First Discussion Paper On Goods and Services Tax In India

Click on the pic below to view first discussion paper on Goods and Services tax in India.

All about KYC i.e. Know Your Customer

1. What is KYC?

KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.

KYC has two components - Identity and Address. While identity remains the same, the address may change and hence the banks are required to periodically update their records.

2. Is there any legal backing for verifying identity of clients?

Yes. Reserve Bank of India has issued guidelines to banks under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act.

3. I want to keep a fixed deposit in a bank. Is KYC - applicable to me?

Yes. KYC is applicable to customers of the bank. For the purpose of KYC following are the ‘Customers of the bank.

• a person or entity that maintains an account and/or has a business relationship with the bank;
• one on whose behalf the account is maintained (i.e. the beneficial owner);
• beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
• any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.

4. Is there any procedure specified for Customer Identification?

Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. Banks have been advised to lay down Customer Identification Procedure to be carried out at different stages i.e. while establishing a banking relationship; carrying out a financial transaction or when the bank has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.

5. Once KYC requirements are complied with while opening the account, whether the bank can again ask for KYC compliance from me?

Yes. To ensure that the latest details about the customer are available, banks have been advised to periodically update the customer identification data based upon the risk category of the customers.

Banks create a customer profile based on details about the customer like social/financial status, nature of business activity, information about his clients’ business and their location, the purpose and reason for opening the account, the expected origin of the funds to be used within the relationship and details of occupation/employment, sources of wealth or income, expected monthly remittance, expected monthly withdrawals etc. When the transactions in the account are observed not consistent with the profile, bank may ask for any additional details / documents as required. This is just to confirm that the account is not being used for any Money Laundering/Terrorist/Criminal activities.

6. I had submitted my driving licence as a proof of identity and address but still the bank asked for telephone / electricity bill.

There are two aspects of Customer Identification. One is establishing identity and the other is establishing present residential address.

For establishing identity, the bank requires any authentic document carrying photo of the customer such as driving licence/ passport/ pan card/ voters' card etc. Though these documents carry the residential address of the customer, it may not be the present address. Therefore, in order to establish the present address of the customer, in addition to passport/ driving licence / voters' card / pan card, the bank may ask for utility bills such as Telephone / Electricity bill etc.

The detailed list of the documents that the bank can ask is given below.

Features		Documents
Accounts of Individuals
-	Legal name and any other names used	(i) Passport (ii) PAN card (iii) Voter's Identity Card (iv) Driving licence (v) Identity card (subject to the bank's satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
-	Correct permanent address	(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the bank) (any one document which provides customer information to the satisfaction of the bank will suffice)
Accounts of Companies
-	Name of the company	(i) Certificate of incorporation and Memorandum & Articles of Association (ii) Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account (iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf (iv) Copy of PAN allotment letter (v) Copy of the telephone bill
-	Principal place of business
-	Mailing address of the company
-	Telephone / Fax Number
Accounts of Partnership Firms
-	Legal name	(i) Registration certificate, if registered (ii) Partnership deed (iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv) Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses (v) Telephone bill in the name of firm / partners
-	Address
-	Names of all partners and their addresses
-	Telephone numbers of the firm and partners
Accounts of Trusts & Foundations
-	Names of trustees, settlers, beneficiaries and signatories	(i) Certificate of registration, if registered (ii) Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the trustees, settlors, beneficiaries and those holding Power of Attorney, founders / managers / directors and their addresses (iv) Resolution of the managing body of the foundation / association (v) Telephone bill
-	Names and addresses of the founder, the managers / directors and the beneficiaries
-	Telephone / fax numbers
Accounts of Proprietorship Concerns
-	Proof of the name, address and activity of the concern	*  Registration certificate (in the case of a registered concern) *  Certificate / licence issued by the Municipal authorities under Shop & Establishment Act, *  Sales and income tax returns *  CST / VAT certificate *  Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities * Registration / licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority / Department. * IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account. *  Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc. Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.

7. Can my wife who is not having any address proof in her name, open an account with the bank?

Yes. In such cases where the utility bills required for address verification are not in the name of the person who wants to open an account ( close relatives, e.g. wife, son, daughter and daughter and parents etc. who live with their husband, father/mother and son, as the case may be) , an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her is acceptable. As supplementary evidence bank may ask for a letter received through post for further confirmation.

8. I am a daily wage earner without any document to satisfy the bank about identity and address. Can I open a bank account?

A customer belonging to low income group who is not able to produce  documents to satisfy the bank about his identity and address, can open bank account with an introduction from another account holder who has been subjected to full KYC procedure provided that the balance in all his accounts taken together is not expected to exceed Rupees Fifty Thousand (Rs. 50,000/-) and the total credit in all the accounts taken together is not expected to exceed Rupees One Lakh (Rs. 1,00,000/-) in a year. The introducer’s account with the bank should be at least six months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his address needs to be certified by the introducer,

or

any other evidence as to the identity and address of the customer to the satisfaction of the bank.

If at any point of time, the balance in all his/her accounts with the bank (taken together) exceeds Rupees Fifty Thousand (Rs. 50,000/-) or total credit in the account exceeds Rupees One Lakh (Rs. 1,00,000/-) in a year, no further transactions will be permitted until the full KYC procedure is completed.

In order not to inconvenience the customer, the bank will notify the customer when the balance reaches Rupees Forty Thousand (Rs. 40,000/-) or the total credit in a year reaches Rupees Eighty thousand (Rs. 80,000/-) that appropriate documents for conducting the KYC must be submitted otherwise operations in the account will be stopped.

9. Whether a certificate from my employer is sufficient as identity as well as address proof for opening an account?

Banks rely on such certification only from corporate and other entities of repute provided that they are aware of the competent authority designated by the concerned employer to issue such certificate. In addition, banks also require at least one of the valid documents indicated above viz. Passport, Driving Licence, PAN Card, Voter's Identity Card etc. or utility bills for KYC purposes for opening bank account of salaried employees of corporate and other entities.

10. Whether the information given by me to the bank under KYC is treated as confidential?

Yes. The information collected from the customer for the purpose of opening of account is treated as confidential and details thereof are not divulged for cross selling or any other similar purposes.

11. Whether KYC is applicable for Credit Cards/Debit Cards/Smart Cards?

Yes. Application of full KYC procedure is necessary before issuing Credit Cards/Debit Cards/Smart Cards and also in respect of add-on/ supplementary cards.

12. If I refuse to give information on KYC asked for by the bank, what action the bank can take against me?

Where the bank is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the bank can consider closing the account or terminating the banking/business relationship after issuing due notice to the customer explaining the reasons for taking such a decision.

Source : Reserve Bank of India

Save income tax in India FY 2013-14

Cenvat credit on tax paid under VCES is available, Circular No. 176/2/2014 - ST

1. Trade and Industry has sought clarification as to whether the first installment of tax dues paid under Voluntary Compliance Encouragement Scheme (VCES), 2013 would be available as Cenvat Credit immediately after payment or Cenvat credit can be availed only after payment of tax dues in full and receipt of Acknowledgement of Discharge in form VCES-3.

2.       The issue has been examined. As per VCES, under Section 108 (2) of the Finance Act, 2013, a declaration made under Section 107 (1) shall become conclusive only upon issuance of acknowledgement of discharge under Section 107 (7). Further, in terms of Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.

3.     It would be in the interest of VCES declarants to make payment of the entire service tax dues at the earliest and obtain the discharge certificate within 7 days of furnishing the details of payment. As already clarified in the answer to question No.22 of FAQ issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004.

4.      Chief Commissioners are also advised that upon payment of the tax dues in full, along with interest, if any, they should ensure that discharge certificate is issued promptly and not later than the stipulated period of seven days.

FOOD SAFETY AND STANDARD ACT, 2006 & HOW IT IMPACTS YOU?

1) What is FSSA, 2006 & why this Act is needed? 

Ans: FSSA, 2006 is an Act enacted to keep with changing needs / requirements of time and to consolidate the laws relating to food and to establish the Food Safety and Standards Authority of India. The Act was needed to bring out a single statutory body for food laws, standards setting and enforcement so that there is one agency to deal and no confusion in the minds of consumers, traders, manufacturers and investors which was due to multiplicity of food laws.

2) What does FSSAI do? 

Ans: The mandate assigned to the Food Authority is (i) laying down science based standards for articles of food (ii) to regulate manufacture, storage, sdistribution, sale and import of food (iii) to facilitate food safety.

3) How consumers are benefitted through FSSA? 

Ans: The representative of the consumer organizations are members of the Food Authorities and Central Advisory Committee. The consumer may analyze the samples of food on payment of fees. The in case of injury of death of consumer there is a provision for compensation to the consumer

4) How New Act will curb increasing food adulteration? 

Ans: There will be better auditing, Food Safety Management System (FSMS), traceability, recall and other systems in place which will help in curbing food adulterants.

5) what is the List of Food Business Falling under the Preview of Central Licensing Authority ?

Ans: Following are the businesses falling under the preview of Central Licensing Authority :-
1. Dairy Units including milk chilling units equipped to handle or process more than 50,000 liters of liquid milk/day or 2500 MT of milk solid Per Annum.
2.Vegetable Oil Processing Units and Units producing Vegetable Oil by the process of solvent extraction and refineries including oil expeller unit having installed capacity more than 2 MT per day.
3.All Slaughter houses equipped to slaughter more than 50 large animals or 150 or more small animals including sheep and goats or 1000 or more poultry birds per day.
4.Meat Processing Units equipped to handle to process more than 500 kg of meat per day or 150 MT per annum.
5.All Food Processing Units other than mentioned under (1) to (4) including Re-labelers and Re-packers having installed capacity more than 2MT/day except grains, cereals, and pulses milling units.
6.100% Export Oriented Units.
7.All Importer importing food items including food ingredients and additives for commercial use.
8.All Food Business Operators manufacturing any article of food containing ingredients or substances or using technologies or processes or combination thereof whose safety has not been established through these regulations or which do not have been a history of safe use or food containing ingredients which are being introduced for the first time into the country.
9.Food Business Operator Operating in two or more states.
10.Food Catering Services in establishments and units under central government agencies like railways, air and airport, seaport, defense Etc

6) what is the List of Food Business Falling under the Preview of Registration ?

(a) Manufactures or sells any article of food himself or a petty retailer, hawker, itinerant vendor or temporary stall holder; or distributes foods including in any religious or social gathering except a caterer. OR
(b) Such other food businesses including small scale or cottage or such other industries relating to food business or tiny food businesses with an annual turnover not exceeding Rs 12 lakhs and/or whose:
a. Production capacity of food (other than milk and milk products and meat and meat products) does not exceed 100 kg/ltr per day OR
b. Procurement or handling and collection of milk is up to 500 liters of milk per day OR
c. Slaughtering capacity is 2 large animals or 10 small animals or 50 poultry birds per day or less

7) Is it mandatory to register under this Act ? 

Ans: In exercise of the powers conferred under section 92 of the Food Safety and Standards Act, 2006, FSSAI has proposed Draft of Food Safety and Standards Regulation, 2010 under which Part 3.2 makes it mandatory for all Food Business Operators in the country to be registered or licensed in accordance with the procedures laid down in the regulation.

8) Is there any penalty for non registration ?

Ans: Penalty for failure to comply with the directions of Food Safety Officer. –
If a food business operator or importer without reasonable ground, fails to comply with the requirements of this Act or the rules or regulations or orders issued there under, as directed by the Food Safety Officer, he shall be liable to a penalty which may extend to two lakh rupees.

9) what is registration fees ?

Ans: 1.Fees for Registration Certificate
Rs 100/-
2.Fees for License issued by Central Licensing Authority
Rs 7500/-
3.Fees for License issued by State Licensing Authority
(a) Manufacture/Miller
(I) Above 1 MT per day production or 10,001 to 50,000 LPD of milk or 501 to 2500 MT of milk solids Per Annum Rs 5000/-
(II) Below 1 MT of production or 501 to 10,000 LPD of milk or 251 MT to 500 MT of milk solids per annum Rs 3000/-
(b) Hotels -3 Star And Above Rs 5000/-
(c) All Food Service Providers including Restaurants/Boarding Houses, Clubs etc Serving Food , Canteen (schools, colleges, office, institution), Caterers, Banquet Halls with Food Catering arrangement, Food Vendor like Dabba Wallas etc. Rs 2000/-
(d) Any Other Food Business Operator Rs 2000/-

For more info kindly visit :  http://fssai.gov.in/
Source : food safety and standard act

Regards,

Ankur Yadav
+91-9718101968
taxsapient@gmail.com
http://www.facebook.com/ankuruniversal

What the "F" form means under Cst Act ?

You may be familiar with the word "f". But today i
am here to demystify the concept of F forms under CST ACT.

The following conversation between Ankur and Aashish will help you to understand the concept in a great manner.


Ankur : Hi Aashish !!,  wassup buddy ??

Aashish : Nothing man, feeling anger on the Indian govt for making nonsense laws. I was transferring my stock from delhi to gurgaon and the tax officer put a penalty on that with no reason and was talking about something f like form. M completely upset.

Ankur : (ohh, may be that would be the case of form F under cst act about which he does not have knowledge) Hey Aashish don't worry and just chill, now i am with you and will tell you about that.

Aashish : Hmmm.

Ankur : Aashish as you know that if you make sale of your goods then you will have to pay vat if the sale is within the state and cst if you sold the goods into other state.

Aashish : Yes i know this thing.

Ankur : buddy, if you are transferring stock to your depot in other state then  how will you prove that you was transferring these goods to your depot and not selling the goods to someone else and thereby evading the taxes thereon ? and Aashish mere words can't prove your intention.

Aashish : Then what to do ??

Ankur : for that purpose Govt introduced the concept of Form - "F" under cst act.
F form is required to be produced as proof of stock transfer. As per section 6A(1) submission of F form is mandatory to prove stock transfer. Otherwise, the transaction will be treated as sale for all purposes of CST Act.
F Form is issued by the branch office/consignment agent receiving goods as branch/stock transfer to its head office/principal who is sending the goods by way of  stock/ branch transfer. The H.O./Principal produces such F forms to its assessing authority to prove such stock/branch transfer.

Aashish : Anka, i got an idea, i will make the complete sell by using f form and how the hell Govt will get to know about it that whether i am selling these goods or transferring it to my depot ?

Ankur : NEVER EVER EVER THINK LIKE THAT ( in arnab goswami style ) because F form is not a conclusive evidence but it is conclusive after assessing officer passes the order.

Aashish : Oh sorry, and how many f form can i get ?

Ankur : Actually as per First Proviso to Rule 5 of CST Rules 1957 provides that one F form covering receipts during the month can be issued. If space in F form is not adequate, a separate list may be attached as annexure to form F giving details, provided that the annexure is firmly attached to the form. The blank form has to be obtained from sales tax authority in which the transferee is situated, i.e. State where goods were received. If the form is lost, indemnity bond has to be given and duplicate form clearly marked as Duplicate can be issued.

Aashish : Anky any thing else about f form ?

Ankur : Yes , click on the link given below to know about the famous case of Ambica Steels and Ashok Leyland Vs State of T.N.

http://indiankanoon.org/doc/1274355/
http://ckbajpai.blogspot.in/2012/04/f-form-requirement-jobwork-and-goods.html

Regards,

Ankur Yadav
+91-9718101968
ca.ankuryadav@gmail.com
taxsapient@gmail.com