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GIFT City IFSC vs Singapore: Why GIFT City Is The Better Destination For Stockbrokers

by InCorp Advisory

Reading Time: 3 minutes

In recent years, Singapore and GIFT City IFSC have emerged as two of the most prominent financial hubs in Asia. Both locations offer world-class infrastructure, skilled talent pools, and access to global markets, making them attractive destinations for stockbrokers looking to expand their regional operations. However, there are significant differences between the two locations that stockbrokers must consider when deciding where to set up their business.

In this blog, we will compare the advantages and disadvantages of setting up a brokerage firm in Singapore versus GIFT City IFSC.

Market Access

One of the most critical factors that stockbrokers must consider when selecting a location is market access. Singapore and GIFT City IFSC have different markets with different regulatory frameworks and market structures. Singapore has a well-established financial market with a sophisticated regulatory framework and access to global markets. Stockbrokers in Singapore can trade in equities, fixed income, derivatives, and other financial products, making it a well-diversified market. However, Singapore’s financial market is relatively small compared to other global financial centers, such as New York and London.

In contrast, GIFT City IFSC offers access to India’s financial market, one of the fastest-growing economies globally. India has a large and rapidly growing middle class, driving demand for financial products such as insurance, mutual funds, and equities. Stockbrokers in GIFT City IFSC can access the Indian market through the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Moreover, India has a vast unbanked population, which provides opportunities for innovative financial products and services. Therefore, stockbrokers looking to tap into the growth potential of the Indian market may prefer GIFT City IFSC over Singapore.

Related Read: Budget 2023: Major Boost & Benefits For GIFT City IFSC

CLICK HERE

Regulatory Framework

Another crucial factor that stockbrokers must consider when selecting a location is the regulatory framework. Singapore is known for its strict regulatory environment, which offers a high level of investor protection. The Monetary Authority of Singapore (MAS) regulates all financial institutions in Singapore and ensures that they comply with strict standards for risk management, customer protection, and market integrity. The MAS has also implemented regulations to combat money laundering and terrorist financing, which reduces the risk of fraud in the financial system.

In contrast, GIFT City IFSC has a less stringent regulatory environment than Singapore. The International Financial Services Centre Authority (IFSCA) regulates financial institutions in GIFT City IFSC and has implemented a more flexible regulatory framework to attract foreign investors. The IFSCA has also implemented tax incentives, such as tax exemptions on income from international transactions, which reduces the tax burden on stockbrokers.

Tax Incentives

One of the most significant advantages of GIFT City IFSC over Singapore is the tax incentives. The Indian government has implemented several tax incentives to attract foreign investors to GIFT City IFSC. For example, companies operating in GIFT City IFSC are exempt from taxes on income generated from international transactions. Moreover, the Indian government has also implemented a low tax rate of 9% for companies operating in GIFT City IFSC, which is significantly lower than the tax rates in Singapore.

In contrast, Singapore has a higher tax rate than GIFT City IFSC. The corporate tax rate in Singapore is 17%, which is higher than the tax rate in GIFT City IFSC. Moreover, Singapore has implemented a Goods and Services Tax (GST), which imposes a tax of 8% on goods and services sold in Singapore.

Related Read: A Complete Overview Of IFSC Gift City And Tax Benefits

CLICK HERE

Conclusion

Singapore and GIFT City IFSC are attractive destinations for stockbrokers looking to expand their operations in Asia. Singapore offers access to a well-established financial market with a sophisticated regulatory environment and access to global markets. On the other hand, GIFT City IFSC provides access to the fast-growing Indian market, which offers vast opportunities for growth and innovative financial products.

Additionally, GIFT City IFSC offers more relaxed regulations and tax incentives, making it a more cost-effective option for stockbrokers. Ultimately, the decision between Singapore and GIFT City IFSC will depend on each stockbroker’s unique business needs, risk tolerance, and growth strategy.

Related Read: Benefits For Stock Brokers Registered In IFSC GIFT City

CLICK HERE

Why Choose InCorp?

InCorp can offer comprehensive guidance to existing and new setups like stockbrokers looking to establish a business in the IFSC jurisdiction.

Our expert team provides valuable insights on regulatory compliance, tax planning, and business strategy to ensure that you can navigate the complexities of setting up your business efficiently and effectively. With our assistance, you can be confident in your ability to establish a successful business plan from the IFSC jurisdiction.

FAQs

Need help with navigating the rules and regulations in Gift city?

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Gift City: The New Hub For Indian Aircraft Leasing And Financing

by InCorp Advisory

Reading Time: 4 minutes

India is one of the fastest-growing aviation markets in the world, with the potential to become the third-largest aviation market by 2025. However, the country’s aviation industry has been facing challenges in terms of financing and leasing, hindering its growth. In response to this, the Ministry of Civil Aviation, Government of India constituted a Working Group on Development of Avenues for Aircraft Financing and Leasing Activities, known as ‘Project Rupee Raftar.’

The project aims to develop a robust and indigenous leasing and financing structure in the country, with the involvement of various stakeholders, regulatory bodies, and financial institutions. Through the efforts of Project Rupee Raftar, the International Financial Services Centre Authority Act (IFSCA) notified aircraft leasing as a financial product, creating a significant opportunity for the establishment of a viable aircraft leasing market in India. The scope of aircraft leasing includes operating lease, finance lease, and a hybrid of both. Finance lease is considered a permitted core activity, while operating lease is regarded as a permitted non-core activity.

In this blog, we will explore how the IFSCA’s move to include aircraft leasing as a financial product has opened up new avenues for financing and leasing activities, unlocking the unbridled potential of the Indian aviation market. The blog comprises of the eligibility criteria, process for registering in GIFT IFSC, tax benefits for lessors and certain general conditions to follow:

Eligibility for Aircraft Leasing in GIFT City

Lessor can undertake permissible activities depending upon nature of lease:
Eligibility for Aircraft Leasing in GIFT City

Related Read: Budget 2023: Major Boost & Benefits For GIFT City IFSC

CLICK HERE

Eligibility of Applicant to act as lessor for Aircraft leasing in IFSC are as follows:
Eligibility of Applicant to act as lessor for Aircraft leasing in IFSC GIFT CityPromoters/partmers/Trustees shall be in Financial Action Task Force compliant jurisdiction

Minimum capital requirement of USD 30,00,000 for financial lease and USD 2,00,000 for operating lease.
Application fees of USD 1,000 (one time) and registration fees of USD 12,500 (one time) for finance lease, and application fees of USD 1000 (one time) and registration fees of USD 5000 (one time) for operating lease. Annual fees are USD 12,500 (2nd year onwards) for finance lease and USD 3,000 (2nd year onwards) for operating lease.

Related Read: A Complete Overview Of IFSC Gift City And Tax Benefits

CLICK HERE

Process flow for registration of Aircraft Leasing in GIFT City

Process flow for registration of Aircraft Leasing in GIFT City

Benefits for Aircraft lessor registered in GIFT City- IFSC

Particulars  Benefits 
Income Tax Act  
  • 100% tax exemption for 10 consecutive years out of 15 years 
  • Capital gain tax deduction from transfer of an aircraft or aircraft engine previously leased by it to any person then the previously mentioned tax holiday period is also applicable to it, provided it has commenced its operations by March 31, 2024, under section 80 LA of Income Tax Act,1961. 
  • MAT / AMT @ 9% of book profits applies to Company / others setup as a unit in IFSC (MAT not applicable to companies in IFSC opting for new tax regime). 
  • Dividend paid to shareholders of company in IFSC (Taxable in the hands of recipient, Exemption not relevant due to withdrawal of DDT regime). 
  • No withholding of taxes is required on interest paid to Non-residents by units in IFSC. 
  • Withholding of taxes is not required on aircraft lease payment to non-residents by units in IFSC provided it has commenced its operations on or before March 31, 2024. 
Goods and Service Tax 
  • No GST on services – 
    • received by unit in IFSC 
    • provided by IFSC / SEZ units to offshore clients 
  • GST applicable on services provided to DTA 
Customs Duty 
  • Exemption from customs duty for all goods imported in the SEZ used for authorized operations. However, any removal of goods from SEZ into Domestic Tariff Area (“DTA”) would attract customs duty. 
Central Excise 

Duty 
  • Exemption from duty of excise on domestic procurement to carry out authorized operations. However, the removal of goods into DTA shall be liable to excise duty. 
Other Benefits 
  • 100% reimbursement of stamp duty and registration paid 
  • 100 % reimbursement of electricity duty and Re. 1 subsidy on power tariff for a period of 5 years. 
  • 100% of EPF amount paid in case of female employees and 75% of EPF amount paid in case of male employees 
  • Lease rental subsidy for every 50 sq. ft per employee 
  • Up-to 20 employees – Rs 8 per sq. ft 
  • 20-100 employees – Rs 5 per sq. ft 
  • 21 Above 100 employees – Rs 3 per sq. ft 

Related Read: How To Incorporate AIF In GIFT City-IFSC?

CLICK HERE

Benefits given by Gujarat Government for setting unit in GIFT City IFSC in Gujarat IT/ITeS policy (2022-27) :

Benefits given by Gujarat Government for setting unit in GIFT City IFSC in Gujarat IT/ITeS policy

General Conditions:

  • Lessor should undertake all transactions in freely convertible foreign currency only. Administrative expenses may be undertaken by the lessor in INR by maintaining a separate INR account. 
  • Books of Accounts, records, document to maintained as required by applicable law in any freely convertible currency. 
  • Lessor shall submit annual final statement within 15 days of finalization all financial information in USD unless otherwise specified. 
  • Lessor shall comply with Cape Town Convention and Protocol and other required statutory requirement, obligation, standards, policies direction and guidelines. 
  • In case the lessor fails to comply with the condition subject to which registration is granted, IFSCA may act after giving an opportunity of submission.

Conclusion

In conclusion, the Indian government’s initiative to develop a robust and indigenous leasing and financing structure, and the IFSCA’s decision to notify aircraft leasing as a financial product, has created a viable aircraft leasing market in India. The registration of aircraft lessors in GIFT City-IFSC offers various benefits, including tax exemptions, GST and customs duty exemptions, and other subsidies, which make it an attractive destination for aircraft leasing companies.

Related Read: Benefits For Stock Brokers Registered In IFSC GIFT City

CLICK HERE

Why Choose InCorp?

At Incorp, we understand the importance of a robust and indigenous leasing and financing structure for the aviation industry. We recognize that setting up an aircraft leasing company can be a complex process, requiring expertise in various fields, including finance, law, and regulation. That’s why we offer specialized advisory services to assist companies in setting up aircraft leasing companies and availing the benefits of the recently created aircraft leasing market in India. Our team of experts can guide companies through the entire process, from initial planning and formation to ongoing compliance and management. With our help, companies can take advantage of the significant benefits offered by the new market, including access to affordable capital and increased flexibility in fleet management. Contact us today to learn more about how we can help your company succeed in the aircraft leasing industry in GIFT City.

FAQs

Need help with navigating the rules and regulations in Gift city?

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Overview of GST on Goods Given as Gifts or Free Samples

by InCorp Advisory

Reading Time: 5 minutes

Organizations have adopted various marketing strategies to boost sales in a consumer-oriented marketplace. To expand their customer base, they distribute goods or services as free samples or gifts. Such samples/ gifts are also known as “Business promotion.” 

Further, distributors are often given additional goods free of cost, a sponsored foreign trip, or certain home appliances when they achieve their sales target. Such expenses are incurred to increase the sales of the company. In this article, we discuss GST taxability on gifts and free samples. Also, the availability of ITC in such activities.

What are the sections relating to GST applicability on gift/free samples?

First, let us take a glance at the related provisions of eligibility of ITC (Input Tax Credit) under the CGST Act on the inputs used by a company:

A. Section 16 of the CGST Act provides that ITC can be availed if the goods/services procured as inputs are used or intended to be used in the course or furtherance of business.

B. Section 17(5)(h) of the CGST Act provides that ITC is ineligible on goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.

Therefore, a company can claim ITC if it satisfies the conditions specified under section 16 of the CGST Act and does not fall under the list of restricted credit mentioned under section 17(5)(h) of the CGST Act.

Related Read: An Overview on Composition Scheme under GST

CLICK HERE

Impact of GST on goods given as free samples/gifts or Business Promotion

We have tabulated a chart on the impact of GST on goods given as free samples/gifts or Business Promotion. In the below scenarios, the parties to the transaction are not related persons as defined under the GST Law.

Scenario Activity GST Impact
1 Buy “x” Qty get “y” Qty free (Same Product)
  • This is a common marketing strategy wherein (x+y) quantity is sold for the price of “x” quantity. In this case, GST is payable on the price charged to the customer. Since no other consideration is flowing to the seller, GST is not payable on the notional value of “y” quantity. Input tax credit on inputs/services is available without any restriction.
  • Here we can also have a case of a company offering specific discounts on achieving a particular sales target during a given time. 
2 Buy Product “A” and get Product “B” free. In this case, we have 2 types of promotion schemes:-

  • If Product A and Product B are related and sold together in the normal course of business, it will be a case of composite supply. The seller needs to charge the GST applicable on a dominant product on the transaction value.
  •  If Product A and Product B are not related and sold together in the normal course of business, it will be a case of mixed supply. The seller needs to charge the highest rate of GST applicable to Product A or Product B on the transaction value.
3 Free Samples of products manufactured /traded by Company to distributors
  • Companies distribute free samples of new products to test the market response or promote the sales of their product. The products are given without consideration and qualify as free samples/gifts. 
  • In this case the company will not be eligible to claim ITC on account of specific restrictions of ITC as per section 17(5)(h).
4 Gold Coins, Outstation Trips, Home Appliances given to distributors under Incentive schemes
  • Many times, companies promise freebies such as gold coins, outstation trips, home appliances etc.  to promote sales to its distributors/customers who achieve a particular sales target. This is a clear case of goods distributed as gifts without any consideration. ITC is not available to the company on the purchase of such goods. 
  • A company need not pay GST on goods distributed as gifts because it doesn’t meet the supply criteria under GST. 
5 Distribution of advertisement materials such as stationery items with name of company embossed on it, signage display
  • It is considered entirely as a business expenditure. It has been incurred to facilitate the business and can’t be termed as a gift. It is an advertisement and the supplier gets material benefits. Essential characters of gifts are missing. Directly or indirectly, suppliers benefit from this and not the recipient. No GST payable on the distribution of such goods. Further, the supplier is eligible for ITC. 
  • However, some advance rulings have held otherwise. It was held that ITC is not allowed as it was considered as a gift.
6 Distribution of Catalogue, Brochures, Rate Card to customers
  • This is not a case of a gift. Catalogue, Brochures, Rate Card etc. are given to customers as a normal business practice to promote the company. There will be no reversal of ITC under this scenario.
7 Goods/ services distributed under CSR Activity
  • This is an unsettled question whether ITC can be claimed on goods distributed free as a part of CSR activities. We have contradicting advance rulings on the subject where some allow ITC and some disallow ITC.
  • Arguments in favor of allowing ITC of CSR activity is that CSR is obligatory under the Companies’ Act 2013. Further, the CSR activity is regular in nature. This is opposed to a ‘gift’ which is voluntary and occasional in nature. Therefore ITC of goods/services distributed under CSR activity should be eligible. It shall not fall under the purview of section 17(5)(h).
8 Supply of Moulds and Dyes by Principal to Job worker without any consideration
  • If the contract between the Principal and Job worker is to undertake job work activity using the moulds and dyes belonging to the Principal then the Principal need not pay GST on its supply. Further there is no need to reverse input tax credit by the Principal.
9 Gift by Employer to Employee
  • Gift given by employer to employee of value not exceeding Rs. 50,000/- per employee in a financial year then ITC to be reversed. 
  • In case of value exceeding Rs. 50,000/-, the employer needs to pay output GST on such supplies and as a result he is eligible for ITC of such supplies. 
10 Goods supplied free of cost under Warranty Under replacement warranty, goods are supplied free of charge to customers. No separate consideration is charged at the time of replacement. This is because consideration for the same has been recovered at the time of supply of principal goods. Thus, tax on the same would have been paid at the time of principal supply of goods, as such costs are included in the price of principal goods sold. ITC on input and input services used to provide warranty services is available to the supplier.

Related Read: What Happens When GST Return Is Not Filed?

CLICK HERE

Conclusion

The impact of GST on gift items varies based on the specific transactions, on the goods or services that are given free of cost to customers, distributors, employees, job workers, or any third person. 

In this regard, businesses must examine the same concerning GST law to avoid future litigation. However, when a given activity qualifies as a free sample / gift, ITC is not eligible to the supplier. Applicability of GST on free samples/gift items will depend on the contractual agreements between the parties involved.

Why Choose Incorp?

At Incorp, our dedicated team of experts shall assist you on various indirect tax levies, including Goods and Services Tax (GST). We can offer you experienced advice relating to nitty-gritty’s of your business; from GST of gifts/free-samples to filing ITC as well as e-invoicing GST, Incorp will be your one stop solution.

Our professionals have in-depth knowledge and wide-ranging experience to help you in the effective planning and structuring of your business to ensure compliance with the GST regulations.

Need help with navigating India’s tax system and GST regulations?

Contact our experts today!

GST on Renewable Energy Sector

by InCorp Advisory

Reading Time: 5 minutes

As per the latest statistics made available by the Ministry of New and Renewable Energy (MNRE), India has a total installed renewable energy capacity of 103.05 Gigawatt as of 31st October 2021. Ministry themselves have set an ambitious target of expanding the capacity to 175-Gigawatt capacity by 2022. Prime Minister Narendra Modi has set the national target of non-fossil energy capacity agreed at COP26 Climate Summit in Glasgow from 450 Gigawatt to 500 Gigawatt of renewable energy to be achieved by 2030. The various sources of renewable energy that contribute to this are:

Type 2021 (existing) 2022 (proposed) 2030 (proposed)
Solar energy 47.66 GW 100 GW 500 GW
Wind energy 39.99 GW 60 GW
Biopower 10.58 GW 10 GW
Small hydro 4.82 GW 5 GW
Total 103.05 GW 175 GW
Source: Economic Times

What do you mean by supplies of Renewable Energy devices?

Renewable energy supplies can be classified as either a supply of renewable energy devices and parts for their manufacture or a composite supply of these goods and their installation services. 

The renewable energy devices refer to the following:

Goods under Chapter 84, 85 or 94 Services under Chapter 99
Biogas plant Construction services, 

Engineering services, 

Installation services and Other technical services provided in relation to these goods.

It also includes maintenance services 
Solar power-based devices
Solar power generator
Windmills, Wind Operated Electricity Generator (WOEG)
Waste to energy plants/devices
Solar lantern / solar lamp
Ocean waves/tidal waves energy devices/plants
Photovoltaic cells, whether or not assembled in modules or made up into panels
Such other goods that may be used
Renewable Energy Certificates

What are the GST rates applicable for Renewable Energy devices?

GST on such renewable energy devices is applicable as below:

Type of supply 01/07/2017 – 31/12/2018 01/01/2019 – 30/09/2021 01/10/2021 – till date
Goods falling under Chapters 84, 85 or 94 5% 5% 12%
Any other goods Applicable GST rates
Pure Services 18%
Composite Supply (except maintenance services) 8.90%*

(70% of 5% + 30% of 18%)

 8.90%

(70% of 5% + 30% of 18%)

 13.80%

(70% of 12% + 30% of 18%)
Renewable Energy Certificates 12% 18%
Composite Supply (maintenance services / AMC) 18%
*Note 1: The GST rates for the period 01/07/2017 to 31/12/2018 are applicable in terms of the Composite Supply provisions i.e., the GST rate of the principal supply which in this case is the supply of renewable energy devices or parts which is taxed at 5%. However, the 45th GST Council meeting held on 17th September 2021 has explained that it shall be taxed in the 70:30 ratio though the relevant notification is applicable from 01st January 2019. And Circular No. 163/19/2021-GST dated 06/10/2021 states that if the GST paid for this period is higher than the 70:30 ratio then no refunds will be given for the excess tax payment made.

Can you claim Input Tax Credit (ITC) on the above supplies?

Main CriteriaManufacturers of Renewable Energy goods:

Businesses that manufacture Renewable Energy goods will be eligible to claim the ITC as available to subject to fulfillment of conditions in Section 16 and restrictions in Section 17. Usually, these manufacturers are solely indulged in the manufacture and sale of complete units such as Solar Panels, Wind turbine fans, etc.

Main CriteriaDealers /Contractors of Renewable Energy goods and services:

Businesses engaged in the procurement and installation of Renewable Energy goods and services shall be eligible for claim of ITC. There is a possibility of inversion of input goods and services in this regard, as the effective GST rate for supply is currently 13.80% whereas the procurement of goods not falling under 84, 85, or 94 and individual services may attract higher GST rates.

Optional CriteriaEnd customers of Renewable energy goods:
Businesses that obtain or procure renewable energy-related goods or services for their business will be eligible to claim ITC as follows:

A. Factories / Commercial buildings:

In the case of renewable energy units, set-up in factories or commercial buildings for captive generation of electricity, then the restriction of Section 17(5)(c) & (d) of CGST Act, 2017 for construction of buildings will not be attracted as such units can be treated on par with ‘Plant and Machinery’ and not ‘Building’.

B. Sale of captively generated electricity: 

In case the captively generated electricity is more than the requirement of the business entity, then any supply of such electrical energy goods is exempt under GST. Hence, common input tax credit incurred for such electricity generation including the ITC on the Renewable Energy units should be reversed in terms of Rule 42 for input goods and services and Rule 43 for capital goods.

C. Generation and sale of electricity:

In the case of businesses involved only in the generation and sale of electricity in the market, then the sale of electrical energy will be considered as the sale of goods as per notification no. 02/2017 dated 28/06/2017. Therefore, in Section 17(3) and Rule 42/43, the input tax credit incurred for such exempt sale shall be reversed accordingly. Hence, such input tax credit incurred will effectively be the cost of the project and will impact the pricing of the electrical energy as well. With the increase in GST rates by 4.9% on composite supply of renewable energy goods, the cost to such businesses for setting up the project has increased further.

D. In all other cases, ITC is eligible for claim as per Section 16 and Section 17 of the CGST Act, 2017.

Therefore, businesses engaged in Renewable Energy can claim input tax credit subject to such restrictions or reversals.

Let us look at the important judgments / rulings on Renewable Energy in GST

  • ITC claim and treatment of capitalized Solar Power Plant in the factory:

The ARA held that the solar power plant has to be fastened to the rooftop of the building and would require construction/erection of pillars for the same. Hence, it is ‘permanently fastened to anything attached to the earth’. Further, as per Section 17(5)(d) of the CGST Act, 2017, the solar power plant will be considered an immovable property but would qualify as a ‘Plant and Machinery’ and hence, is eligible for ITC claim under GST.

M/s. Pristine Industries Limited – Rajasthan AAR (No.- RAJ/AAR/2021-22/16 dated 13/09/2021)

  • Applicability of GST on supply of materials for the manufacture of Wind Operated Electricity Generator (WOEG): 

The ARA held that as seen from the Purchase Orders for the purchase of Stator Coil from the buyer and the Generator Supply agreement between their buyer and the end customer are needed to prove that the supply is for the manufacture of WOEG as per Para 11.3 of Circular No.80/54/2018 GST dated 31.12.2018. The onus is also on the Applicant to satisfy themselves that the supply is in the nature of WOEG supply. 

Comment: This AAR showcases that sufficient proof that the supply is intended for the purpose of WOEG is needed to classify the supply as WOEG and charge a concessional GST rate of 12%.

M/s. Coral Coil India Private Limited – Tamil Nadu AAR (No.- TN/40/ARA/2021 dated 30/11/2021)

  • Applicability of concessional rates to sub-contractors of solar power generation system:

The Advance Ruling Authority (ARA) of Karnataka had held that the benefit of concessional rates is available to sub-contractors as the notification does not distinguish between contractors and sub-contractors.’ Hence, the concessional rates are applicable to sub-contractors as well provided they are supplying for a solar power generation system.

Comment: This ARA’s ruling states that even sub-contractors can avail the benefit of concessional rates. However, proper care and precaution has to be taken in drafting of the contracts. Sub-contractors may also exercise additional safe-guards to ensure that the goods they supply are for construction of solar power generation system only.

M/s. Solarsys Non-Conventional Energy Private Limited – Karnataka AAR (KAR ADRG 120/2019 dated 30/09/2019)

  • Classification of a Waste To Energy Plant (WTEP) is based on the technical specification and not just the name of the product:

The Advance Ruling Authority (ARA) of Gujrat has held that to classify a product as a WTEP liable to a GST rate of 5% should be based on the technical specifications. Merely because the product has been presented as a WTEP does not qualify it for concessional rates. The product in question uses coal as fuel as stated in their website and the same has been deliberately withheld by the Applicant. Therefore, the applicable GST rate 18%.

Comment: The AAR shows that classifying supplies as Renewable Energy devices has to be backed by proper proof and even details such as technical specifications and details disclosed on the websites or other sources which is available to the public will be considered before providing concessional benefit. 

M/s. Isotex Corporation Private Limited – Gujrat AAR (GUJ/GAAR/R/74/2020 dated 17/09/2020)

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An Overview on Composition Scheme under GST

by InCorp Advisory

Reading Time: 4 minutes

Goods and Services Tax GST applies to all service providers, retailers, wholesalers, and producers who are doing business in India. The registration of any business organization under the GST Law is done under two categories which are as under:  

  • Normal scheme registration
  • Composite Scheme registration

In this article we will take a look at eligibility, benefits, disadvantages as well as the compliances involved under the GST Composition Scheme.

What Is the GST Composition Scheme?

Composition Scheme is an optional scheme to pay GST at a lower rate than the normal rate. Small taxpayers who are burdened to comply with GST formalities can opt for composition scheme to reduce compliance and pay GST at a fixed rate on turnover.

Related Read: Your Self-Help Guide For GST Registration

CLICK HERE

Eligibility Criteria For Opting Composition Scheme Under GST?

As per the GST Composition Scheme rules, eligibility depends upon:

Main CriteriaMain criteria:

The main condition to opt for the GST composition scheme is that the taxable person should have aggregate turnover in the preceding financial year not exceeding Rs.1.5 Crore. Further, a person who opts for GST composition scheme rate, may supply services, of value not exceeding ten per cent of turnover in the preceding financial year or five lakh rupees, whichever is higher.

Optional CriteriaOther Eligibility Criteria:
As per the GST Act, the registered person shall be eligible to opt for composite scheme, if— 
  • He is not engaged in the supply of services (apart from limit mentioned in main criteria above);
  • He is not engaged in making any supply of goods which are not taxable under this Act;
  • He is not making any inter-State outward supplies of goods or services;
  • He is not supplying goods or services through an e-commerce operator who is required to collect tax at source under section 52of CGST Act 2017;
  • He is not a manufacturer of ice cream, pan masala, or tobacco; and
  • He is neither a casual taxable person nor a non-resident taxable person.

What Is The GST Rate Under Composition Scheme?

The rate of tax applicable for composition scheme is as under- 

S.No  Type of dealer  CGST  SGST 
1  Manufacturers, other than manufacturers of such goods as may be notified by the Government (Ice cream, Pan Masala, Tobacco products etc.)  0.5%  0.5% 
2   Restaurant services not supplying alcohol  2.5%  2.5% 
3  Traders or any other supplier eligible for composition levy  3%  3% 

What Are Various Conditions To Be Fulfilled By Composite Dealers?

There are various rules to be fulfilled once the dealer has opted for the GST composition scheme, namely:

  • The dealer cannot claim ITC on inputs nor can he collect any taxes from the recipient of the supplies made by him. 
  • The dealer has to issue ‘Bill of Supply’ as it cannot issue Tax Invoice. Also, the dealer has to mention ‘Composition taxable person’ on top of every bill of supply issued by him. 
  • The dealer has to mention ‘Composition taxable person’ on every signboard in the premise of the business or notice issued. 
  • The dealer has to pay tax under Reverse Charge Mechanism at normal rate of tax. 
  • The dealer shall not be eligible to opt for the composition scheme if he is registered for more than one business having the same Permanent Account Number (PAN) [issued under the Income-tax Act, 1961 (43 of 1961)]. However, he can do so only if all such businesses opt to pay tax under composition scheme.
  • The dealer cannot make Inter-state supplies but it can make Inter-state purchases. 

Related Read: What Are The GST Compliances In E-Commerce?

CLICK HERE

What are GST compliances in Composition Scheme?

In order to get a lower GST rate, eligible entities have to follow the following compliances under the Composition Scheme:

  • The registered taxpayer will have to file FORM GST CMP-02, before commencement of the financial year, on the portal to opt for the composition scheme. Once opted, the taxpayer is by default considered under composition scheme for subsequent years to discharge his liability.
  • Other than filing an application to opt for composition scheme, the taxpayer will have to file FORM CMP-03 (Stock Intimation) to declare details of the stock including those purchased from unregistered dealers for reversal of ITC.
  • If the registered taxpayer in the subsequent year wants to withdraw from the scheme, he has to file FORM GST CMP-04. Post opting out the taxpayer will discharge his liability at normal rates and issue ‘Tax Invoice’.
  • Other than filing an application to opt for composition scheme the taxpayer will have to file FORM CMP-03.
  • The taxpayer under composition scheme will pay taxes and furnish the details for every quarter in the FORM GST CMP-08 by 18th of the subsequent month of the quarter.
  • The taxpayer will file their return in the FORM GSTR-4 by 30th April of the subsequent financial year for which the return is filled.

Related Read: What Happens When GST Return Is Not Filed?

CLICK HERE

Conclusion

There are several advantages of opting for GST composition scheme to small taxpayers such as

  • The taxpayers do not have to maintain proper records which reduces a huge burden especially on small dealers and they can allocate more time for business development.
  • Lesser GST liability as the dealer has to pay taxes at lower rates.
  • Lesser tax payment also increases liquidity of funds at hand for small taxpayers.
  • The taxpayer has lesser compliances to adhere to as liability is discharged quarterly by filing a simple form

While there are several pros for opting composition scheme, there are few cons too which are as under: 

  • The taxpayer cannot avail ITC. 
  • The dealer cannot widen the territory of business as he can’t make interstate sales. 
  • The dealer cannot supply through e-commerce portal. 

Why Choose Incorp?

At InCorp, our team has extensive expertise and experience that can assist you in complying with GST requirements and managing your taxes in a timely manner.

Our service scope includes: 

  • GST Compliances 
  • GST Operational Assistance 
  • GST Audit Services 
  • GST updates on recent notifications 
  • GST Representation and Litigation Support 
  • Other Indirect Taxes Advisory and Litigation

FAQs

Stay compliant with all GST regulations!

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Benefits For Stock Brokers Registered in IFSC GIFT City

by InCorp Advisory

Reading Time: 3 minutes

In January 2017, India’s first international exchange was launched in the International Financial Service Centre (IFSC) in Gift City. This exchange includes trading across all asset classes such as equities, currencies, commodities, and fixed-income securities. Securities can be dealt with in the exchanges operating in the IFSC with a specified trading lot size on their trading platform subject to prior approval of SEBI. Further, in December 2020, regulations have been made to set up India’s first International Bullion Spot Exchange. In this article, we discuss the registration process for stock brokers in Gift city – IFSC and its benefits.

An Overview

An International Financial Service Centre (IFSC) is a special jurisdiction where global financial service providers offer financial services/ products to global customers in foreign currencies. In India, an IFSC is to undertake financial services transactions currently carried out outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions. The key institutions permitted to set up an IFSC unit are the Banking sector, Insurance sector, and Capital Markets. A stock broker is an eligible participant in the Capital Markets of IFSC.

Related read: A Complete Overview of IFSC Gift City and Tax Benefits in Gift City

CLICK HERE

What is the operational flow of stock brokers in Gift City – IFSC?

Operational Flow Of Stock Brokers In Gift City

What is the process flow for registering a stock broker in Gift City – IFSC?

Process flow for registering a stock broker in Gift City

 

Related read: Everything You Need to Know About
Portfolio Management Services in GIFT City (IFSC)

CLICK HERE


What are the benefits for stock brokers registered in GIFT City- IFSC?

Stock brokers registered under GIFT city were provided with various benefits as compared to general stock brokers registered elsewhere. Few benefits are listed below:

Investment Opportunities1. Investment Opportunities
  • India’s two largest exchanges, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), have set up international exchanges and clearing corporations at GIFT IFSC. 
  • The exchanges provide more than 140 products for trading, allowing international investors and Non-Residents Indians to trade from anywhere across the globe.
  • Stock brokers can target the following type of investors:-
    • A person resident outside India (Mainly Foreign Portfolio Investors and Eligible Foreign Investors
    • Non-Resident Indian
    • Financial institution resident in India / Resident in India eligible to invest funds offshore, to the extent permitted under FEMA/RBI guidelines.
Taxation benefits2. Taxation benefits
  • Business income 10 years out of the first 15 years earn a tax holiday u/s 80LA of Income Tax Act, 1961. However, business income is taxable for brokers registered elsewhere in India since no specific exemption is provided.
  • Minimum Alternate Tax (MAT)/ Alternate Minimum Tax (AMT) is applicable @9% of book profits. However, the same applies only to companies opting for the old tax regime.
  • Exemption from STT, CTT, stamp duty in respect of transactions carried out on IFSC exchanges by registered brokers.
  • No GST on services received by a unit in IFSC or provided to IFSC units, offshore clients.
Operational Benefits3. Operational Benefits:
Apart from the above tax and compliance benefits, brokers registered in IFSC have some operational benefits too, which are as under:
  • Lower operating costs due to subsidies granted by the Gujarat Government,
  • Availability of skilled labor,
  • Proximity to the onshore market,
  • World-class infrastructure, unparalleled connectivity, and transportation access,
  • Access to multiple markets from IFSC.

Related read: How To Incorporate AIF In GIFT City- IFSC?

CLICK HERE

Conclusion

While worldwide financial hubs such as London, New York, Hong Kong, Singapore, and Dubai have grown in popularity, the moment has come to enhance capital flows through India’s GIFT City. Compared to other major IFCs, the Indian government and its regulatory authorities have enabled GIFT City to provide a commercial and regulatory environment.  The IFSC strengthens India’s strategic position as a global financial services business hub. The city benefits from several economic and financial advantages.

How Can InCorp Help You?

Our Advisory and Taxation Team at Incorp offers seamless assistance in the incorporation of entity in Gift City with related compliance and advisory services. We shall evaluate and assist in analyzing GIFT City related operational, commercial, taxation benefits, ensuring smooth setting up and assistance in regular compliance with all applicable rules and regulations in Gift City.

FAQs on Stock brokers Registered in GIFT City – IFSC

Need help with navigating the rules and regulations in Gift city?

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