INDIA START UP INITIATIVE - KEY POINTS

Start Up Initiative by our PM Mr. Modi is an action plan to boost such ventures which are seen as key to employment generation and wealth creation. This is the beginning of big bang start up boom in India.

Lets understand the basic motive and benefits of the above stated Action Plan .

1.) Objective

The objective of compliance regime based on self certification is to reduce the regulatory burden on startups. This self-certification will apply to laws like payment of gratuity, contract labour, employees provident fund, water and air pollution acts.

2. Startup India hub

A startup India hub will be created as a single point of contact for the entire startup ecosystem to enable knowledge exchange and access to funding.

3. Simplifying the startup process

 A startup will be to able to set up by just filling up a short form through a mobile app and online portal.  A mobile app will be launched on April 1 through which startups can be registered in a day. There will also be a portal for clearances, approvals and registrations

4. Patent protection

The government is also working on a legal support for fast-tracking patent examination at lower costs. It will promote awareness and adoption of Intellectual Property Rights (IPRs) by startups and help them protect and commercialise IPRs.

5. Funds of funds with a corpus of Rs 10,000 crore

In order to provide funding support to startups, the government will set up a fund with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over four years. The fund would be managed by private professionals drawn from the industry while LIC will be a co-investor in the fund. The credit guarantee fund for start-ups would help flow of venture debt from the banking system to start-ups by standing guarantee against risks.

6. Credit Guarantee Fund

A National Credit Guarantee Trust Company is being envisaged with a budgetary allocation of Rs 500 crore per year for the next four years.

7. Exemption from Capital Gains Tax

Currently, investments by venture capital funds in startups are exempt from this law. Now, the same is being extended to investments made by incubators in startups.

8. Tax exemption for startups

Income tax exemption to startups announced for three years

9. Tax exemption on investments above Fair Market Value

10. Startup fests

Innovation core programs for students in 5 lakh schools. There will also be an annual incubator grand challenge to create world class incubators

11. Launch of Atal Innovation Mission

Atal Innovation Mission started to give an impetus to innovation and encourage the talent among the people

12. Setting up of 35 new incubators in institutions

PPP model being considered for 35 new incubators, 31 innovation centres at national institutes

13. Setting up of 7 new research parks

Government shall set up seven new research parks - six in IITs, one in IISc with an initial investment of Rs 100 crore each.

14. Promote entrepreneurship in biotechnology

Five new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.

15. Innovation focused programmes for students

There will be innovation core programs for students in 5 lakh schools.

16. Panel of facilitators to provide legal support and assist in filing of patent application

17. 80 per cent rebate on filing patent applications by startups

18. Relaxed norms of public procurement for startups

19. Faster exits for startups

If a start-up fails, the government will also assist the entrepreneurs to find suitable solutions for their problems. If they fail again, the government will provide an easy way out.

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START UP INDIA INITIATIVE- ROLE OF CHARTERED ACCOUNTANTS IN SHAPING START UPS

Prime Minister Narendra Modi has kicked off the ambitious Startup India Movement. The government programme aims to fill gaps in the economy for the growth and development of startups and will aim to boost digital entrepreneurship at the grassroots .

The role of professional chartered accountants in the start-up scheme is essential, vast and comprehensive. As the partners in nation building it is undoubtedly not only an opportunity in professional domain but it is also a responsibility for interest in large. As we see that the growing complexity has made the business atmosphere comparatively difficult in terms of identification of potential grey areas in which most of the start-ups might find themselves in. The reason is that the start-ups that we are talking about are conventionally not Involved in normal routine trading activities but are mainly involved in e-commerce activities.

So now it is essential to measure and understand how can chartered accountants justify and help entrepreneurs in making sure that the venture results into a profitable and successful adventure. So, let us start with few points that are relevant for our discussion.

Finance professional

Chartered Accountants are trained professionals who work in the finance field. For start-ups undoubtedly one of the most key areas still remains to be fundraising and Managing their capital. It is a difficult job to ensure the important expenses are being met off at the same time the startup remains in a situation which is manageable in terms of financial profitability.

In such a situation there are very important areas to manage in terms of the working capital and the core seed capital of the start-up. Now here how can chartered accountants play a crucial role is important to understand. I see personally that there are two key areas that to look for, one that one must manage the banking affairs of the organisation in regard to financial needs like the banking overdraft etc, second is broader activity of raising capital either by venture capitalists, angel networks or by banking networks.

Chartered accountants need to equip themselves & understand how the process works and accordingly act as an interface for the promoters and the venture capitalists. Undoubtedly the promoters know more and will always continue to know more in terms of their business but chartered accountants understand the numbers better than anyone else does and hence can always be back end support for such promoters to give a good presentation and a good grasp of the affairs of the organisation with a potential investor.

Tax specialisation

We know that chartered accountants are professionally trained tax professionals. The fact that taxation is one of the main areas which are start-up faces beyond the fundamental areas of finance and fundraising is one of the criteria why chartered accountants play a significant and crucial role to help smoothen the business operations.

We know that most of the transactions in start-ups specially in the start-up is the e-commerce player requires a complete an exhaustive structuring in terms of the taxation and the relevant events that an company faces. Hence the relevancy of a person well equipped with the tax laws whether it may be direct taxation, indirect taxation or any other tax involved.

Secretarial matters

Chartered accountants along with other professionals like company secretaries are specialists in the matter of secretarial compliances. As start-up generally are in the form of a registered company ensuring the compliances of companies act 2013 is of high relevance. Now the companies act 2013 is an Act full of complexities and jargons which are changing every day and the notifications are coming very frequently that are resulting into changing of the law every next day or two. The penal consequence is the act are significant and start-ups cannot afford to miss the compliances which are relevant to be duly complied with.

Being professionals it is the role of chartered accountants, company secretaries and cost accountants to ensure that the start-ups are able to comply and adhere to the norms laid down by the companies act 2013.

Start-up scheme

We know that recently our Prime Minister have launched a start-up scheme for developing and promoting start-ups in India. A lot of of tax benefits and other key liberalisations have been offered these start-ups to ensure that the country booms with start-ups and the economic growth following it.

The income tax benefits, the tax holiday period benefits, the freedom from inspector raj, the reduction in the cost of patenting, digitalisation, smoother incorporation  and number of other  matters will require a clear due diligence before it is implemented in the start-up.

Every single impact and every single assessment can be clearly passes by chartered accountants domain and should be readily dealt by them. For example, whether a start-up is eligible to enter into this start-up scheme shall be a chartered accountants domain. Next, if the start-up is available then the certification required to enter into this start-up scheme should again be another domain. And the list continues.

The concept of virtual CFO

Most of us understand the concept of virtual CFO. For those who do not understand I would like to discuss here. Now, why is this relevant for us. The relevancy is because the start-ups are generally coming from people who are not of finance background. They might be engineers or doctors or any other professionals with a brilliant idea and the passion to convert this idea into a successful start-up.

In such a scenario chartered accountant can actually handle and operate just like Chief financial officer of the start-up and ensure complete ad hoc and bird eye view of the complete entity. His role shall be to understand the areas of non-compliances and ensure effective addressal of the matter if so required.

Compliance check up

In this modus of operation instead of choosing a full-time or part-time compliance officer one can appoint a chartered accountant to do the compliance audit of the organisation and identify key areas of non compliances which should be addressed and immediately worked upon.

A chartered accountant is in a situation to best understand and identify what are the areas which will require a addressable and attention before the company can be presented to a venture capitalist for the infusion of funds.

Other Areas:-

• Business Structurisation

• Advisory

• Support in Integrating with Other Portals viz Flipkart, Snapdeal etc and to conduct necessary vat amendments are required by most of these well established players

• Highlight risk areas and suggesting potential mitigation strategies

• Risk Minimization

• Representations to Venture Capitalists

• Others

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QUICK TIPS TO IMPROVE YOUR CIBIL SCORE

Your CIBIL score is a three digit number, in the range 300-900. In today’s date this number has assumed immense significance with banks unwilling to lend to anyone who does not have a score above 750. It is a good financial practice for you to make a constant effort to improve CIBIL score, as the Reserve Bank of India, the central banking authority in the nation has made it mandatory for all lenders to refer to the CIBIL score as an integral part of their credit assessment process. Therefore it makes sense for you to enhance your credit score, if you are slightly below the 750 mark, or want to improve CIBIL score from the level of 750. If you are wondering how to increase your CIBIL points, here are some quick tips that you will find useful.

Keep a check on your credit utilization

In financial parlance, credit utilization refers to the total amount of credit you are using vis a vis the total amount of credit that is available to you. If you want to increase credit score, you must ensure that the total utilization of credit remains below the level of 30%. So, in other words if the limit on your credit card is Rs 1lakh, do not go ahead and spend all of it each month. In fact, when your credit limit is Rs 1 lakh, you should use not more than Rs 30,000 each month and repay the outstanding balance in full within the billing cycle. Credit utilization is an important factor that impacts your CIBIL score, so keep a strict check on it. Enhanced use of credit, indicates a heavier repayment burden and can bring your score down.

A good credit mix is key to a good CIBIL score

In order to increase credit score, you must have a good mix of secured and unsecured loans. Home and auto loans can be categorized under the secured category while, personal loans and credit cards feature under the unsecured category. If your credit portfolio has a larger quantum of unsecured loans, your CIBIL will reflect the fact that your repayment burden is higher and may be viewed as a negative by lenders.

Make all your repayments on time

Whatever credit you have availed of, be it credit cards, home, auto or personal loans, make sure that strictly adhere to the repayment schedule. Even a single missed payment can prove to be detrimental to your CIBIL score. With credit cards you have to be extra cautious, as you can quickly go over the top with credit card usage. Do ensure that whatever you spend on your credit card, you repay in full within the billing cycle. If you already have a large outstanding on your credit card, try and clear it out as soon as you can. More often than not, judicious use of your credit card can be the best way to enhance your credit score.

Do not close old credit card accounts

If you have moved on to new credit card, because it offers a better rate of interest, do not be in hurry to close the previous one. Chances are you have been using it for a while and it bears witness to the fact that you have been responsible with your credit in the past. The length of your credit is also one of the factors that impact your CIBIL score, so do not cancel or close old credit card accounts. Besides the closure of one credit card also amps your overall credit utilization, thus impacting your CIBIL score negatively. If you must close an unwanted card, do it slowly over a period of time, while maintaining a good repayment track record on your new card and enhancing the credit limit on it. This is keep your CIBIL score in tact over the long run.

Do not over leverage yourself

That fact that credit is readily available today is an undeniable fact, with lenders vying with each other to get customers into their fold. If you have a good CIBIL score of 750 or slightly above, chances are that you receive calls from relationship managers of banks who want to avail of a loan or a credit card almost every single day. But just because you are eligible for a card or a loan, does not mean that you should avail of one. For instance, if somebody is offering you a personal loan, do not avail of it for the sake of it and go on a family vacation with it! Credit should be availed of only when you require it and you are sure of your repayment capabilities.

Maintaining good credit behaviour is a by-product of good financial habits. If you follow the above mentioned tips carefully and are careful with your finances, there is a slim chance of you going wrong with your CIBIL score. In fact following these tips are tried and tested ways to improve your credit score fast. Lastly, but not the least, make it a practice to purchase your CIBIL score and CIBIL report at least twice a year, so that you do not get any nasty surprises, by way of discrepancies in it, just when you are planning to apply for a loan. Your CIBIL score, just like your medical records must be kept up to date and in ship shape to ensure that your financial health is in order.

One needs to take into account that the improvement of scores is a slow process and shall take its own course. Thus it becomes imperative for one to keep checking the scores from time to time. There are various sites that can help one get a free CIBIL score and one shall not be required to pay every time.

Written by Arun Ramamurthy, author of “Unlock the Power of Your Credit Score” : India’s first book on credit scores.

CA SHIVANI AGARWAL

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GRACE PERIOD REMOVED FOR PROVIDENT FUND

As per paragraph 38(1) of the EPF Scheme, 1952, paragraph 3 of EPS, 1995 and paragraph 8(1) of EDLI Scheme, 1976, the employers are required to pay the contributions and administrative charges within fifteen days of dose of every month. The employer, as per para 5.1.3 of Manual of Accounting Procedure (Part-I General), is also allowed a grace period of 5 days to remit the contribution.

2.  The grace period of five days have been allowed for the employers to remit the contributions as the system of calculation of wages of the employees and their corresponding dues under the three schemes (Employees’ Provident Fund Scheme 1952, Employees’ Pension Scheme 1995 & Employees’ Deposit Linked Insurance Scheme 1976) were done manually and its remittances in the bank required additional time in the earlier manual setup.

3. In the present era„ employers compute the wages and EPF liabilities electronically (in most of the cases on real time basis) and file Electronic Challan-cum-Return (ECR), The remittances are also being deposited through Internet Banking. This has reduced the process and time taken in calculation of PF dues and its remittances in the bank. Accordingly, it has been decided that concession of grace period of 5 days available to the employers for depositing the contribution & other dues is withdrawn herewith. This decision shall apply from February, 2016 (contributions for month of January, 2016 and payable in the month of February, 2016).

4.  The employers shall pay the contribution and other dues as envisaged under EPF & MP Act, 1952 and Schemes framed thereunder within fifteen days of dose of every month.

Source-  www.Epfindia.Com-Webcircular (No. WSU/9(1)2013/Settlement) Dated 8th Jan 2016.

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Synopsis of Swachh Bharat Cess

As provided for in the budget by Finance Minister Mr. Arun Jaitley, government of India has levied Swachh Bharat Cess on value of services provided. Thus effective rate of service tax has increased from 14% to 14.50%. In this Article I have tried to summarize points of FAQ on Swachh Bharat Cess (SBC) issued by CBEC-

1. Swachh Bharat Cess shall be levied and collected as service tax on all the taxable services at the rate of 0.5% of the value of taxable service.

2. The cess shall be levied from 15^th day of November, 2015.

3. SBC is not leviable on services which are fully exempt from service tax or those covered under the negative list of services.

4. SBC has been imposed for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.

5. Proceeds of the SBC will be credited to the Consolidated Fund of India, and utilise such sums of money of the SBC for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.

6. SBC would be levied on the same taxable value as service tax.

7. SBC needs to be charged separately on the invoice, accounted for separately in the books of account and paid separately under separate accounting code. SBC may be charged separately after service tax as a different line item in invoice.

8. For payment of SBC, a separate accounting code would be notified shortly in consultation with the Principal Chief Controller of Accounts. These are as follows:-

Swachh Bharat Cess (Minor Head)	Tax Collection	Other Receipts	Penalties	Deduct Refunds
0044-00-506	00441493	00441494	00441496	00441495

9. Effective rate of service tax plus SBC, post introduction of SBC, would be 14.50%.

10. SBC is not to be considered as cess on Service Tax. SBC shall be levied @ 0.5% on the value of taxable services.

  

11. Scope:

Government has notified that SBC shall be applicable on all taxable services except services which are either fully exempt from service tax under any notification issued under section 93(1) of the Finance Act, 1994 or are otherwise not leviable to service tax under section 66B of the Finance Act, 1994.

12. In case of reverse charge under section 68(2) of the Finance Act, 1994, the liability has been shifted from service provider to the service recipient. As per section 119 (5) of the Finance Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made thereunder are applicable to SBC also. Thus, the reverse charge under section 68(2) of the Finance Act, 1994, is made applicable to SBC.

13. ABATEMENT:

Taxable services, on which service tax is leviable on a certain percentage of value of taxable service, will attract SBC on the abated percentage of value as provided in the abatement notification.

14. CENVAT:

SBC is not integrated in the Cenvat Credit Chain as enunciated in Rule 6. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.

15. POINT OF TAXATION (POT):

POT shall be determined as per Rule 5 of the Point of Taxation Rules explained as follows-

NO SBC to be levied:

·         In cases where payment has been received and invoice is raised before the service becomes taxable, i.e. prior to 15th November, 2015, there is no lability of Swachh Bharat Cess.

·         In cases where payment has been received before the service became taxable and invoice is raised within 14 days, even then the service tax liability does not arise.

SBC will be levied:

·         SBC will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date.

·      SBC will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued within 14 days.

16. For services covered by Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006, effective rate of Service Tax plus SBC under the works contract service in case of 

Original works would be 5.8% [(14% + 0.5%)*40%]and

Other than original works would be 10.15% [(14% + 0.5%)*70%].

Similar, would be the tax treatment for restaurant and outdoor catering services. The cumulative service tax and SBC liability would be [14% ST + 0.5% SBC] of 40% of the total amount, i.e., 5.8% of the total amount charged.

17. For air travel agent, life insurance premium, purchase and sale of foreign currency and services by lottery distributors/selling agents shall have the option to pay SBC as determined as per the following formula:-

Service Tax liability X 0.5%/14%

18. SBC liability in case of reverse charge services where services have been received prior to 15.11.2015 but consideration paid post 15.11.2015 is determined in accordance with Rule 7 of Point of Taxation Rules, as per which, point of taxation is the date on which consideration is paid to the service provider. Thus, SBC liability in such case will arise.

19. As SBC is not integrated in the Cenvat Credit chain and reversal under Rule 6 is payment of amount equal to 7% of the value of exempted services, hence, reversal of SBC is not required under Rule 6 of Cenvat Credit Rules, 2004.

For further queries you may reach me on mahershi@akvassociate.com

CA Mahershi Vijay

CA, CS, B.Com