Direct Tax

Capital Gains Tax Relief likely for Investors exiting Start-ups

For attracting more investors in the start-up sector, the government is considering to exempt investors from tax on capital gains accrued on exiting a start-up. The Department for Promotion of Industry and Internal Trade (DPIIT) is weighing two alternatives to deliver this incentive:

  • Blanket exemption and
  • Conditional exemption based on funds redeployed

The latter would be on the line of the benefits offered to nascent firms in the UK. This would probably bring major relief to the start-up sector and indirectly encourage more investments in start-ups.

Government may rewrite Start-up ESOP Framework

The government has in the past four months unveiled several measures to shield start-ups from the so-called ‘Angel Tax’. Under the latest changes, a firm can be recognized as a start-up if its turnover for any of the financial years since incorporation is not more than INR 100 crore, instead of the earlier INR 25 crore limit.

Currently, ESOPs (Employee Stock Ownership Plans) are taxed as income, when employees exercise the option to convert them to shares. The DPIIT has begun discussions with the Finance Ministry on taxing shares granted by start-ups under their ESOP only at the time of sale, as part of a package aimed at making the country a hub for start-ups. The Finance Ministry will examine the matter when it looks at proposals for the next budget.

Tough Disclosures needed in Corporate Tax Audit Reports deferred by a year

In view of the various industry representations received by the Central Board of Direct Taxes (CBDT), disclosure requirements with respect to tax avoiding transactions that could get caught in the dreaded General Anti-Avoidance Rules (GAAR) and break-up of payments to various registered/unregistered suppliers for GST have been further deferred till the end of March 2020. The disclosure requirements were onerous on the companies, creating a burden on small businesses.

It is pertinent to note here that it is only the disclosure requirement that is deferred and not the provisions of the GAAR as such. Accordingly, tax avoiding transactions would still be governed by GAAR and the stakeholders involved could still be implicated if found guilty.

Income Tax Department, GSTN to share Taxpayer Data to scale up Scrutiny

The government has authorized the Income Tax department to share details, including sales and profits that businesses have reported in their income tax returns, with GST department to scale up scrutiny and keep a tab on tax evasion.

Indirect Tax

Automated GST refund for exporters by next month

[Excerpt from Livemint]

  • GST refunds of exporters have run into thousands of crores and any delay in the processing of refund claims blocks working capital of exporters.
  • The revenue department has planned that the exporters of goods and services as well as suppliers to SEZ units are likely to get GST refunds automatically from June 2019.
  • Once implemented, the time period for such refunds will come down to about a fortnight from several months at present.

GSTN has released prototype of new return filing system

  • The Goods and Services Tax Network (GSTN) has released a web-based prototype of the offline tool of new return system, which is set to go live in the coming months. This user-friendly prototype offers an interactive interface allowing users to navigate through the pages using various functionalities, such as drop-down menus, invoice upload, upload of purchase register for matching with a system-created inward supplies, etc. The prototype of returns can be accessed on
  • The objectives of releasing the prototype are two-fold
    • Obtaining feedback and suggestions from the users (taxpayers can share their comments on
    • Familiarizing the users with the new system

Kerala Government defers implementation of Kerala Flood Cess

The GST council in its 32nd meeting had approved the levy of calamity cess on intra-state supply of goods and services within the state of Kerala. In line with this, the Kerala state government had issued a notification to impose Kerala flood cess of up to 1% on intra-state B2C supplies from 1 June 2019. Now, in view of certain concerns raised by businesses, the Kerala government has deferred the implementation of Kerala Flood Cess to 1 July 2019.