Updates December Month

Latest Update:

Ministry of Finance vide Press Release dated 24-11-2021, informed that India & USA agree on a transitional approach on Equalisation Levy 2020. As per the release, India and United States have agreed that the same terms that apply under the October 21 Joint Statement shall apply between the United States and India with respect to India’s charge of 2% equalization levy on e-commerce supply of services and the United States’ trade action regarding the said Equalisation Levy. However, the interim period that will be applicable will be from 1st April 2022 till implementation of Pillar One or 31st March 2024, whichever is earlier

For more details please refer to the update bulletin for November 2021 along with the Monthly compliance calendar for December 2021.

Latest Update:

Ministry of Corporate Affairs(“MCA”)  by General Circular No. 17/2021, dated 29th October, 2021 provided the relaxation on levy of Additional fees in filing of e- forms AOC-4, AOC-4(XBRL), AOC-4(CFS), AOC-4(Non- XBRL) and MGT-7/ MGT-7A for the financial year ended on 31.03.2021.  Due Date for filing of form AOC-4/AOC-4(XBRL)/AOC-4(CFS) is within 30 days from the date of Annual General Meeting of the Company & the due date of filing of Form MGT-7/ MGT-7A is 60 days from the date of Annual General Meeting. It has been issued that no additional fee shall be levied upto 31.12.2021 for filing of e- forms AOC-4, AOC-4(XBRL), AOC-4(CFS), AOC-4(Non- XBRL) and MGT-7/ MGT-7A in respect of the financial year ended on 31.03.2021.

For more details please refer the update bulletin for October 2021 along with Monthly compliance calendar for November 2021.

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Executive Summary

Income Tax

• New rule & forms are notified to keep balancing the taxable & non-taxable EPF contribution.
• New rule & forms are notified to channelise the provision of Section 194P inserted by Finance Act 2021.
• Exemption given to person having receipt of shares of PSU under strategic disinvestment.
• Various Due dates of ITRs & Audit Report have been extended.

Goods & Services Tax (GST)

• Various recommendations presented under 45th GST Council meeting relating to GST rates, laws and procedure on supply of goods and services
• Circulars for Clarification in respect of “intermediary services” and “merely establishment of distinct person” have been released
• Amnesty Scheme for GSTR-3B late fee has been extended from 31.08.2021 up to 30.11.2021.

No need to carry the physical copy of tax invoice in cases where an e-invoice has been

Companies Act 2013/ Other Laws

• MCA has extended the Due date of AGM by 2 Months.
• SEBI has issued a circular to allow stock exchanges to offer T+1 rolling settlement on an optional basis effective from January 01, 2022
• DGFT has granted a final opportunity to IEC holders (Import-Export code) to update their IEC in this interim period till 05.10.2021, failing which the given IECs shall be de-activated from October 6, 2021

Income Tax

• CBDT vide Notification No. 95/2021, Dated 31^st August 2021 inserted the Rule 9D after Rule 9C. As per the Rule 9D two separate account need to be maintained for taxable and non-taxable portion contribution of Recognized Provident Fund.
• CBDT vide Notification No. 99/2021, Dated 31^st August 2021 has inserted Rule 26D & Form 12BBA to give effect the provision of Section 194P introduced in Finance Act 2021 related to Senior Citizen. As per the provision a bank is obliged to compute the total income of such specified senior citizen for the relevant assessment year and deduct income-tax on such total income on the basis of the rates in force. So, giving effect to the provision declaration by senior citizen will be done in the Form 12BBA.
• CBDT vide Notification No. 101/2021, Dated 6^th September 2021, has decided that submissions made on Income tax portal after logging to designated account shall be deemed that the electronic record has been authenticated under electronic verification code.
• CBDT vide Press release Dated 10^th September 2021, provide relaxation of Section 79 to PSU. The Finance Act, 2021 has amended section 72A of the Income-tax Act, 1961 (the Act) to inter alia provide that in case of an amalgamation of a public sector company (PSU) which ceases to be a PSU (erstwhile public sector company), as part of strategic disinvestment, with one or more Company or companies, then, subject to the conditions laid therein, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss, or as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected.

In order to facilitate the strategic disinvestment, it has been decided that Section 79 of the Income-tax Act, 1961, shall not apply to an erstwhile Public Sector Company which has become so as a result of strategic disinvestment. Accordingly, the loss incurred in any previous year prior to, and including, the previous year of strategic disinvestment shall be carried forward and set off by the erstwhile public sector company. The above relaxation shall cease to apply from the previous year in which the company, that was the ultimate holding company of such erstwhile public sector company immediately after completion of the strategic disinvestment, ceases to hold, directly or through its subsidiary or subsidiaries, fifty-one percent of the voting power of the erstwhile public sector company.

• CBDT vide Notification No. 105/2021, Dated 10^th September 2021 has amended Rule 11UAC to give exemption to a person who receive shares of PSU given by CG or SG under strategic disinvestment.
• CBDT vide Circular No 17/2021, Dated 9^th September 2021 has extended the due dates of respective ITRs & Audit report as follows.

Goods & Services Tax (GST)

• CBIC vide Notification No. 33/2021 – Central tax dated 29^th August 2021extend Form GSTR-3B late fee Amnesty Scheme from 31.08.2021 up to 30.11.2021.
• CBIC vide Notification No. 35/2021 – Central tax dated 24^th September 2021 authorize the Aadhar authentication for the registered person for filing of application for revocation of cancellation of registration and refund.
• CBIC vide Circular No. 159/15/2021-GST Central tax dated 20^th September 2021 issue clarification on doubts related to scope of “Intermediary”. Scope of Intermediary services has been defined including primary requirements i.e. Minimum of three parties, Two distinct Supplies. The role of intermediary is only supportive and Sub- contracting for a service is not an intermediary service.

Further, specific provision of place of supply of ‘intermediary services’ under section 13 of the IGST Act shall be invoked only when either the location of supplier of intermediary services or location of the recipient of intermediary services is outside India.

• CBIC vide Circular No. 160/15/2021-GST Central tax dated 20^th September 2021 issues clarification in respect of GST related issues as below:

• In case of debit notes, the date of issuance of debit note (not the date of underlying invoice) w.e.f. 01.01.2021 shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act. For Debit Note issued after 01.01.2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4). For Debit note issued prior to 01.01.2021, the provisions of section 16(4), as it existed before the said amendment on 01.01.2021.
• No need to carry the physical copy of tax invoice in cases where an e-invoice has been generated by the supplier prescribed under rule 48(4) of the CGST Rules and production of the Quick Response (QR) code having an embedded Invoice Reference Number (IRN) electronically, for verification by the proper officer.
• It is clarified that only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) from availment of refund of accumulated ITC. Goods, which are not subject to any export duty and in respect of which either NIL rate is specified in Second Schedule to the Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3) of the CGST Act for the purpose of availment of refund of accumulated ITC.
• CBIC vide Circular No. 161/17/2021-GST Central tax dated 20th September 2021 clarified that supply of services by a subsidiary/sister company/group concern etc. of a foreign company, which is incorporated in India under theCA,2013 to the establishments of the said foreign company located outside India (incorporated outside India), would not be barred by the condition (v) of the Sec. 2(6) of the IGST Act 2017 for being considered as export of services, as it would not be treated as supply between merely establishments of distinct persons under Explanation 1 of Sec. 8 of IGST Act 2017.
• CBIC vide Circular No. 162/18/2021- GST Central tax dated 20th September 2021clarifies in respect of refund of tax where Tax wrongfully collected and paid to central or state government specified in section 77(1) of the CGST Act and section 19(1) of the IGST Act.
• CBIC vide Notification no. 44/2021- customs dated 17th September, 2021 amends the BCD rate on Lentils (Masur) [0713 40 00], originating in or exported from USA.
• CBIC vide Notification no. 76/2021 – (Customs NT) dated 24th September 2021 notify the manner to issue duty credit for goods exported under the Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP).
• CBIC vide Notification 77/2021 – (Customs NT) dated 24^th September 2021 Seeks to notify the manner to issue duty credit for goods exported under the continuation of Scheme for Rebate of State and Central Taxes and Levies (RoSCTL).
• CBIC vide Notification no. 41/2021- customs dated 30^th August 2021 amends notification No. 28/2001-Customs dated 01.02.2021 Customs to extend the exemptions under the said notification up to 30th September, 2021.
• CBIC vide Notification no. 42/2021- customs dated 10^th September 2021 specify to amend the notification No. 50/ 2017 -Customs dated 30.06.2017 and notification No. dated 11/2021 dated 01.02.2021 in order to reduce and rationalize the import duties on Palm, Sunflower and Soya-bean oils.
• CBIC vide press release dated 17th September 2021, provides the GST Council’s 45th meeting made recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure as below:

1. Recommendations relating to GST rates on Goods and Services

1. Various major recommendations have been received relating to GST rates on goods and services for extension of existing concessional GST rates and reduction of various GST rates due to relief measures under COVID-19.
2. Supply of mentha oil from unregistered person has been brought under reverse charge. Further, Council has also recommended that exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit.
3. Brick kilns would be brought under special composition scheme with threshold limit of Rs. 20 lakhs, with effect from 1.4.2022. Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.
4. GST rate changes in order to correct inverted duty structure, in footwear and textiles sector, as was discussed in earlier GST Council Meeting and was further deferred for an appropriate time, will be implemented with effect from 01.01.2022.
5. Major recommendations on GST changes in relation to rates and scope of exemption on goods and services has been received.
6. Issue of whether specified petroleum products should be brought within the ambit of GST was placed for consideration before the Council. After due deliberation, the Council was of the view that it is not appropriate to do so at this stage.

2. Presentation relating to Compensation Cess using of revenue collections from Compensation Cess in the period beyond June 2022 till April 2026 for repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22.

3. Recommendations relating to GST law and procedure

Measures for Trade facilitation:

1. Relaxation in the requirement of filing Form GST ITC-04 under GST rules relaxed as under:
   1. Taxpayers whose annual aggregate turnover in preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months;
   2. Taxpayers whose annual aggregate turnover in preceding financial year is up to Rs. 5 crores shall furnish ITC-04 annually.
2. Interest would be levied at 18% on Ineligible ITC availed and utilized instead of ineligible ITC availed u/s 50(3) with retrospective effect from July 01, 2017.
3. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.
4. Clarification in respect of “intermediary services” and “merely establishment of distinct person”

4. Clarification in respect of Certain GST related issues
   1. e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;
   2. There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;

• Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.

Other Recommendations has been received as below:

1. Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.
2. Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.
3. Late fee for delayed filing of Form GSTR 1 to be auto populated and collected in next open return in Form GSTR 3B
4. Rule 36(4) of CGST Rules, 2017 to be amended, section 16(2)(aa) of CGST Act, 2017 is proposed to be notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.

Companies Act 2013

• The Ministry of Corporate Affairs has directed all Registrar of Companies to accord its approval of a 2 (Two) months extension to companies who have not been able to hold their Annual General Meetings for the financial year ended March 31, 2021.

In terms of the power vested under the third proviso to sub-section (1) of Section 96 of the Act, the Registrar of Companies extended the time to hold AGM, other than the first AGM, for the financial year ended on March 31, 2021, for Companies within the jurisdiction of their respective office, which are unable to hold their Annual General Meeting, without requiring extension for such period within the due date of holding the AGM by a period of two months from the due date by which the AGM ought to have been held in accordance with companies to file applications for seeking such extension by filing the prescribed Form No. GNL-1. The RoC clarified that the extension granted under this Order shall also cover the pending applications filed in Form No. GNL-1 for the extension of AGM for the financial year ended on 31.03.2021, which is yet to be approved. Further, the applications filed in Form No. GNL-1 for the extension of AGM for the financial year ended on March 31, 2021, which were rejected, where the approval for the extension of AGM up to 2 months from the due date of the AGM shall be deemed to have been granted without any further action on the part of the Company.

Other Laws.

SEBI

• SEBI has issued a circular to allow stock exchanges to offer T+1 rolling settlement on an optional basis effective from January 01, 2022.

Acoordingly, a Stock Exchange may choose to offer a T+1 settlement cycle on any of the scrips subject to the conditions that advance notice of at least one month, regarding the change in the settlement cycle to be given, to all stakeholders, including the public at large, and also disseminate the same on its website. After opting for a T+1 settlement cycle for a scrip, the Stock Exchange shall have to mandatorily continue with the same for a minimum period of 6 months. Thereafter, in case, the Stock Exchange intends to switch back to T+2 settlement cycle, it shall do so by giving 1-month advance notice to the market. Any subsequent switch (from T+1 to T+2 or vice versa) shall be subject to a minimum period and notice period. Further, there shall be no netting between T+1 and T+2 settlements. The settlement option for security shall be applicable to all types of transactions in the security on that Stock Exchange.

• SEBI has issued the SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2021, which shall come into force on the date of their publication in the Official Gazette.

The amendment provides that the listed entity shall give prior intimation to the stock exchange of at least two working days in advance, excluding the date of the intimation and the date of the meeting of the board of directors, about the Board meeting in which the Board is going to consider any of the proposals relating to an alteration in the form or nature of non-convertible securities that are listed on the stock exchange or in the rights or privileges of the holders thereof; An alteration in the date of the interest/ dividend/redemption payment of non-convertible securities; Financial results viz. quarterly or annual, as the case may be; Fundraising by way of issuance of non-convertible securities; or(e) any matter affecting the rights or interests of holders of non-convertible securities. Further, the amendment also provides that the annual audited standalone and consolidated financial results for the financial years shall be submitted to the stock exchange(s) within sixty days from the end of the financial year along with the audit report.

RBI

• RBI has issued a notification to direct the NBFCs (Non-Banking Financial Companies), payment system providers and payment system participants to submit applications for obtaining Aadhaar e-KYC authentication license.

In terms of Section 11A of the Prevention of Money Laundering Act (PMLA), 2002, the government through a notification may permit entities other than banking firms to authenticate client’s Aadhaar number using the e-KYC facility provided by the Unique Identification Authority of India (UIDAI). However, the notification shall be issued only after consulting with the UIDAI and the appropriate regulator. Further, a detailed procedure for processing of applications under the aforementioned section for the use of Aadhaar authentication services by entities other than banking companies have been provided by the Department of Revenue, Ministry of Finance in its earlier notification dated 9th May, 2019. Accordingly, NBFCs, payment system providers, and payment system participants desirous of obtaining Aadhaar Authentication License -KYC User Agency (KUA) License or sub-KUA License (to perform authentication through a KUA), issued by the UIDAI, may submit their application to this Department for onward submission to UIDAI.

National Company Law Tribunal

• The Government has appointed 8 (Eight) Judicial and 10 (Ten) Technical Members have been appointed to the National Company Law Tribunal.

The list of appointees includes Andhra Pradesh High Court Judge Justice Telaprolu Rajani, Bombay High Court retired Judge Justice Pradeep Narhari Deshmukh, Madras High Court retired Judge Justice S. Ramathilagam, District Court Judge Deep Chandra Joshi, DRT-3 (Delhi) Presiding Officer Dharminder Singh, Punjab and Haryana High Court retired Registrar General Harnam Singh Thakur, Principal District Court, Salem (Tamil Nadu) retired district court judge P. Mohan Raj and advocate Rohit Kapoor are among those appointed as the Judicial Members to the NCLT. The newly-appointed technical members include Principal Commissioner of Income Tax Ajai Das Mehrotra, retired NHPC Chairman and Managing Director Balraj Joshi, retired Ministry of Panchayati Raj Secretary Rahul Prasad Bhatnagar, Retired Principal Director-General of Income Tax Subrata Kumar Dash, retired Department of Consumer Affairs Secretary Avinash K Srivastava and retired SBI Chief General Manager Shree Prakash Singh. Other technical members are chartered accountant Sameer Kakar, retired Director General of Income Tax Manoj Kumar Dubey, Chief Commissioner of Income Tax Kaushalendra Kumar Singh and Principal Chief Commissioner of Income Tax Anuradha Sanjay Bhatia. The Appointments Committee of the Cabinet has approved the appointments to the posts of Judicial Member and Technical Member in the National Company Law Tribunal, in the pay scale of Rs.67,000-79,000/- (pre-revised), for a period of 05 years from the date of assumption of charge of the post, or till attaining the age of 65 years, or until further orders, whichever is the earliest.

IBBI

• The Insolvency and Bankruptcy Board of India made Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2021

To amend the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The amendment regulations enhance the conduct, timeliness, and value maximization in corporate insolvency proceedings. The Code puts in place a creditor-in-control process under the Corporate Insolvency Resolution Process (CIRP). The committee of creditors (COC) has a statutory role and it discharges a sort of public function. The committee and members of the committee shall discharge functions and exercise powers under the Code and these regulations in respect of the CIRP in compliance with the guidelines as may be issued by the Board. In regulation 36A, a new sub–regulation 4A has been inserted to provide any modification in the invitation for expression of interest may be made in the manner as the initial invitation for expression of interest was made and any such modification shall not be made more than once. Further, the committee shall not consider any resolution plan which is received after the time as specified by the committee under regulation 36B or received from a person who does not appear in the final list of prospective resolution applicants or does not comply with the provisions of sub-section (2) of section 30 and sub-regulation (1).

DGFT

• DGFT has granted a final opportunity to IEC holders (Import-Export code) to update their IEC in this interim period till 05.10.2021, failing which the given IECs shall be de-activated from October 6, 2021.

Any IEC where an online updation application has been submitted but is pending with the DGFT RA for approval shall be excluded from the de-activation list. It may further be noted that any IEC so de-activated, would have the opportunity for automatic re-activation without any manual intervention or a physical visit to the DGFT RA. For IEC re-activation after 06.10.2021, the said IEC holder may navigate to the DGFT website and update their IEC online. Upon successful updation the given IEC shall be activated again and transmitted accordingly to the Customs system with the updated status. Earlier DGFT mandated all the IEC holders to ensure that details in their IEC are updated electronically every year during the April-June period. However, based on representations received from the IEC holders who had not updated their IECs, the period of updation was extended up to July 31, 2021 and subsequently to August 31, 2021.

FEMA

• RBI has notified the Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021

RBI has notified the Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021 which shall come into force from the date of their publication in the Official Gazette 10-09-2021. Through this amendment Regulation 15 which deals with advance payment against exports has been amended. Regulation 15 pertains to Advance payment against exports which reads, where an exporter receives advance payment (with or without interest), from a buyer / third party named in the export declaration made by the exporter, outside India, the exporter shall be under an obligation to ensure that the rate of interest, if any, payable on the advance payment shall not exceed 100 basis points above the London Inter-Bank Offered Rate (LIBOR) or other applicable benchmarks as may be directed by the Reserve Bank, as the case maybe.

MSME

• The Ministry of Micro, Small & Medium Enterprises has launched the India Export Initiative and IndiaXports 2021 Portal of India SME Forum.

IndiaXports aims to orient MSMEs free of cost, with the objective of focussing on the untapped export potential in existing tariff lines and supporting MSMEs in order to grow the number of exporting MSMEs and increase MSME exports by 50% in 2022. This initiative features an Info Portal which serves as a knowledge base for exports by Indian MSMEs with the required information related to export potential for all the 456 tariff lines along with the potential markets as well as trends in exports, export procedures and lots more. Apart from an export help desk, instructor-led orientation will also be provided to MSMEs through a series of sessions for specific sectors highlighting the opportunities in specific products in international markets. Further, the initiative targets over 1 lakh MSMEs desirous of knowing more about exports and hand holding over 30,000 MSMEs to start exporting, doubling the base of active exporters.

• The Ministry of Micro, Small, and Medium Enterprises has decided to implement International Cooperation Scheme (IC) with an objective to provide International marketing opportunities to MSMEs as well as to integrate them into global value chains.

Financial assistance is provided to all eligible/State/ Central Government organizations, registered industries associations and Societies/Trusts involved in the promotion and development of MSME sectors. The IC Scheme has been recently revised and it now has three sub-components namely (i) Market Development Assistance of MSMEs (MDA), (ii) Capacity Building of First time MSE Exporters (FTE) and (iii) Framework for International Market Intelligence Dissemination (IMID). Further proposals are invited from all eligible organizations under the MDA (Market Development Assistance) Sub-Component of the IC Scheme. The proposals can be uploaded on the IC Scheme web portal https://ic.msme.gov.in, which will remain open for submission of proposals from September 14, 2021 to September 30, 2021. It is also informed that all proposals under the IC Scheme will be accepted via online mode only.

IFSCA

• The International Financial Services Centers Authority has issued a circular to notify the Code of Conduct and Code of Ethics for the Directors and Key Management Personnel (KMP) of recognized Market Infrastructure Institutions(MIIs) in GIFT-IFSC.

Every Director of the recognized MII shall ensure that the recognized MII abides by all the applicable provisions of International Financial Services Centres Authority Act, 2019, MIIs Regulations, Bullion Exchange Regulations, rules and regulations framed thereunder and the circulars, directions issued by the Authority from time to time; Ensure compliance at all levels so that the regulatory system does not suffer any breaches; Ensure that the recognized MII takes steps commensurate to honor the time limit stipulated by Authority for corrective action; Not support any decision in the meeting of the governing board which may adversely affect the interest of investors and shall report forthwith any such decision to the Authority. Further, the Code provides that its objective is to enhance the level of market integrity and investor confidence. It is emphasized that a written code of ethics may not completely guarantee adherence to high ethical standards. This can be accomplished only if Directors and Key Management Personnel of the recognized MIIs commit themselves to the task of enhancing the fairness and integrity of the system in letter and spirit.

View Monthly Compliance Calendar 

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Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. KNM accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication. Updates are for the period 26.08.2021 till 25.09.2021.

Executive Summary

Income Tax

• Amendment in Rule 12(1) & (5) related to Income Tax Return forms.
• Extensions in various dues dates considering the glitches in Income tax portal 2.0
• Insertion of New rule & Forms to give effect the amendment made by Finance Act 2021 in MAT provisions.

Goods & Services Tax (GST)

• Registered person having turnover of more than 5 Cr shall require to submit self-certified Reconciliation statement.
• Taxpayers having Aggregate Annual Turnover up to Rs. 2 crores exempt from the requirement of furnishing annual return for FY 2020-21.
• Applicability of section 110 and 111 of the Finance Act, 2021 w.e.f. from 01st August 2021.

Companies Act 2013/ Other Laws

• MCA has issued a general circular to release the Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR).
• MCA has notified the Limited Liability Partnership (Amendment) Act, 2021 which shall come into force on such date as the Central Government may, by notification in the Official Gazette.

MCA through its Press Release has stated various disclosures to be made by companies in their financial statements under the Schedule III of the Companies Act, 2013 effective from April 01, 2021, which were amended vide notification dated March 24, 2021

Detailed

INCOME TAX

CBDT vide notification dated 82/2021, Dated 27^th July 2021 amending the rule 12 (1) & (5), that deals with “Return of income”.  Rule 12(1) was amended considering the section 148. Also amends Rule 12(5) which shall now read as “Where a return of income relates to the assessment year commencing on the 1st day of April, 2020 or any earlier assessment year, it shall be furnished in the appropriate form as applicable in that assessment year.

• CBDT vide Circular No. 15/2021 dated 03^rd August 2021 has decided to further extend the due dates for electronic filing of such Forms vide Circular No. 15/2021 dated 3-8-2021. The details are as under:

This is also clarified that above said forms, e-filed, after the expiry of time limits provided as per Circular No.12 of 2021 dated 25.06.2021 or as per the relevant provisions, till date, will stand regularised accordingly.

• CBDT vide Notification No. 92/2021 dated 09/08/2021 has introduced new Rule 10RB giving effect to the newly added sub-section (2D) of section 115JB to rationalize MAT provisions considering the adjustment to book profits on account of secondary adjustment and APAs.

As per Rule 10RB, MAT payable u/s 115JB by the company will be reduced by the relief calculated by below formula:

(A-B) – (D-C),

where,

A = tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of the previous year including the past income;

B = tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of the previous year after reducing the book profit with the past income;

C = Aggregate of tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of those past year or years to which the past income belongs;

D = Aggregate of tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of past year or years, referred to in item C, after increasing the book profit with the relevant past income of such year or years:

Provided that if the value of (A-B)-(D-C) in the formula is negative, its value shall be deemed to be zero.

For availing relief under the said rule 10RB, CBDT has introduced Form 3CEEA which needs to be uploaded and signed / verified electronically at the IT portal.

Goods & Services Tax

• CBIC vide Notification No. 31/2021 – Central tax dated 30^th July 2021 exempt taxpayers having Aggregate Annual Turnover up to Rs. 2 crores from the requirement of furnishing annual return for FY 2020-21.
• CBIC vide Notification No. 30/2021 – Central tax dated 30^th July 2021 amends the provision specifies a registered person having turnover of more than 5 Cr shall not require to get his accounts audited, as only self- certified Reconciliation statement shall be submitted with in prescribed Time limit.
• CBIC vide Notification No. 29/2021 – Central tax dated 30^th July 2021 notifies section 110 of the Finance Act, 2021 omits section 35 of CGST Act and section 111 of the Finance Act, 2021 to amend section 44 of CGST Act w.e.f. 01st August 2021.
• CBIC vide Notification no. 39/2021- customs dated 19^th August 2021 amends notification No. 57/2000-Customs dated 08.05.2000 provided that for the cases where the last date of exports falls between the 1st February, 2021 and the 30th June, 2021, the last date of exports stands extended by six months.
• CBIC vide Circular no. 19/2021- customs dated 16^th August, 2021 specify to amend in circular No. 38/2016 -Customs with the insertion of a new entry 5(d) to enable Pr. Commissioners/Commissioners of Customs to decide the amount of security required in certain cases of provisional assessments.
• CBIC vide Circular no. 20/2021- customs dated 16^th August, 2021 de-notifies the facility of Inland Container Depots/Container Freight Stations/Air Freight Stations registration fails to meet the prescribed minimum threshold requirements.
• CBIC vide Circular no. 18/2021- customs dated 31^st July, 2021 makes amendment in authorized economic operator programme relating to Auto-Renewal of AEO-T1 validity for continuous certification based on continuous compliance monitoring.
• CBIC vide Notification 41/2021 – (Customs ADD) dated 31^st July 2021 Seeks to further amend notification No. 23/2016-Customs (ADD) dated 6th June, 2016 to extend the levy of Anti-Dumping duty on Polytetrafluoroethylene originating in or exported from Russia, up to and inclusive of 30th November, 2021.
• CBIC vide Notification 42/2021 – (Customs ADD) dated 01^st August 2021 Seeks to amend notification No. 48/2017-Customs (ADD), dated the 9th October, 2017 to extend the levy of Anti-Dumping duty on ‘ Wire Rod of Alloy or Non-Alloy Steel ‘ originating in or exported from China PR up to and inclusive of 31st January, 2022.
• CBIC vide Notification 43/2021 – (Customs ADD) dated 09^th August 2021 Seeks to levy anti-dumping duty on imports of Phthalic Anhydride (PAN) originating in or exported from China PR, Indonesia, Korea RP and Thailand for a period of five years.
• CBIC vide Notification 44/2021 – (Customs ADD) dated 12^th August 2021 Seeks to rescind notification No. 43/2016-Cus (ADD) dated 8th August, 2016 to remove levy of ADD on Viscose Staple Fibre (VSF) originating in or imported from China PR and Indonesia.
• CBIC vide Notification 45/2021 – (Customs ADD) dated 24^th August 2021 Seeks to rescind notification No. 14/2016-Cus (ADD) dated 21st April, 2016 to remove levy of ADD on Barium Carbonate originating in or imported from China PR.

Companies Act, 2013

• MCA has issued a general circular to release the Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR).

The broad framework of CSR has been provided in Section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies (CSR Policy) Rules, 2014. MCA had also issued clarifications including FAQs from time to time on various issues concerning CSR and notified the amendments in Section 135 of the Act as well in the CSR Rules on 22nd January 2021 with an aim to strengthen the CSR ecosystem, by improving disclosures and by simplifying compliances. In response to such amendments, Ministry has received several references and representations from stakeholders seeking clarifications on the various issues related to CSR. Accordingly, in suppression of clarifications and FAQs issued vide General Circular no. 21/2014 (dated 18th June 2014), 36/2014 (dated 17th September 2014), 01/2016 (dated 12th January 2016) ,05/2016 (dated 16th May 2016), the clarification issued vide letter dated 25.01.2018 and General Circular no. 06/2018 (dated 28th May 2018), a set of FAQs along with the response of the Ministry is provided herewith at Annexure for better understanding and facilitating effective implementation of CSR. Through these FAQs, MCA has clarified issues relating to the Applicability of CSR, CSR Framework, CSR Expenditure, CSR Activities, CSR Implementation, Ongoing Project, Treatment of Unspent CSR Amount, CSR Enforcement, Impact Assessment and CSR Reporting & Disclosure.

• MCA has notified the Companies (Creation and Maintenance of databank of Independent Directors) Second Amendment Rules, 2021 which shall come into force on the date of their publication in the Official Gazette i.e., 19-08-2021.

The amendments are carried out to insert Rule 6 in the Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019 and the Schedule of Annual Report on Capacity Building of Independent Directors. Accordingly, the institute shall within sixty days from the end of every financial year send an annual report to every individual whose name is included in the data bank and to every company in which such individual is appointed as an independent director in the format provided in the Schedule to these Rules. The schedule consists of various entries namely Director’s Name, DIN Number, IDDB Registration Number, Subscription (1 year or 5 year or Lifetime), Membership Validity, Online Self-Assessment Proficiency Test Status (N.A if exempted), Participation during the Financial Year, and Total Participation.

• MCA has notified the Limited Liability Partnership (Amendment) Act, 2021 which shall come into force on such date as the Central Government may, by notification in the Official Gazette.

Both houses of Parliament have approved LLP Amendment Bill, 2021. Finally, the same got the approval of President of India on 13th August 2021 and become LLP Amendment Act, 2021. MCA has introduced the concept of “small, limited liability partnership” in line with the concept of “small company” under the Companies Act, 2013. Certain sections of the Act are amended so as to convert offenses into civil defaults and to convert the nature of punishment provided in the said sections from fines to monetary penalties. A new section 34A has been inserted to empower the Central Government to prescribe the “Accounting Standards” or “Auditing Standards” for a class or classes of limited liability partnerships. Further, powers under Section 39 of the Act relating to “compounding of offenses” is granted to the Regional Director to compound any offense under this Act which is punishable with a fine only. A new section 67A empowering the Central Government to establish or designate as many “Special Courts” as may be necessary for the purpose of providing speedy trial of offenses under the Act, has been inserted.

• MCA has notified the Companies (Appointment and Qualification of Directors) Amendment Rules, 2021 to further amend the Companies (Appointment and Qualification of Directors) Rules, 2014,

which shall come into force on the date of their publication in the Official Gazette i.e 19-08-2021. The Amendment provides that an individual shall not be required to pass the online proficiency self-assessment test to be included in independent directors databank when he has served for a total period of not less than three years as on the date of inclusion of his name in the data bank in the pay scale of Director or equivalent or above in any Ministry or Department, of the Central Government or any State Government, and having experience in handling matters relating to commerce, corporate affairs, finance, industry or public enterprises; or the affairs related to Government companies or statutory corporations set up under an Act of Parliament or any State Act and carrying on commercial activities. It is further provided that an individual who are or have been, for at least ten years either as an advocate of a court or in practice as a chartered accountant or in practice as a cost accountant or in practice as a company secretary, shall not be required to pass the online proficiency self-assessment test.

• MCA through its Press Release has stated various disclosures to be made by companies in their financial statements under the Schedule III of the Companies Act, 2013 effective from April 01, 2021, which were amended vide notification dated March 24, 2021.

The new disclosures with respect to the virtual currency/cryptocurrency transactions and CSR spending was undertaken by companies during a financial year are to be provided in detail. Where the Company has traded or invested in Cryptocurrency or Virtual Currency during the year, the profit or loss on transactions involving Cryptocurrency or Virtual Currency, amount of currency held as at the reporting date, deposits or advances from any person for the purpose of trading or investing in Crypto Currency/virtual currency is required to be disclosed. Further, where the company covered under section 135 of the Companies Act, disclosures with regard to the amount required to be spent by the company during the year, amount of expenditure incurred, shortfall at the end of the year, a total of previous years shortfall, reason for the shortfall, nature of CSR activities, details of related party transactions, e-contribution to a trust controlled by the company in relation to CSR expenditure as per relevant Accounting Standard, where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.

• MCA exempts Foreign Companies from Dating of Prospectus, provisions as to Experts Consent, and Allotments as provided under the provisions of Sections 387 to 392 of the Companies Act, 2013.

MCA has exempted the foreign companies and companies incorporated or to be incorporated outside India, whether the company has or has not established, or when formed may or may not establish, a place of business in India, insofar as they relate to the offering for subscription in the securities, requirements related to the prospectus, and all matters incidental thereto in the International Financial Services Centre set up under section 18 of the Special Economic Zones Act, 2005. Further, Section 387 to 392 of the Companies Act, 2013 deals with the dating of prospectus and provisions as to experts’ consent and allotment, the registration of the prospectus, the offer of India depository receipts, and the punishment for contravention.

Other Laws

SEBI

• SEBI has issued a circular w.r.t Modalities for implementation of the framework for Accredited Investors

The regulator has issued guidelines on eligibility criteria for accredited investors (AIs), procedure as well as validation for accreditation, a procedure to avail benefits linked to accreditation and flexibility to investors to withdraw consent. A person will be identified as an accredited investor on the basis of net worth or income. Individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body corporates can get accreditation based on financial parameters specified by the regulator. Under the framework, AIs may avail flexibility in minimum investment amount (lower ticket size) or concessions from specific regulatory requirements applicable to investment products. Further, the subsidiaries of recognized stock exchanges can carry out the accreditation process. This is subject to the condition that the stock exchange should have a minimum of 20 years of presence in the Indian securities market and should have a net worth of at least Rs 200 crore and exchange needs to have nation-wide terminals and should have investor grievance redressal mechanisms in place, including arbitration and presence of Investor Service Centres (ISCs) in at least 20 cities. Further, the investors will have the flexibility to withdraw their consent and discontinue availing benefits of accreditation subject to certain conditions and client agreement will have to provide the modalities for withdrawal of consent and consequences of the investor withdrawing the consent.

• SEBI has imposed additional penalties for repeated delivery default in order to strengthen the delivery mechanism and ensure market integrity.

SEBI, in consultation with clearing Corporations (CCs), has decided that in the case of repeated defaults by a seller or a buyer, for each instance of repeated default an additional penalty shall be imposed. Which shall be 3 % of the value of the delivery default. Repeated Default shall be defined as an event, wherein a default on delivery obligations takes place 3 times or more during a six-month period on a rolling basis and the penalty levied shall be transferred to the Settlement Guarantee Fund (SGF) of the Clearing Corporation. Earlier in March, SEBI had fixed a penalty of 4 percent of the settlement price plus replacement cost on delivery default in agricultural commodities sellers. While in non-agricultural commodities, the penalty for delivery default by sellers will be at 3 percent of settlement price plus replacement cost. The new framework will be effective after one month from the date of issuance of the circular.

• SEBI has issued a circular on the Automation of continual Disclosure under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015.

SEBI with an intent of ease of doing has implemented the System Driven Disclosures (SDD) in phases, under PIT Regulations, 2015. It has been confirmed by Stock Exchanges and Depositories that they have implemented the SDD in line with the circular dated September 09, 2020, and the same has gone live from April 01, 2021. SEBI has clarified that for listed companies who have complied with requirements of the circular dated September 09, 2020, the manual filing of disclosures as required under Regulation 7(2)(a) & (b) of PIT Regulations is no longer mandatory. Further, the Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed companies and also disseminate the same on their websites.

• SEBI has notified the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 which shall be applicable to employee’s stock option schemes, purchase schemes, stock appreciation rights schemes, general employee benefits schemes, sweat equity scheme etc.

The provisions pertaining to preferential issues as specified in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 shall not be applicable in case of a company issuing new shares in pursuance and compliance with these regulations except wherever specifically provided for in these regulations. Under this regulation, a company may implement a scheme either directly or by setting up an irrevocable trust(s), however the same has to be decided upfront at the time of taking approval of the shareholders for setting up the scheme(s). An employee shall be eligible to participate in the schemes of the company as determined by the compensation committee. The compensation committee shall frame suitable policies and procedures to ensure that there is no violation of securities laws including the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 and the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, as amended from time to time, by the trust, the company, and its employees, as may be applicable. Further, the Board of Directors of every such Company shall at each Annual General Meeting place before the shareholders a certificate from the Secretarial Auditors of the company that the scheme(s) has been implemented in accordance with these regulations and in accordance with the resolution of the company in the general meeting.

• SEBI has revised the format for disclosure of shareholding pattern of promoters and promoter group entities.

Regulation 31(4) of LODR mandates that all entities falling under promoter and promoter group be disclosed separately in the shareholding pattern on the website of stock exchanges, in accordance with the format(s) specified by the Board. Currently, the shareholdings of the promoter(s) and promoter group entities are collectively disclosed under table II-Statement showing a shareholding pattern of the promoter and promoter group, which shall now be segregated into promoters and promoter group. Accordingly, in the interest of transparency to the investors, all listed entities shall now provide such shareholding, segregated into promoter(s) and promoter group. Through this circular SEBI has modified the Circular No. CIR/CFD/CMD/13/2015 dated November 30, 2015, and Circular no. SEBI/HO/CFD/CMD1/CIR/P/2018/149 dated December 07, 2018, which prescribed formats for disclosure of shareholding pattern including disclosure of holding of specified securities of promoter and promoter group, public shareholders, and significant beneficial owners, respectively.

• SEBI has decided that a lien shall be marked in the depository system by the Depositories in the Beneficial Owner’s Demat Account for the shares offered in tender offers.

The Details of shares marked as a lien in clients’ Demat account shall be provided by respective Depositories to Clearing Corporations (CC). Further, the details in respect of shareholder’ settlement for tender offer process shall be provided to CCs by Issuer /Registrar to an Issue and Share Transfer Agent (RTA) handling the respective tender offer. Under the existing mechanism, the shares tendered by the shareholders are required to be directly transferred to the account maintained by the Clearing Corporation and different tendering processes are being adopted by Depositories. Such transfer involves systematic risk, substantial time, and cost. The revised mechanism shall be applicable to all the tender offers for which Public Announcement is made on or after October 15, 2021.

• SEBI has notified the Securities and Exchange Board of India (Prohibition of Insider Trading) (Second Amendment) Regulations, 2021 to further amend the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015,

which shall come into force on the date of their publication in the Official Gazette. Through this amendment, a new Regulation 7D (1A), which specifies the reward payable has been inserted. It provides that if the total reward payable is less than or equal to Rupees One Crore, the Board may grant the said reward upon the issuance of the final order by the Board. Provided that in case the total reward payable is more than Rupees One Crore, the Board may grant an interim reward not exceeding Rupees One Crore upon the issuance of the final order by the Board and the remaining reward amount shall be paid only upon collection or recovery of the monetary sanctions amounting to at least twice the balance reward amount payable. Further, the words ‘one crore’ substituted by ‘ten crores’ in the Proviso of Regulation 7D.

• SEBI has notified the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, which shall come into force on the seventh day from the date of its publication in the Official Gazette i.e. 16-08-2021.

The Regulation merges SEBI (Issue & Listing of Debt Securities) Regulations, 2008 (ILDS Regulations) and SEBI (Issue & Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 (NCRPS Regulations). The new Regulations shall be applicable on issuance and listing of debt securities and non-convertible redeemable preference shares by an issuer by way of public issuance; issuance and listing of non-convertible securities by an issuer issued on a private placement basis which are proposed to be listed and listing of commercial paper issued by an issuer in compliance with the guidelines framed by the Reserve Bank of India. In all the above situations, in-principal approval shall be obtained by the issuer, making an application to the stock exchanges for a listing of its non-convertible shares and also to enter into an arrangement with the Depositories for dematerialization of the non-convertible securities in accordance with the Depositories Act, 1996. Further, public issue of debt securities and/or non-convertible redeemable preference shares not to be made unless a draft offer document has been filed with all the stock exchanges on which such securities are proposed to be listed, through the lead manager. The lead manager shall ensure that all comments received on the draft offer document are suitably addressed prior to the filing of the offer document with the Registrar of Companies. The lead manager shall, prior to the filing of the offer document with the Registrar of Companies, furnish to the Board a due diligence certificate in the format as per Schedule III of these regulations.

• SEBI Board has approved some major amendments to the existing securities laws in their meeting held on August 6, 2021.

The Board has approved the merger of SEBI (Issue of Sweat Equity) Regulations, 2002 and SEBI (Share Based Employee Benefits) Regulations, 2014 into a single regulation called the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. The Board has granted relaxation in lock-in requirements in certain cases where the promoter shareholding to the extent of minimum promoter contribution (i.e., 20% of post issue capital) shall be for a period of 18 months from the date of allotment in IPO/ FPO instead of existing 3 years and promoter shareholding in excess of minimum promoter contribution shall be locked-in for a period of 6 months instead of existing 1 year. The definition of promoter group shall be rationalized, in a case where the promoter of the issuer company is corporate body, to exclude companies having common financial investors. The disclosure requirements in the offer documents, in respect of Group Companies of the issuer company shall be rationalized to, inter-alia, exclude disclosure of financials of top 5 listed/unlisted group companies. These disclosures will continue to be made available on the website of the group companies. Further, the Board has approved amendments to SEBI (AIF) Regulations, 2012 to provide investment flexibility and streamline regulatory processes.

• SEBI has notified the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2021, which shall come into force on the date of their publication in the Official Gazette i.e 03-08-2021.

Through this amendment, the SEBI inserted a new provision which stated that no independent director, who resigns from a listed entity, shall be appointed as an executive / whole-time director on the board of the listed entity, its holding, subsidiary or associate company or on the board of a company belonging to its promoter group, unless a period of one year has elapsed from the date of resignation as an independent director. For every appointment of an independent director, the Nomination and Remuneration Committee shall evaluate the balance of skills, knowledge and experience on the Board and on the basis of such evaluation, prepare a description of the role and capabilities required of an independent director. Further, for the purpose of pecuniary relationship, it is now provided that it shall be construed when the person is holding securities of or interest in the listed entity, its holding, subsidiary or associate company during the three immediately preceding financial years or during the current financial year of face value in excess of fifty lakh rupees or two percent of the paid-up capital of the listed entity, its holding, subsidiary or associate company, respectively, or such higher sum as may be specified.

• SEBI has notified the Securities and Exchange Board of India (Foreign Portfolio Investors) (Amendment) Regulations,2021, which shall come into force on the date of their publication in the Official Gazette i.e 03-08-2021.

The amendment provides that the non-resident Indians or overseas citizens of India or resident Indian individuals maybe constituents of an applicant for FPI registration provided they meet the conditions specified by the Board from time to time. It is further provided that resident Indian other than individuals may also be constituents of the applicant, subject to the conditions, that Such resident Indian, other than individuals, is an eligible fund manager of the applicant, as provided under Section 9A(4) of the Income Tax Act, 1961 and the applicant is an eligible investment fund as provided under Section 9A(3) of the Income Tax Act, 1961 which has been granted approval under the Income Tax Rules, 1962.

• SEBI has notified the Securities and Exchange Board of India (Bankers to an Issue) (Amendment) Regulations, 2021 to further amend the Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994.

The amendment substitutes the term “banker to an issue” under the definition which means a scheduled bank, or such other banking company as may be specified by the Board from time to time, carrying on any of the activities, including acceptance of application and application monies; acceptance of allotment or call monies; refund of application monies; payment of dividend or interest warrants. Further, Regulation 22 now amended and specifies the action on inspection or investigation report by the Board which includes such activities as it may deem fit and appropriate including action under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. Chapter V of SEBI intermediaries’ regulation deals with Action in case of default and manner of suspension or cancellation of the certificate.

RBI

• RBI has issued a Notification as ‘Financial Institution’ under Section 2(1)(m)(iv) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

In Para 105 of the Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 wherein certain criteria have been prescribed for notification of HFCs as ‘Financial Institution’ under Section 2(1)(m)(iv) of the SARFAESI Act. In this connection, Government has notified the HFCs registered under Section 29A (5) of the National Housing Bank Act, 1987 and having assets worth ₹100 crores & above, as ‘Financial Institution’ under Section 2(1)(m)(iv) of SARFAESI Act, 2002. In view of the revision of the criteria for notification as ‘Financial Institution’ the criteria prescribed under Para 105 of the aforesaid Master Direction are withdrawn with immediate effect. Accordingly, the Master Direction – Non-Banking Financial Company – Housing Finance Company (Reserve Bank) Directions, 2021 is being modified accordingly.

• The Reserve Bank of India (RBI) has decided to align the provisions for Housing Finance Companies (HFCs) relating to the rating of deposits taken by them with provisions on the subject prescribed for non-banking finance companies (NBFCs).

The RBI has approved seven Credit Rating Agencies (CRAs) – Crisis, ICRA, CARE Ratings, Fitch Ratings India Pvt Ltd, Brickwork Ratings, Acuite Ratings & Research and Infomatics Valuation and Rating – and their respective minimum investment-grade credit rating. Accordingly, HFC’s fixed deposit program needs to have a minimum investment-grade credit rating of ‘FA-’ from Crisis or ‘MA–’ from ICRA or ‘BBB’ from CARE Ratings. Crisis’s ‘FA-’ rating indicates that the degree of safety regarding timely payment of interest and principal is satisfactory. Changes in circumstances can affect such issues more than those in the higher-rated categories. Likewise, CARE Ratings ‘BBB’ rating indicates that instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.

IBBI

• MCA has notified the Insolvency and Bankruptcy Code Amendment Act, 2021 which has enabled Pre-packaged Insolvency Resolution for MSMEs.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2021 was introduced in Lok Sabha on July 26, 2021.  It amends the Insolvency and Bankruptcy Code, 2016.  Insolvency is a situation where individuals or companies are unable to repay their outstanding debt. The Bill replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, which was promulgated on April 4, 2021. The Code provides a time-bound process for resolving the insolvency of corporate debtors (within 330 days) called the corporate insolvency resolution process (CIRP).  The debtor himself or its creditors may apply for initiation of CIRP in the event of a default of at least one lakh rupees.  Under CIRP, a committee of creditors is constituted to decide on the insolvency resolution. Application for initiating PIRP may be filed in the event of a default of at least one lakh rupees.  The central government may increase the threshold of minimum default up to one crore rupees through a notification. During PIRP, the debtor will be provided with a moratorium under which certain actions against the debtor will be prohibited.  These include filing or continuation of suits, execution of court orders, or recovery of property. At any time from the PIRP commencement date but before the approval of the resolution plan, the committee of creditors may decide (with at least 66% of the voting shares) to terminate PIRP and instead initiate CIRP.

DGFT

• The Ministry of Commerce & Industry has announced guidelines and rates of the long-pending Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for export items.

Though the scheme for exporters which replaced the ongoing Merchandise Exports from India Scheme (MEIS) came into effect on January 1, 2021, the rates had not been finalized yet. Accordingly, the RoDTEP rates will vary from 0.5-4.3% of export value and will include sectors like marine, agriculture, leather, gems and jewellery, automobile, plastics, electrical, electronics and machinery. However, exporters in sectors like steel, pharmaceutical, chemicals have been kept out of the scheme. Products manufactured or exported at export-oriented units and special economic zones have been excluded from the scheme for the time being.  While most animal products including milk and freshwater fish will get a RodTEP rate of 0.5%, agri items such as tomatoes and onions will get benefits at a 4% rate. Textile items such as saree and shirting fabrics will get the highest benefit at 4.3% of export value.  RoDTEP has created a mechanism to reimburse such central, state, and local taxes, which are not being refunded under any other scheme. The refund would be credited to an exporter’s ledger account with the customs and will be used to pay basic customs duty on imported goods. The credits can also be transferred to other importers. The rebate will have to be claimed as a percentage of the Freight on Board value of exports. A monitoring and audit mechanism, with an information technology-based risk management system has been put a place in to physically verify the records of the exporters.

• DGFT has granted further extension in period of modification of IEC till 31.08.2021 and waiver of fees for IEC updation during August,2021.

All IEC holders must ensure that details in its IEC are updated electronically every year, during the April – June period. However, for the current year only, this period is extended by another month i.e., till August 31, 2021. In cases where there are no changes in IEC details the same also needs to be confirmed online. Further, fee to be charged for modification of IEC done during the month of August 2021 will remain ‘Nil”. Period of modification of IEC is extended for the year 2021-22 only till 31.08.2021, and no fee shall be charged on modifications carried out in IEC during the period up to August 31, 2021.

FEMA

• RBI has amended the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 to enable the increase in foreign direct investment limit in the insurance sector to 74 percent.

According to the Foreign Exchange Management (non-debt instruments) (second amendment) Rules, 2021, applications for FDI in private banks having joint ventures or subsidiaries in the insurance sector may be addressed to the Reserve Bank of India for consideration in consultation with the Insurance Regulatory and Development Authority of India to ensure that the limit of foreign investment of 74 percent for the insurance sector is not breached. It is also provided that in an Indian Insurance Company having foreign investment, a majority of its directors, a majority of its Key Management Persons and at least one among the Chairperson of its Board, its Managing Director, and its Chief Executive Officer, shall be Resident Indian Citizens. The rules also require such insurance companies to have 50 percent of their directors as independent directors unless the chairperson of its board is herself or himself one. In that case at least one-third of its board should have independent directors. It is further clarified that an Indian Insurance company having foreign investment shall comply with the provisions under the Indian Insurance Companies (Foreign Investment) Rules, 2015.

MSME

• The Ministry of Micro, Small & Medium Enterprises has notified the eligibility criteria for availing credit under Emergency Credit Line Guarantee Scheme.

The objective of the scheme is to help businesses including MSMEs to meet their operational liabilities and resume business in view of the distress caused by the COVID-19 crisis, by providing Member Lending Institutions (MLIs), 100 percent guarantee against any losses suffered by them due to non-repayment of the ECLGS funding by borrowers. The overall ceiling initially announced for ECLGS was Rs 3 lakh crore which was subsequently enhanced to Rs 4.5 lakh crore. However, ECLGS being a demand-driven scheme, sanctions/ disbursements are made by lending institutions based on an assessment of borrower’s requirement and their eligibility. Further, this scheme offers a one-year moratorium on payment of principal components.  In addition to this, the other scheme announced under the Atma Nirbhar Bharat package i.e. ‘Credit Guarantee Scheme for Subordinate Debt’ also has a moratorium clause of 7 years on the payment of principal component with the overall all repayment period of 10 years.

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Relief from MAT u/s 115JB with regard to adjustments made to book profit on account of Secondary Adjustment and APAs

Relief Provided

The Finance Act 2021 has introduce new sub-section (2D) of section 115JB to rationalize MAT provisions to consider the below situations in computing MAT liability:

• In case of income of past year is included in the books of accounts of the Assessee, on account of secondary adjustment made under Transfer Pricing on an application made by the Assessee to the AO in this behalf or as a result of APA, book profit shall be computed taking without into account such income;

Computation mechanism

CBDT vide Notification No. 92/2021 dated 09/08/2021 has introduced new Rule 10RB giving effect to the above provision.

As per Rule 10RB, MAT payable u/s 115JB by the company will be reduced by the relief calculated by below formula:

(A-B) – (D-C),

where,

A = tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of the previous year including the past income;

B = tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of the previous year after reducing the book profit with the past income;

C = Aggregate of tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of those past year or years to which the past income belongs;

D = Aggregate of tax payable by the assessee company under sub-section (1) of section 115JB on the book profit of past year or years, referred to in item C, after increasing the book profit with the relevant past income of such year or years:

Provided that if the value of (A-B)-(D-C) in the formula is negative, its value shall be deemed to be zero.

Filing Mechanism

For availing relief under the said rule 10RB, CBDT has introduced Form 3CEEA which needs to be uploaded and signed / verified electronically at the IT portal.

Introduction of Taxation Laws (Amendment) Bill, 2021: Background

• The post 2012 scenario added fears of retrospective taxation to certain companies undergoing tax assessments on account of capital gains arising from transfer of shares of a foreign company. It is argued that such retrospective amendments militate against the principle of tax certainty and damage India’s reputation as an attractive destination.
• This was brought about as a reason of landmark verdict of the Hon’ble Supreme Court in 2012 in the matter of Vodafone International Holdings BV ([2012] 17 taxmann.com 202 (SC)), wherein it was held that such transfer of shares of a foreign company would not give rise to taxable capital gains.
• In the past few years, major reforms have been initiated in the financial and infrastructure sector which has created a positive environment for investment in the country. The country today stands at a juncture when quick recovery of the economy after the COVID-19 pandemic is the need of the hour and foreign investment has an important role to play in promoting faster economic growth and employment. Therefore, to attract the investment in India and to boost growth, this bill proposes to scrap a retrospective amendment.
• The bill has been passed by both houses of Parliament and now pending for Hon’ble President assent.

Brief Facts: The Vodafone Controversy

• In Vodafone International Holdings BV. case, Vodafone International Holdings (VIH), a Netherlands based Company procured 100% shares in CGP Investments (Holding) Ltd a company situated in Cayman Island, for USD 11.1 billion from Hutchison Telecommunications International Ltd in the year 2007. CGP, through different organizations and actions controlled 67% of Hutchison Essar Limited (HEL), an Indian Company. Vodafone got command over CGP and its downstream the subsidiaries including HEL through the acquisition.
• In 2007, the Tax authority issued a notice to Vodafone International Holdings (VIH) for not withholding tax in India. The said notice was challenged by Vodafone International Holdings (VIH) in the Bombay High Court however, the same was turned down citing [2010] 193 Taxman 100(Bombay).
• Thereafter, the matter was filed in the Hon’ble Apex court which held in the favor of Vodafone International Holdings (VIH) in view of the fact that the transfer of shares outside India does not amount to indirect transfer of any assets owned by the company in which the shares are so held. Accordingly, the Apex Court refused to lift the corporate veil of the foreign company holding shares in the Indian company.
• To overcome this ruling, the Government vide Finance Act, 2012 amended section 9(1) of the Income Tax Act (‘ITA’) by introducing the explanation 4 & 5 to tax the indirect transfer made of capital asset of a company having substantial value of asset in India.

There were a total seventeen cases which were under similar dispute and accordingly tax demands had been raised in these matters by the tax authority on similar lines.

Further, the dispute on account of two cases namely, Vodafone BV & Cairn Energy were referred to Arbitration Tribunal under Bilateral Investment Protection Treaty at the International Forum, which ruled in favor of the aforementioned taxpayers and against the Indian Income Tax Department.

Brief- The Taxation Laws (Amendment) Bill, 2021

In a bid to cover the phantom of review tax assessment, the tax authority on Thursday August 06, 2021, passed a Taxation Laws (Amendment) Bill, 2021 (“TLA Bill, 2021”) from the Lok Sabha to pull out all back tax requests on organizations, Cairn Energy and Vodafone and said it will refund the money gathered to authorize such levies (Without Interest).

The Bill accommodates the withdrawal of assessment request made on “Indirect Transfer of Indian resources if the exchange was executed before 28 May 2012 (i.e., the day the review tax enactment appeared).

Hence, after the existing 3^rd proviso to explanation 5 of section 9, additional three provisos i.e., proviso 4, 5 & 6 are proposed to be added to give effect of the new bill.

It is additionally proposed to refund the sum paid in these cases with no interest consequently u/s 244A of Income tax act. The Bill has an immediate bearing on long-running assessment questions with British firms Cairn Energy Plc and Vodafone Group.

Proposals in the Bill:

• Proposed new 4th proviso provides that nothing in Explanation 5 shall apply to—
• an assessment or reassessment to be made under section 143, section 144, section 147 or section 153A or section 153C
• an order to be passed enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154 o
• an order to be passed deeming a person to be an assessee in default under sub-section (1) of section 201.

in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012.

Analysis: It means, no demand will be raised in Future in context of any indirect transfer made till 27.05.2021. As retrospective amendment by Finance Act 2012 was made to cover all the indirect transfer done between April 01, 1961 till the date of getting President assent i.e. 28 May 2021, So for giving the relief it is proposed in this proviso that no order or demand can be raised in future for any indirect capital transfer covered by the section 9(1)(i) for any pending proceedings.

Proposed new 5th proviso provides that:

Where

• an assessment or reassessment has been made under section 143, section 144, section 147 or section 153A or section 153C; or
• an order has been passed enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154; or
• an order has been passed deeming a person to be an assessee in default under sub-section (1) of section 201; or
• an order has been passed imposing a penalty under Chapter XXI or under section 221,

in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and the person in whose case such assessment or reassessment or order has been passed or made, as the case may be, fulfils the ‘specified conditions’.

Analysis: It means, demand raised or order passed to the extent to any indirect transfer made till 27.05.2021 will be nullified. But this effect will be issued once the specified condition as mentioned below will be fulfilled.

• Further it is also proposed to new 6th proviso to Explanation 5 clarifies that
• where any amount becomes refundable to the person referred to in fifth proviso as a consequence of him fulfilling the ‘specified conditions’, then, such amount shall be refunded to him, but no interest under section 244A shall be paid on that amount.

Analysis: It means, any demand collected or refund adjusted, will be refunded.  But here it is pertinent to note that such refund will be without any interest i.e. without giving effect to section 244A.

Specified condition as used in aforesaid provisos 5 & 6 are reproduced as under:

• where the said person has filed any appeal before an appellate forum or any writ petition before the High Court or the Supreme Court against any order in respect of said income, he shall either withdraw or submit an undertaking to withdraw such appeal or writ petition, in such form and manner as may be prescribed;
• where the said person has initiated any proceeding for arbitration, conciliation or mediation, or has given any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise, he shall either withdraw or shall submit an undertaking to withdraw the claim, if any, in such proceedings or notice, in such form and manner as may be prescribed;
• the said person shall furnish an undertaking, in such form and manner as may be prescribed, waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the said income which may otherwise be available to him under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise; and
• such other conditions as may be prescribed.”.

Analysis: As per the condition the assessee or said person needs to withdraw any appeal filed or submit the undertaking to withdraw any initiation made against the order whether filed in India or outside India. The manner, form or other conditions will be notified in future.

Further in this proposed bill, a consequential amendment in section 119 is proposed by adding proviso same to the specified conditions mentioned above.

Concluding remarks:

Bringing the amendment retrospectively, provides an interim and much needed relief to the ongoing litigations created on account of indirect transfers in the aforesaid matters. However, it needs to be understood that as the amendment is only retrospective, hence prospective taxation shall continue to be taxed in the similar manner. Accordingly, on one hand it aims to end specific retrospective controversies created by executive parliamentary powers but however on the other hand, it also creates a dilemma for foreign investors with respect to Indian tax laws, as to the fact that such positions might recur in the future. However, as of now it is a much needed and welcome step for the companies involved in retrospective tax disputes pertaining to indirect transfers.

KNM India can assist you with a range of complete financial services that range from Corporate advisory to Transaction advisory, Pre-incorporation to Post-incorporation, Insolvency and bankruptcy code to Secretarial services, Assurance to Internal audit services, along with Market entry strategy to Foreign company registration in India. To discuss any of these please book your slot, or call us on +91-99105-04170 – or email us at services@knmindia.com to get a quick response.

The article has been contributed by

CA Kavita Arora

Sr. Manager-Direct Tax

Further, we shall be happy to assist in case of any clarifications. For a deeper discussion, feel free to revert us at services@knmindia.com

Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. KNM accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication

Executive Summary

Income Tax

• Manual filing of Form 15CA/CB further extended to 15^th August 2021.
• India Joined hands with OECD/G20 for Digital economy taxation in unified approach (Pillar I & Pillar II).
• Extension of time limits for processing of ITR validly filed upto AY 2017-18 till 30^th September 2021.

Guidelines issued considering difficulty in implementing the provision of Sec 194Q.

Goods & Services Tax (GST)

• Functionality to check and update status of bank account details updated on GST portal
• New functionality on Annual Aggregate Turnover deployed on GST Portal for tax payer’s dashboard
• Basic custom duty has been exempted on covid test kits and specified medicine products for specified period.

Clarification on applicability of Dynamic QR Code

Companies Act 2013/ Other Laws.

• MCA has issued a press release to highlight the various measures taken by the ministry to fight Covid-19 pandemic.
• SEBI has extended the timelines for compliance with the regulatory requirements by debenture trustees for the quarter/half-year/year ending March 31, 2021 by Debenture Trustees.
• DGFT extends Date for Mandatory Electronic Filing of Non-Preferential CoO through Common Digital Platform.

Detailed

Income tax

• CBDT vide Circular No.13/2021 dated 30^th June 2021 issued clarification/guidelines in compliance the provision of section 194Q. In the circular, CBDT has clarified the issues on threshold of TDS and application of TDS/TCS in case of dual applicability.
• CBDT vide Press release dated 02^nd Jul 2021 informs about joining of India in OECD/G20 discussion for consensus on Base erosion and profit shifting Digital economy taxation(Pillar I & Pillar II approach) Pillar I which is  about  reallocation of additional share of profit to the market jurisdictions and Pillar II consisting of minimum tax and subject to tax rules.
• CBDT vide Press release dated 05^th Jul 2021 further extends the manual filing of 15CA/CB considering the bugs/error on new Income Tax website till 15^th July 2021. By Press release dated 20^th Jul 2021, manually filing is further extended till 15^th August, 2021.
• CBDT vide ORDER F. NO.225/98/2020IITA-II, Dated 05^th July 2021 has further extended the dates for the processing of validly filed ITR upto AY 2017-19, considering the pending taxpayers’ grievances related to issue of refund and to mitigate genuine hardship being faced by the taxpayers these time limits, till 30^th September 2021 through order u/s 119 of IT Act, 1961.
• CBDT vide Notification No. 77/2021 dated 07^th July 2021 has makes rule 8AC for of short-term capital gains and written down value under section 50 where depreciation on goodwill has been obtained.

Goods & Services Tax

• CBDT vide Notification No. 28/2021 – Central tax dated 30^th June 2021 waives penalty payable for non-compliance of provisions of notification no. 14/2020 dated 21^st March, 2020 for certain class of registered persons capturing dynamic QR code and the implementation of QR code to be further extended to 30^th September 2021.
• GST portal has issued functionality to check and update status of bank account details dated 29^th June 2021 for the taxpayers who have taken new registration at GST Portal but have not yet furnished the same, has been introduced. Such taxpayers are required to update their Bank Account Details within 45 days through Non-core amendment in the manner as specified of the first login henceforth.
• GST portal has issued New functionality on Annual Aggregate Turnover (AATO) dated 27^th June 2021 deployed on GST Portal for tax payer’s dashboard with the facility of turnover update.
• CBIC vide Circular 157/13/2021 – GST dated 20^th July 2021 issue clarifications regarding the extension of timelines granted by Hon’ble Supreme Court vide its Order dated 27.04.2021 is applicable in respect of any appeal which is required to be filed before Joint/ Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or where proceeding for revision or rectification of any order is required to be undertaken, and is not applicable to any other proceedings under GST Laws
• CBIC vide Notification no. 35/2021- customs dated 12^th July 2021 exempt basic customs duty on various imports of specified API/ excipients for Amphotericin B and raw materials for manufacturing COVID test kits, till specified period.
• CBIC vide Circular no. 17/2021- customs dated 23rd July, 2021 specify to focus its efforts to reduce compliance burden for citizens and business activities. Various procedures and requirements stated under various provisions in the Customs Act,1962 are being revisited so that compliances under these laws can be simplified or dispensed with, in order to enhance ease of doing business and minimize regulatory compliances.
• CBIC vide Circular no. 16/2021- customs dated 19^th July, 2021 issues clarification on issue of applicability of IGST on repair cost, insurance and freight, on goods re-imported after being exported for repairs on the recommendation of the GST council made in its 43^rd
• CBIC vide Circular no. 15/2021- customs dated 15^th July, 2021 prescribe manner for implementation of Risk Management system for processing of Duty drawback claims in exports.
• CBIC vide Circular no. 14/2021- customs dated 07^th July, 2021 has decided to implement various measures in custom for Faceless Assessment and clearance process to enhance the uniformity in assessments with a view to reduce interface with the trade.
• CBIC vide Circular no. 13/2021- customs dated 01^st July, 2021 in relation to AEO (Authorized Economic operator) T1 decide to launch a new version (V 2.0) for on-boarding of AEO T2 and AEO T3 applicants by way of online filing, real- time monitoring and digital certification.
• CBIC vide Circular no. 12/2021- customs dated 30^th June, 2021 guide the trades relating to procedures for smooth implementation of Sea Cargo Manifest and Transhipment Regulations.
• CBIC vide Notification no. 34/2021 – (Customs ADD) dated 28^th June 2021 Seeks to further amend notification No. 29/2017-Customs (ADD) dated 14th June, 2017 ‘Glazed/Unglazed Porcelain/Vitrified tiles’ originating in or exported from China PR, up to and inclusive of 31st December, 2021.

• CBIC vide Notification no. 35/2021 – (Customs ADD) dated 29th June 2021 Seeks to further amend notification No. 11/2016-Customs (ADD) dated 29th March, 2016 ‘Tyre Curing Presses also known as Tyre Vulcanisers or Rubber Processing Machineries for tyres, excluding Six Day Light Curing Press for curing bi-cycle tyres originating in or exported from China PR, up to and inclusive of 30th November, 2021.

• CBIC vide Notification no. 36/2021 – (Customs ADD) dated 29th June 2021 Seeks to further amend notification No. 17/2017-Customs (ADD) dated 11th May, 2017 Hot-Rolled flat products of alloy or non-alloy steel’ originating in or exported from China PR, Japan, Korea RP, Russia, Brazil or Indonesia, up to and inclusive of 15th December, 2021.
• CBIC vide Notification no. 37/2021 – (Customs ADD) dated 29th June 2021 Seeks to further amend notification No. 18/2017-Customs (ADD) dated 12th May, 2017 ‘Cold-Rolled flat products of alloy or non-alloy steel’ originating in or exported from China PR, Japan, Korea RP or Ukraine, up to and inclusive of 15th December, 2021.
• CBIC vide Notification no. 38/2021 – (Customs ADD) dated 30th June 2021 Seeks to further amend notification No. 42/2016-Customs (ADD) dated 08th August, 2016 PVC Flex Film originating in or exported from China PR, up to and inclusive of 31st January, 2022.

• CBIC vide Notification no. 39/2021 – (Customs ADD) dated 30th June 2021 Seeks to further amend notification No. 43/2016-Customs (ADD) dated 08th August, 2016 relating to Viscose Staple Fibre (VSF) excluding Bamboo Fibre, Dyed Fibre, Modal Fibre & Fire-retardant Fibre originating in or exported from China PR and Indonesia.

• CBIC vide Notification no. 40/2021 – (Customs ADD) dated 30^th June 2021 Seeks to further amend notification No. 34/2016-Customs (ADD) dated 14th July, 2016 ‘Plain Medium Density Fibre Board (MDF) having thickness of 6mm and above’ originating in or exported from Vietnam, up to and inclusive of 13th March, 2022.
• CBIC vide Instruction no. 15/2021- customs dated 30^th June 2021 specify requirement of report of testing of Covid-19 in live animals by the exporters not more than 3 days old before export into India in addition to other existing requirements in this regard.

Companies Act, 2013

• MCA has issued a press release to highlight the various measures taken by the ministry to fight Covid-19 pandemic.
• The illustrative list issued by MCA has 23 entries and covers almost all benefits and relaxations extended due to Covid-19 pandemic, which includes the Companies Fresh Start Scheme, 2020 (CFSS), LLP Settlement Scheme, 2020, relaxation on levy of additional fees for companies / LLPs in filing Charge Related Forms, Condonation of Delay Scheme for Companies restored by NCLT between December 1, 2020 to December 31, 2020, conduct Board Meetings through Video Conference (VC) or other audio-visual means for passing resolutions in respect of the restricted matters, conduct of Extraordinary General Meetings (EGMs) through Video Conferencing (VC), conduct of Annual General Meetings (AGMs) by Video Conferencing (VC),  Extension of time in the holding of Annual General Meeting for the financial year ended on March 31, 2020 till December 31, 2020,  enhanced the period to thirteen months from December 1, 2019 within which existing Independent directors may apply online for inclusion of their names in the databank for Independent Directors, Independent Directors (IDs) of a company have been given relaxation from holding at least one mandatory meeting, mandatory requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (CA-13) (120 days) were extended by a period of 60 days, Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Act shall not be treated as a non-compliance for the financial year 2019-20 and 2020-21

Other Laws

• SEBI has extended the timelines for compliance with the regulatory requirements by debenture trustees for the quarter/half-year/year ending March 31, 2021 by Debenture Trustees.

The extended timelines for compliance include submission of Asset Cover Certificate, a statement of the value of pledged securities and a statement of value for Debt Service Reserve Account (DSRA) or any other form of security offered – August 31, 2021; Net worth certificate of guarantor (secured by way of personal guarantee), Financials/ value of guarantor prepared on basis of audited financial statement etc. of the guarantor (secured by way of corporate guarantee) and Valuation report and title search report for the immovable/ movable assets, as applicable – October 31, 2021 and Disclosure on the website of Monitoring of asset cover certificate and quarterly compliance report of the listed entity, Monitoring of utilization certificate, Status of information regarding breach of covenants/ terms of the issue, if any action was taken by debenture trustee and Status regarding maintenance of accounts maintained under the supervision of debenture trustee – August 31, 2021.

• SEBI has issued a circular to notify that the block mechanism in the Demat account of clients undertaking sale transactions would be available from 1st August 2021.

A facility of block mechanism in the Demat account of clients has been made available by the depositories. The securities lying in the client’s Demat account may be blocked in favour of Clearing Corporation either by the client himself using depository’s online system or eDIS mandate or through depository participant based on physical DIS given by client or Power of Attorney (POA) holder. In case the sale transaction is not executed, shares will continue to remain in the client’s demat account and will be unblocked at the end of the T (Trade) day. Blocking of shares will be on ‘time bases. If securities for sale are blocked in the depository system in favour of Clearing Corporation, all margins would be deemed to have been collected and penalty for short/non-collection of margins including other margins shall not arise. Further, the proposed facility of block mechanism is on an optional basis and the EPI mechanism will also continue.

• SEBI has issued a circular to introduce expected loss-based rating scale for rating agencies and standardization of rating scale used by credit rating agencies for ratings of projects/ instruments associated with the infrastructure sector.

All the Credit rating agencies will now be required to provide expected loss-based ratings for projects and instruments associated with the infrastructure sector, with SEBI putting in place a new framework. The new scale will be used by the credit rating agencies for ratings of projects or instruments associated with the infrastructure sector to begin with. Lowest expected loss, very low expected loss, low expected loss, moderate expected loss, high expected loss, very high expected loss and highest expected loss will be the seven levels on the new scale. Further for the existing outstanding ratings, the CRAs shall disclose new rating symbols and definitions on their websites; update their rating lists on their websites; and inform their clients about the change in the rating symbols and definitions and specify that this should not be construed as a change in the ratings. All the provisions in the latest circular except those pertaining to standardization of rating scales, will be applicable with “immediate effect” for Credit Rating Agencies (CRAs). The CRAs shall ensure compliance with the requirements of this circular, latest by March 31, 2022 and also place the compliance status of this circular before their Board of Directors.

• SEBI has come out with a new framework with regard to the valuation of securities, having multiple put options, held by mutual funds.

The new framework will be applicable with effect from October 1, 2021. In respect of valuation of securities with multiple put options present “ab-initio”, wherein put option is factored into the valuation of the security by the valuation agency, SEBI has taken certain decisions based on the recommendation of its mutual fund advisory committee. Under the framework, if the put option is not exercised by a mutual fund while exercising the put option would have been in favor of the scheme, fund houses will have to give justification for not exercising such option to the valuation agencies, board of AMC and Trustees. The explanation must be given on or before the last date of the notice period. The valuation agencies will not take into account the remaining put options for the purpose of valuation of the security. The put option will be considered as ‘in favor of the scheme’ if the yield of the valuation price ignoring the put option under evaluation is more than the contractual yield or coupon rate by 30 basis points.

• SEBI has released the Discussion Paper for Review of SEBI (Share Based Employee Benefit) Regulations, 2014 and SEBI (Issue of Sweat Equity) Regulations, 2002.

Through this discussion paper, SEBI has suggested combining two separate regulations, SEBI (Share Based Employee Benefits) Regulations, 2014, and SEBI (Issue of Sweat Equity) Regulations, 2002, that deal with employee compensation. It is recommended that the objectives for which issuance of sweat equity shares are permitted and the ceiling on the quantum issued by a company should be included in the sweat equity regulations. It also recommended that the lock-in period for sweat equity shares and its pricing formula should be consistent with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. The committee recommended that even non-permanent employees be considered to receive share-based employee benefits falling under SBEB Regulations. Further, through these draft Regulations SEBI has recognised the Secretarial Auditor to certify that the scheme(s) has been implemented in accordance with these regulations and in accordance with the resolution of the company in the general meeting as per Regulation 13 and under Regulation 26(2) to certify compliance with this provision at the time of adoption of such balance sheet by the Company. Public comments are invited on the recommendations made by the Expert Group in its report, in the prescribed format.

• SEBI has issued a standard operating procedure for subsidiary companies planning to get delisted through a ‘Scheme of Arrangement’ wherein the listed holding companies and the listed subsidiaries are in the same line of business.

According to a circular, the ‘same line of business’, is defined as when least 50 per cent of revenue from the operations of the listed holding and listed subsidiary company must come from the same line of business, In addition, at least 50% of the net tangible assets of the listed holding company and the listed subsidiary must be invested in the same line of business. Further, the principal economic activities of both firms need to be under the same group as per the National Industrial Classification (NIC) Code. In case of change of name of the listed entities within the last one year, at least 50 per cent of the revenue, calculated on a restated and consolidated basis, for the preceding one full year has to be earned by it from the activity indicated by its new name. The listed holding company and the listed subsidiary have to provide self-certification with respect to both the companies being in the same line of business. Further, these need to be certified by the Statutory Auditor and Merchant Banker. To be eligible for the exemption under the route, shares of both companies should be listed for at least three years and the trading thereof should not have been suspended immediately before approval of the scheme by the Board of Directors of the companies.

• SEBI has issued a circular to reduces the time period for submitting an application to obtain NOC for release of 1% of the issued amount.

The time period for processing of NOC applications is also reduced to 2 months from the existing period of 4 months after listing for submitting the application. As per its earlier guidelines, the issuer company is required to submit an application on its letterhead addressed to SEBI in the specified format specified, after the lapse of 4 months from listing on the Exchange, which was the last to permit listing, for the purpose of obtaining the NOC. However, the time period of 4 months has now been reduced to 2 months. Further, the merchant banker shall submit a certificate confirming that all the SCSBs involved in the ASBA process have unblocked ASBA accounts. SEBI shall consider the application as incomplete if the application is not accompanied by a confirmation by merchant banker that all the accounts in ASBA have been ‘unblocked’.

RBI

• The Reserve Bank of India (RBI) has extended the last date for filing the Annual Return of Foreign Liabilities and Assets (FLA) to 31st July, 2021.

The Annual Return on Foreign Liabilities and Assets are required to be filed by an Indian Company and LLP to RBI within the prescribed due date. This Return is filed Online on RBI Portal. The portal on which you can file the return is https://flair.rbi.org.in/fla/. Generally, the filing of the FLA annual return has to be done before the 15 of July of the respective year and must include data of FDI or ODI received or made by the company for the previous year or current financial year. Entities that are filing FLA return for the first time/ with revised UIN (Unique identification number) are required to register themselves first for generating login credentials and afterward they can file an FLA return. However, the entities which have already registered earlier may submit FLA 2021 using their earlier login credentials. The Companies which have received FDI and/or made FDI abroad in any of the financial year are required to submit FLA Return to RBI. The Financial Statement of the company for such a particular FY can exactly explain the status of Inward FDI or Outward FDI.

• RBI has issued Instructions on Interest on overdue domestic deposits. 

RBI has instructed all banks that all unclaimed maturity proceeds of Term Deposits (TDs) with banks will attract the rate of interest as applicable to savings accounts or the contracted rate of interest on the matured TD, whichever is lower. This directive comes in the backdrop of Savings Bank (SB) rates (on deposits above ₹1 lakh) of some of the small finance banks being higher than the TD rates in the less than one-year and above five years maturity buckets. Earlier, the rule on overdue domestic deposits stated that if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings deposits. The amendment comes as unclaimed deposits with banks have been growing every year.

IBBI

• IBBI has specified the format of CIRP 8 under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which needs to be filed in respect of every CIRP ongoing or commencing on or after July 14, 2021.

Regulation 35A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) requires the Resolution Professional to form an opinion on transactions covered under sections 43, 45, 50 and 66 by 75 day, make a determination on such transactions by 115 day, and file an application before the Adjudicating Authority by the 135 day of the insolvency commencement date. Further regulation 40B(IB) of the CIRP Regulations require the resolution professional to file Form CIRP 8 intimating details of his opinion and determination under Regulation 35A, by 140 day of the insolvency commencement date. For effective monitoring, the amendment requires the RP to file Form CIRP 8 on the electronic platform of the Board, intimating details of his opinion and determination in respect of avoidance transactions.

• IBBI has notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2021 to further amend the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Through this amendment, a new Regulation 4B has been inserted which deals with disclosure of change in name and address of the Corporate Debtor. Where a corporate debtor has changed its name or registered office address during the period of two years preceding the insolvency commencement date, the Interim Resolution Professional or Resolution Professional, as the case may be, shall disclose all the former name(s) and registered office address(es) so changed along with the current name and registered office address in every communication, record, proceeding or any other document. Further under Regulation 27 the resolution professional shall, within seven days of his appointment but not later than forty-seventh day from the insolvency commencement date, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with Regulation 35.

• The IBBI has issued the has issued Information Brochure on Pre-Packaged Insolvency Resolution Process (PPIRP) for Micro, Small, and Medium Enterprises (MSMEs).

The PPIRP is required to be completed within a period of 120 days from its commencement date. The RP shall either file the resolution plan for approval or an application for termination of PPIRP, with the AA within 90 days from the PPIRP commencement date. A model timeline along with the activities to be undertaken and responsibilities of Resolution Professionals, creditors, and corporate debtors are provided in the brochure. It is designed for the sole purpose of creating awareness on the subject and must not be used as a guide for taking or recommending any action or decision, commercial or otherwise. The released brochure presents step-by-step activities from initiation till the closure of PPIRP. It annexes: (i) a typical process flow of a PPIRP (Annexure A); (ii) an indicative list of responsibilities of the CD, the RP, and the creditors in respect of a PPIRP (Annexure B); (iii) a model timeline for completion of PPIRP within the prescribed period of 120 days from the date of its commencement (Annexure C); and (iv) a list of Forms (Annexure D).

DGFT

• DGFT extends Date for Mandatory Electronic Filing of Non-Preferential CoO through Common Digital Platform.

The DGFT has issued notice to provide that the option of submission and issuance of CoO (Non-Preferential) by the issuing agencies through their paper-based systems may continue further up to 30th September 2021. However, the mandatory electronic filing of the Non-Preferential Certificate of Origin (CoO) shall be from October 1, 2021. The objective of this platform is to provide an electronic, contact-less single window for the CoO related processes. However, on the request of certain Chambers/Associations, the existing system of submitting and processing non-preferential CoO applications in manual/paper mode is being allowed for the time being and the online system is not being made mandatory. All Agencies as notified under Appendix-2E are required to ensure the onboarding exercise is completed latest by September 30, 2021.

• The Directorate General of Foreign Trade has revised para 2.96 from the Handbook of procedures 2015-2020 which deals with intimation regarding a change in the constitution of business of RCMC holders.

Accordingly, clause 2.96(b) w.r.t the Export shall furnish quarterly return /details of his exports of different commodities to the concerned registering authority has been deleted. However, status holders shall also send quarterly returns to FIEO in the format specified by FIEO. Further, the format of ANF-2C of foreign trade policy 2015-2020 mandating submission of monthly return of export including NIL return to the registering authority by 15^th of the month following the quarter deleted.

• DGFT has granted Extension in period of modification of IEC till 31.07.2021 and waiver of fees for IEC updation during July, 2021.

An IEC holder has to ensure that details in its IEC are updated electronically every year, during the April – June period. However, for the current year only, this period is extended by another month i.e., till 31st July, 2021. In cases where there are no changes in IEC details the same also needs to be confirmed online. Further, fee to be charged for modification of IEC done during the month of July, 2021 will remain ‘Nil”. Period of modification of IEC is extended for the year 2021-22 only till 31.07.2021, and no fee shall be charged on modifications carried out in IEC during the period upto 31st July, 2021.

MSME

• The Minister of Micro, Small and Medium Enterprise (MSME) has announced revised guidelines for MSMEs with inclusion of retail and wholesale trades as MSMEs.

With the revised guidelines the retail and wholesale trades will now be allowed to register on the Udyam Registration Portal. The Enterprises having Udyog Aadhaar Memorandum (UAM) under above three NIC Codes are now allowed to migrate to Udyam Registration Portal or they can file Udyam Registration afresh. The existing definition of MSMEs includes manufacturing and service enterprises whereas retail and wholesale trade were not classified under the same. However, benefits to Retail and Wholesale trade MSMEs are to be restricted to Priority Sector Lending only. Accordingly, the list of eligible additional activities under NIC Code 45- Wholesale and retail trade and repair of motor vehicle and motorcycles, NIC Code 46 – Wholesale trade except of motor vehicles and motor cycles and NIC Code 47 – Retail Trade Except of Motor Vehicles and motorcycles. Consequent upon above changes, para 2 including Table. 2 mentioned in O.M. no 5/2(1)/2020/E-P&G/Policy dated 01.12.2020, stands omitted.

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