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July 22, 2020

CBDT signs MoU with CBIC and MoMSME What it means and Know 10 impact on Business and Tax payers

CBDT signs MoU with CBIC and MoMSME What it means and Know 10 impact on Business and Tax payers

A Memorandum of Understanding (MoU) was signed between the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC) on 21st July, 2020, for data exchange between the two organisations. The MoU was signed by Shri Pramod Chandra Mody, Chairman, CBDT, and Shri M. Ajit Kumar, Chairman, CBIC, in the presence of senior officers from both the organizations.

Effect on the earlier MoU signed between CBDT and CBEC

This MoU will supersede the MoU signed between CBDT and the erstwhile Central Board of Excise and Customs (CBEC) in the year 2015. Significant developments have taken place since the signing of earlier MoU in 2015, including introduction of GST, incorporation of GSTN and change in the nomenclature of CBEC to CBIC.

What does the CBDT do?

The Central Board of Direct Taxes is a statutory authority functioning under the Central Board of Revenue Act, 1963 who deals with matters relating to levy and collection of direct taxes. It provides inputs for policy making and planning of direct taxes. It is also responsible for administration and implementation of direct tax laws.

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What does the CBIC do?

Central Board of Indirect Taxes and Customs is a part of the Department of Revenue under the Ministry of Finance which deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC’s purview.

What does the MoU between CBDT and CBIC signify?

  • The MoU will facilitate the sharing of data and information between CBDT and CBIC on an automatic and regular basis. This will lead to more transparency as there will be no scope of hiding data.
  • In addition to regular exchange of data, CBDT and CBIC will also exchange with each other, on request and spontaneous basis, any information available in their respective databases which may have utility for the other organisation.
  • A Data Exchange Steering Group has also been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the data sharing mechanism.

Another MoU signed by CBDT and MoMSME

A Memorandum of Understanding (MOU) was signed on 20th July, 2020 between the Central Board of Direct Taxes (CBDT) and the Ministry of Micro, Small and Medium Enterprises, Government of India (MoMSME) for sharing of data by CBDT to MoMSME. The MoU was signed by Smt. Anu J. Singh, Principal Director General of Income Tax (Systems), CBDT and Shri. Devendra Kumar Singh, Additional Secretary & Development Commissioner, MoMSME.

What does the MoU between CBDT and MoMSME signify?

  • The MoU will facilitate seamless sharing of certain Income-tax Return (ITR) related information by the Income Tax Department to MoMSME.
  • This will lead to more transparency as there will be no scope of hiding data
  • The CBDT data will enable MoMSME to check and classify enterprises in Micro, Small and Medium categories as per the criteria notified in the Notification No. S.O. 2119(E) dated 26/06/2020 of MoMSME. Tax authorities have tightened the screws on companies that continue to enjoy MSME status despite having surpassed the earlier parameter based on investment limit in plant and machinery.
  • Both the organisations will appoint Nodal Officer and Alternate Nodal Officers to facilitate the process of data exchange.

What does the MoMSME do?

The role of the Ministry of Micro, Small and Medium Enterprises is to supplement the efforts of the States/Union Territories aimed at promoting growth and development of MSMEs, for enhancing their competitiveness in the changed scenario. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth

Revised Definition of MSME:

The following enterprises will be classified as MSME

EnterpriseInvestment in plant and machineryTurnover
MicroDoes not exceed Rs 1 croreDoes not exceed Rs 5 crore
SmallDoes not exceed Rs 10 croreDoes not exceed Rs 50 crore
MediumDoes not exceed Rs 50 croreDoes not exceed Rs 250 crore

Both these MoU’s will mark the beginning of a new era of cooperation and synergy between the CBDT and CBIC and CBDT and MoMSME.

How it will Impact Business and Taxpayers?

  1. Business will get Loans Easily as data will be available soon with Banks
  2. Taxpayers data of GST will be shared to Income Tax Department to cross check turnover and other details automatically
  3. Tax Department will have AI to check data mis match and notices can be easily send to tax payers for explanations
  4. GST Turnover details and Income Tax Assets details will be automatically populated for classification as per new definition of MSMEs
  5. If Assessee is at default at one place example in income tax, automatically data and information will be shared with other departments like GST, etc
  6. Big data will help identify potential of tax evasion done by business and others
  7. Export data will be captured at multiple places and any deviation will be asked to explain
  8. All new MSMEs register in Udyam will be given priority in government contracts
  9. Udyam Registration will be very important for business to get subsidy and any apply to government scheme
  10. With E Faceless Assessment in place for Income Tax, simialr will be available for assessment in GST very soon

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