26 April 2011

IndianCAs: Provision of 15-minutes reading time to the candidates of CA Examinations

 

Provision of 15-minutes reading time to the candidates of Chartered Accountants Examinations

(Effective from May-2011 CA Examinations)


The Council of the Institute, based on the recommendation of the Examination Committee has decided to allow 15-minute reading time to the candidates in the Chartered Accountants Examinations before the scheduled commencement of the examinations i.e, if the examination commences from 2.00 PM, then the candidates will be given Question Papers at 1.45 PM. This reading time will not be available for CPT and all post qualification Courses Examinations.

The objective of providing question paper 15 minutes before the scheduled time is to:

(i) Enable the candidates to read the question paper thoroughly (without encroaching on the examination duration) and

(ii) Chalk out the strategy to answer the questions.


Candidates are required to note the following in this regard:

(1) The candidates will not be allowed to leave the Examination Hall under any circumstances from 1.45 PM to 3.00 PM.

(2) The candidates shall be allowed to enter the hall from 1.30 PM upto 2.30 PM only.


Any breach of the above requirements would be treated as adopting Unfair Means by the students concerned and applicable disciplinary action would be taken on such erring students.



( G. Somasekhar)
Additional Secretary(Exams)


 
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ST : Notification Nos. 29 to 37, all dated 25-4-2011




24 April 2011

IndianCAs: ITR-2011 - Only Colour Forms; No Black and White [2 Attachments]

 
[Attachment(s) from Ashwin Nagar included below]

Income Tax returns 2011 - Only Colour Forms; No Black and White

FOR the new Income Tax returns, No Black and White forms will be accepted and only standard forms with appropriate colors prescribed, fonts used, paper size, paper quality, Bar Code Values will be accepted by the department .

The specifications are:

1.Size of the paper should be A4 Sheet- (8.268 inches by 11.693 inches / 210mm by 297 mm )

2.Quality of the paper should be White Paper and above 70GSM. The Paper thickness should be of Executive Bond quality with a minimum of 70 GSM and above

3.Registration Marks should be present at every page and the coordinates of the same are indicated in the Sample Form given in Annexure A. It should be 0.25" from the top edge and the left corner edge.

4.There should be a series of square dots which should be placed on the both sides of the pages on every page. The distance of the same should be 0.32" from the left edge. The square dots are uniformly spaced at 3mm distance from each other

5.Bar Code Specifications should be in Code 39 Format. The Position and Size of the Bar Code should be as Per Annexure A


 
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Attachment(s) from Ashwin Nagar

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22 April 2011

MCA Circular on e-delivery

Document delilvery by electronic mode_A relief through the Green Initiative



Finally, as a move to relieve the Corporate of huge financial burden of sending physical documents such as notices etc. by Registered Post instead of Under Posting Certificates after it being discontinued by the Postal Authorities, the Ministry of Corporate Affairs has come up with a Green Initiative of permitting the service of documents upon the Shareholders through e-mail or other permissible electronic modes instead of physical mode. The move is not only a Green Initiative but also a big boon for the corporate incurring huge financial expenditures on the printing and dispatch of documents from time to time and a directional approach towards the IT revolution.




The ministry has utilized the provisions of Section 2, 4, 5 and 81 of the Information Technology Act 2000 which provides for an overriding effect to the provisions of the IT Act and calls for adequate compliance of law in case the requisite information which otherwise would have been made available in writing, typewritten or printed form, if such information is made available in electronic form. Similarity the authenticity of digital signatures has been provided for herein.




The notification further provides that the company has to take consent from members for sending the notice / documents to them through email and has to provide a forum for registering and changing the email from time to time. Others who do not opt for electronic mode of information or whose email is not registered would be served information in the manner as provided in section 53 of the Companies Act, 1956.


The supporting circular is attached herewith. Download Circular


21 April 2011

ITR-2011 - Only Colour Forms; No Black and White

Income Tax returns 2011 - Only Colour Forms; No Black and White

FOR the new Income Tax returns, No Black and White forms will be accepted and only standard forms with appropriate colors prescribed, fonts used, paper size, paper quality, Bar Code Values will be accepted by the department .

The specifications are:

1.Size of the paper should be A4 Sheet- (8.268 inches by 11.693 inches / 210mm by 297 mm )

2.Quality of the paper should be White Paper and above 70GSM. The Paper thickness should be of Executive Bond quality with a minimum of 70 GSM and above

3.Registration Marks should be present at every page and the coordinates of the same are indicated in the Sample Form given in Annexure A. It should be 0.25" from the top edge and the left corner edge.

4.There should be a series of square dots which should be placed on the both sides of the pages on every page. The distance of the same should be 0.32" from the left edge. The square dots are uniformly spaced at 3mm distance from each other

5.Bar Code Specifications should be in Code 39 Format. The Position and Size of the Bar Code should be as Per Annexure A



--
Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
           +91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
           vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx

18 April 2011

IndianCAs: RBI Recognises DISA (ICAI) Qualification [1 Attachment]

 
[Attachment(s) from Ashwin Nagar included below]

Date: Apr 15, 2011
Submission of system audit reports

RBI/2010-11/476
DPSS.CO.OSD. No. 2374/06.11.001/2010-2011

April 15, 2011

To all Authorised Payment System Operators & Entities

Dear Sir,

Submission of system audit reports

Please refer to our earlier circulars DPSS.AD.No./1206/02.27.005/2009-2010 dated December 7, 2009 and DPSS.1444/ 06.11.001/ 2010-2011 dated December 27, 2010 on the captioned subject.

In partial modification of the instructions contained therein, it is advised that the system audit may be conducted by a Certified Information Systems Auditor (CISA) and registered with Information Systems Audit and Control Association (ISACA) or by a holder of a Diploma in Information System Audit (DISA) qualification of the Institute of Chartered Accountants of India (ICAI).

Please acknowledge receipt.

Yours faithfully,

G. Srinivas
(General Manager)



 
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Attachment(s) from Ashwin Nagar

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14 April 2011

Instructions regarding income limits for assigning cases to Deputy Commissioners/Assistant Commissioners/ITOs


INCOME-TAX ACT

INSTRUCTION

Income-tax : Instructions regarding income limits for assigning cases to Deputy Commissioners/Assistant Commissioners/ITOs

INSTRUCTION NO. 6/2011 [F.NO.187/12/2010-ITA-I], DATED 8-4-2011


Reference may kindly be made to Board's Instruction No. 1/11, dated 31-1-2011 which lays down revised monetary limit of cases to be assessed by DCsIT/ACsIT in metro cities and mofussil areas w.e.f. 1-4-2011. Some CCsIT have expressed the view that the limits fixed in the aforesaid Instruction, if strictly enforced would lead to unequal distribution of workload between the ACITs and the ITOs in some of the charges.

2. In view of the above, the Instruction No. 1, dated 31-1-2011 has been reconsidered by the Board and it has been decided that if the application of above limits in any CIT charge leads to a substantially uneven distribution of workload between DCsIT/ACsIT and ITOs, the CCIT/DGIT may adjust the above limits by an amount of upto Rs. 5 lakhs to ensure that the workload is equitably distributed amongst the Assessing Officers after recording reasons in this regard.

3. It is further clarified that the mofussil areas referred to in the Instruction No. 1/2011 means all stations other than the metro cities of Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Ahmedabad, Pune and Bangalore.

13 April 2011

LIMITS ENHANCED FOR DISCLOSURE OF PARTICULARS OF EMPLOYEES UNDER 217(2A) OF COMPANIES ACT 1956

LIMITS ENHANCED FOR DISCLOSURE OF PARTICULARS OF EMPLOYEES UNDER 217(2A) OF COMPANIES ACT 1956

The Ministry of Corporate Affairs has vide notification dated 31st March 2011 enhanced the limits for the purpose of disclosure of particulars of employees in Directors Report as requisite under Section 217 (2A) read with Companies (Particulars of Employees) Rules, 1975 from the existing limit of Rs. 24 lakh/ year/ Rs. 2 lakh per month to Rs. 60 lakh per year/ Rs. 5 lakh per month and by such notification also covers Government Companies for such disclosures. By such notification, the amended rules may be called as Companies (Particulars of Employees) Amendment Rules, 2011.


The effect of the notification shall require the Companies including Government Companies to include a statement showing the name of every specified employee of the Company in their Board Report pursuant to Section 217 (2A) of the Companies Act 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011 which provides:


(i) If employed throughout the financial year, was in receipt of remuneration for that year which, in aggregate, was not less than Rs. Sixty Lakh for the year: or

(ii) If employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a rate which, in the aggregate was not less Rs. Five Lakh per month.



LIMITS ENHANCED FOR OBTAINING APPROVAL OF THE CENTRAL GOVERNEMENT FOR PAYMENT OF REMUNERATION TO OFFICE OR PLACE OF PROFIT UNDER SECTION 314 (1B) OF COMPANIES ACT 1956

The Ministry of Corporate Affairs has notified dated 6th April 2011 enhancement in previous limit of Rs. Fifty thousand per month given under Rule 3 of Director's Relative (Office or Place of Profit) Rules, 2003 to Rs. Two lakh fifty thousand per month for payment remuneration to relatives or partners of the directors of the Company falling under Section 314(1B) of the Companies Act 1956. By such notification, the amended rules may be called as Director's Relative (Office or Place of Profit) Amendment Rules, 2011.


The effect of notification shall require Companies to obtain prior consent of the Company by a Special Resolution and approval of the Central Government under Section 314(1B) of the Companies Act 1956 read with Director's Relative (Office or Place of Profit) Amendment Rules, 2011, with respect to appointment of:


1. Partner or relative of a director or manager; or 2. Firm in which such director or manager, or relative of either is a partner; or 3. Private company of which such director or manager or relative of either is a director or member,

to any office or place of profit which carries a monthly remuneration exceeding Rs. Two lakh fifty thousand per month.


The notification also redefined the constitution of Selection Committee under Rule 7 of Director's Relative (Office or Place of Profit) Amendment Rules, 2011 for purpose of appointment of persons mentioned under Section 314 (1B) of the Act for Listed Companies, Unlisted Public Companies and Private Companies.

09 April 2011

PAN MANDATORY FOR DIN

PAN is mandatory to obtain new DIN for all Indian Nationals. Registration of PAN for existing DIN is compulsory. Last date for registration of PAN is 31-05-20111 by filing DIN4, otherwise existing DINs may not be active.

07 April 2011

Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011

COMPANIES ACT

RULES/AMENDMENT RULES


Company Law : Director's Relatives (Office or Place of Profit) Amendment Rules, 2011 - Amendment in rules 3 and 7

NOTIFICATION [F.NO. 17/75/2011-C.L.V], DATED 6-4-2011

In exercise of the powers conferred by clause (b) of sub-section (1) of section 642, read with sub-section (1B) of section 314 of the Companies Act, 1956, the Central Government hereby makes the following rules to amend the Director's Relatives (Office or Place of Profit) Rules, 2003, namely:-

1. (1) These rules may be called Director's Relatives (Office or Place of Profit) Amendment Rules, 2011.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Director's Relatives (Office or Place of Profit) Rules, 2003, (hereinafter referred to as the said rules), in rule 3, for the figures "50,000", the figures "2,50,000" shall be substituted.

3. In the said rules, for the figures "50,000", the figures "2,50,000" shall be substituted.

4. In the said rules, for rule 7, the following rule shall be substituted, namely:—

The selection and appointment of a relative of a director holding office or place of profit in the company shall be approved by adopting the same procedure applicable to non-relatives :

Provided that, in the case of listed public companies, the selection of director for holding place of office or profit in the company shall have to be also approved by a Selection Committee.

Explanation.- For the purpose of this sub-rule, the expression "Selection Committee" means a committee, the majority of which shall consist of independent directors and an expert in the respective field from outside the company:

Provided that in case of unlisted companies, independent directors are not necessary but outside experts should be there in the Selection Committee:

Provided further that in the case of private companies, independent directors and outside experts are not necessary.

nn



--
Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
           +91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
           vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx

05 April 2011

Circular on XBRL Filing

CORPORATE LAWS

CIRCULAR/PRESS NOTE

Company Law : Filing of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode

GENERAL CIRCULAR NO. 09/2011, DATED 31-3-2011

It has been decided by the Ministry of Corporate Affairs to mandate certain class of companies to file balance sheets and profit and loss account for the year 2010-11 onwards by using XBRL taxonomy. The Financial Statements required to be filed in XBRL format would be based upon the Taxonomy on XBRL developed for the existing Schedule VI, as per the existing, (non-converged) Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006. The said Taxonomy is being hosted on the website of the Ministry at www.mca.qov.in shortly. The Frequently Asked Questions (FAQs) about XBRL have been framed by the Ministry and they are being annexed as Annexure I with this circular for the information and easy understanding of the stakeholders.

Coverage in Phase I

2. The following class of companies have to file the Financial Statements in XBRL Form only from the year 2010-2011 :-

  (i)  All companies listed in India and their subsidiaries, including overseas subsidiaries;

 (ii)  All companies having a paid up capital of Rs. 5 Crore and above or a Turnover of Rs. 100 crore or above .

Additional Fee Exemption

3. All companies falling in Phase -I are permitted to file upto 30-9-2011 without any additional filing fee.

Training Requirement

4. Stakeholders desirous to have training on the XBRL or on taxonomy related issues, may contact the persons as mentioned in Annexure II.

Annexure I

Frequently Asked Questions

What is XBRL?

1. XBRL is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It provides major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and improved accuracy and reliability to all those involved in supplying or using financial data. XBRL stands for extensible Business Reporting Language. It is already being put to practical use in a number of countries and implementations of XBRL are growing rapidly around the world.

Who developed XBRL?

2. XBRL is an open, royalty-free software specification developed through a process of collaboration between accountants and technologists from all over the world. Together, they formed XBRL International which is now made up of over 650 members, which includes global companies, accounting, technology, Government and financial services bodies. XBRL is and will remain an open specification based on XML that is being incorporated into many accounting and analytical software tools and applications.

What are the advantages of XBRL?

3. XBRL offers major benefits at all stages of business reporting and analysis. The benefits are seen in automation, cost saving, faster, more reliable and more accurate handling of data, improved analysis and in better quality of information and decision-making. XBRL enables producers and consumers of financial data to switch resources away from costly manual processes, typically involving time-consuming comparison, assembly and re-entry of data. They are able to concentrate effort on analysis, aided by software which can validate and process XBRL information. XBRL is a flexible language, which is intended to support all current aspects of reporting in different countries and industries. Its extensible nature means that it can be adjusted to meet particular business requirements, even at the individual organization level.

Who can benefit from using XBRL?

4. All types of organizations can use XBRL to save costs and improve efficiency in handling business and financial information. Because XBRL is extensible and flexible, it can be adapted to a wide variety of different requirements. All participants in the financial information supply chain can benefit, whether they are preparers, transmitters or users of business data.

What is the future of XBRL?

5. XBRL is set to become the standard way of recording, storing and transmitting business financial information. It is capable of use throughout the world, whatever the language of the country concerned, for a wide variety of business purposes. It will deliver major cost savings and gains in efficiency, improving processes in companies, Governments and other organisations.

Does XBRL benefit the comparability of financial statements?

6. XBRL benefits comparability by helping to identify data which is genuinely alike and distinguishing information which is not comparable. Computers can process this information and populate both pre-defined and customised reports.

Does XBRL cause a change in accounting standards?

7. No. XBRL is simply a language for information. It must accurately reflect data reported under different standards – it does not change them.

What are the benefits to a company from putting its financial statements into XBRL?

8. XBRL increases the usability of financial statement information. The need to re-key financial data for analytical and other purposes can be eliminated. By presenting its statements in XBRL, a company can benefit investors and other stakeholders and enhance its profile. It will also meet the requirements of regulators, lenders and others consumers of financial information, who are increasingly demanding reporting in XBRL. This will improve business relations and lead to a range of benefits.

With full adoption of XBRL, companies can automate data collection. For example, data from different company divisions with different accounting systems can be assembled quickly, cheaply and efficiently. Once data is gathered in XBRL, different types of reports using varying subsets of the data can be produced with minimum effort. A company finance division, for example, could quickly and reliably generate internal management reports, financial statements for publication, tax and other regulatory filings, as well as credit reports for lenders. Not only can data handling be automated, removing time-consuming, error-prone processes, but the data can be checked by software for accuracy.

How does XBRL work?

9. XBRL makes the data readable, with the help of two documents - Taxonomy and instance document. Taxonomy defines the elements and their relationships based on the regulatory requirements. Using the taxonomy prescribed by the regulators, companies need to map their reports, and generate a valid XBRL instance document. The process of mapping means matching the concepts as reported by the company to the corresponding element in the taxonomy. In addition to assigning XBRL tag from taxonomy, information like unit of measurement, period of data, scale of reporting etc., needs to be included in the instance document.

How do companies create statements in XBRL?

10. There are a number of ways to create financial statements in XBRL:

   u   XBRL-aware accounting software products are becoming available which will support the export of data in XBRL form. These tools allow users to map charts of accounts and other structures to XBRL tags.

   u   Statements can be mapped into XBRL using XBRL software tools designed for this purpose.

   u   Data from accounting databases can be extracted in XBRL format. It is not strictly necessary for an accounting software vendor to use XBRL; third party products can achieve the transformation of the data to XBRL.

   u   Applications can transform data in particular formats into XBRL. The route which an individual company may take will depend on its requirements and the accounting software and systems it currently uses, among other factors.

Is India a member of XBRL International?

11. India is now an established jurisdiction of XBRL International. A separate company, under section 25 has been created, to manage the operations of XBRL India. The main objectives of XBRL India are

   u   To create awareness about XBRL in India

   u   To develop and maintain Indian Taxonomies

   u   To help companies, adopt and implement XBRL.

For more information, visit www.xbrl.org/in

Which taxonomies developed for Indian reporting requirements? Where can I find the taxonomies?

12. Taxonomies for Indian companies are developed based on the requirements of

   u   Schedule VI of Companies Act,

   u   Accounting Standards, issued by ICAI

   u   SEBI Listing requirements.

Taxonomies for Manufacturing and service sector (referred as Commercial and Industrial, or C&I) and Banking sector, is acknowledged by XBRL International. These taxonomies are available at http://www.xbrl.org/in/

Where can I find more information about XBRL?

13. Please visit www.xbrl.org . Also Ministry of Corporate Affairs would be shortly developing its webpage on XBRL with list of contact persons for training purposes.

What are XBRL Documents?

14. An XBRL document comprises the taxonomy and the instance document. Taxonomy contains description and classification of business & financial terms, while the instance document is made up of the actual facts and figures. Taxonomy and Instance document together make up the XBRL documents.

What is Taxonomy?

15. Taxonomy can be referred as an electronic dictionary of the reporting concepts. Taxonomy consists of all the data definitions, the basic XBRL properties and the interrelationships amongst the concepts. It includes terms such as net income, EPS, cash, etc. Each term has specific attributes that help define it, including label and definition and potentially references. Taxonomies may represent hundreds or even thousands of individual business reporting concepts, mathematical and definitional relationships among them, along with text labels in multiple languages, references to authoritative literature, and information about how to display each concept to a user.

What is meant by extending taxonomy?

16. Taxonomy is extended to accommodate items/relationship specific to the owner of the information. Taxonomy extension therefore can be

 (a)  Modification in the existing relationships

 (b)  Addition of new elements in the taxonomy

  (c)  Combination both a & b.

Are Taxonomies based on any standards?

17. Yes, taxonomies are based on the regulatory requirements and standards which are to be followed by the companies. Accordingly, depending on the requirements of every country, there can be country-specific taxonomies.

What is an Instance document?

18. An XBRL instance document is a business report in an electronic format created according to the rules of XBRL. It contains facts that are defined by the elements in the taxonomy it refers to, together with their values and an explanation of the context in which they are placed. XBRL Instances contain the reported data with their values and "contexts". Instance document must be linked to at least one taxonomy, which defines the contexts, labels or references.

Thus, in order to concluded the usage and explain the XBRL technology which leads to more information exchanges that can be effectively automated by use. This one standard approach leads to the best interest of the company or more so for the international business interests globally that warrant the accuracy of all the financial data for the end users and early collaborative decisions by the companies or those whose interest is involved for acquisition/ rights etc.

Annexure II

(i)
Smt. Nirupama Kotru, Director
Ministry of Corporate affairs
5th Floor, 'A' Wing, Shastri Bhavan,
Dr.R.P. Road, New Delhi
Contact No. 011-23384470
(ii)
Dr. Avinash Chandra, Technical Director
The Institute of Chartered Accountants of India,
'ICAI Bhawan', Post Box No. 7100,
Indraprastha Marg, New Delhi-110002.
Contact No. 011-3011456, 30110427
(iii)
Shri Pankaj Srivastava, Joint Director
Ministry of Corporate affairs
5th Floor, 'A' Wing, Shastri Bhavan,
Dr.R.P. Road, New Delhi
Contact No. 011-23384657
(iv)
Dr. Surinder Pal,
Secretary, Committee on Members in Industry (CMII),
The Institute of Chartered Accountants of India,
'ICAI Bhawan', Indraprastha Marg, New Delhi-110002.
Contact No. 011-30110450
(v)
Mr. N.K. Bansal, Secretary,
Continuing Professional Education (CPE),
The Institute of Chartered Accountants of India,
'ICAI Bhawan', Indraprastha Marg, New Delhi-110002.
Contact No. 0120-3045957


--
Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
           +91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
           vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx

03 April 2011

Clarification on Point of Taxation Rules,2011

SERVICE TAX

LETTER

Service Tax : Amendments in Point of Taxation Rules, 2011 and other related provisions

LETTER [F.NO.341/34/2010-TRU], DATED 31-3-2011

As you are aware, the Point of Taxation Rules (PTR) were formulated vide Notification No.18/2011-ST dated 01.03.2011.  Based on the feedback, certain amendments are being carried out in these rules vide Notification No. 25/2011-ST dated 31.03.2011.   The highlights of the changes are discussed in the following paragraphs.

2. While the rules shall come into force from 01.04.2011, an option has been given in rule 9 to pay tax on payment basis, as at present, till 30.06.2011. 

3. Rule 3 has been amended to provide that the point of taxation shall be as follows:

  (a)  Date of invoice or payment, whichever is earlier, if the invoice is issued within the prescribed period of 14 days from the date of completion of the provision of service.

 (b)  Date of completion of the provision of service or payment, if the invoice is not issued within the prescribed period as above.

The applicability of the rule will be clear from the illustrations in the following table:

S. No.
Date of completion of service
Date of invoice
Date on which payment recd.
Point of Taxation
Remarks
1.
April 10, 2011
April 20, 2011
April 30, 2011
April 20, 2011
Invoice issued in 14 days and before receipt of payment
2.
April 10, 2011
April 26, 2011
April 30, 2011
April 10, 2011
Invoice not issued within 14 days and payment received after completion of service
3.
April 10, 2011
April 20, 2011
April 15, 2011
April 15, 2011
Invoice issued in 14 days but payment received before invoice
4.
April 10, 2011
April 26, 2011
April 5, 2011 (part) and April 25, 2011 (remaining)
April 5, 2011 and April 10, 2011 for respective amounts
Invoice not issued in 14 days. Part payment before completion, remaining later

4. Rule 4 has been amended to clarify that change in the effective rate of tax shall also include change in that portion of value on which tax is payable in terms of an exemption notification or rules made in this regard.  It may be noted that an exemption has been granted in value for various services vide Notification No. 1/2006-ST dated 01.03.2006 which has the effect of payment of tax only on a part of the value.  Similarly either the values or the rates at which tax is payable are provided under rule 6(7, 7A, 7B or 7C) of the Service Tax Rules, 1994 as well as the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.  Thus, whenever these values or the composition rates are changed, it would have the same effect as the change in the rate of duty.  It is hereby further clarified that the rate of tax shall also include any other notification which is issued, rescinded or amended and has the effect of altering the taxability of any service.

5. Rule 6 relating to continuous supply of service has been aligned with the revised rule 3 and the date of completion of continuous service has been defined within the rule.   This date shall be the date of completion of the specified event stated in the contract which obligates payment in part or whole for the contract.  For example, in the case of construction services if the payments are linked to stage-by-stage completion of construction, the provision of service shall be deemed to be completed in part when each such stage of construction is completed.  Moreover, it has been provided that this rule will have primacy over rules 3, 4 and 8.

6. Moreover, the following services have been notified as "continuous supply of services" in terms of clause 2(c) of the rules vide notification No. 28/ST-2011 dated 01.04.2011:

 (a)  Telecommunication service [65(105)(zzzx)]

 (b)  Commercial or industrial construction [65(105)(zzq)]

 (c)  Construction of residential complex [65(105)(zzzh)]

 (d)  Internet Telecommunication Service [65(105)(zzzu)]

 (e)  Works contract service [65(105)(zzzza)]

Thus these services will constitute "continuous supply of services" irrespective of the period for which they are provided or agreed to be provided.  Other services will be considered continuous supply only if they are provided or agreed to be provided continuously for a period exceeding three months.

7. Rule 7 relating to associated enterprises has been deleted.   Now that the date of completion of the provision of service is an important criterion in the determination of point of taxation, it shall take care of most of the dealings between the associated enterprises.   Thus in case of failure to issue the invoice within the prescribed period, the date of completion of provision of service shall come into effect even if payment is not made.

8. Rule 7 has thus been replaced by a new provision whereby the point of taxation shall be the date of making or receiving the payment, as the case may be.  This provision shall apply to the following:

  (i)  Export of services;

 (ii)  Persons, where the obligation to pay tax is on the service recipient in terms of rule 2(1)(d) of the Service Tax Rules, 1994 in respect of services notified under section 68(2) of the Finance Act, 1994.

(iii)  Individuals, proprietorships and partnership firms providing specified services (Chartered Accountant, Cost Accountant, Company Secretary, Architect, Interior Decorator, Legal, Scientific and Technical consultancy services).  The benefit shall not be available in case of any other service also supplied by the person concerned along with the specified services.

9. Export of services is exempt subject, inter alia, to the condition that the payment should be received in convertible foreign exchange.  Until the payment is received, the provision of service, even if all other conditions are met, would not constitute export.  In order to remove the hardship that will be caused due to accrual method, the point of taxation has been changed to the date of payment.   However, if the payment is not received within the period prescribed by RBI, the point of taxation shall be determined in the absence of this rule. 

10. In the case of services where the recipient is obligated to pay service tax under rule 2 (1)(d) of Service Tax Rules i.e. on reverse charge basis, the point of taxation shall be the date of making the payment.  However, if the payment is not made within six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist.  Moreover, in the case of associated enterprises, when the service provider is outside India, the point of taxation will be the earlier of the date of credit in the books of account of the service receiver or the date of making the payment.

11. Changes have also been made in the Service Tax Rules, 1994 vide notification No. 26/2011-ST dated 31.03.2011 and have a close relationship with the Point of Taxation Rules as follows:

  (i)  The obligation to issue invoice shall be within 14 days of completion of service and not provision of service.

 (ii)  If the amount of invoice is renegotiated due to deficient provision or in any other way changed in terms of conditions of the contract (e.g. contingent on the happening or non-happening of a future event), the tax will be payable on the revised amount provided the excess amount is either refunded or a suitable credit note is issued to the service receiver.  However, concession is not available for bad debts.

12. The credit of input services under rule 4 (7) of the Cenvat Credit Rules has also been liberalized vide notification No. 13/2011-CE (NT) dated 31.03.2011 and the same shall be available on receipt of invoice (except in cases of reverse charge) as long as the payment is made within three months.  Even specified persons required to pay tax on cash basis will be able to avail credit on receipt of invoice.  Suitable changes have also been made for reversal of credit or payment when the value of service is renegotiated or altered for any reason by refund or issue of a credit note by the service provider.  Amendment has also been made in Rule 9 of Cenvat Credit Rules, 2004 by allowing credit on supplementary invoice, except in non-bonafide cases, which may become necessary in certain situations e.g. where the point of tax is the date of payment while the invoice had already been issued e.g. rule 4(b)(i) of Point of Taxation Rules.

13. It is further clarified that the transitional provisions will apply to all invoices issued before 31.03.2011 in so far as taxpayers who switch over to the new rules on 01.04.2011.  Those assessees who like to shift to the new rules on 01.07.2011 would have similar protection in respect of invoices issued before the date they switch over to the new rules.  The benefit has also been extended to services when provision has been completed before 01.04.2011 or 01.07.2011, as the case may be. It is also clarified that the payments received before the new rules come into force do not require any transitional provisions as they are already required to pay tax on payment basis. 

14. It is hoped that with these changes and clarifications all representations on the subject have been dealt with.  It is requested that all officers may be advised to explain and clarify the new provisions to taxpayers and assist them in every possible manner in transition to revised rules.  Any difficulty experienced in this regard may be brought to the notice of undersigned as soon as possible.

--
Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
           +91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
           vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx

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