The Service Tax Increases to 15% from 1st June, 2016

Alert! Another cess on the horizon. Owing to the success of the Swachch Bharat cess, the Finance Ministry has now decided to come up with the Krisha Kalyan cess. What is it?

The tax (because that’s what it is) of 0.5% will be levied on all the existing taxable services and will come into effect on June 01, 2016. The proceeds from this burden, will be used to improve agricultural practices, and boost welfare of the farmers. Input tax credit will be available against this charge. This basically means that any Taxes Paid on the inputs of the final service that you are providing, will be available to you as a Tax Credit. This concept is the underlying principle of Value Added Tax (VAT) – you only pay taxes on the value that you add in the value chain.

The Krishi Kalyan cess, is proposed to be collected in another way as well. Enter Black Money. A strong and continuing focus of the Finance Ministry has been to pre-empt those with undeclared assets and income, to come forth and do so. Special attention has been given to this focus this year. Any declarants who come forward and declare their undisclosed income, will have to pay 30% taxes on it, plus a 7.5% penalty and an additional 7.5% as a surcharge. This additional charge will also accrue to the ‘Krishi Kalyan’ scheme.

Previously Exempt Services Coming Under the Scanner

The following services are proposed to be slapped with service tax from April 01, 2016.

• Services provided by an advocate to another advocate or partnership of advocates (14%);
• Construction & installation of original works pertaining to monorail or metro, in respect of contracts entered into on or after 1st March 2016 (5.6%);
• Services of transport of passengers by ropeway, cable car or aerial tramway (14%);
• Service Tax is being levied on transportation of passengers by air conditioned stage carriage (5.6%); Stage carriages are basically larger cabs, that are allowed to carry People and Goods.

New Exemptions Announced

• Housing projects under Housing For All (HFA) (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY), Low Cost houses up to a carpet area of 60 square metres in a housing project under “Affordable housing in Partnership” component of PMAY, and Low Cost houses up to a carpet area of 60 square metres in a housing project under any housing scheme of the State Government;
• Life Insurance business provided by way of annuity under the National Pension System;
• Services provided by Employees’ Provident Fund Organisation (EPFO);
• Services provided by Insurance Regulatory and Development Authority (IRDA);
• Services provided by SEBI;
• General Insurance business provided under ‘Niramaya’ Health Insurance scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability;
• Services provided by National Centre for Cold Chain Development;
• Services provided by way of skill/vocational training by training partners under Deen Dayal Upadhyay Grameen Kaushalya Yojana;

Additional Fascinating Measures:

• Indian shipping companies now have to pay taxes only for transporting Goods to India, from outside. Any goods transported outside of India, ca
  n be used to avail tax credits.
• Exemptions on construction for a Governmental authority and canals, dams or other irrigation works are being reinstated after being removed for a year.
• IIM’s are now exempt from paying Service Tax! Doesn’t apply to their Executive Management programs though.
• Small changes in taxation for agents in the Mutual Funds industry.

 For more information you can contact us at munim.in

Due Diligence - Essential for Start up Funding

Due diligence is now-a-days becoming a synonym to funding. Due diligence is a process by which an investor obtains information about the business in which they are seeking to invest, both from a business and legal perspective.

Due Diligence is nothing but an investigation to assess risk. So, once you have decided to raise money from outside investors, take the time to prepare due diligence. For this, first we need to know about the different stages of funding:

·         Term Sheet Negotiation

·         Business Valuation & Business Plan

·         Due Diligence

·         Agreement Signing

·         Issuance of funding instrument- Share Based and Debt Based Funding

·         Corporate Law and RBI Compliances

So, we can see that before signing of final agreement for funding, we need to clear the due diligence process. When we talk about due diligence, questions like why Due Diligence? Its process.. few tips to clear the process… are generally asked by startups. In this article, we try to clear all the queries related to due diligence for funding:

Why Due Diligence?

·         Check the Internal Control Systems are in place or not

·         To calculate the financial risk involved

·         Judge the awareness of the business owners

·         Assess the team structuring and Operational Processes in place

·         Verify the claims of the pitchers

·         Excavate undisclosed risks

Process of Due Diligence:

·         Investor appoints a team

·         Definite Mandate is set for the team

·         Confidentiality Agreements are formulated between parties

·         Due Diligence Questionnaire and checklist is prepared and circulated

·         Investigation takes place

·         Due Diligence Report is formulated and circulated

Tips to hack the due diligence investigation:

·         Ownership of Intellectual Property should reside with the Company and not the Director(s)/Shareholder (s)

·         Internal Differences of Founders should be thrashed out before pitching for investment

·         Secretarial practices should be in place

·         State Specific licenses and permits have been obtained or not

·         Proper record of all the filings with the Government department till date should be in records of the Company

·         Internal Agreements and contracts between shareholders or directors should be reduced to writing

·         Check the formulation, maintenance and renewal of contracts with service providers and vendors

·         All structural changes in company should be duly recorded with the RoC and should take place as per standard guidelines of the Companies Act, 2013

·         All the compliance related filings should be up to date.

·         State Specific licenses and permits have been obtained or not

·         Litigation issues, if any should be properly recorded and if possible sorted as early as possible.

·         Best to appoint an inspector internally to set everything in place before the due diligence check from the investor is due

Here are a few points for startups to focus on when setting their house in order:

·         Incorporation– Failure to corporatize or legalise your entity, you lose the advantage of ring-fencing yourself with an artificial-legal entity. A legal entity not only adds professionalism to the startup, but also provides a sense of confidence to the other transacting party.

·         Registrations– Failure to register under PF, ESI, VAT, Service Tax might pull you down on the edge of due diligence. So, all the registrations and filings must be in place.

·         Legal issues– Any legal issue outstanding at your door step must be tackled and if you are not capable enough then hire some lawyers and set them off.

·         Accounting– Maintain Income and Expenditure statement, P&L Accounts, other financial statements. If it is eating too much of your time, and weaning you away from core business-building activities, outsource it to someone who does it professionally.

·         Intellectual property–Ownership of Intellectual Property, including non-exclusive licenses, infringement, inappropriate use and potential action, has to be dealt and agreed upon.

·         Previous fundraising documents- If you have already raised funds, then future investors would like to know the details of fundraising, utilisation, its impact, etc. Put these in order so they can understand them thoroughly.

·         Secretarial Drafting- Secretarial practices should be in place like Board Minutes, AGM/ EGM Minutes, all the filings with MCA.

What do you need to know about New Bankruptcy law

Poor resolution of bankruptcies is a big contributor to India’s low position in the World Bank’s ranking of Ease of Doing Business. So, the government has passed a new law to deal with bankruptcy.

The Insolvency and Bankruptcy Code, 2015, a law aimed at speedy winding up of insolvent companies, lowering NPAs, and redeploying capital productively. To understand this law, we must know what bankruptcy amount to and the why the new law was required.

 Being bankrupt is a state of inability to repay debts to creditors. In India’s banking industry the bad debts were piling up at banks. According to central bank data, stressed assets (which include gross bad loans, advances whose terms have been restructured and written-off accounts) rose to 14.5% of banking sector loans at the end of December 2015. That’s almost Rs 10 trillion of loans that are stuck. Freeing up this money is crucial for the banking sector to go about its business.

There are numerous of laws to deal with such issues but multiplicity of laws has been a problem in the way of banks failing to recover their loans.

Highlights of new Bankruptcy law:

·         It consolidate all existing laws

·         For resolving insolvency, it specifies timeframe of 180 days after the process is initiated plus 90 days extension.

Impact of the new Bankruptcy law:

·         The new Bankruptcy Law will fast-track recovery of dues from defaulters and employees will be first in line to get their share from liquidation of assets.

·         It will bring down drastically the time taken to wind up a sick company while making the entire process much easier.

·         It will enable the recovery process to move much more smoothly and effectively.

·         It will protect the workers in case of insolvency by giving first priority on paying their salaries for up to 24 months from the liquidation of assets.

·         Employees’ rights (and) creditors’ rights have been dramatically strengthened and as a result, if indeed there is a default event, employees are first in line to be able to secure their rights.

Changes in ITR for AY 2016-17

Government has notified the new forms with the onset of the new financial year i.e., 1^st April, 2016. The Finance Ministry published a gazette order in this regard on March 30 and taxpayers can file their ITRs till the stipulated deadline of July 31.

In this regard, following changes in ITR for AY 2016-17 need to be marked before filing of return:

 Earning above Rs. 50 lakhs per annum

 Disclosure of value of all assets and liabilities. Assets include immovable assets and movable assets.

Immovable assets:  Disclose cost of land and building.

Movable assets: cost of following assets needs to be disclosed

1. Jewellery
2. Bullion
3. Vehicles
4. Yachts
5. Boats
6. Aircraft
7. Cash in hand

 Taxpayers also need to disclose all liabilities in relation to such assets.

 Claim of TCS credit

 Seller of bullion and Jewellery shall collect TCS at 1% of sale consideration from buyer if such sale consideration is received in cash and it exceeds:

1.     i) Rs. 2 lakh, in case Bullion; and

2.    ii) Rs. 5 lakh, in case of Jewellery.

 Changes applicable in Form 1, 2, 2A.

 Firms can file ITR-4S for presumptive income

 A separate row is provided for in ITR 4S to claim deduction of interest and salary paid by the firms to the partners.  Three additions -specifying nature of business, salary and interest paid to partners (applicable only to firms) and schedule AL.

 Contribution to NPS

 A new row has been inserted to provide for an additional deduction of upto Rs. 50,000 for investment in National Pension Scheme.

 Changes applicable in Form 1, 2, 2A, 3, 4, 4S.

 Details of pass through income of business trust or investment fund

 New Schedule PTI requires following reporting of pass through income of business trust/investment fund.

  ■ Name of business trust/investment fund

  ■ PAN

  ■ Head of income

  ■ Amount of income

  ■ TDS on such amount, if any.

 Changes applicable in Forms 2, 2A, 3, 4, 5, 6, 7.

 No need to disclosed Share of income from firm/AOP/BOI

 Share of income/ profit from partnership firm, AOP and BOI which is exempt in the hands of recipient need not be disclosed. Earlier it was required to be disclosed under Schedule EI.

 Changes applicable in Form 3, 4, 5, 6.

For filing of your proper and timely return, click online return filing.

India's First IPR Policy - How Entrepreneurs going to benefit

India has entered into Globalized Era many decades ago and India’s Intellectual Property Law is already complying with WIPO ( WORLD INTELLECTUAL PROPERTY ORGANIZATION ) and TRIPS (  The Agreement on Trade-Related Aspects of Intellectual Property Rights ). This is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members. However, being a superpower, India was lacking in proper implementation of it’s IP Policy for strengthening its position as destination of Business and Trade Investment.

When current Modi Government came into power in the year of 2014, since then PM Narendra Modi trying to establish a mechanism for “Easing Doing Business in India “. He has also launched pilot MISSIONS Like #MAKEININDIA, #SKILLINDIA #DIGITALINDIA and last but not the least #STARTUPINDIA_STANDUPINDIA.

However, these Missions will only become effective when there’s an effective and implemented Intellectual Property Law. In order to address the need, Ministry of Commerce & Industry along with Department of Industrial Policy and Promotion introduced the final draft of India’s national intellectual property policy. This draft was for inter-ministerial consultation would had been sent to the Cabinet for approval after receiving comments nearly a year ago.

Then finally, on 13^th may, 2016 India’s First Intellectual Property Policy (IP POLICY) was unveiled to the public at large, making a promise of “Creative India, Innovative India”.

Highlighted Areas of IP Law that has been covered by the Policy:

With respect to Copyright:

                                                                                                                                          

 ( i ) The administration of the Copyright Act 1957 along with the office of the Registrar of Copyrights, under the Department of Higher Education, is being transferred to the Department of Industrial Policy and Promotion.

( ii ) Amendment of Indian Cinematographic Act, 1952 for making it more unfriendly with Piracy .

( iii ) Introduction of Copyright Search Service, with a Database of registered copyrighted material.

( iv ) Expediting Copyright services

( v )  Take urgent measures for effective management and administration of copyright societies to ensure transparency and efficiency in the collection and disbursement of royalties for the best interest of the right holders. Copyright Societies are those who is responsible for collecting Royalties from the various user groups on behalf of Artists.

With respect to Patent, Trademark and Design

( vi ) Expedite processing of  applications, that’s trademark Registration within 1 month by 2017 also addressing backlog of nearly 2 lakhs new applications.

( vii )  ‘Tatkal (instant)’ option offered under the latest amended patent Rules. These benefits will also be available to entities that file their first application in India.

 ( viii ) Introducing online search & filling for INDUSTRIAL DESIGNS.

With respect to other Laws

 ( ix ) Empowering Cinematographic Act, which have already been discussed above, other than that creating IP related interfaces for Competition Act, and reviewing other Acts and Rules for harmonizing with Intellectual Property laws.

With respect to Education

( x ) Introducing IP as a subject matter at school curriculum, setting up online  and offline IP training courses for building up IP awareness.

Deal for Entrepreneurs:

India is being considered as one of the startup hubs with cities like Delhi, Hyderabad, Bangalore and Mumbai taking the lead. India has seen an enormous growth With respect tocreating support vessels for early stage or pro-funded Startups’ growth. Many private or publicly funded missions has already been initiated to drag and drop startups in Indian subcontinent, but my personal option has always been catering the need for innovation, and building up facilities where product based startups can be nurtured and build awesome products. Encouraging Entrepreneurs’ to INVENT first, we need to give them reason for INNOVATION, that’s called incentivizing.

Incentivizing by way of giving them a monopolistic RIGHT to Produce and Market for 20 years, Tax benefits, and expedite approvals for speeding up production.   

So in order to address the need, Indian Government already launched Startup India Mission and this new IPR Policy will be using as a fuel into it.

Although, Indian Patent System will still continue to prevent Evergreening of patent under existing sec 3 (d) of Indian Patent Act. Evergreening refers to a variety of legal, business and technological strategies by which producers extend their patents over products that are about to expire, in order to retain royalties from them, by either taking out new patents. Stopping Evergreening in Indian Patent landscape does affect  global Pharmaceutical Companies, but irrespective of continues pressure from US Pharmaceutical Association and other relative lobbyist, India took a major step by not vouching for EVERGREENING. However, that’s actually helping Indian Drug Manufacturers to produce generic drugs and also obtaining COMPULSORY LICENSE which is a kind of license granted after evaluating an application for revoking a Patent Rights for the common good of public at large. This is also encouraging R&D including open source based research such as Open Source Drug Discovery (OSDD) by the Council of Scientific and Industrial Research (CSIR) for new inventions for prevention, diagnosis and treatment of diseases, especially those that are life threatening and those that have high incidence in India.

It’s said that getting a Patent Approval is very time consuming in India, sometimes it takes nearly 5 years of total timeline for Patent Grant that too after paying hefty prices for Statutory fees and Attorney cost. Even Mr. Narendra Modi also aware about the pain in ass for inventors and entrepreneurs, that is why he addressed the same issue during his speech at the time of unveiling STARTUP INDIA Mission, in order to address this pain point.  IPR policy will also curbing the total timeline by introducing TATKAL facility and reducing the Statutory Fees for Entrepreneurs and Inventors by amending Patent RULE, and will also provide Tax benefits for inventors and Makers. 

This will surely encourage Entrepreneurs to go for patenting their state of the Art Technology.

Research and Development is a major step for pre or post Product launch, this new Policy also includes support verticals for R&D process and easy funding norms for the same.

Apart from Patent, IPR Policy also addressed other IP products like Geographic Indication and looking forward to give a diverse opportunity in terms of Marketing in wide level. A geographical indication (GI) is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin. In order to function as a GI, a sign must identify a product as originating in a given place, e.g Mango of Malda ( W.B ) which is having its own segmented marketplaces in India and abroad. So now startups solving marketing problems in indigenous segments like Indian handicrafts now can avail benefits from this Policy framework.    

Valuation for IP or Intangible assets non- liquidated yet, although many methodology is already there but no single window methodology ever provided at policy level for subtracting actual value from IP Products, previously Indian Accounting Standard definitely tried to solve this problem by introducing IAS 38 but that’s moreover for Intangible assets not exactly for Intellectual Properties. But this new policy promised to implement proper guidelines for the same. On the other hand, it’s already been declared that IP Assets can be mortgaged for raising funds. So Startups now can look for this alternative means of fund raising. This policy also empowers social entrepreneurs like craftsman, Artisans’, farmers by providing IP friendly loan and linking up Venture Capital and Angel Funds for the development and Commercialization of IP Assets.

What’s NOT in the platter:

·         This policy is still silent about Software Patenting Issue in India

·      Even no clear directives towards IP protection and monetization for emerging Techs like Internet of Things ( IOT ), Virtual and Augmented Reality and Gaming.

·         No promises of strengthen copyright Protection for Software neither for online marketplaces.

·         No directives towards UX and UI protection through Industrial Designs.

·         No clear prospective on prototyping laws and protecting and commercializing subsequent IPR issues while prototyping.

·         The whole 30 pages exhaustive policy document made without any supportive empirical data.

But irrespective of all its flaws; this is India’s first Intellectual Property Policy which is subject to be validated by proper ACTION.

You can get the trademark at Munim.in