Name Of Student: Rajput Priya Harendrasingh

PRN NO: 8021077076

Course :Post Graduation Diploma In Financial
Management(Evening)
Semester: 2nd Semester
Year: 2021-2022
Subject: Fiscal And Corporate Laws
 (1) Why GST has been introduced in India? Analyse the
reasons in detail.

The beginning of the concept of the Goods and Services Tax (GST) in India was in the year

2000, and it was finally implemented in 2017. It has four bills that relate to the forming of the

Act. The aim of the GST Act is to level out the services and goods all across the nation. 

The historical move of implementing GST gave India a significant indirect tax reform. The

various different taxes that were levied at the state and the centre were clubbed into one tax that

was named GST. The foremost benefit was the removal of double taxation or cascading taxation.

This initiative paved the way for a single national market.  

If we look at the benefit of the GST for the consumer, the reduction will be significant on the tax

burden that currently stands between 30% and 25%. Because of its transparent and self-policing

nature, GST is easy to administer.

 
When was GST Introduced in India? 

GST was implemented in India on 1 July 2017 after the Parliament passed the Goods and Service

Tax Act on 29 March 2017.

Meaning of GST 

GST is a single indirect tax on all goods and services that has replaced the other indirect taxes

previously imposed on goods and services. For example, Value Added Tax (VAT) and excise

duty. On 29 March 2017, Parliament passed the Goods and Service Tax Act. Later, on 1 July

2017, GST came into effect and was introduced across India. 

Before the introduction of GST, the taxation system in India lent itself to various problems.
GSTwas introduced to provide relief from these problems: 
 Subsumed majority of the indirect taxes
 Removed the cascading effect of taxes
 Stopped evasion of taxes
 Increased taxpayer base
 Provided online procedures to increase the ease of doing business
 Made the distribution system and logistics better
 Promoted consumption and competitive pricing.
Different Types/ Components of GST 

In India, four different types of GST have been implemented:

 Integrated Goods and Services Tax (IGST)
 State Goods and Services Tax (SGST)
 Central Goods and Services Tax (CGST)
 Union Territory Goods and Services Tax (UTGST).

Under each version of GST, the rate of taxation is different. 

Importance of GST 

GST is levied on goods and services that are sold for consumption domestically. This tax is part

of the final price of the good or service, and the final consumer needs to pay it when purchasing.

The seller passes the collection to the government. Generally, GST is taxed at one rate all

throughout the country.  

The following list provides some of the important advantages of GST.

 Price reduction: Traders and manufacturers do not need to include taxes in their production
cost, due to which the cost of production will decrease
 Reduction in procedural costs and compliance requirements: GST lends itself to decreasing
compliance maintenance load and does away with the need to maintain separate records for
IGST, SGST, and CGST.
 Implement Unified GST: While dual GST has been implemented in India, it will lead to a
Unified GST, the Indirect Taxes method
 Increase GDP growth by 100-200 bps or (1 to 2%): Due to GST providing a uniform structure
of taxation, it will encourage cheaper and faster goods movement all over the nation
 Attract foreign investment: GST will display to foreign investors the ability created to support
business.

How the Goods and Services Tax Works 

GST has managed to remove most of the indirect taxes levied by the State and Central

governments. 
GST Rates 

GST provides a 4-tier tax structure for all services and goods to be used for the calculation of

applicable GST on a specific good or service. The 4 tax rates are 5%, 12%, 18%, and 28%. GST

is exempt for several goods and services. The GST rate for precious metals, such as silver and

gold, is 3%. 

Input Tax Credit 

Input tax credit enables manufacturers and service providers to offset their input costs when they

pay their output tax.  

Let us take an example. 

Consider that a manufacturer’s output tax adds up to ₹2,000. The manufacturer has paid an input

tax of ₹800 when making the purchase. Now, the manufacturer’s liability for GST will

be ₹1,200 (₹2,000 – ₹800). The compliance required is that the invoices need to match the

claim so that the manufacturer can benefit from the credit facility. 

Export and Import GST 

On the import of goods, the IGST component of GST is applicable. This is because an import is

seen as being an inter-state transaction. Besides the IGST that is applicable in this case, the

import of goods also attracts additional customs duties. On the other hand, there is no tax liability
in the case of the export of goods/ services. Yet, exporters are allowed the advantage of an input

tax credit. 

India’s Adoption of the Goods and Services Tax 

The Goods and Services Tax (GST) is a consumption tax or an indirect tax that is imposed on the

supply of services and goods. GST is a destination-based, multistage, comprehensive tax. 

Destination-based: Unlike previous taxes that were collected from the point of origin, GST is

collected from the point of consumption.  

Multi-staged: While GST is applicable at each step of the process of production, it is refunded to

all parties at the various stages of production other than to the final consumer  

Comprehensive: It subsumes nearly all indirect taxes (besides some state taxes). 

Conclusion

The importance of GST implementation can be seen in the many advantages that it brings to the

taxation system in India. It is a major step forward in significantly reforming India’s indirect

taxation system. The bringing together of various state and central taxes under a single tax

enables the removal of double taxation, and this lends itself to creating a common national

market. 
 (2) Analysis of provisions relating to Input Tax Credit
(ITC)

Input Tax Credit’ or ‘ITC’ means the Goods and Services Tax (GST) paid by a taxable person on

any purchase of goods and/or services that are used or will be used for business. 
ITC value can be reduced from the GST payable on the sales by the taxable person only after

fulfilling some conditions. These conditions given under the GST law are more or less in line

with the pre-GST regime, except for a few additional ones such as GSTR-2B. These rules are

direct and maybe stringent in nature.

Conditions to claim an input tax credit under GST

Section 16 of the CGST Act lays down the conditions to be fulfilled by GST registered buyers to

claim ITC. The conditions are summarised as follows-

Such input tax credit is eligible for claims if the goods or services purchased are further used for

business purposes and not personal use.

Buyer must hold such tax invoice or debit note or document evidencing payment towards the
purchase. For example, Mr Manoj wants to claim an ITC of Rs.5,600 as he found the ITC entry in

GSTR-2B of January 2022 as of 10th February 2022 but he has not received the invoice till 20th

February 2022, being the date of filing the returns. He cannot claim Rs.5,600 as ITC while filing

GSTR-3B of January 2022 due to the absence of the invoice.

Such tax invoice or debit note is filed by the supplier in Form GSTR-1 and it appears in the
buyer’s Form GSTR-2B. For example, Mr Manoj received a tax invoice dated 13th January 2022

for purchases and wants to claim an ITC of Rs.5,600 but has not found the ITC entry in GSTR-

2B of January 2022 as of 20th February 2022. He cannot claim Rs.5,600 as ITC while filing

GSTR-3B of January 2022.

From 1st January 2022, the benefit of provisional ITC claims is no longer available as per Section

16(2)(aa). It means the amount of ITC reported in GSTR-3B will be a total of actual ITC in

GSTR-2B. The provisional ITC of 5% of actual ITC in GSTR-2B will no longer be allowed.

Hence, a regular matching of the purchase register or expense ledger with GSTR-2B is crucial.
Until 31st December 2021, a regular taxpayer could have claimed provisional ITC in GSTR-3B to

the extent of 5% of the ITC available in GSTR-2B, in addition to ITC in GSTR-2B. 

The buyer has received the goods and/or services. The goods are said to be received if it is

delivered by the supplier to the buyer or his representative or agent or another person as directed,

against a document of transfer of title of goods. On the other hand, the services are said to be
received if it is rendered by the supplier to the buyer or another person as directed. For

instance, Mr Manoj received a tax invoice for purchases dated 10th January 2022 but has not yet

received goods until 20th February 2022. The taxpayer cannot report ITC on that tax invoice in

GSTR-3B for January 2022 and may claim it in future once goods are delivered.

The buyer must furnish the GST returns in Form GSTR-3B. 

Where the goods are received in lots or instalments, ITC will be allowed to be availed when the

last lot or instalment is received.

The buyer must pay towards the supply of goods and/or services within 180 days from the

invoice date. If they fail to, then the ITC already claimed will be added back to output tax

liability and interest must be paid on such tax. ITC claim will be reinstated once the payment is

made to the supplier.

No ITC will be allowed if depreciation has been claimed on the tax component of a capital good

purchased. 

ITC on a tax invoice or debit note belonging to a financial year must be claimed within the time

limit given by the GST provisions, explained in the next section.

Common credit of ITC must be identified and split as it is used together for selling both exempt and

taxable supplies, and/or business and non-business activity.

There are certain items listed down that are not eligible for ITC claims under Section 17(5) of the
CGST Act, known as blocked credits under Section 17(5) of the CGST Act .

Clear Solutions to claim accurate and 100% ITC

Many conditions are there to claim ITC before the last date passes. An Indian enterprise must

verify the ITC details before claiming it in Form GSTR-3B for a tax period. It involves regular

reconciliation of GSTR-2B with books of accounts. Further, it requires frequent follow-ups with

suppliers who have not reported tax invoices or debit notes. 

All these require a robust and smart solution that requires the least manual effort! 
Clear GST ensures that your GSTR-2B data is fetched without manual intervention. Our advanced

reconciliation engine matches data between books and GSTR-2B to identify gaps, with the

option to define custom matching logic and claim 100% ITC in GSTR-3B. 
Clear GST also allows users to annually reconcile ITC across financial years for accurate

preparation of GSTR-9 and GSTR-9C.

Clear Max ITC  is India’s first end-to-end enterprise solution for maximising the claims of the

input tax credit. Clear Max ITC platform has exclusive features to improve your input tax credit

claims with value additions such as the following-

1. It hosts the fastest AI-based reconciliations to match invoices without any errors and help you

identify 100% ITC.

2. Automated data reconciliations take place by direct data pulls from the GSTN and the ERP at

regular intervals.

3. Automated vendor communication helps you to keep follow-up efforts at a bare minimum.

4. Smart payment decisions are synced to a business’s ERP based on automated vendor

categorisation through an intelligent vendor scoring mechanism.

5. Advanced user access management helps you define access rights for each team and keeps

data absolutely secure.

The platform firstly sets up a two-way connection between it and your ERP/accounting system.

It schedules automatic reconciliations of the GST details at regular time intervals and also syncs

vendor payment decisions. 

Your team can fix the vendor payment terms to automatically hold the GST value or the entire

invoice due if your vendor has not filed GST returns. It further syncs this decision with the ERP

for all future payments. If any invoice is missing and identified so, communication is auto-sent to

the concerned vendor via email, WhatsApp, etc.

With passing time, you will notice that the Clear Max ITC solution has helped you reduce the

number of defaulting vendors, optimise input tax credit, and unblock your working capital.

We’ve seen that the solution has helped many of our clients reduce their GST cash outflows and

Increase profits by up to 7% just by way of ITC maximisation.

 (3) Section 149 of Companies Act, 2013 relating to
directors

(1) Every company shall have a Board of Directors consisting of individuals as directors and
shall have--

(a) a minimum number of three directors in the case of a public company, two directors in the
case of a private company, and one director in the case of a One Person Company; and

(b) a maximum of fifteen directors:

Provided that a company may appoint more than fifteen directors after passing a special
resolution:

Provided further that such class or classes of companies as may be prescribed, shall have at least
one woman director.

(2) Every company existing on or before the date of commencement of this Act shall within one
year from such commencement comply with the requirements of the provisions of sub-section
(1).

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[(3) Every company shall have at least one director who stays in India for a total period of not
less than one hundred and eighty-two days during the financial year:

Provided that in case of a newly incorporated company the requirement under this sub-section
shall apply proportionately at the end of the financial year in which it is incorporated];

(4) Every listed public company shall have at least one-third of the total number of directors as
independent directors and the Central Government may prescribe the minimum number of
independent directors in case of any class or classes of public companies.
Explanation.-- For the purposes of this sub-section, any fraction contained in such one-third
number shall be rounded off as one.

(5) Every company existing on or before the date of commencement of this Act shall, within one
year from such commencement or from the date of notification of the rules in this regard as may
be applicable, comply with the requirements of the provisions of sub-section (4).

(6) An independent director in relation to a company, means a director other than a managing
director--

or a whole-time director or a nominee director,

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and
experience;

(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate
company;

(ii) who is not related to promoters or directors in the company, its holding, subsidiary or
associate company;

(c) who has or had no 2[pecuniary relationship, other than remuneration as such director or
having transaction not exceeding ten per cent. of his total income or such amount as may be
prescribed,] with the company, its holding, subsidiary or associate company, or their promoters,
or directors, during the two immediately preceding financial years or during the current financial
year;

3
[(d) none of whose relatives--

(i) is holding any security of or interest in the company, its holding, subsidiary or associate
company during the two immediately preceding financial years or during the current financial
year:
Provided that the relative may hold security or interest in the company of face value not
exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding,
subsidiary or associate company or such higher sum as may be prescribed;

(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters,
or directors, in excess of such amount as may be prescribed during the two immediately
preceding financial years or during the current financial year;

(iii) has given a guarantee or provided any security in connection with the indebtedness of any
third person to the company, its holding, subsidiary or associate company or their promoters, or
directors of such holding company, for such amount as may be prescribed during the two
immediately preceding financial years or during the current financial year; or

(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its
holding or associate company amounting to two per cent. or more of its gross turnover or total
income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);]

(e) who, neither himself nor any of his relatives

(i) holds or has held the position of a key managerial personnel or is or has been employee of the
company or its holding, subsidiary or associate company in any of the three financial years
immediately preceding the financial year in which he is proposed to be appointed;

4
[Provided that in case of a relative who is an employee, the restriction under this clause shall not
apply for his employment during preceding three financial years.]

(ii) is or has been an employee or proprietor or a partner, in any of the three financial years
immediately preceding the financial year in which he is proposed to be appointed, of

(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its
holding, subsidiary or associate company; or

(B) any legal or a consulting firm that has or had any transaction with the company, its holding,
subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such
firm;
(iii) holds together with his relatives two per cent. or more of the total voting power of the
company; or

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisation that
receives twenty-five per cent. or more of its receipts from the company, any of its promoters,
directors or its holding, subsidiary or associate company or that holds two per cent. or more of
the total voting power of the company; or

(f) who possesses such other qualifications as may be prescribed.

(7) Every independent director shall at the first meeting of the Board in which he participates as
a director and thereafter at the first meeting of the Board in every financial year or whenever
there is any change in the circumstances which may affect his status as an independent director,
give a declaration that he meets the criteria of independence as provided in sub-section (6).

Explanation.-- For the purposes of this section, nominee director means a director nominated by
any financial institution in pursuance of the provisions of any law for the time being in force, or
of any agreement, or appointed by any Government, or any other person to represent its interests.

(8) The company and independent directors shall abide by the provisions specified in Schedule
IV.

(9) Notwithstanding anything contained in any other provision of this Act, but subject to the
provisions of sections 197 and 198, an independent director shall not be entitled to any stock
option and may receive remuneration by way of fee provided under sub-section (5) of section
197, reimbursement of expenses for participation in the Board and other meetings and profit
related commission as may be approved by the members.

5
[Provided that if a company has no profits or its profits are inadequate, an independent director
may receive remuneration, exclusive of any fees payable under sub-section (5) of section 197, in
accordance with the provisions of Schedule V.]

(10) Subject to the provisions of section 152, an independent director shall hold office for a term
up to five consecutive years on the Board of a company, but shall be eligible for reappointment
on passing of a special resolution by the company and disclosure of such appointment in the
Board's report.

(11) Notwithstanding anything contained in sub-section (10), no independent director shall hold
office for more than two consecutive terms, but such independent director shall be eligible for
appointment after the expiration of three years of ceasing to become an independent director:

Provided that an independent director shall not, during the said period of three years, be
appointed in or be associated with the company in any other capacity, either directly or
indirectly.

Explanation.-- For the purposes of sub-sections (10) and (11), any tenure of an independent
director on the date of commencement of this Act shall not be counted as a term under those sub-
sections.

(12) Notwithstanding anything contained in this Act,--

(i) an independent director;

(ii) a non-executive director not being promoter or key managerial personnel,

shall be held liable, only in respect of such acts of omission or commission by a company which
had occurred with his knowledge, attributable through Board processes, and with his consent or
connivance or where he had not acted diligently.

(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors

by rotation shall not be applicable to appointment of independent directors.

(4) Features of Company

Characteristic or features of a Company:

1. Artificial Legal Person:

A company is an artificial person created by law. Though it has no body, no conscience, still it

exists as a person. Like a person, it can enter into contracts in its own name and likewise may sue

and be sued in its own name.

2. Separate Legal Entity:

A company has a distinct entity separate from its members or shareholders. Therefore, a

shareholder of the company can enter into contract with the company. He/she can sue the

company and be sued by company.

3. Common Seal:

Being an artificial person, company cannot sign the documents. Hence, it uses a common seal on

which its name is engraved. Putting the common seal on papers relating to company’s

transactions makes them binding on the company.

4. Perpetual Existence:

Unlike partnership, the existence of a company is not affected by the death, lunacy, insolvency or

retirement of its members or directors. This is because the company enjoys a separate legal

existence from that of its members. It is said, “Members may come, members may go but the

company goes for ever”. It is created by law and is dissolved by law itself.

5. Limited Liability:
The liability of the members of a company is normally limited to the amount of shares held or

guarantee given by them.

6. Transferability of Shares:

The member of a public limited company can sell his shares to others without the consent of

other shareholders. Yes, he has to follow the procedure laid down in the Companies Act for

transferring his shares. However, there are restrictions for transferring shares to others in case of

a private limited company.

7. Separation of Ownership from Management:

The shareholders, i.e., owners being scattered all over country give right the directors to manage

the affairs of the company. The directors are the representatives of the shareholders. Thus,

ownership is separated from management.

8. Number of Members:

In case of a public limited company, the minimum number is seven and there is no maximum

limit. But, for a private limited company, the minimum number of members is two and the

maximum number is fifty.

(5) Difference between LLP AND LLC.

What is LLP Registration? 

LLP Company Registration is a company formation that provides you with a legal structure of
business in which two or more partners work together and their personal liability is
distinguishable from the company’s liability.
Furthermore, In an LLP, one member is not subject to liability for another partner’s misconduct
or negligence.  As a result, a limited liability partnership is a legally distinct entity from its
partners or owners and has its own identity.

What is LLC Registration?

This is by far the most commonly used organization structure used within the United States, the
United Arab Emirates, Poland, Japan, Brazil, and other countries, using different names. LLCs
are a great source of flexibility. 

What Are the Differences in Management Structures?

There are two common management structures for an LLC. LLC members can manage the
business themselves (commonly referred to as member management). Alternately they can hire
or appoint one or more members and/or non-members to manage the business (commonly
referred to as manager management).

Unlike a member management structure where each member shares responsibility for running
the business, the management team runs the business under a manager management structure and
the remaining members aren’t involved in business decisions.

An LLP operates like a general business partnership, where management duties are equally
divided between partners. A partnership agreement should set out how business decisions will be
made.

What Are the Differences in Limited Liability Protection?

While both LLCs and LLPs provide members and partners, respectively, with limited liability
protections, there are differences between LLC and LLP.

LLC members are protected from personal liability for business debts and claims. That means a
creditor cannot sue to recover a member’s personal assets if the business can’t pay its debts. The
members only lose their monetary investment. However, if a member commits an act that is
legally actionable, both the LLC and its members can be held liable.

Each partner in an LLP is personally liable only for their own negligence. Partners are not liable
for another partner’s mistakes and only risk their capital investment in the LLC.
In some states, partners in an LLP can be personally liable for partnership debts. It’s important to
check your state’s statutes.
Some states require LLPs to carry liability insurance, while others require LLPs to post a bond or
some form of financial security.

What Are the Differences in Tax Benefits?

While LLCs and LLPs are not recognized as business entities by the Internal Revenue Service
(IRS) and don’t pay income taxes, each is required to file an informational tax return.
Unless the LLC elects to file a corporate return, it is treated like a partnership. Certain LLCs,
however, are required under federal tax laws to file as a corporation.

In a partnership, the business earnings are passed through to the partners who report the profits
and losses on their personal federal income tax returns. LLCs avoid double taxation – paying
corporate taxes on earnings and paying personal income taxes on the same earnings – by filing as
a partnership. A one-person LLC is a sole proprietorship and the member must file self-
employment taxes.

Some states require LLCs to file a state tax return so check with your state’s income tax agency
and some states don’t allow pass through taxation and impose a state franchise tax on LLPs.

(6) Classes of companies on the basis of liability

 (A) Companies Having Limited Liability

This liability can be limited in two ways:

 Liability Limited By Shares

A company in which the liability of the members is limited to the unpaid amount of shares held
by them is called a company limited by shares. These are those companies in which the capital is
divided into shares and the liability of members (shareholders) is limited to the extent of the face
value of shares held by them. In the event of the winding-up of the company, a shareholder will
be asked to pay only the unpaid amount on the shares held by him. This is the most popular class
of company. But in the case of partly paid shares, the liability of members is limited to the
unpaid amount on the shares held by them.

 Liability Limited By Guarantee

A company limited by guarantee is a company in which the liability of each member is limited to
such amount which the members undertake to contribute to the assets of the company in the
event of its winding up. These are such companies where shareholders promise to pay a fixed
amount to meet the liabilities of the company in the case of liquidation.

In this case, the shareholders shall be liable to pay the amount which remains unpaid on their
shares plus the amount payable under the guarantee. The amount guaranteed is laid down in the
Memorandum of Association of the company. This type of company is formed for the promotion
of art, culture, religion, sports, trade etc., and not for the purpose of earning profit.

(B) Companies Having Unlimited Liability

A company not having any limit on the liability of its members as in the case of a partnership or
sole trading concern is an unlimited company. In such companies, the liability of a shareholder is
unlimited like sole proprietor and partnership form of business. If such a company goes into
liquidation, the members can be called upon to pay an unlimited amount even from their private
properties to meet the claim of the creditors of the company. Members are held liable for the
debts of the company in proportion to their interest in the company.