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SESSION- 2018-20

SUMMER INTERNSHIP PROJECT REPORT ON


“Finance and Accounts”

AT

INTERNATIONAL LTD.
SUBMITTED TO:- SUBMITTED BY:-
Mr. Rahul Vyas Mr. Janak Gupta
AKNOWLEDGEMENT

It is indeed a great pleasure for me to present this Summer Internship Report


on Finance, as a part of the curriculum of Masters of Business Administration in
Finance at International Institute of Professional Studies, Devi Ahilya University,
Indore.
I take this golden opportunity to thank all the supportive mentors at
FLEXITUFF VENTURES INTERNATIONAL LTD. whose support and venerated
guidance made this training a real success. I express my sincere thanks to Mr. Anil
Mehta (General Manager – Finance and Accounts) who in spite of their busy
schedule have lent precious time for helping me out to understand various heads in
Finance and Accounts Department.
Getting training at such an organisation is an exquisite learning experience that
made a mark at the profoundest part of my mind.
DECLARATION

I, Janak Gupta, hereby declare that the report entitled “Study on Finance and
Accounts” is a record of independent work carried out by me towards the partial
fulfilment of the requirements for the Masters Degree in Business Administration in
Finance Department which is a course of International Institute of Professional
Studies at Devi Ahilya University, Indore.
The study was conducted at Finance and Accounting Department of
“FLEXITUFF VENTURES INTERNATIONAL LTD.” This project is my original
work and it has not been presented earlier in this manner, this information is purely of
academic interest.

Place: Indore
Date: 1st July, 2019
FLEXITUFF’S FINANCIAL BACKGROUND

Flexituff Ventures International Limited (formerly known as Flexituff International Ltd) is engaged
in the business of technical textiles. It is a multi-product multi-market and multi-location company
headquartered in Pithampur Madhya Pradesh. It is a 100% vertically integrated company that serves
the demand for technical textiles construction textiles packaging textiles transport textiles industrial
textiles and agro-textiles among others. The company manufactures Flexible Intermediate Bulk
Container (FIBC) geotextiles reverse printed BOPP (Biaxially Oriented Polypropylene) woven bags
and NPC drippers.

The company is a major exporter of FIBC and woven products from India and have been receiving
the Top Exporter Award from the PLEXCONCIL Ministry of Commerce from 2005-06 to 2008-09
every year. They export to around 30 countries across the globe and are present in 4 continents with
major thrust of exports being to USA and Europe. During FY 2017-18 the Company has 3 direct
subsidiaries out of which 2 are based in India & 1 in Cyprus.

The initial public offer (IPO) of Flexituff International was opened from 29th September 2011 to 4th
October 2011 for QIB and 5th October 2011 for others. There was a fresh issue of 45 lakh equity
shares and Offer for sale of 22.5 lakh equity shares from Clearwater Capital Partners (Cyprus) Ltd.
of Rs.10/- each at Rs. 155/- per share. Credit Analysis & Research Limited assigned Credit Rating 3
out of 5 to company's IPO. Equity shares of the company were listed from 19th October 2011 at BSE
and NSE.

The company issued and allotted 1902173 Equity Shares on Preferential Basis under Private
Placement at a price of Rs 230/- per Equity Share inclusive of premium of Rs 220/- per Equity Share
to International Finance Corporation on 30 December 2013. The company further issued 5.34%
Foreign Currency Convertible Bonds (the FCCBs) amounting to USD 9 Million to International
Finance Corporation.

The FY 2017-18 was a challenging year for the company. Though the FIBC business continued to
operate at healthy margins and strong order-book position the main challenge came from the
paralysis of the banking industry in India. Many of the consortium-bankers of the company faced the
PCA issues. This resulted in curtailed working capital availability to the company. The curtailment
of working capital led to reduction in geo-textile and other business.
CERTIFICATIONS

Flexituff have many certifications under it that helps to create trust on them by their customers and
also helps them to make quality products according to the customer’s needs and will. Successful
companies are driven to deliver quality - from the way they operate, to the customer service
standards they establish and the products they deliver. This is a strategic vision for continuous
transformation to improve brand equity and image and ensure you are better equipped to win new
opportunities in an increasingly competitive global marketplace.
Some of the main certificates sanctioned are as follows:

ISO 9001:2015 - Quality Management System (QMS)


ISO 9001:2015 is an international standard related to quality management, applicable to any
organization from all types of business sectors and activities. ISO 9001:2015 provides a framework
to respond to changing quality requirements in balance with society, economics and environment.
 Ensures your products and services effectively meet customer and applicable
statutory and regulatory requirements.
 Allows you to measure your progress towards continual improvement of business
performance creating a benchmark.
 Creation of knowledge database for effective exchange of company knowledge.
 Stakeholder and Risk management.
 High Level Structure (HLS) to easily integrate with more than one standard.
 QMS closely aligned with core business processes.

ISO 14001:2015 - Environmental Management System (EMS)


ISO 14001 has become the international standard for designing and implementing an environmental
management system. The most recent version of the environmental management system
requirements was published in 2015, and is referred to as “ISO 14001:2015.” The standard was
agreed upon by a majority of member countries before being released and updated, and as such it has
become an internationally recognized standard accepted by a majority of countries around the world.

An environmental management system, often called an EMS, is comprised of the policies, processes,
plans, practices and records that define the rules governing how your company interacts with the
environment. This system needs to be tailored to your particular company, because only your
company will have the exact legal requirements and environmental interactions that match your
specific business processes. However, the ISO 14001 requirements provide a framework and
guidelines for creating your environmental management system so that you do not miss important
elements needed for an EMS to be successful.
OHSAS 18001:2007 - Occupational Health and Safety Assessment
Series

Sound occupational health and safety policies are essential for employees, but they are also
increasingly important for your customers and other stakeholders. Occupational Health and Safety
Management systems certification to OHSAS 18001 is a strong sign of your organization’s
commitment to your employees’ health and safety. OHSAS 18001 certification enables organizations
to manage operational health and safety risks and improve performance.

OHSAS 18001:2007 addresses the following key areas:

 Hazard identification, risk assessment and determining controls


 Legal and other requirements
 Objectives and OHS program(s)
 Resources, roles, responsibility, accountability and authority
 Competence, training and awareness
 Communication, participation and consultation
 Operational control
 Emergency preparedness and response
 Performance measuring, monitoring and improvement

ISO 22000:2015 - Food Safety Certification

Food Safety is essential requirements for a healthy nation therefore FSMS is the basic requirements
of the Healthy Nation, People and for a healthy society Failures in food supply can be dangerous and
cost plenty. ISO has developed the ISO 22000 standard for the certification of food safety
management systems. The standard is intended to provide security by ensuring that there are no weak
links in the food supply chain, and to achieve international harmonization in the field of food safety
standards.
 Improvement of order efficiency of processes.
 Guarantee of production process stability and high quality services.
 Improvement of the firm competitive advantage.
 Increase of public and state auditing bodies trust.
 Increase of company price and image.
 Development of the mutual confidence between a firm and a client

AIB - American Institute of Bakers

AIB to do a yearly inspection that ensures facilities and processes uphold product integrity, comply
with the Food Safety Modernization Act (FSMS), and achieve Global Food Safety Initiative (GFSI)
recognition. AIB International provides food safety audits, inspection, certification, and educational
seminars worldwide to the food manufacturing and distribution industry and its suppliers, including
finished foods and beverages products, ingredients, fresh produce, packaging production and
distribution facilities.
AIB food safety inspections are conducted according to the AIB International Consolidated
Standards. The Standards consist of five Categories for Inspection. Each Category is allocated 200
points for scoring purposes, to a total of 1,000 points. A passing score is 700 and above. Facilities
scoring in the top 25% of all scores for their business category are awarded a Recognition of High
Achievement – Superior. The five Categories for Inspection are:
 Operational Methods and Personnel Practices.
 Maintenance for Food Safety.
 Cleaning Practices.
 Integrated Pest Management.
 Adequacy of Prerequisite Programs and Food Safety Programs.

BRC - British Retail Consortium

Manage your risk and build confidence in your products with certification to the British Retail
Consortium (BRC) Global Standard for Food Safety. BRC certification meets the GFSI compliance
requirements for suppliers to major retailers, brand owners and manufacturers, and is especially
suited for companies exporting to Europe.
The British Retail Consortium (BRC) is a globally recognised UK trade organisation. Which
established a series standards to help companies comply with food safety legislation, and to provide
guidelines for the manufacture of safe, quality food products. The standards soon became a
worldwide benchmark for best practice in the food industry and have evolved into the internationally
recognised BRC Global Standards.
BRC ensures your company's processes and procedures meet the requirements in a consistent
application, with the inclusion of product specifications, supplier approval, traceability, and the
management of incidents, food fraud, food defence and product recalls.

KOSHER

The term “KOSHER” was adapted from a Hebrew word meaning “fit and proper”. It is used to
describe foods that are prepared in accordance with specific biblical Jewish dietary laws. Contrary to
popular belief ,food does not have to be blessed by a rabbi to be consider Kosher. The production
process simply has to be overseen to make sure non- kosher items are not used. However, unless a
person visits every manufacturing plant, the average consumer would find it impossible to determine
whether or not a given item is kosher. Therefore, the kosher symbol system was created to help
consumers find product inspected by a reliable kosher certification agency.
In some companies where the final products may not be certified the manufacturer will nevertheless
insist that all ingredients comply with kosher standards. Furthermore in this age of rationalisation of
supply chains buyers are looking for fewer suppliers that can provide a wider range of ingredients.
Those able to offer both kosher and non-kosher ingredients are more likely to win the business.

HALAL

Halal India is very pleased to introduce ourselves as one of the established halal certification body in
India. We are committed to achieve excellence in consultation, issuing halal certification,
independent auditing & monitoring system and promoting other acceptable products and services as
per Shariah (law). We endeavour to ensure that halal consumer as well as its service providers and
business derive benefits from that which is lawful and governance to Shariah (law). The Halal
Certificate is a document that guarantees that the products and services aimed at the Muslim
population meet the requirements Islamic law and therefore are suitable for consumption in both
Muslim-majority countries and in Western countries where there significant population group who
practice Islam (France, Germany, United Kingdom). It is mainly applied to meat products and other
food products such as milk, preserves and additives.
FLEXITUFF’s MANUFACTURING PRODUCTS

• Sift-proof and Sling Bags


Sift-proof bags are mainly used to carry 20 to 40 bags of 25 to 50 kg each. Thus, it is an outer
bag which enables easy carrying or mechanical handling of small bags without using pallets.
Also Sling bags are needed for products which are powdery in nature and are stitched in a
special manner so as to block needle holes thereby preventing sifting of powder from bags

• Baffle Bags.
These bags have baffle restraints stitched onto all corners of the bag which prevent the bags
from expanding beyond a point. Mainly these bags are used where cargo has to be
containerised or space has to be saved.

• High-end Bags for food and pharma industry:


These bags are made with a high degree of precision. Precautions have to be taken so as to
avoid contamination of any kind from entering the bag. These are normally laminated or lined
bags made in a clean environment.

• Form-fitted Liner Bags.


These are special FIBCs where the liner of the bag is also shaped in the shape of a bag itself.
These liners can be attached to bag by various methods i.e. gluing, tabbing or sewing. The
main purpose of doing this is to avoid extra liners inside the bag and liner easily forms the
shape of the, bag rather than creating bulges in the bag.

• Builder Bag / Tunnel-lift.


Builder Bags are used for high volume usage. Flexituff holds a patent for Tunnel Lift bags. They
are made especially for the Building and Construction Industries and are used for filling sand,
construction waste or aggregates. Flexi Global-UK, Flexituff’s 100% owned subsidiary stocks
and offers entire range of builder bags from its UK warehouses.

• Conductive Type-C Bags:


These are special bags which allow static electricity to pass through the bag when the bag is
earthed. Fast filling and discharge of an FIBC by a powdered material causes static electricity to
accumulate inside the bag. Further, to avert the dangers of explosion due to such accumulation of
static charge, conductive properties are created in the bag and bag is earthed to allow safe discharge
of electrical charge.

• Dissipative Type-D Bags:


These bags are made by using a technology which allows static electricity charge to dissipate in
micro-volts without a bag being earthed.

• UN Bags
Flexituff UN bags are certified by IIP (Indian Institute of Packaging) that issues a UN
certificate based on testing parameters as prescribed in the IMDG code. A UN FIBC is
subjected to rigorous tests to make sure that each of them is safe, functional, and up to
rigorous international standards. The company has been delivering such bags over a decade
with full expertise and full adherence to specified norms.
• Ventilated Bags
Flexituff’s ventilated bags are made of flat Sulzer Polypropylene Woven Fabric specifically
designed to permit the required air flow through the fabric into the bag to keep them from
getting either too hot, too wet and to prevent mould ingress on the crop/log itself. Ventilated
bags are commonly used for packing, storage and transportation of potato, onion and firewood
logs.

• Garden Waste Bags


Your way to a better and cleaner environment... versatile garden waste bags for County Councils,
Collection Services, Farms and Individual Residences:
• Ideally suited for:
• Grass cutting
• Hedge trimming
• Woody waste
• Kitchen waste
• Leaves & Shrubs

• U-Panel Bags
A U-Panel bag requires 2 seams along 2 opposite sides to create 2 panels and a "U" Panel shape.
These bags generally have corner lifting loops but can also come in cross-corner loops.
• Four Panel Bags
A 4-Panel bag has 4 separate panels sewn together to form a "4" Panel shape. These bags generally
have corner lifting loops but can also come in cross-corner loops.

• Single or One Loop Bags


A Single or one loop bags is a tubular body bag with just one single point lifting loops which is
reinforced or wrapped by a sleeve. These bags are bulk product handling bags which can come with
or without liners and are very cost effective bags. What makes them unique is that they are made out
of a single layer circular fabric, coated/ uncoated or with an option of PE liner as per customer’s
requirements. These bags are mainly used for packaging Fertilizer, Fish feed, Seed and Cement.

MARKET CAPTURED BY FLEXITUFF

Germany, France, Ireland, Netherland, Spain, Mexico, United Kingdom, Belgium, Italy, Portugal,
Greece, Brazil, U.S.A., U.A.E., Russia, Kenya, Rwanda, Chile, Eretria, Canada, Switzerland,
Australia, Algeria, Japan, New Zealand, China, Egypt, Singapore, Sweden, Israel, Austria, and
more….
FIBC MANUFACTURING PROCESS

Sourcing the Best Raw Materials:


Manufacturing FIBC bags require PP or Poly-Propylene granules and LDPE or Low Density Poly-
Ethylene.
Extrusion:
Here the mix of virgin and recycled PP granules are being melted and converted into form of tapes in
a extrusion plant and at the end of the process are wound on bobbins of required size. This is the first
stage of process which determines the tensile strength of the tape.
Weaving:
The extruded tape bobbins are then either put in a flat or circular weaving machine. This helps to
weave the tapes to fabric depending upon various specifications. This processes helps by turning out
to become the body of the FIBC bag.
Lamination:
Polypropylene fabric is being laminated with LDPE film for making the fabric moisture proof. This
is optional process as per the requirement of the customer.
Cutting:
The woven Polypropylene fabric in rolls will be feeded in the automatic cutting machine and will be
cut in to cut bit of required size. This Automatic process is adopted to get better accuracy in cut size.
Printing:
The cut bits that are the body fabric will be feeded in to the heavy duty printing machine to make the
printing impression on the fabric. We are equipped with heavy duty printing machine, which gives
the best impression with maximum of three colours.

Needle Loom-Custom based Webbing:


Heavier PP or Poly-Propylene Tapes are woven in to webbing which forms the lifting loop of the
Jumbo bag. It also supports the overall Safe Working Load (SWL), of a filled bag during handling
and transport. It may be either of stiff strap or soft strap.

Sewing:
Here all the components used to manufacture Jumbo bags are brought together along with the printed
body fabric. All the gathered parts are assembled to a Jumbo bag by highly skilled labours under the
supervision of technically qualified supervisors.

Inspection:
Here each and every bag we manufacture will be inspected by a technically qualified person from the
quality control department to ensure that each and every bag delivered from sewing process is of
good quality.

Ultra Violet and Stress Testing:


All of the products are UV tested. They are then put under various conditions to ensure they adhere
to various parameters.
Metal Detection:
All contaminants inside the bag are done away with to ensure cleanliness is kept at top priority.

Burst Test:
Random bags will be selected from a particular lot and will be tested up to 5 times of actual weight
what the bag is going to handle in the testing ring to ensure the Safe Working Load of the bag is
achieved. Generally this test is conducted with the sample bag before commencing the production.
But after completion of the production also, random samples are taken for burst test to ensure the
Safe Working Load.

Bailing:
Here the bags which have been produced will be compressed with the help of the bale press and as
per the requirement of the customers, that how many bags at one time they wanted to compress.

Packing:
Now that a mass production of bulk bags has been completed, the bags are compressed and grouped
into select numbers for distribution in bulk quantities. The results of which allow for the neat and
easy packing of the bags.

Storage:
Once the bag is baled, it will be immediately shifted to a clean storage room, from where the
dispatches are affected and also ensure that they are shipped in a safe manner.
GST – OVERVIEW

GST is a comprehensive, multi-stage, destination-based consumption tax on levied at


every stage of value addition in the lifecycle of a product.

Comprehensive: GST will subsume all of the current indirect taxes. Plus, by bringing in a unified
taxation system, across the country, it will ensure that there is no more arbitrariness in tax rates.
Multi-stage: GST is levied each stage in the supply chain, where a transaction takes place.
Value-addition: This is the process of addition to the value of a product/ service at each stage of its
production, exclusive of initial costs. Under GST, the tax is levied only on the value added.
Destination-based consumption: Unlike the current indirect taxes, GST will be collected at the
point of consumption. The taxing authority with appropriate jurisdiction in the place where the
goods/services are finally consumed will collect the tax.

Implications of GST on Exports and Imports


Exports are not taxable, because the place of consumption is outside India. Imports are taxable,
because the place of consumption is in India. The tax on imported goods will therefore be just the
same as domestically-produced goods. Thus, the export industry will become more competitive when
compared to its international peers. Also, domestic goods will be protected by making imports at par
with domestic goods.

Implementation of GST in India


India’s biggest indirect tax reform in the form of Goods and Services Tax (GST) will be stepping in
its 3rd year on 1st July. A comprehensive dual GST was introduced in India from 1st July 2017.
The idea of moving towards the GST was first mooted by the then Union Finance Minister in his
Budget for 2006-07. The talks of ushering in GST took concrete shape with the introduction of
Constitution (122nd Amendment) Bill, 2014. The Bill was passed by the Parliament on 8th August
2016. This was followed by the ratification of the Bill by more than 15 states.
On 12 April 2017, the Central Government enacted four GST bills:
 Central GST (CGST) Bill
 Integrated GST (IGST) Bill
 Union Territory GST (UTGST) Bill
 The GST (Compensation to States) Bill
In a short span of time, all the states approved their State GST (SGST) laws. Union territories with
legislatures, i.e., Delhi and Pondicherry, have adopted the SGST Act and the other 5 union territories
without legislatures have adopted the UTGST Act.
Advantages or benefits of GST
 Wider tax base, necessary for lowering the tax rates and eliminating classification disputes
 Elimination of multiplicity of taxes and their cascading effects
 Rationalization of tax structure and simplification of compliance procedures
 Harmonization of centre and State tax administrations, which would reduce duplication and
compliance costs
 Automation of compliance procedures to reduce errors and increase efficiency.

GST replaced following Taxes


Central Taxes State Taxes

 Central Excise Duty [including additional  Value Added Tax


excise duties, excise duty under the  Octroi and Entry Tax
Medicinal and Toilet Preparations (Excise  Purchase Tax
Duties) Act, 1955]  Luxury Tax
 Service tax  Taxes on lottery, betting & gambling
 Additional Customs Duty (CVD)  State cesses and surcharges
 Special Additional Duty of Customs (SAD)  Entertainment tax (other than the tax levied
 Central Sales Tax ( levied by the Centre and by the local bodies)
collected by the States)  Central Sales Tax ( levied by the Centre and
 Central surcharges and cesses ( relating to collected by the States)
supply of goods and services)

Registering Under GST


 Every supplier of goods or services is required to obtain registration in the State or the Union
Territory from where he makes a taxable supply if his aggregate turnover exceeds Rs. 20 lakhs
(40 Lakhs w.e.f. 1st April, 2019) in a Financial Year. However, compulsory registration is
required if the person makes inter-state supplies i.e. threshold limit of Rs. 20 lakhs shall not
apply for registration in this case.
 However, the limit of Rs. 20 lakhs would be 10 lakhs in case of Special Category States i.e.
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.
 Composition Scheme for Services: A Composition Scheme shall be made available for Suppliers
of Services (or Mixed Suppliers) with a Tax Rate of 6% (3% CGST +3% SGST) having an
Annual Turnover in the preceding Financial Year up to Rs 50 lakhs.
Taxes under GST

GST

Intra- Inter-
state state
Movement Movement

Central State Integrated


GST GST GST
(CGST) (SGST) (IGST)

Intra-state Supply:
Intra-State supply of goods or services is when the location of the supplier and the place of supply
i.e., location of the buyer are in the same state. In Intra-State transactions, a seller has to collect both
CGST and SGST from the buyer. The CGST gets deposited with Central Government and SGST
gets deposited with State Government.

Inter-state Supply:
Inter-State supply of goods or services is when the location of the supplier and the place of supply
are in different states. Also, in cases of export or import of goods or services or when the supply of
goods or services is made to or by a SEZ unit, the transaction is assumed to be Inter-State. In an
Inter-State transaction, a seller has to collect IGST from the buyer.

Central Goods and Services Tax (CGST)


Under GST, CGST is a tax levied on Intra State supplies of both goods and services by the Central
Government and will be governed by the CGST Act. SGST will also be levied on the same Intra
State supply but will be governed by the State Government.
This implies that both the Central and the State governments will agree on combining their levies
with an appropriate proportion for revenue sharing between them. However, it is clearly mentioned
in Section 8 of the GST Act that the taxes be levied on all Intra-State supplies of goods and/or
services but the rate of tax shall not be exceeding 14%, each.
State Goods and Services Tax (SGST)
Under GST, SGST is a tax levied on Intra State supplies of both goods and services by the State
Government and will be governed by the SGST Act. As explained above, CGST will also be levied
on the same Intra State supply but will be governed by the Central Government.
Note: Any tax liability obtained under SGST can be set off against SGST or IGST input tax credit
only.

Integrated Goods and Services Tax (IGST)


Under GST, IGST is a tax levied on all Inter-State supplies of goods and/or services and will be
governed by the IGST Act. IGST will be applicable on any supply of goods and/or services in both
cases of import into India and export from India.
Note: Under IGST,

 Exports would be zero-rated.


 Tax will be shared between the Central and State Government.

Union Territory Goods & Services Tax (UTGST)


The union territories in India are accounted under a specialized taxation called Union Territory
Goods and Services Tax as per the GST regime 2016. It will subsume the various taxations, levies
and duties with one uniform taxation in Union Territories as well.

Delhi (India’s Capital Territory), Chandigarh, Dadra & Nagar Haveli, Andaman & Nicobar Islands,
Daman & Diu, Lakshadweep and Pondicherry are the prominent union territories in India. UTGST
will account for all the taxations under these union territories in India. The parliament is looking
forward to implement a separate act to impose and supervise GST in Union Territories under the
name of UTGST act.

Input Credit in GST


Input credit means at the time of paying tax on output, you can reduce the tax you have already paid
on inputs.
How to claim input credit under GST?
To claim input credit under GST –
 We must have a tax invoice(of purchase) or debit note issued by registered dealer

Note: Where goods are received in lots/instalments, credit will be available against the tax invoice
upon receipt of last lot or instalment.
 We should have received the goods/services

Note: Where recipient does not pay the value of service or tax thereon within 3 months of issue of
invoice and he has already availed input credit based on the invoice, the said credit will be added to
his output tax liability along with interest.
 The tax charged on your purchases has been deposited/paid to the government by the supplier
in cash or via claiming input credit
 Supplier has filed GST returns

Possibly the most path breaking reform of GST is that input credit is ONLY allowed if your supplier
has deposited the tax he collected from you. So every input credit you are claiming shall be matched
and validated before you can claim it.
Therefore, to allow you to claim input credit on Purchases all your suppliers must be GST compliant
as well.
There’s more you should know about input credit –
 It is possible to have unclaimed input credit. Due to tax on purchases being higher than tax on
sale. In such a case, you are allowed to carry forward or claim a refund.

If tax on inputs > tax on output –> carry forward input tax or claim refund
If tax on output > tax on inputs –> pay balance
No interest is paid on input tax balance by the government
 Input tax credit cannot be taken on purchase invoices which are more than one year old.
Period is calculated from the date of the tax invoice.
 Since GST is charged on both goods and services, input credit can be availed on both goods
and services (except those which are on the exempted/negative list).
 Input tax credit is allowed on capital goods.
 Input tax is not allowed for goods and services for personal use.
 No input tax credit shall be allowed after GST return has been filed for September following
the end of the financial year to which such invoice pertains or filing of relevant annual return,
whichever is earlier.

GST RETURNS

A return is a document containing details of income which a taxpayer is required to file with the tax
administrative authorities. This is used by tax authorities to calculate tax liability.
Under GST, a registered dealer has to file GST returns that include:

 Purchases
 Sales
 Output GST (On sales)
 Input tax credit (GST paid on purchases)

To file GST returns, GST compliant sales and purchase invoices are required.
Who should file a return?
In the GST regime, any regular business has to file two monthly returns and one annual return. This
amounts to 26 returns in a year.
The beauty of the system is that one has to manually enter details of one monthly return – GSTR-1.
The other return GSTR 3B will get auto-populated by deriving information from GSTR-1 filed by
you and your vendors.
There are separate returns required to be filed by special cases such as composition dealers.

Types of GST Returns

Standard Date
Returns Descriptions Who Files?
for Filing
Statement of Outward supplies of Normal Registered Person 10th of the next
GSTR-1
Goods or Services month
Statement of Inward supplies of Normal Registered Person 15th of the next
GSTR-3B
Goods or Services month
Quarterly Return Taxable Person opting for 18th of the month
GSTR-4 Composition Levy succeeding the
quarter
Monthly return for a non-resident Non-resident taxpayer 20th of the month
taxpayer succeeding tax
period & within 7
GSTR-5
days after expiry of
registration

Monthly return for a person Supplier of OIDAR 20th of the next


supplying OIDAR services from a Services month
GSTR-5A place outside India to a non-
taxable online recipient

Monthly return for an Input Input Service Distributor 13th of the next
GSTR-6 Service Distributor (ISD) month

Monthly return for authorities Tax Deductor 10th of the next


GSTR-7 deducting tax at source month

Monthly statement for E- E-Commerce Operator 10th of the next


GSTR-8 Commerce Operator depicting month
supplies effecting through it.
Annual Return Registered Person other 31st December of
than an ISD, TDS/TCS next Financial Year
GSTR-9 Taxpayer, casual taxable
person and Non-resident
taxpayer.
Simplified Annual Return under Taxable Person opting for 31st December of
GSTR-9A
Composition Scheme Composition Levy next Financial Year
Final Return Taxable person whose Within three months
registration has been of the date of
surrendered or cancelled. cancellation or date
GSTR-10
of order of
cancellation,
whichever is later

Special Economic Zone:


A special economic zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and easier
legal compliances. SEZs are located within a country’s national borders. However, they are treated
as a foreign territory for tax purposes. This is why the supply from and to special economic zones
have a little different treatment than the regular supplies. In simple words, even when SEZs are
located in the same country, they are considered to be located in a foreign territory. SEZs are not
considered as a part of India.

Export and Import


SEZ’s are considered to be located in a foreign territory and thus the transactions with SEZ’s can be
classified as Exports and Imports.
Here, Export means:

 Taking goods or services out of India from a special economic zone by any mode of
transport or
 Supply of goods or services from one unit/developer in the SEZ to another unit in the same
SEZ or another SEZ.

Import means:

 Bringing goods or services into a special economic zone from a place located outside India,
by any mode of transport or
 Receiving goods or services from one unit/developer in the SEZ by another unit/developer
located in the same SEZ or another SEZ.

GST and SEZ


Being in a SEZ can be advantageous to a certain extent when it comes to taxes. Any supply of goods
or services or both to a Special Economic Zone developer/unit will be considered to be a zero-rated
supply. That means these supplies attract Zero tax rate under GST. In other words, supplies into SEZ
are exempt from GST and are considered as exports.
Therefore, the suppliers supplying goods to SEZs can:

 Supply under bond or LUT without payment of IGST and claim credit of ITC; or
 Supply on payment of IGST and claim refund of taxes paid.

When a SEZ supplies goods or services or both to any one, it will be considered to be a regular inter-
state supply and will attract IGST. The exception to this is, when a SEZ supplies goods or services or
both to a Domestic Tariff Area (DTA), this will be considered as an export to DTA (Which is
exempt for the SEZ) and customs duties and other Import duties will be payable by the person
receiving these supplies in DTA.
Some of the benefits and exemptions that SEZ operators are eying from GST are:

 Supplies into SEZ to be exempt from GST and be treated as export outside India
 Easy Refund Procedure of input GST paid on procurement of Goods and Services if any.
 Minimalistic Compliance Requirement and Return Filing Procedure

E-Way Bill and SEZ


Under GST, transporters should carry an E-Way Bill when moving goods from one place to another
if the value of these goods are more than Rs. 50,000. SEZ supplies are treated how the other inter-
state supplies are treated. The SEZ units or developers will have to follow the same EWB procedures
as the others in the same industry follow.
In case of supplies from SEZ to a DTA or any other place, the registered person who facilitates the
movement of goods shall be responsible for the generation of e-Way bill.

HSN Codes and GST


The Harmonized Commodity Description and Coding System generally refers to “Harmonized
System of Nomenclature” or simply “HSN”. It is a multipurpose international product nomenclature
developed by the World Customs Organization (WCO). It first came into effect in 1988. It has about
5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical
structure. It is supported by well-defined rules to achieve uniform classification.

HSN codes to be declared as:

Turnover No. of digits of HSN to be declared


Up to 1.5 Crore 0
1.5 Crore to 5 Crore 2
More than 5 Crore 4
Some most commonly used HSN Codes in Flexituff:

Products HSN Codes GST Rate


Fabric (Polymers) 3926 18%
PP Bags 3923 18%
FIBC 6305 12%
Synthetic Filament 5402
Granule 3902
Rope Lock 5910
Job Work (Sales) 9988

Reverse Charge Mechanism in GST:


Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge,
the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed. Thus, if you are a
recipient of goods or services under reverse charge, you must remit only the purchase payments to
suppliers. As for GST, you as a recipient must deposit the tax directly with the tax authorities. This
tax collection mechanism is aimed at reducing tax evasion, particularly from the unorganized sectors.

NORMAL GST PAYMENT PROCESS

Goods/Services

Supplier of Prices of Goods/Services Receiver of


Goods/Services Goods/Services Government
GST

GST

GST PAYMENT IN CASE OF REVERSE CHARGE

Supplier of Goods/Services Receiver of GST

Goods/Services Government
Goods/Services Prices of Goods/Services
Reverse Charge Applicability:
 Supply from Unregistered Dealer to Registered Dealer- If you are a registered dealer who
purchases goods/services from an unregistered dealer, you as a registered dealer must pay the GST.
However, you are exempt from paying GST if your purchases from the unregistered seller do not
exceed Rs. 5,000.
 Supply of Goods and Services Specified by CBEC- If you are purchasing goods/services which are
specified by the CBEC under reverse charge, you as a recipient must pay GST. These include: (i)
goods transport services, (ii) insurance agencies, (iii) recovery agencies, (iv) legal services, (v)
transportation services for imported goods etc.

Time Of Supply Under Reverse Charge Mechanism


Tax for goods under the reverse charge mechanism should be paid on the earliest of the below dates:
 The Date on which the goods and services are received
 Date of payment as entered in the books of accounts of the recipient or the date on which the
payment is debited in his account, whichever is earlier
 Date after 30 days of issuing the invoice by the supplier
Where it is not possible to determine the time of supply, under the above mentioned cases,
– the time of supply shall be the date of entry in the books of accounts of the recipient of
supply.

Tax for services under the reverse charge mechanism should be paid on the earliest of the below
dates:
 Date of payment as entered in the books of accounts of the recipient or the date on which the
payment is debited in his account, whichever is earlier
 Date after 60 days of issuing the invoice by the supplier
Where it is not possible to determine the time of supply, under the above mentioned cases,
– the time of supply shall be the date of entry in the books of accounts of the recipient of
supply.

ITC Claim in RCM:


If you are a recipient and are liable to pay tax on reverse charge basis, you can claim the ITC for
such tax paid. However, it can be claimed only if such goods /services are or will be used for your
business.
A person who is required to pay tax under reverse charge has to compulsorily register under GST.
Also, the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states except J & K) is not
applicable to them.
Job Work
Job work means processing or working on raw materials or semi-finished goods supplied by the
principal manufacturer to the job worker. This is to complete a part or whole of the process which
results in the manufacture or finishing of an article or any other essential operation.
For example, big shoe manufacturers (principal) send out the half-made shoes (upper part) to smaller
manufacturers (job worker) to fit in the soles. The job workers send back the shoes to the principal
manufacturer.
As per GST Act, job work means any treatment or process undertaken by a person on goods
belonging to another registered person. The person doing the job work is called job worker .

Form ITC-04
FORM GST ITC-04 must be submitted by the principal every quarter. He must include the details of
challans in respect of the following-

 Goods dispatched to a job worker or


 Received from a job worker or
 Sent from one job worker to another

Due date of FORM GST ITC-04


ITC-04 is a quarterly form. It must be furnished on or before 25th day of the month succeeding the
quarter.

Details to be furnished in ITC-04


There are 2 parts-

 Goods sent to job worker


 Goods received back from the job worker
FORM GST ITC 04
INCOME

Income
Income is money (or some equivalent value) that an individual or business receives in exchange for
providing a good or service or through investing capital. Income is used to fund day-to-day
expenditures. Investments, pensions, and Social Security are primary sources of income for retirees.
For individuals, income is most often received in the form of wages or salary.
In businesses, income can refer to a company's remaining revenues after paying all expenses and
taxes. In this case, income is referred to as "earnings.” Most forms of income are subject to taxation.

Taxable Income
Income from wages, salaries, interest, dividends, business income, capital gains and pensions
received during a given tax year are considered taxable income in the United States. Other taxable
income includes annuity payments, rental income, farming and fishing income, unemployment
compensation, retirement plan distributions, and stock options. Lesser known taxable income
includes gambling income, bartending income and jury duty pay.

Tax-Exempt and Tax-Reduced Income


Types of income that may be tax-exempt include interest income from U.S. Treasury securities
(which is exempt at the state and local levels), interest from municipal bonds (which is potentially
exempt at the federal, state and local levels) and capital gains that are offset by capital losses. Types
of income taxed at lower rates include qualified dividends and long-term capital gains. Social
Security income is sometimes taxable, depending on how much other income the taxpayer receives
during the year.

Disposable and Discretionary Income


Disposable income is money that’s remaining after paying taxes. Individuals spend disposable
income on necessities, such as housing, food, and transportation. Discretionary income is money
that's remaining after paying all necessary expenses. People spend discretionary income on items like
vacations, restaurant meals, cable television, and movies. In a recession, individuals tend to be more
prudent with their discretionary income. For example, a family may use their discretionary income to
make extra payments on their mortgage or save it for an unexpected expense.
Disposable income is typically higher than discretionary income within the same household because
expenses of necessary items are not removed from the disposable income. Both measures can be
used to project the amount of consumer spending. However, either measure must also take into
account the willingness of people to make purchases.
Section 14 of the Income Tax Act 1961 is for computation of income under Five Heads.
The calculation of income of a person takes place under each such head separately. After this,
computation of total income takes place.

1. Income from Salary


When a person receives a pay check for his job from a company it is called as salary. There must be
a contract existing as per the rule of law, which can established that the payer is the employer and the
receiver is the employee.
One this is established, an employee can receive the salary (remuneration’s) in following forms:
In reference to Indian income tax laws, the terminology to the salary can be the followings-

 Fees
 Wages
 Advances
 Allowances
 Pension
 Gratuity
 Retirement benefits, etc.

2. Income from House Property


The income earned by the owner of house property is taxable. But only if the house property is let-
out on rent, then the income in the hands of the owner becomes taxable. In case the house property is
self-occupied, there will be no income.
The formula for tax liability on income from house property is calculated as such:
Earning - Expenses = Profit

3. Profit from Business


The profit made by the business is liable for taxation. However, one shouldn't confuse with profit
and income as a term. Income from business, minus the allowable expenses incurred while running
the business, is profit. In order to compute profit from the business, it is important for the taxpayer to
be aware of the allowed expenses available as deductions.

4. Capital Gain
Capital gains tax is based on the holding period of the capital asset. There are two categories of
capital gains- the Long Term Capital Gain (LTCG) and the Short Term Capital Gain (STCG).

Short Term Capital Gain


Any asset/property which is sold within less than three years of acquisition are considered as short-
term assets, hence the profit earned by selling the asset is called to be short-term capital gain. In
shares/equities, if you sell the units before one year of the purchase date, the profit would be
considered as the short-term capital gains.
Long Term Capital Gain
Here, the profits earned by selling the property or asset after three years is called as long-term capital
gains. In case of equities, LTCG is applicable if the units have been held for at least one year.
Capital assets that are classified as long-term capital assets if the period of holding exceeds 12
months include:

 Units of UTI & Zero Coupon Bonds


 Equity shares that are listed on any stock exchange
 The units of equity oriented Mutual Funds
 Any listed Debenture or government security.

5. Other Source of Income


There are other types of income sources which will fall under “other income” head are as below:
 Interest earnings
 Dividend earnings
 Gifts Provident Fund income
 Income from games like lottery, race course, etc.
INCOME TAX DEDUCTIONS

Section Section Section


80 C 80 D 24 B*
Limit: Rs. 1.5 Limit: Rs. 25K / Limit: Rs. 2 Lacs
Lacs 50K (Self-occupied or
Let-out Property)
Income
Tax
Deductions Revised Standard Section
List: Section 87A Deduction 80 E
Limit: Rs. Limit: Rs. Limit: Not
FY 2019-20 12,500 50,000 Applicable
OR
AY 2020-
21
Section 80 Section Section
CCD (1b) 80 GG 80 TTA
Limit: Rs. Limit: Rs. Limit: Rs.
50,000 60,000 50,000
Section 80 C

The maximum tax exemption limit under Section 80C has been retained as Rs 1.5 Lakh only. The
various investment avenues or expenses that can be claimed as tax deductions under section 80c are
as below;
 PPF (Public Provident Fund)
 EPF (Employees’ Provident Fund)
 Five year Bank or Post office Tax saving Deposits
 NSC (National Savings Certificates)
 ELSS Mutual Funds (Equity Linked Saving Schemes)
 Kid’s Tuition Fees
 SCSS (Post office Senior Citizen Savings Scheme)
 Principal repayment of Home Loan
 NPS (National Pension System)
 Income Tax benefits are currently available on Tier-1 deposits only (FY 2018-19). The
contributions by the government employees (only) under Tier-II of NPS will also be
covered under Section 80C for deduction up to Rs 1.5 lakh for the purpose of income
tax, with a three-year lock-in period. This is w.e.f April, 2019.
 Life Insurance Premium
 Sukanya Samriddhi Account Deposit Scheme

Section 80CCC
Contribution to annuity plan of LIC (Life Insurance Corporation of India) or any other Life
Insurance Company for receiving pension from the fund is considered for tax benefit. The maximum
allowable Tax deduction under this section is Rs 1.5 Lakh.

Section 80CCD
Employee can contribute to Government notified Pension Schemes (like National Pension Scheme –
NPS). The contributions can be upto 10% of the salary (salaried individuals) and Rs 50,000
additional tax benefit u/s 80CCD (1b) was proposed in Budget 2015.
As per the Budget 2017-18, the self-employed (individual other than the salaried class) can
contribute up to 20% of their gross income and the same can be deducted from the taxable income
under Section 80CCD (1) of the Income Tax Act, 1961.

Section 80D
In the union budget 2018, the government of India has proposed the below changes with respect to
deductions available on Health Insurance and/or towards Medical treatment. The same provisions are
applicable for FY 2019-20 as well;
 Health Insurance & Senior Citizens: In Budget 2018, it has been proposed to raise the
maximum tax deduction limit for senior citizens under Section 80D of the Indian Income Tax
Act 1961. The limit of tax deduction allowed for FY 2017-18 for senior citizens was Rs.
30,000 which was increased to Rs 50,000, from FY 2018-19 (AY 2019-20) onwards.
Single premium Health Insurance policy / Multi-year Medi-claim policy:
 In case of single premium health insurance policies having cover of more than one year, it is
proposed that the deduction shall be allowed on proportionate basis for the number of years for
which health insurance cover is provided, subject to the specified monetary limit.

Section 80DD
You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse,
parents, kids or siblings) who have 40% disability. The tax deduction limit of up to Rs 1.25 lakh in
case of severe disability can be availed.
To claim this deduction, you have to submit Form no 10-IA.

Section 80DDB
An individual (less than 60 years of age) can claim up to Rs 40,000 for the treatment of specified
critical ailments. This can also be claimed on behalf of the dependents. The tax deduction limit under
this section for Senior Citizens and very Senior Citizens (above 80 years) has been revised to Rs
1,00,000 w.e.f FY 2018-19.
To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor
Certificate’ or ‘Prescription’ from a specialist working in a Govt. or Private hospital.

Section 80CCG
Tax Benefits of Rajiv Gandhi Equity Savings Scheme (RGESS) under section 80CCG has been
withdrawn. However, if an investor has invested in the RGESS scheme in FY 2016-17 (AY 2017-
18), they can claim deduction under this Section until AY 2019-20.
Section 24 (B) (Loss under the head Income from House Property)
 From FY 2017-18, the Tax benefit on loan repayment of second house is restricted to Rs 2
lakh per annum only (even if you have multiple houses the limit is still going to be Rs 2 Lakh
only and the ceiling limit is not per house property).
 The unclaimed loss if any will be carried forward to be set off against house property income
of subsequent 8 years. In most of the cases, this can be treated as ‘Dead Loss’.
 I believe that this is a major blow to the investors who have bought multiple houses on home
loan(s) with an intention to save taxes alone.

Section 80E
If you take any loan for higher studies (after completing Senior Secondary Exam), tax deduction can
be claimed under Section 80E for interest that you pay towards your Education Loan. This loan
should have been taken for higher education for you, your spouse or your children or for a student
for whom you are a legal guardian. Principal Repayment on educational loan cannot be claimed as
tax deduction.
There is no limit on the amount of interest you can claim as deduction under section 80E. The
deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.
Section 80EE
This was a new proposal which had been made in Budget 2016-17. The same will be continued in
FY 2018-19 / AY 2019-20 too. First time Home Buyers can claim an additional Tax deduction of up
to Rs 50,000 on home loan interest payments u/s 80EE.

Section 80G
Contributions made to certain relief funds and charitable institutions can be claimed as a deduction
under Section 80G of the Income Tax Act. This deduction can only be claimed when the contribution
has been made via cheque or draft or in cash. In-kind contributions such as food material, clothes,
medicines etc. do not qualify for deduction under section 80G.
The donations made to any Political party can be claimed under section 80GGC.
W.e.f FY 2017-18, the limit of deduction under section 80G / 80GGC for donations made in cash
is reduced from current Rs 10,000 to Rs 2,000 only.

Section 80GG
The Tax Deduction amount under 80GG is Rs 60,000 per annum. Section 80GG is applicable for all
those individuals who do not own a residential house & do not receive HRA (House Rent
Allowance).
The extent of tax deduction will be limited to the least amount of the following;
 Rent paid minus 10 per cent the adjusted total income.
 Rs 5,000 per month.
 25 % of the total income.

Revised Rebate under Section 87A

Tax rebate of Rs 12,500 for individuals with taxable income of up to Rs 5 Lakh has been proposed in
Interim-Budget 2019-20-18 / AY 2020-21 as well.

Section 80 TTA & new Section 80TTB


For Senior Citizens, the Interest income earned on Fixed Deposits & Recurring Deposits (Banks /
Post office schemes) will be exempt till Rs 50,000 (FY 2017-18 limit was up to Rs 10,000). This
deduction can be claimed under new Section 80TTB. However, no deductions under existing 80TTA
can be claimed if 80TTB tax benefit has been claimed (the limit for FY 2017-18 & FY 2018-19 u/s
80TTA is Rs 10,000).

Section 80TTA of Income Tax Act offers deductions on interest income earned from savings bank
deposit of up to Rs 10,000. From FY 2018-19, this benefit will not be available for late Income Tax
filers.
 Proposal has been made to not to deduct TDS of up to Rs 40,000 on interest income from
Bank / Post office deposits (the FY 2018-19 TDS threshold limit u/s 194A is Rs 10,000).
Kindly note that no TDS does not mean no tax liability. Interest income on Deposits
(FDs/RDs) is still a taxable income.
Interest income from deposits held with companies will not benefit under this section. This means,
senior citizens will not get this benefit for interest income from corporate fixed deposits us/ 80TTB.
Section 80U
This is similar to Section 80DD. Tax deduction is allowed for the tax assessee who is physically and
mentally challenged.

TDS and TCS

TDS (Tax Deducted at Source)


TDS stands for 'Tax Deducted at Source'. It was introduced to collect tax at the source from where
an individual's income is generated. The government uses TDS as a tool to collect tax in order to
minimise tax evasion by taxing the income (partially or wholly) at the time it is generated rather than
at a later date. TDS is applicable on the various incomes such as salaries, interest received,
commission received etc.

TDS is not applicable to all incomes and persons for all transactions. Different rates of TDS have
been prescribed by the Income Tax Act for different payments and different categories of recipients.
For example, payment of redemption proceeds by a debt mutual fund to a resident individual is not
subject to TDS but for a Non-resident Indian is subject to TDS.

TDS works on the concept that every person making specified type of payments to any person shall
deduct tax at the rates prescribed in the Income Tax Act at source and deposit the same into the
government's account.

The person who is making the payment is responsible for deducting the tax and depositing the same
with government. This person is known as 'Deductor'. On the other hand, the person who receives
the payment after the tax deduction is called 'Deductee'.

Objectives of Tax Deducted at Source


 To enable the salaried people to pay the tax as they earn every month. This helps the salaried
persons in paying the tax in easy instalments and avoids the burden of a lump sum payment.
 To collect the tax at the time of payment of income to various assessees such as contractors,
professionals etc.
 Government requires funds throughout the year. Hence, advance tax and tax deducted at source
help the government to get funds throughout the year and run the government smoothly.

TDS on Dividends
Section 302of Income Tax Act, 1961 by law notes.[1]

 TDS provisions under this section are attracted only in respect of deemed dividend u/s 2(22)(e),
If such dividend exceeds 2500 in year.
 Rate of deduction of tax in respect of such dividend is 10%.
 Provisions will not apply to dividend receivable by SADHA, GIC(General Insurance
Corporation), its subsidiaries or any other insurer provided shares are owned by it or in which it
has full beneficial interest :] [Provided also that no such deduction shall be made in respect of
any dividends referred to in section 115-O.]

How to avoid TDS

If a person expects that his total income in a financial year will be below the exemption limit, he can
ask the payer not to deduct TDS by submitting Form 15G/15H.

While receiving payment which is subject to TDS, Deductee is required to provide his PAN details
to avoid tax deduction at the higher rates

RATES OF TAXES DEDUCTED AT SOURCES

Section 192 (A) and (B)


Payment of Salary: An employer is required to deduct TDS from the salary payable to the
employees. When an employer is paying salary to an employee, which is categorised in Income
under the head Salary, he is responsible for deducting TDS on an average rate of income tax based
on the prevailing rate during the financial year by considering the estimated income of the assessee.
Rate: 10% rate of TDS on Interest to any person (Individual, HUF, Company, Trust, Association of
Person and Board of Individuals) ceiling limit of Rs. 5,000.

Section 194 (A)


Section 194 (A) deals with deduction of TDS on interest other than interest on securities like Interest
on Fixed Deposits, Interest on Loans and Advances other than banks. This Section is only applicable
to a resident. Thus, the provisions of section 194A are not applicable in case of payment of interest to
a non-resident. Here the Interest rate is 10%.

Section 194 (C)


Payment to Contractor / Sub-Contractor:
Section 194C states that any person responsible for paying any sum to the resident contractor for
carrying out any work (including the supply of labour):

a) HUF and Individual: 1 per cent with ceiling limit of Rs. 30,000
b) Other than Individual: 2 per cent with ceiling limit of Rs. 1,00,000.

Section 194 (H)


Commission or brokerage: Section 194H is for income tax deducted on any income by way of
commission or brokerage, by any person responsible for paying to a resident. The rate of TDS is 5%.
 No surcharge, education cess or SHEC shall be added to the above rates. Hence, the tax will be
deducted at source at the basic rate.
 The rate of TDS will be 20% in all cases if PAN is NOT quoted by the Deductee.

Section 194 (I)

 The person (not being an Individual or HUF) who is responsible for paying of rent is liable to
deduct tax at source.
 in case the aggregate of the amount of rent credited or paid or likely to be credited or paid
during the financial year exceeds Rs.1,80,000/-
 Also, individuals and/or HUFs who are subject to tax audit are also under an obligation to
deduct the tax at source.

S. No Nature of Payment Rates of tax deduction

1 Rent of plant and machinery 2%

Rent of land or building or 10%


2
furniture or fitting (5% if rent exceeding Rs 50,000 / month is paid by
individual/HUF who are not liable for tax audit)

Section 194 (J)


Any sum paid by way of:
a) Fee for professional services
b) Fee for technical services.
c) Royalty
d) Remuneration/fee/commission to a director ore - For not carrying out any activity in relation to
any business.
e) For not sharing any know-how, patent, copyright etc.

Rate of TDS is 10 per cent.

Date of TDS Return Filings:


Quarter 1 - 31st July
Quarter 2 - 31st October
Quarter 3 - 31st January
Quarter 4 - 31st May
Penalty for Late Filing of TDS Return
1. Penalty (Sec 234E)
Deductor will be liable to pay the way of fee Rs.200 per day till the failure to pay TDS continues.
However, the penalty should not exceed the amount of TDS for which statement was required to be
filed.
2. Penalty (Sec 271H)
Assessing officer may direct a person who fails to file the statement of TDS within due date to pay
penalty minimum of Rs.10,000 which may be extended to Rs.1,00,000.

TCS – Tax Collected at Source


Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the
time of sale. Section 206 (C) of the Income-tax act governs the goods on which the seller has to
collect tax from the purchasers. When the below-mentioned goods are utilized for the purpose of
manufacturing, processing, or producing things, the taxes are not payable. If the same goods are
utilized for trading purposes then tax is payable. The tax payable is collected by the seller at the point
of sale.

Type of Goods Rate


Liquor of alcoholic nature, made for consumption by humans 1%
Timber wood under a forest leased 2.5%
Tendu leaves 5%
Timber wood by any other mode than forest leased 2.5%
A forest produce other than Tendu leaves and timber 2.5%
Scrap 1%
Minerals like lignite, coal and iron ore 1%
Bullion that exceeds over Rs. 2 lakhs/ Jewellery that exceeds over Rs. 5 lakhs 1%
Purchase of Motor vehicle exceeding Rs. 10 Lakhs 1%
Parking lot, Toll Plaza and Mining and Quarrying 2%

Due Date TCS of Return Filing:


Quarter 1 – 15th July
Quarter 2 – 15th October
Quarter 3 – 15th January
Quarter 4 – 15th May
TCS Exemptions:
Tax collection at source is exempted in the following cases :
1. When the eligible goods are used for personal consumption
2. The purchaser buys the goods for manufacturing, processing or production and not for the purpose
of trading of those goods.

TCS under GST:


a. Any dealer or traders selling goods online would get the payment from the online platform after
deducting an amount tax @ 1 % under IGST Act. (0.5% in CGST & 0.5% in SGST)
b. The tax would have to be deposited to the government by 10th of the next month.
c. All the dealers/traders are required to get registered under GST compulsorily.
d. These provisions are effective from 1st Oct 2018.

Types of TDS Return Forms:

Form 24Q – TDS Return on Salary Payment


At the time of paying salary to an employee, the employer deducts TDS u/s 192. The employer has to
file salary TDS return in Form 24Q. 24Q is to be submitted on a quarterly basis. Details of salary
paid to the employees and TDS deducted on such payment is to be reported in 24Q. 24Q consists of
2 annexures – Annexure I and Annexure II.
While Annexure I has to be submitted for all four quarters of an FY, Annexure II is not required to
be submitted for the first three quarters. Annexure II has to be submitted in the last quarter (Jan –
Mar) only.
TDS on salary has to be deducted as per income tax slab. The employer has to consider all
deductions and investments of the employee (if proofs of such investments are submitted).
Annexure I of 24Q
Annexure I shows Deductee wise break up of TDS against each particular challan.
Details of challan(s) to be mentioned in Annexure I

 BSR code of branch


 Date of deposition of challan
 Challan serial number
 Total Amount in Challan
 TDS amount to be allocated among Deductees
 Interest amount to be allocated among Deductees

Details of Deductee(s) to be mentioned in Annexure I

 Employee reference number (if available)


 PAN of the employee
 Name of the employee
 TDS Section Code
 Date of payment/ credit
 Amount paid or credited
 TDS amount
 Education Cess

Besides, if the employer doesn’t deduct TDS or deducts TDS at a lower rate, he’ll have to provide
the reasons for such non-deduction or lower deduction.

Annexure II of 24Q
Annexure II consists of a total breakup of the salary, any deductions to be claimed by the employee,
his income from other sources, and house property and overall tax liability as calculated.

TDS Section Code


192 (A) – Salary paid to govt. employees other than union govt. employees
192 (B) – Salary paid to non-government employees
192 (C) – Salary paid to union govt. employees

Fees/ Interest/ Penalties attached with 24Q


Interest:

 If TDS not deducted – 1% per month, from due date of deduction to actual date of deduction,
 If TDS not deposited – 1.5% per month, from actual date of deduction to actual date of payment
Late Filing Fees – under section 234E, a fine of Rs. 200 per day is to be paid until the return is filed.
This amount has to be paid for each day until total fine becomes equal to the TDS amount.

The penalty under 271H – In addition to fees to be paid under 234E, AO may charge the penalty of
minimum Rs. 10,000 and maximum Rs. 1,00,000.
No penalty will be charged under 271H if –

 TDS is deposited to the government


 Late filing fees and interest (if any) is also deposited
 Return is filed before expiry of 1 year from due date

Form 26Q: TDS Return filing for Non Salary Deductions


At the time of paying to the payee, the payer has to deduct TDS on certain occasions. This payment
is other than payment of salary, and the payer has to file TDS return in Form 26Q. 26Q is to be
submitted on a quarterly basis.
Total amount paid during the quarter and TDS amount deducted on such payments have to be
reported in 26Q.
Details to be mentioned in 26Q
As against 24Q which contains 2 annexures, Form 26Q contains only one annexure. Challan details
(BSR code, date of payment, total amount etc.), details of deductor and deductees are to be
mentioned. Along with this, if the deductor hasn’t either deducted TDS or deducted it at a lower rate,
reasons are also to be mentioned in the form.

Rate of Interest
If TDS is not deducted – 1% per month, from due date of deduction to actual date of deduction,
If TDS is not deposited – 1.5% per month, from actual date of deduction to actual date of payment

Penalties for late filing of 26Q


Late Filing Fees – under section 234E, a fine of Rs. 200 per day is to be paid until the return is filed.
This amount has to be paid for each day until total fine becomes equal to the TDS amount.
The penalty under 271H – In addition to fees to be paid under 234E, AO may charge the penalty of
minimum Rs. 10,000 and maximum Rs. 1,00,000.
No penalty will be charged under 271H if –

 TDS is deposited to the government


 Late filing fees and interest (if any) is also deposited,
 Return is filed before expiry of 1 year from due date

INCOME TAX RETURN


An income tax return is a form where taxpayers declare their taxable income, deductions, and tax
payments. This procedure of filing income tax returns is referred to as income tax filing. While
filing, the total income tax you owe to the government is also calculated. If you've paid more tax
than needed for the financial year, the IT Department will refund the extra money to your account. If
you have underpaid taxes for the year, please pay the remaining amount, and then file your income
tax returns.
Income tax return form ranges from ITR 1 to ITR 7, used for different types of income. Some forms
are longer than the others, and they may need additional disclosures such as balance sheet and a
profit and loss statement information.
Why Should we File ITR?
It is mandatory to file income tax returns (ITR) in India if any of the conditions mentioned below are
applicable to you:

1. If your gross annual income is more than-

Particulars Amount
For individuals below 60 years Rs 2.5 Lakh
For individuals above 60 years but below 80 years Rs 3.0 Lakh
For individuals above 80 years Rs 5.0 Lakh

2. If you have more than one source of income like house property, capital gains etc.
3. If you want to claim an income tax refund from the department.
4. If you have earned from or have invested in foreign assets during the FY.
5. If you wish to apply for visa or a loan
6. If the taxpayer is a company or a firm, irrespective of profit or loss.

TYPES OF ITR
ITR-1 OR SAHAJ
This Return Form is for a resident individual whose total income for the assessment year 2018-19
includes:

 Income from Salary/ Pension; or


 Income from One House Property (excluding cases where loss is brought forward from
previous years); or
 Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)
 Agricultural income up to Rs.5000.

ITR-2
ITR 2 is for the use of an individual or a Hindu Undivided Family (HUF) whose total income for the
AY 2018-19 includes:

 Income from Salary/Pension; or


 Income from House Property; or
 Income from Other Sources (including Winnings from Lottery and Income from Race
Horses).

(Total income from the above should be more than Rs 50 Lakhs)

 If you are an Individual Director in a company


 If you have had investments in unlisted equity shares at any time during the financial year
 Being a resident not ordinarily resident (RNOR) and non-resident
 Income from Capital Gains; or
 Foreign Assets/Foreign income
 Agricultural income more than Rs 5,000

Further, in a case where the income of another person like one’s spouse, child etc. is to be clubbed
with the income of the assessee, this Return Form can be used where such income falls in any of the
above categories.

ITR-3
The Current ITR3 Form is to be used by an individual or a Hindu Undivided Family who have
income from proprietary business or are carrying on profession. The persons having income from
following sources are eligible to file ITR 3 :

 Carrying on a business or profession


 If you are an Individual Director in a company
 If you have had investments in unlisted equity shares at any time during the financial year
 Return may include income from House property, Salary/Pension and Income from other
sources
 Income of a person as a partner in the firm

ITR-4 or SUGAM
The current ITR 4 is applicable to individuals and HUFs, Partnership firms (other than LLPs) which
are residents having income from a business or profession. It also include those who have opted for
the presumptive income scheme as per Section 44AD, Section 44ADA and Section 44AE of the
Income Tax Act. However, if the turnover of the business exceeds Rs 2 crore, the taxpayer will have
to file ITR-3.

ITR-5
ITR 5 is for firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons), BOIs
(Body of Individuals), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent,
Business trust and investment fund.

ITR-6
For Companies other than companies claiming exemption under section 11 (Income from property
held for charitable or religious purposes), this return has to be filed electronically only.

ITR-7
For persons including companies required to furnish return under section 139(4A) or section 139(4B)
or section 139(4C) or section 139(4D) or section 139(4E) or section 139(4F).

 Return under section 139(4A) is required to be filed by every person in receipt of income
derived from property held under trust or other legal obligation wholly for charitable or
religious purposes or in part only for such purposes.
 Return under section 139(4B) is required to be filed by a political party if the total income
without giving effect to the provisions of section 139A exceeds the maximum amount, not
chargeable to income-tax.
 Return under section 139(4C) is required to be filed by every –
o Scientific research association;
o News agency ;
o Association or institution referred to in section 10(23A);
o Institution referred to in section 10(23B);
o Fund or institution or university or other educational institution or any hospital or
other medical institution.
 Return under section 139(4D) is required to be filed by every university, college or other
institution, which is not required to furnish return of income or loss under any other provision
of this section.
 Return under section 139(4E) must be filed by every business trust which is not required to
furnish return of income or loss under any other provisions of this section.
 Return under section 139(4F) must be filed by any investment fund referred to in section
115UB. It is not required to furnish return of income or loss under any other provisions of
this section.

SOME BASIC ACCOUNTING TERMS

Debit Note
A debit note is a document sent by a buyer to its seller, or in other words, a purchaser to its vendor
while returning goods received on credit. The intent is to notify the seller that they’ve been debited
by the buyer against the goods returned.
It reduces the amount due to be paid to the seller, (if the amount due is Nil) then it allows further
purchases on behalf of that.
A debit note is issued for the value of the goods returned. In some cases, sellers are seen sending
debit notes which should be treated as just another invoice.

Few Characteristics of a Debit Note


1. It is sent to inform about the debit made on the account of the seller along with the reasons
mentioned in it.
2. The purchase returns book is updated on its basis. (In case of return of goods)
3. It is usually used by the buyer to return goods on credit.
4. It is generally prepared like a regular invoice and shows a positive amount.

Journal Entry for Debit Note

In the books of buyer


Goods returned by the buyer are purchase return, the impact of returning goods to the seller are;

1. Current liability decreases as payables against credit purchase reduce.


2. Expense decreases as credit purchases reduce.
Creditor’s A/C Debit

To Purchase Return A/C Credit

In the books of seller


Goods received (back) by the seller are sales return, the impact of receiving goods by the seller are;

1. Revenue decreases as credit sales reduce.


2. Current assets decrease as receivables against credit sales reduce.

Sales Return A/C Debit

To Debtor’s A/C Credit

Credit Note
A credit note is a document sent by a seller to its buyer or, in other words, a vendor to the customer,
notifying that a credit has been provided to their account against the goods returned by the buyer.

It reduces the amount due to be paid by the customer, (if the amount due is Nil) then it allows further
purchases in lieu of the credit note itself.

A credit note is issued for the value of goods returned by the customer, it may be less than or equal to
total amount of the order.

Important Characteristics
1. It is sent to inform about the credit made in the account of the buyer along with the reasons.
2. The sales return book is updated on its basis. (In case of return of goods)
3. It is usually sent by the seller if the goods are found incomplete, damaged or incorrect at buyer’s
end.
4. It shows a negative amount.

Journal Entry for Credit Note


In the books of buyer
Goods returned by the buyer are purchase return, the action of returning goods by the buyer leads to;

1. A decrease in liability to pay the respective creditor.


2. A decrease in expense previously incurred to purchase those goods.
Creditor’s A/C Debit

To Purchase Return A/C Credit

In the books of seller


Goods returned to the seller are sales return, the action of returning goods to the seller leads to;

1. A decrease in revenue previously booked as sales.


2. A decrease in assets as the payment will not be made by the debtor anymore.

Sales Return A/C Debit

To Debtor’s A/C Credit

Debit Note in GST


Details of debit notes issued should be furnished in Form GSTR-1 for the month in which the debit
note is issued. These details will be made available to the recipient in Form GSTR-2A, post which
the recipient has to accept the details and submit in Form GSTR-2.

Please note that a debit note can be raised by a recipient also, when the goods received are returned,
damaged in transit, taxable value shown in the invoice is more than the actual or tax charged is more
than the actual. However, under GST, debit note furnished by a supplier only will be considered for
revision in the values of an invoice. The same has to be accepted by the recipient for corresponding
impact on input tax credit on the supply.

Credit Note in GST


The details of credit notes issued in a month should be furnished by suppliers in Form GSTR-1. The
recipient of the supply will receive these details in Form GSTR-2A, post which the recipient has to
accept the details and submit in Form GSTR-2. A point to note here is, that a supplier will be
allowed to reduce his tax liability via a credit note only if the recipient of the supply accepts the
credit note details in Form GSTR-2. Once this is done, the recipient’s input tax credit will be
reversed to the extent of the credit note and the supplier’s tax liability will also be correspondingly
reduced.

Please note that a credit note can also be issued by the recipient of a supply, in cases such as when
the taxable value shown in an invoice for an inward supply is less than the actual, or, tax charged for
an inward supply is less than the actual. However, in these cases, revision in the values of an invoice
will only be considered when a supplier issues a corresponding debit note for the supply. The details
of debit note issued have to be furnished by the supplier and the same has to be accepted by the
recipient. Subsequently, the tax liability of the supplier and input tax credit of the recipient will be
modified accordingly.

SALARY COMPOSITION

Tax Is PF Is ESIC Part of Minimum


Component
Deduction Applicable? Applicable Gratuity Amount

As per
Basic Fully Taxable Yes Yes Yes Minimum
Wages
As per
DA Fully Taxable Yes Yes Yes Minimum
Wages
Fully Taxable
Medical effective April No Yes No None
2018
Fully Taxable
Conveyance effective April No Yes No None
2018
Tax Exemption
subject to the
minimum of the
following 3
conditions
1) Actual HRA Varies
HRA 2) 50% of Basic + No Yes No Depending on
DA if Metro or the state
40% of Basic +
DA if non metro
3) Total Rent –
10% of Basic

As per actuals of
LTA the fare expenses No Yes No None
on leave travel
Children Rs. 100 monthly
Education for each child up No Yes No None
Allowance to 2 children
Rs. 300 monthly
Children Hostel No
per child for up to Yes No None
Allowance
2 children
Actual expenses
Mobile &
incurred on one
Telephone No No No None
mobile phone and
Reimbursement
one landline
Rs. 1800/- p.m. in
case Cubic
Car
Capacity of engine No No No None
Maintenance
is 1.6 litres or else
Rs. 2400 p.m.

Actuals of driver’s
Driver Salary salary up to Rs. No No No None
900 monthly
Books &
Actual expenses No No No None
Periodicals
Special Fully Taxable No Yes No None

DEDUCTIONS IN SALARY
Deductions, when applied to the CTC give you the actual take-home salary that an employee gets.
Here are some of the most common deductions:

Deductions How is it calculated? Whom does it apply to?


Provident Employer and Employee each Companies that have more than 20 or more
Fund contribute Contribution 12% of employees. It is mandatory for employees
Basic + DA + Special whose Basic + DA + Special is less than Rs.
15,000 a month
ESIC Employer Contribution is 4.75% If a company has 20 or more employees who
of Gross Salary; Employee have a gross salary of less than Rs. 21,000 a
Contribution is 1.75% of Gross month, then it is applicable to all those
Salary employees
Professional Varies from state to state All employees of applicable states
Tax
Labour Varies from state to state All employees of applicable states, that might
Welfare Fund depend on designation
WORKING CAPITAL

Working capital is the amount of an entity's current assets minus its current liabilities. The
result is considered a prime measure of the short-term liquidity of an organization. A strongly
positive working capital balance indicates robust financial strength, while negative working
capital is considered an indicator of impending bankruptcy.

In other words, Working Capital also known as Working Assets, it is part of the total
capital which is currently employed in a company’s day-to-day operations. Cash or liquid assets
vital to run a company’s daily operations are collectively known as Working Capital. It is computed
as the difference between current assets and current liabilities.
Evaluation is done to find out if a business has enough current assets to cover all its short-term
liabilities. Monitoring helps in efficient management of a company’s operations and maintenance
of its short-term financial health.

A 2:1 ratio of current assets to current liabilities is considered healthy, though the ratio
can vary by industry. The ratio may also be reviewed on a trend line, with the intent of spotting
any declines or sudden drops that could indicate liquidity problems.

CALCULATIONS OF WORKING CAPITAL

The excess of current assets over current liabilities is known as a company’s working capital, it is
calculated as follows:

Working Capital = Current Assets – Current Liabilities

Examples of current assets –


Debtors, Cash, Bank, Inventory, Prepaid Expenses, etc.

Examples of current liabilities –


Creditors, Overdraft, Outstanding Expenses, etc.

Low Working Capital


In case of inadequacy of working assets, current assets are less than current liabilities, which means
the company has to pay more money than it will receive in short-term.

Current Assets < Current Liabilities


A poor working capital condition is the first indication of financial problems for a business
and shows that it is struggling to keep up with its daily operations.

Excess Working Capital


In cases where current assets are considerably higher as compared to current liabilities, it is said to be
an excess of WC.

Current Assets > Current Liabilities

Surplus WC may indicate inefficiency in the way the business operations as it symbolises
that current assets are sitting idle and need to be put to better use.

Working Capital Ratio

The working capital ratio is a measure of liquidity, revealing whether a business can pay its
obligations. The ratio is the relative proportion of an entity's current assets to its current
liabilities, and shows the ability of a business to pay for its current liabilities with its current
assets. A working capital ratio of less than 1.0 is a strong indicator that there will be liquidity
problems in the future, while a ratio in the vicinity of 2.0 is considered to represent good short-
term liquidity.

To calculate the working capital ratio, divide all current assets by all current liabilities. The
formula is:

Current assets ÷ Current liabilities = Working capital ratio

Problems with the Working Capital Ratio

The working capital ratio can be misleading if a company’s current assets are heavily weighted
in favour of inventories, since this current asset can be difficult to liquidate in the short
term. This problem is most obvious if there is a low inventory turnover ratio. A similar problem
can arise if accounts receivable payment terms are quite lengthy (which may be indicative of
unrecognized bad debts).

The working capital ratio will look abnormally low for those entities that are drawing down
cash from a line of credit, since they will tend to keep cash balances at a minimum, and only
replenish their cash when it is absolutely required to pay for liabilities. In these cases, a
working capital ratio of 1:1 or less is common, even though the presence of the line of credit
makes it very unlikely that there will be a problem with the payment of liabilities.
Working Capital

Fund Based Non-Fund Based

Export Packing
Credit

Non-Fund Based

Fund Based
Fund Based Working Capital

Each business has its uniqueness and style which decides the nature and the form of working capital
it require. An exporter for example will need packing credit limit instead to OD limit in compare to a
trader who will ask for OD limit. In view of above and as per industry practices following are the
possible forms of the working capital:

Cash Credit (CC)

To meet working capital requirements of the company the bank gives the CC limit against the
hypothecation of Stock and Debtors. But while deciding the limit, the bank deducts the Trade
Creditors also. Further a monthly stock and debtor’s statement need to be submitted with the bank
showing the position of the stock and aging of the debtors. Client opens the Cash Credit Account
which allows the withdrawal up to the limit sanctioned by the bank. Bank charges the prevailing
interest and other bank charges as per norms. This facility is sanctioned for a year and need to review
at the closing of the year for renewal subject to the requirement of client. Bank normally asks for the
collateral security for securing its hand in case of any default. A regular inspection is conducted on
the factory and godowns of the client, to check the stock levels, by the bank officers along with a
Stock Audit conducted by a Chartered Accountant on yearly basis.

Export Packing Credit

Export Packing Credit is basically a loan provided to exporters or sellers to finance the
goods’ procurement before shipment. The bank will make the funds available to a letter of
credit issued favouring the seller and a confirmed order for selling the goods or services. The
advance is provided to purchase raw materials, process, manufacture, pack, market and transport the
required goods and services. At times, the packing credit is also used for financing the working
capital and meet the requirements of wages, travel expenses, utility payments, etc for companies
listed as exporters.

Pre-shipment Credit Foreign Currency

When an advance or a loan is granted, or another form of credit, is provided by a bank to an


exporter for the purpose of financing the purchase, processing, manufacturing or packaging of goods
before a shipment is called a pre-shipment credit. With the aim to provide the access of credit to
exporters at internationally competitive rates, dealers who are authorised have a permit to offer Pre-
shipment Credit in Foreign Currency to exporters for domestic and imported inputs of exported
goods. This article talks about the process and details concerning Pre-Shipment Credit in Foreign
Currency (PCFC).

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