Vocational Skills in Accounting - I Notes | B.Com. (Accountancy) Semester 1 | Mumbai University | munotes

Why an accountant needs this before anything else

Because the status decides everything that follows:

• Which return form is used, and by when.
• Which rate applies. An individual has slab rates; a firm has a flat rate; a company has its own.
• What deductions are available.
• How PAN is applied for. The fourth character of a PAN is the status code, so the status is inside the number itself.
• Who signs. An individual signs for himself, a partner or designated partner for a firm, a director for a company.

The seven statuses and their PAN letter

Section 2(76) defines PAN as a unique number of ten alphanumeric characters allotted for identification under the Act, and says nothing about how those ten are composed. The composition is the Department's own, and the fourth character carries the status, which is the statuses of section 2(77) with a few splits.

Read the fourth letter of any PAN and you know the status the holder is assessed in.

Not every person is an assessee

Two more words are used loosely in speech and precisely in the Act.

A person is anyone in the list above.

An assessee is a person by whom any tax or other sum is payable under the Act, or in respect of whom any proceeding has been taken. Every assessee is a person; not every person is an assessee.

What MU is actually asking

Her topic line puts three statutes in one row: "Meaning and concept of "Person" under Income Tax Law, GST Law, Udyam". She is not asking for three definitions to be memorised in isolation. She is asking what changes between them, because a firm registering under all three has to know whether the same body is the same "person" each time.

The next two chapters take the GST law and Udyam, and the fourth sets the three side by side.

The distinct-person rule, which has no parallel in income tax

Section 25(4) and 25(5) of the CGST Act treat one legal entity as more than one person in defined circumstances.

Section 25(4). A person who has obtained more than one registration, whether in one State or in more than one State, shall, in respect of each such registration, be treated as distinct persons.

Section 25(5). Where a person has an establishment in one State and another establishment in a different State, those establishments shall be treated as establishments of distinct persons.

The consequence is real and it surprises people. A firm with a branch in Pune and a branch in Nagpur, registered in Maharashtra and Maharashtra, is one person. The same firm with a branch in Gujarat is two distinct persons, and a stock transfer from the Pune branch to the Surat branch is a supply on which tax is payable, though nothing was sold and no money changed hands.

Nothing in the income-tax law does this. A firm is one person wherever its branches are.

The Aadhaar question is separate

MU's topic line runs "Person under Income Tax Law, GST Law, Udyam", and it is easy to assume the third is another definition of person. It is not, and the next chapter says why.

Note the split. For the first three the Aadhaar is that of a named natural person holding the office. For the rest it is the authorised signatory's, and the organisation's own PAN and GSTIN carry the identification.

MU's own scope note confines this paper to individuals and partnership firms, so the first two rows are the ones her examples will use.

One enterprise, one registration

Paragraph 6(7) of the notification:

No enterprise shall file more than one Udyam Registration:

Provided that any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration.

And paragraph 3(3), which decides what counts as one enterprise:

All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and the turnover and investment figures for all of such entities shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprise.

So under Udyam the unit is the PAN. Every GSTIN hanging off one PAN is one enterprise, and their figures are added.

Compare that with GST, where section 25(4) treats each registration as a distinct person and a stock transfer between two of them is a taxable supply. The same PAN with two GSTINs is one enterprise for Udyam and two persons for GST. That is the sharpest single contrast between the three statutes, and the next chapter puts it in a table.

What is not required

Paragraph 6 also settles what a registering enterprise does not need, and each is worth a mark:

• No fee. Paragraph 6(2).
• No documents, papers, certificates or proof. Paragraph 2(1); the registration is on self-declaration.
• No physical visit. The whole process is on the Udyam Registration portal.

The portal itself warns that no private agency is authorised to do this and that it is free. A student should know that, because the fraud is common and the syllabus is training people who will be asked to do it for others.

And the classification of that one enterprise, on the limits in force from 1 April 2025: investment Rs. 1.9 crore is under Rs. 2.5 crore and turnover Rs. 3.4 crore is under Rs. 10 crore, so it is a micro enterprise. The chapter on the MSME classification works the composite criterion through.

The trap in an exam

A question that says "Explain the concept of person under the Income Tax Law, GST Law and Udyam" is not asking for three lists copied out. It is asking what changes, and why. An answer that gives the two lists and then says "there is no definition under Udyam, and here is what Udyam has instead" is a better answer than one that invents a third list to be symmetrical.

So the relationship is one of genus and species. Every digital signature is an electronic signature; not every electronic signature is a digital signature. Aadhaar e-KYC signing, listed in the Second Schedule, is an electronic signature and is not a digital signature under section 3.

Legal recognition

Section 5, legal recognition of electronic signatures, is the provision that makes any of this worth doing: where a law requires information to be authenticated by the signature of a person, that requirement is satisfied if the information is authenticated by an electronic signature affixed in the prescribed manner.

Section 15 adds the idea of a secure electronic signature, which carries a stronger presumption.

Together they are the reason a company can file its return without a piece of paper.

Where an accountant meets it

Every one of these needs a digital signature or an equivalent:

• Income-tax return of a firm or a company that is required to be audited.
• Tax audit report, filed by the chartered accountant with the accountant's own certificate.
• GST registration and returns, where the applicant is a company or a limited liability partnership.
• Company filings with the Registrar of Companies, all of them.
• e-Tendering with any government department.
• Import and export documentation, and the Directorate General of Foreign Trade's own portal.
• Trademark and patent filings.

The three classes, and why only one of them matters now

Certificates were issued in three classes. Class 1 and Class 2 were discontinued from 1 January 2021 by the Controller of Certifying Authorities, and Class 3 is the only class now issued.

A Class 3 certificate comes in two kinds: signature only, and signature and encryption combined. A firm filing returns needs the first; a firm bidding in e-tenders usually needs both.

The two things inside the certificate

A Digital Signature Certificate is a file, and it holds:

• the subscriber's name and details, verified by the Certifying Authority;
• the public key of the subscriber;
• the Certifying Authority's own signature over both;
• the validity period, one, two or three years.

The private key is not in the certificate. It sits in a USB cryptographic token, and it never leaves it. That is the point of the token, and the next chapter takes up how one is obtained.

The certificate is issued to a person, never to a firm. A partnership firm cannot hold a Digital Signature Certificate of its own; a named partner holds one and signs for the firm. That is the commonest misunderstanding on this topic and the reason the authorisation letter exists.

The steps

1. Choose a licensed Certifying Authority. The Controller publishes the list; eMudhra, Sify, NSDL, Capricorn and the National Informatics Centre are among them.
2. Fill the application form, online or on paper, with the class and the validity wanted.
3. Pay the fee.
4. Complete verification. This is the step that changed: it is now normally Aadhaar-based e-KYC with a video recording, in which the applicant reads a displayed code aloud to camera. Where e-KYC is not used, the Registration Authority verifies documents in person and attests them.
5. Approval by the Certifying Authority.
6. Download the certificate into the token. The private key is generated inside the USB cryptographic token and never leaves it.
7. Receive the token, or download onto a token already held.

Two to seven working days is normal where e-KYC is used, and longer where paper verification is needed.

What the applicant should check before paying

• That the Certifying Authority is on the Controller's licensed list. Section 21 makes an unlicensed issuer's certificate worthless.
• That the class is Class 3, which is the only class now issued.
• Whether encryption is needed as well as signing, because a combined certificate costs more and a tender usually requires it.
• The validity, one, two or three years, and that the expiry does not fall in the middle of a filing season.
• That the name and PAN on the application are exactly as on the PAN card. A mismatch is the commonest cause of rejection, and correcting it means applying again.

Section 40A sets out the duties of a subscriber of an Electronic Signature Certificate.

Section 41 governs acceptance: a subscriber is deemed to have accepted a certificate if he publishes it or authorises its publication, or otherwise demonstrates his approval of it.

Suspension and revocation

Section 37, suspension. The Certifying Authority may suspend a certificate on a request from the subscriber or a person authorised by him, or if it is of opinion that the certificate should be suspended in the public interest. A certificate may not be suspended for more than fifteen days unless the subscriber has been given an opportunity of being heard.

Section 38, revocation. The Certifying Authority may revoke a certificate on the subscriber's request, on the death of the subscriber, on the dissolution or winding up of a firm or company where the subscriber is one, and in the circumstances the section sets out. Revocation is permanent; suspension is not.

Section 39, notice. Where a certificate is suspended or revoked, the Certifying Authority shall publish a notice of it in the repository it maintains.

Validity and renewal

A certificate is issued for one, two or three years and stops working on its expiry date, with no grace period.

Renewal is a fresh application. There is no extension of an existing certificate: the applicant applies again, is verified again, and downloads a new certificate, usually onto the same token.

Plan the expiry. A certificate that expires on 20 September expires in the middle of the tax audit season, and a firm that has not renewed cannot file.

What to do when things go wrong

The one-line summary

The Certifying Authority issues the certificate to a person, the person keeps the private key in a token he does not lend, the certificate is registered separately on every portal against a PAN, and it dies on its expiry date unless a fresh application is made.

Clause (d) and clause (e) go together. A resident firm entering into a financial transaction of Rs. 2,50,000 or more must have a PAN, and so must every partner and every person competent to act for it.

Section 262(2): the voluntary application

Any person, not covered under sub-section (1) may apply to the Assessing Officer for the allotment of a Permanent Account Number after which the Assessing Officer shall allot a Permanent Account Number to such person.

Anybody may have a PAN. The section obliges some and permits all.

What the holder must then do

Section 262(3). Quote the PAN in all returns to, and correspondence with, any income-tax authority, and in all challans for the payment of any sum due under the Act.

Section 262(4). Intimate the Assessing Officer of any change in address, or in the name and nature of the business on the basis of which the PAN was allotted. This is forgotten constantly and it is a real obligation.

Section 262(5) and (6). Quote the Aadhaar number in the application form and in the return, and where a PAN was already allotted, intimate the Aadhaar number to the prescribed authority.

Section 262(8). A person who has already been allotted a PAN cannot apply for, obtain or possess another. Holding two is an offence and both are liable to be treated as invalid.

The ten characters

The Act fixes the length and says nothing about the composition, which is the Department's own.

The fourth character is the one to read: P individual, F firm including an LLP, C company, H Hindu undivided family, A association of persons, B body of individuals, T trust, L local authority, J artificial juridical person, G government.

So a PAN beginning AAAFS is a firm whose name begins with S, and a candidate asked to identify the status from a PAN reads the fourth character and stops.

Why a business needs it before anything else

PAN is the first registration, and everything else hangs off it.

• GST registration requires a PAN. Section 25(6) of the CGST Act says every person shall have a PAN in order to be eligible for registration.
• Udyam registration links investment and turnover to the PAN, and paragraph 3(3) of the notification treats every GSTIN under one PAN as one enterprise.
• A current account cannot be opened without one.
• TDS is deducted at a higher rate where the deductee has not furnished a valid PAN, under section 397(2).
• Import and export need an Importer Exporter Code, which is now the PAN itself.

A firm that applies for GST before it has a PAN will be stopped at the first screen. The order of registrations is set by this dependency, and the chapter at the end of Module II sets it out.

The Act MU names, and the Act now in force

Write the section of the 2025 Act. If the question is put in the words of the 1961 Act, say in one line that the 1961 Act has been replaced by the Income-tax Act 2025 with effect from 1 April 2026, and answer under the section of the new Act. That is a complete and correct answer to a question asked in older words.

The rest of the statute book has not caught up either, and it is worth noticing: section 25(6) of the CGST Act 2017 still says a person must have a Permanent Account Number "issued under the Income-tax Act, 1961" in order to be eligible for registration. The requirement is unchanged; only the Act that allots the number has a new name and a new number for the section.

An instant e-PAN through the e-filing portal takes minutes and costs nothing. The ordinary route takes about a fortnight.

The commonest reasons an application is rejected

After allotment

Three things follow, and each is a duty rather than a courtesy.

Quote it. Section 262(3): in every return, in all correspondence with any income-tax authority, and in all challans.

Link it with Aadhaar. Sections 262(5) and 262(6). An unlinked PAN becomes inoperative.

Report a change. Section 262(4): any change in address, or in the name and nature of the business on the basis of which the PAN was allotted, must be intimated to the Assessing Officer. A firm that changes its name or moves its office and does not report it is in default of a statutory duty, and it will also fail the address check at the next registration it applies for.

The consequence of not having a PAN, which sits in the same section

Section 397(2)(a) requires every person entitled to receive an amount on which tax is deductible, or paying an amount on which tax is collectible, to furnish a valid Permanent Account Number to the person deducting or collecting.

Section 397(2)(b) then provides that on failure the tax shall be deducted at the higher of the rate specified in the relevant provision of the Act or the other rates the section prescribes.

So the deductee's PAN and the deductor's TAN are both required, and the penalty for a missing PAN falls on the deductee in the form of a higher rate.

PAN and TAN compared

This table is the answer to the commonest question on this topic.

The structure tells them apart at a glance. A PAN reads AAAPB1234C, five letters then four digits. A TAN reads MUMA12345B, four letters then five digits, and the first three letters are the city code, so a TAN beginning MUM was allotted in Mumbai.

The penalty

A person who fails to apply for a TAN when required, or fails to quote it where the Act requires, is liable to a penalty. More practically, the return of tax deducted at source cannot be filed without one, and the failure to file that return carries its own fee and its own penalty, and it stops the deductee from getting credit for the tax that was deducted from them.

That last consequence is the one to name in an answer. A firm without a TAN does not merely inconvenience itself; it leaves its employees unable to claim the tax already taken out of their salaries.

Does it need a TAN, and from when?

The manager's annual salary is Rs. 5,40,000, above the amount not chargeable to tax, so the firm must deduct tax from his salary. It is also paying rent above the threshold at which tax must be deducted from rent.

So the firm becomes a person deducting tax in July 2027, and section 397(1)(a) requires it to apply for a TAN, having not been allotted one. It should apply before the first deduction, because the challan by which it pays the tax over cannot be filled without the number.

It cannot use its PAN instead. None of the four exceptions in section 397(1)(c) applies: the firm is not an individual or a Hindu undivided family, and none of the named table entries covers salary or rent paid by a firm.

And it must obtain the manager's PAN, because section 397(2) makes the deduction fall at a higher rate if the deductee does not furnish one.

The order in which a new firm does this

PAN first, always. Form 49B asks for the firm's PAN and for the PAN of the person responsible, so a firm without a PAN cannot complete a TAN application.

TAN only when it is needed. A firm that has no employees and makes no payment attracting deduction does not apply for one, and does not have to.

The chapter at the end of Module II puts all eight registrations in the order the dependencies force, and this is one of the dependencies.

Three rules, and the second is the one that is examined.

Going up is easy: either criterion is enough. Cross the investment ceiling or the turnover ceiling and the enterprise moves up a category.

Coming down is hard: both criteria must fall. An enterprise does not return to a lower category until investment and turnover are both below the lower category's ceilings.

That asymmetry is deliberate. It stops an enterprise flickering between categories on one bad year, and it stops it manipulating one figure to get back into a category with better benefits.

Worked, four cases

Apply the limits in force from 1 April 2025.

And the coming-down rule. Enterprise B, now small, has a poor year: investment Rs. 1.90 crore and turnover Rs. 8.20 crore. Both are now under the micro ceilings of 2.5 and 10, so it returns to micro. Had only the turnover fallen, it would have stayed small.

How investment is computed

Paragraph 4 of S.O. 2119(E):

• Linked to the income-tax return of the previous years.
• For a new enterprise with no return yet, on the promoter's self-declaration, and that relaxation ends after the 31st March of the financial year in which it files its first return.
• "Plant and machinery or equipment" takes its meaning from the Income Tax Rules 1962 and includes all tangible assets other than land and building, furniture and fittings.
• The purchase invoice value is taken, first hand or second hand, excluding GST, where the enterprise is new and has no return.
• The items excluded by Explanation I to section 7(1) of the Act are excluded, which are the cost of pollution control, research and development, industrial safety devices and such other items as may be specified.

How turnover is computed

Paragraph 5:

• Exports of goods or services or both are excluded from turnover for classification. This is a deliberate encouragement to export: an exporting enterprise stays in a lower category longer.
• The figures are linked to the Income Tax Act or the CGST Act and the GSTIN.
• Turnover of an enterprise without a PAN was taken on self-declaration only up to 31 March 2021, and PAN and GSTIN have been mandatory since.

The three numbers to carry into the exam

Micro: 2.5 and 10. Small: 25 and 100. Medium: 125 and 500. In crores, investment first, turnover second, in force from 1 April 2025, under S.O. 2119(E) as amended by S.O. 1364(E).

No fee at any step, and no document uploaded at any step.

Whose Aadhaar, once more

Because it is the single most asked detail.

One enterprise, one registration

Paragraph 6(7) allows only one Udyam Registration per enterprise, and its proviso allows any number of activities inside it, manufacturing or service or both.

So a firm that manufactures and also trades does not register twice. It adds the second activity to the one registration, choosing the additional National Industrial Classification code.

And paragraph 3(3) decides what one enterprise is: all units with a GSTIN listed against the same PAN are one enterprise, and their figures are added.

Updation, and what happens if it is not done

The information in the registration is updated every year, and the portal pulls the fresh figures from the income-tax and GST systems.

Failure to update makes the registration liable to suspension. The classification then goes stale, and an enterprise whose figures have risen keeps benefits it is no longer entitled to, which is what paragraph 6(8) is aimed at.

The penalty for a false declaration

Paragraph 6(8) applies section 27 of the MSMED Act to anyone who intentionally misrepresents or attempts to suppress the self-declared facts and figures.

The whole scheme is built on trust and this is its only sanction. Nothing is uploaded and nothing is verified at the counter; the verification is the link to the PAN and the GSTIN, and the penalty is for the person who lies to the machine.

What registration is worth

An answer that lists the steps and stops has not said why anybody bothers. The benefits are the reason.

• Priority sector lending from banks, and collateral-free credit under the guarantee scheme.
• Protection against delayed payment under sections 15 to 24 of the MSMED Act: a buyer must pay within the agreed period or forty-five days, and pays compound interest at three times the bank rate if it does not.
• Reference to the Micro and Small Enterprises Facilitation Council for a delayed payment dispute.
• Preference in government procurement.
• Subsidies on patent registration, barcode registration, industrial promotion and electricity.
• Concessions notified from time to time by the Central and State Governments.

The delayed payment protection is the one a commerce student should name first. It is the practical reason a small supplier registers.

So how should the topic be answered

If a question asks about registration under "Udyam / Udyog Aadhar", the correct answer has three parts:

1. What Udyog Aadhar was, and the two dates: introduced 2015, closed to new registration from 1 July 2020.
2. What replaced it and why, which is the composite criterion and the linkage to PAN and GSTIN.
3. What a holder of a Udyog Aadhar Memorandum has to do, which is to register again under paragraph 7.

An answer that describes Udyog Aadhar as a current option is wrong, and it is the mistake a student who learned this topic from an old textbook will make.

And the Udyam Assist Platform, which is the newest layer

A further scheme reaches enterprises that have no PAN and no GSTIN at all, the informal micro enterprises, through the Udyam Assist Platform.

S.O. 1296(E), dated 20 March 2023, made under section 9 of the MSMED Act, provides that a certificate issued on the Udyam Assist Platform to informal micro enterprises shall be treated at par with a Udyam Registration Certificate for the purpose of availing priority sector lending benefits.

That is a narrow equivalence and the notification says so: at par for priority sector lending, and for that purpose. It is not a general substitute for Udyam registration.

Sub-section (4) deals with a transfer under a scheme of amalgamation or demerger sanctioned by a court: the transferee is liable from the date the Registrar of Companies issues the certificate.

Section 23: who is not liable

The section takes two classes out of section 22 altogether:

• a person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or are wholly exempt; and
• an agriculturist, to the extent of supply of produce out of cultivation of land.

The Government may also, on the Council's recommendations, notify further categories of persons exempted from obtaining registration.

The word "exclusively" governs the first. A person supplying exempt goods and one taxable item is not covered.

Section 24: compulsory registration, whatever the turnover

Section 24 opens with "Notwithstanding anything contained in sub-section (1) of section 22", so it overrides the threshold entirely. A person in any of these categories registers on day one, at a turnover of one rupee.

• persons making any inter-State taxable supply;
• casual taxable persons making taxable supply;
• persons required to pay tax under reverse charge;
• persons required to pay tax under section 9(5), the electronic commerce operator liable for notified services;
• non-resident taxable persons making taxable supply;
• persons required to deduct tax under section 51;
• persons who make taxable supply on behalf of other taxable persons, whether as agent or otherwise;
• input service distributors;
• persons who supply through an electronic commerce operator required to collect tax at source;
• every electronic commerce operator required to collect tax at source;
• persons supplying online information and database access or retrieval services from outside India to an unregistered person in India;
• such other person or class of persons as the Government may notify.

The first item is the one that catches an ordinary small firm. A Pune firm with a turnover of Rs. 6 lakh that sells to one customer in Gujarat is making an inter-State taxable supply, and section 24 requires it to register even though section 22 would not.

Voluntary registration

Section 25(3) allows a person not liable to register to register voluntarily, and all the provisions of the Act then apply to him as they apply to a registered person.

Why anybody would. Input tax credit cannot be taken by an unregistered person, and a registered buyer generally will not buy from an unregistered supplier because it breaks the credit chain. A small supplier selling to businesses usually registers voluntarily for that reason alone.

The decision, as a sequence

1. Is the person in section 23? Exclusively exempt supplies, or an agriculturist supplying his own produce. If yes, no registration.
2. Is the person in section 24? If yes, register, whatever the turnover.
3. Does aggregate turnover exceed the section 22 threshold? Rs. 40 lakh for exclusively goods where the State has adopted it, Rs. 20 lakh otherwise, Rs. 10 lakh in a special category State that has not raised it. If yes, register.
4. Otherwise registration is voluntary under section 25(3).

Four short cases

Part B is filled using that reference number, and it takes the rest: constitution of business, principal and additional places of business, the goods and services supplied with their codes, the details of the proprietor or of every partner, bank account details, and the authorised signatory.

Part B is signed, by digital signature for a company or a limited liability partnership, and by electronic verification code or Aadhaar-based authentication for others.

The steps

1. Fill Part A with PAN, mobile and email; verify by one-time password; receive the Temporary Reference Number.
2. Fill Part B with the business details and upload the documents.
3. Complete Aadhaar authentication, where the applicant opts for it. Where Aadhaar authentication is not done, the application goes to physical verification of the place of business.
4. Sign and submit. An acknowledgement in Form GST REG-02 is issued.
5. The proper officer examines the application. If it is in order, registration is granted. If not, a notice in Form GST REG-03 seeks clarification, which is answered in Form GST REG-04.
6. Registration is granted in Form GST REG-06, with the certificate and the GSTIN. Rejection is in Form GST REG-05.

Section 26 supplies the deemed registration rule: a grant of registration under the State or Union territory Act is deemed to be a grant under the CGST Act, so one application serves both.

The documents

For a proprietor: PAN and Aadhaar of the proprietor, a photograph, proof of the place of business, and a bank account statement or cancelled cheque.

For a partnership firm: PAN of the firm, the partnership deed, PAN and Aadhaar and a photograph of every partner, proof of appointment of the authorised signatory with his own PAN and Aadhaar, proof of the place of business, and the bank details.

Proof of the place of business is an ownership document, or a rent or lease agreement with the lessor's ownership document, or a consent letter with the consenter's ownership document where the premises are shared.

Reading a GSTIN

The certificate carries a fifteen-character Goods and Services Tax Identification Number, and it is not random.

Read positions 3 to 12 of any GSTIN and you have the holder's PAN. That is why one PAN with two GSTINs is one enterprise for Udyam under paragraph 3(3) of the notification, and two distinct persons for GST under section 25(4).

After registration

Section 28, amendment. Every registered person shall inform the proper officer of any change in the particulars furnished, and the officer may approve or reject the amendment.

Section 29, cancellation or suspension. The proper officer may cancel a registration, on his own motion or on an application, where the business is discontinued, transferred, amalgamated, demerged or otherwise disposed of, where there is a change in the constitution of the business, where the person is no longer liable to be registered, and in the other cases the section names.

Section 30, revocation of cancellation. Where a registration is cancelled by the proper officer on his own motion, the person may apply for revocation of the cancellation within the prescribed period.

The three sections run in order and a student should name them in order: register under 25, amend under 28, cancel under 29, and revoke the cancellation under 30.

What happens if registration is not taken

The person remains liable for the tax from the date liability arose, cannot collect tax lawfully, cannot issue a tax invoice, cannot take input tax credit, and is liable to penalty. The liability runs from the day the threshold was crossed, not from the day the officer notices, which is why the thirty-day rule matters.

Both within, so the firm is a micro enterprise.

How. On the Udyam Registration portal, free, with nothing uploaded. The Aadhaar is that of the managing partner, under paragraph 6(4), validated by one-time password, and the firm's PAN is entered and validated.

Result. A permanent Udyam Registration Number and an electronic Udyam Registration Certificate.

Step 4: GST registration

Why the firm must register, and it is not the threshold. Turnover of Rs. 62 lakh exceeds the Rs. 40 lakh threshold for a supplier dealing exclusively in goods, so section 22 catches it anyway.

But it would have been caught even at Rs. 6 lakh. The firm sells to buyers in Gujarat, so it makes an inter-State taxable supply, and section 24(i) requires registration notwithstanding section 22(1), whatever the turnover.

When. Section 25(1): within thirty days from the date on which it becomes liable.

Where. In Maharashtra only. The Gujarat sales are inter-State supplies made from Maharashtra; they do not create a place of business in Gujarat, so no Gujarat registration is needed.

How. Form GST REG-01, Part A with PAN, mobile and email; Part B with the constitution, the workshop as the principal place of business with the rent agreement, the PAN, Aadhaar and photograph of both partners, the authorised signatory, and the bank details. Aadhaar authentication, or physical verification of the premises if it is not done.

Result. Registration in Form GST REG-06 and a fifteen-character GSTIN beginning 27, the Maharashtra State code, with the firm's PAN at positions 3 to 12.

Step 5: TAN

Why, and from when. The firm hires a manager on Rs. 45,000 a month from July 2027, which is Rs. 5,40,000 a year, above the amount not chargeable to tax, so the firm must deduct tax from his salary. Section 397(1)(a) of the Income-tax Act 2025 then requires it to apply for a TAN.

Not before July. A firm that deducts nothing needs no TAN, and applying early serves nothing.

How. Form 49B, no documents, giving the firm's PAN and the name, designation and PAN of the partner responsible for deduction.

And one more duty. Section 397(2) makes the deduction fall at a higher rate if the manager does not furnish his PAN, so the firm must obtain it before the first payment.

The order, and why it cannot be rearranged

Every arrow points back to the PAN. That is the single fact this worked example exists to fix.

What Module II adds

Four workers from July 2027 brings the firm within two more statutes, and both partners come within a third. Profession tax, provident fund and state insurance are Module II, and the chapter that closes it puts all eight registrations in one list with the deadline on each.

On accepting the Surat order. The supply is from Maharashtra to a buyer in Gujarat, so it is an inter-State taxable supply. Section 24(i) requires every person making an inter-State taxable supply to be registered, and section 24 opens with "Notwithstanding anything contained in sub-section (1) of section 22", so the Rs. 40 lakh threshold is displaced entirely.

So the firm must register, and the size of the order is irrelevant. Rs. 40,000 has the same effect as Rs. 40 lakh.

When. Within thirty days from the date it becomes liable, under section 25(1).

Where. In Maharashtra only. The supply is made from Maharashtra; it does not create a place of business in Gujarat.

One further point worth making. The firm should consider whether to accept the order at all, because registration brings monthly returns and a compliance cost for the rest of its life, and it cannot be surrendered while the firm continues to make inter-State supplies. That is the advice a client actually wants, and it is what the syllabus means by a vocational skill.

Question 2 (15 marks, practical)

Deshpande and Sons is a partnership firm formed on 1 May 2027 in Pune, manufacturing plastic components. Investment in plant and machinery is Rs. 2.10 crore. Expected turnover in the first year is Rs. 84 lakh, entirely within Maharashtra. It hires two workers in June 2027 and a supervisor on Rs. 38,000 a month from 1 July 2027. Neither partner and nor the firm holds any registration.

Set out, in order, the registrations the firm needs from the statutes in Module I, the provision requiring each, the time within which it must be applied for, and the classification the firm will receive under Udyam.

Answer to 2

Step 1. PAN of the firm.

Required by section 262(1)(b) of the Income-tax Act 2025: a person carrying on a business whose sales, turnover or gross receipts are or are likely to exceed Rs. 5,00,000 in a tax year must apply. Rs. 84 lakh is likely.

Form 49A, with the partnership deed as proof of identity and address of the firm, signed by a partner. No photograph is required for a firm. The PAN will have F as its fourth character.

It must come first, because section 25(6) of the CGST Act makes a PAN a condition of eligibility for GST registration and Form 49B for TAN asks for it.

Step 2. Udyam registration.

Both criteria are within the micro limits, so the firm is a micro enterprise, under paragraph 1 of S.O. 2119(E) as amended by S.O. 1364(E) with effect from 1 April 2025.

Filed on the Udyam Registration portal, free, with nothing uploaded, on the Aadhaar of the managing partner under paragraph 6(4), with the firm's PAN. A permanent Udyam Registration Number and an electronic certificate follow.

Step 3. GST registration.

The firm deals exclusively in goods, so the threshold under the third proviso to section 22(1) is Rs. 40 lakh. Expected turnover of Rs. 84 lakh exceeds it, so the firm is liable.

It makes no inter-State supply, so section 24 does not apply, but the outcome is the same.

Application in Form GST REG-01 within thirty days of becoming liable, under section 25(1), in Maharashtra. A fifteen-character GSTIN beginning 27 follows, carrying the firm's PAN at positions 3 to 12.

Step 4. TAN.

The supervisor is paid Rs. 38,000 a month, Rs. 4,56,000 a year from 1 July 2027, which is above the amount not chargeable to tax, so the firm must deduct tax at source from his salary. Section 397(1)(a) of the Income-tax Act 2025 then requires it to apply for a TAN, in Form 49B, which needs no documents.

Not before July, because a firm that deducts nothing needs no TAN. And the firm must obtain the supervisor's PAN before the first payment, because section 397(2) makes the deduction fall at a higher rate without it.

Step 5. Digital Signature Certificate.

Not compulsory for a partnership firm, which may sign the GST application by electronic verification code, but needed for tendering and convenient for filing. Applied for under section 35(1) of the Information Technology Act 2000 to a licensed Certifying Authority, Class 3, in the name of a named partner with an authorisation letter from the other. It is issued to the partner, never to the firm.

Question 3 (15 marks: 5 + 5 + 5)

(a) [5] Explain what a digital signature is and how it differs from a scanned image of a handwritten signature, with the sections of the Information Technology Act 2000.

(b) [5] "Udyam and Udyog Aadhar are alternatives." Comment.

(c) [5] Distinguish between PAN and TAN.

Answer to 3(a)

Section 3(1) of the Information Technology Act 2000 allows a subscriber to authenticate an electronic record by affixing his digital signature. Section 3(2) says the authentication is effected by an asymmetric crypto system and hash function which envelop and transform the record into another record. Section 3(3) says any person, by the use of the subscriber's public key, can verify the record, and section 3(4) says the private key and the public key are unique to the subscriber and constitute a functioning key pair.

Section 5 gives it legal recognition: where a law requires authentication by signature, that requirement is satisfied by an electronic signature affixed in the prescribed manner.

It differs from a scanned signature in three ways, and they are the three things a digital signature gives.

Answer to 3(b)

The statement is wrong, and the error is a common one.

Udyog Aadhar was introduced in 2015 and was a free online self-declaration against the entrepreneur's Aadhaar number, classifying an enterprise on investment alone, with no linkage to the income-tax return or to GST and no bar on duplicates.

Udyam Registration was created by S.O. 2119(E) dated 26 June 2020 with effect from 1 July 2020. It classifies on a composite criterion of investment and turnover, links the figures to the PAN, the income-tax return and the GSTIN, and forbids more than one registration per enterprise under paragraph 6(7).

They are not alternatives, because paragraph 7 of the notification closed the older scheme:

(1) All existing enterprises registered under EM-Part-II or UAM shall register again on the Udyam Registration portal on or after the 1st day of July, 2020.

(2) All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification.

"Shall register again." An enterprise still holding only a Udyog Aadhar Memorandum is not registered at all today. The correct statement is that Udyam replaced Udyog Aadhar, and every holder was required to register afresh.

Answer to 3(c)

One line that settles the difference: a proprietor with a shop and no employees needs a PAN and does not need a TAN; the day he hires somebody on a taxable salary he needs both.

Section 4A, restricted liability to pay tax. Section 4B, liability to deduct and pay tax in certain cases, which is the entry Schedule I entry 1A refers to. Section 4C, collection and payment towards tax.

The employer is the collecting agent for his employees and a taxpayer in his own right for his own enrolment. Those are two different capacities and they produce two different certificates, which the next two chapters take up.

Schedule I, the classes and the rates

Section 3(2) charges by reference to Schedule I, which lists classes of person in column 2 and the rate in column 3. The rate for almost every professional and business class is Rs. 2,500 per annum, which is the constitutional ceiling.

Entry 1, salary and wage earners, is the one an employer deducts.

Two things to notice. The women's exemption limit is much higher, Rs. 25,000 against Rs. 7,500, and the February instalment is Rs. 300 rather than Rs. 200 so that eleven months of Rs. 200 and one of Rs. 300 make exactly Rs. 2,500.

Some other entries, all at Rs. 2,500 per annum:

Note 1 to the Schedule, which prevents double taxation

Notwithstanding anything contained in this Schedule, where a person is covered by more than one entry of this Schedule, the highest rate of tax specified under any of those entries shall be applicable in his case.

One person, one liability, at the highest applicable rate. A chartered accountant who is also a partner in a firm and is also registered under the State GST Act is caught by entries 2, 19(a) and 20A, and pays Rs. 2,500 once, not three times.

That is also why the Rs. 2,500 ceiling in the first proviso to section 3(1) is never breached by a person falling in several classes.

The documents

For a partnership firm applying for a PTRC:

For a proprietor, the same list with the proprietor's own PAN in place of the firm's, and no deed.

What the PTRC holder must then do

The employer is liable whether or not he deducts. Section 4 makes the duty to pay independent of the deduction, so an employer who forgets to deduct pays out of his own pocket and must still pay.

The penalty for being late

Section 5(5):

Where an employer, liable to registration has failed to apply for such certificate within the required time, the prescribed authority may, after giving him a reasonable opportunity of being heard, impose penalty of rupees five for each day of delay in case of such employer.

Rs. 5 for each day of delay, and only after a hearing. It is a small figure, and it runs. A firm two years late has a penalty of over Rs. 3,600 on a tax liability that may be smaller than that.

The penalty for a false statement

Section 5(6): where an employer or a person liable to registration or enrolment has given false information in any application under the section, the prescribed authority may, after a reasonable opportunity of being heard, impose a penalty equal to three times the tax payable under the Act.

Three times the tax, against Rs. 5 a day for lateness. The Act punishes lying far more severely than delay, and that contrast is worth stating in an answer.

And one special case

Section 5(3A), added in 2020: a company incorporated under the Companies Act 2013 after the commencement of the amending Act of 2020 shall, at the time of its incorporation, obtain the certificate of enrolment and the certificate of registration under this Act.

For a company the two certificates now come with incorporation itself. For a proprietor or a partnership firm they do not, and must be applied for.

The certificate is itself a demand

Section 5(4):

The prescribed authority shall mention in every certificate of enrolment, the amount of tax payable by the holder according to Schedule I and the date by which it shall be paid and such certificate shall serve as a notice of demand for purposes of section 10.

Two consequences.

The enrolled person is never assessed in the ordinary way. The certificate tells him what to pay and by when, and that is the end of it.

And the certificate is a notice of demand, so failure to pay by the date on it attracts the penalty under section 10 without any further notice being needed.

The procedure

The Department publishes it, and it is entirely online through mahagst.gov.in.

1. Create a profile. On the portal: Other Act Registration, then New Dealer Registration, then registration under various Acts, entering PAN, mobile number and email.
2. The PAN is verified online in real time. Constitution of business and legal name are pulled from the PAN database. If the PAN is wrong the process ends there.
3. Activate the profile by the link sent to the email and the one-time password sent to the mobile.
4. Receive the user name and password by email, and change the password on first login.
5. Log in for e-services, choose Registration, then New Registration, and select the Act as the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 (PTEC).
6. Fill the application.
7. Upload the documents. The Department's own note says documents are not mandatory.
8. Submit. An acknowledgement is generated at once.
9. Auto approval. The registration certificate is generated within a day.
10. Download the certificate from the portal: Other Act Registration, RC Download, enter the TIN or PAN, get status, and print.

There is no fee. The Department's own service note says so in terms.

The documents

The Department asks for proof of the place of business and of residence, for which the latest electricity bill is mandatory, and any one of the following:

• PAN or TAN card, or, if the card is not available, the PAN details from the Income Tax Department's own website;
• a registered deed document issued by the appropriate authority;
• address proof of the owner, tenant, or of a rent-free or consent arrangement;
• a photograph;
• bank details;
• Aadhaar card.

PTEC and PTRC side by side

The single table an examiner is most likely to ask for.

A worked case

Shirke and Deshpande, a partnership firm in Pune with two partners, hires four workers in June 2027. Three are men earning Rs. 9,000 a month and one is a woman earning Rs. 28,000 a month. The firm is registered under the Maharashtra Goods and Services Tax Act 2017.

PTEC. The firm needs none: section 3(2) excludes firms. Each of the two partners must enrol under entry 19(a) at Rs. 2,500 per annum, within thirty days of becoming liable.

Note 1 to Schedule I then matters. The firm is also registered under the State GST Act, which is entry 20A at Rs. 2,500 per annum, but entry 20A charges the registered person, and the registered person is the firm, which is excluded from the charge by section 3(2). The partners pay under entry 19(a), once each.

PTRC. The firm has employees whose salaries cross the entry 1 thresholds, so it is liable under section 4 and must obtain a certificate of registration under section 5(1) within thirty days.

The deduction.

The firm deducts, pays over, and files the returns. Whether it deducts or not, section 4 makes it liable to pay.

Penalty for non-payment

Section 10:

If an enrolled person or a registered employer fails without reasonable cause, to make payment of any amount of tax within the required time or date as specified in the notice of demand, the prescribed authority may, after giving him a reasonable opportunity of being heard, impose upon him a penalty equal to ten per cent. of the amount of tax due.

Ten per cent of the tax due, with two conditions on it: the failure must be without reasonable cause, and the person must be heard first.

Section 10A, special provision regarding liability to pay tax in certain cases, deals with transfer of a business and similar situations, and its sub-section (5) is one of the two limbs of section 5(1).

The penalties, in one table

Because there are four and they are easily muddled.

Every one of the four requires a reasonable opportunity of being heard, and a penalty imposed without one is bad.

Recovery

Section 11, recovery of tax, etc., provides for recovery of any tax, penalty, interest or other amount due as an arrear of land revenue.

Section 11A, special powers of Profession Tax Authorities for recovery of tax as arrears of land revenue, confers those powers on the Act's own authorities so the Department does not have to go through the revenue machinery.

Section 17, special mode of recovery, is the sharpest of the three. The Commissioner may, by notice in writing with a copy to the assessee, require any person from whom money is due to the assessee, or who holds money for or on account of the assessee, to pay the Commissioner instead. In practice this is a notice to the assessee's bank, and it works without a court.

Appeal, and the way out

Section 13, appeal. Any person or employer aggrieved by an order under sections 5, 6, 7, 9, 10, 15 or 16 may appeal, to the Deputy Commissioner where the order was passed by a prescribed authority or an officer subordinate to him, and as the section otherwise provides.

Note which orders are appealable, because it is a list and it can be asked: registration and enrolment under 5, returns under 6, assessment under 7, the default under 9, the penalty under 10, rectification under 15, and accounts under 16.

Section 14, revision. Section 15, rectification of mistakes.

Section 23, compounding of offences. The Commissioner may, before or after proceedings are instituted, permit a person charged with an offence under the Act to compound it on payment of a sum not exceeding double the amount of tax to which the offence relates. On payment, no further proceedings are taken in respect of that offence.

Compounding is the practical exit for a firm that discovers an old default, and a student advising on one should know it exists.

The dates a firm has to diarise

Note 1: one person, one liability

Notwithstanding anything contained in this Schedule, where a person is covered by more than one entry of this Schedule, the highest rate of tax specified under any of those entries shall be applicable in his case.

A chartered accountant who is a partner in his firm and is registered under the State GST Act falls in entries 2, 19(a) and 20A. He pays Rs. 2,500 once.

The Note excepts entry 16(iv) from this rule.

Section 27A, the exemptions

Nothing contained in section 3 and other provisions of this Act shall apply to,-

and then the classes. The ones in force are these.

(a) Members of the armed forces. Members of the forces as defined in the Army Act 1950 or the Air Force Act 1950, and members of the Indian Navy as defined in the Navy Act 1957, serving in any part of the State and drawing pay and allowances as such, including auxiliary forces, reservists and reserve and auxiliary services drawing pay under the budgetary allocations of the Defence Services.

With an Explanation that narrows it: from 1 May 2000 the clause does not apply to persons drawing pay and allowances from the establishments of the Defence Ordnance Factories in the State.

(b) The badli workers in the textile industry.

(c) Disability. Any person with a benchmark disability as defined in section 2(r) of the Rights of Persons with Disabilities Act 2016, or a parent or guardian of a child with a benchmark disability, provided the certificate of disability issued under that Act is held. The certificate must be produced before the prescribed authority for the first assessment year in which the exemption is claimed, and a certificate already produced before 1 April 2023 need not be produced again.

(d) Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana of the Directorate of Small Savings.

(f) Persons who have completed the age of sixty-five years.

(h) Armed members of the Central Reserve Police Force to whom the Central Reserve Police Force Act 1949 applies, and armed members of the Border Security Force to whom the Border Security Force Act 1968 applies, serving in the State.

The five to remember

If only five can be carried into the hall, carry these:

1. Sixty-five years and over. Clause (f).
2. A person with a benchmark disability, and the parent or guardian of a child with one, on a certificate. Clause (c).
3. The armed forces, other than the Defence Ordnance Factories. Clause (a).
4. Badli workers in the textile industry. Clause (b).
5. The Central Reserve Police Force and the Border Security Force. Clause (h).

How the two provisions work together

Read Schedule I first, then section 27A. A person is liable only if he falls in a class in the Schedule; and even then he pays nothing if section 27A reaches him.

Worked. A retired chartered accountant aged sixty-seven still practising in Pune, and a partner in his own firm.

Schedule I catches him twice, at entry 2 as a chartered accountant and at entry 19(a) as a partner, and Note 1 would make it Rs. 2,500 once.

Section 27A(f) then exempts him entirely, because he has completed sixty-five years. Nothing contained in section 3 and the other provisions of the Act applies to him, so he neither enrols nor pays.

Section 18, production and inspection of accounts and documents and search of premises. The power to require production, to inspect, and to search.

Section 24, powers to enforce attendance. The authorities have, for the purposes of the Act, the powers of a civil court in enforcing attendance, examining on oath and compelling production of documents.

Refunds

Section 19, refunds of excess payment. Any amount paid in excess of what is due is refundable.

Section 19A, interest on amount of refund. Interest is payable on the amount refunded.

Section 19B, interest on delayed refund. Where an amount required to be refunded is not refunded in time, further interest runs.

Three sections for one idea, and the reason is that the Act was amended twice to make the State pay for its own delay.

Offences

Section 20, offences and penalties. The Act's offences, and the punishment for each.

Section 21, offences by companies. Where an offence is committed by a company, every person who at the time was in charge of and responsible to the company for the conduct of its business, as well as the company itself, is deemed guilty, subject to the usual defence of having acted without knowledge or having exercised all due diligence.

Section 23, compounding of offences. The Commissioner may permit an offence to be compounded on payment of a sum not exceeding double the amount of tax to which the offence relates, before or after proceedings are instituted, and on payment no further proceedings are taken.

Statistics and rules

Section 26A, power to collect statistics. The Commissioner may collect statistics relating to any matter dealt with by the Act.

Section 27, power to make rules. The rule-making power, exercisable by the State Government, under which the Maharashtra State Tax on Professions, Trades, Callings and Employments Rules, 1975 are made. Rule 4 of those Rules is the application for enrolment, which is why the Department's own service note cites section 3, section 5 and Rule 4 together.

Where the money goes

Section 28, amendment of certain enactments. Schedule II amends five local government Acts, deleting the power of municipal corporations, municipal councils, village panchayats and zilla parishads to levy their own tax on professions, trades, callings and employments. The State took the field over in 1975, and Schedule II is how it cleared it.

Section 29, grants to local authorities for loss of revenue. Because the local bodies lost a tax, the State pays them out of the proceeds.

Section 30, amounts to be paid into the Fund established under the Maharashtra Employment Guarantee Act, 1977. Part of the proceeds goes to the employment guarantee fund.

Sections 28, 29 and 30 together answer a question a thoughtful student asks: why does a State levy a tax capped at Rs. 2,500 a head? Because it replaced a patchwork of municipal levies, it compensates the bodies that lost them, and it funds employment guarantee.

The sections and where each is taught

Forty-one sections, all accounted for.

Voluntary coverage is possible. An establishment below the threshold may come within Chapter III by agreement between the employer and the majority of the employees, on an application, and the Central Provident Fund Commissioner may then apply the Chapter to it.

Who among the employees is a member

Coverage of the establishment and membership of an employee are two different questions, and the second turns on the wage ceiling prescribed under the Code and the schemes framed under it.

In broad terms, an employee drawing wages up to the prescribed ceiling is a member from the day he joins, and an employee drawing more than the ceiling is not compulsorily a member but may be admitted with the employer's agreement and the officer's permission. An employee who was already a member continues to be one even if his wages later exceed the ceiling.

What the establishment then owes

Section 15 of the Code empowers the Central Government to frame the Employees' Provident Fund Scheme, the Employees' Pension Scheme and the Employees' Deposit-Linked Insurance Scheme. Section 16 deals with the funds. Section 17 and the sections that follow deal with the contributions.

For the purposes of this paper, three duties follow from registration:

1. Deduct the employee's share from the wages and add the employer's share.
2. Pay both into the fund within the prescribed time each month.
3. File the monthly electronic return showing the members, their wages and the contributions.

The concordance with the Act MU names

Anything done under the 1952 Act survives, by section 164(2)(a). An establishment holding an old code number does not register again.

How to answer a question put in MU's words

A question that says "Explain the procedure for business registration under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952" should be answered in four movements:

1. Say what happened to the Act. Repealed by section 164(1) item 3 of the Code on Social Security 2020.
2. Say where the law is now. Chapter III of the Code, with registration under section 3.
3. Give the threshold. Twenty or more employees, First Schedule.
4. Give the procedure, which is the next chapter, and which has not changed on the ground: the same portal, the same establishment code, the same monthly return.

That answer is complete, correct and current, and it shows the examiner that the candidate knows more than the syllabus does.

There is no fee.

The documents

The date of setting up and the date the strength first reached twenty are the two dates that matter most. Coverage runs from the day the threshold was crossed, not from the day of the application, so a late application produces arrears of contribution with interest and damages.

What follows registration

The establishment code. A code allotted to the establishment, under which every contribution and every return is filed.

The Universal Account Number. Each member employee holds a UAN, which is his own permanent number and follows him from employer to employer. The establishment code belongs to the employer; the UAN belongs to the employee. That distinction is asked.

The monthly duties.

What happens if registration is not taken

The liability runs from the date of coverage, not from the date of discovery. An establishment that crossed twenty employees two years ago and never registered owes the contributions for both years, with interest and with damages, and its officers are exposed to the Code's penal provisions.

And the employees lose more than the employer. Two years of contributions not credited to their accounts is two years of interest and two years of pensionable service missing.

That is the point to make in an answer, because it explains why the deadline is short and why the Code makes registration electronic and free.

Contributions begin when the benefits begin. The Corporation's benefits are delivered through its own hospitals and dispensaries, so an establishment in a district where the scheme has not been implemented registers but does not contribute until the notified date. This is why some areas are described as "implemented" and others are not, and it is the practical answer to a firm that asks why its branch in one district contributes and its branch in another does not.

The wage ceiling

Coverage of the establishment and coverage of an employee are two questions again.

The establishment is covered at ten or more persons. An individual employee is an insured person if his wages do not exceed the ceiling prescribed under the Code, and an employee above the ceiling is outside the scheme though he is counted for the threshold.

Count everybody for the threshold; contribute for those below the ceiling. That is the rule, and a question that gives a mixed payroll is testing it.

Provident fund and state insurance side by side

Worked, on the firm from Module I

Shirke and Deshpande employs four workers and one manager from July 2027, so five persons. In April 2029 it employs twelve persons, of whom two draw wages above the ceiling. It is not in a notified hazardous occupation.

In July 2027. Five persons. Neither Chapter applies. Below ten and below twenty.

In April 2029. Twelve persons.

• Chapter IV applies. Ten or more persons are employed, so the establishment must register.
• Chapter III does not. Twelve is below twenty.
• The two employees above the wage ceiling are counted for the threshold but are not insured persons, so no contribution is made for them.
• Contributions begin on the date the Corporation's benefits are provided in that area, notified by the Central Government.

If instead the firm were in a notified hazardous occupation, Chapter IV would have applied in July 2027 with its first employee, and the count of five would have been irrelevant.

How to answer a question in MU's words

The same four movements as for provident fund:

1. The 1948 Act is repealed, by section 164(1) item 2 of the Code on Social Security 2020, with effect from 21 November 2025.
2. The law is now Chapter IV of the Code, with registration under section 3.
3. The threshold is ten or more persons, other than a seasonal factory, with the hazardous-occupation proviso bringing in an establishment with even a single employee.
4. The procedure follows, in the next chapter, and it is the same common registration as for provident fund.

The monthly duties

And half-yearly return periods. The Corporation works in two contribution periods a year, and the benefits an insured person can claim in a benefit period depend on the contributions paid in the corresponding contribution period. A student advising an employer should know that a late contribution does not merely attract interest; it can cost the employee a benefit.

What the employee gets, in one paragraph

Because an answer that lists steps and never says what the registration buys is a poor answer. Chapter IV gives an insured person and his family medical benefit at the Corporation's hospitals and dispensaries, sickness benefit in cash during certified sickness, maternity benefit, disablement benefit for an employment injury, dependants' benefit where an employment injury causes death, and funeral expenses. It is the only one of the eight registrations in this book that delivers a service rather than a number.

What happens if registration is not taken

The liability runs from the date of coverage. Contributions for the whole period are due, with interest and damages, and the Code's penal provisions apply to the employer.

And the employee's loss is immediate and personal. An unregistered employee who has an accident at work has no employment injury cover from the Corporation, and the employer then faces the claim himself.

Worked, on the firm from Module I

Shirke and Deshpande, formed 5 April 2027, two partners, manufacturing steel furniture in Pune. Investment in plant Rs. 1.80 crore. Turnover in the first year Rs. 62 lakh, of which Rs. 9 lakh to buyers in Gujarat. It hires four workers in June 2027 and a manager on Rs. 45,000 a month from 1 July 2027. Three of the four workers are men earning Rs. 9,000 a month; one is a woman earning Rs. 12,000 a month. By April 2029 it employs twelve persons.

Two features of that table are worth noticing.

The woman worker at Rs. 12,000 a month pays no profession tax, because entry 1 exempts women up to Rs. 25,000, while the men at Rs. 9,000 pay Rs. 175 a month each. The firm still needs the PTRC, because it is liable under section 4 in respect of the three men.

The firm reaches ESIC two years before it would reach EPF, because the thresholds are ten and twenty. A firm that registers for one and assumes it has registered for both is wrong, and the Shram Suvidha common form asks separately.

The numbers the firm ends up holding

Read the last column. Three of the ten belong to somebody other than the firm: the PTEC to each partner, the insurance number and the UAN to each employee. A student who can say which number belongs to whom has understood this module.

The single sentence to carry into the hall

Get the PAN first, register for GST within thirty days of becoming liable, enrol every partner for profession tax and register the firm as an employer within thirty days of hiring, take a TAN before the first deduction, and register for state insurance at ten persons and provident fund at twenty.

The annual figures.

Three points a good answer makes.

The women's exemption limit is Rs. 25,000, so the two packers at Rs. 11,500 pay nothing while the men at Rs. 9,200 pay Rs. 175 a month. The difference is in the Schedule and is not a mistake.

The February instalment is Rs. 300, so eleven months at Rs. 200 and one at Rs. 300 make exactly Rs. 2,500, which is the ceiling in the first proviso to section 3(1) and under Article 276 of the Constitution.

The firm is liable whether or not it deducts, under section 4, and failure to pay makes it an assessee in default under section 9 with interest, and liable to a penalty of ten per cent of the tax due under section 10.

Answer to 1(c)

Count the persons. Four machine operators, two packers, one supervisor, one accountant and three helpers is eleven persons.

Chapter IV, state insurance: yes. The First Schedule applies Chapter IV to every establishment in which ten or more persons are employed, other than a seasonal factory. Eleven is at or above ten, so the firm must register under section 3 of the Code.

Chapter III, provident fund: no. The First Schedule applies Chapter III to every establishment in which twenty or more employees are employed. Eleven is below twenty.

Contributions under Chapter IV begin on the date the Corporation's benefits are provided in that area, notified by the Central Government, under the third proviso to the First Schedule entry.

One further point. The accountant at Rs. 31,000 a month is counted for the threshold of ten but is not an insured person if her wages exceed the ceiling prescribed under the Code. Count everybody; contribute for those below the ceiling.

Question 2 (15 marks: 8 + 7)

(a) [8] Distinguish between a Profession Tax Enrolment Certificate and a Profession Tax Registration Certificate, and state who in a partnership firm holds which.

(b) [7] "MU's syllabus names the Employees' State Insurance Act 1948 and the Employees' Provident Funds and Miscellaneous Provisions Act 1952." State the position of those two Acts today and where the law on registration now is.

Answer to 2(a)

In a partnership firm:

• The firm holds no PTEC, being excluded from the charge by section 3(2).
• Each partner holds a PTEC, under Schedule I entry 19(a), at Rs. 2,500 per annum.
• The firm holds the PTRC, if it has employees liable under Schedule I entry 1.

A firm of three partners with employees therefore produces three PTECs and one PTRC.

Two contrasts worth adding. A limited liability partnership is different: it was brought into section 3(2) in 2018, so the LLP itself enrols and each partner enrols too, under entry 19(b). And a company incorporated under the Companies Act 2013 after the amending Act of 2020 obtains both certificates at the time of its incorporation, under section 5(3A).

Answer to 2(b)

Both Acts are repealed.

Section 164(1) of the Code on Social Security, 2020 (Act 36 of 2020) repeals nine enactments. Item 2 is the Employees' State Insurance Act, 1948 (34 of 1948) and item 3 is the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952).

The dates differ. The repeal of the 1952 Act took effect on 3 May 2023, and the rest of section 164(1), including the repeal of the 1948 Act, came into force on 21 November 2025 by S.O. 5319(E).

Nothing done under either Act is lost. Section 164(2)(a) provides that anything done or any action taken under the repealed enactments, including any rule, regulation, notification, scheme, appointment, order or direction, is deemed to have been done under the corresponding provisions of the Code. An establishment already holding an EPF or an ESIC code number does not register again, and the proviso to section 3(1) says the same thing from the other side.

Where the law now is.

Registration for both is under section 3 of the Code, electronically, on the Shram Suvidha portal, by a common registration that serves the Employees' Provident Fund Organisation and the Employees' State Insurance Corporation together.

Question 3 (15 marks: 5 + 5 + 5)

(a) [5] State the exemptions under section 27A of the Maharashtra State Tax on Professions, Trades, Callings and Employments Act 1975.

(b) [5] Explain Note 1 to Schedule I of that Act, with an example.

(c) [5] A firm in Nagpur employs eight persons in a notified hazardous occupation. Advise on registration under the Code on Social Security 2020.

Answer to 3(a)

Section 27A provides that nothing contained in section 3 and the other provisions of the Act shall apply to:

1. Members of the armed forces: members of the forces as defined in the Army Act 1950 or the Air Force Act 1950, and members of the Indian Navy as defined in the Navy Act 1957, serving in any part of the State and drawing pay and allowances as such, including auxiliary forces, reservists and reserve and auxiliary services drawing pay under the budgetary allocations of the Defence Services. The Explanation excludes, from 1 May 2000, persons drawing pay and allowances from the establishments of the Defence Ordnance Factories in the State.
2. Badli workers in the textile industry.
3. A person with a benchmark disability as defined in section 2(r) of the Rights of Persons with Disabilities Act 2016, or a parent or guardian of a child with a benchmark disability, on production of the certificate of disability, which must be produced for the first assessment year for which the exemption is claimed and need not be produced again if it was produced before 1 April 2023.
4. Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana of the Directorate of Small Savings.
5. Persons who have completed the age of sixty-five years.
6. Armed members of the Central Reserve Police Force and of the Border Security Force, serving in the State.

Answer to 3(b)

Note 1 to Schedule I:

Notwithstanding anything contained in this Schedule, where a person is covered by more than one entry of this Schedule, the highest rate of tax specified under any of those entries shall be applicable in his case.

One person, one liability, at the highest applicable rate. The Note excepts entry 16(iv).

Why it exists. The Schedule is a list of classes of person, and one person is very often in several of them at once. Without the Note the Act would charge him once for each, and the total would breach both the first proviso to section 3(1) and Article 276 of the Constitution, which cap the liability of one person at Rs. 2,500 a year.

Example. Shri Joshi is a chartered accountant, a partner in Kulkarni and Joshi, and a director of a company registered in Maharashtra.

All three entries carry the same rate, so the highest is Rs. 2,500, and he pays Rs. 2,500 once, not Rs. 7,500. He takes one PTEC, not three.

Answer to 3(c)

Chapter IV, state insurance: the firm must register.

The ordinary threshold in the First Schedule is ten or more persons, and eight is below it. But the first proviso to that entry applies Chapter IV to an establishment carrying on such hazardous or life-threatening occupation as notified by the Central Government "in which even a single employee is employed".

So the eight persons are irrelevant. The firm was within Chapter IV from its first employee, and it must register under section 3 of the Code, electronically, on the Shram Suvidha portal.

Chapter III, provident fund: no. Eight employees is below the threshold of twenty and there is no hazardous-occupation proviso for Chapter III. The firm may, however, come within Chapter III voluntarily, by agreement between the employer and the majority of the employees, on an application.

Contributions under Chapter IV begin on the date the Corporation's benefits are provided in the area, notified by the Central Government, under the third proviso.

And the practical advice. Registration is not optional and the liability runs from the date of coverage, not from the date of discovery. A firm eight years into a hazardous occupation without registration owes eight years of contributions with interest and damages, and its injured employees have had no employment injury cover for the whole of that time.