KGS

INTEGRITY FIRST

“In the business world, the rear view mirror is

always clearer than the windshield.”

Warren Buffett

S. No. Topic

1. Capital Gains Scheme under Income Tax Act – 1961

2. Amendments in Insolvency and Bankruptcy Code

3. GST Audit

Index

INDEX

This article aims to: Definition of Short term/Long term Capital Asset

How to calculate short term capital gains

Rates of tax on Short– Term Capital Gains

Rates of tax on Long – Term Capital Gains

Exemptions from Capital Gains

Capital Gains Scheme

under Income Tax Act, 1961

CAPITAL GAINS SCHEME UNDER INCOME TAX ACT,1961

Capital Gain

Any profit or gain that arises from the transfer of a ‘capital asset’ is a capital gain. This gain or

profit is considered as income and hence charged to tax in the year in which the transfer of the

capital asset takes place. This is called capital gains tax, which can be short-term or long-term.

As per Section 2(47)of Income-tax Act 1961, the term ‘transfer’ has been defined as Transfer in

relation to a capital asset whichincludes :

(i) the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him

as stock-in-trade of a business carried on by him, such conversion or treatment; or

(v) any transaction involving the allowing of the possession of any immovable property

to be taken or retained in part performance of a contract of the nature referred to in section

53A of the Transfer of Property Act, 1882; or

(vi) any transaction (whether by way of becoming a member of, a acquiring shares in, a

co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring

or enabling the enjoyment of, any immovable property.

(vii) maturity or redemption of a zero coupon bond.

Capital gains are not applicable when an asset is inherited . However, if this asset is sold by the

person who inherits it, capital gains tax will be applicable. The Income Tax Act has specifically

exempted assets received as gifts or inheritance or will from the application of any capital gain tax

at the time of gift or inheritance.

Capital Asset

Capital asset is defined to include:

a) Any kind of property held by an assessee, whether or not connected with business or profession

of the assessee.

b) Any securities held by a FII which has invested in such securities in accordance with the

regulations made under the SEBI Act, 1992.

However, the following items are excluded from the definition of "capital asset":

Any stock-in-trade, consumable stores, or raw materials held by a person for the purpose of

his business or profession.

Personal effects of a person, that is to say, movable property including wearing apparels

and furniture held for personal use, by a person or for use by any member of his family

dependent on him. However, jewellery, archaeological collections, drawings, paintings,

sculptures, or any work of art are not treated as personal effects and, hence, are included in

the definition of capital assets.

Agricultural Land in India, not being a land situated:

Within jurisdiction of municipality, notified area committee, town area committee,

cantonment board and which has a population of not less than 10,000;

Within range of following distance measured aerially from the local limits of any municipality or cantonment board:

not being more than 2 KMs, if population of such area is more than 10,000 but not

exceeding 1 lakh; not being more than 6 KMs, if population of such area is more than 1 lakh but not

exceeding 10 lakhs; or

not being more than 8 KMs, if population of such area is more than 10 lakhs. Population is to be considered according to the figures of last preceding census of which

relevant figures have been published before the first day of the year.

6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Gold Bonds, 1980

issued by the Central Government.

Special Bearer Bonds, 1991, issued by the Central Government.

Gold Deposit Bonds issued under Gold Deposit Scheme, 1999.

Definition of Short Term/Long Term Capital Asset

As per section 2(42A), short-term capital asset means a capital asset held by an assessee for not

more than 36 months immediately preceding the date of its transfer.

As per section 2(29A), long-term capital asset means a capital asset which is not a short-term

capital asset.Thus, a capital asset held by an assessee for more than 36 months immediately

preceding the date of its transfer is a long-term capital asset.

Exceptions:A security (other than a unit) listed in a recognized stock exchange, or a unit of an

equity-oriented fund or a unit of the Unit Trust of India or a Zero-Coupon Bond will, however, be

considered as a long-term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer.

Further, a share of a company (not being a share listed in a recognized stock exchange in India) or an immovable property, being land or building or both would be treated as a short-term capital asset

if it was held by an assessee for not more than 24 months immediately preceding the date of its

transfer.

Thus, the period of holding of unlisted shares or an immovable property, being land or building or

both, for being treated as a long-term capital asset would be “more than 24 months” instead of

“more than 36 months”.

Period of holding: A Summary

Nature Period

•Security(otherthanunit)listedinarecognizedstockexchange

•Unitofequity-oriented fund/unitofUTI •ZeroCouponbond

STCA, if held for ≤ 12 month

LTCA, if held for > 12 months

•Unlisted shares

•Land or building or both

STCA, if held for ≤ 24 month

LTCA, if held for > 24 months

•Unit of debt-oriented fund •Unlisted securities other than shares

•Other capital assets

STCA, if held for ≤ 36 month LTCA, if held for > 36 months

How to Calculate Short-Term Capital Gains

Proforma for computation of income under the head “Capital Gains”

Particulars Amt (₹) Amt

(₹)

In case

of a

Short-

term

Capital

asset

Full value of Consideration received or accruing as a result of

transfer

Less: Expenditure incurred wholly and exclusively in connection

with such transfer (for e.g., brokerage on sale)

(Note: Deduction on account of STT paid will not be allowed)

Net Sale Consideration

Less: Cost of Acquisition (COA)

Cost of Improvement (COI)

Short Term Capital Gain (STCG)

Short Term Capital Gain chargeable to Tax

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Particulars Amt (₹) Amt (₹)

In case

of a

Long-

term

Capital

asset

Full value of consideration received or accruing as a result of

transfer

Less: Expenditure incurred wholly and exclusively in connection

with such transfer (for e.g., brokerage on sale)

(Note: Deduction on account of SIT paid will not be allowed)

Net Sale Consideration

Less: Indexed Cost of Acquisition (ICOA)

Cost of acquisition X CII for the year in which the asset

XXX

XXX

XXX

XXX

is transferred

CII for the year in which the asset was first held by the assessee

or P.Y 2001-02, whichever is later

Note: (Benefit of indexation will, however, not be available in

respect of long-term capital gains from transfer of bonds or

debentures other than capital indexed bonds issued by the

Government and sovereign gold bonds issued by RBI and

inrespect of long-term capital gains chargeable to tax under

section 112A)

Less: Indexed cost of improvement (ICOI)

Cost of improvement X CII for the year in which the asset

is transferred

CII for the year in which the improvement took place

Long -term capital gains (LTCG)

Less: Exemption under sections 54/54B/54D/54EC/54EE/54F

Long Term Capital Gains chargeable to tax

XXX

XXX

XXX

XXX

XXX

(*CII – Cost Inflation Index)

Rate of Tax on Short-term Capital Gains

Section Rate of Tax

111A Short-term Capital gains arising on transfer of listed equity shares, units of

equity-oriented fund and unit of business trust- 15%, if STT has been paid on such

sale.

Short-term capital gains arising from transaction undertaken in foreign currency

on a recognized stock exchange located in an International Financial Services

Centre (IFSC) would be taxable at a concessional rate of 15% even though STT is not paid in respect of such transaction.

Note - Short-term capital gains arising on transfer of other Short-term Capital Assets would be

chargeable at normal rates of tax.

Rates of tax on Long-Term Capital Gains

Section Rate of Tax

112A •Tax @10% on long-term capital gains exceeding ₹1,00,000 on the transfer of following long-term capital assets: -

-listed equity shares, if STT has been paid on acquisition andtransfer of such shares

-units of equity-oriented fund and unit of business trust1, if STT has been paid ontransfer of such units

•If such transaction undertaken on a recognized stock exchange located in an

International Financial Services Centre (IFSC),LTCG would be taxable at a

concessional rate of 10% where the consideration for transfer is received or receivable in foreign currency, even though STT is not paid in respect of such

transaction.

•Benefit of indexation and currency fluctuation would not be available.

112 Long-term capital asset Rate of tax

Unlisted securities, or shares of

a closely held company Non-corporate non-resident/ foreign

company - 10% without the benefit of indexation and currency fluctuation.

Other Assessees - 20%, with indexation benefit.

Listed securities other than a

unit) or a zero-coupon bond

-10%, without the benefit of indexation or

-20%, availing the benefit of indexation whichever is more beneficial to the assessee

Other Assets -20%

Exemptions from Capital Gains

It is important for taxpayers who are planning to purchase or sell a capital asset to pay special

attention to tax planning. Income taxpayers who know the various provisions of Income Tax and

related Capital Gains Exemptions can immensely benefit from reducing the incidence of tax. The

duration of holding a capital asset and the various expenses and other deductions to be claimed for arriving at the final quantum of taxable capital gains has a direct bearing on the amount of income tax

to be paid on capital gains in respect of a transfer of the capital assets. Hence, it’s important for all

taxpayers to know about the following capital gains exemptions while purchasing or selling capital

assets.

Exemption of Capital Gain(Section 54 to 54F)

S. No. Particulars Section 54 Section 54B Section 54D Section

54EC

Section

54EE

Section 54F

1 Eligible Assessee Individual /

HUF

Individual/

HUF

Any assessee Any

assessee

Any assessee Individual /

HUF

2 Asset transferred Residential

House

(LTCA)

Urban

Agricultural

Land

Land &

building

forming part

of an industrial

undertaking

Land or

building

or both

(LTCA)

Any LTCA Any LTCA

other than

Residential

House.

3 Other Conditions Income from

such house

should be

chargeable

under the head

“Income from

house

property”

Land should

be used for

agricultural

purposes by

assessee or

his parents or

HUF for 2

years

immediately

preceding the

date of

transfer

Land &

building have

been used for

business of

undertaking

for at least 2

years

immediately

preceding the

date of

transfer.

The transfer

- - Assessee

should not

own more

than one

residential

house on the

date of

transfer. He

should not

purchase

within 2

years or

should be by

way of

compulsory

acquisition of

the industrial

undertaking

construct

within 3

years after

the date of

transfer,

another

residential

house.

4 Qualifying asset

i.e., asset in which

capital gains has

to be invested

One

Residential

House situated

in India

Land for

being used for

agricultural

purpose

(Urban/

Rural)

Land or

Building or

right in land or

building

Bonds of

NHAI or

RECL or

any other

bond

notified

by C.G.

(Redeema

ble after 5

years)

Unit issued

before the 1st

April 2019 of

Specified

Fund as

notified by

the Central

Government

One

Residential

House

situated in

India

5 Time limit for

purchase/

construction

Purchase

within 1 year

before or 2

years after the

date of

transfer

(or)

construct

within 3 years

after the date

of transfer

Purchase

within a

period of 2

years from the

date of

transfer

Purchase/

construct

within 3 years

after transfer,

for shifting or

re-establishing

the existing

undertaking or

setting up a

new industrial

undertaking.

Purchase

within 6

months

from the

date of

transfer

Purchase

within 6

months after

the date of

such transfer

Purchase

within 1

year before

or 2 years

after the

date of

transfer or

Construct

within 3

years after

the date of

transfer

6 Amount of

Exemption

Cost of new

Residential

House or

Capital Gain,

whichever is

lower, is

exempt

Cost of new

Agricultural

Land or

Capital Gain,

whichever is

lower, is

exempt

Cost of new

asset or

Capital Gain,

whichever is

lower.

Capital

Gain or

amount

invested

in

specified

bonds,

whichever

is lower.

Maximum

permissibl

e

investmen

t out of

capital

gains

arising in

any

financial

year is ₹

50 lakhs,

Capital Gain

or amount

invested in

notified units

of specified

fund,

whichever is

lower.

Maximum

permissible

investment in

such units

out of capital

gains arising

in any FY is

₹ 50 lakhs,

whether such

investment is

made in the

current FY or

subsequent

Cost of new

Residential

House ≥ Net

sale

consideratio

n of original

asset, entire

Capital gain

is exempt.

Cost of new

Residential

House < Net

sale

consideratio

n of original

asset,

proportionat

e capital

gain is

exempt.

whether

such

investmen

t is made

in the

current

FY or

subsequen

t FY or

both.

FY or both.

CA Gaurav Bhatia

Priyanka Gattani

This article aims to:

Highlight amendments of

2018 in IBBC

Amendments in

Insolvency and

Bankruptcy code

Amendments in Insolvency and Bankruptcy

Code

Background

The Insolvency and Bankruptcy Code (IBC) — billed as the biggest economic reform in India after the Goods and Services Tax (GST) — is a rare example of a speedy rollout and implementation of a much-

needed law.The Insolvency and Bankruptcy Code,2016 consolidated the archaic Insolvency laws ,provided a consolidated legislation and revolutionised the insolvency regimein India.Undoubtedly , the Code has had a significant impact on the way corporate India functions. Although it is undergoing an initial period of adjustment and cleaning-up, the law lays down a robust framework and time-bound road map to deal with distressed or failed businesses, a welcome contrast from the earlier seemingly never-ending process.

Before and After: How the Law has changed Dealing with Default

Key Existing legislation ,

regulations and non

statutoryguidance amended

Companies Act, 1956/2013

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002)

Recovery of debts due to banks and financial

institutions act, 1993

(RDDBFI Act, 1993)

SICA Act, 1985

Other enactments for partnerships

&individual insolvencies

Non-statutory guidelines/out of court

mechanism

Objective Section of the

Code

Consolidate and amend laws

relating to insolvency and

bankruptcy

Maximization of value

Time-bound resolution

Promote entrepreneurship and

availability of credit

Alteration of priority of payment

of government dues

Capitalize as Insolvency and

Bankruptcy Board in India

The Code

Process and Players

A Company defaults (Minimum amount Rs. 1 Lakh)

Application to NCLT can be filed by Financial creditors/Operational creditors/Corporate debtor

NCLT to appoint Interim resolution Professional and declare Moratorium (to prevent suits/recovery/asset transfer during the 180/270 days).

The Interim resolution professional (IRP) to form Committee of Creditors.

First Committee of Creditors meeting will decide Final appointment of Resolution Professional.

Approval/Rejection of Resolution Plan by Committee of Creditors(COC)

If 66 % of Creditors (in the Committee, If plan is rejected, Company goes

Only Financial creditors have Voting power) into Liquidation.

Okay Resolution Plan, the revival goes through.

Analysis of the Key Changes made by Amendment Actin January 2018

Application of the Code : Section 2 of the Code is amended by extending the application of the code to personal guarantors to corporate debtors, partnership firms and proprietorship firms; and individuals, other than persons

Invitation to Resolution Applicant : Earlier Resolution applicant defined in the code as “ any person who submits a resolution plan to resolution professionals”. This section was in contrast with Section 25(2)(h). As it was argued that the definition of Resolution applicant should be read in consonance with Section

25(2)(h) of the code which requires the resolution professional to invite prospective lenders, investors and any other person to put forward a resolution plan. Therefore, only a person who is invited by the resolution professional could submit his resolution plan and was considered as Resolution applicant. Now Section 5 of the code is amended and “Resolution applicant means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of subsection (2) of section 25.

The resolution professional shall issue an invitation , including evaluation matrix, to the prospective resolution applicants in accordance with clause (h) of sub-section (2) of section 25, to submit resolution plans at least thirty days before the last date of submission of resolution plans. Where “Evaluation Matrix as defined in sub-regulation (1) of regulation (2)(ha)”, such parameters to be applied and the manner of applying such parameters, as approved by the committee, for consideration of resolution plans for its approval.

The resolution professional shall publish brief particulars of the invitation in Form G of the Schedule: (a) on the website, if any, of the corporate debtor; and (b) on the website, if any, designated by the Board for the purpose.”

Qualifying Criteria for resolution applicants :

Previously, the resolution professional had the liberty to invite any prospective lender, investor and any other person to put forward a resolution plan. Now as per amended section 25(2)(h), Resolution Professionals can invite prospective resolution applicants, who fulfil such

criteria as may be laid down by him with the approval of committee of creditors, having

regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans.

Disqualification from submitting Resolution plan : Prior to amendment act, it was becoming increasingly common amongst unscrupulous promoters of corporate debtors to themselves submit a resolution plan in a CIRP for their own distressed company and thereof be the resolution applicant.

The amendment act inserted Section 29A prohibited certain person to submit resolution plan if :- (a) an undischarged insolvent (b) a wilful defaulter as per guidelines of the Reserve Bank of

India (c) a person who has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India.

(d) a person who has been convicted for any offence punishable with imprisonment for two years or more (e) a person who is disqualified to act as a director under the Companies Act, 2013 (f) a person is prohibited by the Securities and Exchange Board of India from trading or accessing the securities markets (g) a person who has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the

Adjudicating Authority under this Code (h) a person who has executed an enforceable

guarantee in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code has been subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India (e) has a connected person not eligible under clauses.

Submission of Resolution Plan:

(a) The committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, if resolution applicant is ineligible under Section 29A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it:

(b) If any person is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make

payment of overdue amounts.

(c) Earlier there was no timeline for submitting the Resolution plan approved by COC. Now, as per sub-regulation (4) of regulation 39, the resolution professional shall submit the

resolution plan approved by the committee to the Adjudicating Authority, at least fifteen days before the expiry of the maximum period permitted under section 12 for the completion of the corporate insolvency resolutionprocess, with certification that

i.) The contents of the resolution plan meet all the requirements of the Code and the

Regulations; and ii.) the resolution plan has been approved by the committee.

Prohibition on Sale of Distressed Assets: The liquidator shall not sell the immovable and movable property oractionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.

Amendment in Information Memorandum

As per Sub-regulation (4), the interim resolution professional or the resolution professional,

as the case may be, shall submit an information memorandum in electronic form to each

member of the committee and any potential resolution applicant containing all details of Corporate Debtor as per Para (a) to (l) of Sub regulation 2. But now Sub regulation (2) (j) and (2)(k) are being omitted where in IRP or RP were required to give “Liquidation value” and “Liquidation value due to operational creditors” in the Information Memorandum.

Punishment where no specific penalty or punishment is provided: If any person contravenes any of the provisions of this Code or the rules or regulations made thereunder for which no penalty or punishment is provided in this Code, such person shall be

punishable with fine which shall not be less than one lakh rupees but which may extend to two crore rupees .

Analysis of the Key Changes made by Amendment Acts in August 2018

Substitution of the terms "repaid/ repayment" with the terms

"paid/payment" in several provisions of the Code : The Ordinance has substituted the terms 'repaid/ repayment' with the terms 'paid/ payment' for several provisions in the Code. The term 'repayment' implies the action of paying back or reimbursement of the debt. However, the term 'payment' provides a wider meaning to include other outstanding amounts in relation to the debt which may include taxes and cess.

Amendment to the definition of 'Financial Debt' to include the amount raised from allottees in a real estate project:The amendment of Section 5(8)(f) with respect to

the definition of 'Financial Debt' ensures inclusion of home buyers as financial creditors

under the Code. This is because any amount raised from an allotee under a real estate project

shall be taken to be an amount having the commercial effect of borrowing.Prior to the

amendments, the home buyers were not categorised as financial creditors or as operational

creditors. Several judgments laid down that buyers of under construction flats could not be

classified as creditors under the Code. The non-inclusion of home buyers as financial creditors

put such buyers in a disadvantageous position. The home buyers could neither initiate the

Corporate Insolvency Resolution Process ("CIRP") nor be a part of the Committee of

Creditors nor be guaranteed the receipt of liquidation value under the Resolution Plan. The

only option available to the aggrieved home buyers was to approach the courts for requisite

reliefs. Insertion of the Definition of 'Related Party

The term 'related party' in relation to an individual has been specifically defined by the insertion of Clause (24A) in Section 5 of the Code.

Insolvency resolution by Operational Creditors: The Ordinance clarifies Section 8(2)(a) of the Code pertaining to the insolvency resolution by operational creditors. The provision shall henceforth also include disputes that are not pending in a suit or arbitration proceedings. Prior to the amendment, the corporate debtor was required to bring to the operational creditor's attention, existence of a dispute and its record of pendency in a suit or arbitration

proceedings before such operational creditor could file an application to initiate the CIRP. However, the Ordinance has amended the provision to render incapable the operational creditor from initiating the CIRP even if the existing dispute has not been taken to court or the

arbitration forum.

Section 9 amended

Further, whilst filing an application for the initiation of CIRP by an operational creditor under Section 9 of the Code, the amendments introduced by the Ordinance make the requirement of submitting a certificate from the financial institutions where an operational creditor has account/s, validating non-payment of unpaid operational debt by the corporate debtor under Section 9(3)(c) of the Code, optional. Prior to the amendments, fulfilment of such requirement by the operational creditor for initiating the CIRP was taken to be mandatory due to the wording of the said clause under Section 9. Such requirement was impeding the operational creditors from filing applications for several reasons. Firstly, foreign banks and non-scheduled banks are not included in the

definition of 'financial institutions' provided in the Code. Therefore, an operational creditor holding account/s in such banks could not initiate CIRP. Secondly, if an operational creditor possesses several bank accounts in different banks then it is an arduous task for the said creditor to obtain the certificates for all the accounts in question. Further, obtaining certificates for some accounts and not all of them would not be sufficient evidence of non-

payment. Thirdly, a universal format for such certificates did not exist with the banks. Finally, the said certificate is not conclusive proof of the concerned operational debt having been

fulfilled. To cater to such problems faced by the operational creditors, the requisite amendment in Section 9(3)(c) was made. Moreover, a new requirement as per the amended Section 9(3)(d) is to submit any record, if available, with the information utility validating non-payment of unpaid operational debt by the corporate debtor. In addition, Section 9(3)(e) permits the operational creditor to submit any other evidence that confirms non-payment of unpaid operational debt by the corporate debtor.

Shareholders' approval for initiating Corporate Insolvency Resolution Process by the corporate applicant:As per the Ordinance, the corporate debtor is

now required to obtain either a special resolution passed by its shareholders or a resolution

passed by a minimum of three-fourth of the total number of its partners in case of a limited

liability partnership, approving the filing of the application initiating the CIRP under Section

10 of the Code. Alterations to the voting thresholds for decision making by Committee of

Creditors: Amendments have been made to the Code wherein the voting threshold for getting approval

of the Committee of Creditors in respect of all major decisions to be taken by the Committee

of Creditors has been reduced from 75% to 66%.

Non-extension of Moratorium to a Surety in a Contract of Guarantee to a Corporate DebtorSection 5A inserted - "Corporate Guarantor" means a corporate person

who is the surety in a contract of guarantee to a corporate debtor.

The provision for moratorium states that instituting suits or continuation of suits or

proceedings against the corporate debtor and its assets shall not be permitted for the duration

of the moratorium. “ The Ordinance has amended Section 14(3)(b) of the Code to clarify that

the applicability of moratorium shall not be extended to a surety in a contract of guarantee to

a corporate debtor. The assets of guarantors of corporate debtors shall be excluded from the

scope of moratorium and the moratorium provisions shall be solely applicable to the assets of

a corporate debtor”.

Extension of the Tenure of Interim Resolution Professional: Earlier, the tenure of the Interim Resolution Professional could not be more than 30 days.

However, post amendment of Section 16(5), the term of the Interim Resolution Professional

extends until such date when the Resolution Professional is appointed.

Compliance of statutory requirements by the Interim Resolution Professional: The Interim Resolution Professional must also comply with legal requisites under applicable

law whilst managing the affairs of the corporate debtor to ensure that the corporate debtor

continues to function as it used to before the commencement of the CIRP subject to the

restrictions imposed upon it under the relevant provisions of the Code. The Ordinance sheds

clarity on the responsibility of the Interim Resolution Professional/ Resolution Professional to

correct the ambiguity in the provision prior to such amendment by the insertion of Section

17(2)(e).

Tenure of Resolution Professional to extend beyond the expiry of the Corporate Insolvency Resolution Process: The amendment to Section 23(1) permits the Resolution Professional to continue to manage

the operations of the corporate debtor even after the expiry of the CIRP till such time the

Adjudicating Authority passes an order.

Prior to such amendment, the Resolution Professional was permitted to manage the

affairs of the corporate debtor for the duration of the CIRP i.e., 180/ 270 days.

Appeal against the decision of the Liquidator: With respect to Section 42, the Ordinance clarifies that the creditor is entitled to appeal to the

Adjudicating Authority against the decision of the liquidator even upon the acceptance of the

claims by such liquidator.

Applicability of the Limitation Act: The insertion of Section 238A seeks to clarify that the provisions of the Limitation Act, 1963 shall be applicable to the proceedings before the NCLT, NCLAT, DRT and DRAT depending on the case. This means that a creditor must ensure that such creditor seeks remedy under the law within the prescribed time period as provided in the Limitation Act. It is essential to specify the application of the Limitation Act to the Code in order to prohibit creditors and claimants from filing claims in relation to time-barred debts. Creditors and claimants should not be permitted new opportunities to obtain remedy once such debts have become time-barred. The Ordinance seeks to clarify that right to remedy is lost in case of time-barred debts.

Applicability of the Code to Micro, Small and Medium Enterprises: The insertion of Section 240A clarifies that the Central Government is empowered to direct the non-applicability of the provisions of the Code to the micro, small and medium enterprises (MSMEs) or permit the applicability subject to modifications.

Conclusion : Upon an analysis of the key amendments to the Code, it can be seen that the Insolvency Law Committee constituted by the Ministry of Corporate Affairs had taken under consideration the lacunae existing in the provisions of the Code and sought to clarify and/ or elaborate the same.

This article aims to: Applicability

Timeline

Checklists for GST Audit

Responsibility of Auditor under GST

Late filing of GSTR – 9

GST Audit

GST Audit

As per Section 2(13) of CGST Act 2017 “Audit” means

(a) the examination of records, returns and other documents maintained or furnished by the registered

person under this act or rules

(b) to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed

(c) to assess the compliance with provisions of this Act or the rules made thereunder

GST Audit is required under the following three circumstances :

(a) Audit by Chartered Accountant or Cost Accountant – Rule 80 and Section 35(5)

(b) Audit by Tax Authorities – Section 65

(c) Special Audit – Section 66

Applicability

As per Section 35(5) of CGST Act 2017, Every registered person whose turnover during a

financial year exceeds the prescribed limit [Rs 2 Crore by Rule 80(3) of CGST Rules 2017]

shall get his accounts audited by a chartered accountant or a cost accountant and shall submit

a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of

section 44 of CGST Act 2017 and such other documents in such form and manner as may be

prescribed.

As per Section 44(2) of the CGST Act 2017, Every registered person who is required to get his

accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish,

electronically, the annual return under section 44(1) of CGST Act 2017 along with a copy of

the audited annual accounts and a reconciliation statement, reconciling the value of supplies

declared in the return furnished for the financial year with the audited annual financial statement,

and such other particulars as may be prescribed.

AS per Rule 80(3) of CGST Rules 2017, Every registered person whose aggregate turnover

during a financial year exceeds two crore rupees shall get his accounts audited as specified

under sub-section (5) of section 35 and he shall furnish a copy of audited annual accounts and a

reconciliation statement, duly certified, in FORM GSTR-9C.

Time line

Annual return is required to be filed on or before December 31, 2018. For instance for the financial year

2017-18 (transactions undertaken during July 17 to Mach 18), the last date for filing is December 31,

2018.

Required Forms in GST to be certified by the auditor for Auditing purpose

GSTR 9C: GSTR 9C should be filed by the taxpayers whose annual turnover exceeds Rs 2 crores during

the financial year. All such taxpayers are also required to get their accounts audited and file a copy of

audited annual accounts and reconciliation statement of tax already paid and tax payable as per audited

accounts along with GSTR 9C.

Checklist for GST Audit

List of tax invoiced issued during the period and reconciliation of the same with books of

accounts, this also should be reconciled with the turnover declared in the audited financial

statements. This should be made each GSTIN statewise by the company.

List of debit/credit notes issued during the period and reconciliation of the same with books

of accounts.

In case company has the different units/branch all over India, then the stock transfer between

units/branches also to be reconciled with the books.

Reconciliation of advances received and GST paid for goods & services during July 1 to

15th November 2017 and advances received for services and GST paid for that from

15th November 2017 to 31ST March 2018.

Reconciliation of E-Way bill data with the tax invoices issued during the period GSTIN

statewise

Reconciliation of HSN wise summary with the issued tax invoices

Reconciliation discount given to the customer with purpose and recheck if the same under

GST act allowed or not.

List of Purchase & other service bills accounted during the period & Input credit taken on the

same and further reconciliation with the books and returns.

Ensure all the input credit taken bills are uploaded by the suppliers and it is reflecting in the

GSTR-2A.

Reconciliation of input credit availed and also ensure all the availed credits are eligible as per

the act and the ineligible credits, common credits are reversed & accounted properly.

Details of input credit taken on the fixed assets and

Reconciliation of Reverse charge GST (RCM) payable till the applicable date on all the

applicable expenses and paid the same.

Reconciliation of monthly GST returns with the books of accounts and all the taxable,

exempted & non GST turn over declared in the returns if any differences, reason for the

same.

Check and ensure input credit taken supplier invoices paid within 180 days, if not the same

input to be reversed.

All the credit taken on TRAN-1 credit reflecting in the GST portal and there is no issue on

that.

In case any refund application filed with the department and eligibility & status of the same.

Responsibility of Auditor under GST Thus Auditor has to decide whether he will give

Observation or

Qualification

Observations may be to provide comments on noncompliance, short comings and deficiency of GST

return filed etc.

Qualification means some reservations i.e. adverse comments on the accounts. The value(amount) is also

reported to what extent these are adverse

Late filing of GSTR-9 form?

Late fees for not filing the GSTR 9 within the due date is Rs. 100 per day per act up to a maximum of an

amount calculated at a quarter percent of the taxpayer turnover in the state or union territory. Thus it is Rs

100 under CGST & 100 under SGST, the total penalty is Rs 200 per day of default. There is no late fee on

IGST.