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The Tax collected at source provision becomes effective on E-commerce companies from October 2018. Please find attached the relevant notifications pertaining to TCS provision effective from October 2018. The GST council has also issued the attached FAQ on TCS. A summary of the key clarifications provided in the FAQ is as below:

 

A. Registration

 

  • Mandatory registration and threshold exemption: Every e-commerce operator and the person supplying through e-commerce operator is required to obtain compulsory registration irrespective of the value of his supply.  

 

  • State-wise registration: An e-commerce operator is required to obtain separate registration for TCS in every State/ UT.  Registration mandatory for an e-commerce operator in each state but presence is not mandatory.  Registration can be obtained basis the Head Office being declared as place of business. 

 

  • Foreign ECO: Where registered supplier is supplying goods or services through a foreign e-commerce operator to a customer in India, such foreign e-commerce operator would be liable to collect TCS on such supply and would be required to obtain registration in each State / UT.  If the foreign e-commerce operator does not have physical presence in a particular State / UT, he may appoint an agent on his behalf. 

 

B. Levy, collection and rate

 

  • Rate: Rate of TCS is notified as 1%.

 

  • Value of net taxable supplies: Value of net taxable supplies is calculated at GSTIN level. 

 

  • Timing of collection of TCS: TCS is to be collected once supply has been made through the e-commerce operator and where the business model is that the consideration is to be collected by the e-commerce operator irrespective of the actual collection of the consideration.

 

  • Consequences of non-compliance: Non-collection of TCS will attract interest as well as penalty.

 

  • Multiple ECOs: In case multiple ECOs’ are involved in supply, the ECO making payment to the supplier will be liable to pay TCS.

 

C. Payment

 

  • TCS to be paid within 10 days after the end of the month in which the said amount was collected. 

 

  • TCS cannot be paid through input tax credit of e-commerce operator. 

 

  • TCS to be deposited by the operator separately under the respective tax head (CT, ST, IT,UT). 

 

D. Exemption from levy

 

  • No TCS to be collected on the following supplies namely: 
  1. exempt supplies
  2. supplies on which the recipient is required to pay under reverse charge mechanism
  3. supplies made by composition tax payer
  4. import of goods or services

 

  • Further there is no exemption from TCS is granted on Golds. 

 

E. Furnishing Forms

 

  • Operator is required to submit a statement electronically containing details of the outward supplies effected through it and the amount collected as TCS during a month within 10 days after the end of such month. 

 

  • TCS amount deposited will be reflected in the electronic cash ledger of the actual registered supplier on the basis of FORM GSTR-8 filed by the operator. 

 

  • Operator has to file an Annual statement by December 31 following the end of the financial year in which the tax was collected in FORM GST-9B.

 

F. Other issues

 

  • Value of the supplies which are returned may be adjusted from the aggregate value of the taxable supplies made by each supplier. 

 

  • If the returns are more than supplies made during a tax period, the negative amount should be ignored in current as well as future period as the same will not have any impact. 

 

  • The address on record of the customer with the supplier of services will be the place of supply for e-commerce operator in the following cases namely:
  1. recharge of recharge of talk time of telecom operator;
  2. recharge of DTH;
  3. in relation to convenience fee charged from customers on booking air tickets, rail supplied through online platform

 

Do share your feedback if any.

NASSCOM is the knowledge partner for National eGovernance Service Delivery Assessment (NESDA) of States and Central Ministries, an initiative lead by Department of Administrative Reforms and Public Grievances (DARPG) to assess States and Union Territories, on their efficiency in public service delivery to all strata of population in the country.

 

NESDA is a step towards strengthening the foundation of e-governance in India; a diagnostic analysis to give states/ UTs a comprehensive view of the effectiveness of their respective public service delivery model and what best practices they can follow to raise their eGovernance quotient. The assessment comprises a well-designed framework for States & Union Territories to evaluate public services provided to Citizens (G2C), Business groups (G2B) and Government departments (G2G) under 6 major focus sectors- Finance, Health, Social Welfare, Education, Labour & Employment and Environment.

 

The Methodology would cover three broad areas:

  • Services & Portal Assessment - Service websites (URLs) would be assessed on parameters listed previously to measure service level maturity & performance of services offered.
  • Citizen Survey - to measure / validate the benefits of eGovernance services offered by the States.
  • Benchmarking - Case studies would highlight best practices based on evaluation areas, mostly used service, transactional service level maturity categories etc.

 

As an initial move to empanel States/UTs for the assessment study, NASSCOM in association with DARPG organized a sensitization workshop on 24th August 2018 in Delhi.

 

 

The workshop emphasized the objectives and key goals to achieve through NESDA, its overall approach & methodology and witnessed participation of 21 States, comprising of IT Secretaries/ Administrative Reforms Secretaries/ Principal Secretaries and other high ranking officials.

 

The opening sessions were led by Secretary, Department of Administrative Reforms & Public Grievances and Sangeeta Gupta, Senior Vice President - NASSCOM. A huge success, it catalysed mining of valuable feedback from state/UT officials on further refinement of the assessment framework.

 

NASSCOM along with its research partner- KPMG will complete the assessment and submit the findings to the government by Jan 2019.

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories 

The DGCA recently released a set of regulations for flying drones in India. We invited articles on implications of these regulations. This article is submitted by Prity Khastgir who is a Strategic Intellectual Property Evangelist Corporate Lawyer and Patent Attorney with 12+ years Experience. 

 

Welcome move by the Directorate General of Central Aviation (DGCA), on framing the policy roadmap of deploying remotely piloted aircraft (RPA) in India. The remotely piloted aircraft (RPA) is commonly called as drone. The clear intent of the current policy is to use the drone technology in different sectors to solve massive problems faced by different sectors in India in the Industry 4 Era.

 

The policy is coming into effect from December 1, 2018. There are majorly five different categories for the different type of drones which are to be introduced in India. The five different categories include Nano, Micro, Small, Medium and Large and are differentiated based on weight parameter and has height restriction at which the said drones can be operated. The detailed characterisation of the drones are as follows:

 

i) Nano : Less than or equal to 250 grams.

ii) Micro : Greater than 250 grams and less than or equal to 2 kg.

iii) Small : Greater than 2 kg and less than or equal to 25 kg.

iv) Medium : Greater than 25 kg and less than or equal to 150 kg.

v) Large : Greater than 150 kg.

 

The Rule 15A of the Aircraft Rules, 1937 describes the operation ambit of remotely piloted aircraft (RPA) system. Except the Nano drone, any other drone has to obtain necessary permits and thereafter a Unique Identification Number (UIN) is allotted by the Director-General. The general validity of the permit will be valid for a period not exceeding five years subject to compliance parameters imposed by the Director-General in the permit. The permit obtained may be renewed for a period not exceeding five years from time to time. The Rule 133A of the Aircraft Rules, 1937 describes the special directions issued by  the Director-General relating to the operation, use, possession, maintenance or navigation of aircraft flying in or over India or of aircraft registered in India. The policy provides the requirements to obtain Unmanned Aircraft Operator Permit (UAOP) and other operational requirements for the smooth operation of the remotely piloted aircraft (RPA).

 

The implication and utilisation of the recent commercial drone policy will assist the agricultural business sector to collect the required data and the big data generated can be studied to solve the current problem of famines in many affected areas in India. Imagine the big data collected can provide in-depth analysis to understand the weather conditions over period of time which in turn can provide solution to grow different crops round the year and indirectly the overall ecosystem will provide employment opportunities in India.

 

The interesting point of the outcome is that Amazon and other technology companies working in India who have aggressively filed numerous intellectual property rights related to drone technology will be benefited in the long run. The technology ecosystem is becoming conducive for Intellectual property rights to foster in India. One can foresee a number of patent licensing deals in near future in India. This welcome move will eventually increase the GDP of India.

It’s time for the NASSCOM pre-budget engagements 2019-20.  We would like to invite your feedback/ suggestions on key legislative and procedural issues of the technology industry.  Refer to the attached link to get an insight and update on NASSCOM's engagements on direct and Indirect tax issues. Please share your comments at policyquery@nasscom.in 

This is in reference to a recent Circular F No DGEP/EOU/GST/MISC/24/2017 dated August 14, 2018 (attached herewith) issued by Ministry of Finance clarifying the waiver of requirement to furnish bank guarantee/ surety by EOUs.   

 To recap, one of the points raised by NASSCOM at the All India Customs Consultative Group was on the aspect that the new Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 which prescribed the revised requirements of bank guarantee/ cash security/ surety.  We had highlighted that field officers were taking a stand that the B-17 bond executed by EOUs would not suffice and a bank guarantee as per these new Rules would need to be furnished. 

 

While an earlier Circular (No. 29/2017-Customs dated 17.07.2017) clarified that the B-17 bond executed by EOUs will serve the purpose of continuity bond as required under the Rules.  However, since this Circular did not specifically refer to EOU units, companies continued to face an issue at the ground level. This has now been resolved through this Circular which clarifies that the EOUs would also be governed under the said circular.

One of the key initiatives the Domestic Council has focused on is the Model RFP and advocacy on changing the terms and conditions that would enable the industry to participate in government projects. Based on the efforts led by NASSCOM, MeITY has released the Model RFP template on its website. This can be accessed here

 

This version is a huge step forward and addresses many of the 19 pain points outlined by NASSCOM. There are 1-2 critical issues that are still unresolved and we are requesting MeITY to address those, but they are not immediate show stoppers. Some of the issues raised are outside the purview of MeITY and hence cannot be addressed by the model RFP.

 

Key Highlights of the Model RFP

 

  1. Gap Warranty: This issue is partially resolved. In case of no response from the purchaser in a post go-live scenario, the deemed acceptance clause will be invoked.

However there are no clear timelines defined. NASSCOM is representing to MeiTY to define a timeline to ensure signoffs over a maximum period of 45 days.

 

  1. Cash Flow: 75% payment on delivery, 15% on commissioning and 10% four months after go-live is the new introduction. Most of the Domestic Council members feel this is very positive.

 

  1. Deemed Acceptance: This is a big win as the government has allowed Deemed Acceptance if there is no response in 15 days from final submission.  

 

  1. Flexibility in H/W specs: Change in OEM has been permitted after approval from the Purchaser.

 

  1. Penalty (fixing of any other defects): Maximum damages capped to one TCV as desired.

 

  1. Penalty (from any other projects): As desired, penalty to be recovered from payments of same project.

 

  1. Termination for Convenience: Although the overarching Optional clause has been removed however no mention of AMC, WIP, uncovered investments has been made as requested.

 

  1. Confidentiality: Organisational NDAs can be accepted depending on project criticality.

 

  1. Extension of warranty (SLA Credits) :  Not completely removed but it’s been mentioned here with a caveat- “For reasons not attributable to IA, the IA shall not be liable”. NASSCOM is representing to MeitY for further clarification on sharing of extended warranty costs.    

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

MEITY has released the report on the data protection framework along with the draft Bill on 27.07.18.  We are analysing these. The report has dissent notes from Ms. Rama Vedashree, DSCI and (pg. 207) and Prof. Rishikesha T Krishnan (pg. 213). Our quick take along with a summary of the Bill pointing to the proposed restrictions around cross border data flow are enclosed (see below). We will be working closely with industry and government in shaping the policy as the government and regulators develop, realign or sharpen their stand on the topic. 

 

  • MEITY has sought public comments on the report and the draft Bill by 10.09.2018.
  • The Bill provides a much needed framework for data protection and privacy in the country. It builds on the earlier efforts in India at consolidating data protection principles found under several sector-specific legislation and the express re-statement of the fundamental right to privacy by the Supreme Court of India in its judgment in K.S. Puttaswamy v. Union of India.
  • It is a step towards creating a sector-agnostic data protection framework, which calls for all stakeholders to be more responsible and build trust while dealing with personal data.
  • It recommends creating an institutional regulatory structure through a Data Protection Authority (DPA), and includes new age regulatory principles such as Privacy by Design.
  • With this initiative, India is now in a select band of countries moving towards a comprehensive data and privacy protection regime.

 

1. NASSCOM-DSCI view

 

The Personal Data Protection Bill released by the Justice Srikrishna committee has suggested a much needed framework for data protection and privacy in the country. The Bill builds on the Supreme Court Judgement that advocated privacy as a fundamental right for the country and creates a framework for all stakeholders to be more responsible and build trust while dealing with personal data. NASSCOM-DSCI welcome the thrust on creating an institutional structure through a Data Protection Authority in the country as well as the importance of Privacy by Design.

 

NASSCOM-DSCI has been advocating for a healthy balance between privacy and Innovation, given that India is today emerging as a preferred hub for innovation and STEM talent globally. Policies that govern data protection, storage and classification need to be carefully crafted given the global footprint of the IT-BPM sector. Service providers in India process financial, healthcare and other data of citizens globally. India is also the destination for R&D, Product Development and Analytics, Shared Services.

 

Mandating localization of all personal data as proposed in the bill is likely to become a trade barrier in the key markets. Startups from India that are going global may not be able to leverage global cloud platforms and will face similar barriers as they expand in new markets.

 

A detailed analysis of the bill is being undertaken and NASSCOM-DSCI welcome the reassurance of an extensive consultation process before the Bill is enacted into law.

 

2. Quick reference to treatment on data localisation. See attached summary for details.

 

  • Personal data: A copy of all personal data is required to be stored in India. There are restrictions on transferring personal data outside India.
  • Sensitive personal data: Passwords, financial data and official identifier are being treated as sensitive personal data. : A copy of all personal data is required to be stored in India. There are restrictions on transferring personal data outside India. (Drafting inconsistency in S.40 and S.41 makes interpretation of restrictions on transfer of sensitive personal data ambiguous.)
  • Critical personal data: The Government has the power to notify critical personal data which would be required to be processed only in a server in India. This suggests that such data needs to be stored as well as processed only in India. It can only be transferred out of India for provision of health services or emergency services where such transfer is strictly necessary, or to a particular country, a prescribed sector within a country or to a particular international organisation where the Central Government is satisfied that such transfer or class of transfers is necessary and does not hamper the effective enforcement of this Act.
  • Criminal Offence: Offences under the Act are treated as non-bailable criminal offence.
  • Anonymised data: The Bill does not apply to processing of anonymised data.
  • Date of restrictions on data flow coming into force: The Bill leaves it to the Government to decide when to notify the restriction on cross border flow of data including requirement to store a copy of personal data in India.

The much awaited Notification on Place of Effective Management (POEM) guidelines is released and attached herewith for your reference. You would recall that the draft notification was issued  in June last year and we had been requesting for the release of final notification considering the rules become effective from FY 16-17. The notification is deemed to have come into force retrospectively from April 1, 2017.  

 

While we had raised several ambiguities some have been partially addressed and for the rest we will continue to engage with the Government basis the feedback received from industry.

 

Also attached is a summary of key relevant provision along with a comparison of draft and final notification and issues addressed basis NASSCOM recommendations.

The Ministry of Commerce, Government of India has formed a Think Tank on the Framework for National Policy on E-commerce. The key objective of the framework is to provide a credible forum for an inclusive and fact-based dialogue leading to informed policy making, so that the country is adequately prepared to take advantage of the opportunities, and meet the challenges, that would arise from the next wave of advancements in the digital economy.

 

The agenda of the framework was divided into several sub groups and NASSCOM was invited to share and represent on 3 such. NASSCOM in consultation with industry members represented on the forum with key suggestions on each of the sub groups. We will continue to engage with the Government towards a holistic and enabling National E-commerce policy.

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

The paper provides a comprehensive perspective on what can be the different dimensions for AI from an India perspective. The emphasis on the role of the government in catalyzing this shift and creating the institutional framework and building blocks will set a strong foundation for industry, startups and citizens.

 

AI and its potential for the technology industry is a significant priority area for NASSCOM and efforts are underway at NASSCOM in a number of segments. NASSCOM’s submission include the following dimensions.

 

  • Positioning: India’s National Strategy #AIforAll should focus on economic development and call out the key success metrics. This is critical for AI to permeate across all sectors in the country and support key parameters of economic and sustainability index.
  • Global Ambition: AI for India is well articulated as the strategy. However, it is equally important that we take an aggressive approach of AI for the world. Catalyzing Indian startups, large enterprise and government enabled AI solutions which create impact for India and have the potential to disrupt the world is critical. The vision of building an AI Giant from India must be part of our global ambition.
  • Key Enablers: The strategy articulates key sectors wherein AI adoption can stimulate growth and promote inclusion. Equal, if not higher focus is needed on talent development, access to data and building a regulatory framework that catalyse innovation. These are must-do imperatives for success.
  • Collaboration: The strategy document lays a great deal of emphasis of R&D in academic institutions to catalyse the R&D ecosystem in AI. It is important that collaboration is a key design principle for the National AI Strategy, and the framework includes the efforts happening in Industry to create ecosystem capabilities and solutions.
  • Design Principles: The National AI Strategy will continue to evolve and hence it is important that the key design principles of the AI Strategy are articulated. Augmenting and not replacing is a key principle that needs to be stated upfront.
  • Evangelisation and Advocacy: AI adoption and scale will require large scale evangelization and advocacy to create trust, remove misconceptions and showcase what AI means to citizens in terms of outcomes and benefits.
  • Institutional Structure: The government could consider setting up a cabinet level position to look into AI development & proliferation (like Chief of Cyber Security) supported by a centralized institution that will work with Industry, Ministries and States, Research & Academia on implementation
  • Milestones and Implementation framework: The National AI Strategy will be implemented by multiple departments, states, industries and startups. It is important that an implementation framework is defined with clear milestones.

 

 Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

The draft of National Telecom Policy (NTP) 2018 also called as the National Digital Communications Policy 2018, was issued for public comments by the Department of Telecommunications. NASSCOM conducted a consultation with its members and invited inputs from all across. Basis the feedback received, a response was submitted to on the draft. Some of the key points of submission are as follows:

 

  • Need for a consolidated approach to ensure that India’s digital economy not only reaches but also exceeds the estimated value of one trillion USD by 2025.
  • Ensure adequate co-ordination among different regulatory agencies and stakeholders including industry to ensure cohesive action.
  • Unbundle different layers of communication services and introduce a differential licensing regime.
  • Need to review OSP regulations in consultations with industry.
  • Track new technologies and even consider a regulatory sandbox approach to assess whether regulation is indeed required or not and until such time deploy a policy of regulatory forbearance.
  • For establishing India as a global hub for cloud computing, content hosting etc. there is a need to a focus on creating adequate infrastructure.

 

NASSCOM would be working with the DoT on an ongoing basis for an effective policy regime. 

 

Know more about NASSCOM's initiatives and programs, follow NASSCOM impact stories

 In pursuance to the 2018 amendment in Section 28 of the Customs Act, 1962 (“Customs Act”) regarding pre-notice consultation, the CIBC had recently issued Notification No. 29/2018-customs (NT) dated April 2, 2018 which notifies the Pre-notice Consultation Regulations, 2018.  These Regulations prescribe the procedure for conducting the pre-notice consultations.  

 

  • To recap, Section 28 of the Customs Act prescribes the normal period of limitation for issuance of a show cause notice.  As per these Regulations, an officer who proposes to issue such notice is required to inform such person, from whom the amount is proposed to be recovered, in writing, at least two months before the expiry of the time limit mentioned in Section 28 of the Act.  It also provides that this intimation is required to be made before issuance of a demand notice. 

 

  • Further, where the concerned person intends to be heard in person, such intent would need to be clearly indicated in the reply filed.  However, an important aspect to note is that the Regulations provide that no adjournment can be sought once the PH request has been granted. 

 

The Regulations are largely a welcome move since it provides assessees an opportunity of being heard before issuance of a notice.  The Regulations also contain other details regarding time limit for filing the response and time limit for granting of the PH and the attached document may be referred to for these details. 

After months of discussions with the CBEC-Service tax team, the circular clarifying the place of provision for software exports is out.

 

You would recall in Nov, that several service tax refunds were rejected in Mumbai, in the pretext that data, emails etc were received in India. AS NASSCOM we had representd the matter to the CBEC and Revenue and were given an assurance that the matter is being looked into. A press release reassuring that no hasty decisions will be taken was also released by the MoF.

 

We are extremely delighted to share that, after several interactions, where the NASSOCM team with or without Industry members, outlined typical fact patters of the contracting and development activities undertaken by the Industry, the CBEC has finally issued the circular, where they clarify that place of provision of services would be the recipient of services, thereby according export status. We hope that this clarification will put to rest the ongoing disputes and denials that companies have faced.

 

We welcome your feedback.

 

We are glad that our quiet but steadfast focus on the issue has yielded results. We continue to work for our members to ease the business environment.

As part of the Domestic Council’s Charter to enhance engagement with the CIO Community – the prime drivers of IT adoption in any organisation, the 2nd NASSCOM CIO Connect event was held in Ahmedabad on 6th April 2018 where CIOs from Chemical, Pharma and Banking industry provided key insights and thought leadership on the way ahead for IT in their respective segments.


The key takeaways from the discussion included:
 Urgent need for a robust IT Partner Ecosystem
 Transformation from custom build to Global solutions
 Challenges in Talent Acquisition/retention and Product hunting
 Growing disconnect between IT industry and solutions being offered- Ensuring plugins with industry specific solutions
 Ensuring continuity of technology and enmeshing of existing technologies in an operational business
 Developing an industry-side fact list, and a need for an executive summary showcasing the best in class technology
 Challenges around going Digital
 Complicated & Challenges complying with different regulators
 Identifying best practices in Fraud Risk Management & formulation of Asset Management Guidelines


The event was very well received by the western region council members that were also present during the meeting. This was a great opportunity for our members to understand the User Community issues and accordingly develop strategies to avail the given opportunities.


Domestic council will strategize on the suggestions/recommendations made by CIOs and ensure concrete steps are taken to address the concerns.

 

 

The income tax department has noted the concern related to angel tax being levied on startups, basis represnetations made by various stakeholders.

 

In the recent letter addressed to principal commissioners, the CBDT has advised: 

  1. No coercive action be initiated for recovery of outstanding demands
  2. Expeditious disposal of appeals by commissioner appeals

 

While fair market value evaluation continues to be applicable on startups, the above advise would be helpful to offer temporary relief to considerable anxiety over demand recovery process. Further, decisions on appeals pending will also act as guidance for on field assessments.

 

However the issue of levy of angel tax needs to be looked into to offer a long term solution.  

 

The copy of the letter can be accessed at https://www.incometaxindia.gov.in/Lists/Latest%20News/Attachments/218/Determination-fiar-market-value-unquoted-equity-shares-Start-Up-6-2-2018.pdf