Firm Registration

Firm Registration – Registering a Partnership Firm in India (UPDATED June 2017)

Last updated: June 2, 2017

Here are complete instructions on firm registration so you can register your Partnership Firm with the Government.

A Background on Partnership Firms

So, how can you be sure that your business is considered a partnership firm, then?

For starters, partnerships are types of firms that do not result to unlimited liability to its members, compared to traditional businesses. What sets partnership firms in India apart is the fact that partnership firms do not need to have at least one mandatory member who would shoulder unlimited responsibility. Therefore, the liability would then depend on the capital that the partners have invested for the current business.

Another thing you can keep in mind is that partnership firm members would be able to have high level of protection, and only limited liability when it comes to financial risks regarding the business.

Before you set out for firm registration of your partnership firm, you do have to be mindful of the following:

  • You or your partner/s cannot file any suit in court against other partners or the firm itself, as this is written in India’s Partnership Act.
  • You or any of your partners cannot claim mutual adjustment of debts, otherwise known as set-offs, which are owned by disputant parties, or any other proceedings.
  • You cannot enforce any contract from the court, and it couldn’t be allowed to arise in any way.

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Choosing a Name for Your Partnership Firm

One important thing that you should do first when it comes to proper firm registration of a partnership firm is that you have to choose a name for your business first. For this, you have to keep two important things in mind, and these are:

  • You have to make sure that the name isn’t too similar to that of another existing firm. This way, confusion would not ensue, and in case the other firm with the same name as yours gets into squabbles, or gets negative reputation in business, your business would not be compromised. There are also several mobile apps that can help you check whether the name you want is already registered or not. These apps are available on the iTunes and Google Play stores and they support all phones including the upcoming mobile phones.
  • You have to make sure that you would not use the following names for your business: Emperor, Crown, Empire, and Princess. Using these terms would not make firm registration easy because these words imply patronage, approval, or sanction of the Government, unless you have to use them as allowed by the government itself.

Check for Name Availability. You might also want to check the availability of your chosen name/s first, just to be sure. This will also save you a lot of time and effort so you won’t have to waste your firm registration time choosing names that have already been taken, or are not allowed. To do this, just follow the guidelines below:

  • Go to the MCA website, and then enter your proposed name in the space labeled Company Name.
  • You’ll then see a dropdown box that shows names of the same kind, if any, so you’d know if your chosen name has already been used before, or if it might cause confusion once you push through in using it.
  • If you see the words “no records found” flashing on your screen, it means that there are no companies with a similar name, and you can push through with using the name that you have already chosen.
  • You can also do the same to check for trademarks or trademarked names. Just enter your proposed name in the wordmark, followed by relevant class, and then you’ll see if any records have been found or not.

The Process of Registration

Now that you’re able to prepare for it, it’s time to understand how the process of firm registration should go for your business. For this, you need to make a partnership deed, mostly because oral arguments do not have any value whatsoever when it comes to the state of your business. A partnership deed should include the following:

  • Name and address of the firm—which also includes names and addresses of all partners involved;
  • Enter your full name, which should be more than a single alphabet in both the first and last name fields. You’d have to fill up your father’s name, as well.
  • Attach a photograph with a full view of your face, facing front.
  • If you’re a foreign national, the nationality you should input is the one that’s written on your passport.
  • Enter educational attainment and current occupation, as well.
  • Take note that for foreign nationals, adding passport number is mandatory to make firm registration
  • Enter residence details—and make sure it matches your current area of residence, and not where you have lived years ago, or in the future.
  • The date when the business was commenced, or would be commenced;
  • The Nature of the business that you’d be carrying on. This means that you have to say what the business would be about, why it is important to put the business up, why it matters in its niche, etc;
  • The Capital Contribution of each of the partners;
  • The Duration of the Partnership. This could denote whether it’s for a given period of time only, or if it would be for a permanent position or amount of time, and;
  • The kind of profit-sharing that would happen between the partners.
  • Provide identification details, affidavits, if needed, and digital signature. Once you have provided all the required details, register using the eForm, also on the said website.

To make firm registration happen, you have to make sure that the application is signed and verified by all of the partners, and that all the prescribed fees are enclosed within the partnership deed, or application documents.

Application Form 1

In the envelope, you will also have to enclose Form 1 for firm registration, which should contain the following:

  • The Class No. of Your Business—you can figure this out at the office of the Ministry—there are lists you can follow there;
  • The full name and nationalities of the partners;
  • Design/blueprint or sketches of the business;
  • The name of the article or design which the business applies to the trade description of each set;
  • Name of country, official date when the business was set or has been thought of, official number of service, and make sure that you have it addressed to the Controller of Designs in Calcutta.

Specimen of Affidavit

The next step in firm registration in India is to make sure that you fill up your specimen of affidavit. Basically, this is a sworn statement that would verify firm registration, and make sure you’re following due process. The affidavit should contain the following:

  • The identity of the person making the declaration (you and your partners), or the declarant;
  • The individual’s current address—do this for each one signing the document, or the location;
  • The signature of the one who’s signing the affidavit, also known as signature;
  • A list or statement of facts that you’re trying to declare under oath, and;
  • Notary Acknowledgment—which means that you need to have the affidavit notarized to verify its authenticity.

Completing the Partnership Deed

Aside from what was mentioned, you have to complete your partnership deed by adding the following:

  • Commissions, salaries, and other forms of payables to all parties;
  • Partner’s Capital Interest and Interest Rates, all of which have to be charged on drawings;
  • Account Preparation Methods;
  • Rules that the company would have to follow in case of accidents, bankruptcies, or deaths, and;
  • Division of responsibilities and tasks, together with obligations and powers for all of the partners

You can customize and personalize the partnership deed, depending on the kind of business you have, and what you and your partners deem to be good for it, and should be placed on a stamp paper for it to be considered helpful for firm registration. This is in accordance to the Indian Stamp Act, which contains the following parameters:

  • Several instruments should be used for single transactions of mortgages, sales, or settlements;
  • Instruments should be chargeable with duty;
  • No payment on principal instruments of the Payment of Punjab Duty should not be made prematurely;
  • Debentures and Bonds relating to 1879’s Act 11 should be declared;
  • There should be sea insurance policies;
  • The use of adhesive stamps should be well thought of;
  • You have to know how duties should be paid;
  • There should only be one instrument on the same stamp;
  • The deed should denote the proper duties of the partners involved;
  • Facts affecting the said duties should be duly noted;
  • Payable duties should be made known, and;
  • There should be obligation to give receipts up on certain cases.

DSC

Acquire DSC. Next, you’d have to get DSC, or Digital Signature Certificate so that you would get the right level of security. If you have managed to read the earlier instructions, you’d know that you can get this while applying for DIN eForm 1. However, if you choose to make this the first step of your personal firm registration, you can check out a couple of websites that can allow you to do this. Not only will you be able to download the certificate you need, you will also be able to track your application, review certificates, and revoke them, if needed.

Now that you know how firm registration happens, it wouldn’t be a surprise if another question plagues you, and it is about how much the whole registration process will cost.

How much would it cost?

What you have to know is that there are different fees that you’d have to be prepared to pay during firm registration. These are as follows:

  • Firm Partnership Registration. This could be around Rs 500 to Rs 5000, depending on the amount of contribution, which in itself could range from Rs 1 Lakh to Rs 10 Lakh. Take note that these fees will have to be paid until you have submitted or have gone through Form 3.
  • Document Recording/Registration. You would also have to pay for the recording or registration of documents that you have. These include forms, Statement of Accounts and Solvency, notices, or any other kind of annual returns that could make way for the registration, privatization, or conversion of any companies. This could go from RS 50 to Rs 500, depending on the amount of contribution, which could range from Rs 1 Lakh to Rs 10 Lakh.
  • Conversion of firms or unlisted public companies. Applications of names u/s 16 would cost Rs 200; names u/s 18 would cost Rs 10,000; names under rule 18 would cost Rs 10000; renewal of names would cost Rs 5000, and application for DPN rule would cost Rs 100.
  • Inspection of Documents. You might also have to pay to have your documents inspected properly. For documents under section 36 of the LLP, you’d have to pay Rs 50; for extraction or copy of documents under section 36, you’d have to pay Rs 5 per fractional page, as filled up by the registrar or Ministry.
  • Statement of Accounts and Solvency. And of course, you would also have to pay for the notices or solvency of documents courtesy of the foreign limited liability partnership. Documents under rule 34 cost Rs 5000, and any other documents or forms of Accounts and Solvency would cost Rs 1000.

These costs are laid out not to scare you, but to make sure that you would be prepared for them, so that the incorporation of your firm would not be derailed simply by small financial matters—and so you’d know what to expect, as well, and that way, firm registration would not be a hassle.

Keep the Following in Mind

Finally, you have to keep the following in mind so that you won’t be confused when it comes to firm registration:

  • It is a Separate Legal Entity. Partnership Firms are considered as juristic persons, and legal entities, based on the Partnership Act of India. This means that it is its own property—no matter how small it is—which means it is seen as a form of organization, and at the same time, it can also incur its own debts, without affecting others in the process. This also means that Firm Partners would have no liability to creditors—which is definitely a winning situation for the firm.
  • One is not responsible for the other. When a business goes down, what comes to mind is that everyone gets to be affected, especially the business owners or managers. That’s not the same for Partnership Firms. When your partner experiences certain losses, it does not necessarily mean that you will, too. If your partner gets involved in fraud, it also does not necessarily mean that you’ll have to be indicted, as well. It also means that your personal properties would not be taken as collaterals to pay off your debts—which definitely lessens the hassle of the process for you.
  • An uninterrupted existence. Partnership Firms make way for perpetual succession. This basically means that the firm would have uninterrupted existence, and would still be continued until the event that it gets dissolved. This also has a lot to do with the fact that it is a separate entity, which means it would not get affected by departures of any kind, or worse, death. It would go on, no matter what the changes in partnership might be.
  • Easy Transferability. Suppose you or your partner would want to give your rights as owner of the firm to somebody else, you would be glad to know that when it comes to Partnership Firms, transferability is fairly easy. What you only have to do is introduce and induct them as your Designated Partners, which would then allow Managing Partners to be changed, and thus, the ownership of the firm follows.
  • Ownership of Property. You and your partner/s would be considered as both the owners and managers of the company, and no one else could take that position and power away from you. No other person could also claim ownership of the property, unless it has been legally transferred, as well.

Keeping Things Right and Legal

As you can see, partnership firms are pretty much the kind of businesses you’d like to get yourself into. They give you enough privacy, security, and freedom, especially if you’re new in the world of business. It gives you enough power to run the business without negatively affecting your personal life. It also gives you the chance to have working power transferred to those you see fit, without having to go through unnecessary rubbles.

Of course, there are downsides, too, such as the fact that partnership firms cannot, in any way, raise public funds, and that the wind up process may be a bit complicated. The amount of fees that you’d have to pay may even be considered staggering by some.

But when it comes to allowing you to run your business freely, and make sure that you have something you will be proud of, partnership firms are the real deal. This is why it makes sense to know what needs to be done to make things legal.

Now that you know how firm registration is done, you now have the chance to achieve the kind of business that you can make an honest living from—and now, you can also be sure that everything will be right and legal, too.

Impact of GST on Digital Marketing

Impact of GST on Digital Marketing

Digital Marketing is the new revolution sweeping the globe and national and multinational companies alike are taking full advantage of the same. Digital Marketing has become an integral part of economies around the world and Indian Economy is no exception. Indian Economy is caught in the eye of a storm with GST and it will have a profound impact on the digital market economy as well.

GST is a huge step in the history of tax reforms to create confidence and an atmosphere of investment, manufacturing, and growth. GST is portrayed to provide the requisite impetus to the business sector and at the same time reducing the price burden due to regressive taxes on the consumers.

The most salient feature of the GST is that it would remove the multiple taxes levied on products both by the state and central government by virtue of taxes being in the concurrent list. GST seeks to replace these taxes which are primarily regressive in nature, due to which a cascading effect is created and as a result, the ordinary consumer pays around 20-30% extra. Another major problem with the previous tax regime was that there were constant disputes about whether certain items come in the category of goods or services and this would be addressed by GST as it explicitly provides a rate card to the same effect.

Digital Marketing and Advertising agencies fall under the services sector and would now be subjected to the Central GST, State GST and the Integrated GST which they will have to charge at 18% which was previously 15% as well as per the state/base of the client. However, previously digital marketing services were not eligible for input tax credit for the taxes paid, which now stands changed. The result

The result will, however, be an increase in the cost of digital marketing as well as the Google Tax Equalization Levy effective from 1st June 2017 will further add to it. This will also increase the cost of digital services in all.

This will go through the initial implementation turbulence which will cause static in the workings of small businesses more than MNCs who are expected to be covering all tracks.

Calls vs Puts

Calls vs Puts

Understanding the difference between calls and puts and how they are traded is essential to fully grasping the art of options trading. Although they can sound a little complicated at first, the strategy behind trading calls and puts is very simple. Let’s start with the definitions.

A call option is an option contract in which the holder (buyer) has the right (but not the obligation) to buy a specified quantity of a security at a specified price (strike price) within a fixed period of time (until its expiration).

A put option is an option contract in which the holder (buyer) has the right (but not the obligation) to sell a specified quantity of a security at a specified price (strike price) within a fixed period of time (until its expiration).

Rather than trying to dive into every detail of exactly what those definitions mean, it is much easier to focus on the big picture.

If you are bullish on a stock and want to profit off of the rise in stock price, your options strategy would be to purchase, or go long, a call option.

If you are bearish on a stock and want to profit off of the fall in stock price, your options strategy would be to purchase, or go long, a put option.

Whether you decide to buy a call or a put, you’ll need to decide on the price of each options contract, the amount of contracts you want to buy, a strike price and an expiration date which can all be done via the options chain. These are the four most important aspects of an option trade and determine how much you’ll be risking, how fast you think the price of the stock will move and how much you think it will increase or decrease in price.

Now that you’re a little more familiar with the difference between calls and puts, we invite you to start placing a few trades on your own. Remember, always do as much research as you can before buying a call or put as they are volatile in nature and can change price very quickly throughout a given trading day.

Car Insurance

What Is The Best Way To Buy Motor Insurance Plans In India?

With the advent of online platform where you can compare a car or a bike has made the process of buying for regular customers very easy. Since the factors on the basis of which things can be compared are quantifiable so it becomes very easy for a regular customer even though they don’t understand the technicalities around a car or bike.

Other than that online, auto magazine can be of great help, but when it comes to buying motor insurance for your car or bike things are quite thoughSince it is quite tough to find quantifiable value around an insurance policy so things become worse while finding the right policy around a car or bike.

The complexity of financial products, unknown jargons used by offline brokers and insurance company make the process tougher. There are quite lot of chance that a wrong policy being sold to you which you can’t even understand till the time you make a claim. Plus there are calculation around understand the right IDV for which one should take a policy.

The chain of registered garages any insurance company has is still not identifiable information and you might end up buy Motor Insurance Online plans from an insurance company which doesn’t offer cashless facility in the city of residence.

One of the smarter solutions to this never ending problem is to buy a motor insurance online. Now there are lots of online insurance comparison websites which are registered under the guidelines of web aggregators or as insurance brokers of the insurance regulator can act as quite beneficial tool. Another big problem this entire website solves is helping users in identifying the right policy. There are thirty two general insurance companies which are offering motor insurance plans. In fact there are a lot of variants available for the same plan too.

To understand the overall process by not going into the hassles is tough to think off in an online scenario. Online comparison of motor insurance plans can act as a helpful enabler in this case. Through all these online tools we can understand our requirement easily and find the most optimized solutions which fit into one’s requirement. Online insurance comparison can help you to understand the nuance of each and every plan available in the market today in a very easy manner. You can easily judge which one is good and which one bad for you plus the online comparison also help to you in buy car insurance online plans India and also which leads to lot of savings.

So the online comparison of motor insurance can acts as a real savior to help one to buy the best motor insurance policy that fits one’s requirement in the true sense

Term Insurance

How to Buy the Right Term Insurance plans in India?

When we are speaking of buying the right insurance term insurance is something that always comes in anybody’s mind. You should always keep in mind that Insurance is actually financial protection against emergency and what you should look at the paying the insurance company is a price for it. The insurance company takes the risk on you behalf and refunds you with a claim amount depending on the sum assured. A regular term policy for continuation of the benefits needs to be renewed every year. You can also opt payment of premium on quarterly or half yearly basis but then the cost of protection will always be high.

Buying a term insurance is always very helpful which you are doing the same at an early age. People at early age are believed to be a low risk for the price charged as premium for any amount of sum assured is always very less compared to what you pay at an older age. But this doesn’t say that you can’t have a term insurance at an old age. The insurance requirement generally increases as you grow old and your financial situation improves. While taking the policy at an early age people generally not able calculate the exact amount of sum assured so it is always advised that you start the policy and early age and increase the cover as your financial requirements increase. Starting early will always have its own benefits and the insurance company will continue the benefits even if you increase the cover at a later age.

The challenge here is now to Buy Best Life Insurance Policy India. There are close fifteen plus insurance companies in India offering term insurance plans. Every plan has some specific feature customized to suit specific needs. Plus there are certain complex calculations which need to keep in mind to buy the right policy. In fact it is always believe that people buying term plans online are more knowledge and they have already taken steps to protect him / herself for future risks so insurance companies have started offering online term plans which are bit different from the regular term plans which is available through offline agents. Online term plans are generally cheaper than their offline variants since the insurer views the risk associated with online policyholder is less. The smartest way to buy a term policy is to buy it online, online websites acts as facilitators for this particular job. You can easily compare term insurance plans online, know the underlying nuances and identify the best features available that suits your needs. This is actually a herculean task if you try to do it offline. Online comparison of term plans help you to take the right decisions keeping you future needs in mind and help you understand the right price that one should pay for safeguarding a particular amount of risk.

We should remember that emergencies can occur any time. if you are the sole bread earner in the family any mishap happening to you can have disastrous consequences when their financial well being too. Their life is aligned to your well being so get insured with the right term insurance cover as early as possible.

Why GST is Getting Surat Terrified

Why GST is Getting Surat Terrified

Starting the 27th of June, the MSMEs belonging to the Textile Industry in Surat have been in a state of shock! They quickly tried to figure out what hit them — got scared to no end doing so — took to the streets, processions, dharnas, fasts — even withstood a Lathi Charge — all within a week! GST surely is Getting Surat Terrified!

To understand why this is so, we need to first understand a bit about Surat.

Surat is the polyester capital of India. Whether you shop at retail stores or buy a Saree, Salwar Suit or a Kurti through one of the daily deals on Amazon, chances are that it has a link back to Surat.

Migrants

The Surat textile industry is full of migrants — people from all over the country (other cities, more from small towns and villages) have migrated to the city to serve their native market. Over the years this additional demand resulted in the growth of the entire sector — and a few of these migrant units grew to a large scale. Most, however, stayed small. The barrier to entry was and is zero causing a continuous influx of migrants from all over the country. Anyone from a small village could come

Anyone from a small village could come into Surat, take a small 160sq ft shop on rent (basic reference of someone from his native already settled here) to start his business operation within a day! Ease of doing business was at all time high here!

The Textile Value Chain

Surat has thousands of weavers — (those who convert yarn to fabric). Around 450 process houses (engaged in printing and dying of fabric). Thousands of embroidery units, stitching units and lakhs of people employed in the checking, packing, cutting, transportation — and thousands of agents, arhatias, brokers, commission agents aiding each step.

The key about the Surat value chain is that it lacks Integrated units — not that they don’t exist — but that they are the exception. GST is a boon for the Integrated players and they are not complaining at all! The norm in Surat, however, is for the migrant trader to buy greige from the weaver, send it for processing to a process house, send it to an embroidery unit, then send it to value addition multiple times before the product is ready to be packed and sold to his native market.

It is worth noting that the value chain is a buyer’s market all the way. Oversupply at each step is the norm. (Reason? Zero barriers to entry at the migrant trader level, and it’s these traders who’ve “graduated” to other parts of the value chain — often to escape competition at their previous link).

Given the above, it is easy to see that these migrant traders drive the value chain. They place the orders at the Weaver, the mills process their orders, and so on in other parts of the chain. These migrant traders started with zero or very little “books capital”. The taxation and the attitude towards taxation ensured that even when they made money, their books capital stayed low — and a parallel economy bloomed! The nature of the value addition required (lace stitching, diamond sticking, handwork etc) and the kind of people executing them (often housewives at their homes) meant that there were lots of avenues to deploy the cash capital. The fact that nothing except income tax was applicable effectively meant that book-keeping was an annual exercise — reserved to be driven by the CA!

Competition, however, is another story. The zero barrier to entry meant more and more competition. This created a large section of migrant-traders who stayed small — and cut corners everywhere to survive! Tax evasion was just one example of such “cost-cutting”.

Goods so produced are typically sold via agents in the native market. The buyer downstream is just as disorganized. Returns are high. Often goods are sent to the agent on a consignment basis. Unsold. To be sold — and invoices created after the agent informs who he sold the goods to and at what rate/discount — sometimes as late as 60 days after dispatch! The high competition also means that even a small migrant-trader deals with multiple agents and keeps switching agents even for the same customer!

Enter GST

With the introduction of GST, the entire value chain breaks down — and will need to re-organize in a big way!

Inverted Duty Structure

The weavers buy yarn with 18% GST, sell fabric with 5% GST. This renders them totally uncompetitive against an integrated player who will be able to sell fabric almost at the cost of the yarn used. (100 Yarn + 20 Conversion + 6 GST = 126 for Integrated, 100 + 18 (GST) + 20 + 7(GST) = 145 for weaver). No ITC Cash refund system for the textile sector ensures that he will not be able to benefit from the yarn GST credit lying with him! There are thousands of weavers facing this!

Cheaper Imports

Imports have become cheaper: Post GST, you can import fabric @ 15%. Earlier it was @27–29%. This is another nail for the weaver! Not only has GST rendered him uncompetitive against local integrated players, it has taken away the protection that the government provided via import duty!

The migrant traders owing to his scale buys from the local weavers. His costs are bound to rise rendering him uncompetitive.

Reporting and Compliance

All transactions need to be reported. Purchases need to be reconciled with the supplier on a monthly basis. This will mean that even even the smallest of traders will need to invest in a full time accountant and be far more organized. The issue may appear frivolous. After all, who runs a business and not even invest in keeping books properly? Welcome to Surat! For the large section of small migrant-traders of Surat, this change itself requires a change in mindset and a recurring expense that they would rather not do!

Cash Capital

Transaction-level reporting as mandated by the GST will mean that the booming parallel economy will collapse! Cash Capital that the trader generated over decades can no longer be deployed in his business. The thriving parallel economy was a tool to cut costs will collapse! GST almost forces that you buy from organized players, and this will, in the Surat’s textile sector, mean that the cost of purchase for these migrant-traders will go up! Bank loans will increase — servicing them will be an additional cost for the trader.

Other Operational Issues

The thousands of housewives working from home stitching laces, sticking diamonds could lose their jobs — lest someone amongst them organizes them into a GST compliant outfit. Even when that happens the costs of the chain increases!

Sales in other states via agents — when goods are sent unsold and later sold by the agent, as per the GST Law, requires registration in each state! This means more compliance, more costs!

No Input Tax Credit Refund to the textile sector — effectively meaning that each and every item is now 5% more expensive!

Fear Factor

Provisions of jail term, audits, inspectors — those mentioned in the GST Law have only served to escalate the fear in the minds of the Surti Trader! The trader has till now been exempt from all taxes (except income tax) — 99.9% are not even covered under ESIC, PF or any other such tax/levy/fee. Fear of being harassed at the hands of the inspector in the GST regime drives them to revolt!

In summary, the traders and weavers, the ones who are up in arms — fear being rendered uncompetitive & jobless, they fear being harassed by the inspectors and getting sucked into a bribe culture (which is non-existent currently!) — it is really a question of survival for many and therefore GST is Getting Surat Terrified!

GST's Role in Pushing Investments in the Real Estate Sector

GST’s Role in Pushing Investments in the Real Estate Sector

The Goods and Services Tax (GST) is one of the largest indirect tax reforms in the country anticipated to not only simplify the complex tax structure but would also boost consumer demand in the prevailing timid realty market.

The GST will be effective beginning 1 st July 2017, and with any new reform, there are some areas where further clarity is required. As people start implementing the tax regime, there will be queries that need further clarification. It is natural for people and businesses to feel overwhelmed when implementing a new reform.

It has been slated that under construction properties or residential construction services, will be subject to a 12 percent GST rate for developers selling residential units prior to the completion of construction to home buyers. Stamp duty will be levied in addition to GST on these transactions. Currently, with the exception of stamp duty, buyers need to pay several indirect taxes such as excise duty, value-added tax and service tax.

In a recent financial analysis, it was estimated that the current real estate transaction taxes are:

15.2% for Bangalore = 4% VAT, 4.5% Service Tax, 5.7% Stamp Duty, 1% Registration

11.5% for Mumbai = 1% VAT, 4.5% Service Tax, 5% Stamp Duty (recently reduced), 1% Registration Charges

11.5% for Pune = 1% VAT, 4.5% Service Tax, 5% Stamp Duty, 1% Registration Charges

14.5% for Chennai = 2% VAT, 4.5% Service Tax, 7% Stamp Duty, 1% Registration Charges

15% for Gurgaon= 4% VAT, 4.5% Service Tax, 6% Stamp Duty, 0.5% Registration Charges

Furthermore, real estate builders will now receive the benefit of input credits on materials such as steel, cement, sand, which will be deducted from tax liabilities. It has been anticipated by the government that builders will transfer these benefits onto the end consumer by way of price reduction/installments with a view to boost consumer demand in a tepid sales environment. The government in a recent statement has alluded to using ‘anti-profiteering’ rules in line with the Directorate General of Safeguards (DGS) stipulations, as a deterrent to ensure builders transfer these benefits to the end consumer. It is, however, in the interest of the sector as a whole to maximise consumer demand and encourage purchase activity.

GST of 18 percent tax will be applicable for leasing commercial properties. Experts have clarified that the threshold limit for the applicability of GST has been increased from Rs 10 lakhs to Rs 20 lakhs. Hence, some of the landlords that came within the purview of the service tax regime, may not be included under the tax net of the GST.

GST is slated to be applicable on financial services at an 18% rate. Hence, loan processing charges are expected to increase in the GST regime.

The affordable housing segment has been currently exempted from service tax and hence a clarification is expected on GST for affordable housing. Additional clarifications are also required with respect to abatements and composition schemes.

The introduction of RERA, the GST, REITs, Benami Transaction (Prohibition) Act and other government initiatives such as demonetisation, contribute to enhancing transparency and accountability across the sector. For the NRI market, it is anticipated that with the easing of purchase norms combined with these measures, there will much needed simplification to the transaction process which should contribute to increasing confidence in the sector. It is also important to remember that when buyers purchase properties, they focus on the value, their individual needs/requirements and potential appreciation of the asset, rather than on taxation slabs!

A uniform tax structure in markets such as Indonesia, Thailand, among others has been seen to be a catalyst to increase investment. With the introduction of input tax credits, there is now an incentive for added transparency at the construction stage, an area that has been of concern to investor’s previously. Limited visibility on transactions and questions around the credibility of companies across the sector has often been a reason for hesitance among investors, especially with respect to equity deals. A combination of these measures should in the long run help improve the perspective of investors and consumers towards the sector.

With the introduction of RERA and the GST, the real estate sector is metamorphosing into a transparent, tightly controlled and regulated industry. All these measures will, in the long run, create stable businesses, as well as contribute to reducing the trust deficit between the consumer, the investor and the developer. Hence, a simplification to the existing complex taxation systems should be welcomed positively as we get more structured as an industry and as an economy

Impact of GST on Residential and Commercial Real Estate Market

Impact of GST on Residential and Commercial Real Estate Market

The implementation of the Goods and Service Tax (GST) will have huge implications on the real estate market in India. Along with instilling transparency into the sector, it will also help boost buyer sentiment across segments.

GST is conceptualised around a ‘One Nation, One Tax’ philosophy. The earlier tax regime is riddled with indirect taxes, which the GST will subsume now. GST will eliminate the cascading effect of taxes on production and distribution prices on goods and services.

The technicality of the GST is slowly being uncovered and its effect on each sector will be clear once the same is in practice in some time. Implementation of GST should ensure efficiency, subsuming the many indirect taxes. GST is a game changer, and is expected to set off revival in the real estate sector.

GST is a customer-friendly decision and its implementation will be a boon for the customers of housing and commercial sector. It should usher transparency in the real estate landscape and will boost buyer sentiment. The council has fixed the GST at 12 percent on the housing sector, with the allowance of credits for taxes paid on inputs like cement, steel, paints, and other items. The service tax of 4.5 percent that buyers paid till now while taking possession will not be levied under the GST regime. The GST should help the affordable housing segment the most. The net price in the affordable housing segment of up to Rs 30 lakh at Rs 3,500 per square feet built-up area may fall. However, the Government has not come out with an explanation on how tax incidence is calculated. Thus, some more clarity is still needed.

Though the impact of GST may vary, depending on the type of property and construction methods, when it comes to the commercial office real estate market – with the existing service tax for commercial leases at 15 percent, GST at 18 percent would be nominally impacting. However, in spite of higher rates, the sector should gain from the input tax credit that is available under GST rules.

Any real estate product has 3 cost components – land, material and labour or service cost. With the implementation of GST, the tax calculations would become much simpler, since the buyer has to pay only a single tax. GST may have a marginal impact on the sector, but it will bring significant improvement in buyer sentiment and perceptions.

Impact of GST on Daily Life

Impact of GST on Daily Life

July 1, 2017 is set to become a red-letter day in the history of India and the Indian economy. This is due to the fact that the taxation system of India, established post-independence, is set to see a radical change. Currently there is a plethora of indirect taxes which the GST aims to subsume with its implementation, thus imposing a single, comprehensive tax. This will also do away with the cascading effect of taxes on goods and services.

What is GST Bill in India

On 12 April 2017, the Central Government enacted four GST Bills:

  • Central GST (CGST)
  • Integrated GST (IGST)
  • Union Territory GST (UTGST)
  • Bill to Compensate States

These bills aim to change the current complex structure of multiple indirect taxes and replace it with a comprehensive Goods and Services Tax (GST). This will be implemented on July 1, 2017. The GST is expected to usher in a transparent and corruption free tax regime.

Key Benefits of GST (Anticipated)

  • Wider tax base, necessary for lowering the tax rates
  • Elimination of multiplicity of taxes and their cascading effects
  • Rationalisation of tax structure and simplification of compliance procedures
  • Reduction in duplication and compliance costs due to harmonisation of Centre and State tax administrations
  • Reduction of errors and increased efficiency with automation of compliance procedures
  • India will become a single market with a reduction in cost and time on movement of goods.
  • While the GST will make way for more tax revenues for government, it will lower the tax burden on industries.
  • There will be a marked reduction in paperwork and time involved in paying taxes.
  • Over time, GST is expected to add between 2 to 2.5% to the GDP.
  • Increase exports between 10 and 14%.

Impact of the GST on Services

To help understand the GST, we need to explore GST impact on common man. (Rates of select services only have been explored as an example)

  • Exempted Services: Education, healthcare, residential accommodation, hotels/ lodges with tariff below Rs. 1000 are exempt from the GST.
  • 5% GST: Goods transport, rail tickets (other than sleeper class), economy class air tickets and cab aggregators (like Uber and Ola) will come under the 5% tax slab in GST.
  • 12 – 18% GST: Work contracts, business class air travel, telecom services, financial services, restaurant services, and hotel/ Lodges with tariff between Rs. 1000 and 5000 will incur a 12 to 18% GST.
  • 28% GST: Get ready to pay GST of 28% for cinema tickets (above Rs. 100 while for tickets below Rs. 100, it will be reduced to 18%), betting, gambling and hotels/ Lodges with tariff above Rs. 5000.

How GST Will Affect Your Everyday Life

The Ministry of Finance has been keeping the masses informed about key issues pertaining to the GST. A tweet informed that daily consumer goods will be exempted from taxes under Goods and Service Tax, making them cheaper by 4 to 5%. “Daily Consumer goods being used by the common man among others to become cheaper after GST,” read a tweet.

“On roll-out of GST wef July 1, 2017, there will be zero GST on food grains, flours, cereals, pulses, atta, maida & besan among others,” read another tweet by the Ministry, informing the people about daily needs and GST.

Along with these commodities, fresh vegetables and fruits, fresh milk, common salt, puffed rice, animal feed, organic manure and fire wood will also be put under the zero% tax slab. However, the same items, if branded with registered trademark will be taxed at 5% under GST.

Raw silk, wool or jute and hand operated agricultural equipments will also be taxed at zero%, thus ‘making these items cheaper for the common man.’

Changes in The Tax Levels by The GST Council

  • Cashew nuts: Reduced from 12% to 5%
  • Ready to Eat: Pickles, chutney, sauces, instant food mixes: Reduced to 12% from 18%
  • Kajal: Slashed from 28% to 18%
  • Insulin: Reduced to 5% from 12%
  • School bags: Reduced from 28% to 18%
  • Children’s colouring and drawing books: NIL (was 12%)
  • Cutlery: Reduced from 18% to 12%
  • Select tractor components: Will now attract 18% compared to 28% under previous arrangement
  • Computer printers: Reduced from 28% to 18%
  • Ayurveda: Increased to 12% from present 8 to 9%
  • Entertainment: Theme park visits and tickets to sporting events like IPL to be charged 28%

The GST Council is meeting at regular intervals to facilitate smooth implementation of the GST. Ten working groups have been set up to help key sectors and industries like banking, telecom, IT/ITES, financial, textile, oil and gas, gems and jewelry, transport and logistics, and small and medium enterprises work through the anticipated hiccups and transition to the GST.

The Impact of GST on Tourism in India

The Impact of GST on Tourism in India

Goods and Services Tax (GST) is touted as one of the biggest reforms of Modern India. GST has got some sectors of the Indian economy delighted, while some are disappointed while the rest are a bit confused about it. GST is expected to add almost 2% to India’s GDP. Spare me the calculation but hey! that is a huge amount! Let us see the Impact of GST on Indian tourism sector.

As a consumer of Tourism and hospitality services, a single tax-structured bill should save up to 10-15 percent on the overall bill. Entertainment, luxury, and other service taxes in the hospitality industry shall attract a rate of 18% as against the existing 20-27%.

The impact of GST on restaurants:

According to the National Restaurant Association of India’s 2013 India Food Service Report, the current size of the Indian food service industry is ₹2,47,680 crore and is projected to grow to ₹4,08,040 crore by 2018 at the rate of 11%.

Many lip smacking dishes in India could be cheaper after GST!

Gains to the restaurant sector:

  • Overall cost of procurement of raw materials will go down
  • Since most items used in the restaurant industry like food grains, milk, eggs, curd, common salt, unbranded besan, sugar, tea, edible oils etc. are either exempt from GST or are in the 5% GST bracket, the restaurant industry has a lot of positive takeaways.
  • Though the entire restaurant industry will benefit from GST, cloud kitchens and Food delivery businesses will be most benefited.
Food ingredients and GST- BnBNation
Most Food ingredients are either exempted or at a low level of GST rate.

As Shitiz Dogra, co-founder of Firsteat.in puts it, “With slightly lower procurement costs GST will make it easy for the restaurants to take credit of input goods and services consumed while providing restaurant services.”

Understandably, the cloud kitchens and Food delivery services are the happiest about GST and the high-end AC restaurants are a bit somber due to high tax rate!

The impact of GST on Accommodations in India

Impact of GST on Hotels- BnBNation
Impact of GST on Hotels

Accommodation forms a major part of a traveler’s journey. Earlier, Hotel owners were tense as room worth INR 5000 a night would have taxed at 28% but now the rooms above INR 7500 will be taxed at 28%. The tax slab shows that travelers should prefer budget rooms that cost less than INR 1000 per night.

However, I am wary if they would be the right choice for a traveler after a long flight! Especially, if situated in a shady area of a city, such a hotel room might just ruin the traveler’s experience!

The impact of GST on Bed and Breakfast accommodations

Most of the BnB owners offer Breakfast (unless the traveler is really on a tight budget) to the travelers. They handpick the source of the ingredients by ensuring that they are safe and economical. Thus, the cost of BnB rooms will be either same or lesser. Apart from that, since BnB’s do not have to pay the luxury tax or service tax up to a certain limit, they are charged water and electricity tariffs at domestic rates, unlike hotels. So when you are coming to India, you could seriously consider staying in an Indian home with an Indian family!

Conclusion:

Though there has been chaos in the Indian economy due to GST. Don’t we crib about the rising corruption in India by referring to a low rank in World Bank’s Ease of Doing Business report. In my opinion, GST is a step in the right direction!

India has a higher rate of taxes than the neighboring South East Asian countries. However, GST will still lower the previous tax rate and may need revising them again in the near future. I think we should all welcome it and make it a part of our lives.

PS. I would recommend you consult your CA and clarify your doubts on the GST rate. Shoot your queries through to @askGST_GoI (Official Twitter handle of Government for queries on GST) through your twitter handle.

Partnership Deed

Partnership Deed – Creating and Registering a Deed

A Partnership Deed can be created using a ready-made template. There are several agreement templates that can be downloaded and edited to fit your requirements.

India is becoming increasingly popular as an entrepreneurial destination. Sole proprietorships and Partnerships are popular types of businesses in India. The regulatory requirements in these two cases are minimal. The business can be setup under these two forms quite easily. If you need more details on these forms, they are available for download right here!

Here, we discuss how a partnership can be setup in India.

Choosing a name for your Partnership firm

The first step is to choose an appropriate name for a partnership firm. The business name has to be unique; it should not in any way resemble an existing business’ name. Having similar names could not only lead to confusion, but it could also hurt the goodwill of the existing partnership firm.

The name should not include words which imply sanction or patronage of the Government of India. The State Government has to provide its consent in written if any such words have to be included as part of the name.

Creating a partnership deed

A partnership firm can be established only if there are two or more persons. A deed has to be executed; the partnership deed template is available for download right here! Feel free to browse the form and download and edit it to suit your requirements.

The partnership deed is a document which specifies the rights and obligations of the members of the partnership. In today’s times, a written partnership deed is needed for statutory and tax purposes.

The partnership deed will need the following information in the document

  1. Names of all members
  2. Addresses of all members
  3. Commencement date
  4. Details of Business
  5. Head office / Assets pertaining to partnership firm
  6. Partnership tenure
  7. Capital contributions by members
  8. Profit sharing ratio of members

These are the bare minimum details that are required, additional details may be included. Normally, these are the additional details included in a partnership deed.

  • Interest to be paid on members’ capital contribution
  • Interest to be charged on loans given to members
  • Salaries or commissions to be paid to members
  • Accounting methodology and auditory requirement
  • Powers, responsibilities and obligations of each member
  • Rules for admission of new partner
  • Rules for Retirement and Death of existing partner

Statutory requirement for registration

The partnership deed is an agreement that should be executed on a stamp paper as stipulated in the Indian Stamp Act. It should be executed in as many copies as the number of members. Each member in the partnership should possess a copy. The copy should be registered with the registrar of firms in India.

Registration of partnership is options as per the Indian law. It is entirely the discretion of the partnership members whether they want to register the partnership or not. Partnership firms in India are governed under the Partnership Act, 1932.

Registration of the partnership firm can be done prior to the commencement of business or subsequently while the business is operational. The following documents are to be produced with the registrar of firms alongside the application –

  • Form No. 1 is the Application of registration of partnership
  • Specimen of Affidavit
  • Original copy / copies of Partnership deed
  • Proof of ownership, rental / lease agreement of partnership firm’s office

The application and affidavit has to be duly signed by all the partnership members. The registrar of the firm will issue a certificate of registration and will make an entry into the partnership firms register for registration of the business. This will be done only if the documents submitted are satisfactory.

For more details on the forms needed, look here and download the forms you need here.