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Proposed Changes in GST Form

August 7th Tuesday, the Lok Sabha passed 4 new bills in an attempt to GST procedures with a focus on empowering the MSME(Micro, Small and Medium Enterprises) sector. The government is also targeting to plug loopholes in existing laws and lightening ROC compliances requirements described as ‘complex’ by many a business owners. The new return filing system is expected to be put in place by the revenue department by January 2019 and would actively replace the current GSTR-3B and GSTR-1 returns.

In addition to these, an attempt has been made for the empowerment of digital payments such as UPI with incentives via cashback offers. The Lok Sabha also facilitated changes in GST return filing forms and also helping in reducing the frequency of return filings for businesses. The bills passed by the Lok Sabha are

•  Central GST(Amendent) Bill, 2018

•  Integrated GST (Amendment) Bill, 2018

•  Union Territory GST (amendment) Bill, 2018

•  GST (Compensation to  States ) Amendment Bill, 2018

This article will focus on the proposed changes in the GST forms.

Filing returns of and payment of taxes had become a little tedious and complex. Aimed at addressing this issue and to bring about simplicity, the government has decided to bring in Sahaj and Sugam the simplified GST forms to achieve ease of going about business.

The finance Minister Piyush Goyal was quoted as being intent on empowering the MSME sector and said “The proposed new return filing system envisages quarterly filing of return and tax payment for small taxpayers along with minimum paperwork". The government also aims at simplifying the procedures for MSME registration by incorporation of the comprehensive SPICe forms.

Along with these changes, the government has also modified the due date for final GST sales returns to 11th of the succeeding month. (applicable for companies with turnovers exceeding 1.5 Crore Rupees.) The single return process will continue to have dates of filling vary based on the turnover of the company.

The simplified GST return filing forms have prospects for:

 

1.      Reducing Confusion among Taxpayers

The government plans to introduce a modular approach in which the aim is to introduce many business types into a simple form. Various modules in one common return will facilitate the filing process for eg. One for traders and one for exporters.The one form approach will help taxpayers pick and choose their type of business module and go to a section which remains relevant to other traders. According to the finance minister “This kind of a modular approach will help significantly in improving the compliance process too”.

2. Decreasing the number of returns from 36 to 12 a year.

Return filings frequency will drop and single return procedures will be introduced per monthly basis to help facilitate the compliance process.

3.One-Monthly return

Barring a few exceptions like composition dealers, all taxpayers shall file one monthly return. Return filing dates would be stacked on the basis of the turnover of the designated individual to manage load on the IT system. The facility of filing quarterly returns can be availed by composition dealers and dealers having no transactions.

4.Unidirectional Flow of Invoices

Invoices can be uploaded at any time of the month in a unidirectional manner by sellers. These invoices can serve as valid documents to avail input tax credit by the buyer and buyer also has the provision of being able to see uploaded invoices during the month continuously.

5. Simple Return Design and Easy IT interface

Invoice-wise descriptions of outward supply made by B2B dealers have to be maintained and the system will be able to calculate the tax liability automatically. Taxpayers will also be facilitated with a user-friendly interface and offline tools to upload invoices. Input tax credit will be calculated by an automated process as well.

6. No automatic reversal of credit

In the the case of non-payment of tax by the seller, automatic reversal of input tax credit from buyer has been prohibited. Options have been put in place to make recovery of defaults in payment of tax by the retailer. In addition to this, however, special provisions have been made to address exceptional situations like the closure of Business, missing dealer or supplier lacking assets to return due payment.

7. Process for recovery and reversal

Issuing of notice and order will be done in an online and automated process to reduce the human interface.

8. Supplier Side Control

Sellers who have defaulted in payment of taxes above a certain threshold will be blocked from raising invoices to avoid misuse of input tax credit facility. Safeguards like these will be deployed for new dealers as well as addition, analytical tools would be employed to prevent loss of revenue.

9. Transition

Transition to the new system will be achieved in three stages.

Stage 1 : Filing of return GSTR 3 B and GSTR 1.

Stage 1 cannot exceed 6 months

Stage 2 : Invoice wise data upload facility and claiming input tax credit on self-declaration basis

Stage 3: Deployment of the new forms and single return system

Thus, the proposed changes in the GST forms come as a relief to the MSME sector traders in simplifying compliance requirements for filing of tax returns.

One Day Company Incorporation- Analysis

Introduction - One Day Company Incorporation

The procedure for company incorporation is provided under Section 7 of the Companies Act, 2013. Companies (Incorporation) Rules, 2014 which came into effect from 1st April 2014 was framed by the Central Government for the purpose of company incorporation. There are Rules prescribing various Forms that are to be used for the incorporation of a Company.

With the introduction of Companies Incorporation Fourth Amendment Rules 2016, with effect from 02/10/2016, Rule 38 was inserted. It introduced a simplified proforma for incorporating company electronically (SPICe). The Rule prescribes the following:

• Form No. INC – 32
• e Memorandum of Association in Form INC – 33
• e Articles of Association in Form No. INC- 34

The Ministry of Corporate Affairs made further amendments to the Incorporation Rules and notified Companies (Incorporation) Fifth Amendment Rules, 2016 which became effective from 01/07/2017. For the purpose of making Simplified Proforma for Incorporation of Companies Electronically (SPICe) more effective, the Amendment was introduced by the Ministry in October 2016. The second proviso to Rule 38(1) and Rule 38(2) was inserted. Amendments were made in Rule 9 and 12, to make incorporation easy under the SPICe method.

Major Highlights for Company Incorporation

• Rule 4 applies to One Person companies, where the subscriber to the memorandum of an OPC shall nominate a person. In events of subscriber’s demise or incapacity to contract, that particular person shall become a member of OPC. Such nomination shall be filed in Form INC – 32 along with nominee’s consent in Form INC- 3.
• Form INC- 32: Single form for the following-
  • Reservation of name,
  • Incorporation of a new company
  • Allotment of DIN

It is supported by documents such as details of directors and subscribers, MoA and AoA etc.

• Form INC- 3 (non-e-form): Nominee consent form for a One Person Company.

2) Rule 10 stipulates that in case of Articles contain entrenchment provisions, it is mandatory for the company to notify the Registrar of any such entrenchment provisions at the time of incorporation of the company. Such notification is to be submitted in Form INC-7 or INC-32 (SPICe) along with the prescribed fee. It is important to note that rule regarding existing companies shall remain same, with filing to be done in Form MGT- 14, within 30 days of the date of entrenchment of articles.

• INC-7: Application form for incorporation of a company other than a one-person company.

3) Rule 12: States that an application is to be filed with the registrar in Form 7 (Part I company with more than seven subsidiaries) and Form INC 32.

4) Rule 38: This Rule was introduced by the Companies Incorporation Fourth Amendment Rules, 2016 unveiling the SPICe Rules. Further, the Fifth Amendment provided that in case of incorporation of Section 8 Company, Form INC-34 is to be filed, with Form INC-13 (MoA) and Form INC 31(AoA) as attachments.

• INC-13: MoA of Section 8 company registration has been prescribed in form INC-13 by the companies act 2013 followed by rule 19 sub-rule 2 of companies incorporation rule 2014.
• INC- 31: Introduced for the purpose of choosing a pre-drafted Article of Association.

5) For the purpose of going digital and paperless, the Fifth Amendment Rule prescribes that a promoter/applicant of the proposed company shall propose only one name in Form INC-32. Further, subscribers, witness or witnesses shall affix their Digital Signatures to the MoA and AoA.

6) Once a company adheres to such Rules for the incorporation, it shall furnish to the Registrar the verification details of its registered office within thirty days of its incorporation in the prescribed manner by filing Form INC-32. It is to be noted that if in case the proposed company maintains its registered office as the given corresponding address.

CONCLUSION

It is observed that in cases where all the documents are in the correct place and the details in the SPICe form gets approved, the company shall be registered within 3 to 4 hours of filing the Form. Since the documents required for the process are extensive and the filing is to be done through the Digital Signature Certificate, it is difficult to say that the process will take only one day. Since the Name Reservation involves a maximum chance of rejection, If the name you filed through the SPICe form gets rejected, all the incorporation documents are to be uploaded and submitted again for Company Registration.

Be Legal: Startups Guide to avoid Legal Troubles

The Dreamland of Startups

The world of startups make for an exciting and attractive work environment, well, almost. Whether it's a new invention/innovation or a revolutionary solution to an existing problem of society, work can get pretty intense at a startup. It's easy to overlook a lot of the "legal stuff" which can hurt in unforeseeable ways immediately after you have done your company registration. In this piece, we are going to look at how startups can avoid "being served" by staying on the right side of the law.

The Right Side of the law

Startups, as we said before, can be a place of high intensity. Startup owners thus, have to vary of situations escalating and problems with the law. Let's look at some of the things a newly formed startup owner should consider for avoiding the scrutiny of the law.

·     Business Structure: What type of Company should I form?

One of the basic foundations of a successful startup is defining the basic structure of your startup. By structure, we mean what type of company you are incorporating. This defines the direction your startup is going to take in the years to come. Things to consider while deciding Company structure:

1.    Do you want to invite investments?

2.    Do you want to go public or not?

3.    What are the responsibilities and liabilities of Directors/Partners/Shareholders?

Startup owners should take a long and hard look at the structure of the company and their regulations to avoid any issue of non-compliance.

·     Business Compliance: Is my Business Compliant?

There are many legal ramifications of starting a company and at first glance, they might look like formalities. However, a non-compliant business could incur heavy fines and penalties and worse yet, face the threat of closure. The government lays down the compliance requirements for various types of companies for a particular country. They also make various amends to existing laws so companies have to recalibrate their compliances frequently.

In India, the Ministry of Corporate Affairs (MCA) lays down the compliance requirements for companies. The compliances in India have to be filed with the Registrar of Companies (ROC). There are many services which help you file ROC compliances if ever startups feel like they would require professional assistance.

The NBFC Drama in India

In an attempt to stop non-compliant companies, the Reserve Bank of India (RBI) canceled the business license of over 100 NBFCs (Non-Banking Financial Companies) over the months of June and July of 2018. These cancellations came as a part of stricter compliance requirements of NBFCs in response to a negligent breach of regulations and violations of codes by the Sahara  Financial Group in 2015. Thus, the compliance requirements are not a matter to be taken lightly by companies

·     Conflicts and Lawsuits by Employees: Avoiding Legal Conflicts with Employees

We all understand how competitive and ruthless a startup environment can be. It is essential thus for owners to be very cautious about incidents of misconduct with or from employees. A rule of thumb for such events indicate generating and handing out employee handbooks to all new recruits. You can also ask for confirmation that employees received the handbooks and are aware of employee codes set by the said handbook. This is a great way to cover all aspects of lawful office conduct from sexual harassment policies to legible office dress code.

·     Protection of Personal Assets: How to make sure nobody comes after my hard-earned money?

It's often said not to mix business with pleasure. The same is true when it comes to personal assets and business assets. It is advisable to keep these assets separate. In the event that a creditor sues you, they may be able to seize your company’s assets if they were purchased using your personal funds.

·     The Partnership Talk: How to structure the partnership agreement?

It's always hard to decide who gets what part of the company, what is the value of their shares and what duties and obligations of each partner/director/shareholder is. However, once this part is done and dusted, it could help avoid all legal troubles in case of a falling out between partners or a dissolving of the firm. Better safe than sorry. Right? A well-drafted partnership agreement is a strong step to let everyone know of their position at your company.

·     The Name Game: Is my Business name protected?

We're sure it must be a hard time settling on the name of the business that you are so passionate about! It would be a shame to have settled on a name after hours of deliberation just to find out there are businesses with the same name. This exposes a company to a lot of legal procedures for a breach of trademark. It is advisable to either do a trademark search or do a trademark registration for your proposed name.

·     What if I get sued?

It's rare to run a company without being subject to lawsuits. In case of the company undergoing legal proceedings, it is advisable to keep a lawyer or a law firm in your retainer to help avoid or minimize damages to the firm. A company, however, should always look at settling cases without involving the court of law or lawyers.

·     Non-Disclosures: Should you use them?

Companies often tend to reveal information related to the company to other companies in the hopes of creating a joint venture. Startups should look at creating well-documented Non Disclosure Agreements(NDA) to protect the interests of the company. Otherwise, you might risk losing valuable work to a competitor and cause major setbacks in making your company a success.

·     Word of Mouth: Are Oral Contracts enforceable?

Contrary to popular belief, Oral Contracts could be enforceable under certain conditions. As per the Indian Contract Act, 1872, an oral contract is valid and binding on the parties which entered into it. It is vital for companies to see and keep evidence for enforcing said oral contract. It could be by means of a call, a personal interaction or through a written message format.

·     Lawyer Up: Do I need an attorney for the company?

Many a time, a legal issue might seem trivial and a non-factor to the company but it could cause unforeseeable damages to the firm and could hurt both financially as well as reputation -wise. Therefore, it is a healthy practice to keep the services of a lawyer/law firm at your disposal to deal with such issues.

Conclusion

Winding up, we would like to add that it is not "fun" for any company owner to deal with legalities and complete formalities like compliances and worry about code violations while you are neck deep into work. However, in order to continue smooth day-to-day operations and ensure a long and healthy future of the company it is important not to fall at odds with the law. Startup owners need to take care of every little aspect of their brilliant startup idea and ensure they protect, foster and grow it well and legally.