How to file form 3CL with DSIR?

As the deadline for filing your R&D Expenditure (Form 3CL) with DSIR is approaching soon for financial year 2018-2019 it is time you gear up for the same.

Section 35(2AB) of the Act provides weighted tax deduction of 150% of expenditure incurred by a company, on scientific research (not being expenditure in the nature of cost of any land or building) in the in- house R&D centres as approved by the prescribed authority.

The Department of Scientific and Industrial Research (DSIR) has recently updated the guidelines for approval of in-house research and development (R&D) centres and submission of prescribed report under section 35(2AB) of the Income-tax Act, 1961 (the Act). Section 35(2AB) of the Act.

Upon receiving recognition from DSIR as IN-HOUSE R&D UNIT, companies are eligible for definite tax benefits u/s 35 (2AB). To avail these benefit, filing of form 3CL is mandatory. The cutoff date for the documents to be submitted for availing 3CL benefits is 31st October of each preceding financial year of approved period to facilitate submission of Report in Form 3CL.

Required information to be filled in form 3CL

  1. Name and Address of the registered company including Telex/Fax/Phone numbers
  2. Permanent Account Number (PAN) of the company Name and designation of the Principal Officer of the company.
  3. Nature of Business, manufacturing details of products Drugs like Pharmaceuticals, Electronic Equipment or any other article or thing notified under sub-section (2AB) of section 35.
  4. Annual production of the eligible products of the company during the past three years.
  5. Proposed objectives of scientific research contemplated by the company.
  6. Whether the nature of the business is related to the proposed objectives of the scientific research contemplated by the company.
  7. Details of the nature of in-house R&D facilities.
  8. Whether recognition granted to the in-house R&D centre of the company by DSIR.
  9. Total cost of in-house research facility, giving break-up of expenditure on land and buildings.
  10. Agreement for co-operation, R&D facility, audit of the accounts maintained for that facility.

 Along with it, documents like Auditor’s Certificate, complete details as per appendix II to annexure IV of DSIR guidelines are required as well.

 FORM 3CL is needed to be filed to DSIR and a FORM 3CLA (to be filed by the auditor) to Director General of Income Tax.

 With this, the process of availing the income tax benefits is completed!

Please Don’t Neglect R&D, Finance Minister.

R&D incentives is a key tool used by Governments globally to promote innovation, create high paying jobs and simulate industry growth with countries like United States of America which has made the R&D Tax credit policy permanent in 2016 recognising the impact it has on economic growth of the country.
India is at the cusp of start up growth as also industries has seriously started investing in Research & Development over the last 5 years to leverage market opportunities, address environmental concerns and create indigenous technologies which is a must for India to become an economic superpower.
Unfortunately the Government policy making towards R&D incentives has been short sighted and temporary making it hard for serious investors to invest in R&D to plan long term as also for SMEs who are now gearing  up to make substantial investment in R&D to create new products and technologies for disrupting the market.
The R&D tax benefits is granted in India based on getting certification from Dept. of Scientific & Industrial Research (DSIR) which can easily take one year or more as also the scheme is tied to the physical location of the company whereas globally the incentives are project based which is flexible, transparent and quick to implement.
In fact despite being in middle of recession for last few years European Union (EU) has been significantly increasing incentives in R&D and their Vision 2020 program has already been envisaged beyond 2020 as investing in innovation is the only way to increase growth and create jobs.
India needs to take a holistic view of R&D incentives as a policy making tool which can stimulate growth and make India an attractive R&D destination.
***
Rajeev Surana is a Patent Attorney and author of Protect Your Ideas book. He is also an avid marathon runner and been deeply involved with the innovation ecosystem in India. He can be reached on rajeev@scinnovation.in

DSIR recognized R&D centres on GST exemption

The Indian public, the industries and the companies recognized by Department of Scientific and Industrial Research (DSIR) were in dilemma with the exemption of Custom duty and GST on purchase of capital goods, but there have been new notifications for Custom and
GST, introduced by Government of India, Ministry of Finance:

 Custom notification vide no. 43/2017
 Customs dated 30.06.2017
 IGST notification no 47/2017
 Integrated Tax (Rate) dated 14.11.2017; No. 9/2018
 Central Tax (Rate), No. 09/2018
 Union Territory Tax (Rate) & No. 10/2018
 Integrated Tax (Rate) dated 25.01.2018 against the previous notifications of Custom and excise duty.

In brief, under the above stated notification, if a research institution (other than a hospital) is registered with the Government of India with Department of Scientific and Industrial Research (DSIR), the company is exempted from paying any Custom duty on purchase of any goods (equipment, consumables, computer software, prototypes etc.) for conducting R&D. The subsidized GST rates for such items is 5% in case of import & interstate purchase and 2.5% along with SGST and 2.5% in case of purchases within state.
Hence the customs exemption has not been scrapped entirely; however earlier central excise duty exemption has been revised to GST concession.

Following are the items which are eligible for GST concession as per amendments made in the above notifications:

a) Scientific and Technical Instruments, apparatus, equipment (including computer)
b) Accessories, Part, Consumables and live animals (Experimental Purpose)
c) Computer Software, Compact-Disc Read, Only Memory (CD-ROM), recorded magnetic tape, microfilms, microfiches
d) Prototypes (the aggregate value of prototypes received by an institution does not exceed fifty thousand rupees in a financial year).

Following is the example of savings for the companies in terms of GST: –
GST GST PAYABLE SAVING
IGST Only 5% GST @ 12%: Saving is 7%
GST @ 18%: Saving is 13%
GST @ 28%: Saving is 23%
CGST Only 2.5% GST @ 12%: Saving is 3.5%
GST @ 18%: Saving is 6.5%
GST @ 28%: Saving is 11.5%

SGST As applicable on the item
(No exemption)

NO SAVINGS
UTGST 2 Only 2.5% GST @ 12%: Saving is 3.5%
GST @ 18%: Saving is 6.5%
GST @ 28%: Saving is 11.5%

To obtain concessional GST, the company will provide a certificate to supplier at the time of supply.
To summarize, DSIR recognized centres can avail customs duty exemption. This was the earlier scenario as well, but in case of GST there is comparatively better savings of indirect tax which was exempted earlier in terms of central excise duty exception.

Let’s talk
For a deeper discussion of how this issue might affect your business, please contact:
letstalk@scinnovation.in
Head Office
109, Marine Chambers, 1st Floor, 43,
New Marine Lines, Mumbai-400020. (INDIA)
Phone: +91 9962696204 
Email: letstalk@scinnovation.in