ITC Effect of GSTR 1 Return Subject to 20% ITC for Purchase

ITC Effect on GSTR 1

Under GST surveillance GSTR 3B is the monthly compliance form that needs to be furnished by the taxpayer mentioning the details of the outgo of his goods or services which were released during the whole month along with paying the relevant amount of tax applicable on those transactions. The form contains a separate section for mentioning the Input Tax Credit which a dealer (taxpayer) claims on his purchase of inputs for that particular month.

GSTR 1 is yet another compliance form required to be filed by the regular taxpayer seeking the details of the invoices issued by him under the purchaser’s GSTN number, the taxable amount and total invoice value. Mentioning such information in B2B invoices is mandatory as this will be computed while determining the Input Tax Credit

Parallel to this is another mechanism in which all B2B invoices get recorded in the GSTN system and automatically appear on the GSTR 2A of the purchaser. GSTR 2A form allows entries of purchases done by the recipient.

To be Noted: As per current laws, the cap of 20% (i.e. Credit reflected in GSTR 2A plus 20% ) on input tax can be availed by the taxpayer on his purchases i.e. an additional benefit of 20% is extended to the taxpayer apart from the ITC shown on his GSTR 2A return.

There are certain instances as follows:

  • Purchaser cum taxpayer is honest in his tax dealings but the seller fails to upload the invoice for a month and is planning to upload it in the next month.
  • Purchaser cum taxpayer is honest in his tax dealings but the seller uploads the invoice mentioning the incorrect GSTN, as a result, an incorrect credit is reflected in GSTR 2A of the purchaser.
  • Purchaser cum taxpayer is honest in his tax dealings but the seller deliberately skips to upload any of his invoices in GSTR 1.
  • There are disputes between the seller and purchaser related to the information entered in the forms by any of the two parties on which the purchaser can claim ITC. Invoice claimed to be uploaded in GSTR 1 of the seller and are not reflected in the GSTR 2A of the buyer causes the case of collusion and fraud.

By looking at the above examples it is clear that the recipient has paid the valid tax on the goods he has purchased from the supplier. In the majority cases, the people falling under the last category are fraudsters who want to make some quick money. The amendment made through Rule 36 (4) of the Central Goods and Service Tax Rules, 2017 is aimed at the fourth category only.

It is absolutely weird that according to a sub-rule (4) in Rule 36 which the legal administration penalises the genuine taxpayers who initiate to curb frauds committed by some fraudsters who against them. Now it is the duty of every taxpayer (Purchaser) to check on a frequent basis that his purchases are entered by his supplier correctly in the GSTR 1 form filed by him so that the same is visible in his GSTR 2A.

Moreover, the government is in action to bring in the limelight such fraudulent transactions on the basis of which some fraudsters claim the wrong availment of ITC.

Adding on to this government has made provisions to ensure that the honest purchasers get the right ITC which they deserve.

  • A solid mechanism in GST forms which where the purchaser can enter the details of invoices mentioning the GSTN of the supplier which can be matched back at the end of the GSTN system in the sales details entered by the supplier. Presently only the input tax credit figure which is being claimed by the taxpayer is required to be declared in the GSTR 3B form.
  • If a mismatch in the details entered by the honest purchaser and the seller is spotted then the notice is sent to the seller demanding the payment of the correct amount and interest charges on the unpaid tax and sales undeclared.
  • In the notice, the seller is either asked to pay the tax and interest charged or give his justification which will ultimately give a buzzer that whether the details by the purchaser is correct or the justification by the seller is genuine.
  • Tax will be paid only after filing GSTR 1 and GSTR 3B with this one can make sure that the suppliers have uploaded correct invoices by the 20th of the next month so that GSTR 2A of the purchaser gets populated with the input tax credits at the earliest.

FAQs on Availment of ITC by the Taxpayer

Q.1 For which invoices/debit notes restrictions under rule 36(4) of CGST shall apply?

  • Restrictions under section 36(4) of ITC is applicable to invoices/debit notes on which the credits are availed after 09/10/2019. Restrictions on claiming ITC is imposed related to invoices/debit notes, the details of which have not been uploaded by the supplier under sub-section (1) of section 37. Once the details are inserted by the supplier, the taxpayer can avail full ITC on IGST paid by him.

Q.2 The restrictions on claiming ITC are calculated supplier wise or on a consolidated basis?

  • Restrictions on availed ITC is not computed supplier wise. Under section 36(4) of ITC, the total payable credit is calculated by the tax officials based on the invoices eligible for credit. For invoices on which ITC cannot be claimed will be detached while calculating ITC.

Q.3 What is section 36(4)?

  • As per the provision under the CGST Act, there are restrictions on the availment of ITC related to invoices or debit notes for which there is no entry by the supplier in his Form GSTR 1.

Q.4 What is GSTR 1 and GSTR 2A?

  • Form GSTR 1 is filed (monthly or quarterly) by the seller putting in details of all his supplies along with the invoices/debit notes of supply to confirm the details. GSTR 2A is the form for the purchaser in which the details are auto uploaded as the supplier fills in his GSTR 1. Based on the information in GSTR 2A of the purchaser, ITC is availed by him.

Q.5 Can ITC be availed by the taxpayer (the purchaser) for which the invoices or debit notes are not uploaded by the supplier? If yes, how much?

  • ITC claimed by the taxpayer on invoices which are still not uploaded by the supplier should not go beyond 20% of the total ITC applicable on invoices uploaded by the supplier under section 37(1). The same will be confirmed by the auto-populated Form GSTR 2A of the taxpayer (purchaser). The supplier must file GSTR 1 on or before the due date.

Q.6 Is it possible for a registered taxpayer to avail ITC on Form GSTR 3B for the invoices which are not yet uploaded by the supplier in Form GSTR 2A?

  • Yes, but ITC claimed by the taxpayer on invoices which are still not uploaded by the supplier should not go beyond 20% of the total ITC applicable on invoices uploaded by the supplier under section 37(1).

Let’s take up an instance, where taxpayer A is eligible for ITC on 100 invoices i.e. Rs 10 Lakhs for October month which he has to mention under ITC section in Form GSTR 3B for October.

Case 1:
Details of supplier’s invoices in GSTR 1 – 80 invoices involving ITC of Rs. 6 Lakhs.

20% eligible credit on missing invoices – Rs. 1,20,000 (20% of 6 Lakhs)

Total payable ITC – Rs. 6 Lakhs (for 80 invoices) + Rs. 1,20,000 (for missing invoices) = Rs. 7,20,000 (to be claimed by the taxpayer).

Case 2:

Details of supplier’s invoices in GSTR 1 – 80 invoices involving ITC of Rs. 7 Lakhs.

20% eligible credit on missing invoices – Rs. 1,40,000 (20% of 7 Lakhs)

Total payable ITC – Rs. 7 Lakhs (for 80 invoices) + Rs. 1,40,000 (for missing invoices) = Rs. 8,40,000 (to be claimed by the taxpayer).

Case 3:

Details of supplier’s invoices in GSTR 1 – 75 invoices involving ITC of Rs. 8.5 Lakhs.

20% eligible credit on missing invoices – Rs. 1,70,000 (20% of 8.5 Lakhs)

Total payable ITC – Rs. 8.5 Lakhs (for 75 invoices) + Rs. 1,50,000* (for missing invoices) = Rs. 10,00,000 (to be claimed by the taxpayer).

To be noted: In case 3, the eligible amount of ITC is deducted ensuring that the total payable amount does not cross the eligible ITC amount i.e. 10 Lakhs.

Q.7 When can one avail the ITC on the pending invoices to be uploaded by the supplier?

  • Taxpayers can get the credit on balance invoices added up to the succeeding month once the supplier uploads all the invoices (balance + new invoices). He can claim ITC based on the calculations of balance + current invoices uploaded by the supplier.

Easy Guide to DIN (Director Identification Number) Under GST with Benefits

What is DIN Code Under GST?

What is DIN (Director Identification Number) Under GST?

The Central Board of Indirect Taxes and Customs (CBIC) has taken the initiative to digitize and secure all the communication sent by it to the registered individuals & taxpayer by starting a system that would generate a Director Identification Number (DIN) as the communication will be sent by tax authorities to the taxpayers.

Director Identification Number Under Income Tax

DIN was first introduced under Income Tax Law. Now with an intent to protect the interests of GST taxpayers and to increase the accountability & transparency under the indirect tax mechanism, CBIC is starting its use under GST.

Initially, the income tax department had started this campaign which knocked off the need for the taxpayer to physically visit the Income Tax Office (IT Office) to answer the income notice.

When DIN Code Will be Used?

According to the orders by CBIC, DIN will be used in GST cases whose inquiries are going on and arrest & search warrants pertaining to them have been issued. According to the board, the documents issued post 8th November 2019 will have DIN. A DIN will confirm the authenticity of the communication.

The authenticity of such communications can be ascertained by the recipient. For this, the recipient will have to quote the CBIC-DIN of the specific communication in the window “VERIFY CBIC-DIN” on the CBIC’S official website —> www.cbic.gov.in.

The window will showcase the information about the communication only if the communication is genuine, otherwise not.

All About Director Identification Number (DIN) Code

DIN code is a digitally generated alphanumeric code by the system in the format of CBIC-YYYY MM ZCDR NNNN, wherein YYYY denotes the year in which DIN is generated, MM denotes the month in which DIN is generated, ZCDR denotes the Zone Commissionerate Division Range Code and NNNN denotes alphanumeric randomly generated code by system.

Benefits of DIN (Director Identification Number) Code

The latest introduction of director identification number code has made some of the best changes in the procedure through which the tax department and taxpayer communicates.

Lets see how the DIN provides advantages to the taxpayers:

  • Transparency Within the Government Department Working
  • Complete Conversation Between Taxpayer and Tax Department
  • Solve Problems of the Taxpayers
  • Protect the Rights of the Taxpayers

After a month of E-Assessment scheme implementation, now DIN accompanied/based communication has become mandatory. After 8th November 2019, an e-communication without digitally generated DIN under GST would be deemed to be invalid and treated as never happened communication.

Step by Step Guide to Generate E-invoice Under GST with Benefits

How to Generate GST E-Invoice?

The scheme of E-invoice was officially approved by the GST Council in the 37th Council Meeting. If you are looking to generate an e-invoice under GST, this is the step-by-step guide to help you.

What is GST E-invoice?

E-invoice is not an invoice that you can download or generate through the GST Portal, but it is a process of validating all the B2B invoices electronically by the GST Network (GSTN). It’s not feasible to generate e-invoices directly from the common portal.

E-invoicing or authentication is required to ensure that the invoices generated by your accounting software are valid to be used for processes like e-way bill creation and return filing. The process involves the submission of business invoices created by different accounting software to the GST Portal in order to get them verified in a common manner.

Since the invoices created by different GST return filing software may have different formats, they cannot be all fed directly to the GST system by the software. So, the government decided to introduce a standard format (Schema), which requires all the accounting software to follow a common format which can then be uploaded to the GST portal for authentication and validation.

To sum up, E-invoice is a standard mechanism or schema for data exchange between different GST billing software of different manufacturers.

How is the GST E-invoicing System Beneficial?

Reporting and authentication of B2B invoices from the common portal will ensure that GST ANX-1 and ANX-2 are auto-prepared in the new format. IT also auto prepares GSTR 1 for B2B supplies.

E-invoicing can be further used for creating e-way bills by providing only vehicle details.

Invoices uploaded by suppliers for authentication will be automatically shared with buyers for reconciliation.

The system will auto-match input credit liability with output tax. E-invoice can be created for Debit/Credit Notes, Invoices and other eligible documents.

E-invoice can be created for Debit/Credit Notes, Invoices and other eligible documents.

Step by Step Guide to Generate an E-invoice Under GST

The taxpayer or business is responsible to generate the invoice/s and then submit them to Invoice Registration Portal (IRP) for approval.

After successful verification, the portal will return the invoice to the supplier along with a unique reference number, digital signature and a QR code. The e-invoice will also be shared with the corresponding buyer on the email id provided.

Step 1: Invoice Creation

The seller/supplier will create an invoice in the prescribed format (e-invoice schema) using his/her accounting or billing software. It must have the mandatory details.

The accounting software of the supplier will generate a JSON for each B2B invoice. The JSON file will be uploaded to the IRP.

Step 2: IRN Generation

The next step would be to generate a unique Invoice Reference Number (IRN) by the seller using a standard hash-generation algorithm.

Step 3: Invoice Uploading

Now, the seller will upload JSON for each of the invoices, along with IRN, to the Invoice Registration Portal, either directly or through third-party software.

Step 4: Authentication and Signing

IRP will validate the hash/IRN attached with JSON or generate an IRN if not already uploaded by the supplier.

Then, it will authenticate the file against the central registry of GST.

Upon successful verification, it will add its signature on the invoice and a QR code to JSON.

Hash generated earlier will become the new IRN of the E-invoice. It will be the unique identity of that e-invoice for the entire financial year.

Step 5: Sharing of Data

The uploaded data will be shared with the E-way bill and GST system.

Step 6: E-invoice Downloading

The portal will send the digitally-signed JSON along with IRN and QR code back to the seller. The invoice will also be sent to the buyer on their registered email id.

GST: Fitch 3.6% Fiscal Deficit Forecast For FY 2019-20

Fitch 3.6% Fiscal Deficit

Determined by Fitch Solutions, India’s fiscal deficit forecast has increased to 3.6% of the GDP for this FY from 3.4% mentioned earlier. This hike is because of the week revenue collections which is again due to dismal economic growth and government’s widening corporate tax rate cut.

“We at Fitch Solutions are revising the fiscal forecast for the central fiscal deficit which is at 3.6% of GDP (for March-April FY 19/20) which was earlier 3.4%, reflecting our view for a larger slippage versus the government’s 3.3 per cent target”.

“This is believed to be the result of weak revenue collection which is again due to depressing economic growth and a sweeping corporate tax rate cut in September”.

The council on 20 September announced to bring down the rates of corporate income taxes for domestic companies to 22% from earlier 30% including all the additional levies it will reach to 25.2%. Manufacturing units registered after 1 October will get the benefit of paying only 15% corporate tax which was previously 25%.

Fitch Solutions even stated the revenue growth forecast of 8.3% (revised by Fitch) is down the expectations of the government’s budget estimation i.e. 13.2% growth. Corporate tax rate cuts and GST collections are again held responsible for the same.

FS gave estimations on private consumption growth which is already more than half as compared to last year (3.1% in Quarter 1 of FY 2019/20) which was 7.2% in Quarter 4 of the last fiscal year 2018/19. Responsible for this is the collapse of a dominant Non-Bank Finance Company (NBFC) in the industry, the Infrastructure Leasing & Financial Services Ltd (IL&FS), in September 2018, it added.

The IL & FS’s failure between fraud accusations also caused a credit crisis for industry rivals and a subsequent surge in their borrowing costs. This saw NBFCs significantly cut back on lending activity in the months that followed which resulted in six consecutive months of year-on-year contractions in vehicle sales from March-September 2019.

According to Fitch, the growth in merchandise imports is at a low pace owing to the hike in tariff rates charged on certain goods brought in FY 2019/20 Union Budget for tax. Fitch’s expenditure growth forecast for FY 2019/20 is 12.1% (earlier 13.7%) which is again below the government’s estimated 13.4%.

Declared by FM Nirmala Sitharaman in September that the government is not cutting down on expenditures and that the distressed revenue collection will eventually be controlled owing to the government’s ability to maintain its spending targets.

It is believed that the government might restore growth through fiscal spending given a really low 5% GDP growth in Quarter 1 of FY 2019/20 vs 5.8% Growth during FY 2018/19.

The government is expecting a large capital income from RBI through its interim dividend paid in March after which it is expected that the percentage of the central deficit will be less than the Fitch’s forecast.

Read Also: GST Impact on Gross Domestic Product (GDP) in India

The RBI follows a 12-month period from July to June and pays an interim and final dividend to the government based on its profits.

Looking at the government’s earnings from RBI the interim dividend of Rs. 28,000 Cr. has been paid in March 2019. Above that, the government has received Rs. 67,400 Cr. from the central bank to brace its finance for FY 2019/20.

GST Impact on Gross Domestic Product (GDP) in India

gross-domestic-product

The biggest tax reform i.e. Goods and Services Tax is now a part of Indian Economy. A new and unified tax structure is followed for indirect taxation on the place of various tax laws like Excise duty, Service Tax, VAT, CST etc. and for sure the new tax regime is determined to eliminate the cascading effect of tax on transaction of products and services, and it will result in availability of product and services to consumers at lower price.

Recently, India accounted 5 percent growth for the Q1 of FY 2019-20, and it is now lower than China’s GDP growth rate of 6.2 percent for the same period.

Latest Update on GDP Data for FY 2019-20 1st Quarter (April to June 2019)

As per the recent data by CRISIL, the Indian economy may not see a rise over above 6.3% for the fiscal year 2020. The current data have opposed the previous suggestion of 6.9% GDP for the year.

The news is in the air due to the disclosure of the lowest 5% GDP of the country in recent years. As per the statement by crisil, “We expect growth to get some lift from the low base effect of 6.3 per cent in the second half of the FY19.”

There is a lowered 0.6% of GDP for the given financial years due to slowdown in the overall economy and revelation by the economics department responsible for foir the maintenance of the financial health of India.

GDP Data for FY 2018-19 Last Quarter (January to March 2019)

India’s GDP has been recorded at 7.7 percent in the quarter of January – March, with a fast approach towards better number than 7.0 in the previous quarter. With some expectations for 6.7 percent in the financial year 2018, to the 7.3 percent and 7.5 percent in the FY 19 and FY 20 respectively. There is some hindrance to the GDP number due to GST as speculated by the experts but still, many economists are likely to maintain around 6.5 percent.

So here in this article, we will see the GST impact on the Indian Economy.

Read Also: GST Impact on E-commerce Sector in India

GST Positive Impact of GDP

Now, There is only one tax rate for all which will create a unified market in terms of tax implementation and the transaction of goods and services will be seamless across the states.

The same will reduce the cost of the transaction. In a survey, it was found that 10-11 types of taxes levied on the road transport businesses. So the GST will be helpful to reduce transportation cost by eliminating other taxes.

After GST implementation the export of goods and services will become competitive because of nill effect of cascading effect of taxes on goods and products. In a research done by NCAER, it was suggested that GST would be the key revolution in Indian Economy and it could increase the GDP by 1.0 to 3.0 percent.

GST is more transparent in comparison to the previous law provision so it will generate more revenue to the Government and will be more effective in reducing corruption at the same time. Overall GST will improve the tax Compliances.

In a report issued by the Finance Ministry, it was mentioned that Make In India programme will be more benefited by the GST structure due to the availability of input tax credit on capital goods.

As the GST will subsume all other taxes, the exemption available for manufacturers in regards of excise duty will be taken off which will be an addition to Government revenue and it could result in an increase in GDP.

The GST regime has although a very powerful impact on many things including the GDP also. The Gross Domestic Product has the tendency to loom on the shoulders of revenue generated by the economy in a year. Still, a worthwhile point includes that the GST has the capability to extend the GDP by a total of 2 percent in order to complete the ultimate goal of increasing the per-capita income of every individual. Also, the GST scheme will certainly improve the indirect revenues to the government as the tax compliance will be further enhanced and rigid, extending the tax paying base which will add to the revenue. The increased income of the government will redirect towards the developmental projects and urban financing creating an overall implied scenario.

GST Negative Impact on GDP

In a report, DBS bank noted that initially, GST will lead to the rise in inflation rate which will remain for a year but after that GST will affect positively on the economy.

As we know Real Estate also plays an important role in Indian economy but some expert thinks that GST will impact the Real Estate business negatively as it will add up the additional 8 to 10 percent to the cost and reduce the demand about 12 percent.

GST is applied in the form of IGST, CGST AND SGST on the Center and State Government, but some economists say that there is nothing new in the form of GST although these are the new names of Central Excise, VAT, CST and Service Tax etc.

As every coin has two faces in the same way we tried here to familiarize the things related to GST with both perspective i.e. positively and negatively in this article. Despite having some factor which is being expected to affect the Economy adversely there are so many other things which are expected with a positive impact on GDP.

ITC Notification: Credit Limited Up to 20% Not Reflected in GSTR 2A

ITC Notification for Invoice or Debit Note

Amendment Impact Input Tax Credit

Now with this insertion of this sub-rule (4) under the CGST Act, the reconciliation of invoices and GSTR-2A form is mandatory, which will increase the monthly workload of taxpayers professionals or practitioners. Keeping a close eye or following up with suppliers about the uploading of invoices will also become mandatory for taxpayers claiming ITC.

The reckless reporting of B2B transactions as B2C by suppliers due to this amendment will result in non-appearance of invoices/debit notes in the recipient’s GSTR-2A. Such a time lag will also make it difficult for them to claim ITC.

Taxable entities with few suppliers belonging to the MNC/organized sector won’t be largely affected due to such an amendment. Reconciliation and follow-up will be easy for such players. However, taxable persons at lower belts with multiple vendors, especially in the FMCG sector, will find it difficult to comply with such an amendment.

CBIC Notification for CGST Rules, 2017

“(4) Input tax credit to be availed by a registered person in respect of invoices or debit notes, the details of which have not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per cent of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37.” Check Notification

Issues that Need to be Addressed

Addressing the Mismatch Problems Between GSTR-1 and GSTR-2A:

As we know, GSTR-2A gets auto-populated based on the detailed filled in GSTR 1 from suppliers end even after passing of due date. Hence, a mismatch between invoices and updated GSTR 2A is common, making reconciliation challenging for taxpayers.

Quarterly GSTR-1 Filings by Suppliers:

The taxpayers with annual turnover less than INR 1.5 crores file quarterly returns as per GST rules. However, with Monthly ITC claiming via GST 3B return form, it is nearly impossible for anyone to reconcile monthly invoices with GSTR 2B (as it would be generated after the given quarter).

Miscellaneous Problems:

The newly inserted sub-rule has left ambiguity in terms of scenarios when the supplier needs to report invoice/debit note for a given tax period. Whether such amount will be a part of the eligible ITC for a reported tax period is still unclear. ITC can be taken as a credit of a FIFO basis or as a pro-rata basis, is also not clarified.

Legal Difficulties on Input Tax Credit

  • Based on Section 164(1), the government has the authority to form rules for applying the provisions of CGST Act 2017, on the basis of the recommendation of the Council. However, the provision of the CGST Act: section 16 and section 17 is not a part of such an embargo. So, invoking such restrictions by a rulemaking make is certainly not an accurate legal position. Also, it is very clear that a rule cannot override the provisions of the Act.
  • In actuality, Article 14 of the Constitution of India formed by Delhi High Court has been violated by the insertion of sub-rule(4) in CGST Act as it does not offer clarity between bona fide cases (the mismatch is due to the fault of the supplier) and non-bonafide cases (bogus credit claim by the recipient).
  • The last legal difficulty related to the insertion of new sub-rule in Act includes violation of the basic principle of law viz., Lex non-cognit ad impossibly, i.e., the law should not compel a person to do something which is impossible. With the current rule, the recipient is restricted from claiming Input Tax Credit because of the failure of the supplier in furnishing details in Form GSTR-1 on time.

Current Income Tax Rates for FY 2019-20 (AY 2020-21)

Income Tax Slab Rate AY 2020-21

Income tax is a kind of direct tax among the two types of taxes – direct tax and Indirect Tax. Income Tax is charged by the government on the income earned by the taxpayer or any profit or revenue generated by him in a specific Fiscal Year i.e. the year in which income is generated. Income tax new rate and slabs for the FY 2019-2020 or the AY 2020-2021 were declared at the time of budget 2019.

However, an assessee pays the income tax in the assessment year 2020-21 i.e. the year next to the FY 2019-20 in which income of the taxpayer is assessed or evaluated. Provisions to deal with income tax are mentioned in the Income Tax Act, 1961.

Let’s have a look at the income tax slabs for different taxpayers for the AY 2020-2021.

Income Slab & Tax Rates (AY 2020-21) for Resident Individual Age =>60 years

Income SlabIncome Tax
Upto Rs. 2,50,000NIL
Rs. 2,50,000 – Rs. 5,00,0005%
Rs. 5,00,000 – Rs. 10,00,00020%
Above Rs. 10,00,00030%
Surcharge( subject to Marginal Relief )10% (If taxable income > Rs. 50 lacs)
15% (If taxable income > Rs. 1 Crore)
25% (If taxable income > Rs. 2 Crore)
37% (If taxable income > Rs. 5 Crore)
Health & Education Cess4% of(Income Tax + Surcharge)

Note: The same income tax slab & rates are applicable on any Non-Resident Individual (NRI), Hindu Undivided Family (HUF) or Association Of Persons (AOP) and Body Of Individuals (BOI) and Artificial Juridical Person (AJP).

Now, we are coming on to new income tax slab & rates are applicable on Senior Citizens for FY 2019-20 i.e. the citizens who are above 60 years of age but below 80 years of age. The exempted income of Rs. 2,50,000 for individual resident increases to Rs.3,00,000 when it comes to Senior citizens. Let us have a deeper dive into the tax rates applicable to senior citizens.

Recommended: Calculate your Taxable Income with Free Income Tax Calculator

Income Slab & Tax Rates for Senior Citizens (FY 2019-20 & AY 2020-21)

Income SlabIncome Tax
Upto Rs. 3,00,000NIL
Rs. 3,00,000 – Rs. 5,00,0005%
Rs. 5,00,000 – Rs. 10,00,00020%
Above Rs. 10,00,00030%
Surcharge( subject to Marginal Relief )10% (If taxable income > Rs. 50 lacs)
15% (If taxable income > Rs. 1 Crore)
25% (If taxable income > Rs. 2 Crore)
37% (If taxable income > Rs. 5 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Income Tax slab & rates for the very senior citizens FY 2019-20 i.e. the citizens of age 80 years or above is showcased in a below-given table in which tax exemption limit of income extends to Rs. 5,000,000. Here we go.

Income Slab & Tax Rates (AY 2020-21) for Income of Very Senior Citizens

Income SlabIncome Tax
Upto Rs. 5,00,000NIL
Rs. 5,00,000 – Rs. 10,00,00020%
Above Rs. 10,00,00030%
Surcharge( subject to Marginal Relief )10% (If taxable income > Rs. 50 lacs)
15% (If taxable income > Rs. 1 Crore)
25% (If taxable income > Rs. 2 Crore)
37% (If taxable income > Rs. 5 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Note: Budget 2019 underlines Rebate for individuals with income below Rs 5,00,000 u/s 87A. Rebate is of Rs 12,500 or 100% of income tax (whichever is lesser).

Now, we shall discuss the different Income Tax slab & tax rates applicable on the income of Firms, Cooperative Societies, Local Authorities and Companies.

Income Tax Slab & Rates Applicable on Cooperative Society

Income SlabIncome Tax
Upto Rs. 10,00010%
Rs. 10,000 – Rs. 20,00020%
Above Rs. 20,00030%
Surcharge( subject to Marginal Relief )12% (If taxable income > Rs. 1 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Income Tax Slab & Rates Applicable to Firm

ParticularIncome Tax
Income Tax30%
Surcharge( subject to Marginal Relief )12% (If taxable income > Rs. 1 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Income Tax Slab & Rates Applicable on Local Authority

ParticularIncome Tax
Income Tax30%
Surcharge( subject to Marginal Relief )12% (If taxable income > Rs. 1 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Income Tax Slab & Rates Applicable to Different Companies

For the Domestic Company which is claiming exemptions and whose turnover in FY 2017-18 was up to Rs. 400 crores, the new income tax rates and slabs are as follows:

ParticularIncome Tax
Income Tax25%
Surcharge( subject to Marginal Relief )7% (If taxable income > Rs. 1 Crore)
12% (If taxable income > Rs. 12 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

For the Domestic Company which is claiming exemptions and whose turnover in FY 2017-18 was more than Rs. 400 crores, the new income tax slabs and rates FY 2019-20 are as follows:

ParticularIncome Tax
Income Tax30%
Surcharge( subject to Marginal Relief )7% (If taxable income > Rs. 1 Crore)
12% (If taxable income > Rs. 12 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

For the Domestic Manufacturing Company which is not claiming exemptions (under section 155BAA), the income tax slabs and rates are as follows:

ParticularIncome Tax
Income Tax22%
Surcharge10% (If taxable income > Rs. 1 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Read Also: Trust Act 1882 Types & Taxation Policies Under Income Tax

For the Domestic Manufacturing Company which is a NEW company (under section 155BAB), the income tax slabs and rates FY 2019-20 are as follows:

ParticularIncome Tax
Income Tax15%
Surcharge10% (If taxable income > Rs. 1 Crore)
Health & Education Cess4% of (Income Tax + Surcharge)

Income Tax Slab & Rates Applicable to Foreign Company

ParticularIncome Tax
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government50%
Any other income40%
Surcharge2% (Iftaxable income >Rs. 1 Crore)
5% (If taxable income > Rs. 10 Crore)
Health & Education Cess4% of (Income Tax + Surcharge).

Surcharge and Marginal Relief on it

Income Tax Surcharge refers to an additional charge or added tax which is payable on income tax by the individual having a higher income inflow during a particular fiscal year.

Marginal Relief on Surcharge

The taxpayer has to pay a surcharge on income tax at applicable rates when his taxable income is more than Rs. 50,00,000 or Rs. 100,00,000. However, the surcharge is reduced when the increase in ‘Income Tax + Surcharge’ > the increased income over Rs. 50,00,000 or Rs. 100,00,000.

‘Surcharge’ is reduced to a limit which will result in ‘Income Tax + Surcharge’ = increase in ‘Total Taxable Income’ over Rs. 50,00,000 or Rs. 100,00,000. The amount so lessens from ‘Surcharge’ is known as ‘Marginal Relief on Surcharge’.

Section 115BAA – New Section that lowers down the tax rate for Domestic Companies

Section 115BAA is a New Section which was added w.e.f. A.Y 2020-21. This section offers an option to the domestic companies to pay lower tax at 22 %. This tax rate of 22% will become 25.168% u/s 115BAA after adding 10% surcharge and 4% cess. The computation of income under this option is subject to the following conditions:

  • Exemption/deduction under the below-mentioned sections is not claimed.
    • 10AA [SEZ units]
    • 32(1)(iia) [additional depreciation qua new plant and machinery @ 20%/ 30%]
    • 32AD [15% on new assets in undertaking set up in mentioned backward areas of Andhra Pradesh, Bihar, Telangana, and West Bengal]
    • 33AB [prescribed %age of amounts deposited with Tea/ Coffee/ Rubber Board]
    • 33ABA [prescribed %age of amounts deposited in Site Restoration Account]
    • 35(1)(ii)/(iia), 35(2AA) [prescribed deduction for scientific research]
    • 35AD [expenditure on prescribed business]
    • 35CCC [expenditure on agricultural extension project]
    • 35CCD [expenditure on skill development project]
    • Under Part C of Chapter VIA other than sec- 80JJAA of the Act (like 80IA/ IB/ IC/ ID/ IE & so on)
  • Carry-forward losses are not settled off to the limit that the loss relates to deductions specified above. These losses also would not be permitted to be carried forward to subsequent years.
  • Depreciation except for the additional depreciation u/s 32(1)(iia) is duly claimed.

Section 115BAB – New Section that lowers down the tax rate for Domestic Manufacturing Companies

Section 115BAB is a New Section which was added w.e.f. A.Y 2020-21. This section offers an option to the domestic manufacturing companies to pay lower tax at 15 %. This tax rate will also include 0% surcharge and 4% cess. The availability of the option is subject to the condition that the company is established and registered on or after 1st October 2019 and starts manufacturing operation by or before 31st March 2023.

  • Alike section 115BAA provisions, income for the above mentioned lower rate, has to be calculated without claiming exemptions & deductions and setting-off the losses which have been brought forward.
  • Besides, the company shall not be allowed to subsequently drop out the option if any of the option available u/s 115BAB & 115BAA is chosen by it.

Additional requirements for the execution of this option are as follows:

  • The company must not be found by dividing or reconstructing the business which is in existence already.
  • The company must not use building hitherto used as a convention centre or hotel.
  • The company must not use the plant or machinery used earlier for any purpose. However, the used plant and machinery can be reused to the limit of 20% of the total value of plant and machinery.

Section 115JB – Recent amendments that lower down MAT on book profit for companies not opting beneficial option u/s 115BAA/ 115BAB

Amendments have been made in the provisions of section 115JB to bring down the Minimum Alternate Tax (MAT) on book profit. MAT shall be reduced to 15% from 18.5% w.e.f. the assessment year 2020-21.

Note: Companies opting for the lower tax option u/s 115BAA/ 115BAB are exempted from MAT on book profit u/s 115JB.

Income Tax Rates for FY 2018-19 (AY 2019-20)

As per the rules and regulations of the income tax department, the filing of Income tax return and sharing your income details with the department is mandatory. The provisions for filing of income tax depending upon the status of the assessee. The detailed information about the income tax rates of the taxpayer is given below:-

Applicable Income Tax Rates for Individual/HUF

The filing of individual/HUF income tax is mandatory if the total income of the individual/HUF exceeds the maximum amount not chargeable to tax, which is defined as the basic exemption limit. But condition under Chapter VI-A (i.e. Allowed deduction under section 80C to 80U) must be followed.

The exemption limits and income tax rates (for the Financial year 2018-2019) for the individual/HUF are as follows:-

A. For all individuals (other than below)/HUF remaining

  • Up to Rs. 2,50,000 – no tax payable
  • From Rs. 2,50,000 to Rs. 5,00,000 – 5% of the earned income
  • From Rs. 5,00,000 to Rs. 10,00,000 – 20% of the earned income
  • Above Rs. 10,00,000 – 30% of the earned income

Note: The annual income tax rebate has been extended till gross annual income 6.50 lakhs in case of the individual invests into the provident fund and other opted equities while there is a full tax rebate on annual income tax up to 5 lakh (applicable from FY 2019-20).

B. For individuals, residing in India, who is the age of 60 years or more but less than 80 years at any time in the previous year:-

  • Up to Rs. 3,00,000 – no tax payable
  • From Rs. 3,00,000 to Rs. 5,00,000 – 5% of the earned income
  • From Rs. 5,00,000 to Rs. 10,00,000 – 20% of the earned income
  • Above Rs. 10,00,000 – 30% of the earned of income

C. For individuals, residing in India, who is the age of 80 years or more at any time in the previous year:-

  • Up to Rs. 5,00,000 – no tax payable
  • From Rs. 5,00,000 to Rs. 10,00,000 – 20% of the earned income
  • Above Rs. 10,00,000 – 30% of the earned income

Surcharge on Income Tax having a Total Income of 50 Lacs but not exceeding 1 Crore:-10% of Income Tax.

Surcharge on Income Tax having a Total Income exceeding 1 Crore: 15% of Income Tax.

Recommended: Calculate your Taxable Income with Free Income Tax Calculator

Income Tax Rates for Companies

Being a company, a person is needed to file his income tax return, because it is mandatory. Irrespective of its income as profit and loss.

Domestic Company: 25% if Gross Receipts/Turnover is not more than 250 crore in the previous year 2016-17.

———————–30% in other cases————————————————

Foreign Company: 40%

  • Surcharge on Income exceeding 1 crore:-7% of Income Tax.
  • Surcharge on Income exceeding 10 crore: 12% of Income Tax.

IT Rates for Partnership Firms

Being a partnership firm, it is the responsibility of either its partner or authorized person to file an income tax return, because it is mandatory. Irrespective of its earned income as profit and loss.

Income will be taxable @ 30%

Health & Education Cess (Updated in AY 19-20)

It will be calculated at 4% of (Income Tax and surcharge)

So these are categories of the taxpayer defined by the income tax department if a taxpayer belongs to any one of these categories, then he/she has to pay the income tax because it is mandatory.

Online filing of income tax return is quite an easy process with available tools and software. SAG Infotech company also provides Income Tax E-Filing solution to upload returns directly from the software, named Gen Income Tax Return Filing software.

Income Tax Department to Launch Instant e-PAN Services

PAN cards will now be issued online and instantly in India by the Income Tax Department. This is a good move towards digitalization of services by the Income Tax Department.

Applicants will not need to fill out an application form and submit the required documents manually as now the income tax department would procure the details from the Aadhar card of an applicant and issues a PAN card instantly. Besides the facility is free to use.

The procedure is entirely online and since it knocks off every single manual processing which consumes a time-frames of 15 days, the e-PAN facility guarantees a “near to real-time” process.

Read Also: Simple Steps for Filling New PAN Card Application Online

To apply for the instant e-PAN, the applicants would need to quote their basic details such as name & address along with Aadhaar details which are mandatory to be mentioned. The details would need to be verified by the applicants using a one-time password (OTP) which will be sent on their registered mobile phone number. Since Aadhaar card already carries details such as Date of birth, Address and Father’s name so the applicant would not need to upload any substantial document as an address proof or any other evidence. However, it should be noted that applicants must send correct Aadhaar details because any mismatch would lead to the rejection of the application.

Once the details of Aadhar get verified through OTP, a digitally signed e-PAN will be issued to the applicant. The e-PAN will feature a QR code that will carry the applicant’s photo and demographic information in an encrypted manner for security reasons and to avert the risks of fraudulence & forgery or digital photoshopping.

Read Also: Avoid Errors in Aadhaar/PAN for Income Tax Return Filing

“The move is part of greater digitization of income tax services and aimed at providing the facility without anyone having to visit any office,” an official said.

The e-PAN facility will benefit the new applicants as well as the existing PAN users. A few clicks and minutes, the existing PAN holders will get a duplicate.

In the ongoing pilot test of the instant e-PAN service, more than 62,000 e-PANs have been issued in the period of merely eight days. After the successful test, the facility will be launched throughout the country.

GST: Facility Re-open to File or Revise Tran-1 Form on Punjab & Haryana HC Orders

Facility Re-open to File or Revise Tran-1

Goods and Services Tax ( GST ) department has received orders by the Punjab and Haryana High Court to reinitiate the facility of filing or revising Tran-1. The directions have been given to the GST department to allow the Petitioners to file TRAN-1 Form or revise their already filed erroneous TRAN-1 either electronically or manually.

Petitioners have been urging the High courts for directions under Article 226 of the Constitution of India to Respondents for allowing them to carry forward the unutilized CENVAT credit of duty discharged under Central Excise Act, 1944 and Input Tax Credit of VAT paid under PVAT Act, 2005 or HVAT Act, 2003.

These petitioners are registered under the Central/State Goods and Services Tax Act, 2017 and their credits could not be carry forwarded because they either failed to file the stipulated Form i.e. TRAN or filed it incorrectly by the prescribed due date of 27th December 2017.

Such petitioners have been behesting for permitting them to revise the incorrect TRAN or file a new TRAN in any mode and carry forward the unclaimed credits.

Justice Jaswant Singh and Justice Lalit Batra of the division bench decided and directed to allow the claimants to claim the transitional credit of the eligible CENVAT / ITC duties by filing a declaration in GST TRAN-1 and GST TRAN-2 Form.

It should be noted that only those duties are permitted to be claimed which are related to the inputs kept in stock on the appointed day as per Section 140(3) of the Act.

The Court also said that “the due date contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit is procedural in nature and thus should not be construed as a mandatory provision”.

Petitioners are given a time-restricted opportunity to claim or carry forward their unclaimed credit. 30th November 2019 is the due date of filing the statutory Form(s) TRAN-1 or revising an already filed erroneous TRAN.

“The Respondents are at liberty to verify the genuineness of claim of Petitioners but nobody shall be denied to carry forward the legitimate claim of CENVAT / ITC on the ground of non-filing of TRAN-I by 27.12.2017”, added by the Court.

GST Collection Below INR 1 lakh Crore in Oct 2019

GST Revenue

As anticipated the GST collections for the month of October the collection took turns for the INR 95,380 crores only which is less than the normal peak stable fo 1 lakh crore of targets. The same collections for the month of October from the previous year were 1,00,710 crore.

The central GST was evaluated at 17,582 crores, state GST came at 23,674 crores, Integrated GST came at 46,517 crores while the cess collection came at 7,607 crore rupees for the month of October for the government.

Also, there was a total of 73.83 lakh of GSTR 3B returns filed in the month which have not brought any significant collections to the government.

GST collection was at a 19-month low in September

Information received by the Revenue Department had revealed a total GST collection of Rs 91,916 crore in September 2019. The figure was at a 19-month low. Even in the month of August, the GST collection figure was Rs 98,202 crore. However, the economic slowdown was said to be the reason for the decrease in GST collection in both the months.

A reduction of approx 2 lakh crore rupees in the total tax collection in the financial year 2019-20 is likely to happen. The government has informed the Finance Commission regarding the same. The central government had estimated the gross tax collection of Rs 24.6 lakh crore in the current fiscal year.

Initially, the estimate was Rs 22.5 lakh crore. The total tax collection this year was Rs 21 lakh crore. This means that the government needs to increase the total tax collection by 18 per cent to meet its target in the current financial year. Government of India needs more than Rs 1 lakh crore GST to meet its fiscal target but not to offset the state-level losses as GOI is responsible to compensate the states for its revenue losses only once in every two months for the first five years of GST onset.

Read Also: First Meeting of GST Review Committee Went Inconclusive

The government has already compensated the states with Rs 27,955 crore and Rs 17,789 crore in June-July & April-May this year, respectively.

The tax collection in the month of September came out to be the lowest in nineteen months which is another symbol of economic downturn. In such a scenario, the government’s concern regarding the GST collection and economic improvement has increased because of poor tax collection.