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Secretarial Compliance, Uncategorized, Winding up of Company
It is better to abandon a sinking and damaged ship than to sink with it. A business may need to be closed for many reasons that may be due to business failure or any other unavoidable circumstances. This article will help you understand different ways to close a company in India.

Under Companies Act 2013, a Company can be closed in two ways.

    1. Winding Up
Winding up is a tedious process and can be done either voluntary by calling up a meeting of all stakeholders and passing a special resolution or can be done on the order of Court or Tribunal. Strike Off mode was introduced by the MCA to give the opportunity to the defunct companies to get their names struck off from the Register of Companies. On 27th December 2016, MCA has notified new rules i.e. Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 prescribing rule for winding up or closure of the private limited company under companies act 2013. By releasing the form STK 2, the ministry of Corporate Affairs has brought the Section 248- 252 of 2013 act into force.

    1. Fast track Exit
This is the most awaited procedure, that got active again on 5th April 2017. This procedure was introduced in Section 248 of Companies Act 2013.
Fast Track exit can be done in two ways:
    • Suo Moto by Registrar
The registrar may strike off the name of Company on its own if:
    • Company has failed to commence any business in a year of its incorporation
    • The company is not carrying out any business or Activity for preceding 2 financial years and has not sought the status of Dormant Company.
The Registrar sends a notice (STK-1) of his intention to remove the name and seeks the representation of Company in 30 days. Note: Liability on the Directors of the company still exists. ROC can invoke penalty clauses anytime, and the penalty may range from INR 50K to INR 5Lakhs per director.
    • Voluntary Removal of Name using Form STK 2
The company can also move an application to Registrar of Companies for striking off the name by filing form STK-2 along with a fee of Rs 5000/-. Once the form is filed, the Registrar has power and duty to satisfy him that all amount due by the company for the discharge of its liabilities and obligations has been realized. ROC can also issue a show cause notice in case of default in filing returns or other obligations. After above formalities, ROC issues a public notice and strike off the name of Company after its expiry. Note: The form is in approval route. Therefore, concerned ROC can ask for the completion of the fillings.

Details Required
:
    • Incorporation Certificate
    • Director Identification Number
    • Pending Litigation Proceedings if any
Documents Required:
    • Application in form STK-2
    • Government filing fees: INR 5,000/-
    • Copy of Board resolution authorizing the filing of this application;
    • A statement of accounts showing the assets and liabilities of the Company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant
    • The shareholder’s approval by way of Special Resolution
    • In the case of a company regulated by any other authority, approval of such authority shall also be required.
    • Copy of relevant order for delisting, if any, from the concerned Stock Exchange;
    • Indemnity bond in Form No. STK-3;
    • Affidavit in Form No. STK-4
Note: This form must be signed by a practicing CA or CS

Companies that cannot file for voluntary strike-off:

A company cannot fill the form STK 2 at any time in the previous 3 months if the company has
    1. Has changed its name or shifted its registered office from one State to another;
    2. Has made a disposal for value of property or rights held by it, immediately
    3. Before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
    4. Has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company or complying with any statutory requirement;
    5. Has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
    6. Is being wound up under Chapter XX of Companies Act or under the Insolvency and Bankruptcy code, 2016

Companies that cannot use Fast Track Exit option:
    • Companies Registered Under Section 8
    • Listed companies
    • Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
    • Vanishing companies;
    • Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
    • Companies where notices have been issued by the Registrar or Inspector (under Section 234 of the Companies Act, 1956 (old Act) or section 206 or section 207 of the Act)and reply thereto is pending;
    • Companies against which any prosecution for an offense is pending in any court;
    • Companies whose application for compounding is pending;
    • Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
    • Companies having charges which are pending for satisfaction.

After you Strike off your company:

As soon as the name of the company is removed from Register, from the date mentioned in the notice under sub-section (5) of section 248 cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been canceled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.
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GST, TAXATION
Infrastructure and Construction Sector is no doubt the most important pillars of Developing Economy. In absence of it, no resources can be extracted, no goods and services can be transferred from one place to other as no business is made in open grounds.

What’s been happening so far?

When it comes to taxation, Infrastructure and Construction Sector, generally, face a lot of complexities. Tax is levied at every stage separately, by the Centre and the State, at varying rates i.e. 10.5% / 6% / 4.5% for service tax and different rates by different States, on the value of construction services.

What are the implications of GST on this sector?
  1. Overview
  • Under the GST system, the tax will be charged only on the value added at each stage by the sub-contractors, main contractors and developers or builders.
  • It is a single tax collected at multiple value additions with a full set-off for taxes paid earlier in the value chain by subcontractors and main contractors.
  • The inter-credit of different taxes paid in the current regime be a service tax, VAT, CST, etc. to Centre or States are not allowed and thus becomes a part of the cost on the suppliers. Thus, under GST the final buyer/client will bear only the GST charged by the last person i.e. developer or builder.
  • GST clearly defines WORKS CONTRACTS as service. Thus, there is:
    1. Simplified treatment of works contracts, since there would be no multiplicity of taxes.
    2. Ease in contract structuring as there will be no requirement to divide contracts into material and service portion, as the entire contract would be treated as service. This would be relevant for onshore services contracts entered with project owners undertaking supply of both goods and services.
  1. Effect on Raw Materials
Most of the Construction projects are carried out using following materials:
MaterialCurrent RegimeNew GST regime Probable Tax %
Excise %VAT %
Cement12.512.512-18
Coal6512
Steel12.5518
Bricks12.5518
Wires(all types)12.5518
tiles12.512.528
  Also, the input credit available to manufacturers of these products would increase, and if passed on to the end customers, is likely to result in lower prices. The benefit to other projects will be affected on the basis of ability to offset the input credit of these items with the output tax.
  1. Effect on basis of Construction Project:
Many real estate projects are developed in a way where the land owner gets a fixed amount of flats in lieu of the transfer of land development rights to the developer. It is known as Joint Development Agreement. barter exchanges are covered in the definition of supply, the law is still vague about the transfer of land rights. The other one is Work Contractor EPC Contracts.  

Joint Development Agreement ModelWork Contracts or EPC Contracts
Cost goes Up if land barter comes in the ambit of Supply.No credit can be taken on goods and services in the execution of Work Contract. Similar to the current tax regime.
Capital Lockup (long interval between transfer and ability to set off.Increases the cost since work contracts specifically defined as Supply
Input Credit on Material consumed, Lower cost of Materials (As mentioned in above table)Lower Input material Cost reduces the Overall price. Though Not a significant difference.
 
  1. Road, Rail and Airport Projects
  • Exemption from paying service tax yet liable to pay input tax and service tax to transporter as well as states.
  • No improvement in tax credit liability due to Section 17 (4) (c)
  • However, for power projects and operational power units that enjoy certain exemptions, will have a negative effect since electricity is outside the ambit of GST and input tax is a cost.
  1. Compliance Ease
Finally, the benefit of GST will be the ease of compliance that it would offer. Elimination of multiple taxes and tax laws is a certainty. However, “Engineering, Procurement, and Construction” (EPC) contracts spread across multiple states would require contractors to register in multiple states including their site offices due to ?place of supply? concept. Further, all the site offices will require technological upgradations since input credit would be available only after an online reconciliation of tax invoices is done.

You know how we Wazzeerians are particular about satisfying your business needs, be it Fortune 100 or upcoming Fortuner one thing that forms the pattern is your value for quality and transparency. We would love to hear from you, anytime. Let’s connect!
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