Paying Taxes Questionnaire - India Delhi · Paying Taxes Questionnaire - India Delhi Dear...

Paying Taxes Questionnaire - India Delhi www.doingbusiness.org

Dear Contributor, We would like to thank you for your participation in the Doing Business project. Your expertise in the field of taxation is essential to the success of the Doing Business report, one of the flagship publications of the World Bank Group that benchmarks business regulations in 190 economies worldwide. The paying taxes indicator, which measures the taxes and mandatory contributions that a standardized case study firm pays in its second year of operation, as well as new measures of the efficiency of postfiling processes is one of the 11 indicator sets published by the Doing Business report. The report attracts much attention around the world. The latest edition, Doing Business 2017: Equal Opportunity for All, introduced improvements in the paying taxes and protecting minority investors indicators, and included a gender component in 3 of 11 Doing Business indicator sets. It received over 7,000 media citations within just a week of its publication on October 25, 2016 and the report was downloaded almost 40,000 times within that same period. A record 137 economies implemented a total of 283 reforms. Low and middle income countries carried out more than 75% of these reforms, with Sub-Saharan Africa accounting for 80 of them. Governments worldwide read the report with interest every year, and your contribution makes it possible for the Doing Business project to disseminate the regulatory best practices that continue to inspire their regulatory reform efforts. Since Doing Business 2006, economies worldwide have implemented 443 reforms making it easier to pay taxes. In 2015, 46 economies implemented such reforms with the introduction or enhancement of electronic systems for filing and paying taxes as the most popular reform. We are honored to be able to count on your expertise for Doing Business 2018. Please do the following in completing the questionnaire:

Review the assumptions of the case study before updating last year’s information in the questionnaire.

Describe in detail any reform that has affected paying taxes, obtaining a VAT refund and tax audits in calendar year 2016.

Be sure to update your name and address if necessary, so that we can mail you a complimentary copy of the report.

As of last year, we cover questions on postfiling processes (VAT refund, tax audit). We urge you to provide us with answers to these questions. We included last year’s consolidated answers for ease of reference.

We included this year new questions on childcare services and tax benefits under section C6.

Kindly return the questionnaire to the following address: [email protected]. We thank you again for your invaluable contribution to the work of the World Bank Group. Sincerely,

Ms. Joanna Nasr Ms. Parvina Rakhimova Phone: +1(202) 458 0893 Fax: (202) 473-5758 Fax: (202) 473-5758 Phone: +1 (202) 458 2126 Email: [email protected] Email: [email protected]

http://www.doingbusiness.org/

mailto:[email protected]



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A. Case Study Assumptions

The paying taxes indicators record the taxes and mandatory contributions that a standardized case study firm (a medium-size company) must pay in a given year and also measure the administrative burden of paying taxes and contributions. There are 4 indicators: payments, time, total tax rate and postfiling index. The number of payments indicates the different types of taxes and contributions which the company has to file and pay, adjusted for the way in which those payments are made. The time indicator captures the number of hours it takes to prepare, file and pay 3 major types of taxes: profit taxes, consumption taxes, and labor taxes and mandatory contributions. The total tax rate measures the tax cost borne by the case study firm. The postfiling index captures the time to comply with a VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax audit and time to complete a corporate income tax audit.

The standardized case study was developed to ensure comparability of responses across countries. Therefore, in completing the questionnaire, please keep in mind the following key assumptions about the standardized company, called “TaxpayerCo.”

General Description of the Company

1 Start of operations: The company (TaxpayerCo.) started operations 2 years ago, on January 1, 2015. On that date, the company bought all its assets and hired all its employees.

2 Year of assessment: January 1, 2016–December 31, 2016.

3

Type and location: TaxpayerCo. is a taxable corporation and operates in a typical manufacturing location in the second largest business city in the country – in Delhi.

The company is liable for taxes levied at the local, state/provincial and national levels. Please consider taxes at all levels when completing the questionnaire. TaxpayerCo. does not qualify for investment incentives or any special benefits apart from those related to the age or size of the company.

4 Ownership: The company is 100% domestically and privately owned; that is, it has no foreign or state ownership. The company has 5 owners, none of whom is a legal entity.

5 Sales: INR 84,373,656

6 Capital: The company’s capital has not changed since the company was created.

7 Accounting rules: Accounting is compliant with generally accepted accounting principles, or GAAP (local or international, depending on your national laws). This includes, for example, the International Financial Reporting Standards/International Accounting Standards (IAS/IFRS) regime, if applicable to your country.

8 Type of operation: TaxpayerCo. performs general manufacturing and commercial activities: it produces ceramic flowerpots and sells them at retail. All its transactions are purely domestic, and it does not handle any products subject to a special tax regime, such as liquor or tobacco.

Specific Assumptions and Definitions

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Mandatory tax books and records: In the course of the financial year, companies are required to maintain various books and records for accounting and audit purposes. These books are often also used for preparing tax computations and completing tax returns. In some cases, tax laws or tax authorities may also require companies to keep additional books and records specifically for tax purposes—books and records that are over and above those kept for the accounting and audit processes and that are not required for the financial reporting processes. The questionnaire’s sections on compliance time include an entry under each of the 3 tax categories for time related to maintaining mandatory tax books and records. Please disregard in those entries any time spent on books and records that are also used for financial accounting or audit purposes. Please only include time associated with additional books and records specifically required for tax purposes.

5

10

Employees: The company has 60 employees: 4 managers, 8 assistants and 48 workers. All the employees were hired on the same day: January 1, 2015. No employee has left the company and no new employee has joined the company since January 1, 2015. One of the managers is also an owner. All employees at any given level earn the same wage as others at their level. All employees are nationals and male. Each employee is married with 2 pre-teen children and has no other significant source of income. Each is a single wage earner (spouse has no income).

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Social security contributions and payroll taxes: Please include all social security contributions and payroll taxes paid by the employer for each category of employees on the wages and salaries paid by the company. These taxes may be referred to by different terms in different economies. These taxes and contributions should be split between those that are a cost to the employer and those that are withheld by the employer on behalf of the employee.

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Other labor taxes or mandatory contributions: In this category include all other labor taxes and social contributions paid by the company, withheld by the company from employees’ pay or paid directly by the employees. Please keep in mind that these can be collected by different levels of government. Please include all government-mandated contributions even if paid to nongovernment entities (e.g., compulsory guarantees and insurance paid to third-party agencies).

13

Land: On January 1, 2015, the company began operations owning 2 plots of land, each with an area of 557.4 square meters (6,000 square feet). In early January 2016, plot number 2 was sold. Any property transfer tax due on the sale needs to be listed in Section C.1. If there is a stamp duty or any other taxes/fees payable on the sale contract, please include these taxes/fees as well.

14 Building: The building where production and storage take place, located on land plot 1, was originally 929 square meters (10,000 square feet). It was expanded in 2016 with half the proceeds from the sale of land plot 2.

15 Truck: The company owns a truck that is used to ship products to customers and is classified as a nonluxury, medium-size unit. This truck covers on average 80,000 km (50,000 miles) a year and weighs 15,300 kilos (34,000 pounds) when loaded. In addition to this, the company also leases one truck.

16

Capital gains: At the beginning of the second year of operation (2016), the company sells a plot of land (land plot 2) that it had owned for 12 months at a price 20% higher than the original cost of the land plot. Please indicate whether there is a capital gains tax separate from corporate income tax by including the tax in Section C.1. Please note that half of the proceeds from this sale are reinvested in assets (by expanding the existing building).

17 Dividends: In the second year of operation (2016), the company distributes 50% of its profits to its owners. The dividends are paid in cash. The other 50% of profits are kept as retained earnings. Please provide any dividend tax borne by the company in this transaction. If the company merely withholds tax on paying shareholders, EXCLUDE this withheld dividend tax.

18 Fuel expenses: TaxpayerCo. purchases vehicle fuel and therefore should pay fuel tax (if applicable). Fuel tax may be embedded in the price of fuel paid at the pump.

19 Environmental duties: TaxpayerCo. produces 2 tons of nontoxic waste a month and therefore must pay the tax or other duties (if any) associated with waste production.

Would TaxpayerCo. be considered a micro, small, medium-size or large company in your country? Please specify the criteria for classification.

Small Size Company based on Investment - less than Rs 5 Cr

B. Reform Update Please update us of any tax reforms that occurred in your country in calendar year 2016 or that are planned for this year. These could include new tax codes, a change in rates, a change in the frequency of payment of taxes, unification of tax agencies into one administration, elimination or merging of taxes, introduction or improvement of online filing systems, or new rules related to audit or VAT cash refunds, among others.

If yes, please explain:

1. Between January 1, 2016 and December 31, 2016, were there any major changes to the tax laws,

Yes

1. As per Rule 12 of the Income Tax Rules, 2016, the taxpayer being a company is required to mandatorily file the return of income electronically through digital signature (DSC). Further, on such filing the companies are not required to

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regulations or administration in your country?

send the acknowledgment (ITR V) to the tax authorities in hard copy for processing or verification. This reduces the time for completion of return of income. URL: goo.gl/8ci9e4 2. Reduction in corporate tax rate from 30% to 29% for domestic companies whose total turnover/ gross receipts does not exceed INR 50 Million. The amendment can be referred at Paragraph E of Part III of the First Schedule to the Finance Act, 2016. Available at http://egazette.nic.in/ 3. Under the newly introduced Section 115BA of the Income Tax Act, 1961, the corporate tax rate has been reduced from 30% to 25% for newly set-up domestic companies engaged solely in the business of manufacture or production of article or thing. URL: goo.gl/KIHwOQ 4. 100 per cent deduction of profits for any three consecutive years out of five years is available to start-ups incorporated up to 31 March 2019. Refer Section 80IAC of the Income Tax Act, 1961. URL: goo.gl/5WPgEQ 5. New Direct Tax Dispute Resolution Scheme, 2016 has been introduced for speedy settlement and resolution of disputes/pending litigations. Refer Chapter X of the Finance Act, 2016. URL - goo.gl/TFC82q 6. Rebate under Section 87A raised to INR 5000 from INR 2000 for resident individuals with income up to INR 500,000. URL: goo.gl/0W9vG8 7. Mandatory online payment of ESI and EPF. Link is available to employer to make the online payment without using his login and password. The link is 1. ESIC- goo.gl/hFSEhC and Point No. 2 on this URL: goo.gl/W2AWhu and EPFO- goo.gl/FaPTYf 8. For making electronic payment of EPF and ESI, private banks were included in the list. This lead to ease in making online payment of EPF and ESI EPF Link- http://epfindia.gov.in/site_docs/PDFs/Updates/Banks_onlinepayment_gateway.pdf ESI Link- http://www.egazette.nic.in – E gazette notification [F. No. G-20025/1/2014-SS-II] dated 4 January 2017 by Ministry of Labour and Employment 9. The tax department introduced the facility and procedure for e-audit of the income tax return. Under the e-audit, the audit of the income tax return would be undertaken online, all the documents/details/information can be provided by the taxpayer through his email id. Refer Rule 127 of the Income Tax Rules, 1962 Rule 127 - goo.gl/8ci9e4, Procedures - Notification 2/ 2016 dated 3 February 2016 - goo.gl/ouP8a1 10. The tax department introduced an online appeal filing procedure (Form 35) for filing an appeal against the order issued by the tax audit official. Rule 45 of the Income Tax Rules, 1962 has been amended to bring online filing of appeal in force. Rule 45 - goo.gl/8ci9e4 11. For the purpose of selection of the taxpayers for the audit purpose, the tax department is using risk based system and only 2% of the revised returns were selected for audit after satisfaction of the other risk parameters. 12. Refund facility of excess Value added Tax (VAT) paid introduced under Section 38 of the Delhi VAT Act, 2004. The excess amount of VAT paid is at the option of the taxpayer is either refunded or carried forward to the next tax period as a tax credit in that period. The refund would be granted in one month after the return was furnished or claim for the refund was made. URL: goo.gl/uHP3jw 13. As per Section 9 of the Delhi VAT Act, 2004 read with Rule 6 and 7, the tax credit in respect of the capital goods shall be allowed 1/3rd in the tax period in which it is arising and balance 2/3rd in equal proportions in corresponding tax periods, in two immediately successive financial years. URL: goo.gl/uHP3jw

2. Between January 1, 2016 and December 31, 2016, were any new taxes introduced?

No

No

2.1 Between January 1, 2016 and Wealth tax has been abolished and it is not applicable from 1 January, 2016. Refer

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December 31, 2016, were any taxes eliminated or merged with other taxes?

Yes Finance Act 2015 - http://egazette.nic.in/ and Press release dated 1 April 2016 - goo.gl/p8f1A4

3. Between January 1, 2016 and December 31, 2016, did any of the following tax rates or tax bases change?

If yes, please explain the changes:

a. Corporate income tax Yes

1. Reduction in corporate tax rate from 30% to 29% for domestic companies whose total turnover/ gross receipts does not exceed INR 50 Million. The amendment can be referred at Paragraph E of Part III of the First Schedule to the Finance Act, 2016. Available at http://egazette.nic.in/ 2. Under the newly introduced Section 115BA of the Income Tax Act, 1961, the corporate tax rate has been reduced from 30% to 25% for newly set-up domestic companies engaged solely in the business of manufacture or production of article or thing. URL: goo.gl/KIHwOQ

b. Labor taxes and mandatory contributions

Yes

1. The Provident Fund administrative charges reduced from 1.10% to 0.85%. This resulted in reduction of employer's social security contribution to 13.36%. Refer Notification No. S -35012/01/2014-SS, II dated 2nd february 2015. URL:goo.gl/tlqSL5 2. ESIC has reduced Employees contribution to 1% and employers' contribution to 3 % in the areas where ESI Act is implemented for the first time as per Government of India Gazette notification Extraordinary No 711 Part II, Section -3. Sub Section (1) containing GSR-959(E) dated 6/10/2016. The notification and relevant circulars available at http://esic.nic.in/backend/writereaddata/file/9f085e16fc292fb8f8a7ebf6bbe8f63b.pdf

c. Sales tax, value added tax (VAT), goods and service tax (GST) or other consumption tax

No

1. Refund facility of excess Value added Tax (VAT) paid introduced under Section 38 of the Delhi VAT Act, 2004. The excess amount of VAT paid is at the option of the taxpayer is either refunded or carried forward to the next tax period as a tax credit in that period. The refund would be granted in one month after the return was furnished or claim for the refund was made. DVAT Act - goo.gl/uHP3jw 2. As per Section 9 of the Delhi VAT Act, 2004 read with Rule 6 and 7, the tax credit in respect of the capital goods sall be allowed 1/3rd in the tax period in which it is arising and balance 2/3rd in equal proportions in corresponding tax periods, in two immediarely successive financial years. DVAT Act - goo.gl/uHP3jw

d. Any other taxes No

No

4. Between January 1, 2016 and December 31, 2016, did the tax payment or filing schedules change for any of the following taxes?


a. Corporate income tax No No

b. Labor taxes and mandatory contributions No No


No No

d. Any other taxes No No

5. Between January 1, 2016, and December 31, 2016, were there any legal or regulatory changes that increased or reduced the time for preparing, filing or paying any of the following taxes?


a. Corporate income tax Yes

As per Rule 12 of the Income Tax Rules, 2016, the taxpayer being a company is required to mandatorily file the return of income electronically through digital signature (DSC). Further, on such filing the corporates are not required to send the acknowledgment (ITR V) to the tax authorities in hard copy for processing or verification. This reduces the time for completion of return of income. Select Rule 12 at URL: goo.gl/8ci9e4

b. Labor taxes and mandatory 1. Online payment of EPF and ESIC through Banks.

8

contributions Yes ESIC- goo.gl/hFSEhC and Point No. 2 on this URL: goo.gl/W2AWhu EPFO- goo.gl/FaPTYf 2. Banks launched dedicated PF Helpline Numbers. Inclusion of Private Banks for Electronic Payment of ESI and EPF. 3. ESIC- Notification [F. No. G-20025/1/2014-SS-II] - http://www.egazette.nic.in – e gazette notification by Ministry of Labour and Employment dated 4 January 2017 EPFO - http://epfindia.gov.in/site_docs/PDFs/Updates/Banks_onlinepayment_gateway.pdf


No

No

6. Between January 1, 2016, and December 31, 2016, were there any changes to the method (e.g., electronic capabilities) of preparing, filing or paying any of the following taxes that increased or reduced the time required?


a. Corporate income tax Yes Easy to use software facility for attachment of DSC. Rule 12 - goo.gl/8ci9e4 and DSC Manual -goo.gl/yiULfb

b. Labor taxes and mandatory contributions Yes 1. Mobile application for employees and employers. Refer URL : http://59.180.231.60:9091/AppDownload/


Yes All VAT payment and return filing is completely online. URL:www.dvat.gov.in


7. Between January 1, 2016, and December 31, 2016, were there any legal or regulatory changes that affected the audit procedure for direct and/or indirect taxes in your economy (e.g. introduce time limits, introduce a risk-based audit selection system, apply single issue audit, increase number of tax auditors)?

Yes 1. Introduced an online appeal filing procedure (Form 35) for filing an appeal against the order issued by the tax audit official. Rule 45 of the Income Tax Rules, 1962 has been amended to bring online filing of appeal in force. Rule 45 - goo.gl/8ci9e4 2. Introduction of procedures for e-assessments for direct tax. URL:goo.gl/xqolZi 3. Use of risk based system for selection of the taxpayers for the audit purpose. 4. The tax department introduced the facility and procedures for e-audit of the income tax return. Under the e-audit, the audit of the income tax return would be undertaken online, all the documents/details/information can be provided by the taxpayer through his email id. Rule 127 - goo.gl/8ci9e4 , Procedures - Notification 2/

9

2016 dated 3 February 2016 - goo.gl/ouP8a1 5. CBDT has implemented E-Proceeding for all taxpayers which is an expanded and extended form of e-assessment involving direct communication between the taxpayer and the Department for all Income Tax proceedings including assessment. Under this procedure all notices, letters and queries raised by the officers of the Department would not only be sent by e-mail to the taxpayer but would be made available to the taxpayer under the e-proceedings tab of the taxpayer’s account in the e-filing portal of the Department. The taxpayer can submit his return online and the same would be visible in chronological order to the officer in the Income Tax Business Application. Notification No. 4/2017 - goo.gl/qSKGe0

8. Between January 1, 2016, and December 31, 2016, were there any legal or regulatory changes that affected the process of claiming and obtaining a VAT refund in your economy (e.g. introduce time limits, payment of interest for late VAT refunds, introduce VAT refund for cases of capital purchase, fast-track process for specific type of taxpayers)?

Yes 1. Refund facility of excess Value added Tax (VAT) paid introduced under Section 38 of the Delhi VAT Act, 2004. The excess amount of VAT paid is at the option of the taxpayer is either refunded or carried forward to the next tax period as a tax credit in that period. The refund would be granted in one month after the return was furnished or claim for the refund was made. DVAT Act - goo.gl/uHP3jwl 2. As per Section 9 of the Delhi VAT Act, 2004 read with Rule 6 and 7, the tax credit in respect of the capital goods sall be allowed 1/3rd in the tax period in which it is arising and balance 2/3rd in equal proportions in corresponding tax periods, in two immediarely successive financial years. DVAT Act - goo.gl/uHP3jw

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9. Have any changes to tax rates, associated rules or tax administration become effective or are expected to become effective between January 1, 2017 and June 1, 2017? Please note that these reforms will not affect the data in this year’s report.


a. Corporate income tax Yes Tax rate of 25% for companies having turnover below 50 crores. Refer Paragraph E of Part III of the First Schedule to Finance Act 2017. http://egazette.nic.in/

b. Labor taxes and mandatory contributions Yes The Provident Fund administrative charges reduced from 1.10% to 0.65%. This resulted in reduction of employer's social security contribution to 13.16% for the fiscal year 2017. Notification No. S -35012/01/2014-SS, II dated 15 March 2017- goo.gl/Uc1LNQ and http://www.egazette.nic.in – e gazette notification by Ministry of Labour and Employment dated 15 March 2017


Yes Roll out of GST to further ease out Tax payments and return filing . GST- http://www.cbec.gov.in/htdocs-cbec/gst.

d. Any other taxes Yes Individual Tax rate in threshold Rs. 250000- Rs. 500000 to be 5% (10% currently) - which would result in tax savings ranging between INR 2,575 to INR 14,807 for all taxpayers. Refer Paragraph A of Part III of the First Schedule to the Finance Act 2017 - http://egazette.nic.in/

C. Data Update

In the following pages, please consider taxes paid to all levels of government by TaxpayerCo. during the calendar year ending December 31, 2016. For your convenience, parts of the questionnaire are already populated with the aggregate answers obtained last year for 2015. You only need to update those figures for 2016. Please keep in mind that last year’s answers provided here represent a unified response based on all the answers we received from various contributors.

When answering the questions, always use the method for computing the taxes that is most favorable for the company in the second year of operation, i.e. minimize taxes within legal constraints and make reasonable assumptions where necessary. Please state any such assumptions clearly in the comments corresponding to the relevant data input cell. The information provided should be based on a typical or normal business in your country of a size similar to TaxpayerCo.

If you feel that a unified answer reported in the subsequent sections does not reflect the reality in your country, kindly provide your own answer and clearly indicate why you disagree.

C.1 List of Taxes

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In the table below, please update the information for each tax, taking into account the detailed assumptions of the case study described in section A. If you make any changes to last year’s data, please explain the change and advise why you think the data for this year should be different:

Correction (our unified answer is wrong and does not reflect the current and previous reality in your country), OR

Reform (the different answer resulted from a modification in practice or by law that occurred as of January 1, 2016).

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India Delhi - Delhi Number of taxes: 16

Tax Number of payments and filings required

in one year (monthly = 12, quarterly = 4, annual = 1).

Please include any final payments or filings that need

to be made.

Can this tax be paid and filed online?

Can this tax be paid and filed jointly with

another tax? ‘Jointly filed and paid’ means taxes are reported in the same return and paid in one slip.

Statutory tax rate Tax base Explain any changes to the

data and provide the legal basis

when applicable. Indicate when

the change took effect.

Last year Update Last Year Update Last Year Update Last Year Update Last Year Update

1. Vehicle tax (pollution tax)

1 1 no no no no INR 200 INR

200

fixed fee per vehicle

Fixed

per

vehicle

2. Tax on insurance contracts

1 0 no Not

payab

le by

Taxpa

yerCo

since

Servic

e tax

is part

of the

Insura

nce

Premi

um

Invoic

e

no no 12% * (1+ 2% Education cess + 1% Secondary & High education cess)

0 insurance premium

not

applica

ble

Not payable

by Taxpayer

co since

Service tax is

part of the

Insurance

Premium

Invoice. The

service tax

payment and

return filing in

relation to the

insurance

contract is

undertaken by

Insurance

Company and

not the

Taxpayer Co. 3. Tax on interest 0 0 no not

applic

no not

applic

10% not

applica

interest income

not

applica

Interest

tax has been

13




to be made.








able able ble ble abolished after

31 March

2000. 4. Dividend tax 1 1 no Yes no no 16.995%

17.304

%

dividend distributions

dividen

d

distrib

utions

DDT is

paid online

from multiple

public and

private sector

banks website

and details

form part of

the Corporate

Tax Return 5. Fuel tax 1 0 no not

applic

able

no not

applic

able

not

applica

ble

fuel consumption

not

applica

ble

There is No

Fuel Tax.

Sales tax on

Fuel is

included as a

part of the

Fuel Invoice.

The Sales Tax

is payable by

Petrol Filling

Station and

corresponding

return is also

filed by Petrol

Filling Station

14




to be made.








and not by

TaxPayer

Co. 6. Property tax 1 1 no yes no no 10% 10% assessed

value

assesse

d value

of the

propert

y

7. Social security contributions

12 1 no yes no no 13.61%

13.36

%

gross salaries Basic

salary

plus

dearne

ss

allowa

nce

and

retaini

ng

allowa

nce

EPF

payments are

required to be

mandatorily

paid online

8. Employee's state insurance contribution

12 1 yes yes no no 4.75% 4.75% gross salaries gross

salaries

ESIC

payments are

required to be

mandatorily

paid online 9. Corporate

income tax 5 1 yes yes no no 30% 30% taxable profit

taxable

Corporate

Tax payment

15




to be made.








profit and filing of

return is made

online 10.

Central Sales Tax 12 0 yes yes

(but

not

applic

able

in the

instan

t case)

no no 2% not

applica

ble

purchase price

not

applica

ble

CST is

payable by the

seller when he

makes an

inter-State sale

to a dealer

registered in

another State

(B2B

transactions).

In the

questionnaire,

we are

assuming that

the case study

company is

making only

retail sales,

and hence, no

CST can be

leviable on

these sale

transactions.

All retail sales

attract only

VAT as these

16




to be made.








are assumed to

be intra-State

sales

transactions

under the CST

Act, 1956.

Further,

another point

to be made

here is that

CST is only

paid by the

seller in the

origin State of

the inter-State

sales

transactions.

The buyer

does not pay

CST to the

Government

as he is based

in the

destination

State. The

buyer submits

a declaration

to the seller

that he is

17




to be made.








liable to pay

CST, and not

VAT, and

accordingly,

the seller

collects 2%

CST from

him, and pays

the same to the

Government

of the origin

state.

Therefore, in

the

questionnaire,

even if the

case study

company

purchases any

raw materials

from a dealer

in another

State, the case

study

company does

not make any

payment of

CST to the

(any) State

18




to be made.








Government. 11.

State VAT 12 1 yes yes no no 12.5% 12.5% value added value

added

The

payment of

VAT and

filing of return

is done online.

http://dvat.gov

.in/website/ho

me.html 12.

CENVAT (Excise Duty)

12 1 yes yes no no 12.5% 12.5% value added value

added

The payment

of excise duty

and filing of

return is done

online. :

https://www.a

ces.gov.in/ePa

yment.jsp 13.

Income surcharge

12 0 no yes

(but

not

applic

able

in the

instan

t case)

yes yes

(but

not

applic

able

in the

instan

t

case)

10% 7% if

above

INR 1

crore

and

upto

INR 10

crore

and

12% if

above

on applicable federal taxes

on

applica

ble

income

tax

No

Surcharge is

payable by

TaxpayerCo.as

the income is

less than one

crore.

Otherwise also

it forms part of

the corporate

tax and not to

19




to be made.








INR 10

crore

be considered

separately. 14.

Education cess 12 0 no yes yes yes 2% 2% all federal taxes including the surcharge

all

federal

taxes

includi

ng the

surchar

ge

it forms part

of the

corporate tax

and not to be

considered

separately.

15.

Secondary & Higher education cess

12 0 no yes yes yes 1% 1% all federal taxes including the surcharge

income

tax

includi

ng the

surchar

ge

it is included

in Corporate

Tax Paymentit

forms part of

the corporate

tax and not to

be considered

separately.

16.

Employee paid - Social security contributions

12 0 no yes yes yes

jointly

with

emplo

yer's

socual

securi

ty

contri

ution

12% + 1.75%

12% +

1.75%

gross salaries Basic

salary

plus

dearne

ss

allowa

nce

and

retaini

ng

Deducted

from Salary

and paid

online

20




to be made.








allowa

nce

If there are any taxes or contributions, which the case study company would be required to pay, and which are not listed in the table above, please list them in the table below:



Please include any final payments or filings

that need to be made.


Can this tax be paid and filed

jointly with another tax?

Statutory tax rate Tax Base Please provide details (respective law, any special rules, etc.)

21

NEW QUESTIONS: Personal Income Tax (PIT)

1.1 In your national tax system, is there an obligation on the case study company to deduct PIT from employee wages?

No (Please go to Section C.2 Deductions and Depreciation)

1.2 Please specify the number of filings and payments of PIT that the case study company must complete in a year (e.g. monthly =12, quarterly = 4)?

NA

1.2.a Please specify how the majority of companies similar to the case study company file PIT (electronically, by mail, in person at tax office)?

-Click to Select-

1.2.b Please specify how the majority of companies similar to the case study company pay PIT (electronically, by mail/cheque, at a bank, in person at tax office)?

-Click to Select-

1.3 Is PIT filed and paid jointly with any of the taxes or mandatory contributions reported in the table above?

-Click to Select-

1.3a If yes, please specify which tax. NA

1.4 How much time out of the total hours spent to comply with labor taxes (including mandatory contributions reported in section C.4) is dedicated to the preparation, filing and payment of PIT?

NA

C.2 Deductions and Depreciation

2.1 Deduction of Taxes In the table below please complete the information on deductibility of each tax when calculating corporate profit subject to tax, taking into account the detailed assumptions of the case study described in section A. Note: use "Not Applicable" for taxes that shall not be deductible by nature (e.g . corporate income tax, VAT, etc.).

Tax Deductible in 2016?

% deductible

1. Vehicle tax (pollution tax) Yes 100%

2. Tax on insurance contracts Yes 100%

3. Tax on interest Not Applicable NA

4. Dividend tax No 0

5. Fuel tax Not Applicable NA

6. Property tax Yes 100%

7. Social security contributions Yes 100%

8. Employee's state insurance contribution Yes 100%

9. Corporate income tax No 0

10. Central Sales Tax Yes 100%

11. State VAT Yes 100% if the credit if not taken separately

12. CENVAT (Excise Duty) Yes 100%

13. Income surcharge No -

14. Education cess No -

15. Secondary & Higher education cess No -

16. Employee paid - Social security contributions No -

2.2 Tax-Deductible Expenses

22

Please indicate if the following expenses are deductible in computing corporate profit subject to tax and note the total amount of deductions allowed per year. Kindly provide information for calendar year 2016 based on the law in your country.

Deductible in

2016? % deductible

Start-up expenses: Official and attorney fees paid at the time of incorporation. If the company can deduct these expenses only in the first year of operation, then input zero as this year’s deductible expense. If the tax law allows companies to assign these expenses to future years, please allow the maximum possible deduction this year (the second year of operation). Please note that these expenses are not capitalized and they are different from the business development expenses indicated in section 2.4.

Yes 20%

Advertising expenses: The company engages the services of an advertising company to promote its ceramic products at an annual cost of 1% of its sales revenue.

Yes 100%

Leasing expenses: The company leases a new truck for 3 years. This truck is used for business purposes, covers on average 80,000 km (50,000 miles) a year and weighs 15,300 kilos (34,000 pounds) when loaded.

Yes 100%

Medical insurance premium for employees: The company pays part of the medical insurance premium for its employees. This medical insurance is an extra benefit for the workers and goes beyond what may be mandated by law. It amounts to 1% of total salaries.

Yes 100%

Building insurance premium: The company insures the building against fire and theft at a cost of 1% of the building’s value.

Yes 100%

Business travel expenses: The company managers travel for business purposes (e.g., to meet customers and suppliers).

Yes 100%

Accountancy fees: The company hires an accountancy firm to manage its books. Yes 100%

Legal fees: The company hires a law firm for writing contracts with its suppliers and customers and for other legal services.

Yes 100%

Machinery repair expenses: The company has to repair some of its machinery. These repairs do not add value to the machinery. The cost of the repairs is NOT capitalized in the company’s books.

Yes 100%

Patent royalties: The company pays royalties to another domestic company for a patented industrial process that the company uses in its operations.

Yes 100%

Owner’s expenses: These are expenses made by the owner who is also a manager: 60% are expenses on business travel, 20% are expenses on entertaining customers (e.g., meal with customers) and 20% are purely private expenses.

Yes 80%

Loss carry forward: The company made tax losses in the first year of operations (2% of capital). If these tax losses can be brought forward to the year of assessment, please use the maximum losses that can be utilized in this financial year.

Yes 100%

2.3 General Provisions Please indicate if the following general provisions are deductible in computing corporate profit subject to tax and note the total amount of deductions allowed per year. Kindly provide information for calendar year 2016 based on the law in your country.

Deductible in 2016?

% deductible

Bad debt: Assume that TaxPayerCo estimates 10% of its account receivables will not be collected. These 10% of account receivables are overdue for at least 6 months and are not guaranteed debt. The company knows the actual debtor accounts which will probably not be paid and sets aside this provision.

No 0

Pension contribution: The company puts aside every year 1% of total paid wages in an internal pension fund for its employees. This is a provision, not an actual expense. No

No 0

23

Deductible in 2016?

% deductible

funds leave the company.

Machinery expenses: The company puts aside every year 1% of the net value of machinery to pay for future machinery repairs. This is a provision, not an actual expense. No funds leave the company.

No 0

2.4 Annual Depreciation of Fixed Assets Please carefully read the assumptions indicated in the table below and provide the tax depreciation rate and method for calendar year 2016 for each type of asset.

Tax depreciation rate in 2016

Depreciation method in 2016

Please specify if accelerated depreciation or any other

special rules apply

Land: On January 1, 2015, the company began operations owning 2 plots of land. Each plot has an area of 557.4 square meters (6,000 square feet). In early January 2016, plot number 2 is sold.

0% -Click to Select-

Building: The building where production and storage take place, located on land plot 1, was originally 929 square meters (10,000 square feet). In 2016 the building was expanded with half the proceeds from the sale of land plot 2.

10% Declining balance method

If the building expansion (the new part added to the building) would be depreciated at a different rate, please specify the rate.


Machinery: Light machinery for tax purposes. 15% Declining balance method

Truck: The truck is used to ship products to customers and is classified as a nonluxury, medium-size unit. This truck covers on average 80,000 km (50,000 miles) a year and weighs 15,300 kilos (34,000 pounds) when loaded.


Computers: The company has 10 computers. 60% Declining balance method

Office equipment: Includes standard office tables, chairs, one copier, one fax machine, one scanner and 10 phones.


Business development expenses: These are expenses that the company incurred when starting operations and which were capitalized (e.g., research and development expenses). Please note that these are different from the start-up expenses indicated in section 2.2.

- -Click to Select- The business related Research and Development expenses are deductible as per Section 35 of the Income Tax Act, 1961. This

should be counted in section 2.2 Tax-Deductible expenses.

C.3 Labor Taxes and Mandatory Contributions Please use the following assumptions when answering the questions below:

The company has 60 employees: 4 managers, 8 assistants and 48 workers.

All the employees were hired on the same day: January 1, 2015. No employee has left the company and no new employee has joined the company since January 1, 2015.

24

All employees at the same level earn the same wage as others at their level.

All employees are nationals, male and married with 2 pre-teen children and have no other significant source of income.

Each employee is a single wage earner (spouse has no income).

Please provide calculations per employee.

For each category of employee, please include all mandatory contributions and taxes paid on the salaries, or on the number of employees. These taxes may be referred to by different terms in your country.

Please differentiate between taxes that are a cost to the employer, those that are withheld by the employer on behalf of the employee and those paid directly by the employee.

In the tax base column, please provide actual tax base used in calculations, considering minimum and maximum amount for the contribution, deductibles, etc. For example, if the gross salary is used as the tax base, insert the amount of gross salary. If the contribution is capped at the maximum amount as envisaged in legislation, please provide this ceiling as the tax base. If the fixed contribution is levied per employee, the tax base shall be 1 (as calculations are done per employee) and the tax rate shall be the amount of fixed fee.

3.3 Manager Annual salary of each manager: INR 180,800.69 Please note that one of the managers is also an owner. If different taxation applies, please clarify in comments.

Labor tax or contribution Tax base Tax rate Tax amount

Social security contribution – paid by employer

1. Salary as per the Employees Provident Fund

and Miscellaneous Provisions Act, 1952 is basic salary plus

dearness allowance and retaining allowance. In the

case study, the annual salary is INR 180,800.69 and basic

salary component is generally 30% of the gross salary component in India

and hence, PF is likely to be applicable on INR 54240.

2. Wages as per the ESI Act are defined in Sec 2(22) of

the ESI Act

1. PF contribution - 12% of basic salary plus dearness

allowance 2. EDLI - 0.5% applicable on

basic salary of INR 15000 per month

3. PF admin charges - 0.85% of basic salary plus dearness

allowance 4. EDLI admin charges- 0.01% applicable on basic salary of

INR 15000 per month 5. ESI Employers'

Contribution @4.75%

1. PF - INR 6509 2. EDLI - INR 900

3. PF admin charges - INR 461

4. EDLI admin charges - INR 18

5. EMPLOYERS

CONTRIBUTION- INR 8588.00 per employee.

Social security contribution – withheld by employer







2. Wages as per the ESI Act

1. Employee's PF contribution - 12% 2. ESI Employees

Contribution @1.75%

1. PF contribution - INR 6509

2. ESIC EMPLOYEE'S CONTRIBUTION INR 3164.00

per employee

25


are defined in Sec 2(22) of the ESI Act

Social security contribution – paid by employee directly

Health care contribution – paid by employer

Health care contribution – withheld by employer

Health care contribution – paid by employee directly

Unemployment insurance contribution – paid by employer

Unemployment insurance contribution – withheld by employer

Unemployment insurance contribution – paid by employee directly

Payroll tax – paid by employer

Payroll tax – withheld by employer

Payroll tax – paid by employee directly

Fringe benefit tax – paid by employer

Fringe benefit tax – withheld by employer

Fringe benefit tax – paid by employee directly

Personal income tax – paid by employer

0 0 0

Personal income tax – withheld by employer

Not applicable as the salary of the employee is below the taxable limit of INR 250000

0 0

Personal income tax – paid by employee directly

Not applicable as the salary of the employee is below the taxable limit of

INR 250000

0 0

If there are any other labor taxes and/or contributions, please provide details below:

Name of tax or contribution Tax base Tax rate Tax amount

Comments (if any):

3.4 Assistant

26

Annual salary of each assistant: INR 100,444.83










the ESI Act



basic salary of INR 15000 per month


allowance 4. EDLI admin charges- 0.01% applicable on basic salary of

INR 15000 per month 5. ESI Employers'

Contribution @4.75%

1. PF - INR 3616 2. EDLI - INR 900



5. ESI EMPLOYER'S CONTRIBUTION - INR 4772






salary component is generally 30% of the gross

salary component and hence, PF is likely to be

applicable on INR 30133. 2. Wages as per the ESI Act are defined in Sec 2(22) of

the ESI Act

1. PF Contribution - 12% 2. ESI Employees

Contribution @1.75%

1. PF Contribution- INR 3616

2. ESI EMPLOYEES CONTRIBUTION - INR 1758












27







INR 250000

0 0



INR 250000

0 0

If there are any other labor taxes and/or contributions, please provide the details below:


Comments (if any):

3.5 Worker Annual salary of each worker: INR 80,355.86










the ESI Act



flat basic salary of INR 15000 per month


allowance 4. EDLI admin charges- 0.01% applicable on flat basic salary

of INR 15000 per month 5. ESI Employers'

Contribution @4.75%

1. PF - INR 2893 2. EDLI - INR 900



5. ESI EMPLOYER'S CONTRIBUTION -4772.00

PER EMPLOYEE




1. PF Contribution -12% 2. ESI Employees

Contribution @1.75%

1. PF Contribution - INR 2983

2. ESI EMPLOYEES CONTRIBUTION - INR 1758

28







the ESI Act
















Not applicable as the salary of the employee is

below the taxable limit of INR 250000

0 0


Not applicable as the salary of the employee is below the taxable limit of INR 250000

0 0

If there are any other labor taxes and/or contributions, please provide the details below:


29


Comments (if any): 3.6 Please indicate which taxes or contributions paid by employer are filed and paid jointly with those withheld on behalf of employees: Social Security Contributions and State Insurance Contribution. 3.7 Please indicate if any taxes or contributions cannot be paid at the moment of filing (i.e. there is a mandatory waiting period between the moment of filing the return and paying the tax liability). No there is no such taxes/contributions.

C.4 Time to Prepare, File and Pay 3 Major Taxes 4.1 Was the total time required to prepare, file and pay profit tax, labor tax and mandatory contributions, or consumption taxes different 5 years ago? Yes If yes, was the process to comply with these 3 major taxes faster or slower? Please explain: Profit taxes Further, all the companies, similar in size with the case study assumptions, use advanced accounting software such as Tally or SAP for making accounts which helps them to prepare data in much faster manner and provides tax compatible reports. Additionally, in India there is no requirement to prepare separate accounts for tax purpose. Labor Taxes and Mandatory contributions Now, all the payments are required to be made mandatorily online. This has resulted in reduction of time required for undertaking the labour tax compliances. Further, the inclusion of private banks in the list of eligible banks for making online EPF and ESI payment has widened the base of users availing online services. Please update the following sections for calendar year 2016 (January 1, 2016–December 31, 2016), taking into account the detailed case study assumptions about the company TaxpayerCo. (see section A). The information on compliance time should include all time spent calculating the tax liability for inclusion in the tax returns, except where accounting records are acceptable for tax purposes. However, if special or additional accounting records or books are maintained for tax purposes, the time required for this should be included. The information you provide on compliance time will directly affect the time indicator. We would greatly appreciate if you would take the time to break down the compliance time among the different tax compliance activities in the cells below to assist our analysis.

4.2 Compliance Time for Profit Taxes 4.2.1 Is last year’s information provided in the tables below for preparation, filing and payment of profit taxes accurate and up to date for 2016?

Yes. No. If no, please update the tables below. NA. Profit tax does not exist in my country.

PREPARATION — Profit taxes

Time last year: Updated time if Please briefly outline the main

30

Hours per year (2015)

applicable: Hours per year (2016)

steps and tasks for each time entry.

1. Data gathering from internal sources (for example, accounting records)

12 3 The data gathering from accounting records is a simple

process as it involves extraction of data available in the accounting

software. Also, generally the company uses basic accounting

software such as Tally for preparing its accounting records

and therefore, extraction of reports would not take longer

time. Learning Curve: No change in

business and no major change in turnover. Employees will fasten

the pace of doing work.

2. Additional analysis of accounting information to highlight tax-sensitive items

8 4 As per the case study the number of adjustments are very minor and

shall not involve considerable amount of time. (Calcualtion of

tax depreciation and few personal expenditure related adjustments.)

Learning Curve: No change in business and no major change in turnover. Employees will fasten


3. Actual calculation of tax liability, including inputting of data into software/spreadsheets or hard-copy records

8 3 The company does not have major adjustments and therefore,

computation of tax liability would not take more hours.



4. Time spent maintaining/updating accounting systems for changes in tax rates and rules

0 In the case study, the change in tax rate is only in relation to dividend distribution tax and

provident fund contribution which are not fed in the accounting

system. Therefore, the TaxPayerCo. is not required to

update the accounting system and the time extimate shall remain 0.

5. Preparation and maintenance of mandatory tax records if required (see section A for definition of mandatory tax records)

0 Under the Indian Income Tax Act, maintenance of tax records is not

mandatory. Hence, the TaxPayerCo. is not required to

maintain the separate tax records in India.

6. Other activities undertaken for preparation of profit taxes in your country (please specify)

Total preparation time for profit taxes 28 10 Reasons for reduction in time explained at the appropriate

places

31

FILING — Profit taxes

Time last year: Hours per year

(2015)

Updated time if applicable: Hours per

year (2016)

Please briefly outline the main steps and tasks for each time

entry.

7. Completion of tax return forms 6 3 ITR-6 (excel utility of the income tax return) is required to be filed by the Taxpayer Co. As the case

study does not require major adjustments to be made, the time

required to complete the tax return form would invlove filling up the details readily available

from the balance sheet and profit and loss account and would

therefore would take less time. Learning Curve: No change in



8. Time spent submitting forms to tax authority, which may include time for electronic filing, waiting time at tax authority, etc.

1 0.5 The tax return form filled by the TaxPAyer Co. is validated by the

excel utility and a .xml version file is generated which needs to be mandatorily uploaded online on

the Income tax portal by the corporate taxpayer. Therefore,

the time estimated for uploading the tax return form on the online portal is estimated to be minimal.

9. Other activities undertaken for filing of profit taxes in your country (please specify)

Total filing time for profit taxes 7 3.5 Reasons for reduction in time explained at the appropriate

places

PAYMENT — Profit taxes


(2015)


year (2016)


entry.

10. Calculations of tax payments required, including if necessary the extraction of data from accounting records

3 0 With the caluculation of tax liability, the details related to tax payment would automatically be

available to the company. This exercise need not be done again.

11. Analysis of forecast data and associated calculations if advance payments are required (for example, quarterly installment payments based on estimates of expected tax liability)

5 2 For computation of advance tax liability, the Taxpayer Co.would be

required to make minor adjustments (i.e. related to

depreciation) and therefore, minimal time is estimated for this

exercise. Also, for advance tax payment is required to be made

online and there is no

32

requirement to file any return with the tax authorities. It is

generally computed on the basis of estimates and at times, the

company makes ad-hoc payment based on average tax payment

trend in earlier years.

12. Time to make the necessary tax payments, either online or at the tax authority (including time for waiting in line and travel if necessary)

2 0.5 Alll the payments are required to be mandatorily paid and filed

online. There is no requirement of manual interaction and no time

involved for waiting in line.

13. Other activities undertaken for payment of profit taxes in your country (please specify)

Total payment time for profit taxes 10 2.5 Reasons for reduction in time explained at the appropriate

places

Total compliance time (preparation, filing and payment) for profit taxes

45 15 Reasons for reduction in time explained at the appropriate

places

4.3 Compliance Time for Labor Taxes and Mandatory Contributions Please note that according to the case study assumptions, TaxpayerCo. has 60 employees. 4.3.1 Is last year’s information provided in the tables below for preparation, filing and payment of labor taxes and mandatory contributions accurate and up to date for 2016?

Yes. No. If no, please update the tables below. NA. Labor taxes or contributions do not exist in my country.

PREPARATION — Labor taxes and mandatory contributions


(2015)


year (2016)


entry.


24 6 1. Salary sheets are already prepared in the software and data

can be easily extracted from software for computing labor

contribution. Also, generally the company uses basis accounting

software such as Tally for preparing its accounting records and therefore, extraction of such

reports would not take longer time.

2. For profession tax, the Taxpayer Co. generaly have automated

excel sheets with macros inbuilt in it to compute the profession tax

liability. For the casestudy company, it would not take much time for gathering data from the

33

salary sheets as all the employees are based in Mumbai and the

salary slab is defined under the Profession tax.


the pace of doing work. .


4 4 1. The Company would be required to compute the salary on which the contribution is required

to be made as per the PF Act. 2. No additional analysis is

required for the Profession Tax.


16 10 1. The calculation of contribution would be similar to last year and would not involve much time as

employee's salary and details remain the same.

2. Only Profession Tax calculation is taken in to consideration. Once the return is prepared, it gives the

tax liability. Since this is already covered by Point No. 1 as

discussed above, no additional time is required. Learning Curve:

No change in business and no major change in turnover.

Employees will fasten the pace of doing work.


NA NA


4 3 Learning Curve: No change in business and no major change in turnover. Employees will fasten the pace of doing work.

6. Other activities undertaken for preparation of labor taxes and mandatory contributions in your country (please specify)

Total preparation time for labor taxes and mandatory contributions


places

FILING — Labor taxes and mandatory contributions


(2015)


year (2016)


entry.

7. Completion of tax return forms 8 6 The salary sheets for feeding in return is alaready available with

the company and would not required major time to copy the

same in the return. Learning Curve: No change in


34



4 3 1. Return filing process under Profession Tax is end to end

online and hence waiting time at tax authorities is redundant.

2. Learning Curve: No change in business and no major change in turnover. Employees will fasten


9. Other activities undertaken for filing of labor taxes and mandatory contributions in your country (please specify)

Total filing time for labor taxes and mandatory contributions


places

PAYMENT — Labor taxes and mandatory contributions


(2015)


year (2016)


entry.


25 2 Tax is already available in the salary sheet of employees or

could be easily calculated (specific percentage of salary).


the pace of doing work. Further, Once return is prepared, tax liability is determined. Hence

separate time is not required for calculation of tax payment as it is

the part of the return preparation.


12. Time to make the necessary tax payments, either online or at the tax authority (including time for waiting in line and travel if necessary)

6 0.5 All the payments are required to be made mandatorily online and hence, would reduce the time to one hour spread over the entire year. Also, no time for waiting in

line at tax authority and travel time is required for tax payment.



13. Other activities undertaken for payment of labor taxes and mandatory contributions in your country (please specify)

Total payment time for labor taxes and mandatory contributions

31 2.5 Reasons for reduction in time explained at the appropriate

places

35

Total compliance time (preparation, filing and payment) for labor taxes and mandatory contributions

91 34.5 Reasons for reduction in time explained at the appropriate

places

4.4 Compliance Time for Consumption Taxes 4.4.1 Is last year’s information provided in the tables below for preparation, filing and payment of VAT, sales tax and/or GST accurate and up to date for 2016, considering that TaxpayerCo. has annual turnover of INR 84,373,656?

Yes. No. If no, please update the tables below. NA. VAT/sales tax/GST do not exist in my country.

PREPARATION — VAT, sales tax and/or GST


(2015)


year (2016)


entry.


12 6 Return is made invoiced based. Most of the fields of the return

are getting auto populated from the Sales and Purchase Anx.

Dealer is not required to make summary of the figures for filing

of the returns. Hence time is significantly reduced.


5 0 Not applicable. Data for filing and payment is gathered from the books of accounts kept by the

dealer in regular course of business.


0 0 No change suggested


4 4 Updating the tax rate in the accounting software does not takes time as it involves just

creating a ledger account in Tally with the new VAT rate.




24 0 Dealer extracts data from the regular books of accounts he is

required to keep for the business purpose. No additional books of

accounts are required for the preparation of return. Pl also refer the answer to the Question 5c of

the B.Reform update.

6. Other activities undertaken for preparation of VAT/sales tax/GST in your country (please

10 0 There are no other activities remained to be performed after

36

specify) considering the above mentioned fields.

Total preparation time for VAT/sales tax/GST 55 10 Reasons for reduction in time explained at the appropriate

places.

FILING — VAT, sales tax and/or GST


(2015)


year (2016)


entry.

7. Completion of tax return forms 12 8 The accounting software has the VAT rate feeded in it and

therefore, it would not take much time in feeding the data in the

VAT return forms.


4 0.5 Return filing process is end to end online and hence waiting time at

tax authority is redundent.

9. Other activities undertaken for filing of VAT/sales tax/GST in your country (please specify)

18 0 There are no other activities undertaken for filing of returns

Total filing time for VAT/sales tax/GST 34 8.5 Reasons for reduction in time explained at the appropriate

places.

PAYMENT — VAT, sales tax and/or GST


(2015)


year (2016)


entry.


12 0 This requires to be clubbed with the return preparation. When

return is prepared, tax liability is calculated automatically. No need

to extract data separately for calculation of tax.


NA NA

12. Time to make the necessary tax payments, either online or at the tax authority office (including time for waiting in line and travel if necessary)

4 0.5 All the payments are required to be mandatorily paid

and filed online. There is no requirement of manual

interaction and no time involved for waiting in line.

13. Other activities undertaken for payment of VAT/sales tax/GST in your country (please specify)

0 0

Total payment time for VAT/sales tax/GST 16 0.5 Reasons for reduction in time explained at the appropriate

places.

Total compliance time (preparation, filing and payment) for VAT/sales tax/GST


places.

37

4.4.2 Is TaxpayerCo. required to submit invoices or schedule of invoices to support the figures reported in the VAT/sales tax/GST returns? No 4.4.3 If yes, how much time (in hours) does it take TaxpayerCo. to collate and submit these invoices or schedule of invoices? Please also indicate UNDER WHICH STEPS in (1) preparation, (2) filing or (3) payment you have included any required time for collating and submitting these invoices/schedule of invoices. The schedule of invoices is included in the details required to be filed in the return. However, the invoices are not required to be physically submitted with the tax department.

C.5 Postfiling procedures

In this section, please consider the same case study company TaxpayerCo. as described in section A. “Case Study Assumptions”. We present below additional specific assumptions that are important for answering the postfiling questions.

5.1. VAT Cash Refund

Please consider the following scenario for a VAT refund: In June 2016, TaxpayerCo. makes a large capital purchase. TaxpayerCo. buys one additional machine for manufacturing pots. The value of the machine is: INR 5,223,131.11.

The machine is manufactured domestically. It is not imported.

The additional capital purchase is only considered for the postfiling process.

Assume management of TaxpayerCo. prefers to claim cash VAT refund instead of carrying forward excess input VAT if both options are available.

The seller of the machinery is registered for VAT.

If carried forward, excess input VAT incurred in June will be fully recovered after four (4) consecutive months.

5.1.1 Please indicate whether any of the following applies to your country:

Last year’s response: calendar year 2015 (January 1, 2015 – December 31, 2015)

Updated response: calendar year 2016 (January 1, 2016 – December 31, 2016)

Please explain:

There is no VAT or General Sales Tax. No No No change

Consumption taxes (e.g. Retail Sales Tax) are levied only at the point of final sale (i.e. tax is not levied on the purchase of the machine by TaxpayerCo, but is due on final sales by TaxpayerCo to its customers).

No No No change

The purchase of a machine for use in manufacturing is not subject to VAT.

No No The purchase invoice of the

machinery would have VAT levied

on it and the TaxpayerCo would be required to pay

the same to the seller of the machinery.

VAT paid on the purchase of the machine is not recoverable.

No No The VAT paid on the machinery is

recoverable either by way of refund

38

or credit. Also, VAT paid on purchase of

machinery can be included in the

Capital Cost of the machinery and would then be

included (100%) while computing depreciation on the machinery

There is no cash refund mechanism in place. No No As per Section 9 of the DVAT Act, 2004, the dealer at its option can claim refund of the VAT paid or

claim tax credit as 1/3

rd in the tax

year in which excess is paid and balance 2/3

rd in

the subsequent 2 consecutive years.

DVAT Act - goo.gl/uHP3jw

VAT cash refunds are never applied in practice. No No No change

The law mandates the excess input VAT to be carried forward for a specified period of time before a cash refund can be requested.

No No No change

Please indicate the mandatory carry forward period (e.g. 3 months).

0 Carry forward

of the excess

input is not

mandatory.

5.1.2 Please indicate whether the following applies to your country:



Please explain:

Taking into consideration the parameters of the case study company, are VAT cash refunds restricted to specific type of taxpayers or to specific conditions e.g., only exporters, company must be less than two years old? Please state the reasons that apply.

CENVAT: restricted to international traders and others VAT: carry forward until the end of the fiscal year (March)

VAT: VAT cash refunds are not

restricted to specific type of taxpayers or

specific conditions.

VAT cash refund is not restricted

to specific type of taxpayers. Any

registered dealer who is entitled to refund as per the provisions of the law can apply for

the refund. Dealer which has more input VAT

than that of output VAT may

39

claim refund irrespective of whether he is a

exporter or of any other type. refer Section 38 of the

Delhi Vat Act, 2004 -

goo.gl/uHP3jw

5.1.3 For calendar year 2015, the following VAT rate was used for the table below: 12.5% for VAT and 12.5% for CENVAT% If the VAT rate(s) is different for calendar year 2016, please provide details of the VAT rate(s) you used for the table below (specify the rate and explain why you used that rate): The VAT rate remains the same. Input VAT will exceed Output VAT in June 2016 as shown in the table below:

Output VAT Input VAT

Sales = INR 7,031,138.04

VAT rate * 7,031,138.04

Capital purchase = INR 5,223,131.11

VAT rate * 5,223,131.11

Raw material expenses = INR 5,859,281.7

VAT rate * 5,859,281.7

VAT refund VAT rate * ((5,223,131.11 + 5,859,281.7) - 7,031,138.04)

If TaxpayerCo. must first carry forward the excess credit for a period of 4 months or more, please answer the next questions on VAT refunds assuming hypothetically that after the end of the mandatory period to carry forward the excess input VAT, an amount of excess credit remains to be recovered by TaxpayerCo.

If TaxpayerCo. must first carry forward the excess credit for a specified period of time that is less than 4 months, please answer the next questions on VAT refunds considering that TaxpayerCo. will request a refund for the amount of excess credit that remains to be recovered.

If there is no VAT or General Sales Tax in your country, please proceed to section 5.2.

If VAT refunds are not applicable to the VAT case study scenario described above, please proceed to section 5.2.

General Questions on VAT refunds Please provide answers in respect to calendar year 2016 (January 1, 2016 – December 31, 2016). If the answers are the same as last year’s response (calendar year 2015), please insert ‘no change’ in respect to calendar year 2016 or chose the same answer as last year's response.

Last year’s response: calendar year 2015 (January 1, 2015 –

December 31, 2015)

Updated response: calendar year 2016 (January 1, 2016 –

December 31, 2016)

5.1.4 Does the law in your country prescribe a time limit (from the moment of submission of refund claim) for the tax authority to pay a VAT refund claim?

Not Applicable Yes

5.1.4a If yes, please provide the time limit. Not Applicable As per Section 38 of the Delhi VAT Act 2004, the tax

authorities grant the refund to the person within one month

40


December 31, 2015)


December 31, 2016)

after the date on which the return was furnished or claim

for the refund was made. DVAT Act - goo.gl/uHP3jw

5.1.4b Please provide legal basis (name of legislation and article):

Not Applicable Section 38 of the Delhi VAT Act 2004 - goo.gl/uHP3jw

5.1.4c If yes to 5.1.4, please indicate the extent to which the time limit is applied in practice.

Not Applicable Always

5.1.5 Does the tax authority in your country impose a minimum amount for a VAT refund claim in order for taxpayers to be eligible for a VAT refund?

-Click to Select- No

5.1.5a If yes to 5.1.5, please specify the minimum amount needed for a claim to be made.

Not Applicable

Time to comply with requesting a VAT cash refund

For questions 5.1.7 – 5.1.15 you should only include time that is in addition to the time captured in the main questionnaire for preparing and filing the standard VAT return. Please answer questions 5.1.7 – 5.1.15 based on the VAT case scenario described above. Please provide answers in respect to calendar year 2016 (January 1, 2016 – December 31, 2016). If the answers are the same as last year’s response (calendar year 2015), please insert ‘no change’ in respect to calendar year 2016 or chose the same answer as last

year's response.


December 31, 2015)


December 31, 2016)

5.1.7 Please explain in detail how TaxpayerCo. would request a VAT refund (e.g. submit a specific VAT refund form, complete a section of the standard VAT return, tick a box in the standard VAT return, etc.).

Not Applicable As per Section 38 read with

DVAT Rules, in case of a registered dealer, return filed in Form DVAT-16 is

also the claim for refund. A claim for refund of any

other amount may be made in Form DVAT-21, giving the grounds on which the claim is made. Refer Rule 34, 27,

28 URL for Rules: goo.gl/ZTAkcc

URL for Section:

goo.gl/JnB0Zl

5.1.8 Please estimate the time in business hours spent by TaxpayerCo. on gathering VAT information from internal sources, including time spent on any additional analysis of accounting information and calculating the VAT refund amount.

Not Applicable As the data is the same used for filing the VAT

return, there is no time involved for gathering VAT information from internal

resources.

41


December 31, 2015)


December 31, 2016)

5.1.9 Please estimate the time in business hours spent by TaxpayerCo. on preparing the VAT refund claim.

Not Applicable As the process is mandatorily online , the

time required is 0.5 hours. Refer link for submitting

online application - http://dvat.gov.in/website/

home.html#

5.1.10 List all documents that TaxpayerCo. would need to prepare and submit to the tax authority to substantiate the claim for a VAT refund.

Not Applicable The return copy and copy of judgment/order if the refund is claimed on

account of judgment/order.

5.1.11 Please estimate the time in business hours spent on preparing all additional documents that are needed to substantiate the claim for the VAT refund. Please include all documents that are routinely requested by the tax office after submission of the claim, but before audit, if any.

Not Applicable As all the documents required for refund

applications is the same as required for filing VAT

returns, therefore no time is required for preparing documents for filing VAT

refund.

5.1.12 Are both (i) the standard VAT return and (ii) the claim for the VAT refund (along with the additional documents) submitted at the same time?

-Click to Select- At the same time

5.1.12a If separately, please explain how does the majority of companies – such as the one considered in the case study – submit these documents?

-Click to Select- Electronically

5.1.12b If separately, please estimate the time in business hours TaxpayerCo. would spend in submitting the VAT refund claim and all additional documents. If in person at the tax office, please include waiting time to submit all necessary information.

Not applicable

5.1.13 Would TaxpayerCo. be required to make representation in person at the tax office after submitting the claim?

Not Applicable No

5.1.13a If yes and this time estimate is not included in 5.1.12b, please estimate the time in business hours spent at the tax office including waiting in line and travel if necessary.

Not Applicable Not applicable

5.1.14 Please describe any other mandatory activities/tasks associated with the VAT refund.

Not Applicable No such activity is required.

5.1.15 Please estimate time in business hours spent on each of them (e.g. obtaining internal or external advice).


Time to obtain a VAT cash refund

Please answer questions 5.1.15 – 5.1.28 based on the VAT case scenario described above. Please provide answers in respect to calendar year 2016 (January 1, 2016 – December 31, 2016). If the answers are the same as last year’s responses (calendar year 2015), please insert ‘no change’ in respect to calendar year 2016 or chose the same answer as last

year's response. Please consider the following definition of tax audit: an examination of taxpayer’s financial records and dealings by the tax authority to verify whether such taxpayer has correctly assessed and reported their tax liability and fulfilled other obligations. We are only

42

considering tax audits that require interactions between TaxpayerCo. and the Tax Authority and which are often more detailed and extensive than other types of examination, such as general desk checks, compliance visits/reviews or document matching programs.


December 31, 2015)


December 31, 2016)

5.1.15 In the absence of the VAT cash refund case scenario, how often would you expect the case study company to be subject to a VAT audit?

-Click to Select- Once every 2 - 3 years

5.1.16 What percentage of companies with a similar case of excess input VAT resulting from a large capital purchase would be audited by the tax authority as a result of requesting a cash VAT refund? Please only consider tax audits that require interactions between TaxpayerCo. and the Tax Authority.

-Click to Select- 50% - 74%

5.1.17 Based on your experience, what is the most common type of audit that the scenario described above would trigger?

Not Applicable Limited scope audit

5.1.17a Please explain: 1. As per Section 38 of the Delhi VAT Act 2004, the

tax authorities grant the refund to the person within

one month after the date on which the return was

furnished or claim for the refund was made.

2. Where a notice is issued by the Commissioner for

investigation or inquiry into the business affairs of the

person, the amount shall be carried forward to the next tax period as a tax credit. 3. Amount of refund given

is INR 1923.7 Million during 2015-16 (01-apr-2015 to 31-

mar-2016) and Amount of refund given is INR 8594.4

Million during 2016-17 (01-apr-2016 to 31-mar-2017)

by the Department of Trade & Taxes.

goo.gl/JnB0Zl

5.1.18 How would the most common type of audit indicated in 5.1.17 and applied to the given scenario be conducted in your country?

Not Applicable Office audit (attending to an auditor’s office)

If 50% or more cases would be audited by the tax authority, please respond to questions 5.1.19 - 5.1.27, if less than 50% please respond to questions 5.1.28 - 5.1.30. If in question 5.1.15, you responded that the company would be audited every year as a matter of course and even if the VAT cash refund case scenario described above would not trigger an audit by the tax authority, please still provide answers to questions 5.1.19– 5.1.27.

43


December 31, 2015)


December 31, 2016)

5.1.19 Please indicate the time (in calendar days) it takes the tax authority to start an audit from the moment of submitting the claim for a VAT refund and all necessary documents to the tax authority.

Amount of refund given is Rs. 192.37 CR during

2015-16 (01-apr-2015 to 31-mar-2016) and Amount of refund given is Rs. 859.44

CR during 2016-17 (01-apr-2016 to 31-mar-2017) by

the Department of Trade & Taxes.

5.1.20 Please specify the time (in business hours) TaxpayerCo. would spend in gathering information and preparing any additional documentation (information such as receipts, financial statements, pay stubs) as required by the tax auditor. If various rounds of interactions occur between TaxpayerCo. and the auditor, please estimate the total time for all these interactions.

Not Applicable All the details called for by the department are

generally available and maintained by the

company. No additional time is required to gather

and ore

5.1.21 Please list the documents TaxpayerCo. would most typically have to prepare for an auditor.

Not Applicable a. Profit & loss Account and Balance-sheet

b.Sales Summary c.Purchase Summary

d.Details of claims on Sales side.

e.Details of setoff claimed.

5.1.22 Please explain how does the majority of companies – such as the one considered in the case study – submit these documents (electronically, by email, by mail, at the tax office, at the taxpayer’s premises).

Not Applicable By mail

5.1.23 Please estimate the time (in business hours) TaxpayerCo. would spend in submitting the documents requested by the auditor. If in person, at the tax office, please estimate time in business hours spent at the tax office including waiting time. If in person and at the taxpayer’s premises, please put zero.

Not Applicable 3 hours

5.1.24 Please estimate the total time (in calendar days) from the moment an audit starts until there are no further interactions between TaxpayerCo. and the auditor (this estimate would include the various rounds of interactions between TaxpayerCo. and the auditor).

Not Applicable 4 days

5.1.25 Please estimate the total time (in calendar weeks), it takes for TaxpayerCo. to receive the final report from the auditor from the moment TaxpayerCo. has submitted all relevant information and documents, and there are no further interactions between TaxpayerCo. and auditor.

Not Applicable 1 week

5.1.26 Please indicate the time (in calendar weeks) it takes to receive the VAT refund from the moment the final audit report or decision is issued (assuming the decision is an approval of the VAT refund claim).

one month

5.1.27 How are the majority of VAT refunds released (online, at a bank, by mail, at the tax office, other)?

Not Applicable Electronically

44


December 31, 2015)


December 31, 2016)

If less than 50% cases would be audited by the tax authority, please respond to questions 5.1.26 – 5.1.28.

5.1.28 If the answer to 5.1.15 is less than 50% of cases, please assume that an audit will not take place. In this case, please indicate the time (in calendar days) it takes to receive the VAT refund from the moment of submitting the claim for a VAT refund and all necessary documents to the tax authority.

Not Applicable Not Applicable

5.1.29 If the answer to 5.1.15 is less than 50% of cases, please assume that an audit will not take place. In this case, please indicate the time (in calendar days) it takes to receive the VAT refund from the moment of approving the claim for the VAT refund by the tax authority.

Not Applicable Not Applicable

5.1.30 How are the majority of VAT refunds released (online, at a bank, by mail, at the tax office, other)?


5.2 Corporate income tax (CIT) underpayment Please answer the questions in this section based on the CIT error and underpayment scenario described below.

Please consider the following scenario for corporate income tax: an error in the calculation of the income tax liability (e.g. use of incorrect tax depreciation rates, or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and consequently an underpayment of corporate income tax.

Please consider that TaxpayerCo. itself discovered the error and voluntarily notified the tax authority of the error in the corporate income tax return (if it is possible in your country to notify the authorities).

Please consider that the value of the underpaid income tax liability is 5% of the corporate income tax liability due.

Please consider that TaxpayerCo. submits the corrected information after the deadline for submitting the annual tax return, but within the tax assessment period, if applicable.

Please provide answers in respect to calendar year 2016 (January 1, 2016 – December 31, 2016). If the answers are the same as last year’s responses (calendar year 2015), please insert ‘no change’ in respect to calendar year 2016 or chose the same answer as last

year's response.



5.2.1. Can TaxpayerCo. voluntary notify the tax authority of an unintentional CIT error of the type described in the assumptions above?

Yes Yes

If you answer Yes to 5.2.1, please provide answers to questions 5.2.1a – 5.2.4. If you answer No, please proceed to section 5.3

5.2.1a Please explain how TaxpayerCo. would notify the tax authority?

Electronically Electronically

5.2.1b Please list all documents TaxpayerCo. has to provide to the tax authority to correct and substantiate the error in the income tax return.

Amended tax return Amended/revised tax return

5.2.1c Please estimate the time (in business hours) TaxpayerCo. 4 2

45



would spend gathering information and preparing the documents required to notify the tax authority.

5.2.1d Please explain how does the majority of companies – such as the one considered in the case study - submit these documents.


5.2.1e Please estimate the time (in business hours) TaxpayerCo. would spend in submitting the documents.

1 0.5 (mandatorily online for companies to file revised

return electronically)

5.2.1f Is the payment of the additional CIT liability and the submission of the amended return (along with the additional documents) done at the same time?

-Click to Select- At the same time

5.2.1g If separately, please estimate the time (in business hours) TaxpayerCo. would spend in making the additional tax payment.

Not applicable

5.2.1h Please explain how that payment is processed (electronically, through a bank, at the tax office)?


5.2.2 Please indicate whether or not TaxpayerCo. is allowed at that stage to make additional payments.

-Click to Select- Yes

5.2.3 If TaxpayerCo. is NOT allowed to make additional payments at that stage, please explain how long does TaxpayerCo. have to wait (in calendar days) until a tax notice/reassessment is issued?

Not Applicable

5.2.4. Please explain if this tax notice/reassessment is dependent of an audit taking place.

The revision of return would not trigger the audit.

5.3 Corporate income tax audit Please provide answers based on the CIT case scenario described above. Please provide answers in respect to calendar year 2016 (January 1, 2016 – December 31, 2016). If the answers are the same as last year’s responses (calendar year 2015), please insert ‘no change’ in respect to calendar year 2016 or chose the same answer as last

year's response. Please consider the following definition of tax audit: an examination of taxpayer’s financial records and dealings by the tax authority to verify whether such taxpayer has correctly assessed and reported their tax liability and fulfilled other obligations. We are only considering tax audits that require interactions between TaxpayerCo. and the Tax Authority and which are often more detailed and extensive than other types of examination, such as general desk checks, compliance visits/reviews or document matching programs.



5.3.1 In the absence of the CIT error, how often would you expect the case study company to be subject to a corporate income tax audit?

-Click to Select- Once in 5 years or more

5.3.2. Based on your experience, what percentage of similar cases of self-reporting a CIT error and underpayment of CIT liability as described in the case study scenario above would trigger an audit by the tax authority? Please only consider audits which require interactions between

-Click to Select- 0% - 24%

46



the TaxpayerCo. and the Tax Authority.

5.3.3 Based on your experience, what is the most common type of audit that the scenario described above would trigger?

Full Audit Limited scope audit

5.3.3a Please explain: Majority of cases similar to Case Study - TaxpayerCo (small

company) are subject to Limited Scope Audit. Few cases

are subject to Full Audit

5.3.4 How would the most common type of audit indicated in 5.3.2 and applied to the case scenario described above would be conducted in your country?

Office Audit Office audit (attending to an auditor’s office)

If 50% or more of cases would be audited by the tax authority, please respond to questions 5.3.5 – 5.3.10. If less than 50%, please proceed to section 5.4. If in question 5.3.1, you responded that the company would be audited every year as a matter of course and even if the CIT case scenario described above would not trigger an audit by the tax authority, please still provide answers to questions 5.3.5 – 5.3.10.

5.3.5 Please indicate the time (in calendar days) it takes the tax authority to start an audit from the moment of submitting an amended CIT return and making the payment of the additional CIT liability due.

Not applicable as explained above. Filing revised return

does not lead to Audit.

5.3.6 Please specify the time (in business hours) TaxpayerCo. would spend in gathering information and preparing any additional documentation (information such as receipts, financial statements, pay stubs) as required by the tax auditor. If various rounds of interactions occur between TaxpayerCo. and the auditor, please estimate the total time for all these interactions.

47

5.3.7 Please list the documents TaxpayerCo. would most typically have to prepare for an auditor.

All financial books and other statutory records: - Financial statements

- Tax audit reports - Computation of income

with detailed notes thereon

- Challans for payment of taxes

- Withholding tax certificates

- Evidences of expenses incurred

5.3.7a Please explain how does the majority of companies – such as the one considered in the case study -submit all these documents?

In person, at the tax office Not applicable

5.3.8 Please estimate the time (in business hours) TaxpayerCo. would spend in submitting the documents requested by the auditor.

1.5 Not applicable

5.3.9 Please estimate the total time (in calendar days) from the moment the audit starts until there are no further interactions between TaxpayerCo. and the auditor (this estimate would include the various rounds of interactions between TaxpayerCo.

180

Not applicable

47



and the auditor).

5.3.10 Please estimate the total time (in calendar weeks), it takes for TaxpayerCo. to receive the final report from the auditor from the moment TaxpayerCo. has submitted all relevant information and documents, and there are no further interactions between TaxpayerCo. and auditor. Please assume the final decision of the audit is an agreement with the self-assessed tax liability of TaxpayerCo.

2 Not applicable

5.4 Overall Time variance

VAT cash refund case scenario

Please verify the overall time required to obtain a VAT cash refund.

Question Time (in weeks)

Please explain:

Last year, the overall time in calendar weeks to obtain a VAT cash refund per the case study scenario in Delhi from the moment of submitting the claim for a VAT cash refund– was estimated at:

Not applicable On an average VAT cash refund is

released in 4 weeks

This year, based on your experience and referring to the parameters of the case study of a large capital purchase, what is the overall time in calendar weeks to obtain a VAT cash refund from the moment of submitting the claim for a VAT refund?

On an average cash refund is released in

4 weeks.

Amount of refund given is Rs. 192.37 CR during 2015-16

(01-apr-2015 to 31-mar-2016) and

Amount of refund given is Rs. 859.44 CR during 2016-17

(01-apr-2016 to 31-mar-2017) by the

Department of Trade & Taxes.

Based on your experience and the same case study assumptions, what can be the fastest time (calendar weeks) in practice to obtain the VAT cash refund?

1 week

Based on your experience and the same case study assumptions, what can be the slowest time (calendar weeks) in practice to obtain the VAT cash refund?

4 weeks

If there is a difference in time, what is the main reason behind it?

Corporate Income Tax (CIT) audit case scenario

Please verify the overall time required to complete a corporate income tax audit

Question Time (in weeks)

Please explain:

Last year, the overall time in calendar weeks to complete a CIT audit per the case study scenario in Delhi from the moment the audit starts – was estimated at:

27.7 Not applicable. As explained above, the

filing of revised return does not

48

trigger audit.

This year, based on your experience and referring to the parameters of the case study scenario of self-reporting an error in the CIT return and underpayment of liability due, what is the overall time in calendar weeks to complete the CIT audit from the moment the audit starts?

NA

Based on your experience and the same case study assumptions, what can be the fastest time (calendar weeks) in practice to complete the CIT audit?

NA

Based on your experience and the same case study assumptions, what can be the slowest time (calendar weeks) in practice to complete the CIT audit?

NA

If there is a difference in time, what is the main reason behind it? NA

5.5 General Questions on tax audit by tax authorities 5.5.1 Is there a comprehensive audit manual (documented material on audit policies and procedures) that is readily accessible to all audit staff and/or general public? Yes, Instructions on Limited Scrutiny are issued to Income Tax Department employees. Refer Instruction No. 5/2016 dated 14th July 2016 and Instruction No. 20/2015 dated 29 September 2015 - goo.gl/g2kTrP

5.5.2 Does the audit manual or any relevant guidelines explain the types (and numbers) of audits to be conducted, and the circumstances in which specific types of audits are to be carried out? All Selection is done Centrally based on Approved Risk Parameters approved by the Central Board of Direct Taxes 5.5.3 Do tax auditors in your country often carry out computer-assisted tax audits (e-audits) where they utilize the company’s electronic transaction data as much as possible? Income tax department also uses Computer Aided Scrutiny Selection (CASS) for the audit purpose. Instructions on Limited Scrutiny are issued to Income Tax Department employees. Refer Instruction No. 5/2016 dated 14th July 2016 URL: goo.gl/wSYzNH and Instruction No. 20/2015 dated 29 September 2015 URL: goo.gl/PDrPCy

5.5.4 Do most companies similar to the case study company in your country maintain and share their accounting records with the tax authority in electronic format? If yes, does the tax authority use a remote online connection to the companies’ financial systems to access their archives of invoices, general ledger and other data? No

49

6. NEW QUESTIONS: Childcare services and tax benefits to employers, private stand-alone childcare centers and parents

This year we are collecting data on tax benefits associated with childcare services applying to private-sector employers, private stand-alone childcare centers and parents. This data will be used by the Women, Business, and the Law unit of the World Bank Group. This section measures services provided by private businesses to children under the age of 6 years old, which may be regulated differently depending on the age of the child. Please indicate responses based on the legislation applicable to each age group. In this section, all information listed under ‘Last Cycle’ refers to the laws and regulations effective up to April 30, 2015. In columns ‘This Cycle’, please provide your answers and legal citations referring to the laws and regulations that are currently effective. If you disagree with the information provided for the last cycle, you may note a correction (the data presented is incorrect) or a reform (a modification in the law or the enactment of new legislation after 30 April 2015). Assumptions:

Assume that the employee (a man or a woman):

Resides in Delhi (the economy's main business city).

Has reached the legal age of majority and is capable of making decisions as an adult. If there is no legal age of majority, the employee is assumed to be 30 years old.

Is sane, competent, in good health, has no criminal record, and is a lawful citizen of India Delhi.

Is employed full-time under a permanent contract in a privately-owned, limited liability company.

Is not a member of a union, unless membership is mandatory.

Has been working long enough to accrue all benefits measured in this section.

Has one child and is currently legally married.

6.1. GOVERNMENT INCENTIVES TO EMPLOYERS This section measures government tax and non-tax incentives for private limited liability companies that provide and/or support childcare services. Benefits are granted directly to employers for (a) directly establishing childcare centers or financing childcare services by granting employees allowances for the use of childcare; or (b) by financing pre-existing childcare centers to be used by employees. In your response, please explain if different provisions apply to (a) and (b) above. 6.1.1 Do employers receive tax benefits for providing or supporting childcare services for children under 6 years? Tax benefits are tax credits or deductions on the company’s income. This does not include VAT benefits or tax benefits on social security payments or other contributions paid by the employer.

Age of Child This cycle Legal Basis (please cite law and article)

1 year old Not Applicable

2 years old Not Applicable




6.1.2 Do employers receive non-tax benefits for providing or supporting childcare for children under 6 years?







6.1.3 Please include any additional comments and links to laws relevant to this section: Not Applicable

50

6.2 GOVERNMENT INCENTIVES TO STAND-ALONE CHILDCARE CENTERS This section measures government tax and non-tax benefits for private stand-alone for-profit childcare centers (i.e., benefits that are granted directly to the childcare provider). Benefits included under this section are of a general nature and are not linked to a specific child. 6.2.1 Do private childcare centers receive tax benefits for providing childcare services for children under 6 years? Tax benefits are tax credits or deductions on the center's income. This does not include VAT benefits for services provided by the childcare center.







6.2.2 Do private childcare centers receive subsidies or other non-tax benefits for providing childcare services for children under

6 years? Non-tax benefits include monetary and non-monetary support, such as technical support, property or financial incentives.







6.2.3 Does the government directly provide childcare services for children under 6 years? Public childcare services are provided directly by the government for all children universally. These services may be provided at no cost or for a small fee. If these services are available only for low-income families, please indicate so in the legal basis field.







6.2.4 Please include any additional comments and links to laws relevant to this section: 6.3 GOVERNMENT INCENTIVES TO PARENTS (EMPLOYEES) This section measures government tax and non-tax benefits for parents employed in the private sector. Non-tax benefits are monetary benefits granted to the parent or directly to the childcare provider for the benefit of a certain parent (employee). This section does not cover unemployment benefits. 6.3.1 Are there any gender-specific tax deductions or tax credits that are only applicable to:

Answer and Legal Basis (please cite law and article)

Last cycle This cycle Last cycle This cycle

Men No Not Applicable No applicable provisions could be located

No such provisions

Women No Not Applicable No applicable provisions could be located

No such provisions

6.3.2 Are childcare payments tax deductible for parents of children under 6 years? Childcare payments are payments made by the parent to a childcare provider. This question captures tax deductibility of payments paid by a parent specifically for childcare services.



51






6.3.3 Does the government provide employed parents with children under the age of 6 years with non-tax benefits specifically

for the use of childcare? Non-tax benefits include allowances or financial support granted by the government to parents employed in the private sector specifically for childcare services. The payment can be granted to one or both parents or directly to the childcare provider to benefit a certain child. Please specify if the payment is granted to one parent only and if so which parent.







6.3.4 If 6.3.3 is yes, is it based on income?







6.3.5 Do parents receive tax benefits (not specific to childcare services) for children under 6 years? Tax benefits include tax deductions and/or credits that are granted to one or both parents. If the payment is granted to a specific parent, please indicate so in the legal basis field and if so which parent.







6.3.6 If 6.3.5 is yes, is it based on income?







6.3.7 Do parents receive non-tax benefits (not specific to childcare services) for children under 6 years? Non-tax benefits

include allowances or financial support granted by the government to parents employed in the private sector specifically for childcare services. This payment is not specific for the use of childcare services). Please indicate if the benefit is granted based on income.







52

6.3.8 Does the tax law require married couples to file personal income taxes jointly? If the answer depends on the matrimonial regime, please provide details for each regime in the legal basis field.

Answer Legal Basis (please cite law and article)

No

6.3.9 Please include any additional comments and links to laws relevant to this section: 6.4. REFORMS AND PENDING LEGISLATION 6.4.1. Have there been any reforms in the laws and regulations relating to the childcare services and associated taxes and incentives since 30 April, 2015? No 6.4.2 If Yes, please describe in detail and, if possible, provide a citation to the new legislation or regulation (you can also email us a copy of the new legislation or regulation as an attachment to [email protected]). 6.4.3 Are there currently any draft laws or regulations going through the legislative process or pending approval related to childcare services and associated taxes and incentives? The answer is yes if a new law or regulation or amendment to the existing laws and regulations is currently going through the legislative process to be adopted by the legislative body. No 6.4.4 If Yes, please describe in detail and, if possible, provide a link to the draft legislation or regulation (you can also email us a copy of the draft legislation or regulation to [email protected]).



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