Can an LLP have two different business - 1.Manufacturing and 2.Trading in stocks?

Income Tax
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1

I have a family manufacturing business and file quarterly GST return. As a family we invest in stocks and trade in equity derivatives by pledging these delivery stocks.
Now I pay GST and take input tax credit in manufacturing business… this is fine and there is no confusion about it.
Now my trading and investment activity has gradually scaled up and I see lot of expenses like,- I pay interest on funds taken againt stocks pledged , brokerage and STT on my trading turnover which I am not able to capture in my profit and loss account …as my CA suggests that my primary business is manufacturing and we cannot claim input tax credit or claim expenses from secondary business in same co. Can anyone tell me what shoud I do ? I plan to register a LLP showing both businesses in AOA / MOA with all family members as partners and open two different accounts each for both businesses and claim all expenses of both business activity seperately but in same LLP. Is this the right thing to do or is there a better way to deal with it ?

2

Hi @Siddhesh,

Yes, you can continue both the businesses under the same LLP provided you mention both the business in AOA/MOA of the LLP.

For GST purposes, you can not claim the credit of Trading business under Manufacturing business.
You can keep both the accounts differently under the same LLP.

Hope this helps!

3

Hi @CA_Niyati_Mistry,

If we have two different business under same LLP … one is stock market trading and other is manufacturing … with two different bank accounts …
i) Can I claim STT and brokerage and other expenses against my manufacturing profits.
ii) Can I adjust profits of my manufacturing business against trading losses.
iii) How will final combined profits or losses be taxed… will they be added to give a combined effect ?

Thanks.

4

Hi @Siddhesh

Here are answers to your questions.

  1. No, STT & brokerage expenses cannot be claimed against income from the manufacturing business.
  2. Yes, the overall profit and loss can be adjusted for both businesses. Keep in mind the rules for set-off and carry forward for Intraday and FnO trading.
  3. Yes, it will be treated as combined profits and will be taxed under the head “Income from Business & Profession” at the slab rates for individuals depending upon the regime chosen.

The profit/loss from both businesses shall be calculated separately first. While reporting in the return, they will be reported in the same head and hence will have a combined effect.

Hope this helps.