Registered under GST? Heard about Profession Tax? Pay it NOW…

With the GST coming in from July 1, 2017 numerous persons got themselves registered under the GST regime for various reasons, some mandatory while some voluntary, but little did they know that, they would be served with notices for non-registration and non-payment of profession tax under The Maharashtra State Tax On Professions, Trades, Callings And Employments Acts, 1975. This is probably due to integration of government websites and better co-ordination among various departments of tax authorities.

So what exactly is Profession Tax (hereinafter referred to as “PT”), who needs to PT and is it mandatory to pay PT? Well PT is a tax levied by the state and is a state revenue. Various states have enacted such acts for collection of PT in their respective states. This article is restricted to  The Maharashtra State Tax On Professions, Trades, Callings And Employments Acts, 1975.

PT becomes applicable once a person starts his business or profession. The person needs to get itself mandatorily registered within 30 days of starting the business or profession. Once a person is registered TIN is allotted by the department and the person can pay PT. The due dates for various persons have been provided in the Act. Generally for individuals the last date for payment of PT is 30^th June of every year. For companies the last date of payment is 31^st March of every year, if their PT liability does not exceed Rs. 50,000/- if however the PT liability is beyond Rs. 50,000/- then monthly returns are to be filed and payment shall be made accordingly.

As per the amendments in the PT Act 1975, a person (natural / legal) registered under MGST Act is liable to enroll for Profession Tax Enrollment Certificate (PT-EC) and pay Rs.2500/- per annum which is levied in most cases. In addition, if the business is having any employee whose monthly salary is above Rs. 7500/- is also required to obtain Profession Tax Registration Certificate (PT-RC) and pay tax after deducting the same from the employee’s salary as per the provisions of law. Also it should be noted that different rates of PT are specified for different businesses and professions.

If you are registered under MGST Act, and you have neither obtained PT-EC nor PT-RC, failure to comply with the provisions of the Act may result in penal proceedings. It is therefore advisable to enroll yourself under PT Act and also obtain PT Registration Certificate, if applicable and to pay off your PT liability at the earliest in order to avoid any further action from the department. One should also check their e-mails regularly including the spam folder for any department correspondence and seek profession assistance immediately so as to comply within the specified timeframe, if any.

This article is for informational purpose only and we advise the person to seek professional assistance for the same. For any assistance or queries pertaining to PT the email address of the authors is provided below.

Authors: CS. Ashish & CS. Sadanand
Occupation: Practicing Company Secretaries, Mumbai

Reach us at: corporatecompliance365@gmail.com

Disqualified to act as director under the Companies Act...There is nothing much one can do!!!

Newspapers, blogs, websites are flooded with the news regarding the disqualification of about 3 lakh directors across the country. Even more there is speculation that, a new list of disqualified directors would be released anytime soon. The Ministry’s stand is very clear “Comply or Perish”. Disqualified directors would never have thought that, something like this would ever happen to them and the ministry would become so stringent overnight. We understand the intention of the Government is to curb the black money and put an end to the parallel economy, if not then atleast to control and supervise it, because no economy in this world is free from it, but in all of this there are directors who are in a soup just because they were directors in a company which they didn’t know existed or had filed resignations which were not uploaded or intimated to ROC for reasons unknown.

We are in support, of this noble initiative taken by the government but one should also provide some relief to the persons genuinely affected by such disqualification. The Ministry has come up with the CODS scheme, 2018, wherein the defaulting company can file its returns and the disqualification is lifted on its directors. On analyzing the scheme, only defaulting companies and directors associated with such defaulting companies are given an opportunity and not to directors who are disqualified because of being associated with struck off companies.

In one of the practical cases, a person is a director in a company and the company has been compliant in filing its timely returns until 2016. But since the carnage began in 2017, the person suddenly came to know he is disqualified because a company is struck off in which he was a director in the year 19XX, from which he had resigned. The MCA went online somewhere in 2005 or 2006 and hence there are no records of such resignation and the business of such person has come to a standstill. Yes we do agree that, one should be absolutely aware of their actions and cannot escape their responsibility, but what is the solution?

Looking at the technicality, a directors is disqualified by virtue of section 164 read with section 167 of the Companies Act, 2013. Sec 164 (2) states that, No person who is or has been a director of a company which—

(a) has not filed financial statements or annual returns for any continuous period of three financial years; or

(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more,

shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

The ROC on the instructions of the Ministry had started insertion of new director name on the board of the company through physical filing of documents providing some relief to the companies but on careful reading of the above provision i.e Sec 164 it becomes evident that, even if a new director is appointed then even the newly appointed director stands disqualified. Sec 167 authorizes the shareholders to appoint the minimum number of directors required as per the act in case all the directors are disqualified, however the ROC allows appointment of only one director.

In such a scenario how will the company function? How will board meetings be conducted without the necessary quorum? How will the resolutions be passed by having only one non-disqualified director? The private limited company in such a scenario would be similar to a one person company which entirely defeats its existence. And lastly what about the amendments in the Companies Amendment Act, 2017 which would levy additional fees of Rs. 100/- per day in case of delay in filing of financial statements which would be a big hit for small businesses and is ready to see the light of the sun as soon as it is published in the Gazette Notification.

While writing this article we hope that, the Ministry comes up with some circular or notification to address such issues and provide the much needed clarity going forward and also end the misery of the directors who unknowingly fell prey to such stringent action by the Ministry. Until then we will just have to wait and watch as to what will be the Ministry’s stand on this entire issue.

Authors: CS. Ashish & CS. Sadanand

Occupation: Practicing Company Secretaries, Mumbai
Reach us at: corporatecompliance365@gmail.com