You might be a non resident Indian (NRI) or a foreigner who is looking to make a play for the market in India for some reason or the other. Quite often, as a foreign investor you may also be eager to know about the various ways in which you are able to use the money that you have in India and just grow it. You would be happy to know that there are several ways in which you would be able to invest in India even if you are not an Indian national.
Here you can follow some investment plans that are providing services to non-resident Indian (NRI) for investing in Indian company and abroad.
Foreign direct investment
Foreign direct investment (FDI) is the easiest way for one to invest in India in case that entity is not Indian. There are however certain activities and sectors where you will not be allowed to do this as such. Investments such as these are normally done under the aegis of the Foreign Exchange Management Act (FEMA). India has an FDI policy as well, which places caps on certain sectors. There are two major ways through which this can happen – the automatic route and the government route. There are certain sectors and activities that are covered specifically by the two routes. Ones that cannot be done through the automatic route can be done via the government route.
The investment options open to you through the automatic route are normally strategic investments that have to be done over the longer term. In case of the government route the main authorities are the Foreign Investment Promotion Board (FPIB).
Foreign portfolio investment
You can invest in India as a foreigner through the various portfolio investment schemes (PIS). However, for that you need to be eligible – the only kinds of entities that are allowed to perform investments such as these are foreign institutional investors (FIIs), persons of Indian origin (PIO), NRIs, and qualified foreign investors (QFIs). They can invest in the convertible debentures and shares of Indian companies, the stock exchanges of India, and units of various mutual funds operating within India. An FII is basically an institution that has been incorporated outside India.
Foreign venture capital investors
A foreign venture capital investor (FVCI) is an entity who is established or has been incorporated outside the country. They are allowed to invest in domestic venture capital (VC) funds as well as VC undertakings. The latter are basically unlisted companies operating within India. In case you want to work as an FVCI in India you would have to procure separate registration from SEBI (Securities and Exchange Board of India). You would also need to invest at the very least 66.67 per cent of your investible funds in equity linked instruments and unlisted equity shares.
Other kinds of investments
NRIs can invest in various government securities in India – the same facility is afforded to the FIIs as well. Apart from this they can invest in any or all of the following options by companies in India:
There are however a few restrictions that are applied in these cases by the RBI.
Non repatriable investments
These options are meant only for PIOs and NRIs. In this case they can buy shares in Indian rupees – the investment can be done through an NRO (nonresident ordinary). In case you invest in these non repatriable investment options your earnings would be sent to the NRO account that you have opened for this purpose. By definition, the amount that you have invested in this scheme and the capital profits that you have made from the same cannot be sent outside India.
The term digital signature certificate (DSC) can be defined as the electronic version of a paper certificate or a physical one such as a driving license or passport. They normally serve as proofs of identity of a person and are used in certain cases only. It is just like a passport that demarcates the country whose citizen you are. Thanks to your passport you can legally travel to a country.
In much the same way you can use a DSC in order to prove your identity as such in an electronic context. With the help of your DSC you would also be able to get access to technology as well as various other services on the internet. You can also sign various documents digitally as well.
Types of Digital Signature Certificate (DSC)
The different types of digital signature certificates are classified as 3 classes such as –
Where these DSCs are being used?
The organizations or companies or individuals are required DSC for the purpose of –
Why are DSCs important?
With the help of a DSC you would be able to authenticate your signature electronically. You also get a high amount of security by using this in the context of your online transactions. This digital signature makes sure that the information, which you exchanged during a particular transaction, remains absolutely private. The certificate can also be used to encrypt information in such a way that only the intended recipient is able to read it.
When you sign in any documents digitally or electronically, you're basically assuring the addressee that no information has been misrepresented in as an interim measure. The DSC also helps you verify your identity as far as being the sender of said message is concerned.
How to obtain DSCs in India?
As far as India is concerned, the legally valid DSCs are issued by certain entities. The highest among them is the Controller of Certifying Authorities (CCA). Next in line are the certifying authorities (CAs) who have been licensed by the Indian government. A prominent name among them is eMudhra. You can get secure digital signatures from them.
There are different options over here that are supposed to suit the requirements of different kinds of individuals as well as organizations. As far as the application process is concerned, you can easily visit the official website of eMudhra and find out as to how you need to apply for the DSCs, it is nicely said by ClearTax.
There are number of vendors who have Certifying Authority like Emudhra, Ncode Solution, Sify, etc
If you're looking for any kind of DSC for your personal or business use, we will help you to obtain your DSC in Bengaluru, Karnataka or anywhere in India. Because you know that most of the works are done online in these days.
Procedure for Obtaining Digital Signature
Documents Required for Obtaining Class 2 Individual
Documents Required for Obtaining Class 3 Digital Signature for Organization
For Limited/Private Limited/OPC/LLP/Partnership/proprietorship with seal and sign
How are DSCs used?
The DSCs are used in a wide array of areas. You can use them in order to send and receive mails that have been signed digitally and are encrypted. They can be used in order to execute safe and sound transactions on the internet.
In fact, DSCs are also used in order to identify the other entities that may be taking part in a web-based transaction. You can use it for purposes such as eTendering and eProcurement. The DSCs are also used in order to file compliance with the Registrar of Companies in Ministry of Corporate Affairs (MCA).
If you wish to file your income tax returns on the internet then too you can use the DSCs. People also use DSCs in order to sign documents such as MS Word, PDFs, and MS Excel. If you wish to create a paperless office then this is easily the best bet that you got.
Are DSCs legal?
Ever since the Information Technology Act 2000 was enacted the DSCs have become legal in India. In fact, the CAs that issue these certificates work under the aegis of the Ministry of Information Technology of the government of India and it is the Information Technology Act that governs the entire procedure.
You should not though confuse a digital signature with a DSC. A digital signature is basically an electronic way of signing an electronic document. On the other hand, a DSC is basically a computer based record.
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DIN (Director Identification Number) can be described as a unique identification (UID) number much like the Aadhaar number. This one too is issued by the central government and is allotted to individuals who are looking to become a director of a company or is already an existing director of a company. This unique identification number (UID) will remain valid for a lifetime. All the information pertaining to the directors are updated in a central database and maintained over there and this is done through the DIN.
The specialty of DIN is that it would belong to one person even if she or he were a director at more than one company. Even in case if she or he left a company and joined another one this number would stay with her or him.
Why is DIN necessary?
The DIN is needed in order for a director to sign on returns, applications, and information that may be related to a company and is supposed to be submitted by the company as per some law. The DIN is normally mentioned below the signature of the director in such cases.
How to get DIN in India?
An important part of the process of getting DIN in India is to apply for the same. If any directors of the company intend to obtain Director Identification Number (DIN) in India, he shall have to make application in eForm DIR-3 through online on MCA portal.
For this, you would need to fill out a form electronically. Then you need to sign it electronically and upload it on the official portal of MCA21 (Ministry of Corporate Affairs). The link is http://www.mca.gov.in/mcafoportal/login.do. There are certain documents that need to be attached to the DIR 3 form such as your photograph, your identity proof, your residence proof, and verification. Now, under verification you would need to provide the following information:
In case you are not an Indian citizen you would have to submit your passport as the identity proof.
Your photograph, proof of residence, and proof of identity need to be attested by a chartered accountant, a cost accountant, or a company secretary. It is also essential that the professional doing the honours is a full-time professional.
As far as foreign nationals are concerned the attestation can be done by a foreign public notary or the Consulate of the Indian Embassy.
Once you have uploaded DIR 3 you would need to pay the fee at the next window screen. It needs to be paid via net banking, NEFT (National Electronic Funds Transfer), and credit card. You will not be allowed to make the payment manually.
After you have paid the application fee and submitted the application an application number would be generated by the system. And DIN Allotment Letter will send to the respective person. The application will be processed by the national government and a decision will be taken on approving or rejecting it.
In case your application has been approved you will receive communication from the central government having made the application.
In case the application has been rejected you shall also come to know of the reason of rejection through an email. The reason behind your rejection would also be put up on the website. You will be given 15 days in order to correct the reason. In case you are able to accomplish that particular goal you will be allotted your DIN else your application would be declared invalid by the central government.
You also need to inform all the companies where you are working as a director your DIN within a month of getting it. You would also need to inform the ROC (Registrar of Companies) within 15 days of having intimated your company/ies.
As far as India is concerned companies are formed as per Companies Act, 2013. It has been said in the section 2 (20) of this Act that only those organizations that are formed as per said Act. It has given a definition of companies saying that company is an incorporated association that is in essence an artificial individual, possesses a separate legal entity, has eternal succession, a common seal, and a common capital that has been made up of limited liability and shares that can be transferred.
Following are the various kinds of companies that can be formed as per Companies Act, 2013.
Public Limited Company
Section 2 (71) of the Companies Act defines a public limited company. It says that a public limited company is one that has a paid up capital of at least INR (Indian National Rupees) 5 lakh and is not a private company. A company such as this does not limit the transferability of shares. As per rules you need at least 7 members in order to form such a company. However, there is no upper limit as such regarding the number of members that such a company could have.
Such a company is also required to have a minimum of three directors. Its name also needs to end with the word limited. It has the right to accept public deposits and can also invite the public to subscribe to its debentures and shares. Even in case this public company opens a private company as its subsidiary the Act will regard it as a public company.
Private Limited Company
Section 2 (68) of the Companies Act defines a private limited company. In order for a company to be recognized as a private limited company it needs to have a minimum paid up capital of INR 1 lakh.
The company operates under a number of restrictions that have been mentioned in the Articles of Association and Memorandum. There are limits on the number of shares that can be transferred between members. There cannot be more than 50 members. It cannot invite or accept public deposits, and cannot also invite the public to buy its debentures.
However, it does enjoy some privileges as well. It can be started with as little as 2 members. There is no need for it to create a prospectus and it can get started right away after it receives the certificate of incorporation.
One Person Company
A one person company is one that has only one main owner. This owner possesses the entire amount of the company’s share capital. Normally, in these cases a few dummy members are selected just in order to meet the statutory requirements in India pertaining to the minimum numbers of people that should be there in a company. It needs to be incorporated as per Section 2 (62) of the Companies Act. In these cases, the owner enjoys limited liability – the other dummy members are given a share each.
Limited Liability Partnership
In India, limited liability partnerships (LLPs) are registered as Limited Liability Partnership Act, 2008. You need at least two partners in LLPs but there is no upper limit as far as owners are concerned. Here the share can be transferred but the transferee is not allowed to automatically become a partner as such.
How to incorporate companies in India?
Following are certain steps that you need to follow in order to incorporate companies in India:
Here you can look over the process of company registration in India. To get a brief knowledge of everything on company formation here we explained shortly to register a company with the 7 steps. The following below steps are must needed to incorporate a company in Bangalore Karnataka and all over in India.
Let’s starts the company registration procedure using these 7 steps:
Step-1: Select the Type of Company – Choosing the right business structure is an important decision for you which will help your enterprise drive efficiently and meet your business goals and visions that you want.
Step-2: Apply for Digital Signature Certificate (DSC) – It is an electronic certificate refers to the identity of a person as like as passport or driving license. DSC is used in certain cases for signing the various documents in digital medium.
Step-3: Apply for DIN (Director Identification Number) – It is a unique identification number which is allotted to director of the company according to Section 152, 153, 154 of Company Act, 2013. DIN is mandatory for all directors.
Step-4: Apply for Name Approval – Company shall give proposed name of company to ROC for approval of name. The name shall not be resembled to any other company name.
Step-5: Upload the SPICe Forms INC-32, INC-33 and INC-34 in MCA (Ministry of Corporate Affairs) for incorporating the company.
INC-32 – It contains the details of the company like SRN of form INC-1, the type of company, the class of company, the category of company, sub-category of company, Company is Having share capital or Not having share capital, Main division of industrial activity of the company, Capital structure of the company, Registered office address, Particulars of individual first subscriber(s) cum directors, Particulars of payment of stamp duty, Additional Information for applying Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) Information specific to PAN, Source of Income.
INC-33 (MOA) – It is a constitution of company which contains all the objects of the company. It is a document which describes activity and scope and relation with shareholders.
INC-34 (AOA) – It is a document which contains rules and regulations relating to the internal management of the company.
Step-6: Payment of Fees – After uploading above forms, registration fees shall be paid towards the registrar of companies online.
Step-7: Incorporation Certificate – When all documents are filed in order with requisite fees then MCA will verify it and issue the incorporation certificate. After this a company can start their business journey in the corporate world.
Essential documents required during the company registration
The following documents are necessary for company incorporation in India
As you already know, all the above documents are important for registering a company for the better prospects. So once you have assembled all these documents you are ready to be incorporated your company smoothly.
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The Indian government has come out with a new format for forming/ registering and incorporating companies in India. This particular format is being referred to as Simplified Proforma for Incorporating Company Electronically (SPICe). There are certain rules in India that are meant to govern these issues. For example in order to incorporate a Private Limited Company in India you need to have at minimum two members and two directors as well. In case it is a one person company there should be one member and one director. In any case a lot of information and documents need to be submitted in order to start a business in India.
The forms need to be filed during incorporating a business entity
While starting a business in India a company also has to file forms such as E-form INC-7, INC-22, and DIR-12. Normally, with all these formalities it takes around a month to get a company registered. However, the central government has made some major changes from 1st February onwards as far as the process of Company Incorporation is concerned. It is expected that this would reduce the time taken to incorporate these companies. The new process that it has started in this regard is known as “Incorporation through SPICe form”.
The background of SPICe act
It was on 1st October 2016 that the Indian government had amended Companies (Incorporation) Rules 2014 and also notified Companies (Incorporation) Fourth Amendment Rules, 2016. On 29th December 2016, the Indian government amended Companies (Incorporation) Rules 2014, and also notified Companies (Incorporation) Fifth Amendment Rules, 2016. All the changes came into play from 1st January 2017. Thanks to the amendment the process of incorporation became a faster through SPICe and can also use this form of incorporation in order to apply for PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number).
Information on SPICe
It is also referred to as E-Form SPICe (Form INC-32). The form deals with a single application that is meant to serve the purpose as far as reserving your company’s name, incorporating a new company, and/or applying for Director Identification Number (DIN) is concerned. You can also file the form even if the director does not have DIN. In this form at the most three directors would be allowed to fill up their respective details in order to file application for a DIN to be allotted to you. This can be done while incorporating a company.
E-Form SPICe (Form INC-33, INC-34) is to be filed with SPICe (INC-32) to get approve certified copies through MCA. E-Form SPICe (Form INC-33- MOA) which contains main objects of the Company and it also called as charter of the company whereas E-Form SPICe (Form INC-34 - AOA) which holds the rules and regulations available to the Company and subscription sheet has to be signed digitally by the promoters of the Company in MOA and AOA.
After the e-form has been processed and found to be complete the company would be registered and Certificate of Incorporation (CIN) would be allotted. The PAN would also be allotted as part of the CIN. Along with this, DINs are issued to director who does not have a proper and valid DIN as such.
How to fill up the form?
While filling up the form there are certain things that have to be kept in mind. First of all, you need to choose the kind of company you are trying to set up. The various choices that you have in this regard are New Company, Producer Company, Section 8 Company and Part I Company.
The next thing that you need to do is choose the class of company – private, one person, or public. The third step that you need to take is to choose the category of your company – would your company be limited by shares or would it be limited by guarantee or would it be an unlimited company. Herein, you also need to specify the applicable main division code with respect to the industrial activity that your proposed company would be a part of. You will also have to specify subscriber and authorized equity as well as the preference capital of your company, AO type for PAN and TAN with respective state codes, number of shares for each Director/promoter and last but not least attach all the required documents.
When we are going to incorporate a company we found there always a company has two important documents that is Memorandum of Association (MOA) and Articles of Association (AOA) which plays a vital role during the company formation. Here you can get a comprehensive package of information on MOA and AOA and their distinction.
So let’s come to know what is MOA and AOA
Memorandum of Association (MOA) and Articles of Association (AOA) are basically charter documents that are needed in order to set up a company and govern its operations thereafter. MOA can be described as the very basis on which a company is formed since it contains all the basic information about the company in question. AOA basically contains all the rules and regulations that would be governing the company when it starts to operate as a legal entity.
MOA is normally used in order to set up the constitution of the company and as such it can be called the cornerstone on which a company is built. AOA has the bye-laws that come into play in order to govern the internal affairs of the company.
You need to register both MOA and AOA with Registrar of Companies (ROC) at the time when you are incorporating the company.
Memorandum of Association (MOA) is a special document that contains all the necessary fundamental information which is required for the company at the time of incorporation. It is the base of the company; it is also said in company law, no company can be incorporated without memorandum of association.
Memorandum is used to constitute the constitution of the company and it provides the foundation on which its structure is built by you. It defines the objects, powers and scope of the company activities as well as its relation to the outside world. The main objective of memorandum is to explain the scope of the activities of the company.
The main features of memorandum of association (MOA) are discussed below:
1. As far as MOA is concerned one of its most important features is the name clause. No company is allowed to register a name that the central government (CG) may consider to be an unfit one. At the same time, the name should not also resemble closely the name of another company.
2. The second important feature in this case would be the situation clause. As per this clause the company would have to specify the name of the state where you would be setting up the registered office of your company.
3. The third important feature of MOA would be object clause, whereby you would have to specify the prime objectives as well as the secondary objectives of your company as a business enterprise.
4. The fourth important feature of MOA would be liability clause. Here you would need to specify various details pertaining to the liabilities that the members of your company have at present.
5. In the fifth important feature of MOA – capital clause – you would need to specify the total capital that your company has.
6. The last major important feature of MOA is the subscription clause whereby you would have to specify the details of your subscribers, the shares that they have taken, and witness related details.
As you know that Memorandum of Association is the foundation structure of a company; it defines the area where the company can operates. According to the Section 4(1) of Companies Act, 2013 memorandum of a company states that -
Articles of Association is abbreviated to AOA, is a primary/secondary document which states all the rules and regulations that designed by the company for conducting its policy of day-to-day administration to run their organization smoothly. Articles of Association define the rights, responsibilities, duties and the purpose of the members and directors of the company.
The articles of association is generally contains the provisions for the company name, Board of Directors, Equity and preference shares, Bonus shares, remuneration, ESOPS, the organization of the company, provisions regarding to shareholders meetings , Board meeting and committee Meeting, etc..
The major features of articles of association (AOA) generally deals with the following
1. AOA is basically a secondary document in a way. It spells out the rules and regulations of your company with regards to administration as well as daily management. Along with this, the article would also have the rights, powers, responsibilities, and duties of members as well as directors of the company.
2. It is optional for Public Ltd Companies on Limited by Shares; but compulsory for all other companies.
3. AOA also has information on audit and accounts of the company. It is very necessary for a company to have articles.
4. AOA also tells the classes of shares, their values and the rights attached to each of them.
5. It can be altered from time to time according to the company's activity.
While the memorandum deals with external affairs of a company, the articles essentially deal with internal working of a company.
As stated in Section 5(1) Companies Act that the Articles of Association shall contain its bye-laws or rules and regulations for governing the management of its internal affairs to conduct the business of a company.
It deals with the rights of the members of the company among themselves.
In Section 5 (2), the articles shall contain such matters that may be prescribed and it can't be overruled. If it required necessary of additional matters in its articles then could be considered by its management.
The Table F, G, H, I and J of Schedule 1 of the Companies Act, 2013 contains the model articles, can refer to it as per Section 5(6) and companies may adopt wholly or partly these tables for company management purpose. [As it is mentioned in Section 5(7)]
The articles includes with some activities in a company are
Here take a look at the following main areas of differences between MOA and AOA during the formation of company:
MOA is defined in Section 2 (56).
AOA is defined in Section 2 (5).
It is subordinate to Companies Act.
It is subordinate to the memorandum.
It can be amended later on.
It can be amended in some cases.
It should have at least six clauses.
You can draft it as per Rules and Regulations.
It is mandatory for all companies.
If you are a public company that is limited by shares you can use Table A rather than AOA.
You have to file it for sure at the time of registration.
You have to file it for sure at the time of registration.
You need the approval of central government or Company Law Board (CLB) in order to alter it.
Such approval is not needed in order to alter it.
It defines the relation that a company has with outsiders.
It deals with the relationship that a company has with its members as well as between the members.
Memorandum of Association and Articles of Association are the necessary, most useful and important documents of the company which are to be managed to build the company’s aim, objects, power, scope, rules and regulations to run, grow and guide on various matters related to the company.
It also helps in proper functioning of management during the company life cycle. So, it is absolutely necessary and adds a great value for every company or business entity that’s why a company must have to need its own memorandum and articles for their business goals.
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Goods and services tax (GST) is one of the biggest fiscal reforms in India ever since Independence. It is expected that this indirect tax would have a major effect on businesses of all sizes, big as well as small. GST is expected to be levied on all goods and services and will take up the mantle now vacated by the indirect taxes of yore. This includes taxes such as excise tax, value added tax (VAT), and service tax to name a few. It is expected to have several advantages for Indian economy. Look over here, the four benefits of goods and services tax (GST).
1. Removal of cascading effect of taxes
This is expected to be an important benefit of the GST tax regime. It will significantly do away with the cascading effect that the previous indirect taxes had. In layman’s terms the phrase cascading effect of tax means one tax upon another. In the present regime the service tax that has been paid on the input services cannot be set off with respect to the output VAT. In GST the tax payer would be able to avail input tax credit without any problem whatsoever. This facility will be available across all goods and services. In the end this would reduce the tax burden applicable for the end user.
This will do away with the cascading effect. It is expected that this would really benefit industries where both products and services are involved. Examples of such businesses would be the various restaurants and eateries.
2. Greater tax breaks for smaller organizations
It is also expected that GST would make registration really easy. The registration limit for excise tax was INR 1.5 crores, and for VAT in most states across India the figure was at least INR 5 lakh. For service tax this figure went up to INR 10 lakh. The registration limit for GST is INR 20 lakh. In the states located in northeastern India this limit has been fixed at INR 10 lakh.
The present VAT structure makes it necessary for any company with an annual turnover of more than INR 5 lakh to pay the tax. The rates are however different across states. As far as service tax is concerned any company with a yearly turnover of at least INR 10 lakh would have to pay the tax. In GST this limit has been taken up to INR 20 lakh. It is expected that this would significantly benefit many small and medium industries.
3. Small businesses to be benefited by composition scheme
The administrators have also come up with an alternative programme of lower taxes that is expected to benefit the smaller companies that earn between INR 20 lakh and INR 50 lakh a year. This scheme is known as the composition scheme and would benefit these entities by reducing the tax rate applicable to them. It is being proposed that the limit be increased to INR 1 crore as compared to the earlier turnover threshold of INR 75 lakh a year. This is expected to be of significant benefit for a number of small businesses across the country as well.
4. Online procedure becomes much simpler
The whole process of GST is expected to be much simpler compared to other indirect taxes. This includes processes such as registration, filing of returns, and payment of the tax, all of which have to be done online. Now, there is no longer the need for a startup to do the rounds of a tax office so as to get registered for various taxes. The number of compliances has come down as well. At present, there are other indirect taxes such as excise tax and VAT that have their own compliances and returns. GST is expected to unify all the different compliances and returns and make the entire process much simpler and, thus, easier.
One of the various small businesses that you can start with very little investment is a personalized and customized gift store. In fact, this is a hot business idea right now considering how people want to buy such presents for their near and dear ones as well as others that matter in their lives. If you are thinking to start a choicable business, here you can look over some small business ideas can turn your mind to put a thumb for new initiative.
Gym or fitness centre
You can easily start a gym or fitness centre considering how conscious people are these days about fitness. Almost everyone you see out there wants to be fit. So, in case you had some room you could easily start a fitness centre or gym over there and earn good money in the process.
You could easily start a small event management company that would organize different kinds of events. More than money what you need over here is sufficient manpower and significant amount of expertise in the industry.
These days everyone wishes his home to be decorated by an interior designer or decorator. So, you could easily start that business. However, you need to be trained and certified in order to enjoy a successful career here.
Small grocery shop
Yet another good small business idea with little investment is a grocery store. Here you do not need any special skill as such and you can go on expanding even as you go.
Ice cream parlour
If you have little money then you can do worse than start an ice cream parlour.
Photocopies and book binding
There are plenty of school and college areas that may not have this facility. You can easily fill this gap in those areas and it does have the potential to help you earn.
Mobile food shop
This is the mobile generation. So, it might make sense for you to start a mobile food service such as a food truck.
The price of gold is always increasing and there is great demand for golden jewellery as well. This is why you can undertake a course in this regard and start a small business that could one day grow into something so much bigger.
It is also a good business idea to start a small insurance company of your own or even become the agent of an established insurer.
If you are good at what you do and have sufficient experience and repute in the industry where you work at present you can always consider working as a freelancer.
You can always count on book lovers to buy several books at once and this is why the idea of starting a book store happens to be such an attractive one.
These days, people always look for good catering service for special occasions such as parties and marriage ceremonies. So, if you are skilled in this area then it is one business that you should definitely try.
If you are capable of providing computer training then this is one business that you would enjoy. In any case, in the modern world it is important to know computers.
These days life is rather stressful and a lot of people like to practice yoga to stay fit and de-stress. So, in case you are trained in that regard you can jolly well start a new business.
Baby sitting services
This business idea is meant primarily for women who wish to do some home based work instead of moving outdoors for work. You will find a lot of working couples who would be more than willing to avail your services.
Real estate consultant
Real estate is one business that is always growing and as such you can always start a consultancy in this particular industry. You can guide people how to sell, buy, and rent property.
The financial transactions are the very center of economic activity as investment in assets, goods and productive activity is funded by financial transactions. These transactions take various forms – from equity to loans, to investment in various securities. Besides primary financing transactions there are numerous secondary market transactions – including traders in securities, assignment and securitization of loans, etc.
The introduction of Goods and Services Tax (GST) is admittedly one of the most outstanding tax reforms since Independence and therefore, it is very important to unravel the implication of GST on financial transactions. This article is limited to GST on basic financial transaction excluding insurance, stock broking services, etc.
What about GST on Lending Transactions
One of the primary facts one should note while evaluating the applicability of GST is the nearly-all-pervasive nature of the levy. The charging section [Sec 9 of the CGST Act] imposes the tax on any “supply”. Exclusions are items like non-taxable supplies [for example, alcohol for human consumption], or exempt supplies, or supplies which are zero-rated. Hence, the focus shifts to the ambit of the word “supply”, which consists of all forms of supply of goods and services under Section 7 (1) of CGST Act, 2017. Since the word is intrinsically connected with the words “goods” and “services”, one needs to examine the meaning of those terms.
“Goods” are defined in Section 2 (52) to include any movable property, other than money and securities. “Services” are defined in Section 2 (102) to mean anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
Mere money is excluded from both goods as well as services. When read with the word “supply”, supply of money is neither a supply of goods, nor a supply of services. However, Section 2 (102) includes, in the definition of “service”, any activity relating to use of money, even though supply of money itself is not a service. Mere supply of money could be settlement of a transaction – for instance, making a payment for goods and services. It could not have been argued that the person making the payment itself is making a supply. Therefore, the intent of the law excluding supply of money, but including any activity pertaining to the use of money becomes intriguing. This conundrum was faced by the Delhi High Court in Delhi Chit Fund Association Vs. Union of India1 while interpreting similar expression used in sec 65B (44) of the Finance Act, 1994 – the High Court expressed its perplexity in the following words: The Explanation, therefore, seems to offer a clue to the problem which appears to us to be a creation of the very confounding manner in which the definition is found to have been drafted. However, we have to make sense of what we have.
Can it, therefore, be argued that lending of money is an activity pertaining to use of money? If the settlement of a supply in form of a monetary payment cannot itself be taken to be a supply, then, what else could be the exclusion of monetary transactions in both the definition of “goods” as well as “services”, except lending or deposit of money?
The list of exempted services [item 8- extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services)]. That is to say, there is a clear exemption for extending of deposits, loans or advances, insofar as the consideration is interest or discount. Therefore, it does not practically matter whether lending of money is a supply of services or not. However, the question becomes crucial from at least 2 viewpoints:
• Lending of money is a supply of service, but an exempt service in terms of Item 8 of Exemption list
• Interest involved in credit cards is not a fully exempt service
The exemption for financial transactions in India is quite narrow – it is only the interest/ discount earned or paid for loans, deposits or advances. Therefore, if the transaction deviates from a plain vanilla structure and therefore, fails the test of being a “loan”, “deposit” or “advance”, or the consideration is not an interest or discount, the exemption is lost. As a result:
• All earnings and charges other than interest or discount will be chargeable to GST. This includes any upfront or regular charges such as processing fees, documentation charges, service charges, collection charges, inspection charges, repossession charges, foreclosure or prepayment charges and so on.
• If the transaction does not fit into the meaning of “loan”, “deposit” or “advance”, even if the transaction is intrinsically a financial transaction, it does not seem that the supply will be exempt from GST. Thus, if an inventory repurchase transaction or a financial lease transaction may have the substance of a financial transaction, but it will be difficult to contend that they avail the exemption given in Item 8 of the Exemption list.
• Nevertheless, if the transaction is a loan transaction, there is no question of GST on the recovery of principal lent as the tax can only be on the consideration and not for principal recovery.
Is Registration Required Under GST Law for Money-Lenders?
Loan transactions are currently originated from banks, but by thousands of non-banking financial entities, thousands of money-lenders and entities occasionally engaged in lending activities. Therefore, a pertinent question is, is registration under GST law relevant for an entity even though the entity may be earning income by way of interest.
Notably, interest on loans is exempt as per the exemption discussed above; however, the registration requirement is based on (a) aggregate turnover in a financial year exceeding Rs 20 lakhs and (b) the supplier making a taxable supply. The term “aggregate turnover” as defined in Section 2 (6) includes value of all exempt supplies as well. Thus, while there is no GST on interest on loans, but the same is still captured in while computing aggregate turnover. Thus:
• If the aggregate amount of turnover (note that this is all – India turnover), including interest, in a year exceeds Rs 20 lakhs and
• The entity has received any consideration other than interest (any amount whatsoever) or made any other taxable supply (for example, even sale of scrap in the office), the entity will require registration.