TIOL-DDT 2956
25 10 2016
Tuesday

PARA 10.1 of the JS TRU letter of Budget 2016 (Service Tax) reads:

10.1 In Union Budget, 2015, as a policy decision to prune exemptions, the exemption to services provided by mutual fund agents/distributors to an asset management company was withdrawn. However these services were put under reverse charge liability, i.e., the Asset Management Company was made liable to pay service tax for the services received from such agents/distributors. Services provided by mutual fund agents/distributor to a mutual fund or asset management company are being put under forward charge, i.e. the service provider is being made liable to pay service tax. The small sub-agents down the distribution chain will still be eligible for small service provider exemption [threshold turnover of Rs 10 lakh/year] and a very small number will be liable to pay service tax. Accordingly, Rule 2(1)(d)(EEA) of Service Tax Rules, 1994 making service recipient, that is, mutual fund or Asset Management Company as the person liable for paying service tax is being deleted along with consequential changes in notification No. 30/2012-ST.

In view of the above changes, the mutual fund agents have to pay Service Tax from the year 2016-17 under direct charge. It is learnt that these mutual fund agents were advised by their Asset Management companies to claim exemption up to a value of Rs 10 lakhs in the year 2016-17, irrespective of the amount of commission received by them in the year 2015-16, as these agents are paying Service Tax for the first time.

However, some of the agents are apprehensive that they may not be eligible for small service provider exemption if their commission in the preceding year exceeded 10 lakhs as technically it is the Service income received though the liability had been discharged by the Asset Management companies under reverse charge.

There is also another view. Since para 3 of the Notification No 33/2012-ST, dated, June 20, 2012 excluded turnover which is taxable under reverse charge under Sec 68(2) from "aggregate value" for the purpose of small scale exemption in respect of GTA service, the same logic applies to mutual fund agents also and they are entitled to exemption up to 10 lakhs in the year 2016-17.

It looks as if the advisory given by the Mutual Fund Companies has been misunderstood by many of the Mutual Fund Distributors. For example, the clarification given by SBI Mutual Fund was this:

4. How to compute the threshold of Rs 10 Lac for the benefit of small scale provider?

Ans: The threshold for the benefit of small scale service provider should be computed by including all taxable services provided by the distributor (including but not restricted to distribution commission from sale of MF, distribution commission from sale of Insurance policy, advisory fee and any other professional fee etc.).

5. How distributor may avail the benefit of small scale service provider during current financial year?

Ans: The Distributor may avail the benefit of small scale service provider on the basis of their gross taxable services provided in the previous and the current financial year. Following are the scenarios to understand the applicability of service tax for distributor.

Reliance Capital Asset Management Ltd also gave similar clarifications.

Today is the last day for these agents/distributors to file their first return after they became liable to pay the tax from April 2016. And many agents are confused about liability on that 10 lakh rupees.

Will CBEC issue a clarification without waiting for an audit objection running into crores?

GST - 'Four Rates Fine' says Arvind Panagariya; 'Disastrous' says Chidambaram

NITI Ayog Vice Chairman Arvind Panagariya says that the structure of having four slabs of 6, 12, 18, and 26 per cent, as proposed by the Centre, would see to it that there was a certain level of predictability to the revenue calculations, along with keeping the inflationary implications in check.

He adds:

+ If you do a single rate (16 or 18 per cent) then some of rates you will have to bring very far off. Obviously, then there will be inflation on those particular commodities (with lower rates of tax). There are products which have 3 per cent rate of tax. Those if you take all the way to 16 or 18 per cent then there will be inflation implications.

+ The criticism of the multiple rate structure is "overstated".

+ The big gains from GST will come from having a single tax rate on a single product across geographies. There is no tax theory which suggests one tax rate is better than two, or two are better than four.

+ If there was another tax instead of the cess, the tax rate would have been much higher since 42 per cent of the amount would go to states. Also since the cess is to be temporary, it can be dropped after five years. In case there was a higher tax rate, there may be no inclination among the states to remove it.

+ While the government's target to roll out the GST regime from April 1, 2017 was "a little bit of a race", it was "certainly within the realm of possibility".

Chidambaram sang a different tune. He says,

+ There cannot be multiple tax slabs in Goods and Services Tax (GST) and it is nothing more than VAT in "new shape"

+ A well designed GST is expected to have a standard rate, a plus (standard) rate and a minus (standard) rate. But it cannot have different rates across the board.

+ We can't have 20 rates. This will be disastrous and that cannot be GST. It will be fooling the country. That's simply existing VAT rates in a new shape.

+ The transition to GST was good for the overall economy in the long run even though the impact was expected to be inflationary in the first year. Taxes are expected to go up mostly on services. But, I think that over a period of time, it is expected to level off.

ATM Cards Misuse few - But do change the PIN - RBI

THE Reserve Bank of India convened a meeting yesterday with senior officials from select banks, National Payment Corporation of India and card network operators to review the steps taken by various agencies to contain the adverse fall out of certain card details alleged to have been compromised.

It has come to the Reserve Bank's notice on September 8, 2016 that details of certain cards issued by a few banks had been possibly compromised at ATMs linked to the ATM Switch of one of the service providers. The issue is currently being investigated by an approved forensic auditor.

The number of cards misused, as per currently available information, is few. As a matter of abundant precaution, card network operators concerned were earlier advised to share the details of cards used during the period of such exposure. Based on this, banks have been taking necessary remedial action to avoid any potential abuse of such cards in future by unscrupulous elements and to protect the interest of their customers. Banks have taken measures including advising the customers to change PIN, blocking payments at international locations, reducing the withdrawal limits, monitoring unusual patterns, replacing the cards and re-crediting the accounts of cardholders for amounts wrongly debited.

The Reserve Bank urges the cardholding bank customers that it is a good practice to change the PIN and passwords periodically and not to share them with anyone for any reason. Banks do not ask for card or account details from their customers, hence, customers may exercise caution and not reveal such information to any person on phone or email.

RBI Press Release 2016-2017/1014., Dated: October 24, 2016

Income Tax - Draft Rules for prescribing method of valuation of fair market value in respect of trust or institution

THE Finance Act, 2016 inserted a new Chapter XII-EB consisting of sections 115TD, 115TE and 115TF in the Income-tax Act, 1961 (the Act). This chapter contains specific provisions relating to levy of additional income-tax where the charitable institution exempt under the Act ceases to exist as charitable organization or converts into a non-charitable organization.

Sub-section (2) of newly inserted section 115TD provides that the accreted income for the purposes of sub-section (1) thereof means the amount by which the aggregate fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total liability of such trust or institution computed in accordance with the method of valuation as may be prescribed.

Therefore, the method of valuation of fair market value in respect of the trust or the institution as on the specified date for determination of accreted income needs to be prescribed in the rules.

Accordingly, CBDT proposes to insert rule 17CB in the Income-tax Rules, 1962. comments and suggestion of stakeholders and general public on the draft rules may be sent electronically by 31st October, 2016 at the email address, dirtpl1@nic.in

CBDT F. No. 370142/21/2016-TPL., Dated: October 24, 2016

TDS - FM Launches SMS Alert Service for about 2.5 crore salaried employees

THE other day, I met a clueless retired IRS Officer who found that his bank had deducted TDS from his pension, but it is not reflected in his 26AS and he had no clue as to what to do. I found a similarly placed Bank officer, who is still doing the rounds to get his TDS reflected in his 26AS.

Woe betide the ones who are covered under TDS - one small mistake and it doesn't get corrected for years.

Yesterday, the FM launched a new effort by the CBDT to directly communicate deposit of tax deducted, through SMS alerts to salaried taxpayers, at the end of every quarter.In case of a mismatch, they can contact their deductor for necessary correction. Simultaneously, SMS alerts will also be sent to deductors who have either failed to deposit taxes deducted or to e-file their TDS returns by the due date.

This initiative will initially benefit approximately 2.5 crore salaried cases. The CBDT will soon extend this facility to another 4.4 crore non-salaried taxpayers. The frequency of SMS alerts will be increased, once the process for filing TDS returns is streamlined to receive such information on a real-time basis.

Launching the scheme, Finance Minister Arun Jaitley said,

1. better facilities and services to the taxpayers are central to Direct Tax Reforms.

2. The taxpayers have a right to know the deductions made from their salary/income on regular basis.

3. More and more taxpayer services have to be provided in order to make the people tax complaint.

4. Government is committed towards continuously upgrading tax payer services.

Until Tomorrow with more  DDT

Have a nice day.

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