Mba-gst-project-report.pdf

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MBA GST Project Report BHMCT (Uttar Pradesh Technical University)

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Project Report On Goods And ServiceTax (GST). In Ircon International limited. Submitted in the partial fulfillment of the requirement for the Degree of Master of Business Administration to Dr. A.P.J. Abdul Kalam Technical University, LUCKNOW. SUBMITTED BY

SUBMITTED TO Dr. MAMTA SHUKLA

NIVEDITA SRIVASTAVA MBA II Year ROLL.NO.1752270019

MAHARANA PRATAP COLLEGE OF ENGINEERING. KOTHI MANDHANA KANPUR.

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CERTIFICATE This is to certify that Ms. Nivedita Srivastava is bonafide student of the Maharana Pratap College of Engineering Kanpur has successfully Completed her project on the topic “Goods and Service Tax (GST)”, With the special reference to Ircon International Ltd. With during the Period from 11 June 2018 to 11 August 2018.

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DECLARATION

I Undersigned Nivedita Srivastava student of Maharana Pratap College of Engineering Kanpur of hereby declare that I have completed my project, Titled “GOODS AND SERVICE TAX (GST) on IRCON International Ltd.”

The information submitted herein is true and original to the best of my knowledge.

Nivedita Srivastava PLACE: Kanpur

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ACKNOWLEDGEMENT I wish to express my sincere gratitude to my institute to provide this opportunity to learn the element of GOODS AND SERVICE TAX. One person is seclusion is hardly ever able to complete any project or training. There is always discussion with professional about conceptual matters, which enhance the idea and the knowledge of trainee. Thereby, I would like to acknowledge the contribution and support that each person’s at IRCON INTERNATIONAL LTD. extended to me during my training period. I would also like to express my special thanks to my guide Mr.Sudhir Gupta (Chief General Manager-Tax), Mr. R.K. Jaiswal, Mr. Naveen Makharia and special Thanks to Mr. Tushar Gera who provide me valuable insight about aspect of Goods and Service Tax with respect of company and the external environment with which it associated.

Nivedita Srivastava.

Date:

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FOREWORD Tax policies play an important role on the economy through their impact on both efficiency and equity. A good tax system should keep in view issues of income distribution and ,at the same time , also endeavor to generate tax revenues to support government expenditure on public service and infrastructure development .cascading tax revenues have differential impact on firms in the economy with relatively high burden on those not getting full offsets. This argument can be extended to international competitiveness of the adversely affected sectors of production in the economy. Such domestic and international factors lead to inefficient allocation of productive resources in the economy .This result in loss of income and welfare of the affected economy. Value added tax was first introduced by Maurice Laure, a French economist, in 1945. The tax was designed such that the burden is borne by the final consumer. Since VAT can be applied on goods as well as services it has also been termed as goods and service tax (GST). During the last four decades VAT has become an important instrument of indirect taxation with 130 countries having adopted this, resulting in one fifth of the world’s tax revenue. Tax reform in many of the developing countries has focused on moving VAT. Most of these countries have gained thus indicating that other countries would gain from its adoption. For a developing economy like India it is desirable to become more competitive and efficient in its resources usage. Apart from various other policy instruments, India must pursue taxation policies that would maximize its economic efficiency and minimize distortion and impediments to efficient allocation of resources, specialization, capital formation and international trade. Traditionally India’s tax regime relied heavily on indirect taxes including customs and excise revenue from indirect taxes was the major source of tax revenue till tax reforms were undertaken during nineties. The major argument put forth for heavy reliance on indirect taxes was the India’s majority of populations was poor and thus widening base of direct taxes had inherent limitations. Another argument put forth for heavy reliance on indirect taxes income was not subjected to central income tax and there were administrative difficulties involved in collecting taxes.

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The board objectives of our report relates to analyzing the impact of introducing comprehensive goods and services tax (GST) on economic growth and international trade; change in rewards to the factors of production; and output, prices, capital, employment, efficiency and international trade at the sectoral level . Analysis in this report indicates that implementation of a comprehensive GST in India is expected to lead to efficient allocation of factors of production thus leading to gain in GDP and exports. It will also ensure better compliance of tax law and will remove cascading effective which is still present in taxation system. This would translate into enhanced economic welfare and returns to the factors of production, viz. land, labour and capital.

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Executive Summary The differential multiple tax regime across sectors of production leads to distortions in allocation of resources thus introducing inefficiencies in the sectors of domestic production. While indirect taxes paid by the producing firms get offsets under state VAT and CENVAT, the producers do not receive full offsets particularly at the state level. The multiplicity of taxes further adds the difficulty in getting full offsets. Add to this, the lack of full offsets taxes loaded on the fob export prices. The export competitiveness gets negatively impacted even further. Efficient allocation of productive resources and providing full tax offsets is expected to result in gains for GDP, returns to the factors of production and export of the economy. The joint working Group of the Empowered Committee of the State Finance Ministers submitted to its report on the proposed Goods and Service Tax (GST) to the finance minister in November 2007.A dual GST, one for the entre and other for the state was to be implemented by 1 April 2010. The new system would replace the state VAT CENVAT and some other taxes. The proposed GST would eliminate the cascading effect and would integrate hitherto disjointed goods and services taxes. It will lead to uniformity in tax rates and procedures throughout the country.it will ensure better compliance and thus will increases the revenue of both Centre and state. The export sector will also gain from his integration of state and Centre taxes. Consumer will be benefited in form of lower tax rates. There will be dual tax rate viz. Central GST (CGST) and state GST (SGST).also for interstate sales there will be an integrated GST. However cross credits among CGST and SGST are yet to be decided .It is also proposed to keep certain taxes such as taxes on petroleum products to be kept out of purview of GST. However, there are major challenges to introduction of GST like amendment of constitution of India to alter power of taxation of Centre and state rates of SGST and CGST, standardization to procedure, compensation for revenue loss to state, etc.

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CONTENTS      

COVER PAGE COLLEGE CERTIFICATE DECLARATION ACKNOWLEDGEMENT FOREWORD EXECUTIVE SUMMARY

CHAPTER– 1  INTRODUCTION OF RESEARCH………………..12 -15

CHAPTER– 2       

COMPANY PROFILE…………………………….. 16 - 21 PROJECTS…………………………………………. 22 – 30 FINANCIAL PROFILE……………………………. 31 – 38 BOARD OF DIRECTORS………………………… 39 – 50 OPERATIOAL PROFILE…………………………. 51 – 57 AWARDS ………………………………………….. 58 - 59 SUBSIDIRIES AND JOINT VENTURE COMPANY…. 60 – 68

CHAPTER-3  INTRODUCTION OF TAXATION................ 70 - 79 a. b. c. d.

Meaning of Taxation Characteristics of Taxation Principles of Taxation Tax applicable in India.

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CHAPTER-4  INTRODUCTION OF GST................ 80 – 153 e. Meaning of GST. f. History of GST. g. Key feature of GST. h. GST Model. i. GST Rates j. GST Council k. GSTIN l. SWOT Analysis m. Impact of GST n. Result Analysis o. Registration of GST p. GST Return q. Important concept of GST r. Important concept of GST s. Works contract Act t. Audit

CHAPTER-5  CONCLUSION…………….. 154- 157  ANNEXURE……………….. 158 -172  REFERENCE……………….. 173

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TABLES SR. NO 1 2

CONTENT Performance for the year Operating Turnover

PAGE NO 31 32

3 4

Operational Performance Segment wise Profitability

33 34

5

Dividend History

35

6

Income tax slab for individual tax payers

76

7

equity structure

93

8

Result Analysis

99-100

9

Place of supply

129-134

10

The Place Of Supply Of Services

137-138

11

Works Contract

144

12

Annual aggregate turnover

156

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CHAPTER– 1 INTRODUCTION ABOUT RESEARCH.

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INTRODUCTION Background:Internship is the process of working as an assistant to gain practical experience and skills in an occupation. In order to expose the students to the actual working environment, internship has been included as a compulsory requirement for the successful completion of two-year MBA (Finance) under AKTU University. MBA (Finance) is a management program with the provision of four semester comprising of two month industrial training. Internship is an opportunity to observe, learn and understand the corporate culture, acquire knowledge and skills in the respective field which helps the students in their further carrier development. It is carried out in the organization which suits the area of specialization. Internship provides the opportunity to understand how the knowledge acquired through the lectures, group discussion and formal study is applied in real working situation. It is the best way of knowledge gaining as it provides as experience. Similarly the assigned responsibilities during the internship period help to enhance the interpersonal and communicative skills and boost up the confidence level as well. Even though the interns are not the employees of the organizations, they are given an opportunity to work as if they are the employees. The interns do what the staffs of the organizations have to do. However, they do not have obligations or authority over anything. The interne did there internship in under Mr.Sudhir Gupta. The interne was given the opportunity to observe and learn about the GST Registration and Return process.

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Objectives of the Study : The general objective of the study is to get practical insights of Goods and Services Tax. The specific objectives are as follows:

.

TToo learn le a r n aabout b o u t th S T RRegistration e g is tra tio n pprocess ro c e s s thee GGST

TToo learn le a rn hhow o w to to file f ile GST G S T RReturn e tu r n bboth o th oonline n lin e & & ooffline f flin e

TToo help h e lp cclients lie n ts in e g is tra tio n pprocess. ro ce ss. in th thee RRegistration

TToo help h e lp cclients lie n ts in d o w n lo a d in g th o f f lin e return re tu rn software s o f tw a r e in downloading thee offline

Figure:1

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Rational of the study In college we learn the organizational structure only in theoretical basis. Internship is the place where how theoretical knowledge are useful in real life scenarios. For that students need to prepare resumes, write cover letters and go through interviews as if they were applying for the job. This gives students valuable experience in preparation for employment. The internship allows opportunities for the development of practical’s skills in contexts where professional criticism is both immediate and constructive. It also furnishes students with opportunities to observe and understand connections between coursework and skills needed to perform effectively in a given profession. Finally, internship aid in the identification of knowledge and skills essential to doing well in a particular profession.

Scope of the study Generally, an internship consists of an exchange of services for experience between the student and an organization Internship program is a good opportunity to show our learning skills that we get from our school/college. Students can also use an internship to determine if they have an interest in a particular career. It helps to build Curriculum Vitae (CV) for the student.

Methodology For the preparation of this report both primary and secondary sources of data are used. The secondary data are collected from annual reports, brochures, website of GST, different financial magazine, published documents. Most of the information in this report is written on the basis of experience gained by the internee in the company during the period of internship. While preparing this report I took help from company staff and group discussion with friends. I have consulted related departmental staff as a primary source. For the secondary data I used GST website, financial express website, and clear tax website.

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Organization Selection Selection of the organization is one of the most difficult tasks. However the specialization of the student in finance has made GST a better option for doing internship. Since GST is related to financial transaction, it would be easy to understand various dimensions related to services like registration, quarterly return, monthly return, annual return. Besides this, one should have strong reference to get enrollment in the organizations. So because of the reference of the college.

Duration The duration of internship period has been defined for 2 Months by the AKTU University. The intern has completed internship from 10 th June to 10th August in Ircon international limited.

Limitations of the Study Even though great support was provided by the organization and the staff to the intern during the internship period to make the work environment conducive, they had to face various difficulties during the internship period. Due to various unavoidable constraints, the report could not do complete justice to the study. The interns in the organization are more focused to assist their supervisors. It restricts the amount of information and the level of complex work assigned to its interns owing to the confidentially and competency issues. It is because of this interns get to learn mostly by observation and some amount of discussion with supervisor only. The report is limited to the department in which the intern is placed it might not be able to provide the comprehensive knowledge of the overall functioning of the company.

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CHAPTER– 2 Company Profile

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About Ircon International Limited:

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About Ircon International Limited: Ircon international limited (ircon), a government company incorporated by the central government (ministry of railways) under the companies act, 1956 on 28 april, 1976 originally under the name Indian ralways construction company limited is the leading turnkey construction company in the public sector known for its quality, commitment and consistancy in terms of performance. Ircon has widespread operations in several states in india and in other contries (Malaysia, Nepal, Bangladesh, Mozambique,Ethopia, Afganistan, U.K. Algeria & Sri Lanka now).

Ircon is a specialized constructions organizaton covering the entire spectrum of construction activities and servies in the infrastructure sector. However, Railway and Highway construction, EHP sub- stations (engineering and constructons), and MRTS are the core competence areas of IRCON.

IRCON operates not only in a highly competitive environment but also in difficult terrains and regions in India and abroad and is an active participant in prestigious nation building projects . Ircon has so for complete more than 300 infrastructure projects in India and more than 100 projects across the globe in more than 31 countries.

The Company has a long standing reputation as a sectoral leader in Transportation Infrastructure amongst the public sector construction companies in the Country with specialization in execution of Railway Projects on turnkey basis or otherwise. IRCON is known for its quality, commitment and consistency in terms of its performance.

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After commencing business as a railway construction company it diversified progressively since 1985 to roads, buildings, electrical sub-station and distribution, airport construction, commercial complexes, as well as to metro works. It has been one of the few construction companies in the public sector to have earned substantial foreign exchange for the Country and paid dividend without fail every year to the Government. As a construction organization, the Company operates in the entire spectrum of construction activities and infrastructure services; Railways and Highway Construction, Tunnels & Bridges, Railway Workshops, EHP substation (engineering and constructions) and MRTS being the core competence areas. The Company has executed many landmark construction projects in the last 41 years both in India and abroad. In India, in particular, it has also been undertaking projects even in difficult terrains and disturbed regions. The Company has so far completed more than 120 projects in more than 24 countries across the globe, and 376 projects in India. The Company is an ISO certified Company for Quality, Environment, and Occupational Health and Safety Management Systems, a Schedule ‘A’ public sector company, and a Mini Ratna – Category I. The company is well known for undertaking challenging infrastructure projects, especially in difficult terrains in India and abroad. The core competence of the company in order of priority is - Railways, Highways and EHT Substation Engineering and Construction including Ballastless track, electrification, tunning, signal & telecommunication as well as leasing of locos, construction of roads, highways, commercial, industrial & residential buildings and complexes, airport runway and hangers, metro and mass rapid transit system, etc.

During its 42 years of operation, Ircon has emerged as front ranking construction company of international repute having executed several prestigious projects. Ircon 20

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Has been figuring in the list of top 225 International Contractors since 2009-10 consistently, as per Engineering News Record (ENR), published by Mc Graw-hill Construction (Financial) USA. Ircon has so far completed about 378 major infrastructure projects of National importance in India and 127 projects across globe in more than 21 countries. Ircon has over 1000 trained technical personnel having rich experience in execution of infrastructure projects including Railway Project. Ircon has capacity to mobilize adequate resources for large projects due to its strong technical manpower base and financial position. Besides its own resources Ircon draws its strength from more than 150 years of experience of Indian Railways in all aspects of Railway Construction and management. Presently, Ircon is executive projects abroad in Nepal, Bangladesh, South Africa, Myanmar and Algeria. In India, the Company is executing several prestigious projects which include J & K Rail Link Project, Road over Bridges in the State of Rajasthan and Bihar, New rail Coach Factory at Rae Bareilly (U.P.), Sivok-Rangpo new Rail Line Project, three contract packages on Western Dedicated Freight Corridor, Coal connectivity Projects in Chhattisgarh, Orissa and Jharkhand, National Highway projects in Rajasthan, Madhya Pradesh and Karnataka and Railway Doubling projects in Bihar and Madhya Pradesh. Ircon is also executive electrification distribution projects in the state of Jammu & Kashmir, and UP and railway electrification projects in the state of UP and MP.

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FOCUS AREAS--

Railways - Track, Railway Electrification,Workshops and Signalling & Telecommunication Railways - SPV/BOT/Concession

Track & Electrification - Metro Railways

ROBs

Road/Highways

Electrical Sub Station & Distribution

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Greater focus on International Projects in Railway Sector

Railways Projects HimalayasNew BG rail link project in Kashmir Valley-value USD 1.60 Billion.

AlgeriaA new railway line at benisef,Algeria including 70m tall viaducts value USD87 Million.Double track line between OUED-SLY and YELLELL,in progress,value USD 250 Million

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MalaysiaDouble track project between Seremban and Gemas value USD 1.00 Billion.

Double tracking of Rawang Seremban railway line, value USD 62 Million.

Malaysia Rehabilitation of 327 km track from Paloh to Singapore & from Slim river to Seremban main line.

Bangladesh Jamuna bridge rail link-II 24km.

Mozambique

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Rehabilitation of 670km track of Sena line,value USD 68 Million.

Sri Lanka Up gradation of colombo- Matara Coastal Railway line.value USD 78 Million.

Metro Work 15.70 km of ballast less track for Metropolitan Transport Project,Chennai.

Roads & Highways 25

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 Expertise and know-how to undertake mega road projects of all types in different terrains.  Full range of plant & machinery to complete such projects within the desired time schedule.  Executed variety of Road projects for NHAI which include Expressway, Highway, BOT Toll road etc. apart from a number of World Bank & ADB funded projects in India. Executed major road projects in India, Ethiopia, Bangladesh & Nepal and a network of roads for its railway projects in Iraq & Algeria.

Bangladesh Road Improvent includimg Construction of Bridges on Dhaka-Chittagong Highwa,Value USD 46 Million.

NepalStrengthening of BelbariChauharawa Road,value USD 14.41 Million.

Electrical

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• IRCON has in-house resources to undertake turnkey contracts involving design, supply, erection and testing & commissioning of equipment for Traction and Grid substations. • With distinction of completing more than 60 HT sub-stations in India, the company has also completed sub-stations in Turkey, Syria and Bangladesh. • The Company has to its credit the electrification of over 4500 Track Km in India and 425 Track Km in Turkey and Indonesia. Turkey Railway electrification @ 25KV AC348

Indonesia Raiway electrification @1500 90 TMK.

VDC-

Signaling & Telecommunication

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• Experience and expertise to provide the entire range of cost effective and safe signalling systems ranging from orthodox mechanical signalling system to the state-of -the-art soli d state interlocking .

• Completed many prestigious projects CTC and Relay based interlocking in IRAQ, Radio based CTC and Axle Counter Block working in Zambia and Solid State interlocking and CTC system project in Malaysia.

• Unparalleled expertise in the field of Telecommunication. Completed GSM-R based train radio communication, Optical Fibre Cable based communication for more than 5000 Kms.

Area of business The core competence of the company in order of priority are - Railways, Highways and EHT Substation Engineering and Construction. Ircon is a turnkey construction 28

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company

that

is

specialized

in

railways

(new

railway

lines,

rehabilitation/conversion of existing lines, station buildings and facilities, bridges, tunnels, signalling and tele-communication, railway electrification, and wet leasing of locomotives), highways, EHV sub-station (engineering, procurement and construction) and metro rail.

LEGAL STATUS AND AUTONOMY

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The Company, a legal entity separate from the Government, is legally, functionally, and financially autonomous, operates under the corporate laws as an independent commercial enterprise, does not receive any budgetary or financial support from the Government, nor is it a dependent agency of the Government. However, the Government of India through the Ministry of Railways and the Department of Public Enterprises under the Ministry of Heavy Industries and Public Enterprises monitors its performance through a system of Memorandum of Understanding (MOU) as regards targets to be achieved every year as part of accountability to the Parliament in respect of all government companies.

Government can issue and does issue guidelines to regulate and bring about some uniform pattern in the functioning of the Company as a public sector company. However, no Government department has any supervisory authority to exercise control over the Company which is managed and run under the superintendence, control, and direction of its Board of Directors as per the Companies Act.

BUSINESS ENVIRONMENT

India is not only among the world’s fastest growing major economies, but also one of the few economies enacting major structural reforms. Indian economy registered a growth of 7.1% for the financial year 2016-17 in the backdrop of two major domestic development viz. demonetization of two highest denomination notes in November 2016, and subsequently implementation of Goods & Service Tax (GST) in July 2017.

To make this growth rate consistent and enduring, the government continues with its initiatives on economic reforms, increase in public investment in infrastructure 30

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and development projects, export growth etc. A total allocation of Rs. 3,96,135 crore for infrastructure development in 2017-18 would afford business opportunities for your Company. The historic step of merger of the Railways Budget with the General Budget would facilitate multi-modal transport planning between railways, highways, and inland waterways.

VISION & MISSION OUR VISION To be recognized nationally and internationally as as a specialized construction organization comparable with the best in the field covering the entire spectrum of constructions activities and services in the infrastructure sector

OUR MISSION  To effectively position the company so as to meet the construction needs of infrastructure development as per the changing economic scenario in India and abroad. To earn global recognition by providing high quality products and services in time and in conformity with the best engineering practices as well as good corporate governance and customer satisfaction .

FINANCIAL PROFILE

 The operating income of the company has registered an increase of 24% from Rs. 2419 crore in 2015-16 to Rs. 2995 crore in 2016-17, though profit before tax has

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decreased by 12% from Rs. 602 to Rs. 532 crore during the corresponding period. Indian project has contributed 90% to the total income of Rs. 3254 crore.  IRCON has allotted bonus shares in January 2017 in the ratio of 4:1 i.e. bonus (equity) shares for every one equity share held by the shareholders thereby increasing the paid up capital from Rs. 19.796 crore to Rs. 98.98 crore.

Performance for the yearRs.in crore 2016-17

Total Income/Gross 3254 Sales Total Operating Income 2995

2015-16

% age Increase/ (Decrease)

2860

13.78%

2418

23.86%

Profit Before Tax

532

602

(11.63%)

Net Worth

3828

3667

4.39%

Table : 1

Operating Turnover

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Geographical Distribution (Rs.in crore) Foreign

Domestic

Year

Amount

%

Amount

%

Total

2016-17 2015-16 2014-15 2013-14 2012-13

327 409 878 2138 1975

10.9% 16.9% 29.8% 52.6% 46.7%

2668 2009 2072 1929 2257

89.1% 83.1% 70.2% 47.4% 53.3%

2995 2418 2950 4067 4232

Table : 2

Operational Performance

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Sectoral Performance

(Rs. In crore)

Sector

Turnover

%age

Raiways

2074

69.24

Highways

589

19.67

Buildings

78

2.61

Electricals

253

8.46

Others

1

0.02

Total

2995

100

Table : 3

Segment wise Profitability

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(Rs. In Crore) Segment

Operating Profit

%age#

177

6.63

International 327

21

6.42

Total

198

6.61

Domestic

Operating Tornover 2668

2995

Table : 4

Dividend History Financial year

Amount (Rs.Cr.)

% on Equity

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2016-17

192.40

194.38

2015-16

168.26

850.00

2014-15

182.12

920.00

2013-14

182.12

920.00

2012-13

148.47

750.00

Table : 5

Note:i. ii.

Cumulative dividend (incl.proposed) as on 31.03.2017 is Rs.1299.91Cr. Interim dividend for 16-17 Rs. 95.15Cr.,Final diviend for 15-16 Rs.97.25Cr.

iii. Financial Highlights(Standalone) (In Rs.Crore) 36

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S. No. 1 2 3

4 5 6 7 8 9 10 11 12 13 14 15 16 17

Particulars

201617

Operating Income

2,995 Less: Company Share of Turnover in Integrated JVs Add: Company Share of Profit/(loss)in Integrated JVs Net Operating Income 2,995 Other Income 25 9 Total Income 3,25 4 Expenditure (Incl.increase/ 2,76 decrease in stock) 6 Operating Margin (PBDIT) 48 8 Interest Expenses 12 Depreciation 18 Exceptional items (7 4) Profit Before Tax 532 Profit After Tax 369 Dividend for the Year 19 2 General Reserve 3,33 4 Retained Earnings 39 0 Other Comprehensive

201516

201415

2,418 -

2,950

-

89 2

2,418 44 2 2,86 0 2,22 2 63 8 8

2,864 25 8 3,12 2 2,26 7 85 4 -

201213 4,23 2 (1 3)

4,05

4,22

7

0

602

0

8

7

4,4 71

3,02 4

3,4 12

1,28 3

1,0 59

3

44

-

-

1,24

1,01 5

90 7 18

2 3,33

51

9

579 16

2

4,30

844

395

0

4

-

1

25

1

28

4

201314 4,06 7 (9 ) (1 )

73 0

18 2

3,33

1 48

2,97

2,2

4 31 -

1 -

77 -

(5 -

-

-

8

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18 19 20

Income Foreign Project Reserve Other Reserves

5

Total Reserves & Surplus

) -

-

3,72

3,64

9 21

Net Fixed Assets

7

22

Inventories 9

1

2,97 17

11 4

2,2 80

0

14

3

16 3

13

2 3

14 9

-

3,33 4

13 8

-

1 80

11 9

1 25

26

Foreign Exchange Earnings 41 1,04 8 24 59 (net) 8 2 22 Share Capital 98.980 19.796 19.796 19.796 19.796 Capital Employed 3,82 3,66 3,35 2,99 2,3 8 7 4 3 00 Government Investments -

27

Net Worth

23 24 25

3,828 28 29 30

Profit Before Tax to Capital 14 Employed (%) Operating Margin to 13 Capital Employed (%) Profit After Tax to Share 373 Capital (%)

31

Expenditure to Income (%)

32

Number of Employees

33

Income per Employee

34

Foreign Exchange Earning per Employee 0.02

85

3,667

3,354

2,993

2,300

16

25

42

44

26

43

46

17

3,6 1,995

2,924

4,578

87

78

73

70

76 1,7

1,496

1,499

1,472

1,579

04 2.

2.18

1.91

2.12

2.73

62 0.

0.04

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0.28

0.66

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2.0

35

Current Ratio

36

Debt/Equity Ratio

37

Investments

2

1.9 9

-

1.7 2

-

1.8 1

-

1.61 -

-

2 1,223

743

BOARD OF DIRECTORS

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494

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As on 31st March 2017, the strength of Board of Directors was nine comprising four whole-time directors, two government nominated directors, and three independent directors. The details are as follows: 1)

Mr. S.K. Chaudhary Chairman

&

w.e.f. Managing 29.10.2016

2)

Director Mr. M.K. Singh

w.e.f.

3)

Director Finance Mr. Deepak Sabhlok

01.05.2016 w.e.f.

4)

Director Projects Mr. Hitesh Khanna

16.04.2016 w.e.f.

5)

Director Works Mr. Rajiv Chaudhary

07.03.2011 w.e.f.

6)

Part-time (Official) Director Mr. S.C. Jain

17.11.2016 w.e.f.

7)

Part-time (Official) Director Mr. S.K. Singh

03.01.2017 w.e.f.

8)

Independent Director Mr. Avineesh Matta

05.04.2017 w.e.f.

9)

Independent Director Prof(Ms.) Vasudha V. Kamat

08.04.2016 w.e.f. 22.04.2016

Independent Director

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MR. S.K CHAUDHARY

Mr. S.K Chaudhary graduated in civil engineering form Delhi College of engineering in the year1982 and obtained Master Degree in Management system from Indian institute of technology, Delhi and P.G diploma in alternative Dispute resolution from Indian institute of law he has 35 years’ experience He started his career with IRCON and worked for about 23 years in various capacities. He has handles national & international tendering works having funding from World Bank, ADB bank etc., along with construction projects involving flyovers, roads, railway line, etc. He has extensive knowledge in the field of infrastructure projects, such as, highways, railways, airports, flyovers and bridges etc. as well as experience in international market and finance appraisal and feasibility study etc. Recently, he has been awarded “Distinguished alumni” from DCE-DTU alumni association of Delhi College of engineering in the year 2017.

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SH. M.K SINGH Mr. M.K Singh has joined the board of IRCON as director finance i.e. 1 st may 2016 in terms of presidential order dared 26 th April 2016 issued by the ministry of railways. Born on 25th September 1961, Mr. Singh’s academic qualification BA. (Hones.). MA. (Mathematics), M.Phil. (mathematics), and post graduate diploma in financial management form IGNOU. He is an Indian railway accounts service (IRAS) officer of 1990 Batch. Prior to joining Indian railways he worked as a lecturer of mathematics in the University of Delhi. He has gained rich experience in various branches of railway accounts and finance including exposures of working in multi-department set up of Indian railways. He has worked in the area of financial matters of construction issues of rail infrastructure pertaining to SPVs, financials of railway projects and appraisal of PPP projects in Indian railways, compilation and preparation of accounts package system and other relation database management system packages of accounting and finance in zonal headquarters and divisions in the railway finance and accounts in two major decisions.

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He has undergone training on public private partnership mode of project finance form IIM Ahmedabad, freight business marketing course from railway Staff College, management development program in Canada from Rottman School of management, university of Toronto, Canada. He has also received various awards like minister of railway award (in 1998), general manager award (2004) etc.

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SH. DEEPAK SABHLOK

Mr. Deepak Sabhlok in an officer of 1982 Batch of Indian railways service of engineers. He is graduate in civil engineering from national institute of technology (NIT), Bhopal (Gold medalist). He has held various responsible positions in many capacities on northern railway, north central railway, north western railway and south eastern railway. In his career, spanning over 29 years, he worked on important projects including prestige’s rail coach factory, kapurthala during its construction phase, chief engineer track machines on south eastern railway. He was in charge of maintenance of civil engineering assets and coordination of various divisional activities of Allahabad division of NC railway for over 5 yeats. He has published technically papers on Bridge Rehabilitation technique he has worked on deputation with IRCON for over 5 years as GM/Business development and GM/works.

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MR. RAJIV CHAUDHARY

Rajiv Chaudhary aged 57 years, is a government nominee (part- time official) director of our company. He holds a bachelor’s degree in civil engineering from Indian institute of technology. Roorkee (formally known as university of Roorkee). He is an officer of the Indian railway service of engineers. He is posted as principle executive director (station development) railway board, ministry of railways and is also on the board of konkan Railway Corporation limited as government nominee director (part-time official). He is experienced in various fields of the railway sector particularly rail transport, operation, maintenance, planning, designing and executive of large civil engineering projects. He has been on the board of our company since November 17, 2016

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SH. VED PAL

Ved pal, aged 59 years, is the government nominee (Part-time officially). Director of our company. He holds a bachelor’s degree and a master’s degree in electrical engineering from university of Roorkee. He also holds a bachelor’s degree in law from barkatullah vishwavidhalaya, Bhopal and is an officer of Indian railway service of electrical engineers. Presently, he is posted as an additional member (planning), railway board, ministry of railway and is experienced in the railway sector particularly in preparation of annual reports, budgets and feasibility report for projects of various railway zones, planning and monitoring safety works, port connectivity and coal connectivity projects, planning of infrastructure for long term planning, maintenance of electric locomotives, production and technology. He has been on the board of our company since November 22, 2017.

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SH. AVINEESH MATTA

Avinesh matta 58 years, is an independent (part-time non - official), director of our company. He holds a bachelor’s degree in commerce (honors) and bachelor’s degree in law from university of Delhi. He also holds an advanced diploma in management from Indira Gandhi national Open University. He is a fellow member of the institute of Charted accountants of India (ICAI) and has completed courses in information systems audit and valuation from ICAI. He is registered as an insolvency and bankruptcy board of India. He is experienced in finance, audit and taxation with service segments. He also provides consultancy on engineering procurement-construction, operate-maintaintransfer, build-operate transfer and similar projects in road transport and highway sector. He is currently a partner at AVA & Associates, Chartered Accountants. He has been on the board of our company since April 8, 2016

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PROF (MS.) VASHUDHA V. KAMAT Vashudha vasant kamat, aged 65 years, is an independent (Part –time non official) director of our company. She holds a bachelor’s degree in science (Chemistry) from university of Poona and a master’s degree in arts (sociology) from shreemati Nathibai Damodar Thackersy (S.N.D.T) women’s university, Bombay. She is also holds a bachelor’s degree and a master’s degree in education from university of Bombay. She is experienced in the education sector and is associated with various foreign universities for the fellowship programmers and in the capacities of visiting scholar. In the past, she has held the post of joint director at the central institute of educational technology a constituent unit of National Council of educational research and training and vice- chancellor of S.N.D.T women’s university thereby retiring from the post in 2016. She is also a part of the committee constitute for preparation of the draft national education policy. She has been on the board of our Company since April 22, 2016

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DR. C.B. VANKATARAMANA

Chitta Balasatya Venkataramana, aged 62 years, is an independent (Part-time nonofficial) Director of our company. He holds a master’s degree in commerce from Sri Venkateswara University, master’s degree in arts (economics) from University of madras and a master’s degree in health science of Hygiene and public Health, Baltimore, MD, USA and is a retired office of the Indian administration services. He has experienced in the public services sector and has been on the board of our Company since September 28, 2017.

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DR. NARENDRE SINGH RAINA Narender Singh Raina, aged 51 years, is an independent (part –time Non-official) Director of our company. He holds bachelor’s degree and a master’s degree in science (forestry) from Dr. Yashwant Singh Parmar University of Horticulture and forestry. He also holds a degree of doctor of Philosophy (Forestry) from Dr. Yashwant Singh Parmer University of horticulture and forestry. Prior to joining our Company, he was posted as the range officer grade 1, Jammu and Kashmir, Department of forest and then as the assistant professor agroforestry with Sheer-e-Kashmir University of agricultural Science and technology of Jammu. He is experienced in education sector and is presently working as an associate professor with Sheer-e-Kashmir University of Agricultural Sciences and technology of Jammu. He has been on the board of our Company since October 17, 2017.

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SH. ASHOK KUMAR GANJU Sh. Ashok Kumar Ganju, aged 65 years, is an independent (part –time NonOfficial). Director of our Company. He holds a bachelor’s degree in science (civil engineering) from University of Delhi and a master’s degree in technology (Water resources) form Indian institute of technology, Delhi. He also holds a post graduate diploma in Hydraulics from IHE Delft institute for water education, Netherlands. Presently, he is providing consultancy on water resources development projects to PSUs. He was ex-officio additional secretory to the government of India and retired as a member, design and research, central water commission in 2012. He was the chairman of Ganga Flood Control Commission, Patna from May 2010 to august 2011. He has experienced in the planning and designing of water resources development, Flood management, hydro and thermal projects, dam safety inspections, resolution of disputes between the project authorities and contractors and advising on construction related problems. He has been on the board of our company since March 08. 2018

OPERATIOAL PROFILE 51

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During 2016-17, IRCON has completed four projects, two in India and one each in Bhutan and Bangladesh. Ircon is having pan India presence through more than 24 projects across various states of India. In addition, the company executing projects in Bangladesh, Algeria, and South Africa. The product mix of IRCON is varied and includes signaling projects, electrical sub-stations, and road over bridges, buildings, road projects from NHAI, apart from railway projects of track laying, up gradation, doubling, railway sidings, coal connectivity projects, redevelopment of stations, etc. The mode of execution of some of these projects is EPC whereas road projects from NHAI are being executed through wholly owned subsidiary companies (WOS) formed for this purpose, and coal connectivity projects are being executed through joint venture companies formed as a strategic alliance with other PSUs, Ircon’s equity stake in such JVs being 26%.

PERSONNEL DEVELOPMENT 52

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Cordial and harmonious industrial relations prevailed in the Company during the year. The total manpower strength as on 31 March 2017 stood at 1495, which included 1183 regular employees, 47 deputationists, and 265 employees on contract (including service contract). 1004 employees of the Company were technically and professionally qualified. The total number of women employees was 68. There were a total of 241 scheduled caste / scheduled tribe employees as on 31st March 2017.

IRCON has been continuously taking steps for building capacity of its human resource through training in functional and general management areas, contract & arbitration, leadership, information technology, as well as soft skills. External faculty is arranged wherever required and officials are nominated for workshops, seminars, etc. with reputed institutes. During the year 2016-17, a total 912 man-days training was imparted to officials of Ircon through workshops, seminars, conferences, in-house trainings and training in external institutes, etc.

Ircon has various schemes for staff welfare like educational scholarships, one-time educational grant for admission to professional degrees and diploma courses, educational awards to meritorious children of employees, educational assistance to the wards of deceased employees, assistance for marriage of daughters and dependent sisters of group ‘C’ and ‘D’

employees, etc. An award was introduced for meritorious wards of Ircon employees who secured gold medal in professional courses. In addition to

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facility of homeopathy and allopathic treatment at corporate office, yoga classes are also conducted for overall well-being of the employees. Other facilities like immediate financial assistance and guidance are being provided to employees and their family members in case of any medical exigency, lump sum exgratia payment to family members in case of death of serving employee.

IRCON aims to provide congenial and safe working atmosphere to women employees. The Company has a complaints committee for prevention of sexual harassment at work place. Further, provision pertaining to prohibition of sexual harassment has also been incorporated in Ircon Conduct, Disciplinary, and Appeal Rules. No complaints relating to sexual harassment has been received by the Company during the year. The Company, on International Women’s day, arranged one workshop during the year, exclusively for women employees for creating awareness on health related issues. Inter-project Quiz programs and Debate competition were conducted for the employees of Ircon. Winning team and the runners up were awarded cash prize and certificate of commendation.

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QUALITY,

ENVIRONMENT,

AND

HEALTH

&

SAFETY

MANAGEMENT Quality Management System (QMS) has been successfully sustained and continually improved since 1996 when the Company as a whole was first certified for ISO-9002-1994 by TUV Suddeutschland Private Limited (TUV). Your Company has continued the certification and sustained the system as per latest revised code ISO 9001:2015 (by periodical recertification audit after expiry of every three years). Latest re-certification audit has been conducted in March 2017, whereby the Company has been recertified by TUV for a period of another three years i.e. up to June 2020.

During the year, the Company has started working on development of mobile phone / web based video library, and for this purpose two topics have been identified viz. Construction of Embankment (Mechanized) in 3D format and Personal Safety & safety in construction in 2D format. The mobile / internet based application on personal safety and safety in construction has been released and is available on Ircon’s internal website.

Environmental friendly equipment such as solar panels has been installed and are being installed at various offices / projects. Waste water is recycled at Corporate Office through Sewage Treatment Plant (STP), and the same is used for horticulture work. STPs are also being constructed at Noida, Gurgaon, and MFC buildings. LED lights, sensor lights and sensor taps are being used in Corporate Office to conserve electricity and water. Various environment friendly steps like use of fly ash brick instead of clay brick, rain

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water harvesting arrangements, sensor controlled Chromium Plate (CP) fittings, use of latest version of facade glass (glass in building) to make the building sustainable etc. are being taken up across various offices / projects of the Company. Monitoring of water usage and waste water, ambient air quality and noise quality is also being carried out at various construction sites. The Company is emphasizing on providing clean environment by initiating indoor air quality monitoring in the Corporate Office building. Tree plantation is also undertaken by corporate office and project offices.

TECHNOLOGY ABSORPTION AND UPGRADATION

Supervisory Control and Data Acquisition System (SCADA) for energy management have been made operational at Rail Coach Factory, Rae Bareli. Further, the Company has constructed all sub-station buildings in DMRC with latest energy efficient and environmental friendly guidelines which includes LED lights, Rain Water harvesting.

For the first time in Indian Railways, Overhead Equipment (OHE) design for Railway Electrification Project is being carried out by using Drone camera for picking the coordinates and Geographical Information System (GIS). The OHE layout plans are then prepared with the help of Autocad. Ircon has also planned for use of Drone Camera for Katni Singrauli Doubling project. A concept paper on adoption of Semi High Speed on existing routes was presented in IPWE Seminary in January 2017.

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RESEARCH AND DEVELOPMENT

IRCON does not undertake any pure research project but takes the help of consultants and firms to innovate and to develop methods and techniques to execute projects in a cost effective manner, with requisite quality, to enhance the technological competence and efficiency.

INFORMATION TECHNOLOGY AND DEVELOPMENT OF ERP With an objective to enable IT facility in all domain, efforts were directed towards enhancement of SAP ECC 6.0 based Finance-Controlling module to incorporate additional functionalities like fixed asset accounting for calculation of depreciation as per Indian Income Tax Act, Bank Reconciliation System, FOREX reporting in Functional currency, local currency and reporting currency, Implementation of IndAS functionality (age analysis and discounting of Financial Asset and liability),

reports for quarterly and annual financial statements as per schedule III of the Companies Act, 2013; implementation of E-recruitment system on SAAS model with functionalities like on-line submission of application with payment gateway, generation of admit card and communication through SMS / e-mail with the

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applicants, conducting online written test, instant publication of results; installation of video conferencing system for conducting review meetings with Project Heads, training, promotion interviews etc.; hiring data centre services for SAP ERP

application to gain enhanced efficiency, security, and flexibility for capacity augmentation; revamping company’s responsive internet website etc.

To reduce paper usage and transparent working, use of IT has been enhanced in all the functional domains.

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AWARDS IRCON had received following awards during the year 2016-17:

India Pride Awards 2015-16 instituted by Dainik Bhaskar for ‘Excellence in Public Sector Undertaking – Central in CSR/Environment Protection and Conservation’. The award was presented by Mr. Venkaiah Naidu, Honable Union Minister for Urban Development to Mr. Mohan Tiwari, former Chairman & Managing Director, Ircon, at a function held in New Delhi on 4th April 2016.

Dun & Bradstreet Infra Awards 2016, in the category of “Best Infrastructure Project: Setting up of Rail Coach Factory, Rae Bareli at Lalganj (U.P.) Phase-I Project”. The award was presented by Mr. Mansukh L. Mandaviya, Hon’ble

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Minister of State for Transport & Highways to Mr. M.K. Singh, Director Finance, Ircon, at a function held in New Delhi on 8th November 2016.

Governance Now 4th PSU Awards 2016 in the category of “HR Initiative (Miniratna I)”. The award was presented by Mr. Ram Villas Paswan, Hon’ble Union Minister for Consumer Affairs, Food and Public Distribution, to Ms. Anupam Ban, General Manager/HRM, Ircon, at a function held in New Delhi on 23rd December 2016.

CIDC Vishwakarma Award 2017 from Construction Industry Development Council (CIDC) in the category of Best Construction Project for Railways Coach Factory, Rae Bareli. The award was presented to Mr. S.K. Chaudhary Chairman & Managing Director; Mr. Deepak Sabhlok, Director Projects; Mr. Dwarika Prasad, Executive Director (Rae Bareli);, and Mr. A.K. Goyal, Executive Director (Projects); at a function held in New Delhi on 7th March 2017.

As per Dun & Bradstreet India’s Top PSUs 2016 Certificate released on 22nd August 2016, Ircon ranks 93 on the basis of Total Income.

From Engineering Export Promotion Council, the company has won 18 Awards of Excellence, including the All India Trophy for the Top Exporters in the category of Merchant Exporters in recognition of the outstanding contribution to engineering exports.

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SUBSIDIRIES AND JOINT VENTURE COMPANY Subsidiaries companies 1. IRCON INFRASTRUCTURE & SERVICES LIMITED (IRCONISL)

IrconISL, a wholly owned subsidiary of Ircon, was incorporated on 30th September 2009 and obtained a Certificate of Commencement of Business on 10th November 2009. The main object of IrconISL is to undertake infrastructure projects including planning, designing, development, improvement etc. in the field of construction of Multi-Functional Complexes (MFCs), etc., to provide facilities and amenities to users of Indian Railway System, and to carry on the business of hire purchasing, leasing of all kinds of moveable and immoveable properties, to provide consultancy for all kinds of engineering projects including providing maintenance, support, and all kinds of services including social welfare measures, etc. During the year 2016-17, IrconISL has executed consultancy project of Ministry of External Affairs (MEA) for preparation of feasibility report and Detailed Project Report (DPR) for Bridge Project in Myanmar, and preparation of DPR for road project in Rakhine state.

During the year, IrconISL had achieved an operating income of Rs. 40.98 crore, and earned profit before tax of Rs. 20.81 crore and profit after tax of Rs. 12.36 crore.

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2. INDIAN

RAILWAY

STATIONS

DEVELOPMENT

CORPORATION LIMITED (IRSDC) IRSDC, a subsidiary company of Ircon and JV Company with Rail Land Development Authority (RLDA), was incorporated on 12th April 2012 and obtained a Certificate of Commencement of Business on 9th May 2012. The main objects of IRSDC is to develop / re-develop the existing / new railway station(s) which will consist of upgrading the level of passenger amenities by new constructions/ renovations including re-development of the station buildings, platform surfaces, circulating area, etc., to better standards so as to serve the need of the passengers in India, and commercial development of land/ air space. The equity participation of Ircon and RLDA in IRSDC is in the ratio of 51:49 respectively.

IRSDC has been entrusted with development of 13 stations located at Chandigarh, Habibganj (Bhopal), Shivaji Nagar (Pune), Bijwasan (New Delhi), Anand Vihar (Delhi), Surat and Gandhinagar (Gujarat), and SAS Nagar (Mohali) Punjab, Gandhinagar (Jaipur), Amritsar, Gwalior, Nagpur and Baiyappanhalli (Benguluru) for development/re-development. The status of re-development of railway station by IRSDC is as follows:

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Chandigarh Railway Station - proposal sent to Railway Board for taking up redevelopment work on EPC mode, decision awaited; (ii) Habibganj Railway Station - contract for redevelopment of this station has been awarded, wherein the station will be modernized through commercial development of land and maintained through retail and advertising revenues, physical work has started; Shivajinagar Railway Station - development is under approval by Pune Municipal Corporation; Bijwasan and Anand Vihar Railway Station - bidding process is in advance stage; (v) Surat Railway Station - planned to be re-developed as a Multi Modal Transportation Hub through a Joint Venture Company and pooling of land by the Central, State, and Local Government;

Gandhinagar Railway Station - work taken up through a JV company between IRSDC (MoR) and Gujarat Industrial Development Board (GIDB) (GoG) on EPC mode;

SAS Nagar Mohali Railway Station - found to be unviable and has been proposed for de-entrustment.

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3. IRCON PB TOLL-WAY LIMITED (IRCONPBTL) IrconPBTL, a wholly owned subsidiary of Ircon, was incorporated as a Special Purpose Vehicle on 30th September 2014, and has obtained approval for, commencement of business on 14thNovember 2014. The main object of IrconPBTL is to carry on the business of widening and strengthening of the existing Bikaner & Phalodi Section to four lane from 4.200 km to 55.250 km and Two Lane with paved shoulder from 55.250 km to 163.500 km of NH-15 on Build, Operate, and Transfer (BOT) (Toll) basis in the State of Rajasthan, in accordance with the terms of the Concession Agreement signed with National Highways Authority of India (NHAI) on 7th November 2014.

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Joint venture companies 1. IRCON-SOMA TOLL WAY PRIVATE LIMITED (ISTPL)

A joint venture company called ‘Ircon-Soma Toll way Private Limited’ (ISTPL) was 1incorporated on 19th April 2005, with 50% equity participation by both Ircon and Soma Enterprise Limited (a construction company in private sector), for executing a BOT project for four laning of PimpalgaonDhule section of NH-3 from km 380 to km 265 in Maharashtra for NHAI. The BOT project for four laning of Pimpalgaon-Dhule section got completed in 201011 and accordingly, ISTPL is earning toll on the entire stretch of 118.158 km. Financials of ISTPL: The authorized share capital of ISTPL is Rs. 130 crore and its subscribed and paid-up share capital is Rs. 127.74 crore (Ircon’s share being Rs. 63.87 crore) as on 31stMarch 2017. During the year, ISTPL has achieved operating turnover of Rs. 153.34 crore as compared to Rs. 157.23 crore achieved during the previous year, and earned profit after tax of Rs. 11.69 crore against profit of Rs. 5.91 crore incurred during the previous year.

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2. CHHATTISGARH EAST RAILWAY LIMITED (CERL)

A joint venture company called ‘Chhattisgarh East the Railway Limited’ (CERL) was incorporated on 12thMarch 2013, with equity participation by South Eastern Coalfields Limited, Ircon, and Chhattisgarh State Industrial Development Corporation Limited (nominee of Government of Chhattisgarh) in the ratio of 64:26:10 respectively, for development of coal connectivity corridor i.e. East Corridor (length 180 Km) in the State of Chhattisgarh. CERL had obtained the Certificate for Commencement of Business on 7thMay 2013.

The CERL has signed concession agreement on 12thJune 2015 with Ministry of Railways, for Chhattisgarh East Railway Corridor - Phase I in the State of Chhattisgarh (Total 104.157 km). Phase I of the project is being implemented for Build, Own, Operate, and Transfer (BOOT) model for PPP projects. Detailed Project rd Report (DPR) has been approved on 3rd May 2016 by Zonal Railways viz. South Eastern Central Railway with inflated mileage proposed by the Ministry of Railways.

Financial closure is in progress and likely to be completed by 30thSeptember 2017. The project progress is infringing due to stay by National Green Tribunal (NGT) payment of compensation on account of Rehabilitation and Resettlement to 66

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land holders. So far only 67% disbursement has been completed by State Revenue officials and balance as committed by State Government would be completed by August 2017.

FINANCIALS OF CERL:

The authorized share capital of CERL is Rs. 400 crore and its subscribed and paid-up share capital.

MAHANADI COAL RAILWAY LIMITED (MCRL) A joint venture company called ‘Mahanadi l is Rs. 306 crores (Ircon’s share being Rs. 139.06 crore) as on 31stMarch 2017. CERL is yet to start commercial operations.

Coal Railway Limited’ (MCRL) was incorporated on 31stAugust 2015, with equity participation by Mahanadi Coalfields Limited, Ircon, and Odisha Industrial Infrastructure Development Corporation (nominee of Govt. of Odisha) in the ratio of 64:26:10 respectively, with the main object to build, construct, operate, and maintain identified rail corridor projects that are critical for evacuation of coal from mines in the State of Odisha. MCRL has signed project execution agreement with Ircon on 19thApril 2016. Angul-Balram-Jharpada new rail corridor has been identified by the Company for implementation. Feasibility Report has been submitted to East Coast Railway (ECoR) on 8th August 2016 and DPR has been

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submitted to ECoR on 18th July 2017 and forwarded to Railway Board on 20th July 2017 for approval. Land acquisition process is in progress.

JHARKHAND CENTRAL RAILWAY LIMITED (JCRL) A joint venture company called ‘Jharkhand Central Railway Limited’ (JCRL) was incorporated on 31st August 2015, with equity participation by Central Coalfields Limited, Ircon, and Govt. of Jharkhand in the ratio of 64:26:10 respectively, with the main object to build, construct, operate, and maintain identified rail corridor projects that are critical for evacuation of coal from mines, in the State of Jharkhand.

JCRL had signed project execution agreement with Ircon on 28th March 2016. Railway Board on 6th April 2016 has granted in-principle approval for project transferring Broad Gauge Single Railway Line connecting Shivpur to Kathautia from km 41.5 to km 90.7 in the State of Jharkhand, having a total route length of 49.2 km and track length of 68.7 km to JCRL. The construction of the project is expected to be started by March 2018 at an estimated cost of Rs. 1400 crore. Orders for acquisition of private and Government land acquisition have been issued and environmental clearances are under process. Feasibility / initial viability estimation and Detailed Project Report (DPR) are in the process of finalization.

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FINANCIALS OF JCRL: The authorized share capital of JCRL is Rs. 100 crore and its subscribed and paidup share capital is Rs. 50 crore as on 31st March 2017.

FINANCIALS OF MCRL: The authorized, subscribed, and paid-up share capital of MCRL is Rs. 5 lakhs as on 31st March 2017.

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CHAPTER– 3 INTRODUCTION OF TAXATION

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Taxation The term “Taxation” comes from the Latin word “Taxatio”. It means to determine the payable quantum on estimate. According to Justice Holmes “The price paid to the government for living in a civilized society is the tax. According to Taylor “taxes are the compulsory payments to government without expectation of direct benefit to the tax payer. Taxation is a system of raising money to finance government. All governments require payments of money-taxes-from people. Governments use tax revenues to pay soldiers and policy, to build dams and roads, to operate schools and hospitals, to provide food to the poor and medical care to the elderly, and for hundreds of other purposes. Without taxes to fund its activities, government could not exist. Taxation is the most important sources of revenue for modern governments, typically accounting for 90 percent or more of their income. Taxation is a major instrument for the conduct of public policy. This is true for both developed and developing countries . Taxation is known to accomplish a number of objectives revenue generation for government, economic stabilization and income re-distribution. Taxation as an instrument of public policy is essentially concerned with the manipulation of financial operation of both the government anti private sectors with a view of furthering certain economic objectives.

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CHARACTERISTICS OF TAX

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Direct Tax payment has age limit

Tax is a compulsory levy that must be paid by an individual or corporate body

It is levied by the government or its agencies

Tax is made for the general welfare of the public.

Figure-2

PRINCIPLES OF A TAXATION

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Certainity Perdictability

Equity

Simplicity

Neutrality

Principles

Efficiency

Adequacy

Broad Basing

Convenince Compatibility

Figure-3

 Principle of certainty: This principle states that the tax should be certain and clear to everybody concerned; the amount to be paid and the manner of payment should also be clear and plain to the tax payer. 74

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 Principle of equity: This principle states that tax should be paid based on your abilities, it should be paid without causing undue hardship to the payers.  Principle of neutrality: this principle says that a good tax system should not in any way interfere unnecessarily with the supply and demand for goods and service. It studies the effect people’s ability to save, produce and their willingness to work.

 Adequacy: taxes should be just-enough to generate revenue required for provision of essential public services.  Broad Basing: taxes should be spread over as wide as possible section of the population, or sectors of economy to minimize the individual tax burden.  Compatibility: taxes should be coordinated to ensure tax neutrality and overall objectives of good governance.  Convenience: taxes should be enforced in a manner that facilitates a way to the maximum extent possible.  Efficiency: tax collection efforts should not cost an inordinately high percentage of tax revenues.

 Simplicity: tax assessment and determination should be easy to understand by an average taxpayer.  Predictability: collection of taxes should reinforce their inevitability and regularity.

TAXES APPLICABLE IN INDIA 75

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Direct Tax

Indirect Tax

Figure-4

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DIRECT TAX

Direct taxes are directly imposed on the tax payer. They depend on the income and wealth of an individual or entity.

DIRECT TAX IN INDIA INCOME TAX

This is one of the most well-known and least understood taxes. It is the tax that is levied on your earning in a financial year. There are many facets to income tax, such as the tax slabs, taxable income, tax deducted at source (TDS), reduction of taxable income, etc. The tax is applicable to both individuals and companies. For individuals, the tax that they have to pay depends on which tax bracket they fall in. This bracket or slab determines the tax to be paid based on the annual income of the assesse and ranges from no tax to 30% tax for the high income groups. The government has fixed different taxes slabs for varied groups of individuals, namely general taxpayers, senior citizens (people aged between 60 to 80, and very senior citizens (people aged above 80). In the Union Budget 2018, a standard deduction of Rs.40000 has been introduced for salaried-employees for transport allowances and medical expense

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reimbursement. This proposal will benefit about 2.5 crore salaried employees and pensioners while costing Rs.8000 crore to the government. To ease tax burden for senior citizens, there is an exemption of interest income of up to Rs.50000 on Fixed Deposits, Recurring Deposits, and Post Office. There is also a rise in limit for tax deduction on health insurance premium from Rs.30,000 to Rs.50,000 under Section 80D. There is no TDS required under Section 194A.

Income tax slab for individual tax payers & HUF (less than 60 years old) (both men & women)

Income Tax Slab Tax Rates Income up to Rs.2,50,000 No Tax Income from Rs.2,50,000-Rs.5,00,000 5% Income from Rs.5,00,000-10,00,000 20% Income more than Rs.10,00,000 30% Surcharges: 10% of income tax,where total income is between Rs.50 Lakh and Rs.1 crore.15% of income tax , where total income exceeds Rs.1crore. Cess:3% on total of income tax + surcharge. *Income upto Rs.2,50,000 is exempt from tax if you are less than 60 Years old. Table-6

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INDIRECT TAX

Indirect taxes are those taxes that are levied on goods or services. They differ from direct taxes because they are not levied on a person who pays them directly to the government, they are instead levied on products and are collected by an intermediary, the person selling the product. The most common examples of indirect tax Indirect tax can be VAT (Value Added Tax), Taxes on Imported Goods, Sales Tax, etc. These taxes are levied by adding them to the price of the service or product which tends to push the cost of the product up.

TYPES OF INDIRECT TAX

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TaxTax Value Added Securities Transaction Tax (STT) Custom duty Service Exice Duty

Figure-5

CUSTOMS DUTY: Customs Duty is a type of Indirect Tax which is levied on goods which are imported into India. In some cases, it is also levied when the goods are exported from India.

SERVICE TAX IN INDIA: Service Tax is a tax which is levied on the Services provided by an entity. If an entity is providing any service, they are required to levy Service Tax on the same. This service tax is collected from the recipient of service and deposited with the Central Govt.

VALUE ADDED TAX: VAT stands for Value Added Tax and is levied on the sale of movable goods in India. VAT is a multi-point destination based system of taxation, with tax being levied on value addition at each stage of transaction in the production/ distribution chain. The term ‘value addition’ implies the increase in value of goods and services at each stage of production or transfer of goods. VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer.

EXCISE DUTY: Excise Duty is an indirect tax levied on those goods which are manufactured in India. The taxable event in this case is manufacture and the liability of central excise duty arises as soon as the goods are manufactured. It is a 80

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tax on manufacturing which is paid by the manufacturer, who passes its incidence on to other customers and recovers the same from them.

SERVICE TAX: Service tax is applied generally at the rate of 12.36%, which has been revised to 14% from April 2015. This type of indirect tax is levied by the service tax provider and paid by the recipient of the services. However, in some cases the liability for the tax is divided between the recipient as well as the provider of service.

Securities Transaction Tax (STT): This indirect tax is imposed when stocks are sold or purchased through any Indian stock exchange. STT was introduced in 2004 and is applicable to shares, mutual funds, and future and options transactions. STT was imposed to reduce the short-term capital gains tax and eliminate long-term capital gains tax.

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CHAPTER– 4 ABOUT THE GOODS AND SERVICE TAX.

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Introduction to Goods and Services Tax (GST) About GST: The Good and services tax (GST) is the biggest and substantial indirect tax reform since 1947. The main idea of GST is to replace existing taxes like value-added tax, excise duty, service tax and sales tax. GST as it is known is all set to be a game changer for the Indian economy. India as world’s one of the biggest democratic country follow the federal tax system for levy and collection of various taxes. Different types of indirect taxes are levied and collected at different point in the supply chain. The center and the states are empowered to levy respective taxes as per the Constitution of India. The Value Added Tax (VAT) when introduced was considered to be a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level. Now the Goods and Services Tax (GST) will be a further significant breakthrough - the next logical step - towards a comprehensive indirect tax reform in the country. Several countries have already established the Goods and Services Tax. In Australia, the system was introduced in 2000 to replace the Federal Wholesale Tax. GST was implemented in New Zealand in 1986. A hidden Manufacturer’s Sales Tax was replaced by GST in Canada, in the year 1991. In Singapore, GST was implemented in 1994. GST is a value-added tax in Malaysia that came into effect in 2015.

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History of GST in India 





 

 

2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee Government in 2000. The state finance ministers formed an Empowered Committee (EC) to create a structure for GST, based on their experience in designing State VAT. Representatives from the Centre and states were requested to examine various aspects of the GST proposal and create reports on the thresholds, exemptions, taxation of inter-state supplies, and taxation of services. The committee was headed by Asim Dasgupta, the finance minister of West Bengal. Dasgupta chaired the committee till 2011. 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry, indicated that the existing tax structure had many issues that would be mitigated by the GST system. February 2005: The finance minister, P. Chidambaram, said that the medium-to-long term goal of the government was to implement a uniform GST structure across the country, covering the whole production-distribution chain. This was discussed in the budget session for the financial year 2005-06. February 2006: The finance minister set 1 April 2010 as the GST introduction date. November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that states will have to prepare and make reforms for the upcoming GST regime. February 2007: The 1 April 2010 deadline for GST implementation was retained in the union budget for 2007-08. February 2008: At the union budget session for 2008-09, the finance minister confirmed that considerable progress was being made in the preparation of the roadmap for GST. The targeted timeline for the implementation was confirmed to be 1 April 2010.

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









 





 



July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic skeleton of the GST system. The 1 April 2010 deadline was being followed then as well. November 2009: The EC that was headed by Asim Dasgupta put forth the First Discussion Paper (FDP), describing the proposed GST regime. The paper was expected to start a debate that would generate further inputs from stakeholders. February 2010: The government introduced the mission-mode project that laid the foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerized commercial taxes in states. Following this, the implementation of GST was pushed by one year. March 2011: The government led by the Congress party puts forth the Constitution (115th Amendment) Bill for the introduction of GST. Following protest by the opposition party, the Bill was sent to a standing committee for a detailed examination. June 2012: The standing committee starts discussion on the Bill. Opposition parties raise concerns over the 279B clause that offers additional powers to the Centre over the GST dispute authority. November 2012: P. Chidambaram and the finance ministers of states hold meetings and set the deadline for resolution of issues as 31 December 2012. February 2013: The finance minister, during the budget session, announces that the government will provide Rs.9,000 crore as compensation to states. He also appeals to the state finance ministers to work in association with the government for the implementation of the indirect tax reform. August 2013: The report created by the standing committee is submitted to the parliament. The panel approves the regulation with few amendments to the provisions for the tax structure and the mechanism of resolution. October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of Rs.14,000 crore per annum, owing to the destination-based taxation rule. May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra Modi was voted into power at the Centre. December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution (122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill be sent for discussion to the standing committee. February 2015: Jaitley, in his budget speech, indicated that the government is looking to implement the GST system by 1 April 2016. 85

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May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced that petroleum would be kept out of the ambit of GST for the time being.  August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption had no specific cause. 



March 2016: Jaitley says that he is in agreement with the Congress’s demand for the GST rate not to be set above 18%. But he is not inclined to fix the rate at 18%.

In the future if the Government, in an unforeseen emergency, is required to raise the tax rate, it would have to take the permission of the parliament. So, a fixed rate of tax is ruled out.  June 2016: The Ministry of Finance releases the draft model law on GST to the public, expecting suggestions and views.  August 2016: The Congress-led opposition finally agrees to the Government’s proposal on the four broad amendments to the Bill. The Bill was passed in the Rajya Sabha.  September 2016: The Honorable President of India gives his consent for the Constitution Amendment Bill to become an Act.  2017: Four Bills related to GST become Act, following approval in the parliament and the President’s assent: o Central GST Bill o Integrated GST Bill o Union Territory GST Bill o GST (Compensation to States) Bill. Goods and Services Tax (GST) is an indirect tax which was launched at midnight on 1 July 2017 by the President of India, Pranab Mukherjee and Prime Minister of India, Narendra Modi. The launch was marked by a historic midnight (30 June-1 July) session of both houses of the Parliament convened at the Central Hall of the Parliament. GST is applicable throughout India which will replace multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Act Bill.

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Key features of GST Dual Goods and Service Tax Destination-Based Consumption Computation of GST on the basis of invoice credit method Payment of GST Goods and Services Tax Network (GSTN) GST on Imports Maintenance of Records Administration of GST Goods and Service Tax Council

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Figure-6 1.

Dual Goods and Service Tax: CGST and SGST

2. Destination-Based Consumption Tax: GST will be a destination-based tax. This implies that all SGST collected will ordinarily accrue to the State where the consumer of the goods or services sold resides.

3. Computation of GST on the basis of invoice credit method: The liability under the GST will be invoice credit method i.e. cenvat credit will be allowed on the basis of invoice issued by the suppliers.

4. Payment of GST: The CGST and SGST are to be paid to the accounts of the central and states respectively.

5. Goods and Services Tax Network (GSTN): A not-for-profit, NonGovernment Company called Goods and Services Tax Network (GSTN), jointly set up by the Central and State Governments will provide shared IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders.

6. GST on Imports: Centre will levy IGST on inter-State supply of goods and services. Import of goods will be subject to basic customs duty and IGST.

7. Maintenance of Records: A taxpayer or exporter would have to maintain separate details in books of account for availment , utilization or refund of Input Tax Credit of CGST, SGST and IGST. 8. Administration of GST: Administration of GST will be the responsibility of the GST Council, which will be the apex policy making body of the GST. Members of GST Council comprised of the Central and State ministers in charge of the finance portfolio. 9. Goods and Service Tax Council : The GST Council will be a joint forum of the Centre and the States. The Council will make recommendations to the Union and the States on important issues like tax rates, exemption list, threshold limits, 88

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etc. One-half of the total number of Members of the Council will constitute the quorum of GST council.

GST MODEL

GOODS AND SERVICE TAX

Central GST

State GST

Integrated GST

Levied by the Centre

Levied by the State

Levied by the Centre

This is applicable on supplies within the state.

This is applicable on supplies within the state.

Tax collected will be shared to Centre

Tax collected will be shared to State.

This is applicable on interstate and import transactions. Tax collected is shared between Centre and State

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Figure-7

Central Goods and Service Tax.

CGST means Central Goods and Service Tax. CGST is a part of goods and service tax. It is covered under Central Goods and Service Tax Act 2016. Taxes collected under Central Goods and Service tax will be the revenue for central Government. Present Central taxes like Central excise duty, Additional Excise duty, Special Excise Duty, Central Sales Tax, Service Tax etc. will be subsumed under Central Goods And Service Tax.

State Goods and Service Tax SGST means State Goods and Service Tax. It is covered under State Goods and Service Tax Act 2016. A collection of SGST will be the revenue for State Government. After the introduction of SGST all the state taxes like Value Added Tax, Entertainment Tax, Luxury Tax, Entry Tax etc. will be merged under SGST. For example, if goods are sold or services are provided within the State then SGST will be levied on such transaction.

Integrated Goods and Service Tax IGST means Integrated Goods and Service Tax. IGST falls under Integrated Goods and Service Tax Act 2016. Revenue collected from IGST will be divided between Central Government and State Government as per the rates specified by the government. IGST will be charged on transfer of goods and services from one state to another state. Import of Goods and Services will also be deemed to be covered under Inter-state transactions so IGST will be levied on such transactions. For example, if Goods or services are transferred from Rajasthan to Maharashtra then the transaction will attract IGST.

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GST Rates in India

S S p p ee cc ii a a ll cc a a tt ee g g o o rr y y o o ff

E x e m p t e d ccategories a te g o r ie s – 0 % Exempted – 0 % G G S S t ta anndoda arC rdd o m GGoods G omoo ooddns sl and a yand anu ndsd eServices SServices S de erGoods Grv voi ci ocedes ss fall f fall fa alnl ldunder uunder uServices n Sneddre evr ri c2nd 2 1st 1enssdt – –slab sSlab Sl5 la a% bb – –– – 12% 1 18% 12 8% % Standard Standard Commonly Goods used and 5% o o o d d ss a a n n d d S S ee rr v v ii cc ee ss ii n n cc ll u u d d ii n n g g ll u u x x u u rr y y -2 2 8 8

% %

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Figure-8

GST Council  It is set up by president under article 279-A. It is chaired by union finance minister.  It will constitute union minister of state in charge of revenue and minister in charge of finance or taxation or of any other field nominated by state governments. The 2/3rd representatives in council are from states and 1/3rd from union.  It will make recommendations on: a. Taxes, surcharge, cess of central and states which will be integrated in GST. b. Goods and services which may be exempted from GST. c. Interstate commerce – IGST- proportion of distribution between state and center. d. Registration threshold limit for GST. e. GST floor rates. f. Special rates during calamities. g. Provision with respect to special category states specially north east states  It may also work as Dispute Settlement Authority for GST.  The Council would consist of 2/3rd representation of states and 1/3rd representation of the Centre. The GST Council will take all decisions regarding tax rates, dispute resolution, exemptions and so on. Recommendations of the GST Council (75% votes) will be binding on the Centre and the States.

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Goods and Services Tax Network (GSTN) Goods and Services Tax Network has been set up by the Government as a private company under erstwhile Section 25 of the Companies Act, 1956. GSTN would provide three front end services, namely Registration, Payment and Return to taxpayers. It will also assist some State with the development of back end modules. Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Government, private limited company. It was incorporated on March 28, 2013. The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Pondicherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with nonGovernment financial institutions. The Company has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST). The Authorized Capital of the company is Rs. 10,00,00,000 (Rupees ten crore only).

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Structure of GSTN  The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the first time to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. Currently, the Centre and State indirect tax administrations work under different laws, regulations, procedures and formats and consequently the IT systems work as independent sites. Integrating them for GST implementation would be complex since it would involve integrating the entire indirect tax ecosystem so as to bring all the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and other external stakeholders. Besides, GST 94

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being a destination based tax, the inter- state trade of goods and services (IGST) would need a robust settlement mechanism amongst the States and the Centre. This is possible only when there is a strong IT Infrastructure and Service back bone which enables capture, processing and exchange of information amongst the stakeholders (including tax payers, States and Central Governments, Accounting Offices, Banks and RBI).  Prior to this, the Union Ministry of Finance had set up the Technical Advisory Group for Unique Projects (TAGUP) in March 2010 to make recommendations on the roadmap to roll out five major financial projects including GST. TAGUP recommended setting up of National Information Utilities as private companies with a public purpose for implementation of large and complex Government IT projects including GST.

 In compliance of the above decision, GST Network was registered as a non-government, not-for-profit, private limited company under section 8 (under new companies Act, not for profit companies are governed under section 8) of the Companies Act 1956 with the following equity structure:

Central Government

24.5%

State Governments & EC

24.5%

HDFC

10%

ICICI Bank

10% 95

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NSE Strategic Investment Co

10%

LIC Housing Finance Ltd

11% Table-7

 In brief, the decision to structure GSTN in its current form was taken after approval of the Empowered Committee of State Finance Ministers and the Union Government after due deliberations over a long period of time

GSTIN

 Goods and Services Identification Number is a 15 digit alphanumeric number.  First two digit shows the State code,  Another ten digit shows the Permanent Account Number (PAN).  Next number shows the entity number of the same PAN holder in a state. Next is alphabet Z by default.  Next is the check sum digit.

GST Identification Number 96

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1 2 3 4 5 6 7 8 9 1 0 State PAN

1 1

1 2

code

1 3

1 4

1 5

Entity Code/ Check digit

SWOT Analysis Strengths GST provides a comprehensive and a wider coverage of input credit set off service tax credit could be used for the payment of tax on the sale of goods etc.  A single GST could be used instead of other indirect taxes at the state and central level.  It would end the cascading effects.  There would be uniformity of tax rates across the states.  It ensures better compliance as the aggregate tax reduces.  It helps in the reduction of prices of the goods and services to the consumer with the reduction of tax. 97

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 It would reduce transaction costs and unnecessary wastage to both government and individuals.  It encourages transparency and unbiased tax structure.  It brings efficiency in the indirect tax mechanism.

Weaknesses  It doesn’t include alcohol and petroleum products which would lead to incurring of huge losses.  It requires strong IT infrastructure which is not highly developed in India.  Single GST rate would be high compared to individual indirect tax rate.

.

Opportunities  Reduction in tax burden will increase the competitiveness of Indian products in the international market.  There would be a gradual increase in the revenues of state and the union.  Helps reducing corruption as the implementation of GST would result in a gradual decrease of procedures and formalities.

Threats  It is entirely dependent on the efficiency and effectiveness of the system  Beneficiaries of the system are uncertain. It could be either state or the Centre. This would create a chaos while preparing budgets and financing polices

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 Lack of co-ordination between the Centre and the state might affect the system and also the revenues generated.

Interpretation of the SWOT Analysis From the above SWOT analysis it is clear that GST would create uniformity of taxes and also reduce tax burden. This in turn would increase revenues of the state and the union at the country level and increase competition at the international level. But this in reality might appear to be a dual tax system and would also require a strong IT infrastructure. Besides this, it is entirely dependent on the efficiency of the system. Co-ordination between the Centre and the state only can help in its implementation and execution of the proposed plan. Therefore before implementation of such a tax regime, it should be carefully examined at every levels to benefit all the stakeholders.

Impact of GST on various sectors IT Currently IT sector is paying 14 percent of tax to the authority and subjected to 1820 percent after the imposition of GST. Also an important point to notice here, that the long disputed issue of canned software taxation will also come to end as their will no difference arise between goods and services after the GST. Overall impact could be suggested here is neutral or slightly negative.

Telecom In the current stage, the Telecom sector is paying 14 percent of tax to the government body, but the scenario takes the shift after the imposition of GST. The rate arises to 18 percent and the companies expect to pass the burden on the post99

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paid customers. There is also a lower input tax credit in this sector's capex cost. Overall, it seems that this regime will be negative to the industry and the sector will also be in state where they can't pass the entire tax burden to the customers especially their prepaid segment.

Automobiles Currently, automobile sector pays around 30 to 47 percent tax to the Government which is now expected to range between 20-22 per cent, after the implementation of GST. And the overall cost cutting can be expected for the end user by around 10 per cent. Transportation time should also be reduced as the check points and octroi is cleared hands before. Overall GST will bring a smile into the automobile sector.

Cement In the current scenario, cement sector is presenting 27 to 32 per cent of their share to the tax authority. After the rolling out of GST, this will improve the sector growth in various terms, like transportation by 20-25 per cent and in the warehouse scheme as the rationalization would be easy in terms of state wise fragmentation and also in the transportation cost as reduced transit time.

Pharmacy Here, the impact could be neutral as the sector only shares 6 per cent of his share to the tax authority. The sector also avails the incentives in tax benefits of location wise. There are various concessional benefits and exemptions held for this sector and will extend till the expiry of the period. The implications of GST would also try to reduce the logistics cost and would also try to see in to the matter of inverted duty structure.

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Banking and Financial Institutions The sector is paying 14 percent right now, but not on the interest part of transaction. After the GST implied, the tax horizon can expand up to 18 to 20 percent on the fee based transactions. Overall input expense of operations will likely to increase and also hike in the transactions of financial in nature such as loan processing fees, debit/credit charges, insurance premiums etc.

Result Analysis Basic concept of GST: How GST Work Retailer to wholesaler Gold Sales Tax (14%) Duty (12.5%) Excise Duty (1%) CGST (18%) Grand Total

100000 14000 12500 1000 127500 Table-8

Wholesaler to retailers 101

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100000 18000 118000

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Price Add margin (10%) other charges (rent, transport) Sub Total Sales Tax (14%) SGST (18%) Total Price

127500 12750 15000 155250 21735 176985

118000 11800 15000 144800 26064 170864

Table-9

Effect on IT Industrial

M&G LTD.

9500

Software for school uses Service Tax (14%) GST (5%) Grand Total

1330 10830 Table-10

Effect on Manufactory Industrial

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9500 475 9975

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Whirlpool 6.5 kg Fully Automatic Top Load Washing Machine

Price (exclusive Tax)

15490

15490

Sales Tax (14.5%)

2168.6

-

GST (12%)

-

1858.8

Grand Total

17658.6

17348.8

Table-11

Impact of GST on Indian Economy Reduce tax burden on producers and foster growth through more production. This double taxation prevents manufacturers from producing to their optimum capacity and retards growth. GST would take care of this problem by providing tax credit to the manufacturer.  Various tax barriers such as check posts and toll plazas lead to a lot of wastage for perishable items being transported, a loss that translated into major costs through higher need of buffer stocks and warehousing costs as well. A single taxation system could eliminate this roadblock for them.  A single taxation on producers would also translate into a lower final selling price for the consumer.  Also, there will be more transparency in the system as the customers would know exactly how much taxes they are being charged and on what base.  GST would add to government revenues by widening the tax base.  GST provides credits for the taxes paid by producers earlier in the goods/services chain. This would encourage these producers to buy raw material 103

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from different registered dealers and would bring in more and more vendors and suppliers under the purview of taxation.  GST also removes the custom duties applicable on exports. Our competitiveness in foreign markets would increase on account of lower cost of transaction.  The proposed GST regime, which will subsume most central and state-level taxes, is expected to have a single unified list of concessions/exemptions as against the current mammoth exemptions and concessions available across goods and services. The introduction of Goods and Services Tax would be a very noteworthy step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would alleviate cascading or double taxation in a major way and pave the way for a common national market.

GST REGISTRATION A person is eligible to take registration if his aggregate turnover exceeds Rs. 20 lakhs and for person conducting business in North-East state are required to take registration if their aggregate turnover exceeds Rs. 9 lakhs. Aggregate Turnover means the aggregate value of all taxable supplies, exempt supplies export of goods and/or services and inter-state supplies of a person having the same PAN to be computed on all India basis. A person has to take registration in the state from where taxable goods and/or services are supplied. Every person who is liable to be registered under Schedule III of this Act, shall apply for registration in every such State in which he is liable within 30 days from the date of which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed. Notwithstanding anything contained in sub-section (1), a person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed. A person, though not liable to be registered under Schedule III, may get himself registered voluntary, and all provisions of this Act, as are applicable to a registered taxable person, shall apply to such person. 104

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Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961 (43 of 1961) in order to be eligible for grant of registration under subsection (1), (2) or (3). The registration or the Unique Identity Number, shall be granted or, as the case may be, rejected after due verification in the manner and within such periods as may be prescribed. A registration or an Unique Identity Number shall be deemed to have been granted after the period prescribed under sub-section (7), if no deficiency has been communicated to the applicant by the proper officer within that period. The Central or State Government may, on the recommendation of the Council, by notification, specify the category of persons who may be a exempted from obtaining registration under this Act.

GST registration page

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Figure-9

GST Identification Number

1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 State Entity PAN code

Code/ Check digit

Amendment of Registration 106

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Every registered taxable person shall inform the proper officer of any changes in the information furnished at the time of registration, or that furnished subsequently, in the manner and within such period as may be prescribed

The proper officer may, on the basis of information furnished under sub-section (1) or as ascertained by him, approve or reject amendments in the registration particulars in the manner and within such period as may be prescribed, provided that approval of the proper officer shall not be required in respect of amendment of such particulars as may be prescribed. The proper officer shall not reject the request for amendment in the registration particulars without giving a notice to show cause and without giving the person a reasonable opportunity of being heard.

Any rejection or approval of the amendments under the CGST/SGST Act shall be deemed to be rejection or approval of amendments under the CGST/SGSTAct

Figure-10

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Tax Invoice:

A registered taxable person supplying –

taxable goods shall issue, at the time of supply, a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed;

taxable service shall issue a tax invoice, within the prescribed time, showing the description, the tax charged thereon and such other particulars as may be prescribed

Provided that a registered taxable person may issue a revised invoice against the invoice already issued during the period starting from the effective date of registration till the date of issuance of certificate of registration to him;

Figure-11

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GST RETURNS Every registered taxable person shall, for every calendar month or part thereof, furnish, in such form and in such manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services, input tax credit availed, tax payable, tax paid and other particulars as may be prescribed within 20 days after the end of such month: Provided that a registered taxable person paying tax under the provisions of Section 8 of this Act shall furnish a return for each quarter or part thereof, electronically, in such form and in such manner as may be prescribed, within 18 days after the end of such quarter: Every registered taxable person, who is required to furnish a return under subsection (1), shall pay to the credit of the appropriate Government the tax due as per such return not later than the last date on which he is required to furnish such return. A return furnish under the sub-section (1) by a registered taxable person without payment of full tax due as per such return shall not be treated as a valid return for allowing input tax credit in respect of supplies made by such person. Every registered taxable person shall furnish a return for every tax period under subsection (1), whether or not any supplies of goods or services have been effected during such tax period.

Note: Subject to the provisions of Section 25 and 26, if any taxable person after furnishing a return discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission in the return to be filed for the month or quarter, as the case may be, during which such omission are noticed, subject to the payment of interest, where applicable and as specified in the Act:

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Types of GST Returns

GSTR-1

GSTR-2

GSTR-3

TY PES

GSTR-4

GSTR-5

GSTR-6

GSTR-7

GSTR-8

GSTR-9

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Figure-12

GSTR-1 = GSTR-1 is a monthly return that should be filed by every registered dealer by the 10th of the following month. It is the first or the starting point for passing input tax credit to the dealers. It contains details of all outward supplies i.e. sales. GSTR-1 has to be filed by "all" taxable registered persons under GST. However, there are certain dealers who are not required to file GSTR-1, instead are required to file other different GST returns as the case may be. These dealers are E-Commerce operators, Non-Resident dealers and Tax deductors. It has to be filed even in cases where there is no business conducted during the reporting month.

GSTR-1 Registration

Figure-13 112

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File GSTR-1 The Suppliers need to log in to the GSTN portal with the given User ID and Password, following these steps: Search for "Services" and then click on Returns, followed by Returns Dashboard. In the Dashboard, the dealer has to enter the financial year and the month for which the return needs to be filed. Click on Search after that. All returns relating to this period will be displayed on the screen. Dealer has to select the tile containing GSTR-1 After this, he will have the option either to prepare online or to upload the return. The dealer will now Add invoices or upload all invoices directly. Once the entire form is filled up, the dealer shall then Click on Submit and validate the data filled up With the data validated, dealer will now click on FILE GSTR-1 and proceed to either E-Sign or digitally sign the form. Another confirmation pop-up will be displayed on the screen with a yes or no option to file the return. Once Yes is selected, an Acknowledgement Reference Number (ARN) is generated.

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Figure-14

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GSTR-2 It is mandatory to furnish details of inward supplies of goods/services received during a tax period for every registered taxable person. These details are furnished based on FORM GSTR-2A which is auto populated on the basis of GSTR 1 filed by your supplier, electronically through the Common Portal, either directly or from a Facilitation Centre. However, GSTR 2A does not in itself auto populates a complete GSTR 2, as there are certain other transactions which are to be mentioned manually in addition to the data which is generated through GSTR 2A, viz. Details of Inward Supplies from an Unregistered Persons on which tax is paid on the Reverse Charge basis and Imports effected during the tax period, etc

Who can file GSTR-2 It is mandatory to file a GST Return for each and every entity registered under the GST Act. Even in case where there are no inward supplies during the tax period, NIL return for that period is required to be filed. In case of failure to file the return within due period, the tax payer is penalized with the late fees of INR 100 per day up to a maximum limit of INR 5,000/-

When to file GSTR-2 ?  Every registered taxable person is required to furnish details of Inward Supply for a tax period i.e. the end of the relevant month.  This return has to be filed by the recipient of (goods/services) supplies within 15 days from the end of the relevant tax period.  However to facility the ease of payment and return filing for small and medium scale businesses with annual aggregate turnover up to Rs.1.5 crores, it has been decided in the 22nd GST Council meeting dated 06th October 2017, that such tax payers shall be required to file quarterly returns in Form GSTR 1,2 and 3 and pay taxes only on quarterly basis, starting from the third quarter of this financial year, i.e. October to December 2017.

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Figure-15

GSTR-3 GSTR-3 is a return to be filed on monthly basis (compounding and ISD taxpayers are exceptions). GSTR-3 is more like a pooled version of GSTR1 and GSTR-2. The form captures the information of outward and inward supply information at aggregate level which will be auto populated through GSTR-1, GSTR-1A and GSTR-2.It will comprise of the entire turnover related details, including, local sales turnover, export sales turnover, exempted local sales turnover, turnover except GST and taxable turnover. A taxpayer just has to validate this prefilled information and make modifications if required.

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Figure-16

GSTR-4 Compounding taxpayers would have to file a quarterly return called GSTR-4. Taxpayers otherwise eligible for the compounding scheme can opt against the compounding and file monthly returns and thereby make their supplies eligible for ITC in hands of the purchasers. Compounding taxpayer will also file a simple Annual return (GSTR-9).

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Figure-17

GSTR-5 Non –Resident Taxpayers would have to file GSTR-1, GSTR-2 and GSTR-3 returns for the period for which they have obtained registration. The registration of Non–Resident taxpayers will be done in the same manner as that of Regular taxpayers. Non-Resident Taxpayers would be required to file GSTR-5 return for the period for which they have obtained registration within a period of seven days after the date of expiry of registration. In case registration period is for more than

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one month, monthly return(s) would be filed and thereafter return for remaining period would be filed within a period of seven days as stated earlier.

Figure-18

GSTR 6 GSTR 6 is a monthly return that has to be filed by an Input Service Distributor. It contains details of ITC received by an Input Service Distributor and distribution of ITC.

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.

Figure-19

GSTR-7 GSTR 7 is a return to be filed by the persons who is required to deduct TDS (Tax deducted at source) under GST. GSTR 7 contains the details of TDS deducted, TDS liability payable and paid, TDS refund claimed if any etc.

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Figure-20 GSTR-8 GSTR-8 is a return to be filed by the e-commerce operators who are required to deduct TCS (Tax collected at source) under GST. GSTR-8 contains the details of supplies effected through e-commerce platform and amount of TCS collected on such supplies.  

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Figure-21

GSTR-9 GSTR 9 is an annual return to be filed once in a year by the registered taxpayers under GST including those registered under composition levy scheme. It consists of details regarding the supplies made and received during the year under different 123

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tax heads i.e. CGST, SGST and IGST. It consolidates the information furnished in the monthly/quarterly returns during the year.

Figure-22

Annual Return Every registered taxable person, other than an input service distributor, a deductors under Section 37, a casual taxable person and a non-resident taxable person, shall 124

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furnish an annual return for every financial year electronically in such form and in such manner as may be prescribed on or before the thirty first day of December following the end of such financial year. Every taxable person who is required to get his accounts audited under sub- section (4) of section 42 shall furnish, electronically the annual return along with the audited copy of the annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the year with audited annual financial statement, and such other particulars as may be prescribed.

Challenges faced during Return Filing

VAT

GST 125

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Interaction with Government for compliance

3 times Every Month

Once a Quarter or Month

Return filing

Summary of Sales/ Purchases needs to

Need to upload Every Transaction

Invoice Matching

Not Monitored extensively

Invoices of Supplier and Recipient need

Input Credit

Can be availed only when Invoices are

Availed based on Returns

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There are three important concepts in GST.

Time of Supply Place of Supply Value of Supply Figure-23 127

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1. Time of Supply

As per Section 13 Time of supply means the point in time when goods/services are considered supplied’. When the seller knows the ‘time’, it helps him identify due date for payment of taxes. CGST/SGST or IGST must be paid at the time of supply. Goods and services have a separate basis to identify their time of supply. Section 31(1) of the CGST Act provides that a registered person supplying taxable goods shall, before or at the time of,  An invoice has to be created before removal of goods as defined in Clause (96) of Section 2 of the CGST Act. If invoice is not created time of removal shall be taken as last date of making invoice as mentioned in Section 12.  If invoice is created earlier than time of removal, time of supply shall be treated as date of preparation of invoice.  If payment is received with respect to supply of goods earlier than making of invoice, such payment shall be treated as time of supply. Concept of time of supply of goods provided in GST law shows a departure from the earlier Central Excise provisions. In the Central Excise provisions invoice was required to be made at the time of removal only. These provisions give liberty to trade and industry to prepare invoice well in advance of removal of goods. Thus, a supplier of goods may issue an invoice to recipient but removes goods only after, say receipt of payment. If in the meantime say, payment is not received, he can cancel the invoice as per provisions of GST laws. Such cancellation of invoice shall not result in removal of goods, retaking or return of goods in the supplier premises etc.

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It is also considered 3 points:

Time of Supply of Goods

Time of Supply for Services

Time of Supply under Reverse Charge

Figure-24

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A. Time of Supply of Goods Time of supply of goods is earliest of: 1. Date of issue of invoice 2. Last date on which invoice should have been issued 3. Date of receipt of advance/ payment*.

For example: Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th January. The payment was received on 31st January. The goods were supplied on 20th January. *Note: GST is not applicable to advances under GST. GST in Advance is payable at the time of issue of the invoice. Notification No. 66/2017 – Central Tax issued on 15.11.2017 Let us analyze and arrive at the time of supply in this case. Time of supply is earliest of – 1. Date of issue of invoice = 15th January 2. Last date on which invoice should have been issued = 20th January Thus the time of supply is 15th January. What will happen if, in the same example an advance of Rs 50,000 is received by Mr. X on 1st January?

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The time of supply for the advance of Rs. 50,000 will be 1st January (since the date of receipt of advance is before the invoice is issued). For the balance Rs. 50,000, the time of supply will be 15th January.

B. Time of Supply for Services

Time of supply of services is earliest of: 1. Date of issue of invoice 2. Date of receipt of advance/ payment. 3. Date of provision of services (if invoice is not issued within prescribed period) Example: Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was issued on 20th January and the payment for the same was received on 1st February. In the present case, we need to 1st check if the invoice was issued within the prescribed time. The prescribed time is 30 days from the date of supply i.e. 31st January. The invoice was issued on 20th January. This means that the invoice was issued within a prescribed time limit. The time of supply will be earliest of – 1. Date of issue of invoice = 20th January 2. Date of payment = 1st February This means that the time of supply of services will be 20th January.

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C. Time of Supply under Reverse Charge In case of reverse charge the time of supply for service receiver is earliest of: 1. Date of payment* 2. 30 days from date of issue of invoice for goods (60 days for services) *w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only to services. Notification No. 66/2017 – Central Tax

For example: M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th January. The invoice was raised on 1st February. M/s ABC Pvt. Ltd made the payment on 1st May. The time of supply, in this case, will be earliest of – 1. Date of payment = 1st May 2. 60 days from date of date of invoice = 2nd April Thus, the time of supply of services is 2nd April.

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2. Place of supply It is very important to understand the term ‘place of supply’ for determining the right tax to be charged on the invoice.

Here is an example:

Location of Service

Place of

Nature of

GST

Receiver Maharashtra

supply Maharashtra

Supply Intra-state

Applicable CGST + SGST

Maharashtra

Kerala

Inter-state

IGST

Table-12

It is also considered 2 points.

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Place of Supply for Services

Place of Supply of Goods

A. Place of Supply of Goods Usually, in case of goods, the place of supply is where the goods are delivered. So, the place of supply of goods is the place where the ownership of goods changes. What if there is no movement of goods. In this case, the place of supply is the location of goods at the time of delivery to the recipient.

Place of Supply When There is Movement of Goods:

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Supply

Place of supply

Involves movement of goods, whether

Location of the goods when the

by the supplier or the recipient or by

movement of goods terminates for

any other person. Goods are delivered by the seller to a

delivery to the recipient. It is assumed that the third person has

recipient on the direction of a third

received the goods and the place of

person (whether agent or not) before or supply of such goods will be the during movement of goods by way of

principal place of business of third

transfer of documents of title to the

person.

goods or some other way.

Table-13

For example: In case of sales in a supermarket, the place of supply is the supermarket itself. Place of supply in cases where goods that are assembled and installed will be the location where the installation is done

For Example: Intra-state sales Mr. Raj of Mumbai, Maharashtra sells 10 TV sets to Mr. Vijay of Nagpur, Maharashtra The place of supply is Nagpur in Maharashtra. Since it is the same state CGST & SGST will be charged.

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For example – Deliver to a 3rd party as per instructions Anand in Lucknow buys goods from Mr. Raj in Mumbai (Maharashtra). The buyer requests the seller to send the goods to Nagpur (Maharashtra) In this case, it will be assumed that the buyer in Lucknow has received the goods & IGST will be charged. Place of supply: Lucknow (UP GST: IGST

Figure-25

No Movement of Goods Supply is :

Place of supply 136

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No movement of goods, either by the

Location of such goods at the time of

supplier or the recipient.

the delivery to the recipient ( at the

time of transfer of ownership) The goods are assembled or installed at Place of such installation or assembly. site.

Table-14

For Example: No movement of goods Sales Heaven Ltd. (Chennai) opens a new showroom in Bangalore. It purchases a building for showroom from ABC Realtors (Bangalore) along with pre-installed workstations. Place of supply: Bangalore GST: CGST& SGST There is no movement of goods (work stations), so the place of supply will be the location of such goods at the time of delivery (handing over) to the receiver

Imports & Exports The place of supply of goods: Imported into India will be the location of the importer. 137

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Exported from India shall be the location outside India. Supply is Goods imported

Place of supply GST into Location Of the importer. Always IGST on imports.

India. Exported from India.

Location outside India.

Exports are exempted.

Table-15

For Example - Import Ms. Malini imports school bags from China for her shop (registered in Mumbai) Place of supply: Mumbai GST: IGST

For Example - Export Ms. Anita (Kolkata) exports Indian perfumes to UK Place of supply: Kolkata GST: Exempted

B. Place of Supply for Services

Generally, the place of supply of services is the location of the service recipient.

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In cases where the services are provided to an unregistered dealer and their location is not available the location of service provider will be the place of provision of service. Special provisions have been made to determine the place of supply for the following services:  Services related to immovable property  Restaurant services  Admission to events  Transportation of goods and passengers  Telecom services  Banking, Financial and Insurance services. In case of services related to immovable property, the location of the property is the place of provision of services.

Example 1: Mr. Anil from Delhi provides interior designing services to Mr. Ajay (Mumbai). The property is located in Ooty (Tamil Nadu). In this case, place of supply will be the location of the immovable property i.e. Ooty, Tamil Nadu.

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Determining The Place Of Supply Of Services GST is destination based tax i.e. consumption tax, which means tax will be levied where goods and services are consumed and will accrue to that state. Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the ‘’place of supply’’ so determined, the respective tax will be levied. IGST is levied where transaction is inter-state, and CGST & SGST are levied where the transaction is intra-state. For understanding Place of Supply for Services the following two concepts are very important namely:  location of the recipient of services location of the supplier of services The two concepts in detail as they will form the base for determining the place of supply in case of supply of services are:

Location of the recipient of services: 140

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Location of Recipient of Service

S.No Case . where a supply is received at a place of A

such place of business

business for which the registration has been obtained

B

where a supply is received at a place

such fixed establishment

other than the place of business for which registration has been obtained (a fixed establishment elsewhere C

where a supply is received at more than the location of the one establishment, whether the place of establishment most directly business or fixed establishment

concerned with the receipt of the supply

D

in absence of such places

the location of the usual place of residence of the recipient;

Table-16

Location of the provider/supplier of services:

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S.No Case .

A

Location of Recipient of Service

where a supply is made from a place of

the location of such

business for which the registration has

place of business

been obtained B

where a supply is made from a place other

the location of such

than the place of business for which

fixed establishment

registration has been obtained (a fixed establishment elsewhere C

where a supply is made from more than

the location of the

one establishment, whether the place of

establishment most

business or fixed establishment,

directly concerned with the provision of the supply

D

in absence of such places,

the location of the usual place of residence of the supplier;

Table-17

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Category of supply of services:

Domestic Transactions

International Transactions

Figure-26

Domestic Transactions; These are the transactions where both the parties i.e. the supplier as well as recipient of service are in India. Domestic transactions can be further categorized as below: Inter-State (i.e between two different states) Intra-State (i.e within the same state)

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General Rule In general, the place of supply for services will be the location of the service recipient (the recipient needs to be a registered person). In cases, where service is provided to an unregistered person, the place of supply will be the:  Location of the service recipient (if the address is available on record);  Otherwise, location of service provider.

International Transactions These are the transactions where either of the service recipient or the provider is outside India. Transactions in which both the recipient as well as provider are outside India are not covered here.

General Rule The Place of Supply for services treated as international transactions shall be:  The location of service recipient  In case where the location of service recipient is not available, the place of supply shall be location of the supplier.

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3. Value of Supply of Goods or Services Value of supply means the money that a seller would want to collect the goods and services supplied. The amount collected by the seller from the buyer is the value of supply. But where parties are related and a reasonable value may not be charged, or transaction may take place as a barter or exchange; the GST law prescribes that the value on which GST is charged must be its ‘transactional value’. This is the value at which unrelated parties would transact in the normal course of business. It makes sure GST is charged and collected properly, even though the full value may not have been paid.

Works Contract under GST Works Contract As per section 2(119) of CGST Act.

The taxation laws on Works Contracts have changed since the implementation of GST. Any Immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

In simple words, any contract in relation to an Immovable property where services are provided along with transfer of goods is known as a “Works Contract”.

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“Work s contract” is defined as a contract for Building, construction Fabrication Completion, Fitting out, Repair, Maintenance, Renovation, Improvement, modification,

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Building, construction Improvement, modification,

Fabrication

Repair, Maintenance, Renovation,

Completion

Fitting out Figure-27

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Works Contract in Pre-GST Regime Different aspects of an activity were taxed differently in the pre-GST regime as mentioned below:

Aspect in the Works

Tax Applicable

Contract Provision of Services

Service Tax

Transfer of Goods

VAT

Goods manufactured in course of

Central Excise

contract

Table-17

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Let us understand the complications that a provider of works contract would encounter previously: 

VAT being a state tax, different States had different VAT rates



Different VAT composition schemes in every state



Different abatement rates for new works contract and repair works contract in service tax



Maintenance of large amount of VAT documentation



Current law Works Contracts consists of three kinds of taxable activities as per the current law. It involves supply of goods as well as supply of services. If a new product is created during the works contract, then such manufacture becomes a taxable event. Currently, the supply of goods is taxable in the form of VAT and the service is taxable under service tax. If a new product appears in the process of completing a works contract, Central Excise duty is levied. So, different aspects of one a single activity are taxed by different laws. This causes a lot of confusion regarding treatment and taxability which is why there are so many legal disputes in related to works contracts. GST aims to put an end to the uncertainty for the legislature.

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Works Contract under GST Supply Of Service or Supply of Goods: A simpler treatment has been introduced for Works Contract under GST. Schedule II clearly states that Works Contract amounts to supply of services, hence the confusion whether it will be categorized as supply of service or goods has been done away with. A single rate has been fixed for services provided under Works contract and the entire amount shall be taxed at this rate without any bifurcation between goods and services.

Contract for Immovable property only: Under the GST regime the scope of works contract has been restricted to any activity undertaken in relation to Immovable property only, unlike the previous regime where works contract for movable properties was also considered.

For example: Any composite supply of paint job done in an automotive body shop will not fall within the definition of term works contract per se under GST. Such contracts would continue to remain composite supplies, but will not be treated as a Works Contract for the purposes of GST.

Separate Works Contract Account A separate account for works contract must be maintained by a registered taxable person who is executing work contract. Following information must be maintained in this account: 

name and address of persons on behalf of whom works contract is executed



description, value and quantity of goods or services received and utilized for works contract 150

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

details of payment received in respect of every works contract undertaken



Name and address of supplier from whom he received goods or services.

Decentralised Service Registration As per the rules laid down under CGST Act, every person whose aggregate turnover crosses the threshold limit of Rs.20 lakh and Rs 10 lakh in Special Category States) must compulsory take registration. This applies to provider of Works Contract as well. Thus, every state where a works contractor has a project office, he will need to obtain a registration.

Composition Scheme Composition scheme is not available to works contractors as it is treated as service under GST. Composition scheme is only available to suppliers of goods and the restaurant industry (not serving alcohol). He will have to register as a normal supplier on crossing the 20 Lakh threshold. Hence, small sub-contractors will have to incur increased cost of compliance as they cannot opt for composition scheme.

Abatement No abatement has been prescribed for works contract under the GST law. Hence it may lead to significant increase in tax burden, especially if such works contract is taxed at Standard GST rate (which is 18%) and even if subjected to lower tax rate (12%).

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Input Tax Credit for Works Contract. As per section 17(5) of CGST Act, Input tax credit shall not be available in respect of works contract services availed by a person for constructing an immovable property (other than Plant and Machinery). ITC for works contract can be availed only by those who are in the same line of business and is using such services received for further supply of works contract service (e.g. ITC in respect of bill raised by sub-contractor is allowed to the main contractor). Plant and Machinery in certain cases, when affixed permanently to the earth, would constitute immovable property. Thus, where a works contract is for the construction of plant and machinery, the ITC of the tax paid to the works contractor would be available to the recipient.

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Rates of GST for Works Contract Two GST rates have been prescribed for services provided under Works contract i.e. 18% and 12%.

GST @ 18% Construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate Composite supply of works contract

GST @ 12% Composite supply of Works contract to the Government, local authority or a governmental authority by way of construction, erection, commissioning, installation , completion, fitting out, repair, maintenance, renovation, or alteration of:   

Historical monument, archaeological site or remains of national importance Canal, dam or other irrigation works Pipeline conduit or plant for o Water treatment o Water supply o Sewerage treatment/disposal  a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession  a structure meant predominantly for use as o an educational o a clinical o an art or cultural establishment o a residential complex predominantly meant for self-use or the use of their employees Composite supply of works contract supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of: 153

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

a road, bridge, tunnel, or terminal for road transportation for use by general public.  a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana  a pollution control or effluent treatment plant, except located as a part of a factory  a structure meant for funeral, burial or cremation of deceased  railways, excluding monorail and metro  a single residential unit otherwise than as a part of a residential complex  low-cost houses up to a carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India  post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes  mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages A works contract is treated as supply of services under GST. Under the previous regime, there were issues in tax treatment of works contract. Both the Central Government (on the services component of a works contract) & the State Governments (on the sale of goods portion involved in the execution of a works contract) used to levy tax. Thus, the same contract was subject to taxation by both Central and State Government. GST aims to put at rest the controversy by defining what will constitute a works contract (applicable for immovable property only), by stating that a works contract will constitute a supply of service and specifying a uniform rate of tax applicable on same value across India. Thus, under GST, taxation of works contract will be simpler and easier to administer.

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ACCOUNTS AND RECORDS Every registered person shall keep and maintain, at his principal place of business, as mention in the certificate of registration, a true and correct accounts of production or manufacture of goods, of inward or outward supply of goods and services, of stocks of goods, of input tax credit availed, of output tax payable and paid, and such other particulars as may be prescribed in this behalf: Provided that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business concerned: Provided further that the registered person may keep and maintain such accounts and other particulars in the electronic form in the manner as may be prescribed. The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose. Every registered taxable person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit to the proper officer a copy of the audited statement of accounts, the reconciliation statement under sub-section (2) of section 30 and such other documents in the form of manner as may be prescribed in this behalf.

Period of retention of accounts Every registered taxable person required to keep and maintain books of account or other records under sub-section (1) of section 42 shall retain them until the expiry of sixty months from the last date of filing of Annual Return for the year pertaining to such accounts and records: Provided that a taxable person, who is a party to an appeal or revision or any other proceeding before any Appellate Authority or Tribunal or Court, whether filed by him or by the department, shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceeding for a period of one year after final disposal of such appeal or revision or proceeding, or for the period specified under sub-section (1), whichever is later.

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AUDIT Audit by tax authorities  The Commissioner of CGST/SGST or any officer authority by him, may undertake audit of the business transactions of any taxable person for such period, at such frequency and in such manner as may be prescribed.  The tax authorities referred to in sub-section (1) may conduct audit at the place of business of the taxable person or in their office.  The taxable person shall be informed by way of notice, sufficient in advance, not less than 15 working days, prior to the conduct of audit.  The audit under sub-section (1) shall be carried out in a transparent manner and completed within a period of three months from the date of commencement of audit.  During the course of audit, the authorized officer may require the taxable person,  To afford him the necessary facility to verify the books of accounts or other documents as he may require.  To furnish such information as he may require and render assistance for timely completion of the audit.  On conclusion of audit, the proper officer shall without delay inform the taxable person, whose records are audited, of the findings, the taxable person's rights and the obligations and the reasons for the findings.  Where the audit conducted under sub-section (1) results in detection of tax not paid or short paid, the officer may initiate action under section 51.

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OFFENCES AND PENALTIES Offences and penalties: Where a taxable person who –  Supplies any goods or services without issue of any invoice or issue any false invoice with regard to any such supply ;  Issue any invoice or bill without supply of goods or services in violation of the provisions of this Act ;  Collects any amount as tax but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due ;  Fails to deduct the tax in terms of sub-section (1) of section 37, or deduct the amount which is less than the amount required to be collected ;  Fraudulently obtains refund of any CGST/SGST under this Act ;  Is liable to be registered under this Act but fails to obtain registration ;  Transport any taxable goods without the cover of documents ;  Fails to keep, maintain or retain books of account ;  Issues any invoice by using the identification number of another taxable person ;  Destroys any material evidence ;  Supplies, transports or stores any goods which he has reason to believe are liable to confiscation under this Act; Any person who contravenes any of the provisions of this Act or rules made there under for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to Rs. 25,000/-

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Conclusion It can be concluded from the above discussion that GST will provide relief to producers and consumers by providing wide and comprehensive coverage of input tax credit set-off, service tax set off and subsuming the several taxes. Efficient formulation of GST will lead to resource and revenue gain for both Centre and States majorly through widening of tax base and improvement in tax compliance. It can be further concluded that GST have a positive impact on various sectors and industry. Centre has decided to review the existing exemptions from Central Excise Duty so that list of goods exempt from CGST and SGST list and 99 items exempted from VAT are taken off from both the components of GST. VAT has to some extent reduced tax-evasion and frauds. It is encouraging to note that most of the traders and general public are aware of VAT. GST, the major reforms on indirect taxes, will reduce tax burden due to cascading effect. The efficiency in tax administration will be improved, indirect tax revenue will be increased considerably due to inclusion of more goods and services, and at last the cost of compliance will be reduced for the dealers. The implementation of GST will be in favor of free flow of trade and commerce throughout the country. This single most important tax reform initiative by the Government of India since independence provides a significant fillip to the investment and growth of our country’s economy. To get the desired result, it should be assured that the benefit of input credit is ultimately enjoyed by final consumers. Although implementation of GST requires concentrated efforts of all stake holders namely, Central and State Government, trade and industry. GST effect the indirect taxation systems and help reduce the burden on tax payer. GST help to reduce the burden of record make and

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file maintain. Because GST cover 10-12 Tax. GST reduce the price of various goods and increase the sale. After the implementation of GST indirect taxation

Systems will remove and it easy to all tax payer to pay the tax to government. Efficient formulation of GST will lead to resource and revenue gain for both Centre and States majorly through widening of tax base and improvement in tax compliance. It can be further concluded that GST have a positive impact on various sectors and industry. Although implementation of GST requires concentrated efforts of all stake holders namely, Central and State Government, trade and industry.

23rd GST Council Meeting Summary:– Changes in the tax slabs: - Taxes on over 200 items have been squeezed and a whopping 88% of the items from the highest slab of 28% have been switched to 18%. Out of the 228 items in the 28% category, only 50 have been retained and the rest 178 have been slid downwards to different tax brackets. 2 items saw a dip from 28% to 12%, 6 items from 18% to 5%, 8 items from 12% to 5% and 6 items from 5% to nil. Changes in the composition scheme: Manufacturers and traders would now operate at a standard rate of 1%.  The threshold to opt GSTR-3B along with payment of tax will now need to be filed by 20th of the next month till March 2018.  Threshold for the composition scheme has been increased to Rs. 1.5 crores from the current limit of Rs. 1 crore. Softened fines on late filing: Fine for late returns has been slashed by 90% to a mere Rs. 20 per day from Rs. 200 per day for a taxpayer with nil liability. 159

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 Late fine for not submitting the GSTR-3B within due dates for the month of July, August and September 2017 has been waived off.

Relaxed deadlines for filing returns

GSTR-3B along with payment of tax will now need to filed by 20th of the next month till March 2018. - Taxpayers divided into two categories for filing GSTR-1 till March 2018. The categories are:Businesses with an annual aggregate turnover of upto 1.5 crores will file GSTR-1 quarterly.

Period

New Due Date

July - September October - December January - March

31 – Dec - 2017 15 – Feb - 2018 30 – April - 2018

Table-18

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Business with an annual aggregate turnover of above 1.5 crore will file GSTR1 monthly.

Period

New Due Date

July – October November December January February March

31 – Dec - 2017 10 – Jan - 2018 10 – Feb - 2018 10 – Mar - 2018 10 – Apr - 2018 10 – May - 2018

Table-19

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ANNEXURE

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QUESTIONNAIRE

My name is Nivedita Srivastava. I’m a MBA student at the AKTU University. Supervised by Dr. Mamta Shukla. My research aims to evaluate and document the understanding and expectations from the proposed Goods and Services Tax (GST) to be introduced in India. You are being invited to take part in this research because your experience with taxation and the financial services industry coupled with your knowledge of the proposed GST will greatly expand my understanding of the overall experience of GST as part of my academic study. The data from this study will be used in the completion of my Summer Training, and it may be included in my doctoral thesis, journal articles, and presented at conferences. Your response will be anonymous, and so anyone who takes part in the research will not be identified. This survey will take about 5 – 10 minutes. Most questions are multiple choice and we ask that you simply provide us with your best answer. Completion of the survey will be treated as explicit consent to participate in the research. Because the survey is anonymous, it is not possible to withdraw from the participation after the submission of questionnaire.

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1. Name and address of the business

2. Name and contact details of the interviewee

3. Number of members in the tax team

□ 0-5 □ 6-10 □ More than 10 4. Whether separate indirect tax team?

□ Yes □ No □ Not Applicable

5. If yes number of members in tax team for indirect tax

□ 0-5 □ More than 5 □ Not Applicable

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6. % of indirect tax paid to total tax paid by the business – By the business/by clients

Financial year FY 201112 FY 201213 FY 201314

% of IDT to total tax

0-10%

11-25%

26-50%

More than 50%

7. Does the department apply the existing service tax laws fairly?

□ Yes □ No

8. Have you faced practical difficulties in compliances under the current service tax requirements? If yes, give examples

□ Yes □ No

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Examples - ____________________________________________________

______________________________________________________________

9. Have you ever encountered technical problems with the tax (eg, uncertainty as to whether the service tax applied to a transaction you were involved with/your client was involved with).

□ Yes □ No Examples - ____________________________________________________ ______________________________________________________________ ______________________________________________________________

10. Is the available legislation in relation to the proposed GST satisfactory or do you feel need for more clarity?

□ Yes - Satisfactory □ No – Need more clarity

11. Can you comment on the following in relation to the existing provisions of service taxes impacting the financial services industry: 166

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Whether the banking services as included in the negative list is satisfactory or not? Whether the definition can be amended to reduce litigation? (Discount income to be specifically included – currently addressed only in the education guide)

□ Yes satisfactory □ No – Needs to be amended for more clarity

Whether the exclusions to the definition of services are satisfactory or not? (Secured Debts are not specifically included – currently addressed only in the education guide)

□ Yes satisfactory □ No – Needs to be amended for more clarity

Whether the definition of securities is satisfactory? (Securities as defined by Reserve Bank of India – ‘RBI’ are still not specifically covered – currently addressed only in the education guide)

□ Yes satisfactory □ No – Needs to be amended for more clarity

Whether the existing definition of banking services as included in the negative list is very clear? – (Eg to add Income on securities and services provided to RBI)

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□ Yes Very clear □ No – Not clear

Whether taxability of financial services transactions in terms of “place of supply” is clear and unambiguous? If yes, are you clear on the state in which the financial service would be provided under the proposed GST regime and whether Rule 3/9 of the Place of Provision of Service Rules, 2012 – ‘POPS’ would apply?

□ Yes clear on applicability of POPS □ No – POPS needs to be amended for more clarity

Whether it is clear that Rule 3 of place of supply rules applies to financial services?

□ Yes clear □ No not clear

Whether current law is clear on the taxability of interchange income received by issuing banks?

□ Yes □ No

12. Are you aware of the taxing provisions for financial services under GST regime globally? Can you suggest any provision which could be incorporate into the Indian scenario? 168

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□ Yes □ No

Comments __________________________________________________________

_______________________________________________________________

_______________________________________________________________ 13. The taxability of the interstate transaction under the proposed GST is based on the following:

Central GST ‘CGST’/ State GST – ‘SGST’ and Integrated GST – ‘IGST’ C-VAT model for interstate transactions

Which of the above do you think is a better option?

□ IGST □ C-VAT

14. Do the existing POPS need to be more clear and precise for taxability of interstate transactions?

□ Yes 169

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□ No

15. Have you /your clients been subject to audits (CERA/EA 2000/VAT etc.) from the department in relation to service taxes? If yes, were the issues raised resolved in an appropriate manner?

□ Yes □ No Issues Resolved □ Yes □ No □ Not Applicable

16. Do you use the services of external consultants for current service tax matters

□ Yes □ No □ Not Applicable

17. Do you see a rise in the demand for your services by clients?

□ Yes □ No 170

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□ Not Applicable

18. If yes what is the nature of services desired – Advisory or compliance i.e. special advice or routine work? Which would you rate as more dependent on the external consultants?

□ □ □ □

Advisory (including special advice) Compliance (routine) Both Not Applicable

More External consultant dependent □ Advisory (including special advice) □ Compliance (routine) □ Both □ Not Applicable

19. How much time do you currently spend on service tax compliances? Do you think this will increase or reduce in the long term with the introduction of GST?

□ □ □ □ □

Less than 25% More than 25% More than 50% Will increase with introduction of GST Will decrease with introduction of GST

20. Do you think that the current service tax compliances are easier than the direct tax compliances

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□ Yes easier than direct tax compliances □ No not easier than direct tax compliances

21. Do you think the existing Cenvat Credit rules are fair? Are the exclusions valid?

□ Yes – Fair exclusions valid □ No – Not Fair exclusions not valid

22. Do you think the reversal mandated for the financial service industry is fair?

□ Yes □ No

23. Do you think the provisions in relation to exports are clear?

□ Yes □ No

24. Do you foresee any issues arising out of the amendment to export rules whereby export to branches is not construed as exports?

□ Yes □ No 172

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Issues _____________________________________________________________

_______________________________________________________________

25. Do you think the current exemptions provided under the existing laws are too many or too less? Any suggestions to be incorporated in relation to the same in the proposed GST? □ Not Enough □ Just Right □ Too many Suggestions _________________________________________________________ _______________________________________________________________

26. Do you think the proposed threshold exemption limit is correct?

□ □ □ □

Correct Too Low Too High No comments

27. Do you think that the provisions in relation to valuation of services are unambiguous? Specifically in relation to reimbursements of costs, financial leases and credit card transactions?

□ Yes 173

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□ No

28. Do you think GST will be easier to comply with or difficult?

□ Easier □ Difficult □ Don’t know

29. Do you think under GST regime Centralized registration with one return for state and one for centre will work or do you envisage multiple state registrations and compliances under the proposed GST regime?

□ Multiple State registrations □ Centralized registration

3.. Does your business have a policy/plan in place specifically to cope with the proposed GST?

□ Yes □ No

31. Is your current software system equipped to handle the proposed GST?

□ Yes □ No □ Not Applicable

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32. Do you have any software solutions for your client to handle the proposed GST?

□ Yes □ No

33. Do you think GST is a fair tax?

□ Yes □ No

34. Is the proposed rate of GST @ 27% high, low or correct?

□ Too Low □ Too High □ Just Right

35. Would you rate the current service tax administration as better as or worse than the direct tax administration?

□ Indirect – Service tax administration is better □ Direct tax administration is better □ Others -

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36. Do you feel that as a taxpayer you have an opportunity to raise your voice in indirect – service tax matters?

□ Yes □ No

37. Do you think that the proposed GST is a predominantly compliance tax or a technically oriented tax?

□ Compliance Tax (Focus is on filling and filing of returns etc.) □ Technical Tax (Focus is on the applicability or otherwise of the tax) □ Don’t know □ Both

38. Any suggestions/comments.

_______________________________________________________________

Reference

www.gst.gov.in www.gstn.org www.gstcouncil.gov.in www.cbec.gov.in 176

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www.financialexpress.com www.wikipedia.com www.cleartax.com

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