Private Limited Company and its Incorporation

WHAT IS A PRIVATE LIMITED COMPANY?

A private limited company is a type of privately held business entity registered under the Companies Act, 2013. In this type of business entity, the owners are liable to their shares. Private companies issue stock and have shareholders, they cannot trade on public exchanges and shares are not issued through an initial public offering (IPO). A private limited company must have at least one shareholder and can have a maximum of fifty shareholders. This makes the entity to stand between partnership and a public company. It is widely acceptable among entrepreneurs as it is more convenient to start a Private Limited Company.

INCORPORATION OF A PRIVATE LIMITED COMPANY

A Private Limited Company can be incorporated as per the procedure explained below :

Director Identification Number (DIN) & Digital Signature Certificate (DSC)

A person intending to become a director of a company requires a unique identification number which is issued by the Ministry of Corporate Affairs. This number then is used to record the details of the director of the company. The Digital Signature Certificate is the digitalised version of all the paper certificates. This certificate can be used to prove the director’s identity, access information and sign documents digitally. Certain documents are required for DIR-3 application:

Identity Proof: A copy of PAN card is mandatory whereas a copy of the Driver’s license is optional.
Address Proof: A copy of the Passport / Election ID / AADHAR card / Driver’s License is sufficient.
Passport Size photo
Mobile Number
Education Qualification
Verification signed by the applicant.

Company Name Availability

The name of the company must not be pre-existing, applicants must first search for any existing Trademark and then decide on the company’s name. The Promoters of the company have to provide at least 6 names in the order of their preference to the Registrar of Companies for name availability.

Memorandum of Association (MOA) & Articles of Association (AOA)

When the name of the company has been approved by the Registrar of Companies then the Subscribers have to draft a MOA & AOA specifying their Names, Address, Occupation and the sign the subscription pages of the Memorandum and Articles of Association formed.

The Memorandum of Association is a document regarding the main objectives as well as the secondary objectives of a company. It covers all the necessary fundamental provisions of the company’s constitution.

Articles of Association is a contract based on mutual understanding between the company and its members defining their rights and duties.

Filing E-Forms with Registrar of Companies

After the drafting of Memorandum of Association and Articles of Association, an application has to be sent to the Registrar of Companies regarding the incorporation of the company. This Application must contain all the necessary documents of the Company and its Directors.

Verification of Documents

The company must pay the desired fees to the Registrar of Companies and must get Stamp Duty to get the documents verified.

Issue of Certificate of Incorporation

When all the documents are verified and duly approved by the Registrar of Companies, a digitalised ‘Certificate of Incorporation’ is mailed to the Directors of the company. Once the Incorporation Certificate is received , company can start with its operations .

ADVANTAGES OF A PRIVATE LIMITED COMPANY

Separate Legal Entity

A company is a legal entity and a juristic person under the law. The members (Shareholders/Directors) of a company have no liability to the creditors of the company. This form of organisation has wide legal capacity, acquire and hold property and also incur debts in its own name. As a juristic person, a company can sue in its own name and can be sued by others. A company’s common seal is considered as its signature but is not mandatory.

Limited Liability

Limited liability means the status of being legally responsible only to a limited amount of debts of a company. A company is a separate legal entity from its members. The liability for repayment of debts incurred by the company lies on the company itself and not on the owner. Unlike other business entities the liability of the members in respect of the company’s debts is limited.

Uninterrupted Existence

A private limited company has perpetual succession. A perpetual succession means the company has uninterrupted existence until it is legally dissolved or voluntarily. A company, being a separate legal person will continue to exist even if a member dies or ceases irrespective of the changes in the membership.

Easy Transferability

Shares of a Private Limited company which is limited by the number of shares can be transferred by a shareholder to any other person. The shares and other interest of any member in the company is dealt as a movable property and can be transferred in the manner provided by the Company. Shares can be transferred by filing and signing a share transfer form and handing it over to the buyer of the shares along with the share certificate. It is easier for a member to leave the membership of the company and also to transfer its share of ownership.

Owning Property

A company as a legal entity is capable of owning its funds and properties. No shareholder can make any claim upon the property of the company as the owner of the company and the company itself are two separate entities.

If you are looking for incorporating a private limited company or still perplexed as to what is most appropriate for your kind of business, feel free to get in touch with us. You can visit us for consultation and speak to our CS to ascertain the right direction.

For more information on Incorporation of a Private LTD company , feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Tax Reforms – Budget 2017

As the Finance Minister of India , Mr. Arun Jaitley, got up to deliver the Union Budget for the Financial Year 2017-2018, every Business Man in the country was waiting for the Tax Reforms. The Direct Tax Reforms given in the budget dated 1^st Feb’2017 will be applicable in the F.Y. 2017-18 or A.Y 2018-19. Some crucial and evident changes have been made by the Government for the Small and Medium Scale Business in the budget.

As per the Narendra Modi Government, the Tax Revenue of the central Government from Direct Tax Collection has gone up by 17% in F.Y. 2015-16 as compared to F.Y. 2014-15, and the rate of growth in advance tax in personal income tax domains for the F.Y. 2016-17 has increased by 34.81% till 20^th Jan’2017 as compared to F.Y 2015-16.

We have decoded the key changes proposed in the Union Budget announced by the Finance Minister on February 1, 2017.

Tax slabs

It has been proposed to reduce the tax rate for taxable income less than Rs 500,000 from current 10% to 5% benefiting Individuals (resident/ non-resident) below the age of 60 years and Individuals (resident/ non-resident) above the age of 60 years and below the age of 80 years.

Rebate under section 87A

Rebate under section 87A of the Income-tax Act, 1961 (“the Act”) is proposed to be reduced from Rs 5,000 to Rs 2,500. It has also been proposed to restrict such rebate to resident individuals whose total income does not exceed Rs 350,000 (earlier Rs 500,000). Considering the above amendments, the net benefit arising to an individual with taxable income of Rs 350,000 and Rs 500,000 is Rs 2,575 and Rs 7,725 respectively.

Partial exemption for pension

The existing provision of section 10(12A) of the Act provides that payment from National Pension System (“NPS”) trust to an employee on closure of his account or opting out shall be exempt up to 40% of total amount payable to him. In order to provide relief to an employee who is a subscriber of NPS, it is proposed to provide exemption for partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made thereunder.

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Rationalization of deduction under section 80CCD for self-employed individual

In order to bring about parity between an individual who is an employee and an individual who is self-employed, it is proposed to amend section 80CCD of the Act so as to increase the upper limit of 10% of Gross Total Income (“GTI”) to 20% in case of individual who is self-employed. Accordingly, for a self-employed individual, contributions to NPS to the extent of 20 percent of his/ her GTI will now be allowed.

Withholding tax obligation for individual not liable to tax audit

As per the existing provision of the Act, withholding tax obligation on rent payments arises only in case of individuals or HUF who are liable to tax audit. It is proposed that individual or HUF not liable for tax audit will now be required to withhold tax at the rate of 5%, if the rent exceeds Rs 50,000 per month or part of month on payment of rent.

Also Tax deduction and collection Account Number (“TAN”) will not be required to be obtained.
Further, tax would be required to be withheld only once during the previous year in the last installment payable for the year.

In addition to the above, it is proposed that under section 206AA of the Act, maximum deduction shall not exceed the rent payable for the last month of the previous year/ last month of tenancy.

Shifting base year from 1981 to 2001 for computation of capital gains:

Existing provisions gave the assesse an option to consider Fair Market Value (“FMV”) as on April 1, 1981 for capital assets acquired before the said date. It has been proposed to shift the base to April 1, 2001. Accordingly assesses have an option to consider cost or FMV as on April 1, 2001 as their cost in respect of assets acquired on or before April 1, 2001.

Further, for the purpose of computing indexed cost of acquisition, 2001 shall be considered as the base year.

Reduction of holding period for computation of capital gains for immovable property:

It is proposed to amend section 2(42A) of the Act to reduce the holding period from existing 36 months to 24 months in case of immovable property being land and building or both to quality as long term capital asset.

Expansion of scope of long term bonds under section 54EC

It is proposed to provide exemption under section 54EC of the Act on investment of long term capital gains in any bond redeemable after three years that shall be notified by the central government. This will be in addition to investments in NHAI bonds and RECL bonds where exemption was allowed on investment up to Rs 5,000,000.

Measures for promoting digital payments in case of presumptive business income cases

In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend section 44AD of the Act to reduce the existing rate of deemed total income of 8% to 6% in respect of turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year. However, the existing rate of deemed profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in any other mode.

For more information on Tax Reforms, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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One Person Company and its Incorporation

ONE PERSON COMPANY

One Person Company (OPC) is a form of business entity that is owned and managed by a single entrepreneur. This concept was introduced in India through the Companies Act, 2013 supporting entrepreneurs who are capable of starting a venture by creating a single person economic entity. A One Person Company is also a separate legal entity from its members just like a Private Limited Company or a Limited Liability Company. In this type of business entity, only one person is required who can be the Director and as well as the shareholder of the company. This venture of One Person Company is still in its emerging stages which makes it much more difficult for entrepreneurs to adopt, it is mainly suitable for people starting an unregistered Proprietorship. The entrepreneur can set up their company without sharing their profits as One Person Company does not need a middleman to target the markets.

Features of One Person Company (OPC)

One Shareholder

One Person Company is a business entity which is owned and managed by a single person. The Company Incorporation Rule states that only a resident and also a citizen of India can form a One Person Company. The entrepreneur hold all the shares of the company as it has only one member. The people who are Foreign citizens and are Non-Resident citizens cannot indulge in the formation of a One Person Company. A shareholder can only have shares in a single One Person Company and not in various companies.

Director

A One Person Company can be managed by a Single Person. In this type of business entity, the Sole Shareholder can become the Sole Director of the business. A One Person Company can have a maximum number of 15 directors even if it may be having a Sole Shareholder.

Nominee

This states that the Shareholder of the company has to nominate a person who in the event of death or inability to continue the work in the company will come forward to take the charge of the One Person Company. The present shareholder will issue a written consent in the name of the nominee, the nominee must also be a resident and a citizen of Indian. The person nominated must not have any other One Person Company under control.

Incorporation of a One Person Company (OPC) in India

A One person Company can be incorporated as per the procedure explained below :

Director Identification Number (DIN) & Digital Signature Certificate (DSC)

1. Identity Proof: A copy of PAN card is mandatory whereas a copy of the Driver’s license is optional.

2. Address Proof: A copy of the Passport / Election ID / AADHAR card / Driver’s License is sufficient.

3. Passport Size photo

4. Mobile Number

5. Education Qualification

6. Verification signed by the applicant.

Company Name Availability

The name of the company must not be pre-existing, applicants must first search for any existing Trademark and then decide on the company’s name. The Promoter of the company have to provide at least 6 names in the order of their preference to the Registrar of Companies for name availability.

Memorandum of Association (MOA) & Articles of Association (AOA)

When the name of the company has been approved by the Registrar of Companies then the Subscriber have to draft a MOA & AOA specifying their Names, Address, Occupation and the sign the subscription pages of the Memorandum and Articles of Association formed.

Articles of Association is a contract based on mutual understanding between the company and its members defining their rights and duties.

Filing E-Forms with Registrar of Companies

Verification of Documents

The company must pay the desired fees to the Registrar of Companies and must get Stamp Duty to get the documents verified.

Issue of Certificate of Incorporation

Post Incorporation

After the Incorporation of a One Person company some necessary formalities are required immediately, such formalities are:

 Opening a Current Bank account in the name of the Company

 The Company must apply for the Shop Act License

 The Shareholder must be issued a Share certificate by the Company

 The subscription money must be payed through the Current Bank account

of the Company

BENEFITS

1. A One Person Company is a separate business entity and have Limited liability to its members.

2. This type of Company helps an entrepreneur to establish its own business without depending upon a second person.

3. A Legal Auditor is not required in this business unlike any other business enterprise.

4. A One Person Company being a separate legal entity can own property in the Company’s name and the shareholder cannot make any claim upon the property.

For more information on Incorporation, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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What Are The Things Great Managers Do Differently?

Have you tried to prove yourself as a good manager? Do you sometimes feel you need to get the best out of your position and those working with you?

Here are 7 tips on how you can exploit your subordinates’ and your own potential to the fullest.

• Discover your employees’ strengths It’s very important to know when people are clearly enjoying what they’re doing. Their talents, their values, their hard work, their interests, their distractions, everything plays an important role in assessing an employees strengths and what are they more likely to do better. This way, they could enjoy the work they do for the mutual benefit of the employee and the organisation.

• Offer guidance for their development All the work assigned to the employees should regularly be checked, and any guidance sought should be offered to them. The employees should be focused more on their strengths, and on developing them. It is the duty of the manager to check on it and offer help as and when required for development. If they had the opportunity to do what they do best each day, what would they be doing more of? What development support, on-the-job experiences, coaching or training, off the job trainings might they need to develop these strengths further? These are some important things you should keep in mind for their overall developments based on their strengths.

• Give strength-based feedback – You should look at how your employees are using their strengths for their duties. Tell them when you’re proud of good results that you get after they apply their strengths. Help them to understand when they’re overplaying a strength and how to dial it back in these moments. Encourage them to stop underplaying specific strengths when you see them hesitating or holding themselves back. Your feedbacks play a crucial role in their development.

• Set Clear expectations – The outcome of work, from every input should be pre planned and well defined. Every employee under you must know what is expected out of their work in a defined time period. If this is not clearly defined and agreed upon both ways, there will be lots of confusion when the deadline comes, the atmosphere in the work place would prove to be against benefits and you’ll find unhappy faces and blame games all over the place. This is why it’s very important to discuss in detail with the whole team and clarify wherever needed.

• Identify Uniqueness – Great Managers try to learn what is that one thing which is unique about every employee and work on it. They tend to use the unique factor for the benefit of the organisation.Everyone is good at something. It helps improve the over all productivity in work place with satisfaction. Such identification works wonders if done with each and every employee in any environment.

• Appreciate Subordinates – Some managers are quite reluctant to appreciate their subordinates because they think it will make them overconfident and complacent. But, this is opposed to what is the ideal way of treating and behaving with subordinates. For development and confidence boost, they need appreciation, recognition and appraisal from time to time when they do work that demands these. Everybody likes to get appreciated for the things that they do.Excellence needs praise. Great Managers never make it too late to appreciate.

• Care about subordinates – If you are a manager, you need to take care of people you’re managing. Sometimes, your employees might have certain personal problems coming in the way of organizational duties, you need to care for them, and understand the circumstances through which they are going. They might need an extra leave, they might need your inspirational and motivational words when they are morally down, they might need a boost when things are not going on well and so on.If you prove to be a good manager in this respect, so will they turn out to be good employees.

For more information on feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Excerpts from GST Council’s 8th Meeting

What were the main points in the GST Council’s 8th meeting?

The main points of discussion in the 8th GST council meeting were as follows:

1. ISSUE OF DUAL CONTROL
In the 8th GST council meeting, the group of members didn’t have any common agreements on the issue of dual control. This issue made people think differently as many had different views on this topic. The State does not want the Centre to have the authority over all the small tax paying entities whereas The State does not have any problem in having Dual Control with the Centre for the authority of all the bigger tax payers. The Council also cannot decide the turnover to defy a small taxpayer from a bigger one, for some a company having a turnover below 5 crores will be a small tax payer whereas as per the Centre a company having a turnover of 1.5 crores will also be a small tax payer. The centre is not ready to accept the demands of state for access over 1.5 crores in case of small tax payers. The council wants to consider a high cut off rate and wants the Central Goods and Services Tax to be administered by the Centre and the tax payers below that cut off should be administered by the State.

2. CESS
CESS will be charged on many more goods such as luxury goods, aerated drinks, tobacco products and on high-end cars. The ultra-luxury goods and sin goods will have a GST cess for a period of 5 years. The major part of CESS will depend upon the current incidence of tax, if the clause of GST cess for 5 years raises any profit, then the council will decide on how to use these profits to compensate any other losses incurred by the State or Centre. Only the Clean Environment Cess will be retained and all the funds will be used to compensations.

3. INDUSTRY REPRESENTATION
The Government is deliberating all representation from Trade and Industry in the implementation of the GST bill. The Commerce and Industry sectors has given representation from officials to the GST council. The banking and insurance sector also has given representation to understand the impact of GST on products.

STATE WISE SCHEDULE FOR GST REGISTRATION

State	Start Date	End Date
Puducherry	08-11-2016	07-12-2016
Sikkim	08-11-2016	07-12-2016
Maharashtra	14-11-2016	07-12-2016
Goa	14-11-2016	07-12-2016
Daman and Diu	14-11-2016	07-12-2016
Dadra and Nagar Haveli	14-11-2016	07-12-2016
Chhattisgarh	14-11-2016	07-12-2016
Gujarat	15-11-2016	07-12-2016
Odisha	30-11-2016	15-12-2016
Jharkhand	30-11-2016	15-12-2016
Bihar	30-11-2016	15-12-2016
West Bengal	30-11-2016	15-12-2016
Madhya Pradesh	30-11-2016	15-12-2016
Assam	30-11-2016	15-12-2016
Tripura	30-11-2016	15-12-2016
Meghalaya	30-11-2016	15-12-2016
Nagaland	30-11-2016	15-12-2016
Arunachal Pradesh	30-11-2016	15-12-2016
Mizoram	30-11-2016	15-12-2016
Manipur	30-11-2016	15-12-2016
Uttar Pradesh	16-12-2016	31-12-2016
Jammu & Kashmir	16-12-2016	31-12-2016
Delhi	16-12-2016	31-12-2016
Chandigarh	16-12-2016	31-12-2016
Haryana	16-12-2016	31-12-2016
Punjab	16-12-2016	31-12-2016
Uttarakhand	16-12-2016	31-12-2016
Himachal Pradesh	16-12-2016	31-12-2016
Rajasthan	16-12-2016	31-12-2016
Kerala	01-01-2017	15-01-2017
Tamil Nadu	01-01-2017	15-01-2017
Karnataka	01-01-2017	15-01-2017
Telangana	01-01-2017	15-01-2017
Andhra Pradesh	01-01-2017	15-01-2017
Enrolment of Taxpayers who are registered under Central Excise Act but not registered under State VAT	05-01-2017	31-01-2017
Enrolment of Taxpayers who are registered under Service Tax Act but not registered under State VAT	09-01-2017	31-01-2017
New registration under VAT/Service Tax/Central Excise after August 2016	01-02-2017	20-03-2017

For more information on GST or for Registration under GST, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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EMPLOYEES PROVIDENT FUND

Employee’s Provident Fund is a scheme which helps in providing financial assistance to the workers by saving their own money for future use after retirement. This scheme of Employee Provident Fund has been carried forward by the government for the welfare of its retired citizens and also for those who are disabled to work. The employees and their employers have to contribute a fixed amount of money from their salaries at a constant rate within a particular time interval in the Provident Fund to get interests after retirement. When the Provident Fund matures, it provides a good return and interest of the invested money as the money received will be Tax-free. The Employees Provident Fund can also be used before retirement in case of an emergency such as when a person is unfit for employment, this provides a type of monetary security to the employee. This scheme is growing at an increasing speed and is backed by many intellectual people in the business and finance industry.

APPLICABILITY AND ELIGIBLITY IN IMPLEMENTATIONOF PROVIDENT FUND

APPLICABILITY

• A company or any other Business entity having 20 or more employees working for the business must register for the Employee’s Provident Fund.
• The employers and the employees have to issue an amount of Rs.1800 per month into their Employees Provident Fund.
• When the amount has been transferred into the Employees Provident Fund, a small contribution is also made to the Pension, Insurance and Administrative Cost account.
• In case of a company which has more losses than its entire net worth can contribute 10% of their compensations in their Employees Provident Fund.

ELIGIBILITY

• An employee working under any company is qualified to participate in the scheme of Employees Provident Fund.
• Any company having 20 or more employees is eligible of participating in this scheme.
• Whenever an employee exceeds the amount of Rs.6500 in their salaries, then they have the eligibility to join the scheme with the permission of its employer.
• When a person becomes the member of this scheme, they have to contribute 12% of their rewards in the Employees Provident Fund.

BENEFITS

Insurance

In most of the organisations employee’s insurance schemes are not available to the employees of the company, Employees Provident Fund provides that scheme for the security and stability of the employee in the future. For getting insured, the business entity just need to provide a sum of Rs.6500 on a monthly basis to ensure an insurance premium benefit. Insurance helps an employee in case of an emergency, also provides a good amount of money after maturity for the survival of their family.

Pension

When an employee has retired, and does not have any source of monetary income, pension provides that source for the employee. A part of the employees pay also goes into the Employee’s Pension Fund, which provides an employee a sense of security after retirement.

Tax Free

Upon maturity of the Employees Provident Fund, the interest received by the employee’s will be tax free. This results in proper stability and security of employees as they get vast interest on their invested amount.

Financial Security

The Employees Provident Fund provides financial security for the employees at the time of retirement, emergencies and at loss of income. Employees Provident Fund provides a source of financial assistance to the retired personnel as well as gives funds to the employee to meet their requirements in case of an emergency, early drawings are allowed only in case of an emergency. When an employee cannot work, or has any disability to work, provident fund helps them to overcome their loss of income and provides means to survive. Also, if the employee has passed away then the funds are passed on to their applicant to provide them with financial assistance.

Long Term

The Employees Provident Fund allows the employees to have some kind of monetary security in the long run, it also ensures that the employee can have certain investment or any other goal after retirement. Resources can also be borrowed in the Long Run for marriage, education, medical reasons and also for housing purposes.

Withdrawal

Employees Provident Fund also provides the benefit of withdrawal to the employee. An employee can withdraw their money only when they are unemployed, self-employed or have left the current job to work in another company. In case of any emergency, an employee can withdraw the amount in its provident fund before the time of maturity. Pre-mature withdrawal can also be treated as a loan as an employee can use the money for education, marriage, medical expenses. These withdrawals must not be more than 50% of the amount in the provident fund.

Transfer

An employee can also transfer its provident fund account rather than closing it whenever they are leaving their current job and joining a new employer. Transferring of the funds from an old account to a new one is a better option because if an account is closed before 5 years then the money contributed in that account will then become tax deductible whereas by transferring of funds, an employee will get the money in full at maturity.

REGISTRATION PROCEDURE FOR EMPLOYEES PROVIDENT FUND

The Employees Provident Fund registration is now mainly done Online as it is more convenient and accessible for an organisation. A business entity having less than 20 employees can apply for the scheme voluntarily, but an organisation having more than 20 have to register their company for this scheme to avoid penalties in delaying the registration. The procedure for registering for the Employees Provident Fund is as follows:

• The company must provide the name, address, branch details, head office details and the Date on which the company was established.
• The organisation must also provide the total strength of employees working as well as the services provided by the company.
• They must also provide the legal proof that if the company is a partnership, private limited company or a public limited.
• The total salary distribution to the employees of the company must be provided with the details of the bank in which the company has its account.
• The Directors or the owners of the company have to provide legal documents to prove that the documents are verified. The address of all the owners must be given with the details of all the employees including date of joining, salary.
• A copy of the partnership deed must be given to prove that the company is registered with the Registrar of Companies.
• PAN details of the Business entity must also be provided.

For more information on EMPLOYEES PROVIDENT FUND, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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GST Registration Procedure

GST, AN OVERVIEW

The Goods and Services Tax is destination based indirect tax, levied at the time of consumption of goods and services by the ultimate consumer. It also aims at simplifying the present tax structure in India. It subsumes taxes like Central indirect taxes – Service Tax, Additional Customs Duty, Special Additional Customs Duty, Central Excise Duty, and Countervailing Duty, and Sale indirect taxes – Sales Tax, Central Sales Tax, Entertainment Tax, Luxury Tax, and Octroi/ Entry Tax.GST is just like a duty just on value addition at every stage. The end consumer subsequently bears the GST charged by the last merchant in the Sales Network, with set-off advantages at all the past stages. With the GST all set to be rolled out, we look at the registration procedure.

GST REQUIREMENTS

Any person carrying on any business who has a taxable supply of over Rs.10 lacs in case of Northeastern States Of India and Rs. 20 lacs in the rest of India would be required for registration of GST in India. A mechanism is available for voluntary GST registration to help claim ITC(Input Tax Credit). It must be obtained under 30 days of exceeding the Rs.25 lacs turnover limit. A procedure would be announced for migrating the VAT or service tax registration as a GST registration.

According to Schedule III of the Model GST Law, the following shall be registered compulsorily, disregarding the total turnover of their respective businesses:

• Every person/entity who is registered or holds license under any earlier law, is liable to get migrated under this Act;
• Every person shall be liable to be registered under this Act if his turnover in a financial year exceeds the taxable threshold limit.
• Every person making any inter-state Supply, irrespective of taxable threshold limit;
• persons who are casually taxable i.e. any person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business;
• Every person who are required to pay tax under reverse charge;

GST REGISTRATION NUMBER

It is expected to be provided based on PAN. One of the major advantage of implementation is that the same GST registration number can be used across all states of India against the VAT regimen in which a dealer needs to obtain VAT registration in each of the states (with additional cost and compliance formalities).

DOCUMENTS REQUIRED FOR GST REGISTRATION

For Private limited company

• Certificate of Incorporation
• PAN of the company
• List of Directors along with their personal details
• PAN Card of Directors
• Adhaar Card of Directors
• Passport size Photo of Directors
• Board Resolution
• Address proof of company

For Proprietorship

• PAN of the proprietor
• Address proof of the proprietor
• Photo of Proprietor
• Address proof of Entity

For Limited Liability Partnership

• Certificate of Incorporation
• LLP Dead
• PAN of LLP
• PAN of partners
• Adhaar Card of partners
• Letter Of Authorisation
• Address proof of Entity

For Partnership Firm

• Certificate of Registration
• Partnership Dead
• PAN of Partnership
• PAN of partners
• Adhaar Card of partners
• Letter Of Authorisation
• Address proof of Entity

ONLINE GST REGISTRATION PROCEDURE

GSTN maintains a portal for the online GST registration procedure. The applicant is required to submit an online application for GST registration along with the entire and specific details of the goods and services to be dealt. A temporary GST registration number would be provided post the submission of application and the online payment of registration fee.

A copy of the application must respectively be printed, attached with the other mentioned documents and then couriered to the GST department. A final GST certificate would be issued by the concerned officer post the verification of the application along with the documents.

ADVANTAGES OF GST REGISTRATION FOR BUSINESSES

On the registration of a business it will get various advantages of the implementation of GST. Business will legally be approved to gather charge from buyers and pass the tax credit on to the buyers or beneficiaries and will be legally perceived as a provider of goods and services. The business shall thus be having a proper bookkeeping of expenses paid on the input goods or services which can be used for payment of GST due on supply of products or services by the business.

For more information on GST Registration Procedure, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Limited Liability Partnership and its Incorporation

Limited Liability Partnership and its Incorporation (LLP)

It is an association of 2 or more persons who have set up this business structure for carrying on a lawful business with a view to profit, with the partners having a limited state of liability. LLPs are governed under the Limited liability Partnership Act, 2008. It can be said that LLP is a combination of Partnership and Private Limited Company as it encompasses features of both. Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

How to Incorporate a New Limited Liability Partnership

A Limited Liability Partnership may be incorporated as per the procedure explained below :

Registration

Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services . Fill in the registration form then select your user name and password. Therein, upload digital signature certificate.

Designated Partners Identification Number (DPIN)

All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN)”.

Digital Signature Certificate

Partners/Designated partners whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorised certifying agency.

Name reservation

Log on to the LLP portal. After login, click “E-Forms” link. Open Form-1 for reservation of name and fill in the details. Choose the name of the proposed LLP (upto 6 choices can be indicated). After this attach the digital signatures and submit the e-form and pay the necessary fee.

Details of minimum two designated partners of the proposed LLP, (at least one of them must be a resident of India) is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.

Incorporation of LLP

Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”.
Pay the prescribed registration fee as per the slab given in LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP. Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP . On submission of complete documents, the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act can register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.

Incorporation documents must be filed with the following attachments.

1. Copy of authorisation where the partner is a limited liability partnership, or company, or a limited liability partnership incorporated outside India or a company incorporated outside India.
2. Proof of address of registered office of limited liability partnership.
3. Details in respect of names of partners/witnesses and their signatures.
4. Attachments in respect of details of individuals/bodies corporate where the number exceeds five.
5. Optional attachments as may be required.

LLP agreement must be filed in (E-Form 3) with the Registrar within 30 days of incorporation.
The LLP Agreement must be stamped in accordance with the stamp Act.

CHARACTERSTICS

Separate legal entity : Like a company LLP also has a separate legal entity. So the partners and the LLP are distinct from each other.

No requirement of minimum capital : In case of companies there should be a minimum amount of capital that should be brought by the members or owners who want to form it. But to start an LLP there is no requirement of minimum capital.

Minimum number of members : To start a limited liability partnership at least two members are required initially. However, there is no mentioned limit on the maximum number of partners.

No requirement of compulsory audit : All the companiesare required to get their accounts audited. But in case of LLP, there is no such mandatory requirement.

BENEFITS

• It is flexible to organise the internal structure of an LLP
• There is no maximum limit for the no. of partners in LLP
• Raising and utilisation of funds depends on the partners will
• LLP is exempted of Dividend Distribution Tax (DDT)
• The partners have limited liability
• There is no requirement of minimum capital
• One can easily become a Partner or leave the LLP
• An LLP can easily attract finance from PE Investors, financial institutions, etc.

DEMERITS

• Any act of the Partner without the other partner , may blind the LLP
• LLP cannot raise money from public, unlike a company.
• Angel investor or venture capital firm does not prefer LLP

E-FORM INC-32

EVERYTHING ABOUT E-FORM INC-32

The Ministry of Corporate Affairs has introduced E – Form INC-32 under SPICe (Simplified Proforma for Incorporating Company Electronically) scheme vide MCA’s notification dated 01/10/2016 notifying Companies fourth amendment Rules,2016. This is a very significant initiative for technological advancement. The basic aim is to simplify the incorporation of a company by filling up an e-form INC-32.

EarlierMCA had come with the integrated process of incorporation by filing E-form INC-29. This was a major reform brought by MCA for incorporation of a company which required filing of only one E-form i.e. INC-29 as against the 5 forms filed earlier. As the entire process is in single form, correct filing would mean approval in 48 hours.

For further simplification, MCA has facilitated the process of incorporation by introducing SPICe E-form INC-32 which provides the same facilities as were provided in Form INC-29 with facilitating the process by introducing filing of Memorandum and Article of Association electronically. As against the earlier process, it has the potential to save lots of time and energy, if properly implemented. However, further clarification with regard to incorporation under SPICe is to be provided by Ministry of Corporate Affairs.

THE FORM CAN BE FILED EVEN AFTER INC-1
As against the facility provided by the e-form INC-29, e-form INC 32 has the facility to fill the form of incorporation of a company even after filing for the INC-1. That is, even if you’ve already filed the INC-1, you can apply for the name of the company INC-32.

IN DEPTH INFORMATION AS COMPARED TO INC-29
The five purposes for company registration, which are application for DIN allotment, reservation of name, incorporation and even PAN and TAN, are fulfilled by both INC-32 and INC-29, but INC-32 has in depth information as compared to INC-29 with an additional introduction of filing of MOA and AOA of the company electronically.

ELECTRONIC FILING OF MOA AND AOA
Now under SPICe, Memorandum and Articles of Association should be filed electronically, simplifying the whole process. In E-form INC-33 a copy paste of the objects of the company has to be done and in E-Form INC-34 a choice has to be made amongst the pre-drafted clauses of Articles of Association.
This has made the task of drafting Memorandum and Article of Association much easier for professionals.

DIGITAL SIGNATURES OF SUBSCRIBERS AND WITNESS
With the introduction of the new electronic Memorandum and Article of Association of the company, there is no need of signatures of subscribers and witness. Only the digital signatures of subscribers and witness on the E-Form INC-33 and E-form INC-34 would be enough for the specific purpose!

SHORTCOMINGS OF INC 32

Obtaining digital signatures is a costly affair.
The maximum limit for initial subscribers is 7, exceeding to which, the normal procedure of incorporation must be followed.
One single name can be proposed in the form as there is no provision for entering multiple names.

Further to this if you seek any further clarity, feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.

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One India one Tax- GST

GST is Goods and services tax which will substitute the old tax regime, where the ultimate tax burden and its cascading results will be lessened, with a concept of ONE INDIA ONE TAX.

Under this model there will be a single indirect tax, i.e GST which will substitute various indirect taxes levied on goods and services from manufacture till consumption.

Under this tax regime the concept of origin based taxation has changed to consumption based taxation (or destination principle).

Federal structure of GST

Taxes will be subsumed as:

CGST – Central excise duty, Additional excise duty, service tax, CVD, Spl. Add. Duty @ 4%, surcharges and cess levied by central govt. Rates will be same across India.

SGST – Sales tax/VAT, Entertainment tax, luxury tax, taxes on lottery, betting & gambling, octori& entry tax, purchase tax, Surcharges &cess levied by state govt. Rates may vary for different states.

IGST – Taxes will be levied on interstate trade and taxes levied in the case of import. It will be sum total of CGST & SGST.

Legal Implications

The government of India is committed to replace all the indirect taxes levied in India with one tax GST, other than alcohol for human consumption.
Provisions will be made for removal of 650 check posts and 11 local taxes across India.
GST will be levied on sale of newspapers and advertisements.
Stamp duties imposed on legal documents by states will continue to be levied.
Petroleum and petroleum products may be subject to GST.
The list of exempted goods and services would be kept to minimum, it would be harmonised for the centre and state as far as possible.
GST is value addition at each level in the supply chain which will be applicable to both goods and services.
Where credit will be allowed for tax paid on input used in manufacture or for using any input service.
The Centre GST and State GST will be levied would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.
Input or input services for personal consumption will continue to be GST regime.
An additional 1% tax will be levied by the centre which will be redirected to origin states for a period of 2 yrs or more as may be proposed by the central govt.

GST Impact on Sectors/Companies in a Nutshell

Banks – Current Tax Rate is 15%. After GST it is 18%. Negative
Consumer Staples – Current Tax Rate is 22%. After GST it is 18%. Positive for Asian Paints, Dabur, HUL, Emami; Negative for ITC, UBL
Consumer Discretionary – Current Tax Rate is 15%. After GST it is 18%. Negative for Jubilant Foods, Cafe Coffee Day, Restaurant businesses
Media & Entertainment – Current Tax Rate 15% + 7% State Entertainment tax. After GST it is 18%. Positive for Dish TV, Videocon D2H, BIG TV
Telecom – Current Tax Rate is 15%. After GST it is 18%. May see marginal dip in consumption
Auto & Auto Ancillary – Current Tax Rate is 27%. After GST it is 18%. Positive for M&M, Maruti, Bajaj Auto, Eicher Motors, Ashok Leyland
Metals – Current Tax Rate is 18%. After GST it is 18%. No significant impact.
Cement – Current Tax Rate is 27%. After GST it is 18%. Positive for UltraTech, Shree Cement, Ambuja Cement
Pharma – Current Tax Rate is 15%. After GST it is 18%. Negative for Pharmaceutical co.s
Real Estate – Current Stamp Duty is 15%. After GST it is 16%. No significant impact.
Logistics – No change in Tax Rate after GST. Positive for Container Corp, GATI, etc.

Scheme of levy

The Levy in the common parlance means charge or imposition or collection of tax by authority. For the purpose of collection of tax, the authority should have the power of collection of tax.

Section 7 of Model GST Act 2016, sets out that CGST/SGST and IGST shall be levied on all intra-state sales and interstate supplies of goods and/or services.
The Assessee who has an aggregate income of Rs. 50 lakh are eligible for composition levy, where amount of tax payable is 1% of the turnover during the year where the assesse shall not be entitled to claim any input tax credit.
Under the GST regime the threshold limit for SME’s is proposed to be around Rs. 25 Lakh. The lowering of the threshold would bring many SME’s under the Tax bracket.
GST Model law has also brought supply of goods or services without consideration, under the tax bracket, by imposing tax on value derived under Rule 4 of valuation rules.
Under section 43C(4) of Model GST Law, states that every e-commerce operator shall furnish a statement
electronically, providing the details of the amount collected on behalf of each supplier in respect of all supplies of goods and/or services effected through the operator.
Imported goods would be liable to custom duty along with IGST (equivalent to IGST on similar goods in India).

Utilisation of Input credit

Chapter-V states that Every taxable person shall, subject to such conditions and restrictions as may be prescribed in this behalf, be entitled to take credit of input tax and may deduct the amount of admissible credit in respect of a tax period from the output tax for the same period and pay the remaining amount, if any, to the credit of the appropriate Government (i.e. Central Government in case of the IGST and the CGST, and the State Government in case of the SGST) within such time and in such manner, as may be prescribed.

Manner of taking credit of IGST/CGST/SGST:

IGST paid on interstate purchase shall first be utilised towards payment of IGST then (if amount remaining) towards payment of CGST and SGST, respectively.
CGST paid on purchase shall first be utilised towards payment of CGST then (if amount remaining) towards payment of IGST.
SGST paid on purchase shall first be utilised towards payment of SGST then (if amount remaining) towards payment of IGST.
ITC of CGST cannot be utilised towards payment of SGST.
ITC of SGST cannot be utilised towards payment of CGST.
There shall be two type of electronic ledgers for every registered taxable person:-
- Electronic Cash Ledger

Electronic Credit Ledger

Every deposit made towards tax, interest, penalty, fee or any other amount shall be credited to his Electronic Cash Ledger.
Input Tax Credit as self-assessed in the return shall be credited to his Electronic Credit Ledger. The amount available in this ledger may be used for making any payment towards tax payable under GST Law.

Procedural Aspects

New Applicant can apply for Registration:
At the GST Common Portal directly ; or
At the GST Common Portal through the Facilitation Center (FC)

As per the following process:

Constitution of Business –

Partnership Deed in case of Partnership Firm ;

Registration Certificate in case of other businesses like Society, Trust etc. which are not captured in PAN.
In case of Companies, GSTN would strive for online verification of Company Identification Number (CIN) from MCA21. Constitution of business / applicant as per PAN would be taken except for businesses such as Society, Trust etc. which are not captured in PAN. Partnership Deed would be required to be submitted in case of Partnership Firms.

Details of the Principal Place of business –

In case of Own premises – any document in support of the ownership of the premises like Latest Tax Paid Receipt or Municipal Khata copy or Electricity Bill copy.

In case of Rented or Leased premises – a copy of the valid Rent / Lease Agreement with any document in support of the ownership of the premises of the Lessor like Latest Tax Paid Receipt or Municipal Khata copy or Electricity Bill copy

In case of premises obtained from others, other than by way of Lease or Rent – a copy of the Consent Letter with any document in support of the ownership of the premises of the Consenter like Municipal Khata copy or Electricity Bill copy

Customer ID or account ID of the owner of the property in the record of electricity providing company, wherever available should be sought for address verification
This is required as an evidence to show possession of business premises. If the documentary evidence in Rent Agreement or Consent letter shows that the Lessor is different from that shown in the document produced in support of the ownership of the property, then the case must be flagged as a “RiskCase”, warranting a post registration visit for verification. GST Law Drafting Committee may add penalty provision for providing wrong lease details.

Details of Bank Account(S) Opening page of the Bank Passbook held in the name of the Proprietor / Business Concern – containing the Account No., Name of the Account Holder, MICR and IFS Codes and Branch details This is required for all the bank accounts through which the taxpayer would be conducting business.

Details of Authorised Signatory For each Authorized Signatory:

Letter of Authorisation or copy of Resolution of the Managing Committee or Board of Directors to that effect This is required to verify whether the person signing as Authorised Signatory is duly empowered to do so.

Benefits of GST

This structure would overall reduce the combined rate of taxation and the cascading burden on the economy.
This would increase the productivity and performance in the economy.
Indian truck system will work effectively with removal of 650 check posts and 11 local taxes.
Reduction of cost to the company for extra working capital.
Reduction in typicality of existing tax structure in India.
A transparent and simple tax regime of ONE TAX ONE INDIA.

Limitations under GST Model

When the aviation industry was witnessing the much awaited growth with increasing domestic traffic, the GST implementation might slower the rate at which the industry is expecting growth as flying will become expensive.
India, on one hand, has the lowest insurance penetration in the world (less than 5% of Indian population & half of the global average) and on the other GST will further make the insurance products dearer.
The Banking & Financial Sector (including Insurance as statedabove) might take a hit as currently the effective tax rate in the sector is 14 per cent, which is levied only on fee component (and not interest) of the transaction. Under GST, effective tax rate on fee-based transactions is expected to increase to 18-20%.
Petroleum products form a majority import value in the Indian ecosystem. However, key petroleum products like crude, natural gas, high-speed diesel and ATF have been kept out of GST.

Conclusion

A seamless implementation of GST may boost growth of the overall economy to a level that the above stated pitfalls might be merely seem as part and parcel of the India growth story. When most of the sectors grow simultaneously, it might increase jobs and disposable income of individuals to an extent that the dearness brought by GST gets offset. Analysts are already predicting 10% GDP growth for the Indian Economy with GST coming into effect.

Read more about Registration of GST and about the GST’s 8 Council meet here.

Further to this if you seek any further clarity, feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.

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