Latest Blogs from SBS and Company LLP

    In this edition, we bring to you certain important articles on various aspects. 

    The article on ‘Changes to Real Estate Sector – GST Perspective’ deals with the recent notifications issued in the context bringing changes to taxation aspects in real estate sector dealing with residential apartments. The rate of tax of 5% which is applicable for new projects which commences on or after 01.04.19 is coming without credit. Even though the new rate appears to be lower than old rate of 12%, the customer would be paying more tax because the credit which was erstwhile allowed and now not being allowed would sit in the cost of project on which customer would be asked to pay 5%. However, under the erstwhile scheme certain builders were collecting 12% and also not passing the benefit of input tax credit which has put the customer in highly disadvantageous position. Now that the builder is not allowed to avail credit, the question of passing of such benefit would not arise and accordingly the customer is benefitted to such an extent. 

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    Key Topics:

    AUDIT

    • OVERVIEW ON BANK GUARANTEE

    DIRECT TAX

    • ICDS VI - EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

    UPDATES

    COMPANIES ACT, 2013

    • RULES, CIRCULARS, NOTIFICATIONS AND ORDERS ISSUED DURING THE MONTH OF MARCH, 2019

    Background:
    1. The Central Government has issued various notifications dated 30th March 19 to bring out the changes to the tax rates applicable for real estate sector. In this note, we have made an attempt to understand the impact of such notifications and the way forward for the promoters. Without any further delay, let us proceed to understand the notifications.

    Snapshot of Changes:
    2. Essentially, the notification dealing with rate of tax has categorised, the projects as under:

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    Introduction:

    • Section 145(2) of the Income Tax Act,1961 (“the Act”) grants power to Central Government to notify Income Computation Disclosure Standards.
    • So far 10 ICDS were notified by Central Government on 31stMarch,2015. However, they are made applicable from the Assessment Year 2017 -18 with a specified deferment period of one year from date of its implementation.
    • ICDS are NOT for maintenance of books of accounts, they are only for the purpose of
    • Income Computation &
    • Disclosure (Notification S.O.892(E) dated 31.03.2015)

    Note: In the case of conflict between the provisions of the Act and the ICDS, the provisions of the Act shall prevail to that extent.

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    General Meaning of Shell Company:

    The Companies Act does not define “Shell Company” and no other piece of Legislation provides for the guidance on what does it constitutes; however, the general definition is understood as:

    “A shell company is a company that exists only on papers, without active business operations or significant assets and has no office or employees. These types of companies are not necessarily be illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. Legitimate reasons for a shell company include such things as a start up using the business entity as a vehicle to raise, funds, conduct a hostile takeover or to go public.”

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