INSITE - INDIA - Aug 2024
- sukhwinder21
- Sep 4, 2024
- 3 min read
COMPANIES WITH MULTI-STATE PRESENCE MUST REGISTER AS INPUT SERVICE DISTRIBUTOR (ISD) WITH GST AUTHORITIES
Summary: Companies operating in multiple states need to register as an Input Service Distributor (ISD) with Goods & Service Tax (GST) authorities by April 1, 2025. This change is intended to improve transparency and ensure correct tax credit distribution.
In Detail: The Finance Bill, 2024, introduces important updates to GST law, one of which is the new requirement for companies operating in multiple states to register as ISDs. This change aims to improve how Input Tax Credits (ITC) are distributed among different branches of a business. By mandating ISD registration, the bill seeks to ensure a more transparent and accurate allocation of ITC, helping to prevent tax evasion and streamline tax processes for businesses with a multi-state presence.
Starting April 1, 2025, companies with operations in multiple states must register as ISDs under GST. The Central Board of Indirect Taxes and Customs (CBIC) has set 1 April 2025 as the deadline to comply to register as ISDs to avoid penalties and ensure proper ITC allocation.
PRESIDENT ASSENTS FINANCE (NO 2) BILL, 2024
Summary: On August 16, 2024, the President of India approved the Finance (No 2) Bill, 2024, making it the Finance (No. 2) Act, 2024. This bill was approved by both houses of Parliament and completes the budget process for the fiscal year 2024-25.
In Detail: The Finance Act (No. 2) 2024 has now been formally enacted and notified by the Ministry of Law and Justice. This follows its approval by the President of India on August 16, 2024. The Act originated from the Finance (No. 2) Bill 2024, which was introduced in the Lok Sabha on July 22, 2024, as part of the Union Budget for the fiscal year 2024-25. After thorough discussion, the bill was passed by the Lok Sabha on August 7, 2024. The notification of the Act marks its official implementation, finalizing the budget process and introducing its provisions into law.
The Finance (No 2) Bill, 2024, introduced by the Finance Minister of India, included notable amendments to the long-term capital gains tax on real estate. Originally, the budget proposed a reduction in the long-term capital gains tax rate from 20% to 12.5%, but this reduction would not include indexation benefits, which adjust for inflation.
On August 7, 2024, an amendment to the bill provided taxpayers with more flexibility by offering two options:
Opt for the New Tax Rate: Taxpayers can choose the new lower rate of 12.5% on capital gains, but without the benefit of indexation. This means that the gains will be taxed based on nominal values without adjusting for inflation.
Stick with the Old Regime: Alternatively, taxpayers can retain the existing tax regime, which has a higher rate but includes indexation benefits. Indexation allows for adjustment of the capital gains amount to account for inflation, potentially reducing the taxable gain.
This amendment aims to accommodate different taxpayer needs and preferences, offering a choice between a lower tax rate and the benefit of indexation. It reflects the government's effort to balance its revenue objectives with the interests of investors, providing options that could better suit individual financial situations.
GUIDELINES FOR BORROWING BY CATEGORY I AND CATEGORY II AIFS AND MAXIMUM PERMISSIBLE LIMIT FOR EXTENSION OF TENURE BY LVFS
Summary: The Securities and Exchange Board of India (SEBI) has released new guidelines allowing Category I and II Alternative Investment Funds (AIFs) to borrow money to cover temporary shortfalls in funds needed for investments. This borrowing can help them manage gaps between investor contributions and investment requirements.
In Detail: On August 19, 2024, SEBI issued new guidelines for Category I and II AIFs concerning borrowing and tenure extensions for Large Value Funds (LVFs). Key points include:
AIFs can only borrow to cover short-term funding gaps, not for investments.
Borrowing limits are set at 20% of the intended investment or 10% of investable funds and should only be used in emergencies.
Costs from borrowing will be covered by investors who did not provide the required funds.
LVFs can extend their tenure by up to five years with approval from two-thirds of unit holders.
Existing LVF schemes must comply with these rules by November 18, 2024.
SEBI also requires a 30-day cooling-off period between borrowings and full disclosure to investors about borrowed amounts.
These guidelines are effective immediately and must be followed by all affected funds.
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