Private Company Registration, procedure,Benefits and Compliances

Private Limited Company is the most prevalent and popular type of corporate legal entity in India. Private limited company is governed by the Companies Act 2013.

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Today, startup and young generation entrepreneurs prefer private companies over traditional proprietorship and partnership firms due to its many advantages.

1. Features of the Private Company

  1. Members – Minimum 2 members and maximum 200 members.
  2. Directors – Minimum two directors for private company.
  3. Paid up capital – Private Companies can be start with Rs. 2/-.
  4. Limited Liability – The liability of each member is limited upto unpaid amount of shares.
  5. Name – Must include ‘private limited’ after its name.

2. Benefits of Private Companies

Separate Legal Entity – A company is a legal entity and a juristic person established under the Companies Act.

Limited Liability – Unlike proprietorships and partnerships, in a limited liability company the liability of the members in respect of the company’s debts is limited only upto the unpaid amount of shares.

Easy transferability of shares – Shares of a company limited by shares are easily transferable by a shareholder to any other person. So, it provides easy mechanism to enter and exit the company.

Borrowing Capacity – A company enjoys better avenues for borrowing of funds. Banking and Financial Institutions prefer to render large financial assistance to a company rather than partnership firms or proprietary concerns.

Trusts of foreign parties – Foreigners prefer to deal with the registered companies. So, Companies create trust and preference for import and export.

Low Tax Rate – Tax rate on Companies having turnover upto Rs. 250 crore is reduced to 25% unlike partnership firms which is tax rate having 30%.

3. Process of Incorporation 

a. Get Digital Signature of Proposed Directors and First Subscribers 

Get Class 2 DSC of first subscribers and Directors from the Certified Authority or consultants. 

b. Apply for Name Approval 

File “Reserve Unique Name” in MCA Portal. RUN is an online form in which applicants have to fill the information like proposed name, activity and type of company online. You can attach proposed object and NOC of trademark owner, if proposed name is subject to trademark. You can propose maximum 2 names and the fees of RUN is Rs. 1000/-. Name reserved shall be valid for 20 days from the date of approval of Name.

c. Preparation of Documents for Incorporation of Company

After approval of name or for Incorporation of Company applicant have to prepare the following below mentioned Documents:

  • INC-9: Self Declaration by first subscribers and directors (on plain paper);
  • DIR-2: Declaration from first Directors along with Copy of Proof of Identity and residential address (On plain paper);
  • NOC from the owner of the property;
  • Proof of Registered office address (Conveyance/Lease deed/Rent Agreement etc);
  • Copy of the Electricity/Telephone/Municipality Tax bills (not older than two months);
  • PAN Card and Aadhar Card of all Subscribers and Directors;

d. Filling Incorporation Form Online

Once all the above mentioned documents are executed then applicant has to fill the information in the e-form SPICe -32, E-MOA and E-AOA in 33 and 34. SPICe form is a single window clearance form and use for the following purposes:

  • Application of DIN (up to 3 Directors)
  • Application for Availability of Name
  • No need to file separate form for first Director (DIR-12)
  • No need to file separate form for address of registered office (INC-22)
  • No need to file separate form for PAN & TAN

4. Post Incorporation Compliances

  • Open Bank Account
  • Appoint Auditor for book-keeping and Auditing (CA)
  • Appoint CS for Corporate Law Compliances, Consultancy and to avoid heavy penalties
  • File TDS Returns quarterly
  • File GST Return Monthly/Quarterly (If turnover exceeds Rs. 20 Lacs)
  • File Income Tax Return upto 30th September
  • File Tax Audit Report upto 30th September (If Turnover exceeds Rs. 1 crore)
  • File Audit Report, Balance Sheet and Annual Return with ROC within 30th October
  • Intimate changes in Directors, Shareholders, Auditors, Registered office, Loans, Capital etc to the ROC.
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Details analysis :- FORM GSTR-9C : Reconciliation of Input Tax Credit (ITC)

Details analysis :- FORM GSTR-9C : Reconciliation of Input Tax Credit (ITC)

Extension of date for filing FORM GST TRAN-1 TRAN-2 for credit of tax carried forward/held in stock

 

The entire reconciliation statement in the form 9C has been divided into the following Parts namely:

1. Basic details.

2. Reconciliation of turnover declared in the audited Annual Financial Statement with turnover declared in Annual Return

3. Reconciliation of tax paid Reconciliation of Input Tax Credit (ITC); and lastly

4. Auditor’s recommendation on additional Liability due to non-reconciliation

Before we start with the relevant topic, we must understand that GST being the new system and pertain to the major area from where the state government and the central government drive their revenue.

Hence, if you want to make sure that the revenue is not leaking from any point then you must place proper checkpoints and to understand that these checkpoints are effective the same assurance can be obtained if the required outcome is matching with the expected one and if not then there must be some reconciliation with the proper explanation.

This is what the government is doing through the current reconciliation statement in the form 9C and its certification.

As the input tax credit plays the major role in the GST calculation it is quite obvious to place the best checkpoints to detect the revenue leakage.

A. Firstly make sure that the credit availed as per the books of account are matching with the credit availed as per the annual return in form GSTR-9. And if there is any difference then each category of the difference shall be correctly explained.

B. Reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited Annual Financial Statement or books of account. the same can be bifurcated as:

This clause is somewhat similar to the clause 34 of the tax audit report for the TDS reconciliation. Hence we must have the expense and credit bifurcation of the following expenses:

After consolidating the credit under the different heads we shall make sure that it matched with the amount claimed in the annual return in form 9.

If we have kept the proper record in the excel sheet or other software then the required information becomes a cake walk by inserting the expense head column and then dong the pivot.

If the same is not matching then each category of the difference shall be properly explained.

After making and explaining the above two reconciliations, there may be a situation where some amount may become payable to the government in the form of:

The same shall be properly calculated and mentioned in the reconciliation statement.

Form the above it is quite clear that if the proper records are not maintained then it’s going to be very difficult as it requires again going to the source documents for the checking.

Scheme for Service Exports from India

Scheme for Service Exports from India

 

  DP Accounting & Taxation services

SEIS is one of the Exports from India Scheme launched by DGFT in Chapter 3 of Free Trade Policy 2015-20. This scheme aims to incentivize service exporters of India with the objective to encourage and maximize export of notified Services from India (The list of notified services is given at last of this article).

Rewards under the scheme:

The rewards under the scheme are not given in the form of money but in the form of Duty Credit Scrips. Duty Credit Scrip is a scrip issued by the DGFT and can be used to pay various duties/taxes to the Central Govt. Split certificates of such Duty Credit Scrip may also be issued, at the time of application and are freely transferable.

Eligibility

(a) Service Providers of notified services, located in India, shall be rewarded under SEIS. Only Services rendered in two modes, i.e., Cross Border Trade (Supply of a ‘service’ from India to any other country) and Consumption abroad (Supply of a ‘service’ from India to service consumer(s)of any other country in India) shall be eligible.

(b) Such service provider should have minimum net free foreign exchange earnings of US$15,000 in year of rendering service to be eligible for Duty Credit Scrip.

(c) For Individual Service Providers and sole proprietorship, such minimum net free foreign exchange earnings criteria would be US$10,000 in year of rendering service.

Net Foreign exchange earnings for the scheme are defined as under:

Net Foreign Exchange = (Gross Earnings of Foreign Exchange) – (Total expenses / payment / remittances of Foreign Exchange) by the IEC holder relating to service sector in the Financial year.

(d) If the IEC holder is a manufacturer of goods as well as service provider, then the foreign exchange earnings and Total expenses / payment / remittances shall be taken into account for service sector only.

(e) In order to claim reward under the scheme, Service provider shall have to have an active IEC at the time of rendering such services for which rewards are claimed.

Ineligible categories under SEIS

Foreign exchange remittances other than those earned for rendering of notified services would not be counted for entitlement. Thus, other sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible.

Entitlement

Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates on net foreign exchange earned. These rates vary from 5% to 7% on notified services.

Procedure to apply

(a) An application for grant of duty credit scrip for eligible services rendered shall be filed online for a financial year on annual basis in ANF 3B using digital signature.

(b) The last date for filing application shall be 12 months from the end of relevant financial year of claim period.

(c) Applicant shall have option to choose Jurisdictional Registering Authority on the basis of Corporate Office/ Registered Office/ Head Office / Branch Office address endorsed on IEC for submitting application/applications under SEIS.

(d) This option needs to be exercised at the beginning of financial year.

(e) Once an option is exercised, no change would be allowed for claims relating to that year. To illustrate, if an exporter has chosen RA Chennai for claiming rewards for exports made in 2017-18, then all claims for exports made in 2017-18, irrespective of the date of application shall be made to RA Chennai only.

(f) RA shall process the application received online after due scrutiny.

Port of Registration

(a) The applicant can choose any port as port of registration and mention it in the application at the appropriate column. RA will issue the scrip with such port of registration. Such Duty credit scrip needs to be registered at the port of registration of duty credit.

(b) Once registered at EDI port, scrip can be automatically be used at any Electronic Data Interchange (EDI) port for import and at any manual port under Telegraphic Release Advise (TRA) procedure.

(c) In case port of registration is a manual port, TRA shall be required for imports at any other port.

Remittances through Credit Card and other instruments

Free Foreign Exchange earned through international credit cards and other instruments, as permitted by RBI shall also be taken into account for computation of value of exports.

Risk Management System:

(a) A Risk Management System shall be in operation whereby every month Computer system in DGFT Headquarters will select 10% of applications for each RA where scrips have already been issued. RA in turn may call for original documents in all such selected cases for further examination in detail. In case any discrepancy and/ or over claim is found on such examination, the applicant shall be under obligation to rectify such discrepancy and/or refund over claim in cash with interest. The original holder of scrip, however, may refund such over claim by surrendering the same scrip whether partially utilized or fully unutilized, without interest.

(b) Regional Authority may ask for original proof of landing certificate (wherever required under the policy), annexures attached to ANFs or any other document, which has been uploaded digitally or any other export related documents related to the application such as Export Invoices at any time within 3 years from the date of issue of scrip.

(c) Failure to submit such documents in original would make applicant liable to refund the reward granted along with interest from the date of issuance of scrip. It would be the responsibility of applicant to maintain such documents, certificate etc. for a period of at least three years from the date of issuance of scrips or the completion of scrutiny under Risk Management System initiated by the RA whichever is later.

Validity period and Revalidation

(a) Duty Credit Scrip issued under SEIS shall be valid for a period of 24 months from the date of issue and must be valid on the date on which actual debit of duty is made.

(b) Revalidation of Duty Credit Scrip shall not be permitted unless validity has expired while in custody of Customs Authority / RA / Government Authority.

List of Services and Rates of reward under SEIS:

A. Professional Services -Rate of Reward 7%

B. Research and development services -Rate of Reward 7%

C. Rental/Leasing services without operators – Rate of Reward 7%

D. Audiovisual services – Rate of Reward 7%

E. Construction and Related Engineering Services – 7% Rate of Reward

F. Educational Services – 7% Rate of Reward

G. Environmental Services – 7% Rate of Reward

H. Health and Social Services – 5% Rate of Reward

I. Tourism and Travel Services – 5% or 7% Rate of Reward

J. Recreational, Cultural and Sporting Services – 7% Rate of Reward

K. Transport & Auxiliary Services – 7% Rate of Reward

L. Other Business Services – 5% Rate of Reward

No Government Approval Needed for Remuneration of Top Executives

No Government Approval Needed for Remuneration of Top Executives

Form DIR3-KYC is likely to be revised on MCA21

Ministry of Corporate Affairs vide notification dated September 12, 2018 has effected certain amendments in Section 197 of Companies Act, 2013 relating to Managerial Remuneration payable top executives.

In addition, the Ministry has also come up with corresponding amendments in Schedule V of the Companies Act, 2013 and issued Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2018 to give effect to the said changes.

  • Now, any person who has been convicted of an offence under IBC, GST Act or the Fugitive Economic Offenders Act will not be eligible for appointment as MD/WTD/Manager of a company.
  • Approval of Central Government is no longer required for payment of total remuneration in excess of eleven per cent. of the net profits of the company to all its directors, including MD, WTD and Manager (Managerial Person). The payment beyond the said limit can be made by passing an Ordinary Resolution in the General Meeting of the Company.
  • For payment of remuneration exceeding the threshold limits of 5% & 10% to MD/WTD/Manager and 1% & 3% to other directors individually, the approval of shareholders through a Special Resolution shall be required.
  • In case of companies who have defaulted in payment of any Bank/PFI/NCD holder or any other secured creditor, prior approval shall be taken from them before placing the matter in the general meeting for obtaining shareholders’ approval for payment in excess of the threshold limits.
  • Any application made to the Central Government before amendment to Section 197 which is pending with the Government shall abate, and the companies to obtain the approval of shareholders in accordance with the provisions of the amended section within a period of one year starting from September 12, 2018.
  • In case of companies having no profits or inadequate profits, remuneration payable to the MD/WTD/Manager shall be as per the limits prescribed under Schedule V which could earlier be doubled by the shareholders in the General meeting. Now, after the amendment in Schedule V, shareholders can approve any amount in excess of the said limits by passing a Special Resolution in the General Meeting.

Relevant Notifications are as follows:-

Title Notification No. Date
MCA notifies sections 66 to 70 of Companies (Amendment) Act, 2017 S.O. __ (E) 12/09/2018
Companies (appointment and remuneration of managerial personnel) Amendment Rules 2018 G . S . R. 12/09/2018
MCA Amends Schedule V of Companies Act, 2013 S.O. …. (E). 12/09/2018

 

Details analysis at http://dptaxexperts.com/company-registration.html

GST ITC-04: Details of goods/capital goods sent to job worker & received back

GST ITC-04: Details of goods/capital goods sent to job worker & received back

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Understanding Newly Substituted GST ITC-04 – Details of goods/capital goods sent to job worker and received back

Defining ‘job work’ in simple terms can be undertaking any process on the inputs / semi-finished goods supplied by the principal manufacturer. However, the statutory definition of ‘job work’ is contained in section 2 (68) of the Central Goods and Service Tax Act, 2017 which means ‘any treatment or process undertaken by a person on goods belonging to another registered person’.

Provisions relating to conditions and restrictions in respect of inputs and capital goods sent to the job worker are contained under rule 45 of the Central Goods and Service Tax Rules, 2017. As per rule 45 (3) of the said rules, the principal manufacturer is required to file FORM GST ITC-04 mentioning therein details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another job worker.

DUE DATE OF FILING FORM GST ITC-04 –

As per rule 45 (3), the detail in FORM GST ITC-04 needs to be filed on the quarterly basis on or before the 25th day of the month succeeding the said quarter.

NEWLY SUBSTITUTED FORM GST ITC-04 –

Vide sr. no. 9 of notification no. 39/2018 – Central Tax dated 4th September, 2018, the Central Board of Indirect Taxes and Customs has substituted earlier FORM GST ITC-04 with the new form and the details contained in substituted FORM GST ITC-04 are summarized hereunder –

1. GSTIN

2. Legal name

Trade name (if any)

3. Period

4. Details of inputs/ capital goods sent for job work –

Details of input / capital goods to be provided in sr. no. 4 should include inputs / capital goods directly sent to the place of business / premises of the job worker and the details need to be provided in the below mentioned table –

GSTIN
Challan No.
Challan date
Description of goods
UQC
Quantity
Taxable value
Types of goods (i.e. input or capital goods)
Rate of tax (%)
Central tax
State / UT tax
Integrated tax
cess

It must be noted that in case the job worker is not registered, instead of GSTIN, state of job worker needs to be mentioned.

  1. Details of inputs / capital goods received back from job worker or send out from the business place of job work –

(A) Details of inputs / capital goods received back from job worker to whom such goods were sent for job work –

Under the below mentioned table, details of inputs/ capital goods which has been received back from the job worker need to be mentioned –

GSTIN Challan No. issued by the job worker under which goods have been received back Date of challan issued by the job worker under which goods have been received back Description of goods UQC Quantity Original challan no. under which goods have been sent for job work Original challan date under which goods have been sent for job work Nature of job work done by the job worker Losses & wastes
UQC Quantity
1 2 3 4 5 6 7 8 9 10 11

The above table is self-explanatory, however, sr. no. 2 and 3 are mandatory only in the case where fresh challan are required to be issued by the job worker. Further sr. no. 7 and 8 may not be filled if it is not possible to do one-to-one correspondence between goods sent for job work and goods received back after job-work.

(B) Details of inputs / capital goods received back from job worker other than the job worker to whom such goods were originally sent for job work –

In the case where the goods have been sent for further job work from the premises of the job worker and such goods have been received back by the principal manufacturer, details of such inputs / capital goods need to be provided under below mentioned table –

GSTIN
Challan No. issued by the job worker under which goods have been received back
Date of challan issued by the job worker under which goods have been received back
Description of goods
UQC
Quantity
Original challan no. under which goods have been sent for job work
Original challan date under which goods have been sent for job work
Nature of job work done by the job worker
Losses & wastes
UQC Quantity
1 2 3 4 5 6 7 8 9 10 11

The above table is self-explanatory, however, sr. no. 2 and 3 are mandatory only in the case where fresh challan are required to be issued by the job worker. Further sr. no. 7 and 8 may not be filled if it is not possible to do one-to-one correspondence between goods sent for job work and goods received back after job-work.

(C) Details of inputs / capital goods sent to job worker and subsequently supplied from the premises of job worker –

In case the inputs/ capital goods supplied by the principal manufacturer to job worker, for job work purpose, has been subsequently supplied from the premises of the job worker, details of such transaction needs to be provided in the below mentioned table –

GSTIN
Invoice No. in case supplied from the premises of job worker issued by the principal
Invoice date in case supplied from the premises of job worker issued by the principal
Description of goods
UQC
Quantity
Original challan no. under which goods have been sent for job work
Original challan date under which goods have been sent for job work
Nature of job work done by the job worker
Losses & wastes
UQC
Quantity
1 2 3 4 5 6 7 8 9 10 11

The above table is self-explanatory, however it must be noted that, details in sr. no. 7 and 8 may not be filled if it is not possible to do one-to-one correspondence between goods sent for job work and goods received back after job-work.