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TDS on premature PF withdrawal may go

The Finance Ministry is reconsidering its Budget provision to tax premature provident fund (PF) withdrawals of Rs. 30,000 or more, even as the Finance Act of 2015 has been notified and deduction of tax at source from PF accounts settled before five years of service comes into force on JUNE 1. 

"The government is mulling two options to hold back the implementation of this tax, after it was pointed out that it would be unfair to tax retirement savings of people whose income is less than Rs. 2.5 Lakh, " said a senior official. The finance ministry may issu a directive to put the implementation of this clause in the Finance Act in abeyance or raise the Rs. 30,000 trigger for tax deductions from PF accounts. (HT Mint)

CPC (TDS)'s provision for "Correction of Potential Errors" in Original TDS statements before Computation of Final Defaults

Date of communication : 24/05/2015 

Dear Deductor (TAN - XXXXXXXXXX), 

As you may be aware, Centralized Processing Cell (TDS) intimates you of possible PAN Errors and Short Payment Defaults, through an Intermediate Communication, during processing of Original Quarterly TDS Statements. This change was incorporated in processing of TDS Statements, in view of feedbacks received from deductors, to avoid defaults that may arise due to inadvertent data entry errors.The central point in the new process is identifying errors in challan/ PANs and facilitating their corrections before CPC (TDS) computes defaults in TDS statements. Following are the salient features of Intermediate Communication:

What is new?
  • Step 1: CPC (TDS) will first process Original TDS Statements till the stage of 26AS generation for deductees reported.
  • Step 2: Short Payments and PAN Errors will be identified in the preliminary check of the Original statements.
  • Step 3: The statements will be placed "On Hold" for further processing and an opportunity will be provided to correct potential defaults of Short Payment and PAN Error
  • When the statement is placed on Hold, CPC (TDS) will intimate you through following means:

    • e-mail at the Registered e-mail address at TRACES
    • SMS at Registered Mobile Number with TRACES
    • Message will be delivered to the Deductor's Inbox in TRACES

  • The above correction needs to be carried out by using Online Correction feature at TRACES after 24 hours of the receipt of the Intermediate Communication and must be availed within 7 days of receipt of such communication.
What are the advantages:
  • You would have preliminary information of potential Short Payments and PAN Errors, before the Original Statement is completely processed for Defaults and Intimations are generated.
  • Correction of above defaults using Online Correction can be submitted before final processing of statements.
  • Above action will facilitate avoidance of multiple Correction Statement filing later, after the defaults are identified CPC (TDS) and Intimations have been sent.
What actions to be taken:
  • Please take note of the Intermediate communication from CPC (TDS) and submit Online Correction for potential defaults in TDS statement within the stipulated time frame.
  • Only "Online Correction" facility can be used for correction of above Short Payments and PANs.

    To avail the facility, you are requested to Login to TRACES and navigate to Defaults tab to locate Request for Correction from the drop-down menu. For any assistance, please refer to the e-Tutorial available on TRACES.

    Please note that Digital Signature will be required to avail the benefit of complete correction features, including PAN Corrections.
  • PAN Verification facility on TRACES can be used for verifying the deductees. You are requested to navigate to Statement/ Payment to locate PAN Verification in the menu to download the file.
  • You can make use of the "Consolidated TAN - PAN File" that includes all the valid PANs attached with the respective TANs. To avail the facility, please navigate to Dashboard to locate Consolidated TAN - PAN File.
  • The action requires to be completed after 24 hours and within 7 days of Intermediate communication from CPC (TDS).
It is hoped that the deductors will avail of the time window to correct errors, if any. CPC (TDS) is committed to provide best possible services to you.

  • Please maintain updated email address and Contact Number on TRACES to receive regular periodic updates and guidelines from TRACES.
  • Please refer to our FAQs and e-tutorials for detailed screen-driven assistance, before seeking further help.

Analysing the Judgement of Hon’ble Bombay HC holding meal vouchers as ‘Goods’ & Implications

Recently the Hon’ble High Court of Bombay have pronounced an order which is a land mark judgment for Indian E-commerce Industry specifically and including Coupon / voucher sub-industry considering the vacuum of judicial pronouncements on this aspect. The matter relates to CWP No. 5653 of 2010 & 7503 of 2013 decided on 20th March, 2015 in case of M/s Sodexo SVC India Private Limited vs. The State of Maharasthra & others in Hon’ble Bombay HC where the basic issue required to be addressed by the court was,  
Facts of the Case – The Arrangement

·         M/s Sodexo SVC India Private Limited (hereinafter referred to as ‘Petitioner’ / ‘Sodexo’) is engaged in conducting a business of providing pre­printed Sodexo Meal   Vouchers (“Vouchers"). Sodexo  enters  into  a  contract  with  its  customers  for  issuing  the  said vouchers (Say Rs 100/- face value). The  customers  in  turn  distribute  the  said vouchers  to  their  employees  who  are  the  actual  users  of  the  said vouchers. It  is  stated  that  Sodexo has  contracts  with various  affiliates  such  as  restaurants,  departmental  stores,  shops,  etc. Under  the  affiliate  contracts,  the  affiliates  are  required  to  provide  food and  other  items  on  presentation  of  the  said  vouchers  by  the  users. The affiliates  are  bound  to  honour  vouchers  once  presented  by  the  users. The  affiliates  after  receiving  the  said  vouchers,  present  the  same  to  Sodexo. On   receipt   of   the   vouchers,   Sodexo reimburses the affiliates after deducting service charges (say Rs 15/-). 

·         To operate such a model of paper based voucher, Sodexo had obtained  certificate  of  authorization  from  the  Reserve Bank  of  India  under  Section  7  of  the  Payment  and  Settlement  Systems Act, 2007 to  operate  a  payment system  for  issue  of  meal  and  gift  vouchers  in  the  form  of  'paper  based vouchers'  and  'smart  meal  cards'  with  effect  from  25th  June  2009.
The Issues
·         Whether  the  Sodexo  Meal  Vouchers  are  ‘goods’  for  the purposes  of  levy  of  Octroi  and  LBT  ?
·         Whether  a  Municipal  Corporation constituted  under the  Maharashtra  Municipal  Corporations  Act,  1949  is entitled  to  levy  and/or  collect  Octroi  or  Local  Body Tax  (LBT)  on  Sodexo  Meal  Vouchers  in  accordance with  the  provisions  of  the  Maharashtra  Municipal Corporations   Act,1949 and the Rules framed thereunder?

Petitioner’s Contention
·         The said vouchers  are nothing but  payment  instructions  or  payment  instruments  issued  under a  payment  system  operated  under  the  said  Act  of  2007  as  per  the authorization  received  from  the  Reserve  Bank  of  India.
·         Under  both  the  Octroi  Rules  and  the  LBT  Rules,  the  taxes  can  be collected  on  the  goods. Incidentally, since the octroi and LBT legislation does not throw light on definition of ‘Goods’ inference can be drawn on the other provisions of the Act i.e. Octroi  or  LBT  can  be  levied  on  the  consumption, use  or  sale  of  goods  within  the  limits  of  Municipal  Corporations. The  said  vouchers  are  a  medium  to  acquire  any  article  for consumption,  use  or  sale  and  the  said  vouchers  are  not  capable  of consumption,  use  or  sale  by  themselves. Simply to say that the said vouchers are only medium of payment.
·         Vouchers are similar to ‘Lottery tickets’ which held not be ‘goods’ by relying on Sunrise Associates  v.  NCT  of  Delhi (2006)5 SCC 603
·         Vouchers are similar to ‘papers and files in possession of a legal practioner’ by relying on R.D.Saxena  v.  Balram  Prasad  Sharma (2000)7 SCC 264
·         He placed reliance on State Bank  of  India v.  Neela  Ashok  Naik  and  Another AIR 2000 Bom. (151) wherein fixed deposit receipts were held to be goods on their characteristic of being capable to be sold, purchased or consumed, but the said vouchers do not possess any such charactersictic.
·         He also relied on other judgements viz Bharat  Sanchar  Nigam  Ltd.  and  Another  v.  Union  of  India  and  Others (2006)3 SCC 1 & TATA  Consultancy  Services  v. State  of  Andhra  Pradesh (2005)1 SCC 308 for laying down the characteristics of ‘goods’ and justifying as to said vouchers do not stand as ‘goods’ within the prescribed characteristics.
Revenue’s Contention
·         Revenue simply relied upon on the thesis that said vouchers were capable  of  use and/or  consumption  as  well  as  sale  within  the  limits  of  the  Municipal Corporations.
·         In support of above, revenue  relied  upon  a  decision  of  the  Division  Bench  in  the  case of  Maharashtra  Chamber  of  Commerce  Industries  &  Agriculture  &  Others v.  State  of  Maharashtra ,  through  its  Secretary  &  Others 2004(1) Bom.C.R. 137  and  Small  Scale Interpreneurs  Association  and  Others  v.  State  of  Maharashtra  and  Others 2007(3) Bom.C.R. 496.
Key Judicial Lay-downs
·         The   said   vouchers   are   capable   of   being   sold   by   the Petitioner  after  they  are  brought  into  the  limits  of  the  City. In  fact, going  by  the  scheme  narrated  above,  the  said  vouchers  are  sold  by  the petitioner  to  its  customers  for  value.

·         Relying on Tata Consultancy services (supra), court pointed that  (Para 81)

'Goods'  may  be  a  tangible  property  or  an intangible  one.  It  would  become  goods  provided  it has  the  attributes  thereof  having  regard  to  (a)  its utility;  (b)  capable  of  being  bought  and  sold;  and (c)  capable  of  transmitted,  transferred,  delivered, stored   and   possessed.

Going  by  the  test  laid  down  in  Paragraph  81  of  the  said decision  of  the  Apex  Court  in  the  case  of  TATA  Consultancy  Services,  the said  vouchers  have  its  utility,  the  same  are  capable  of  being  bought  or sold  and  the  same  are  capable  of  being  delivered,  stored  and  possessed. Hence said vouchers are in the nature of ‘goods’.

·         Citing the examples of several instances viz lottery tickets, Fixed deposit receipts and electromagnetic waves held that such printed paper vouchers are in the nature of ‘goods’ and are not in the nature of actionable claim. The said voucher cannot be equated with lottery ticket or electromagnetic waves.

How this Judgement opens up Pandora Box?
·         The judgment was limited only to determine the applicability of LBT and/or Octroi in respect of sale of Sodexo Meal Vouchers within the local municipality. Such judgment, though has left open the issue of whether such meal vouchers would qualify as 'goods' for other Acts as well.
·         Is it that the test laid out in TCS’s (Supra) and other cases referred to above conclusive to identify whether a particular item to be goods?
·         If such vouchers are held to be goods, will the redemption of such voucher tantamount to barter transaction?
·         Can this judgement have implications on coupons, gift cards and gift vouchers remains a point to ponder?
·         A lot many issues which arise because of this judgment remains unanswered and requires due consideration
·         Paper based voucher is similar to cases of cash cards used by several malls and retail outlets which create virtual currency on the card against which items can be purchased from retail outlets, does this sought of virtual currency also qualify to be ‘goods’?.

Before Parting..

The decision of Hon’ble HC in the above case can lead to wide implications and the ones which might to un conductive to the trade and potentially lead to double taxation with ancillary implications. Industry though shall push the caution button to ensure that the mitigation strategy shall be duly implemented. Further, one may absurdly even see advance payment (as similar to said voucher) as ‘Goods’ by applying this ratio laid down! 

Circular with regard to malicious mails. - (23-05-2015)

Circular No. 1-CA (7)/165/2015

Dated 23rd May,2015

The Council of the Institute of Chartered Accountants of India (ICAI) at its 342nd meeting held on 5th and 6th May, 2015 noted the judgment dated 24th March, 2015 delivered by the Hon’ble Supreme Court of India in case of Shreya Singhal vs Union of India, whereby Section 66 A of the Information Technology Act, 2000 has been struck down.

The Council at its above meeting further noted that recently certain emails having false and misleading contents with a malicious intent are being circulated in a derogatory manner for bringing down the image of the Institute.

In the light of the above judgment of the Hon’ble Supreme Court and the facts of circulation of malicious emails, the Council in its above meeting decided as under:
  • That the Circular No. 1-CA (7)/165/2014 dated 17th April, 2014 published in May 2014 issue of the Chartered Accountant Journal and hosted on the website of the Institute containing the provisions of section 66 A of the Information Technology Act, 2000 stands withdrawn.
  • That while the members of the Institute are free to express their views in respect of the affairs of the Institute by any means but while doing so members are advised to exercise reasonable restraint so as to avoid defamation of any person or the Institute in order to maintain decency and morality in the interest of the profession or the Institute.
  • That the members are accordingly hereby advised to desist in engaging themselves from sending malicious emails against the Institute or its members, which may bring disrepute to the profession or the Institute.
  • That in case any member is found engaged in sending malicious emails against the Institute, its members or otherwise spreading false, misleading or defamatory statements, may invite action under the applicable provisions of the Chartered Accountants Act, 1949 and the rules framed there under.
  • That besides above, in case any member is found engaged in sending such malicious emails, the action may also be initiated under any other law of the land as applicable.
All the members of the ICAI are hereby advised to take note of the above decision of the Council.

Announcement - Zone Shifting of Candidates for 14th June - 2015 CPT. - (21-05-2015)


May 21, 2015

Subject: Zone-shifting of candidates for 14th June - 2015 CPT

Due to paucity of accommodation in certain Zones opted by the candidates in the city of Chennai and Hyderabad some of the candidates have been allotted examinations centres in the zone other than the zone opted by them. In view of this, it is not possible to accede to the requests of the candidates for transfer to an examination centre in a particular zone of the city opted by them. 

While inconvenience caused in the matter is deeply regretted, we seek the cooperation from the examinees and other stakeholders in this regard. 

Determination of point of taxation rule because of increase in service tax rate from 12.36% to 14%

On 19th May 2015 Central Government has issued most awaited notification for change in effective rate of Service Tax from 12.36% to 14%. New rates will be applicable from 1st June, 2015 (Notification No. 14/2015-ST dated 19th May, 2015). 

Point of taxation involving change in effective rate of tax is governed by Rule 4 of the POT Rules, which provides for determination of Point of taxation when there is change in effective rate of tax as mentioned in the table below:

S. No.
In case a taxable service has been provided
Invoice has been issued
Payment received for the invoice
Point of taxation shall be
Applicable Rate
BEFORE the change in effective rate of tax
AFTER the change in effective rate of tax
AFTER the change in effective rate of tax
Date of issuance of invoice or Date of receipt of payment, whichever is earlier
New Rate
BEFORE the change in effective rate of tax
AFTER the change in effective rate of tax
Date of issuance of invoice
Old Rate
AFTER the change in effective rate of tax
BEFORE the change in effective rate of tax
Date of receipt of payment
Old Rate
AFTER the change in effective rate of tax
BEFORE the change in effective rate of tax
AFTER the change in effective rate of tax
Date of receipt of payment
New Rate
BEFORE the change in effective rate of tax
BEFORE the change in effective rate of tax
Date of issuance of invoice or Date of receipt of payment, whichever is earlier
Old Rate
AFTER the change in effective rate of tax
BEFORE the change in effective rate of tax
Date of issuance of invoice
New Rate

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How new change in Service Tax rate should be tackled.

How change in Service Tax rate should be tackled.
Please keep in mind the following and prepare yourself accordingly:
1. Service Provision is complete till 31.05.2015 and Invoice raised till 31.05.2015 but Payment received on or after 01.06.2015- 12.36% applicable.

2. Service complete till 31.05.2015, Invoice raised on or after 01.06.2015 but Payment is received till 31.05.2015 - 12.36%
3. Service Provision complete till 31.05.2015 and Invoice raised on or after 01.06.2015 and Payment also received after 01.06.2015- 14%
4. Invoice raised till 31.05.2015 in advance and some part of total consideration has been paid till 31.05.2015 but Service Provision is being done on or after 01.06.2015 -12.36% for such part payment, 14% for balance to be recd.
5. Entire consideration received till 31.05.2015 but no invoice raised till 31.05.2015 and no service provided -14%
6. Even if entire service has been provided on or after 01.06.2015 but both payment as well as invoicing has been done till 31.05.2015 then -12.36

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Finance Bill, 2015 Enacted. - ICAI

                                                                                                                                             15th May, 2015

Finance Bill, 2015 Enacted

Finance bill, 2015 has received the presidential assent on 14th May 2015 and has now become Finance Act, 2015. All the provisions which were due to be effective from the date the Finance Bill receives the assent of the President have now been implemented w.e.f. 14th May 2015.

It is worthwhile to mention that the following provisions would be applicable from the date yet to be Notified and have NOT BEEN implemented yet:
  • Increase in effective rate of Service Tax from 12.36% to 14%. Hence, there is no change in the rate of Service Tax w.e.f. 14th May 2015.
  • Imposition of Swachh Bharat Cess @ 2% on the value of taxable services.
  • Levy of Service Tax on Entry to Entertainment Events and Access to Amusement Facilities
  • Levy of Service Tax on contract manufacturing/job work for production of potable liquor for human consumption.
  • Levy of Service Tax on services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered in the Negative List.
These changes would be made effective vide separate Notifications. For further details visit www.idtc.icai.org

Allotment of assignment of Checkers in respect of CA exams held in May 2015 - on Checkers Portal. - (19-05-2015)

Checkers Portal-Chartered Accountancy Main Examinations

May 19, 2015

A web portal, http://checkers.icaiexam.icai.org has been developed and put in place, for handling the activities relating to Checkers, with effect from CA Examinations held in May 2015 onwards.

Details of allotment of assignments to act as Checkers for the Chartered Accountancy Examinations held in May 2015 can be accessed at the above mentioned website from 11.00 a.m. on 19th May 2015 onwards.

Members who filed applications, online, for the assignment of Checkers are requested to check the details of the assignment allotted to them, if any, print their appointment letters, upload their acceptance and proceed further. They will also be able to submit their bills/claims through the portal. 

Applicants are requested to note that no physical appointment letters will be issued. 

For any further clarifications, contact examchecker@icai.in.

Examination Department

Service tax Rate of 14% will be effective from 1st june 2015

Today Central Government has issued most awaited notification for change in effective rate of Service Tax from 12.36% to 14%. New rates will be applicable from 1st June, 2015 (Notification No. 14/2015-ST dated 19th May, 2015). Corresponding changes in Rules 6 of Service Tax Rules, 1994 for increase in rate of Service Tax for:
  1. Air Travel Agent,
  2. Life Insurance Business,
  3. Foreign Exchange Brokers and
  4. Distributor & Selling Agent of Lottery
will also be applicable w.e.f. 1st June, 2015 (Notification No. 15/2015-ST).

In addition following changes will be applicable w.e.f. 1st June, 2015:
  1. Service Tax on amusement facilities and Entertainment Events however exemption is available in respect of following services by way of right to admission to,-
    1. exhibition of cinematographic film, circus, dance, or theatrical performance including drama or ballet;
    2. recognised sporting event;
    3. award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event, where the consideration for admission is not more than Rs. 500 per person.”
  2. Service Tax on Liquor Job Work;

Date of applicability of following provisions is yet to be notified:
  1. Expansion of scope of services provided by Government and Local Authority; and
  2. Applicability of ‘Swachh Bharat Cess’

To Download the Notification CLICK HERE

Tags: Service tax Rate of 14% will be effective from 1st june 2015

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