (CST) was payable @2% for
every movement of goods from one State
to Other but no credit was available. Even
in case of stock transfers or branch transfers,
there is incidence of tax as inputs service

credit (set off) of inputs taxes was not fully
available.
 Cascading effect of taxes could not be
avoided due to CST and Entry Tax. State
taxes were payable on central excise
element also.
 Movements of goods in European Union
(EU) are free across all countries without any
incidence of tax. However, in India,
movement of goods from one State to other
was not free. Each state had its own State
VAT laws with different provisions, different
VAT rates, different forms and different
procedures. Thus, taxable person having
business in more than one state found it
extremely difficult to keep pace with tax
laws of each state.
 India did not have a national market due to
invisible barriers of central sales tax, Entry
Tax and State VAT and visible barriers of
check posts. Besides, huge corruption is
involved. Hopefully, these will be eliminated
under GST regime by introduction of GST “E-
way Bills”.
 Central Government could not impose tax
on goods beyond manufacturing level.
State Government could not impose service
tax.
 Over the years, distinction between goods
and services had become hazy, due to
which there is overlapping of State VAT and
Central Service Tax on transaction like works
contract, food rated services (restaurants,
outdoor catering, mandap services),
Software, IPR Related services, lottery, SIM
cards, operating lease/renting of goods
etc.
GST is a solution to get over the
defects:
GST is a “destination-based” tax that will
replace the current Central taxes and duties,
except customs duty, such as Excise Duty,
Service Tax, Countervailing Duty (CVD),
Special Additional Duty of Customs (SAD),
Central Charges and Cesses and local state
taxes i.e. VAT, CST, Octroi, Entry Tax, Purchase
Tax, Luxury Tax, Taxes on Lottery, betting and
gambling, State Cesses and surcharges and
Entertainment tax (other than the tax levied by
the local bodies).
GST is “consumption based tax” i.e. tax will be
payable in the State in which goods and
services are finally consumed. GST will be
based on VAT system of allowing Input Tax
Credit for payment of tax on Output Supply.
The states from which goods and services are
supplied will not get any taxes as good and
services are consumed in another State.
In case of Inter-State supplies, IGST will be
payable. Input Tax Credit of IGST paid in one
State will be available to receiver of goods or
services in another State.

Allowability of Input Tax credit for payment of
Output tax is one of the key features of GST.
This will avoid cascading effects of taxes.
IGST will ensure Seamless movement of Goods
across the country as taxes will move along
with goods.
However, since IGST will be payable on inter-
state branch transfer and stock transfers,
finance will be blocked and interest burden of
dealers having inter-state transaction will
increase considerably.
Provisions made effective from 01-
07-2017
(a) CGST Act, 2017 – All provisions of Act
made effective from 01-07-2017, except
proviso to section 42(9) and proviso to section
43(9). These sub sections provide for Refund of
interest on account of discrepancy, if liability is
reduced after supplier accepts the invoice
and output tax liability is reduced. The provisos
state that amount of Interest to be credited
shall not exceed the interest paid by recipient.
(b) IGST Act, 2017 – All provisions of Act
Section 15 which provides for refund of IGST to
International tourist leaving India
(c) UTGST Act, 2017 - All provisions of Act
proviso to section 42(9) and proviso to section
43(9).
(d) Taxation Laws (Amendment) Act,2017 –
These sections make changes in provisions in
Central Excise, Customs, CST Act and certain
Cesses to align them with GST Law. All the
changes are made effective from 1-07-2017.
(e) SGST Act, 2017 – Provisions made
effective by respective State Governments.
Three Prime
Models of GST
Cental GST
GST to be
levied by the
Center
State GST
GST to be
levied by the
States
Dual GST
GST to be
levied by the
Center and
States

Integration of Taxes under GST
EXCLUSIONS FROM GST
 Customs duty
 Local Taxes levied by local authorities.
 Present Taxes will continues for the
following goods
o Alcohol, liquor for human
consumption
o Petroleum Products
o Tobacco Products
o Electricity
REGISTRATION UNDER GST
Registration is the first step towards the
compliance of any tax law. Under GST. Also
registration of new person and migration of
existing person is
going to be very
relevant and
crucial.
Another reason
why registration
under GST is crucial is that there is no concept
of centralized registration and hence a person
has to take registration in each state from
where he makes any supplies.
Liability to Register
GST being a tax on the event of “supply”,
every supplier needs to get registered.
However, small businesses having all India
aggregate turnover below Rupees 20 lakh (10
In CGST
Central Excise
Service Tax
SAD
CVD
AED
Surcharge and Cess
In SGST
VAT/Sales Tax
Entry Tax
Tax on Lottery etc.
Surcharge and Cess
Purchase Tax
Entertainment Tax
Luxury Tax
In IGST
Central Sales
Tax

lakh if business is in Assam, Arunachal Pradesh,
J&K, Himachal Pradesh, Uttarakhand,
Manipur, Mizoram, Sikkim, Meghalaya,
Nagaland or Tripura) need not register. The
small businesses, having turnover below the
threshold limit can, however, voluntarily opt to
register.
The aggregate turnover includes supplies
made by him on behalf of his principals, but
excludes the value of job-worked goods if he
is a job worker. But persons who are engaged
exclusively in the business of supplying goods
or services or both that are not liable to tax or
wholly exempt from tax or an agriculturist, to
the extent of supply of produce out of
cultivation of land are not liable to register
under GST.
Some of such suppliers who need to
compulsorily register irrespective of the size of
their turnover are:
• Inter-State Suppliers
• A person receiving supplies on which tax is
payable by recipient on reverse charge
basis
• Casual taxable person who is not having
fixed place of business in the State or Union
Territory from where he wants to make
supply
• Non-resident taxable persons who are not
having fixed place of business in India
• A person who supplies on behalf of some
other taxable person (i.e. an Agent of
some Principal)
• E-commerce operators, who provide
platform to the suppliers to supply through
it
• Suppliers who supply through an e-
commerce operator
• Those ecommerce operators who are
notified as liable for GST payment under
Section 9(5)
• TDS Deductor registered under GST.
• Those supplying online information and
data base access or retrieval services from
outside India to a non-registered person in
India.
Casual Taxable Person/Non-Resident
Person
A Casual taxable person is one who has a
registered business in some State in India, but
wants to effect supplies from some other
State in which he is not having any fixed
place of business. Such person needs to
register in the State from where he seeks to
supply as a Casual taxable person.
A Non-Resident taxable person is one who is
a foreigner and occasionally wants to effect
taxable supplies from any State in India, and
for that he needs GST registration.
GST law prescribes special procedure for
registration, as also for extension of the
operation period of such Casual or Non-

Resident taxable persons. They have to apply
for registration at least five days in advance
before making any supply. Also, registration is
granted to them or period of operation is
extended only after they make advance
deposit of the estimated tax liability.
COMPOSITION LEVY
A registered person, having aggregate
turnover upto Rs. 75 Lakhs (50 Lakhs in
specified states) in the preceding financial
year may opt to pay GST under composition
levy, in lieu of the regular tax payable by him.
Where a person with a PAN has more than one
registration it shall be mandatory for all such
persons same PAN to opt for Composition levy
else registered person shall become ineligible
for opting for composition levy.
Turnover below Rs. 75 lakhs
Rate of GST under Composition Levy :
For Restaurants – 5%
For Manufacturer – 2%
For Others –1%
Conditions for Composition Levy:
1. Should not be engaged in the supply of service apart
from business of Restaurants service.
2. Not engaged in making any supply of goods which are
not leviable to tax.
3. Outward supply should be made within the State/UT.
4. Cannot supply goods to electronic commerce
operator who collect tax at source
5. Not manufacturer of goods which are notified by
Government

Restrictions:
1. No tax is to be collected from recipients.
2. No entitlement of Input Tax credit.
3. The day aggregate turnover exceeds the
limit specified (Rs.75 Lakh), the option of
composition shall lapse.
If he procures goods/services from
unregistered dealer, then he is liable to pay tax
under RCM.
Nature of Supply
The following supplies also come under inter-
state supply
1. Import of goods or services
2. Supplier is located in India and place of
supply is outside India
3. Supplies to or by SEZ unit/ developer.
REVERSE CHARGE MECHANISM
The concept of reverse charge mechanism
was already present in Service Tax.
In GST regime, RCM may apply to both
services as well as goods. The purpose of
introduction of this charge in India is to
increase tax compliance and tax revenue.
Earlier, the Government was unable to collect
service tax from various unorganized sector
like goods transport. Compliances and tax
collections will therefore be increased through
RCM.
If location of
supplier and
place of supply
are in the same
state/union
territory
SGST/CGST will
apply
Intra state
supply
are in different
state/union
territory
Inter-state
supply
IGST will apply

“Reverse Charge” means the liability to pay
tax by the person receiving goods or services
or both instead of the suppliers of such goods
and/or services.
Reverse charge in case of receipt of supply
from unregistered person will apply even to
small value supplies also like tea from tea
Vendors, repair services of petty contractors,
stationery items, petty purchases etc., if such
total supplies exceed Rs. 5,000 per day.
MRP AFTER GST
Companies have time till September 30 to
clear unsold pre-GST goods as the
Government has allowed a revised MRP to be
displayed along with printed sale price to
reflect the changes post the new tax regime
kicking-in. MRP or Maximum Retail Price, as per
law, is the highest price that can be charged
to a consumer after including all taxes. But in
case of some commodities, the tax rate has
Table showing Services/Goods covered in RCM under GST regime:
Service/Goods Provided by Received by
Any taxable service
Persons residing in
Non-taxable territory
Persons residing in
taxable territory
Goods Transport Agency
Goods Transport
Agency (GTA)
Factory, Society, co-
operative society,
Taxable person
under GST, body
corporate, AOP,
firms, casual taxable
person.
Legal Service Advocates Any business entity
Arbitral Tribunal Arbitral Tribunal Any business entity
Sponsorship Any person
Any corporate or
Firm
Directors Service Director
A Company or Any
Corporate
Supply from Unregistered Dealer Unregistered Dealer
Any registered
person
Provided to Government or local authority Govt. or local authority Any business entity
Transportation of Goods from outside India up to the
customs station of clearance.
Persons residing in
non taxable territory
Importer
Radio taxi or Passenger Transport Service provided
through e-commerce operator
Taxi driver or a car
operator
Any business entity
Note: 100% GST shall be payable by the person who “receives the service.”

changed post
Goods and
Services Tax
(GST), altering
the MRP.
This created a problem for several businesses
which were left with large volumes of unsold
pre-packed items when the GST came into
force from July 1.
A government notification has now allowed
such unsold pre-packed items to be marketed
to consumers with an add-on sticker indicating
the revised price. The old MRP will have to be
clearly on display along with the revised MRP
sticker.
But from October 1, all pre-packed goods will
have to have just one MRP including the GST.
Food and Consumer Affairs Minister Ram Vilas
Paswan warned of legal action against
manufacturers for not printing the revised MRP
post rollout of the GST. Fall in prices due to
lower GST should be passed on to consumers.
The government will take legal action against
vendors not declaring revised MRP after GST.
The old MRP will have to be necessarily
displayed on the unsold inventories and the
new rates can be reflected by way of stickers
or through online printing alongside as clarified
by Consumer Affairs Secretary Avinash
Srivastava.
On items where the price has to be increased
for unsold stocks, the manufacturer or packer
or importer will have to give at least two
advertisements in two or more newspapers
informing people about the change.
The difference between the retail sale price
originally printed on the package and the
revised price “shall not, in any case, be higher
than the extent of increase in tax” or in the
case of imposition of fresh tax on account of
the implementation of the GST.
For reducing the MRP, a sticker of revised lower
MRP (inclusive of all taxes) may be affixed and
the same shall not cover the MRP declaration
made by the manufacturer or the packer on
the label of the package.
The notification also said that the packaging
material or wrapper which could not be
exhausted prior to July 1 may be used for
packing of material till September 30, 2017.
This will be permissible after the manufacturer
or importer or packer makes correction in the
retail sale price on account of the GST
implementation by way of stamping or
putting sticker or online printing.
-CA Avinash T Jain
“I think in the medium and long term more
revenue means more spending by the
government. I do not want to get into
numbers” – Arun Jaitley, Honourable Finance
Minister of India

Policy Watch
Company Law
Increase in the threshold limit on paid
up share capital for private companies
for restriction on reappointment of
Auditors
The Ministry of Corporate Affairs vide its
notification dated 22nd June, 2017 has
increased the limit on paid up share capital
for private limited companies mentioned in
the class of companies in Rule 5 of
Companies (Audit and Auditors) Rule, 2014
for restriction on reappointment of auditors
under Section 139(2) of the Companies Act,
2013 from ‘twenty lakhs’ to ‘fifty lakhs’.
http://www.mca.gov.in/Ministry/pdf/Compan
iesAuditandAuditorsSecondAmendmentRules
2017.pdf
RBI
Increase in limits for investments by
Foreign Portfolio Investors (FPIs) for
the quarter July-September, 2017
Reserve Bank of India vide notification no.
RBI/2017-18/12 dated 3rd July, 2017 has
revised the limits for investments by FPIs in
Central Government Securities and State
Development Loans (SDLs) for the quarter
July-September, 2017. The revised limits are
as follows.
https://rbidocs.rbi.org.in/rdocs/notification/P
DFs/NOTI3171E66547E9D0E49B4B616A8509EF8
4872.PDF
Limits for FPI investment in
Government Securities
(INR Billion)
Existing
Limits
Revised
limits
Central
Govt.
Securitie
s
General 1,849 1,877
Long Term 461 543
Total 2,310 2,420
State
Developm
entLoans
General 270 285
Long Term -- 46
Total 270 331
Aggregate 2,580 2,751

Direct Tax
Class of persons or receipts which
do not come under the purview of
Section 269ST (Mode of undertaking
a transaction) of the Income Tax
Act, 1961
The Central Board of Direct Taxes vide its
notification no. Notification No. 57 /2017,
F.No.370142/10/2017-TPL dated 3rd July,
2017 has notified the following class of
persons or receipts for which the section
269ST is not applicable.
a) receipt by a business correspondent on
behalf of a banking company or co-
operative bank, in accordance with the
guidelines issued by the Reserve Bank of
India;
b) receipt by a white label automated teller
machine operator from retail outlet
sources on behalf of a banking company
or co-operative bank, in accordance
with the authorization issued by the
Reserve Bank of India under the Payment
and Settlement Systems Act, 2007 (51 of
2007);
c) receipt from an agent by an issuer of pre-
paid payment instruments, in
accordance with the authorization
issued by the Reserve Bank of India under
the Payment and Settlement Systems
Act, 2007 (51 of 2007);
d) receipt by a company or institution
issuing credit cards against bills raised in
respect of one or more credit cards;
e) receipt which is not includible in the total
income under clause (17A) of section 10
of the Income-tax Act, 1961.
http://www.incometaxindia.gov.in/communi
cations/notification/notification57_2017.pdf
SEBI
Acceptance of E-PAN card for KYC
compliance by Foreign Portfolio
Investors (FPIs)
Securities and Exchange Board of India vide
its circular no. SEBI/HO/IMD/FIIC/CIR/P/
2017/068 dated 30th June, 2017 notified that
the FPIS can avail the facility if E-PAN Card
introduced by Central Board of Direct Taxes
for the purpose of KYC compliances.
http://www.sebi.gov.in/legal/circulars/jun-
2017/acceptance-of-e-pan-card-for-kyc-
purpose_35210.html
Indirect Taxes
Due date for filing service tax returns
for the quarter April-June, 2017 to be
15th August, 2017

The Central Board of Excise and Customs
vide its notification no. 18/2017 dated 22nd
June, 2017 has notified that the due date for
filing Form ST-3 or ST-3C (Service Tax Returns)
for the quarter April-June, 2017 shall be 15th
August, 2017 and the due date for filing
revised return for the same quarter will be 45
days from the date of filing the original
return.
http://www.cbec.gov.in/resources//htdocs-
servicetax/st-notifications/st-notifications-
2017/st18-2017.pdf
Exemption of Excise Duty on goods
manufactured on or before 30th
June, 2017 but not cleared from the
factory of production before 1st July,
2017.
The Central Board of Excise and Customs
wide its notification no. 12/2017 has
exempted all the excisable goods, except
petroleum crude, high speed diesel, motor
spirit (commonly known as petrol), natural
gas, aviation turbine fuel, tobacco and
tobacco products, which have been
manufactured before 30th June, 2017 but
not cleared from the factory of production
before 1st July, 2017, form the whole of
excise duty leviable on such goods.
http://www.cbec.gov.in/resources//htdocs-
cbec/excise/cx-act/notifications/notfns-
2017/cx-tarr2017/ce12-2017.pdf
Verdicts
Direct Tax
Correction of PAN, in case wrongly
quoted in TDS returns, allowed upto
two alphabets and/or 2 numerical
characters
–vide the decision of High Court of Gujarat vide
Purnima Advertising Agency (P.) Ltd. Vs. Deputy
Commissioner of Income –tax - TDS Circle
The honourable High Court of Gujarat vide
Purnima Advertising Agency (P.) Ltd. Vs.
Deputy Commissioner of Income –tax - TDS
Circle held that in case the deductor has
wrongly quoted the PAN of the deductee in
his TDS return, he can correct it as long as the
mismatch is upto two alphabets and two
numerical characters

https://www.taxmann.com/filecontent.aspx?
Page=CASELAWS&id=101010000000175973&is
xml=Y&search=&tophead=true&tophead=true
The right to use a place (rent) and
the right to carry on a business
(royalty), if not separated in the
license agreement, entire amount
to be treated as rent under Section
194-I of Income Tax Act,1961
-vide the decision of High Court of Delhi vide
Commissioner of Income Tax Vs. I.T.C Ltd
The honourable High Court of Delhi vide
Commissioner of Income Tax Vs. I.T.C Ltd held
that if the license agreement does not clearly
specify the amount to be paid as royalty to
carry on the business and rent to use the
space, the entire amount of fee paid shall be
treated as rent under section 194-I and TDS
shall be deducted accordingly.
Page=CASELAWS&id=101010000000175948&is
xml=Y&search=&tophead=true&tophead=true
Indirect Taxation
Activity of a Chit Fund company not to
be treated as banking and other
financial services under section 65 of
the Finance Act, 1994
-vide the decision of supreme court of India vide
Union of India Vs. Margadarshi Chit Funds (P.)
Ltd.
The honourable Supreme Court of India vide
Union of India Vs. Margadarshi Chit Funds (P.)
Ltd. held that the activity of managing chit
fund does not amount to management of any
type of fund and hence it shall not be covered
under Sub-section 12 of Section 65 of the
Finance Act, 1994 which defines “banking and
other financial services”.
Page=CASELAWS&multipage=false&id=10101
0000000175889&isxml=Y&search=&tophead=tr
ue&tophead=true
Disclaimer
Information in this Newsletter, charts, articles,
or any other statements regarding market or
any other financial information, is obtained
from the sources, which we feel reliable. We
do not warrant or guarantee the timeliness or
accuracy of the information. The reader shall
not take any decision based on the facts or
figures of the newsletter without professional
advice.

►►► PHOTOGRAPH OF THE MONTH
Seagull taking off at Sewri Mudflats, Mumbai
- Clicked by M Siva Ram Prasad
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