Executive Summary

Income Tax

• CBDT issued the annual circular for TDS on Salary under one Umbrella.
• CBDT gives relaxation to Non-resident taxpayers for filing online Form-10F having No PAN in India.

Good & Services Tax (GST) & Customs

• GST Council Recommend Reduction in Compounding Amount.
  GST Council Recommend Raising the Minimum Threshold amount for launching prosecution.

Companies Act 2013/ Other Laws

• MCA to Roll out 56 Company Forms on MCA21 V3 Portal in January 2023
• Clarification of holding of Annual General Meeting through Video Conference Mode
• Sovereign Gold Bond (SGB) Scheme 2022-23
• RBI migrates fraud reporting module to ‘DAKSH’ to streamline reporting, enhance efficiency and automate processes
• SEBI proposes a regulatory framework for index providers; prescribes various compliances and conditions
• IBBI specifies the proforma for reporting the liquidator’s decision if different from the advice of SCC

Income Tax

• Circular No. 24/2022 [F. NO. 275/15/2022-IT(B)], Dated 07-12-2022: CBDT has issued an annual circular for TDS on salary to clarify the various applicable provisions under one umbrella.
• CBDT vide CIRCULAR F.NO. DGIT(S)-ADG(S)-3/e-FILING NOTIFICATION/FORMS/2022/9227, DATED 12-12-2022 gives partial exemption to those entities not having PAN in India but need to submit Form 10F to the deductor. Earlier CBDT Notification No.3/2022 dated 16.07.2022 mandated to furnish Form 10F electronically. Now by exemption CBDT gives relaxation to Non-resident taxpayers to furnish manual Form 10F but this exemption is up to 31st March 2023 only.

Goods & Services Tax

• As per 48th GST council meeting – The GST council has recommended to raise the minimum threshold of tax amount for launching prosecution under GST from Rs. One Crore to Rs. Two Crores, except for the offence of issuance of invoices without supply of goods or services or both
• As per 48th GST council meeting – The GST council has recommended to reduce the compounding amount from the present range of 50% to 150% of tax amount to the range of 25% to 100%.
• The GST council has recommended to decriminalize certain offences under clause (g), (j) and (k) of sub-section (1) of section 132 of CGST Act 2017, viz.-
  • obstruction or preventing any officer in discharge of his duties;
  • deliberate tempering of material evidence;
  • failure to supply the information
• Facilitate e-commerce for micro enterprises: GST Council in its 47th meeting had granted in-principle approval for allowing unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs), subject to certain conditions. Further, considering the time required for development of the requisite functionality on the portal as well as for providing sufficient time for preparedness by the ECOs, Council has recommended that the scheme may be implemented w.e.f. 01.10.2023.
• Further, Issuance of the following circulars in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:
  • Procedure for verification of input tax credit in cases involving difference in input tax credit availed in FORM GSTR-3B vis a vis that available as per FORM GSTR-2A during FY 2017-18 and 2018-19.
  • Clarifying the manner of re-determination of demand in terms of sub-section (2) of section 75 of CGST Act, 2017.
  • Clarification in respect of applicability of e-invoicing with respect to an entity.

Companies Act, 2013

• MCA to Roll out 56 Company Forms on MCA21 V3 Portal in January 2023 – MCA vide announcement dt. 23/12/2022 is going to release the Second Set of Company Forms on the MCA21 V3 portal, in January 2023, comprising of total 56 forms. The first lot will consist of 10 forms to be released on January 9, 2023, and the second lot will consist of 46 forms to be released on January 23, 2023. All stakeholders are advised to ensure that there are no SRNs in “pending payment” or “resubmission” status. The V2 Portal for company filing will continue to be available for all forms except the 56 forms as notified by MCA.
• Clarification of holding of Annual General Meeting through Video Conference Mode – The Ministry of Corporate Affairs vide its General Circular No. 10/2022 dated 28/12/2022 has allowed the companies whose AGMs are due in year 2023, to conduct their AGMs on or before 30/09/2023 through video conference (VC) or other audio visual means (OAVM) in accordance with the requirements laid down in Para 3 and Para 4 of the General Circular No. 20/2020 dated 05/05/2020.

RBI

• Sovereign Gold Bond (SGB) Scheme 2022-23
  Government of India, vide its Notification No F.No4.(6)-B (W&M)/2022 dated December 15, 2022, has announced Series III and IV of Sovereign Gold Bond Scheme 2022-23. Under the Scheme, there will be a distinct series (Series III and IV) for every tranche. The terms and conditions of the issuance of the Bonds shall be as per the above notification.
• RBI migrates fraud reporting module to ‘DAKSH’ to streamline reporting, enhance efficiency and automate processes
  To streamline reporting, enhance efficiency and automate the payments fraud management process, the fraud reporting module is being migrated to DAKSH – Reserve Bank’s Advanced Supervisory Monitoring System. The migration will be effective from January 01, 2023, i.e., entities shall commence reporting of payment frauds in DAKSH from this date. In addition to the existing bulk upload facility to report payment frauds, DAKSH provides additional functionalities, viz. maker-checker facility, online screen-based reporting, option for requesting additional information, facility to issue alerts / advisories, generation of dashboards and reports, etc.

SEBI

SEBI proposes regulatory framework for index providers; prescribes various compliances and conditions
With the objective of furthering transparency and accountability in financial benchmarks / indices in the Indian securities market, the SEBI has proposed a regulatory framework for index providers. The Index providers offering indices for use in India shall be required to register with SEBI for the introduction of indices in India. Further, it shall be a legal entity incorporated under the Companies Act. Also, many conditions have been prescribed.

Insolvency And Bankruptcy Code

IBBI specifies the proforma for reporting the liquidator’s decision if different from the advice of SCC
The IBBI has made available an electronic platform at www.ibbi.gov.in, for reporting the liquidator’s decisions different from the advice given by the SCC. The insolvency professionals are directed to make use of the aforesaid proforma for reporting to the Board and Adjudicating Authority, under proviso to sub-regulation (10) of regulation 31A. This Circular is issued in exercise of the powers under section 196 of the Insolvency and Bankruptcy Code, 2016

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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 from 25th Nov till 25th Dec 2022.

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Section 194R: Tax on benefit or perquisite or Reformed Fringe Benefits Tax Applicability: 01st July 2022

Contents:

• Background of Section 194-R
• Snapshot to the guidelines of section 194R dated 16.06.2022
• Clarification relating to provisions of section 194R

Background- 194R

Section 194R: Deduction of TDS if benefits/Perquisites provided by any person to a Resident arising from business/profession.

Applicability :
• Value of benefit or perquisite provided > Rs. 20,000 (Cash or Kind or both).
• Rate @ 10%
• If cash is not sufficient then Advance tax must be paid by the recipient on such benefits/Perquisites.

Exception:
• Individual or a HUF is not liable to deduct if immediately preceding financial year:
o business turnover < one crore rupees or,
o profession gross receipts < fifty lakh rupees

Clarification 1: Is it necessary that the person providing benefit or prerequisite needs to check if the amount is taxable under clause (iv) of section 28 of the Act, before deducting tax under section 194R of the Act?
• No.
• The deductor is not required to check or verify the taxability of the amount or the rate of taxability in the hands of the recipient, whether as a resident or non-resident.

Clarification 2: Is it necessary that the benefit or prerequisite must be in kind for section 194R of the Act to operate?
• No.
• Benefits can be in cash or kind or partly in cash and in-kind
• Deductor required to deduct TDS, whether the benefit or perquisite is either in cash or in-kind or partly in cash or partly in kind.

Clarification 3: Is there any requirement to deduct tax under section 194R of the Act, when the benefit or perquisite is in the form of a capital asset?
• Yes
• Tax deducted in all cases where benefit or prerequisite (of whatever nature) is provided.
• Courts have held many benefits or perquisites to be taxable even though they are in the nature of capital assets.
• Deductor is not required to check if the benefits or perquisites are taxable in the hands of the recipient.

Clarification 4: Whether sales discounts, cash discounts, or rebates beneficial or perquisite?
• No tax is not required to be deducted u/s 194R on sales discount, cash discount, and rebates allowed to customers.
• Even in case, a seller is offering a free item on a certain purchase, still it will not be taxable. For Example, Sellers offer 2 items free with the purchase of 10 items. But this is not a case of free sample, in case of the free sample having worth more than INR 20000 will become under the preview of TDS u/s 194R
• Examples of benefits/perquisites on which tax is required to be deducted – free Samples, car, TV, computers, gold coin, mobile phone, sponsors a trip upon achieving certain targets, free ticket for an event, medicine samples free to medical practitioners.
• The provision of section 194R of the Act shall not apply if the benefit or perquisite is being provided to a Government entity, like a Government hospital, not carrying on business or profession.                                                                                                          • Benefits/Perquisites received by the Owner/director/employee/their relative of the recipient entity will be taxable in the hands of the recipient entity.
For Example, if the benefit or perquisite is provided to a doctor who is working as a consultant in the hospital. In this case, the benefit or perquisite the provider may deduct tax under section 94R of the Act with the hospital as the recipient, and then the hospital may again deduct tax under section 194R of the Act for providing the same benefit or prerequisite to the consultant. To remove the difficulty, as an alternative, the original benefit or perquisite the provider may directly deduct tax under section 194R of the Act in the case of the consultant as a recipient.

Clarification 5: How is the valuation of benefit/prerequisite required to be carried out?
⦁ The valuation would be based on the fair market value(FMV) of the benefit or perquisite except in the following cases:-
⦁ benefit/perquisite provider has purchased the benefit/prerequisite before providing it to the recipient i.e. purchase price shall be the value for such benefit/perquisite.
⦁ benefit/perquisite provider manufactures such items given as benefit/prerequisite, then the price that it charges to its customers for such items shall be the value for such benefit/perquisite.
⦁ GST will not be included for the purpose of valuation.

Clarification 6: Many times, a social media influencer is given a product of a manufacturing company so that he can use that product and make audio/video to speak about that product on social media. Is this product given to such influencer a benefit or perquisite?
• If the product is returned to the manufacturing company after using-: No TDS u/s 194R.
• If the product is retained -: then it will be in the nature of benefit/perquisite and taxes are required to be deducted under section 194R of the Act.

Clarification 7: Whether reimbursement of the out-of-pocket expense incurred by the service provider in the course of rendering service is benefit/perquisite?
• Yes, however, it depends on the facts of the case. Let’s take an example If Mr. X gets services from the services provider says Y. If Mr. Y takes the services of the traveling agent, Mr. Z, then:

Clarification 8: If there is a dealer conference to educate the dealers about the products of the company – Is it benefit/perquisite?
• No if dealer/business conference is held with the prime object to educate dealers/customers.
• However, such a conference must not be in the nature of incentives/benefits to select dealers/customers who have achieved particular targets.

Further, in the following cases, the expenditure would be considered as a benefit or prerequisite for the purposes of section 194R of the Act:
(i) Expense attributable to leisure trip or leisure component, even if it is incidental to the dealer/business conference.
(ii) Expenditure incurred for family members accompanying the person attending dealer/business conference
(iii) Expenditure on participants of dealer/business conference for days which are on account of prior stay or overstay beyond the dates of such conference.

Clarification 9: Section 194R provides that if the benefit/prerequisite is in kind or partly in kind (and cash is not sufficient to meet TDS) then the person responsible for providing such benefit or perquisite is required to ensure that tax required to be deducted has been paid in respect of the benefit or perquisite, before releasing the benefit or perquisite. How can
such person be satisfied that the tax has been deposited?
• Benefits provider provides benefit in kind to a recipient and tax is required to be deducted under section 194R of the Act, the Benefit the provider is required to ensure that the tax required to be deducted has been paid by the recipient. Such recipients would pay tax in the form of advance tax.
• In Form 26Q he will need to show it as tax deducted on the benefit provided.

Clarification 10: Section 194R would come into effect from the I” July 2022. The second proviso to subsection (I) of section 194R of the Act provides that the provision of this section does not apply where the value or aggregate of the value of the benefit or perquisite provided or likely to be provided to a resident during the financial year does not exceed twenty
thousand rupees. It is not clear how this limit of twenty thousand is to be computed for the Financial Year 2022-23?
• Since, the threshold of Rs 20,000 is with respect to the financial year
• Calculation of value or aggregate of the value of the benefit or perquisite shall be counted from 1″ April 2022.
• However, The benefit or perquisite which has been provided on or before 30″ June 2022, would not be subjected to tax deduction under section 194R of the Act.

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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.