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Raksha Bandhan or Rakhi: The Thread of Love

Raksha Bandhan, or also known as Rakhi is a Hindu festival, which celebrated in many parts of the Indian subcontinent, or Nepal. Meaning of Raksha bandhan is “bond of protection”.  It is observed on the full moon day of the Hindu lunisolar calendar of Shravana month, which falls in Gregorian calendar of August month.

The festival is symbol of the love and duty between brothers and sisters. It is also used to celebrate any brother-sister type of relationship between men and women who may or may not be biologically related. On Raksha Bandhan, a sister ties a rakhi on her brother’s wrist with a prayer for his happiness and prosperity. This represents the sister’s love towards his brother. The brother gives her a gift & a promise to protect her.

This frail of thread of Rakhi is considered as stronger than iron chains as it binds the most beautiful relationship in an inseparable bond of love and trust. Rakhi is a sacred thread of Rakhi is a sacred thread of protection embellished with love & affection of a sister for her brother.

Rakhi festival also has a social significance because it underlines the notion that everybody should live in harmonious coexistence with each other. Not a single festival in India is complete without the typical Indian festivities, the gatherings, and celebrations, exchange of sweets and gifts, lots of noise, singing and dancing.

Raksha bandhan is also celebrated by some Jains and Sikhs, by Hindu communities in other parts of the world. Among the Jains, Jain priests give threads to devotees. Raksha Bandhan has been an important tradition in the history of Sikhism as well. In Nepal, the festival is called Rishitarpani or Janai Purnima, involving a sacred thread ceremony, one observed by Hindus and Newar Buddhist communities.

Raksha Bandhan as a religious festival focuses on performing the aarti and saying prayers prior to tying the rakhi. The prayers draw inspiration from the Hindu scriptures. Raksha Bandhan in Sanskrit literally means “the tie or knot of protection”. The word Raksha means protection, while Bandhan is the verb to tie.

“The memories may fade away with time but the love and special bond we share will grow ever stronger with each day… Home Search Wishes you all Happy Raksha Bandhan!”

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Happy Homebuyers, Karnataka RERA covers many ongoing plans

Homebuyers may stand to benefit from the provisions of the Real Estate (Regulation & Development) Act notified by the Karnataka government on Monday. It, among other things, brings a huge number of ongoing projects under the purview of the law.

The government had come under criticism for the draft rules published last week which said ongoing projects, where 60% development work had been completed or 60% of the apartments/houses/plots had been registered and executed, would not come under the purview of the Act.

 

If the OC has already been applied for, the building is exempt from RERA regulations.

 

 

 

Buyers felt that the provision gave a leeway to the developers to slip out and there was also confusion as to how a consensus could be reached on such an arbitrary number.

That part seems to have been addressed. As per the notification published on Monday, only ongoing projects “where all development works have been completed as per the Act and certified by the competent agency“are exempted from RERA. The 60% sale lease deed provision stays.

“We were not expecting this, “Shriram Properties managing director Murali said, when asked about his response about the rules. Sobha managing director JC Sharma said though the law is customer friendly, any retrospective law is bad and goes against natural justice. Most of my ongoing projects, where I have not applied for an occupancy certificate, will come under RERA, “Sharma said.

According to the notification, a builder can apply for an OC only if it has been certified by a competent agency -in this case by an architect. If the OC has already been applied for, the building is exempt from RERA regulations. “The rules are stringent because builders have to get in place waterlines, electricity lines and other things before applying for OC, “Suhail Rehman, director of Asse Builders, said.

E Suhail Ahmed, advocate and legal consultant at RERA Consultants, said the rules are not much of a dilution from the central legislation. “They are almost in line with the Act as far as its application to ongoing projects is concerned, “Ahmed said. If a project comes under RERA, buyers would be in a position to file a complaint in case there is a delay or if the building has not gone by the approved plans.

 

(This article was originally published in The Times of India)

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What is GST? Goods & Services Tax Law for Beginners

What is GST?

Goods & Services Tax is a comprehensivemulti-stagedestination-based tax that will be levied on every value addition.

To understand this, we need to understand the concepts under this definition. Let us start with the term ‘Multi-stage’. Now, there are multiple steps an item goes through from manufacture or production to the final sale. Buying of raw materials is the first stage. The second stage is production or manufacture. Then, there is the warehousing of materials. Next, comes the sale of the product to the retailer. And in the final stage, the retailer sells you – the end consumer – the product, completing its life cycle.

So, if we had to look at a pictorial description of the various stages, it would look like:

 

Goods and Services Tax will be levied on each of these stages, which makes it a multi-stage tax. How? We will see that shortly, but before that, let us talk about ‘Value Addition’.

Let us assume that a manufacturer wants to make a shirt. For this he must buy yarn. This gets turned into a shirt after manufacture. So, the value of the yarn is increased when it gets woven into a shirt. Then, the manufacturer sells it to the warehousing agent who attaches labels and tags to each shirt. That is another addition of value after which the warehouse sells it to the retailer who packages each shirt separately and invests in marketing of the shirt thus increasing its value.

 

 

GST will be levied on these value additions – the monetary worth added at each stage to achieve the final sale to the end customer.

There is one more term we need to talk about in the definition – Destination-Based. Goods and Services Tax will be levied on all transactions happening during the entire manufacturing chain. Earlier, when a product was manufactured, the centre would levy an Excise Duty on the manufacture, and then the state will add a VAT tax when the item is sold to the next stage in the cycle. Then there would be a VAT at the next point of sale.

So, earlier the pattern of tax levy was like this:

 

 

Now, Goods and Services Tax will be levied at every point of sale. Assume that the entire manufacture process is happening in Rajasthan and the final point of sale is in Karnataka. Since Goods & Services Tax is levied at the point of consumption, so the state of Rajasthan will get revenue in the manufacturing and warehousing stages, but lose out on the revenue when the product moves out Rajasthan and reaches the end consumer in Karnataka. This means that Karnataka will earn that revenue on the final sale, because it is a destination-based tax and this revenue will be collected at the final point of sale/destination which is Karnataka.

Browse GST articles by Topic

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Transition to GST Composition Scheme Penalties & Appeals
News & Announcements Input Tax Credit Analysis & Opinions
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Procedure Payments & Refunds GST Terms

Why is Goods and Services Tax so Important?

So, now that we have defined GST, let us talk about why it will play such a significant role in transforming the current tax structure, and therefore, the economy.

Currently, the Indian tax structure is divided into two – Direct and Indirect Taxes. Direct Taxes are levies where the liability cannot be passed on to someone else. An example of this is Income Tax where you earn the income and you alone are liable to pay the tax on it.

In the case of Indirect Taxes, the liability of the tax can be passed on to someone else. This means that when the shopkeeper must pay VAT on his sale, he can pass on the liability to the customer. So, in effect, the customer pays the price of the item as well as the VAT on it so the shopkeeper can deposit the VAT to the government. This means that the customer must pay not just the price of the product, but he also pays the tax liability, and therefore, he has a higher outlay when he buys an item.

This happens because the shopkeeper has paid a tax when he bought the item from the wholesaler. To recover that amount, as well as to make up for the VAT he must pay to the government, he passes the liability to the customer who has to pay the additional amount. There is currently no other way for the shopkeeper to recover whatever he pays from his own pocket during transactions and therefore, he has no choice but to pass on the liability to the customer.

Goods and Services Tax will address this issue after it is implemented. It has a system of Input Tax Credit which will allow sellers to claim the tax already paid, so that the final liability on the end consumer is decreased.

How does GST work?

A nationwide tax reform cannot function without strict guidelines and provisions. The GST Council has devised a fool proof method of implementing this new tax regime by dividing it into three categories. Wondering how they work? Let our experts explain this to you in detail.

When Goods and Services Tax is implemented, there will be 3 kinds of applicable Goods and Services Taxes:

CGST: where the revenue will be collected by the central government

SGST: where the revenue will be collected by the state governments for intra-state sales

IGST: where the revenue will be collected by the central government for inter-state sales

In most cases, the tax structure under the new regime will be as follows:

Transaction New Regime Old Regime Comments
Sale within the state CGST + SGST VAT + Central Excise/Service tax Revenue will now be shared between the Centre and the State
Sale to another State IGST Central Sales Tax + Excise/Service Tax There will only be one type of tax (central) now in case of inter-state sales.

Example

A dealer in Maharashtra sold goods to a consumer in Maharashtra worth Rs. 10,000. The Goods and Services Tax rate is 18% comprising CGST rate of 9% and SGST rate of 9%. In such cases the dealer collects Rs. 1800 and of this amount, Rs. 900 will go to the central government and Rs. 900 will go to the Maharashtra government.

Now, let us assume the dealer in Maharashtra had sold goods to a dealer in Gujarat worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 1800 as IGST. This IGST will go to the Centre. There will no longer be any need to pay CGST and SGST.

 

How will GST help India and common man?

The basis of Goods and Services Tax is the seamless flow of Input Tax Credit (ITC) along the entire value addition chain. At every step of the manufacturing process, businesses will have the option to claim the tax already paid in the previous transaction. Understanding this process is crucial for businesses. A detailed explanation here.

To understand this, let us first understand what is Input Tax Credit. It is the credit an individual receives for the tax paid on the inputs used in manufacturing the product. So, if there is a 10% tax that the individual must submit to the government, he can subtract the amount he has paid in taxes at the time of purchase and submit the balance amount to the government.

Let us understand this with a hypothetical numerical example.

Say a shirt manufacturer pays Rs. 100 to buy raw materials. If the rate of taxes is set at 10%, and there is no profit or loss involved, then he has to pay Rs. 10 as tax. So, the final cost of the shirt now becomes Rs (100+10=) 110.

At the next stage, the wholesaler buys the shirt from the manufacturer at Rs. 110, and adds labels to it. When he is adding labels, he is adding value. Therefore, his cost increases by say Rs. 40. On top of this, he has to pay a 10% tax, and the final cost therefore becomes Rs. (110+40=) 150 + 10% tax = Rs. 165.

Now, the retailer pays Rs. 165 to buy the shirt from the wholesaler because the tax liability had passed on to him. He has to package the shirt, and when he does that, he is adding value again. This time, let’s say his value add is Rs. 30. Now when he sells the shirt, he adds this value (plus the VAT he has to pay the government) to the final cost. So, the cost of the shirt becomes Rs. 214.5 Let us see a breakup for this:

Cost = Rs. 165 + Value add = Rs. 30 + 10% tax = Rs. 195 + Rs. 19.5 = Rs. 214.5

So, the customer pays Rs. 214.5 for a shirt the cost price of which was basically only Rs. 170 (Rs 110 + Rs. 40 + Rs. 30). Along the way the tax liability was passed on at every stage of transaction and the final liability comes to rest with the customer. This is called the Cascading Effect of Taxes where a tax is paid on tax and the value of the item keeps increasing every time this happens.

Action Cost 10% Tax Total
Buys Raw Material @ 100 100 10 110
Manufactures @ 40 150 15 165
Adds value @ 30 195 19.5 214.5
Total 170 44.5 214.5

In the case of Goods and Services Tax, there is a way to claim credit for tax paid in acquiring input. What happens in this case is, the individual who has paid a tax already can claim credit for this tax when he submits his taxes.

In our example, when the wholesaler buys from the manufacturer, he pays a 10% tax on his cost price because the liability has been passed on to him. Then he adds value of Rs. 40 on his cost price of Rs. 100 and this brings up his cost to Rs. 140. Now he has to pay 10% of this price to the government as tax. But he has already paid one tax to the manufacturer. So, this time what he does is, instead of paying Rs (10% of 140=) 14 to the government as tax, he subtracts the amount he has paid already. So, he deducts the Rs. 10 he paid on his purchase from his new liability of Rs. 14, and pays only Rs. 4 to the government. So, the Rs. 10 becomes his input credit.

When he pays Rs. 4 to the government, he can pass on its liability to the retailer. So, the retailer pays Rs. (140+14=) 154 to him to buy the shirt. At the next stage, the retailer adds value of Rs. 30 to his cost price and has to pay a 10% tax on it to the government. When he adds value, his price becomes Rs. 170. Now, if he had to pay 10% tax on it, he would pass on the liability to the customer. But he already has input credit because he has paid Rs.14 to the wholesaler as the latter’s tax. So, now he reduces Rs. 14 from his tax liability of Rs. (10% of 170=) 17 and has to pay only Rs. 3 to the government. And therefore, he can now sell the shirt for Rs. (140+30+17) 187 to the customer.

Action Cost 10% Tax Actual Liability Total
Buys Raw Material 100 10 10 110
Manufactures @ 40 140 14 4 154
Adds Value @ 30 170 17 3 187
Total 170 17 187

In the end, every time an individual was able to claim input tax credit, the sale price for him reduced and the cost price for the person buying his product reduced because of a lower tax liability. The final value of the shirt also therefore reduced from Rs. 214.5 to Rs. 187, thus reducing the tax burden on the final customer.

So essentially, Goods & Services Tax is going to have a two-pronged benefit. One, it will reduce the cascading effect of taxes, and second, by allowing input tax credit, it will reduce the burden of taxes and, hopefully, prices.

GST Law in India – A Detailed History

GST is not a new phenomenon. It was first implemented in France in 1954, and since then many countries have implemented this unified taxation system to become part of a global whole. Now that India is adopting this new tax regime, let us look back at the how and when of the Goods and Services Tax and its history in the nation.

France was the world’s first country to implement GST Law in the year 1954. Since then, 159 other countries have adopted the GST Law in some form or other. In many countries, VAT is the substitute for GST, but unlike the Indian VAT system, these countries have a single VAT tax which fulfills the same purpose as GST.

In India, the discussion on GST Law was flagged off in the year 2000, when the then Prime Minister Atal Bihari Vajpayee brought the issue to the table.

History of GST in India – Year by Year Events

 

Summary

The idea behind having one consolidated indirect tax to subsume multiple currently existing indirect taxes is to benefit the Indian economy in a number of ways:

  • It will help the country’s businesses gain a level playing field
  • It will put us on par with foreign nations who have a more structured tax system
  • It will also translate into gains for the end consumer who not have to pay cascading taxes any more
  • There will now be a single tax on goods and services

In addition to the above,

  • The Goods and Services Tax Law aims at streamlining the indirect taxation regime. As mentioned above, GST will subsume all indirect taxes levied on goods and service, including State and Central level taxes. The GST mechanism is an advancement on the VAT system, the idea being that a unified GST Law will create a seamless nationwide market.
  • It is also expected that Goods and Services Tax will improve the collection of taxes as well as boost the development of Indian economy by removing the indirect tax barriers between states and integrating the country through a uniform tax rate.
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Real Estate Roundup!

May new home sales gain 2.2% from April

Sales of new single-family houses in May 2015 were at a seasonally adjusted annual rate of 546,000, which is up 2.2% from April, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. — From Housing Wire

3 ways to tame student loan debt and afford a mortgage

It’s no secret that student loans can make buying a home a challenge. But what exactly is the problem, and how can buyers overcome it? The problem is that student loans can be included in the buyer’s debt-to-income ratio, or DTI. — From Bankrate

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