G.S.R. 438(E).––In  exercise  of  the  powers  conferred  by  clause  (iii)  of  Section  3  of  the  Government Securities Act, 2006 (38 of 2006), the Central Government hereby makes the Sovereign Gold Bond Scheme 2023-24

Who can hold these bonds-

The Gold Bonds issued under this Scheme may be held by a Trust, HUFs, Charitable Institution, University or by a person resident in India, being an individual, in his capacity as such individual, or on behalf of minor child, or jointly with any other individual

Minimum and maximum holding-

 The bonds will be issued in denominations of one gram of gold or multiples thereof. Provided that the minimum limit of subscription for the Bonds issued shall be of one gram and maximum limit of subscription per fiscal year shall be of four kg for individuals, four kg for Hindu Undivided Family (HUF) and 20 kg for trusts and similar entities notified by the Government from time to time

Nominal value: –

 The  nominal  value  of  Gold  Bonds  shall  be  in  Indian  Rupees  fixed  on  the  basis  of  simple  average  of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited, for the last 3 working days of the week preceding the subscription period.
The issue price of the Gold Bonds will be less than the nominal value by ₹50 per gram to those investors applying online and making the payment against the application through digital mode.

Interest

(i) The interest on the Gold Bonds shall commence from the date of issue and shall be paid at a fixed rate of 2.50 percent per annum on the nominal value of the bond. (ii)  The interest is  payable half-yearly and the last interest shall be payable along with the principal on maturity.

Redemption- (i) The Gold Bonds shall be repayable on the expiration of eight years from the date of the issue of the Bonds: www.taxmann.com

 

Loan against Bonds

  • The Gold  Bonds issued under this Scheme may be used as collateral security for availing any loan. Such loans could be granted by marking a lien on Gold Bonds appropriately.
  • The Loan to Value  ratio as applicable  to any ordinary  gold loan  mandated by the  Reserve  Bank of India shall also apply to the Bonds issued under this Scheme

Tax Treatment

The  interest received on the  Gold  Bond shall be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of these bonds to an individual is exempted.

Executive Summary

 

Income Tax

 

  • Expenses through International Credit card will comes into the specified limit of LRS and TCS is applicable on the same.
  • Changes proposed in Rule 11UA to calculate the FMV of shares and charged excess amount u/s 56(2)(viib).
  • Few investors/entities are excluded from the purview of Section 56(2)(viib).
  • Leave encashment limit increased to Rs.25,00,000 w.e.f. 01.04.2023.
  • CBDT releases the guidelines for Complete scrutiny for FY 2023-24.
  • India has signed DTAA with Chile.
Goods & Services Tax (GST) & Customs
  • GSTN added new facility to verify document reference number (RFN).
  • Extension time limit for filling GSTR-1 whose principal place of business in the State of Manipur.
  • GSTN issues advisory on Deferment of Implementation of Time Limit on Reporting Old e-Invoices
  • CBIC rolls out Automated Return Scrutiny Module for GST returns.
  • E-invoices limit is reduced to Rs.5Crore from Rs.10Crore w.e.f.01.08.2023.

Companies Act 2013/ Other Laws

  • Application for removal of Company’s name to be made to Registrar C-PACE.
  • MCA has notified Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023
  • MCA streamlines approvals for mergers vide Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023.
  • RBI withdraws Rs. 2000 notes from circulation; will continue to remain a legal tender
  • RBI mandates banks to maintain daily data on Rs. 2000 banknotes’ deposits/exchange in a prescribed format
  • SEBI tweaks ICDR norms; underwriting agreement now a pre-requisite for IPO filings
  • Clearing Corps in Commodity Derivatives can now align Core Settlement Guarantee Fund as per SEBI circulars

 

CBDT vide Press Release dated 19.05.2023 has clarify that the use of international credit cards for meeting his/her expenses by a person when he is abroad will come under the purview of LRS, earlier only Debit card was covered. Further, to avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards upto Rs. 7 lakhs per financial year will be excluded from the LRS limits and hence, will not attract any TCS.  Existing beneficial TCS treatment for education and health payments will also continue.

Instances have come to notice where the LRS payments are disproportionately high when compared to the disclosed incomes. Therefore, TCS rates are increased. Primary Impact only on investment in assets such as real estate, bonds, stocks outside India by HNI and tour travel packages or gifts to non-residents.

 

TCS rates with the changes brought about in Finance Act, 2023 are tabulated as under

 

  • CBDT vide Press Release dated 05.2023 has proposes changes to Rule 11UA in respect of ANGEL TAX and also proposes to notify Excluded Entities.

 

Proposed changes in Rule 11 UA :

  • Rule 11UA currently prescribes two valuation methods with respect to valuation of shares namely, Discounted Cash Flow (DCF) and Net Asset Value (NAV) method for resident investors. It is proposed to include 5 more valuation methods, available for non-resident investors, in addition to the DCF and NAV methods of valuation.

Further, where any consideration is received by a company for issue of shares , from any non-resident entity notified by the Central Govt , the price of the equity shares corresponding to such consideration may  be taken as the FMV of the equity shares for resident and non-resident investors subject to the following:

  • To the extent the consideration from such FMV does not exceed the aggregate consideration that is received from the notified entity and
  • The consideration has been received by the company from the notified entity within a period of ninety days of the date of issue of shares which are the subject matter of valuation.
  • On similar lines, price matching for resident and non-resident investors would be available with reference to investment by Venture Capital Funds or Specified Funds.
  • It is proposed that the valuation report by the Merchant Banker for the purposes of this rule would be acceptable, if it is of a date not more than ninety days prior to the date of issue of shares which are subject matter of valuation.
  • Further, to account for forex fluctuations, bidding processes and variations in other economic indicators, etc. which may affect the valuation of the unquoted equity shares during multiple rounds of investment, it is proposed to provide a safe harbor of 10 % variation in value.

The draft Rules on the above lines will be shared for public comments for 10 days, after which these will be notified.

  • CBDT vide CIRCULAR NO. 5 OF 2023, DATED 22-05-2023 has issued guidelines for the purposes of removal of difficulties in view of the New Section 194BA inserted by Finance Act 2023. As per new section mmandates a person, who is responsible for paying to any person any income by way of winnings from any online game during the financial year to deduct income-tax on the net winnings in the person’s user account. Tax is required to be deducted at the time of withdrawal as well as at the end of the financial year. Net winning is required to be computed in the manner as may be prescribed. The manner of computation of net winning has now been prescribed in Rule 133 of the Income-tax Rules, 1962, videnotification no. 28/2023, dated 22nd May, 2023. There are multiple FAQs are issued in this circular. Net winnings for the purposes of calculating tax required to be deducted under section 194BA shall be calculated as under

Net winnings = A-(B+C), where

A = Amount withdrawn from the user account;

B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during the financial year, till the time of such withdrawal; and

C = Opening balance of the user account at the beginning of the financial year

  • CBDT vide NOTIFICATION F.NO.225/66/2023/IT A-II, DATED 24-05-2023 has release the guidelines for Compulsory selection of return for complete scrutiny during FY 2023-24.
  • CBDT vide NOTIFICATION 29&30/2023, DATED 24-05-2023 has exempt the certain class of Non-resident investor from the ambit of Section 56(2)(viib). Finance Act 2023 has amended the provisions of Section 56(2)(viib) and as per the amendments Non-resident also comes into purview of Angel Tax. CBDT gives the clarity that few entities and also start-ups which fulfilles the conditions are not covered by the provision.
  • CBDT vide NOTIFICATION 31/2023, DATED 24-05-2023 has increased the leave encashment limit to Rs.25,00,000 from Rs.3,00,000 u/s 10(10AA) w.e.f. 01.04.2023.

 

  • CBDT vide NOTIFICATION No. 24/2023, DATED 03-05-2023 has notifies the Agreement and Protocol between the Government of the Republic of India and the Government of the Republic of Chile for the elimination of double taxation and the prevention of fiscal evasion and avoidance with respect to taxes on income, was signed at Chile on the 9th day of March, 2020.

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  • As per Notification No.10/2023 Dated 10/05/2023 CG on the recommendations of the Council, hereby makes the following further amendment in the notification No.13/2020 In the notification first paragraph with effect from the 1st day of August, 2023, for the words “ten crore rupees”, the words “five crore rupees” shall be substituted.

As per Notification No.11/2023 Dated 24/05/2023 CG on the recommendation of council make following amendment in the Notification NO 83/2020 In the said notification, after the third proviso, the following proviso shall be inserted, namely:-―Provided also that the time limit for furnishing the details of outward supplies in FORM GSTR-1of the said rules for the tax period April, 2023, for the registered persons required to furnish return under sub-section (1) of section 39 of the said Act whose principal place of business is in the State of Manipur, shall be extended till the thirty-first day of May, 2023..This notification shall be deemed to have come into force with effect from the 11thday of May, 2023.

 

  • GSTN added new facility to verify document reference number (RFN) mentioned on offline communication issued by state GST authority on 28/04/2023Under this feature, the State Tax office can generate a RFN for the physically generated correspondence sent to the taxpayer, which can be validated by the taxpayer (both pre-login and post-login). The facility to verify RFN of System-generated documents, once deployed, shall also be available in a seamless manner using the same link.
  • CBIC rolls out Automated Return Scrutiny Module for GST returns in ACESGST backend application for Central GST officers. This module will enable the officers to carry out scrutiny of GST returns of Centre Administered Taxpayers selected on the basis of data analytics and risks identified by the system In the module, discrepancies on account of risks associated with a return are displayed to the GST officers. Implementation of this Automated Return Scrutiny Module has commenced with the scrutiny of GST returns for FY 2019-20, and the requisite data for the purpose has already been made available on the GST officers’ dashboard.

GSTN issues advisory on Deferment of Implementation of Time Limit on Reporting Old e-Invoices that it has been decided by the competent authority to defer the imposition of time limit of 7 days on reporting old e-invoices on the e-invoice IRP portals for taxpayers with aggregate turnover greater than or equal to 100 crores by three months.  The next date of implementation will be shared by them.

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  • Application for removal of Company’s name to be made to Registrar C-PACE.

The Ministry of Corporate Affairs notified the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2023 to amend the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. The provisions will come into force on 1-5-2023.

Key Points:

  1. Rule 4 (1) relating to Application for removal of name of company has been revised which says that an application for removal of name of company under Section 248 (2) will now be made to the Registrar, Centre for Processing Accelerated Corporate Exit in Form No. STK-2 with a fee amounting to Rs. 10,000.

 

 

2. Rule 4 (3-A) relating to Application for removal of name of company has been inserted. The Registrar, Centre for Processing Accelerated Corporate Exit will be established under Section 396 (1) and this Registrar of Companies has the power of exercising functional jurisdiction of processing and disposal of applications made in Form No. STK-2 and all matters related to Section 248 having territorial jurisdiction all over India.

  1. Form No. STK- 2 relating to “Application by company to ROC for removing its name from register of companies” has been revised.

4. Form No. STK- 6 (Public Notice) has been revised.

  1. Form No. STK- 7 relating to “Notice of Striking Off and Dissolution” has been revised.
  • MCA tightens norms for closure of firms vide Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023

The Ministry of Corporate Affairs notified the Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023 to amend the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. The provisions came into force on 10-5-2023.

Key Points:

  1. Rule 4 relates to “Application for removal of name of company” which says that an application for removal of name of a company under Section 248(2) will be made to the Registrar, Centre for Processing Accelerated Corporate Exit in Form No. STK-2 along with fee of Rs. 10000.

 

  1. New Provisions have been inserted regarding the same:

 

  • The Company cannot file an application unless it has filed overdue financial statements and overdue annual returns up to the end of the financial year in which the company ceased to carry out its business operations.
  • Where the Registrar’s action has already been initiated against the Company, it can only file the application for removal of names, after filing pending financial statements and annual returns.
  • A Company will not be allowed to file an application for removal of names, once the Registrar has issued notice for publication.
  • MCA streamlines approvals for mergers vide Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023.

The Ministry of Corporate Affairs notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023 to amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

Key Points:

 

  1. Rule 25 has been modified in order to streamline approvals for mergers by way of deemed approvals. Rule 25 (5) now provides that if no objection/suggestion is received within a period of 30 days from the Registrar of Companies/ Official Liquidator, and if the Central Government (‘CG’) thinks that the scheme is in the public interest or in the interest of creditors, CG can issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12 within a period of 15 days after the expiry of said 30 days. If the CG does not issue a confirmation order within 60 days, it will be deemed that there is no objection, and a confirmation order will be issued.

 

  1. Rule 25 (6) provides that if the objections/suggestions are received within 30 days, the CG can take following actions:
  • A confirmation order will be issued within 30 days, if the objections/ suggestions are deemed unsustainable, and the CG thinks that the scheme is in the public interest or the interest of creditors.
  • In case CG thinks that the scheme is not in the public interest or the interest of creditors, CG can file an application stating the objections/ opinion to consider scheme under 232 of Companies Act, 2013 before the Tribunal within 60 days. If the Central Government does not issue a confirmation order or file an application.

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  • RBI withdraws Rs. 2000 notes from circulation; will continue to remain a legal tender

 

The Reserve Bank of India (RBI) on 19.05.2023 announced the withdrawal of the Rs 2,000 banknote from circulation with the public being “encouraged” to deposit or exchange the notes at bank branches until September 30, 2023. At the same time, the central bank maintained that these notes will enjoy legal tender status even beyond the September 30 deadline.

  • RBI mandates banks to maintain daily data on Rs. 2000 banknotes’ deposits/exchange in a prescribed format

In furtherance to the RBI’s direction on the withdrawal of Rs. 2,000 notes from circulation, the banks have been advised to provide appropriate infrastructure at the branches such as shaded waiting space, drinking water facilities, etc. considering the summer season.

Further, Banks shall have to maintain daily data on the deposit and exchange of Rs. 2000 banknotes in the prescribed format (specifying date, bank name, and amount deposited/exchanged) and submit the same as and when required.

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  • SEBI tweaks ICDR norms; underwriting agreement now a pre-requisite for IPO filings

 

The SEBI has notified amendment in SEBI (ICDR) Regulations, 2018. As per the amended norms, if the issuer making an IPO, desires to have the issue underwritten, it shall, prior to the filing of the prospectus, enter into an underwriting agreement with the merchant bankers or stock brokers, indicating the maximum number of specified securities they shall subscribe to, at a predetermined price which shall not be less than the issue price

  • Clearing Corps in Commodity Derivatives can now align Core Settlement Guarantee Fund as per SEBI circulars

Earlier, SEBI issued circulars prescribing norms relating to Core Settlement Guarantee Fund (SGF), Min. Reqd. Corpus of core SGF, etc. for Clearing Corporations (CCs) and Stock Exchanges. SEBI recently received representations to review the target corpus level & to harmonise the methodology for computation of core SGF corpus in Commodity Derivatives Segment. Now, after receiving representations, SEBI directed that the CCs can now align their core SGF in terms of earlier issued SEBI circulars.

 

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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 26th Apr till 25th May. 2023.

 

 

Executive Summary

Income Tax
  • Annual Finance Bill 2023 has been approved in Lok Sabha with few amendments.
  • Govt. has released Mobile APP for quick verification/update for AIS information Income tax exemption has been granted to IBBI.
Good & Services Tax (GST) & Customs
  • GSTN Issues advisory on e-invoice registration with private IRPs.
  • GSTN Issues advisory for taxpayer wishing to register as OPC.
  • GSTN Issues advisory for GTAs on opting for payment of tax under the forward charges mechanism.
  • HSN Code reporting in e-invoice on IRPs portal.
Companies Act 2013/ Other Laws
  • Govt. establishes C-PACE, to fasten the voluntarily winding up process
  • RBI signs MoU with Central Bank of UAE to promote innovation in financial products and services
  • Govt. fixes April 10, 2023 as the date for closure of residual transactions of banks for March 2023
  • Use of e-wallets for investing in Mutual Funds are to be fully compliant with KYC norms prescribed by RBI
  • SEBI issues simplified norms/procedural requirements for processing investor’s service requests by RTAs

Income Tax

CBDT vide Press Release dated Dated 22.03.2023: has issued AIS Mobile app to make user easier to give feedback for transaction reflected in AIS/TIS. Govt has issued clarification also that if taxpayer is disagree with the AIS/TIS information, he needs to submit the feedback and accordingly action will be taken by the Income tax dept. If any mismatch is there with the information and filed ITR then dept will issue notice and taxpayer need to comply the same.

  • CBDT vide Notification No.09/2023 dated 01.03.2023 grant tax exemption to Insolvency & Bankcruptcy Board of India(IBBI) on the following income:
    • Grants-in-aid received from Central Government
    • Fees received under Insolvency and Bankruptcy Code, 2016
    • Fines collected under Insolvency and Bankruptcy Code, 2016,
  • Major Changes as introduced & approved in Lok Sabha w.r.t. Finance Bill 2023:
    • Marginal relief to a resident individual opting new tax scheme: The Finance Bill (Lok Sabha) has substituted said proviso to Section 87A to allow a marginal rebate if the total income marginally exceeds Rs. 7,00,000. The marginal rebate under Section 87A shall be computed in the following steps:
      • Step 1: Calculate tax payable on total income before rebate under Section 87A
      • Step 2: Calculate the difference between total income and Rs. 7,00,000.
      • Step 3: Calculate the difference between Step 1 and Step 2.
      • Step 4: If the figure in Step 3 is positive, the difference will be the rebate allowed under Section 87A. However, if the figure is negative, then no rebate shall be allowed under Section 87A.
    • Expansion in Section 50AA: Section 50AA as introduced in Finance Bill that will cover the STCG on transfer of Market linked Debenture irrespective of the period of holding will now also cover the specified mutual funds as well. The “specified mutual fund” means a mutual fund where not more than 35% of its total proceeds is invested in the equity shares of domestic companies.
    • Changes in the tax rate of Royalty, FTS & Dividend u/s 115A: Royalty & Fees for Technical services which was currently taxable @ 10%, now been proposed to taxable @20% u/s 115A.
    • No higher TDS on winning from online games if the deductee is a non-filer of return or didn’t furnish PAN
    • Exemption from capital gains on transferring the interest in a JV by a Public sector company in exchange for shares in a foreign company [Section 47(xx) and Section 49(2AI)]
  • Exemption to be available to a “Sikkimese woman marrying a non-sikkimese” and an “Individual domiciled in Sikkim” [Section 10(26AAA)]: As per the Finance Bill(Lok Sabha), now proviso that restrict to claim the exemption is substituted and changes made in Section 10(26AAA) as below:
    • The proviso to Section 10(26AAA) has been omitted; and
    • The definition of ‘Sikkimese’ has been amended to include the followings:
      • Any other individual whose name does not appear in the Register of Sikkim Subjects but it is established that such individual was domiciled in Sikkim on or before 26-04-1975;
      • Any other individual who was not domiciled in Sikkim on or before 26-04-1975, but it is established beyond doubt that such individual’s father or husband or paternal grand-father or brother from the same father was domiciled in Sikkim on or before 01-04-1975.
  • Changes Proposed for IFSC: With respect to IFSC, Finance bill(Lok Sabha) proposes the following amendments:
    • No surcharge and cess on income earned by GIFT Category III from securities under section 115A(1)(a)
    • Provision for tax neutral reallocation of any investment vehicle in which ADIA is sole direct or indirect shareholder/ unitholder to GIFT City introduced; power to notify any other funds for tax neutral reallocation to GIFT City added (section 47(viiad);
    • Dividend distributions from IFSC unit to be taxable at 10% (as against 20%)
    • Interest income on borrowing by foreign company from long-term bond or rupee denominated bond listed on IFSC stock exchange taxable @ 9%.
  • Changes proposed in TCS: Following changes has been proposed in Finance bill(Lok Sabha) with regards to Tax Collected at Source(TCS):
    • Earlier TCS will be applicable when funds are remit out of India. The Finance Bill (Lok Sabha) has amended Section 206C(1G)(a) to omit the words “out of India” to expand the scope of the provision to the remittance made under LRS, even within India. Thus, where the remittance is made under LRS to the GIFT city, the new rates of TCS shall
    • The Finance Bill (Lok Sabha) has inserted a proviso to Section 206CC(1) and Section 206CCA(1) to provide that the rate of TCS under Section 206C shall not exceed 20% even if the collectee does not furnish his PAN or is a non-filer. These provisos have been inserted with effect from 01-07-2023
  • The Finance Bill (Lok Sabha) has inserted a new proviso after clause (b) to Section 80LA(1) to increase the amount of deduction available to the eligible assessees under Section 80LA(1) for the subsequent 5 years from 50% to 100%. It should be noted that there is no change in the period for which deduction is available or the quantum of deduction, and the total deduction can be claimed for a maximum period of 10 years.

Goods & Services Tax

  • GSTN Issues advisory dated 4 mar 2023 for launches e-invoice registration services with private IRPs. Clear Tax, Cygnet, E&Y and IRIS Business Ltd were empaneled by GSTN for providing these e-invoice registration services to all GST taxpayers of the country The taxpayers can now register their e-invoices using more than one IRP. This significantly increases the capacity and redundancy of the previous single e-invoice registration portal.
  • GSTN issues advisory dated 21 mar 2023 for the taxpayer who wants to be register as “One Person Company”. If Taxpayer wants to be register as one person, then he needs to select an option Other in ‘Part B’ of GST Registration Form ‘REG-01’and also mentioned “one person company” in the text field.
  • It is mandatory to report minimum six digits HSN code for the outward supply having AATO more than 5 crores in Previous FY. Now in the process of implementing the same at IRPs portal in collaboration with our IRP partners including NIC.
  • GSTN issues advisory dated 25 Feb 2023 for GTA’s on opting for payment of tax under forward charge mechanism. For such option it requires to submit Annexure V Form on the portal every year before commencement of financial year. GTA’s can opt this option for the financial year 2023-24 till 15 march 2023.
  • Ministry of finance issued clarification dated 14 march 2023, CGST Act 2017 does not restrict GST registration of management consultants, architects and other professionals operating from residential premises, due to Covid19 pandemic or otherwise.
  • Major Changes as introduced & approved in Lok Sabha w.r.t. Finance Bill 2023:
    • Levy of IGST and GST Compensation Cess on removal of imported goods to warehouse for further manufacturing/processing: The Finance Bill (Lok Sabha) has proposed to insert a new Section 65A under the Customs Act, 1961 which imposes IGST and GST Compensation Cess on the goods, which are moved to the warehouse for the purpose of carrying on any manufacturing process or other operations in the warehouse, at the time of removal of goods to such warehouse, instead of imposing it at the time of clearance of home consumption from the warehouse. Notably, no amendment is proposed in the existing provisions for the levy of customs duty, which will continue to be paid by the importer when the goods are cleared for home consumption from the bonded warehouse.
  • Amendment relating to GST Appellate Tribunal: The GST Appellate Tribunal (‘GSTAT’) is the forum of second appeals in GST law for filing the appeals against the orders passed by the First Appellate Authority or Revisional Authority.
    • After the proposed amendment, the jurisdiction, authority and power of GSTAT shall be exercised by the Principal Bench located at New Delhi will be constituted by the Government via notification and it will consist of the President, a Judicial member and one Technical members from both Centre and State.
    • The appeals, where the amount of tax/input tax credit/fine/fees/penalty does not exceed Rs. 50 Lakhs and does not involve any question of law, can be heard by a single member with the approval of President and subject to such conditions.
    • In all the other cases, the appeal shall be heard by one Judicial member and one Technical member. The existing provisions under the GST law, though not effective yet, provides the monetary limit of Rs. 5 lakhs for the above purpose.
    • As per the GST law, an appeal before GSTAT can be filed within 3 months from the date on which the order sought to be appealed is communicated. However, since GSTAT has not been constituted, the appeal in many cases could not be filed within 3 months. In this regard, the Government by way of issuing the Removal of Difficulties Order, 2019 prescribed the time limit for filing the appeal before GSTAT once the same is constituted.
  • Removing the requirement of compulsory registration where exemption is granted by the Government through notification: In the Finance Bill 2023, amendment is made in Section 23 by inserting a non – obstante clause. As per the new amendment, if the person or class of persons falls under the category as specified under Section 23 (2), the person shall not be liable to get registered even if Turnover increases the threshold limit or falls under Section 24.
  • Extension of time limit to apply for revocation of cancellation of registration from 30 days to 60 days: The Finance Bill (Lok Sabha) has proposed to increase the time limit for filing of return from 30 days to 60 days for enabling deemed withdrawal of best judgment assessment orders. It has also been proposed that where the return is not filed by the taxpayer within 60 days, the same can be done in another 60 days by paying additional late fees of Rs. 200 per day (e.Rs. 100 CGST + Rs. 100 IGST) for delay after 60 days of the said assessment order. If the person furnishes a ‘valid return’ within extended days, the assessment order will be deemed to have been withdrawn, but the person will still be liable to pay interest under section 50(1) or a late fee under section 47.
  • Place of supply in case of services of transportation of goods where location of supplier/recipient is outside India: The Finance Bill (Lok Sabha) has been proposed to omit the provision regarding place of supply of transportation of goods where the location of the supplier or the recipient is outside India. The location of the service recipient would be considered as the place of supply of services of transportation of goods where either the location of the supplier or the recipient is located outside India.
  • The proposal relating to changes in the GST compensation cess is as below:
    S No. Description of  supply Maximum rate at which GST compensation cess may be collected
    Existing Proposed
    1. Pan Masala 135% ad valorem 51% of retail sale price per unit
    2. Tobacco and manufactured tobacco substitutes, including tobacco  product Rs. 4170 per 1000 sticks or 290% ad valorem or a combination thereof, but not exceeding Rs. 4170 per 1000 sticks plus 290% ad valorem Rs. 4170 per 1000 sticks or 290% ad valorem or a  combination thereof, but not exceeding Rs. 4170    per 1000 sticks plus 290% ad valorem or 100% of retail sale price per unit
  • Changes in Customs Duty Rates relating to few items: The Finance Bill (Lok Sabha) provides some changes in the Customs duty rates, which are summarized below:
HSN Code Description of Goods Old Import      Duty New Import   Duty
90221410 X-ray generators and apparatus 10 % 15 %
90221420 Portable X-ray machine 10 % 15 %
90221490 Others 10 % 15 %
29335950 Bispyribac-sodium (ISO) 7.5 % 10 %

Companies Act, 2013

Govt. establishes C-PACE, to fasten the voluntarily winding up process

The Centre has taken the next big step towards accelerating the process for voluntary winding up of companies. The Corporate Affairs Ministry (MCA) has now established a dedicated unit — Centre for Processing Accelerated Corporate Exit (C-PACE) in IMT Manesar, Gurugram — as part of its overall efforts to speed up the voluntary winding up of companies from the currently required two years to less than 6 months. C-PACE will be located at the Indian Institute of Corporate Affairs (IICA) in Manesar.

RBI

  • RBI signs MoU with Central Bank of UAE to promote innovation in financial products and services – Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (CBUAE) have signed a Memorandum of Understanding (MoU) to enhance cooperation and jointly enable innovation in financial products and services. Under the MoU, which was signed on Wednesday in Abu Dhabi, the two central banks will collaborate on various emerging areas of FinTech, especially Central Bank Digital Currencies (CBDCs) and explore interoperability between the CBDCs of CBUAE and RBI.
  • Govt. fixes April 10, 2023 as the date for closure of residual transactions of banks for March 2023 – The Government of India has decided that the date of closure of residual transactions for the month of March 2023 be fixed as April 10, 2023. In view of the ensuing closing of Government accounts for the financial year 2022-23, receiving branches including those not situated locally, should adopt special arrangements such as courier service etc., for passing on challans/scrolls etc., to the Nodal/Focal Point branches so that all payments and collections made on behalf of Government towards the end of March are accounted for in the same financial year.

SEBI

  • Use of e-wallets for investing in Mutual Funds are to be fully compliant with KYC norms prescribed by RBI – E-wallets used for investing in mutual funds should be compliant with KYC norms prescribed by the Reserve Bank of India (RBI). In its circular, the regulator said that the provisions will be applicable with effect from May 1, 2023. The move was also part of the efforts to promote digital payments in the mutual fund industry and channelise household savings into the capital market.
  • SEBI issues simplified norms/procedural requirements for processing investor’s service requests by RTAs – As an on-going measure to enhance the ease of doing business for investors in the securities market, SEBI, vide Circular Nos. SEBI/HO/MIRSD/MIRSD_RTAMB/P/ CIR/2021/655 dated November 03, 2021 & SEBI/HO/MIRSD/MIRSD_RTAMB/P/ CIR/2021/687 dated December 14, 2021, had prescribed the common and simplified norms for processing investor’s service request by RTAs and norms for furnishing PAN, KYC details and Nomination. It shall be mandatory for all holders of physical securities in listed companies to furnish PAN, Nomination, Contact details, Bank A/c details and Specimen signature for their corresponding folio numbers.
MONTHLY COMPLIANCE CALENDAR

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 26th Feb till 25th Mar. 2023.

 

Requirement of having a Resident Director:
  • Section 149(3) of the Companies Act, 2013 provides that every Company shall have at least one director who has stayed in India for a total period of at least 182 days during the financial year.
  • In the case of a newly incorporated company, the requirement of Resident Director shall apply proportionately at the end of the financial year in which it is incorporated.

If you are Incorporating a new company or having an existing company that has all the Directors who are not Residents of India, you need to hire one Indian Resident Director.

Duties and Responsibilities of Resident Director in India
  • Resident Director will act as any other Director of the Company.
  • He will be fully responsible as any other Director of the Company,
  • Resident Director may not be involved in the operational control of the Company.
  • Resident Director is usually appointed to fulfill the statutory requirements.
  • Resident Director may participate in Board Meetings of the Company, wherever required.
  • The Resident Director like any other Director is required to attend at least one Board Meeting in a year.

We shall be happy to provide the services of the Resident Director from our team. In case of any clarifications or for deeper discussion, feel free to revert us at services@knmindia.com

Disclaimer: Information in this note is intended to provide only a general update on 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.

Download this as a PDF.

Executive Summary

Income Tax
  • Limit of Rs. 2 Lakh may not constitute an event or occasion for the purposes of 269ST(c) in respect of co-operative societies, a dealership/distributorship contract by itself.
  • In SFT reporting Interest income will be reported for all account/deposit holders where any interest exceeds zero per account in the financial year excluding Jan Dhan Accounts. A limit of Rs. 5000 is abolished.
  • The compliance due date is extended from 30th September 2021 to 31st March 2023 with respect to exemption u/s 54 to 54GB. However, the Due date of the ITR has lapsed.
Good & Services Tax (GST) & Customs
  • CBIC has clarified the supply of services by way of transportation of goods outside India
  • CBIC issues clarification regarding the time limit for the re-computation of GST.
  • CBIC issues clarification regarding treatment of statutory dues under GST law.
  • CBIC prescribes the manner of filing an application for a refund.
Companies Act 2013/ Other Laws
  • MCA has amended Companies (Management and Administration) Rules, 2014 by modifying the format of e form MGT-3 & MGT 14
  • MCA extended timelines for conducting Extra Ordinary General Meeting through Video Conference Mode
  • Sebi Introduces Information Database and Repository on Municipal Bonds
  • RBI extended the deadline for Safe Deposit Locker/Safe Custody Article Facility Provided By Banks
  • NFRA to introduce Annual Transparency Report by Audit Firms

Income Tax

  • Circular No. 25/2022 F.NO. 225/129/2022/ITA-II], DATED 30-12-2022: has clarified that in respect of co-operative societies, a dealership/distributorship contract by itself may not constitute an event or occasion for the purposes of 269ST(c) i.e. in respect of transactions relating to 1 event or occasion from a person. Receipt related to such a  dealership/distributorship contract by the co-operative society on any day in a year, which is within Rs. 2 lahks and complies with 269ST(a) and (b), may not be aggregated across multiple days for purposes of (c).
  • CBDT vide Notification No.01/2023 dated 05.01.2023 abolish the limit of Rs.5000 for Interest income to be reported in SFT filing. This information need to be furnished by Banking company, Co-operative bank, Post office etc. Now after amendment, the information is to be reported for all account/deposit holders where any interest exceeds zero per account in the financial year excluding Jan Dhan Accounts.
  • CBDT vide Circular No.01/2023 dated 06.01.2023 extended the time limit to make investment as per section 54 to 54GB which has original time limit is 30th September 2021. Now as per circular due date of compliance is 31st March 2023. However, it must be noted that ITR compliance due date is already lapse for FY 2020-21.

Goods & Services Tax

  • CBIC Notification No. 26/2022 Dated 26th December 2022 after the recommendation of 48th council meeting:

(a) Form GSTR-1 has been amended to change the manner of reporting details relating to supplies made through the e-commerce operator (‘ECO’);
(b)The procedure is prescribed for filing an application for refund by the unregistered buyers where the contract/ agreement for the supply of services, like construction of flat/house and long-term insurance policy, is canceled;
(c) Rule 37A is inserted to provide for the mechanism and time limit of reversal of ITC by the recipient where the supplier does not pay the tax to the Government. If supplier has not deposited the GST by 30th September then buyer has the time limit to reverse it by 30th November. After the same buyer has to reverse the same with interest.
(d) New Rule 88C and Form GST DRC-01B introduced for issuing intimation to the taxpayer for the differences between liability reported in Form GSTR-1 and Form GSTR-3B, where such difference exceeds a specified amount and/or percentage;
(e) Rule 37(1) is amended w.e.f. 01-10-2022 to provide for the reversal of input tax credit only proportionate to the amount not paid to the supplier vis-a-vis the value of the supply, including tax payable;
(f) Rule 108 and Rule 109 are amended to provide clarity on the requirement of submission of the certified copy of the order appealed against and the issuance of final acknowledgment by the appellate authority; and
(g) New Rule 109C and Form GST APL-01/03W are introduced to provide the facility for withdrawal of an application of appeal up to a certain specified stage.

  • CBIC vide Circular No.184/16/2022 has clarified the below in respect of supply of services by way of transportation of goods outside India (including by mail or courier).
    • Where both supplier and recipient of the aforesaid supply are located in India than the place of supply – Place of destination of such goods.
    • the aforesaid supply of service shall be treated as Inter-state supply (IGST would be chargeable).
    • the recipient would be eligible to avail ITC in respect of IGST charged by the supplier of such aforesaid services.
    • 96-Foreign Country the state code that needs to be mentioned by the supplier of aforesaid service while reporting the place of supply in Form GSTR-1.
  • Circular No. 185/17/2022-GST CBIC issues clarification regarding time limit for re-computation of GST liability by tax authorities, if charges of fraud, willful-misstatement or suppression of facts is not established against a taxpayer GST officer is required to issue the order of re-computation of GST liability within 2 years from the date of communication of order of appellate authority / court u/s 75. Further, in case where the notice u/s 74 was issued beyond the period of 2 years and 9 months as mentioned in (c) above, the entire proceedings will have to be dropped, being hit by the time limitation u/s 73
  • Circular No. 187/19/2022-GST Since the IBC proceedings also resolve any outstanding government debts against the corporate debtor under the CGST Act or other applicable legislation, they appear to fall under the definition of “other processes” in section 84 of the CGST Act.
    The Commissioner of GST shall issue an intimation in Form GST DRC-25 reducing the amount of statutory dues payable by the corporate debtor to the Government under the CGST Act or under existing laws when a confirmed demand for recovery has been issued by the tax authorities for which a summary has been issued in Form GST DRC-07/DRC 07 against the corporate debtor and where the proceedings have been finalized against the corporate debtor under IBC.
  • Circular No. 188/20/2022 -GST CBIC prescribes manner of filing application for refund by unregistered buyers in case of cancellation of agreement for supply of services
    • The unregistered person shall obtain a temporary registration on the common portal using his Permanent Account Number (PAN). While doing so, the unregistered person shall select the same state/UT where his/her supplier
    • The application for refund shall be filed in FORM GST RFD-01 on the common portal under the category ‘Refund for unregistered person’. The applicant shall upload statement 8 (in pdf format) and all the requisite documents as per the provisions of sub-rule (2) of rule 89 of the CGST Rules
    • The acknowledgment / reference no. (ARN) shall be generated which can be used to track the status of the application. The application can be filed within 2 years from the date of issue of letter of cancellation by the supplier.
  • Recently, a functionality of “Automated Drop Proceedings” of GSTINs suspended due to non-filing of returns has been implemented on the GST Portal. This functionality is available for the taxpayers who have filed their pending returns i. e. 6 monthly or 2 Quarterly returns.
    • If such taxpayers have filed all their pending returns, the system will automatically drop the proceedings and revoke suspension.
    • If the status of the GSTIN does not automatically turn ‘ACTIVE’, then taxpayers are advised to revoke the suspension once the due returns have been filed, by clicking on ‘Initiate Drop Proceeding’ for which navigation

Companies Act, 2013

  • MCA has amended Companies (Management and Administration) Rules, 2014 by modifying the format of e form MGT-3 & MGT 14 – MCA vide notification dated 21-1-2023 has amended Companies (Management and Administration) Rules, 2014 by modifying the format of e form MGT-3 & MGT 14 thereby substituting the old e forms MGT-3 & MGT -14 with the new e forms MGT-3 & MGT-14 respectively.
  • MCA extended timelines for conducting Extra Ordinary General Meeting through Video Conference Mode – MCA has clarified vide general circular no. 11/2022 dated December 28, 2022, that the companies can conduct their extraordinary general meetings through video conference or other audio visual means or transact items through postal ballot up to September 30, 2023 in accordance with the framework provided in the general circular no.14/2020 dated April 8, 2020 and general circular no. 03/2022 dated May 5, 2022. All other requirements provided in the aforesaid circulars shall remain unchanged.

RBI

  • RBI extended the deadline for Safe Deposit Locker/Safe Custody Article Facility Provided By Banks
    RBI vide its circular dated January 23, 2023, has extended deadline for Safe Deposit Locker/Safe Custody Article Facility to December 31, 2023. Banks were required to renew their locker agreements with existing locker customers by January 1, 2023. However, it has come to the notice of the Reserve Bank that large number of customers are yet to execute the revised agreement and are facing difficulties in doing the same. In many cases, the banks are yet to inform the customers about the need for renewal of agreements before January 1, 2023. Further, there is a need for revision in the Model Agreement drafted by the Indian Banks’ Association (IBA) to fully comply with the revised instructions. Considering the above aspects, the deadline for banks is being extended in a phased manner to December 31, 2023.
  • NFRA to introduce Annual Transparency Report by Audit Firms
    The National Financial Reporting Authority (NFRA) has published draft requirements regarding the preparation and publication of the Annual Transparency Report (ATR) by auditors/audit firms as a step toward improving the transparency about management and governance of audit firms and their internal policy framework to ensure high quality audits and prevent conflict of interest by maintaining independence.

SEBI

SEBI introduces Information Database and Repository on Municipal Bonds
SEBI vide its press release no. 1/2023 dated 22/01/2023 announced as a part of its initiative to develop Bond markets, an outreach programme on Municipal Bonds and Municipal Finance was organized on January 20 and 21, 2023 at New Delhi to provide a common platform for stakeholders to discuss the concerns of the issuers of Municipal Debt Securities, the requirements of investors, the extant regulatory framework and to recommend measures to increase awareness of and improve traction in the market for Municipal Debt Securities.

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

 

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 26th Dec till 25th Jan. 2023.

Download the pdf.

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

MONTHLY COMPLIANCE CALENDAR

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.

Download the pdf.

Executive Summary

Income Tax
  • Procedure of PAN application & allotment through Simplified Proforma for incorporating Limited Liability Partnerships (LLPs) electronically (Form: FiLLiP) of MCA.
  • Specific documentation needs to be provided to avail the Covid-19 tax exemption
  • Form 67 can be filed upto the end of the relevant Assessment year. In case of updated return it can be filed upto the date of filing
  • ITR need to be verified within 30 days instead of 120 days
Goods & Services Tax (GST) & Customs
  • Turnover limit for generating E-invoice for B2B supply of goods and services or both or for exports is decreased to exceeding 10 crores from 20 crores
  • GSTN has enabled Form GSTR-9 (Annual Return) and GSTR-9C (Self- Certified Reconciliation Statement for FY 2021-22 on GST portal
  • Single click Nil filing of GSTR-1 has been introduced on the GSTN portal to improve the user experience and performance of GSTR-1/IFF filing
Companies Act 2013/ Other Laws
  • MCA has upgraded the present version of the portal from Version 2 to Version 3.
  • MCA has issued the new rules for registration of company office.
  • MCA has notified the manner in which the books of accounts are kept in electronic mode.
  • SEBI has notified the definition for Related Party.
  • RBI has published the rules which simplifying the existing framework for overseas investment and has aligned with the current business and economic dynamic

Income Tax

  • CBDT vide Notification No. 4/2022, dated 26/07/2022, specified that to ease to the newly incorporating LLPs can apply PAN through FilliP form instead of filing a separate PAN form.
  • CBDT vide Notification No. 5/2022, dated 29/07/2022, notified the new rules of ITR verification. As per the new rules ITR needs tobe verified within 30days of ITR filing. As this notification is effective from 01.08.2022, therefore ITR filed before this date old rule of 120 days will be applicable.
  • CBDT vide Notification No. 90/2022, dated 05/08/2022, notified that employees needs to submit covid-19 related documents to themself & of their family to avail the benefits of tax exemption. This notification is applicable for AY 2020-21 & 2021-22.
  • CBDT vide Notification No. 94/2022, dated 10/08/2022, inserted the Rule 17AA in which specified books of accounts/documents needs to maintained by the every entity registered u/s 10(23C) & 12A(1)(b).
  • CBDT vide Notification No. 98/2022, dated 17/08/2022, inserted the Rule 40G to implemented the provision as inserted by the Finance Act 2022 in section 239A. As per section 239A if tax is bear by the tax payer and claims that tax is not payable within 30day of such payment then refund of such tax can be claimed by filing Form 29D alongwith relevant documents.
  • CBDT vide Notification No. 99/2022, dated 17/08/2022, clarify that provision of section 206(1G) is not applicable on Non-resident doesn’t have PE in India.
  • CBDT vide Notification No. 100/2022, dated 18/08/2022, amended the rule 128(9) that now Form 67 can be submitted on or before the end of the relevant assessment year in which related income is offered to tax & ITR is filed. Further if Updated Return filed (U/s 139(8A)) then such Form 67 need to be filed before furnishing of such ITR.

Goods & Services Tax

  • CBIC vide Notification no. 17/2022-Central Tax dated August 01, 2022, the turnover limit for generating E-invoice for B2B supply of goods and services or both or for exports is decreased from 20 crores from 10 crores from October 01, 2022 onwards.
  • CBIC vide Circular no. 179/11/2022-GST dated August 03, 2022 notifies clarification regarding GST rates and classification goods based on the recommendation of GST council as below:
    • Electric vehicles whether or not fitted with a battery pack classified under HSN 8703 and attracts GST rate of 5%.
    • Concessional rate of 5% on stones covered in S.No. 123 minor polished stone. Napa Stone is a variety of dimensional limestone, which is a brittle stone and cannot be subject to extensive mirror polishing and do not qualify as mirror polished stone.
    • All forms of fresh, dried and sliced mangoes including mango pulp attracts GST at 12% rate.
    • Supply of treated sewage water, falling under heading 2201, is exempt under GST.
    • The Nicotine Polacrilex gum which is commonly applied orally and is intended to assist tobacco use cessation is appropriately classifiable with applicable GST rate of 18%.
    • The condition of 90 per cent. or more fly ash content applied only to Fly Ash Aggregates and not to fly ash bricks and fly ash blocks.
    • By-products of milling of Dal/ Pulses such as Chilka, Khanda and Churi attracts GST at 5% rate.

 

  • CBIC vide Circular no. 177/09/2022-TRU dated August 03, 2022 provides clarification regarding GST rates and exemptions on certain services on the recommendation of GST council as below:
  1. Applicability of GST rates on supply of ice-cream by ice-cream parlors during the period from 01.07.2017 to 05.10.2021
  2. Applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions
  3. Whether storage or warehousing of cotton in baled or ginned form is exempted services by way of storage and warehousing of raw vegetable fibres such as cotton before 18.07.2022
  4. Whether exemption covers supply of services associated with transit cargo both to and from Nepal and Bhutan
  5. Applicability of GST on sanitation and conservancy services supplied to Army and other Central and State Government departments;
  6. Whether the activity of selling of space for advertisement in souvenirs is eligible for concessional rate of 5%
  7. Taxability and applicable rate of GST on transport of minerals from mining pit head to railway siding, beneficiation plant etc., by vehicles deployed with driver for a specific duration of time
  8. Whether location charges or preferential location charges (PLC) collected in addition to the lease premium for long term lease of land constitute part of the lease premium or upfront amount charged for long term lease of land and are eligible for the same tax treatment
  9. Applicability of GST on payment of honorarium to the Guest Anchors
  10. Whether the additional toll fees collected in the form of higher toll charges from vehicles not having fastag is exempt from GST
  11. Applicability of GST on services in the form of Assisted Reproductive Technology (ART)/ In vitro fertilization (IVF)
  12. Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST
  13. Situations in which corporate recipients are liable to pay GST on renting of motor vehicles designed to carry passengers
  14. Whether hiring of vehicles by firms for transportation of their employees to and from work is exempt
  15. Whether supply of service of construction, supply, installation and commissioning of dairy plant on turn-key basis constitutes a composite supply of works contract service and is eligible for concessional rate of GST prior to 18.07.2022;
  16. Applicability of GST on tickets of private ferry used for passenger transportation.

 

  • CBIC vide Circular no. 178/10/2022-GST dated August 03, 2022 clarifies issues regarding Compensation and penalty arising out of breach of contract, Cancellation charges or other provisions of law.
  1. Cheque dishonor fine / penalty is not a consideration for any service, hence not taxable under GST
  2. Penalty imposed for violation of laws are not consideration for supply received and are not taxable under GST.
  3. Any amount recovered by the employer under Notice pay recovery are not taxable under GST.
  4. GST is applicable on the amount collected on account of interest and late payment surcharge or fine/penalty and taxable considering the naturally bundled with the main supply.
  5. Services such as travel and tour constitute a bundle of services which starts with booking of the ticket for travel and lasts at least till exit of the passenger from the destination terminal. The facilitation service of allowing cancellation against payment of cancellation charges is also a natural part of this bundle. Therefore, such amounts should be considered as consideration for tolerating the act of late payment and hence taxable under GST.
  6. CBIC vide Notification no. 25/2022-GST dated August 18, 2022 Seeks to impose provisional anti-dumping duty on imports of Ursodeoxycholic Acid (UDCA) originating in or exported from China PR and Korea RP for a period of six months.
  7. CBIC vide Notification no. 24/2022-GST dated August 18, 2022 seeks to impose anti-dumping duty on Opal Glassware from UAE & China PR for a period of 5 years.
  8. Introducing Single Click Nil Filing of GSTR-1: Single click Nil filing of GSTR-1 has been introduced on the GSTN portal to improve the user experience and performance of GSTR-1/IFF filing. Taxpayers can now file NIL GSTR-1 return by simply ticking the checkbox File NIL GSTR-1 available at GSTR-1 dashboard.
  9. GSTN has enabled Form GSTR-9 (Annual Return) and GSTR-9C (Self- Certified Reconciliation Statement for FY 2021-22 on GST portal.

Companies Act, 2013

To further amend the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, which shall come into force on the date of their publication in the Official Gazette i.e. 24-08-2022.  Through this amendment, MCA has revised Form No. STK-1, Form No. STK-5 and Form No. STK-5A to capture the declaration that the company is not carrying on any business or operations, as revealed after the physical verification, as carried out by the Registrar of companies under the provisions of Section 12(9) of the Companies Act, 2013.

These forms will be launched on August 31, 2022 at 12:00 AM. Following forms will be rolled out in this phase: DIR3-KYC Web, DIR3-KYC Eform, DPT-3, DPT-4, CHG-1, CHG-4, CHG-6, CHG-8 & CHG-9. To facilitate implementation of these forms in the V3 MCA21 portal, stakeholders are advised to note that the Company e-Filings on the V2 portal will be disabled from 15th Aug 2022 at 12:00 AM for the above 9 forms. All stakeholders are advised to ensure that there are no SRNs in pending payment and Resubmission status. Further, offline payments for the above 9 forms in V2 using the Pay later option would be stopped from August 07, 2022 at 12:00 AM. You are requested to make payments for these forms in V2 through online mode (Credit/Debit Card and Net Banking).

The Through this amendment, MCA has modified the manner in which the books of accounts are kept in electronic mode. The amendment is brought under Rule, 3 which deals with the manner of books of accounts to be kept in electronic mode in which the books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India, at all times so as to be usable for subsequent reference. Under sub-rule 5, there shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable unless permitted by law. Provided that the back-up of the books of account and other books and papers of the company is maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a daily basis. Further, the company shall intimate to the Registrar on an annual basis at the time of filing of financial statement, the information about the service provider who maintains the books of accounts and other documents in electric mode.

 

  • MCA has notified the companies (incorporation) third amendment rules, 2022 to amend the companies (incorporation) rules, 2014, which shall come into force from the date of publication in the official gazette i.e 18-08-2022.

 

In the Companies (Incorporation) Rules, 2014, Rule 25B relating to Physical verification of the Registered Office of the company has been inserted. The Rule provides that If Registrar has a reasonable cause to believe that the Company is not carrying on any business or operations pursuant to section 12(9) of the Companies Act, 2013, the Registrar may carry out Physical verification of the Registered Office. The physical verification of the said registered office should be done in presence of two independent witnesses of the locality in which the said registered office is situated and may also seek the assistance of the local Police for such verification if required. Further, the Registrar shall carry the documents as filed with the MCA while physical verification and shall cross-check with the documents filed by the Company. The Registrar shall take a photograph of the registered office while performing physical verification. The report of such verification shall be prepared and relevant attachments shall be attached. Where the registrar is not getting any reply from the Company on the notices sent by it, the Registrar shall send a notice to the Company and its directors of intention to remove the name of the Company from the register of companies within 30 days from the notice.

 

 

MCA21-version 3 is a technology-driven forward-looking project, envisioned to strengthen enforcement, promote Ease of Doing Business and enhance user experience. MCA21 version-3.0 rollout has been planned in phases to ensure minimum disruption in regulatory filings. To start with 9 (Nine) company forms (Form CHG-1, Form CHG-4, Form CHG-6, Form CHG-8, Form CHG-9, Form DIR-3 KYC, Form DIR-3 KYC WEB, Form DPT-3 and Form DPT-4) has been scheduled to go-live from September 01, 2022. The remaining company forms and other modules like e-Adjudication, and Compliance Management System are scheduled to be fully deployed within this Calendar Year. In view of the upcoming launch of 09 Company forms in version-3, LLP filings on the MCA21 V-3 portal will not be available from 27th Aug (00:00 AM) to 28th Aug (23:59hrs). However, the MCA21 V-2 Portal for company filings will remain available.

 

 

To further amend the Companies (Appointment and Qualification of Directors) Rules, 2014. The amended Rules shall come into force on the date of their publication in the Official Gazette i.e. 29-08-2022. Keeping in mind the launch of MCA V3 for Companies Act Forms, MCA has released the amended version of the eForms DIR-3-KYC and web-form DIR-3-KYC-WEB and the same have been substituted in place of the old forms. It is clarified that in the case of Indian nationals, the Income-tax Permanent Account Number (Income-tax PAN) is mandatory in all cases even if there is no change in Income-tax PAN. In such cases, director details should be as per Income-tax PAN. In case the details as per Income-tax PAN are incorrect, the director/designated partner is advised to first correct the details in Income-tax PAN. The new forms would be made available from 01-09-2022 on the MCA portal.

Other Laws

SEBI

 

 

As per the new guidelines, AIFs/VCFs shall file an application to SEBI for allocation of overseas investment limit in the notified format and they shall invest in an overseas investee company, which is incorporated in a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding or a signatory to the bilateral Memorandum of Understanding with SEBI. AIFs/VCFs shall not invest in an overseas investee company, which is incorporated in a country identified in the public statement of the Financial Action Task Force (FATF) as a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address the deficiencies. Further, if an AIF/VCF liquidates an investment made in an overseas investee company previously, the sale proceeds received from such liquidation to the extent of investment made in the said overseas investee company shall be available to all AIFs/VCFs (including the selling AIF/VCF) for reinvestment. Furthermore, the AIFs/VCFs shall furnish the sale/divestment details of the overseas investments to SEBI in the format given in Annexure B within 3 working days of the divestment, for updating the overall limit available for overseas investment by AIFs/VCFs. All the overseas investments sold/divested by AIFs/VCFs to date shall also be reported to SEBI in the format given in Annexure B within 30 days from the date of this circular.

 

 

Through this amendment, the definition for the term “related party “under section 2(1)(PA) has been notified which means a director, partner, or his relative; key managerial personnel or his relative; a firm, in which a director, partner, manager or his relative is a partner; a private company in which a director, partner or manager or his relative is a member or director; a public company in which a director, partner or manager is a director or holds along with his relatives, more than two percent. of its paid-up share capital; anybody corporate whose board of directors, managing director or manager is accustomed to acting in accordance with the advice, directions or instructions of a director, partner or manager; a related party as defined under the applicable accounting standards; such other person as may be specified by the Board. Provided that, any person or entity forming a part of the promoter or promoter group of the listed entity; any person or any entity, holding equity shares: (i) of twenty percent or more; or (ii) of ten percent or more, with effect from April 1, 2023; in the listed entity either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at any time, during the immediately preceding financial year; shall be deemed to be a related party. Further, the portfolio manager shall ensure compliance with the prudential limits on investments as may be specified by the Board. The prudential limits shall be applicable at the client level at the time of making investments by the portfolio managers. The portfolio manager shall not be allowed to invest clients’ funds in unrated securities of their related parties or their associates.

 

 

For the entities against whom proceedings have been initiated and are pending before any forum or authority, viz. Courts/SAT, Adjudicating Officer, and Recovery Officer (provided an appeal has been filed and the same is pending before the SAT/Court). The terms and conditions along with the FAQ of the Scheme, 2022 are also made available on the respective websites of SEBI and BSE on August 22, 2022. The Scheme shall commence on August 22, 2022 and end on November 21, 2022 (both days inclusive) or such other date as approved by the Competent Authority. The Scheme would be applicable in respect of the entities that have executed reversal trades in the illiquid stock options segment of BSE between April 1, 2014 and September 30, 2015 and against whom proceedings have been initiated and are pending before any forum or authority, viz. Courts/ SAT, Adjudicating Officer and Recovery Officer (provided an appeal has been filed and the same is pending before the SAT/Court); Entities against whom orders have been passed levying penalty that has not been paid and against whom recovery proceedings have been initiated, may be eligible for the scheme only if an appeal is filed and the same is pending before the Courts/ SAT. An entity desirous of availing of settlement under the Scheme would be required to submit a settlement application along with an application registration fee of Rs. 25,000/- + GST @18% in case of body corporates and Rs. 15,000/- + GST @18% in case of individuals in the specified format, available on the respective websites of SEBI and BSE

 

 

The enhanced norms shall be applicable to credit ratings of securities that are listed, or proposed to be listed, on a recognized stock exchange, and other credit ratings that are required under various SEBI Regulations or circulars thereunder. In order to standardize the methodology of computation and disclosure of a ‘sharp rating action’, it is clarified that CRAs shall compare two consecutive rating actions. Therefore, a CRA shall disclose a sharp rating action, if the rating change between two consecutive rating actions is more than or equal to 3 notches downward. In other words, if the difference in credit rating between two consecutive press releases is more than or equal to 3 notches downward, the same has to be included in the disclosure on sharp rating actions. In addition to the current disclosures of sharp rating actions excluding noncooperative issuers, CRAs shall also separately disclose sharp rating actions including such actions on non-cooperative issuers. Further, CRAs shall follow a uniform practice of three consecutive months of non-submission of No-default Statement (NDS) (or inability to validate timely debt servicing through other sources) as a ground for considering migrating the ratings to INC and shall tag such ratings as INC within a period of 7 days of three consecutive months of non-submission of NDS. The CRA in its judgment may migrate a rating to the INC category before the expiry of three consecutive months of non-receipt of NDS.

 

 

 

Under the new guidelines, the REIT/InvITS shall make an application for listing of the units to the stock exchange(s) and the units shall be listed within two working days from the date of allotment. Provided that where the REIT/InvIT fails to list the units within the specified time, the monies received shall be refunded through verifiable means within four working days from the date of the allotment, and if any such money is not repaid within such time after the issuer becomes liable to repay it, the REIT.InvIT, the manager of the REIT/InvIT and its director or partner who is an officer in default shall, on and from the expiry of the fourth working day, be jointly and severally liable to repay that money with interest at the rate of fifteen percent per annum. Further, the Preferential issue of units shall not be made to any person who has sold or transferred any units of the issuer during the 90 trading days preceding the relevant date. Further, where any person belonging to the sponsor(s) or Sponsor group(s) has sold/transferred their units of the issuer during the 90 days preceding the relevant date, all sponsors and members of sponsor group(s) shall be ineligible for allotment of units on a preferential basis. Provided that this restriction on preferential issue of units shall not apply to a sponsor(s) or member of the sponsor group, in case any asset is being acquired by the REIT/InvIT from that sponsor(s) and/or member of sponsor group(s), and the preferential issue of units is being made to that sponsor and/or member of the sponsor group, as full consideration for the acquisition of the such asset.

 

RBI

 

 

The recommendations including directions relating to All loan disbursals and repayments are required to be executed only between the bank accounts of the borrower and the RE without any pass-through/ pool account of the LSP or any third party; Any fees, charges, etc., payable to LSPs in the credit intermediation process shall be paid directly by RE and not by the borrower; A standardized Key Fact Statement (KFS) must be provided to the borrower before executing the loan contract; All-inclusive cost of digital loans in the form of Annual Percentage Rate (APR)6 is required to be disclosed to the borrowers. APR shall also form part of KFS; Automatic increase in credit limit without explicit consent of borrower is prohibited.; A cooling-off/ look-up period during which the borrowers can exit digital loans by paying the principal and the proportionate APR without any penalty shall be provided as part of the loan contract; REs shall ensure that they and the LSPs engaged by them shall have a suitable nodal grievance redressal officer to deal with FinTech/ digital lending related complaints. Such grievance redressal officers shall also deal with complaints against their respective DLAs. The details of the Grievance redressal officer shall be prominently indicated on the website of the RE, its LSPs and on DLAs, as applicable. Further, as per extant RBI guidelines, if any complaint lodged by the borrower is not resolved by the RE within the stipulated period (currently 30 days), he/she can lodge a complaint under the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS)7.

 

 

RBI has simplified the existing framework for overseas investment and has aligned with the current business and economic dynamics. Clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment related transactions that were earlier under the approval route are now under the automatic route, significantly enhancing “Ease of Doing Business”. As per the amended Regulation, the Indian entity may lend or invest in any debt instrument issued by a foreign entity or extend the non-fund-based commitment to or on behalf of a foreign entity including overseas step-down subsidiaries of such Indian entity subject to the following conditions within the financial commitment limit as prescribed in the Foreign Exchange Management (Overseas Investment) Rules, 2022. An Indian entity may lend or invest in any debt instruments issued by a foreign entity subject to the condition that such loans are duly backed by a loan agreement where the rate of interest shall be charged on an arm’s length basis. It is clarified that for the purpose of this regulation, the expression “arm’s length” means a transaction between two related parties that is conducted as if they were unrelated so that there is no conflict of interest. Further, where a person resident in India acquires equity capital by way of subscription to an issue or by way of purchase from a person resident outside India or where a person resident outside India acquires equity capital by way of purchase from a person resident in India, and where such equity capital is reckoned as ODI, the payment of the amount of consideration for the equity capital acquired may be deferred for such definite period from the date of the agreement as provided in such agreement subject to prescribed terms and conditions.

 

 

The Foreign Exchange Management (Overseas Investment) Rules shall apply to any investment made outside India by a financial institution in an IFSC or acquisition or transfer of any investment outside India made out of Resident Foreign Currency Account; or out of foreign currency resources held outside India by a person who is employed in India for a specific duration irrespective of length thereof or for a specific job or assignment, duration of which does not exceed three years; or in accordance with sub-section (4) of section 6 of the Act. Any investment or financial commitment outside India made in accordance with the Act or the rules or regulations made thereunder and held as on the date of publication of these rules in the Official Gazette, shall be deemed to have been made under these rules and the Foreign Exchange Management (Overseas Investment) Regulations, 2022. Further, any person resident in India who has an account appearing as a non-performing asset; or is classified as a willful defaulter by any bank; or is under investigation by a financial service regulator or by investigative agencies in India, namely, the Central Bureau of Investigation or Directorate of Enforcement or Serious Frauds Investigation Office, shall, before making any financial commitment or undertaking disinvestment under these rules or the Foreign Exchange Management (Overseas Investment) Regulations, 2022, obtain a No Objection Certificate from the lender bank or regulatory body or investigative agency by making an application in writing to such bank or regulatory body or investigative agency concerned. The No Objection Certificate issued shall be addressed by the lender bank or regulatory body or investigative agency concerned to the designated AD bank with an endorsement to the applicant. An Indian entity may make ODI by way of investment in equity capital for the purpose of undertaking bonafide business activity in the manner and subject to the limits and conditions as notified under these rules.

View Monthly Compliance Calendar

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 25.07.2022 till 25.08.2022

 

According to section 12(9) of Chapter II- Incorporation of Company and Matters Incidental Thereto, If the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may cause a physical verification of the registered office of the company in such manner as may be prescribed and if any default is found to be made in complying with the requirements of subsection (1), he may without prejudice to the provisions of sub-section (8), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII of the Companies Act, 2013.

In reference to the above provision, the Ministry of Corporate Affairs has inserted Rule 25B through its notification dated 18.08.2022 in the Companies (Incorporation) Rules, 2014.

25B. Physical Verification Of The Registrar Office Of The Company – By ROC

ROC has to prepare a Physical Verification Report of the Registered Office of the company in the given format.

Report to be filed by ROC:
  1. Name and CIN of the Company.

  2. Latest address of the registered office of the company as per MCA records.

  3. Date of authorization letter issued by the ROC

  4. Name of the ROC

  5. Date and time for the physical verification of the Registered office

  6. Location details along with landmark

  7. Details of the person available, if any at the time of visit-

  8. Remarks if any:-

  9. Documents attached:-

(i) Copy of Agreement/ownership/rent agreement/NOC of the Registered Office of the company from owner/tenant/lessor.

(ii) Photograph of the registered office.

(iii) Self-attested ID card of the person available, if any.

Where the registered office of the company is found to be not capable of receiving and acknowledging all communications and notices, the Registrar shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of relevant documents, if any, within a period of thirty days from the date of the notice before taking further actions in accordance with the provisions of section 248 of the Act.”.

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

  • New Form 26QF inserted i.e. Quarterly statement of tax deposited in relation to transfer of virtual digital asset u/s 194S to be furnished by an exchange as an alternative to tax deducted by buyer.
  • Few exclusions were made from the definition of virtual digital assets.
  • New Form 8A inserted for application u/s 158AB to defer filing of appeal before the Appellate Tribunal or the jurisdictional High Court.
  • The procedure of PAN application & allotment through Simplified Proforma for incorporating Limited Liability Partnerships (LLPs) electronically (Form: FiLLiP) of MCA.

Goods & Services Tax (GST) & Customs

  • Clarification on various issues relating to applicability of demand and penalty provisions under the CGST Act, 2017 in respect of transactions involving fake invoices.
  • Mandatory furnishing of correct and proper information of inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORM GSTR-3B and statement in FORM GSTR-1.
  • Exemption from filing annual return of the year to the registered person whose aggregate turnover in the financial year 2021-22 is up to two crore rupees.

Companies Act 2013/ Other Laws.

  • Amendment made in Corporate Social Responsibility (“CSR”) Rules.
  • NSE has notified a new module for filing of information required under Regulation 46 and 62 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on NEAPS.
  • SEBI has issued a Circular to make an amendment to Investor Grievance Redressal Mechanism regarding the Online Web-Based Complaints Redressal System.
  • SEBI has issued a circular to notify that all chargers payable to SEBI shall be subjected to GST at the rate of 18% with effect from July 18, 2022.
  • Applicability of GST on services provided by FSSAI.

Income Tax

Monthly News & Updates July Month

  • CBDT vide Notification No. 73/2022, dated 30/06/2022, inserted a proviso under rule 31A, where the exchange has agreed to pay tax in relation to a transaction of transfer of a virtual digital asset, owned by it as an alternative to the tax required to be deducted by the buyer of such asset u/s 194S, the Exchange shall deliver or cause to be delivered, a quarterly statement of such transactions in Form No. 26QF to the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) or the person authorized by the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems).

“Exchange” means a person that operates an application or platform for transferring virtual digital assets, which matches buy and sell trades and executes the same on their application or platform.

  • CBDT vide Notification No. 74/2022, dated 30/06/2022, few exclusions made from the definition of virtual digital asset:
    1. A gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;
    2. Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;
    3. Subscription to websites or platforms or applications.

  • CBDT vide Notification No. 83/2022, dated 12/07/2022, Form 8A inserted for application u/s 158AB to defer filing of appeal before the Appellate Tribunal or the jurisdictional High Court. Section 158AB provides a procedure where an identical question of law is pending before High Courts or Supreme Court.
  • CBDT vide Notification No. 03/2022, dated 16/07/2022 notifies various forms i.e. 3CEF, 10F, 10IA, 3BB, 3BC, 10BC, 10FC, 28A, 27C, 58D, 58C and 68 to be furnished electronically under Income Tax Rules, 1962.
  • CBDT vide Notification No. 04/2022, dated 26/07/2022, A Common Application Form (CAF) in the form of Simplified Proforma for incorporating Limited Liability Partnership (LLP) (Form – FiLLiP) has been notified by the MCA. Application for allotment of PAN will be filed in FiLLip form using the Digital Signature of the applicant as specified by the MCA. After the generation of the Limited Liability Partnership Identification Number (LLPIN), MCA will forward the data in form 49A to the Income-tax Authority under its Digital signature.
  •  CBDT vide circular no. 15, 16, and 17 dated 19/07/2022 condones delay in filing of Forms 9A, 10, 10B, 10BB to extend the powers of Principal Chief Commissioner of Income-tax (Pr. CCIT) / Chief Commissioner of Income-tax (CCIT) where the period of delay is between 365 days to 3 years, for AY 2018-19 and subsequent years.

Goods & Services Tax

Monthly News & Updates July Month

  • CBIC vide Circular No. 171/03/2022-GST dated 06 July 2022, clarifies various issues relating to the applicability of demand and penalty provisions under the CGST Act, 2017 in respect of transactions involving fake invoices

Issue 1: – In case a registered person (A) issues a tax invoice without a supply of goods and services to another registered person (B), then such an activity does not satisfy the criteria of “Supply” as defined u/s 7 of the CGST Act.

    • No demand and recovery are required to be made against ‘A’ under the provisions of section 73 or section 74 of the CGST Act.
    • No penal action under the provisions of section 73 or section 74 is required to be taken against ‘A’

However, The Registered Person ‘A’ shall be liable for penal action under section 122 (1)(ii) to a penalty of Rs 10,000/- or 10% of the tax due from such person, whichever is higher under the CGST Act for issuing tax invoices without actual supply of goods or services or both.

Issue 2: – In case a registered person (A) issues a tax invoice without a supply of goods and services to another registered person (B). B further issue invoice along with the underlying supply of goods or services or both to his buyers and utilizes ITC availed on the basis of the above-mentioned invoices issued by ‘A’ for payment of outward tax liability.

    • It is a contravention of the provisions of section 16(2)(b) of the CGST Act, ‘B’ shall be liable for the demand and recovery of the said ITC under the provisions of section 74 of the CGST Act, along with applicable interest under provisions of section 50 of the said Act.
    • Also, penal action under the provisions of section 74 is required to be taken against ‘B’.

Further, as per provisions of section 75(13) of CGST Act, if penal action for fraudulent availment or utilization of ITC is taken against ‘B’ under section 74 of CGST Act, no penalty for the same act, i.e. for the said fraudulent availment or utilization of ITC, can be imposed on ‘B’ under any other provisions of CGST Act, including under section 122.

Issue 3: – In case a registered person (A) issues a tax invoice without a supply of goods and services to another registered person (B). B utilizes ITC availed on the basis of the above-mentioned invoice. Further, issue a tax invoice to ‘C’ and passes ITC without the supply of goods or services or both.

    • There was no supply of goods or services or both by ‘B’ to ‘C’ in respect of the said transaction and also no tax was required to be paid in respect of the said transaction. Therefore, in these specific cases, no demand and recovery of either input tax credit wrongly/ fraudulently availed by ‘B’ in such case or tax liability in respect of the said outward transaction by ‘B’ to ‘C’ is required to be made from ‘B’ under the provisions of section 73 or section 74 of CGST Act.

However, The Registered Person ‘B’ shall be liable for penal action under section 122 (1)(ii) and section 122(1)(vii) to a penalty of Rs 10,000/- or 10% of the tax due from such person, whichever is higher of the CGST Act, for issuing invoices without any actual supply of goods and/or services as also for taking/ utilizing input tax credit without actual receipt of goods and/or services or both.

  • CBIC vide Circular No. 170/02/2022-GST dated 06 July 2022, Mandatory furnishing of correct and proper information of inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORM GSTR-3B and statement in FORM GSTR-1.

Furnishing of information regarding inter-State supplies made to unregistered persons, composition taxable persons, and UIN holders – Information sought in Table 3.2 of FORM GSTR-3B is required to be furnished. Along with details on e-commerce operator tax on supplies u/s 9(5) and supplies through e-commerce operator.

Furnishing of information regarding ITC availed, reversal thereof, and ineligible ITC in Table 4 of GSTR-3B –

a) any reversal of ITC or any ITC which is ineligible under any provision of the CGST Act should not be part of Net ITC Available in Table 4(C) and accordingly, should not get credited into the ECL of the registered person.

b) it is clarified that the reversal of ITC of ineligible credit under section 17(5) or any other provisions of the CGST Act and rules thereunder is required to be made under Table 4(B) and not under Table 4(D) of FORM GSTR3B.

c) the registered person is required to identify ineligible ITC as well as the reversal of ITC as per section 16 to arrive at the Net ITC available, which is to be credited to the ECL.

d) Registered person will report reversal of ITC, which are not permanent in nature and can be reclaimed in the future subject to fulfillment of specific conditions, such as on account of rule 37 of CGST Rules (non-payment of consideration to the supplier within 180 days), section 16(2)(b) and section 16(2)(c) of the CGST Act in Table 4 (B) (2).

e) Ineligible ITC on account of the limitation of the time period as delineated in sub-section (4) of section 16 of the CGST Act, which has not been auto-populated in Table 4(A) of GSTR-3B is to be mentioned in others under 4 (D) 2.

  • CBIC vide Circular No. 172/04/2022-GST dated 06 July 2022, Clarification on various issue pertaining to GST.

Matter 1:  Refund claimed   by the recipients of supplies regarded as deemed export

a) The ITC of tax paid on deemed export supplies, allowed to the recipients vide Circular No. 147/03/2021-GST dated 12.03.2021 only for enabling them to claim a refund of such tax paid on the portal, is not ITC in terms of the provisions of Chapter V of the CGST Act, 2017. Therefore, the ITC so availed by the recipient of deemed export supplies would not be subjected to provisions of Section 17 of the CGST Act, 2017.

b) The ITC of tax paid on deemed export supplies, allowed to the recipients for claim refund of such tax paid, is not ITC in terms of the provisions of Chapter V of the CGST Act, 2017. Therefore, such ITC availed by the recipient of deemed export supply for claiming a refund of tax paid on supplies regarded as deemed exports is not to be included in the “Net ITC”.

Matter 2: Clarification on various issues of section 17(5) of the CGST Act.

a) It is clarified that the proviso at the end of section 17(5)(b) of the CGST Act is applicable to the entire clause (b) which is as under:

“Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.”

b) It is clarified that “leasing” referred to in section 17(5)(b)(i) refers to the leasing of motor vehicles, vessels, and aircraft only and not to the leasing of any other items. Accordingly, availing of ITC is not barred under section 17(5)(b)(i) of the CGST Act in case of leasing, other than leasing motor vehicles, vessels, and aircraft.

Matter 3: Perquisites provided by the employer to the employees as per contractual agreement.

a) As per Schedule III to the CGST Act provides that “services by an employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence GST is not applicable on services rendered by an employee to employer-provided they are in the course of or in relation to employment.

b) Any perquisites provided by the employer to its employees in terms of the contractual agreement entered into between the employer and the employee are in lieu of the services provided by an employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of the contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same is provided in terms of the contract between the employer and employee.

Matter 4: Utilisation of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities.

a) It is clarified that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.

b) As per section 49(4), the electronic credit ledger can be used for making payment of output tax only under the CGST Act or the IGST Act. It cannot be used for making payment of any interest, penalty, fees, or any other amount payable under the said acts. Similarly, an electronic credit ledger cannot be used for payment of an erroneous refund sanctioned to the taxpayer, where the such refund was sanctioned in cash.

c) As per section 49(3) of the CGST Act, the amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees, or any other amount payable under the provisions of the GST Laws.

  • CBIC vide Circular No. 13/2022- Central Tax dated 05 July 2022, Extension of various time limits. This notification shall be deemed to have come into force with effect from the 1st day of March 2020.

Extension of the time limit specified 73(10) for issuance of order u/s 73(9) for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized, in respect of a tax period for the financial year 2017-18, up to the 30th day of September 2023.

Exclusion of the period from the 1st March 2020 to the 28 of February 2022 for computation of the period of limitation u/s 73(10) of the said Act for issuance of order u/s 73(9) of the said Act, for recovery of erroneous refund.

Exclusion of the period from the 1st March 2020 to the 28th February 2022 for computation of the period of limitation for filing refund application under section 54 or section 55 of the said Act.

  • CBIC vide Notification no. 09/2022-Central Tax dated 05 July 2022, notifies and appoints the 5th July 2022, as the date on which the provisions of clause (c) of section 110 and section 111 of the Finance Act 2022 relating to amendment in Section 49 and section 50 of the Central Goods and Services Tax Act, 2017 respectively which relates to Interest on delayed payment of tax on Net liability shall come into force.
  • CBIC vide Notification no. 10/2022-Central Tax dated 05 July 2022, hereby exempts the registered person whose aggregate turnover in the financial year 2021-22 is up to two crore rupees, from filing an annual return for the said financial year.
  • CBIC vide Circular No. 174/06/2022-GST, dated 06 July 2022, notifies Form GST PMT-03A in case of re-credit in electronic credit ledger equivalent to the amount of erroneous refund sanctioned by the officer and credited to the registered person. Procedure and time limit are defined for the same.
  • CBIC vide Notification no. 17/2022-Central Tax dated 01 Aug 2022, the turnover limit for generating e-invoice for B2B supply of goods and services or both or for exports is decreased to exceeding 10 crores from 20 crores. It will be applicable from October 01, 2022.

Companies Act, 2013

  • MCA has issued clarification w.r.t. the spending of Corporate Social Responsibility (“CSR”) funds for the “Har Ghar Tiranga” campaign. `Har Ghar Tiranga’, a campaign under the aegis of Azadi Ka Amrit Mahotsav, is aimed to invoke the feeling of patriotism in the hearts of the people and promote awareness about the Indian National Flag. In this regard, it is clarified that spending of CSR funds for the activities related to this campaign, such as mass scale production and supply of the National Flag, outreach and amplification efforts, and other related activities, are eligible CSR activities under item no. (ii) of Schedule VII of the Companies Act, 2013 pertaining to the promotion of education relating to culture. Further, the companies may undertake the aforesaid activities, subject to fulfillment of the Companies (CSR Policy) Rules, 2014 and related circulars/ clarifications issued by the Ministry thereof, from time to time.
  • MCA has issued a public notice to all the stakeholders that MCA is launching the first set of Company Forms on the MCA21 V3 portal. These forms will be launched on August 31, 2022, at 12:00 AM. Following forms will be rolled out in this phase: DIR3-KYC Web, DIR3-KYC Eform, DPT-3, DPT-4, CHG-1, CHG-4, CHG-6, CHG-8 & CHG-9. To facilitate implementation of these forms in the V3 MCA21 portal, stakeholders are advised to note that the Company e-Filings on the V2 portal will be disabled from 15th Aug 2022 at 12:00 AM for the above 9 forms. All stakeholders are advised to ensure that there are no SRNs in pending payment and Resubmission status. Further, offline payments for the above 9 forms in V2 using the Pay later option would be stopped from August 07, 2022, at 12:00 AM. You are requested to make payments for these forms in V2 through online mode (Credit/Debit Card and Net Banking).

Other Laws

NSE

NSE has notified a new module for filing of information required under Regulation 46 and 62 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on NEAPS. NSE has directed the listed to furnish information required under Regulations 46 & 62 of Listing Regulations by July 18, 2022. As per Regulation 46 and Regulation 62 of the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulation, 2015, the listed entities are required to maintain a functional website containing basic information about the Company. In order to ensure effective enforcement of the Listing Regulations, the Exchange has developed a new module in NEAPS (NSE Electronic Application Processing System) wherein all the listed entities are required to provide the URLs of the information required under Regulations 46 & 62 of Listing Regulations through the prescribed path and for any subsequent modification to be done a separate path is prescribed by the NSE. NSE has further extended the last date of submissions from July 18, 2022, to August 31, 2022, through a separate circular.

SEBI
  • The Stock Exchanges have issued a Circular w.r.t maintenance of a functional website containing basic information about the Listed Company under Regulation 46 and Regulation 62 of Securities and Exchange Board of India (SEBI) (Listing Obligation and Disclosure Requirements) Regulation, 2015(Listing Regulation). As per the direction by SEBI, all the listed entities are requested to disseminate certain requirements mentioned in sub-regulation 2 of Regulation 46 and sub-regulation 1 of Regulation 62 of Listing Regulation for equity and debt listed entities, respectively, under a separate section on its website. It has been observed that the required disclosures under the aforesaid regulations have been majorly done by the listed entities, but at times, it is cumbersome to locate these disclosures as same are not located in one place along with proper indexing. It has also been observed that the listed entities do not disclose the last amended date of policies uploaded on the website. In view of the above, the listed entities are advised to Disseminate all disclosures, specified under Regulation 46 and Regulation 62 of Listing Regulations, under a separate section as prescribed in the circular. Further, all listed companies have to ensure that their website needs to be updated with the effective date or last amended date of the policies uploaded on the website. All listed entities are therefore advised to take necessary steps to be in compliance with the provisions of this Circular.
  • SEBI has issued the consultation paper on the applicability of SEBI (Prohibition of Insider Trading), Regulations, 2015 to Mutual Fund (MF) units with an objective to extend the applicability of insider trading regulations to units of mutual funds. The intent is to harmonize the regulations governing trading in securities, while in possession of Unpublished Price Sensitive Information (UPSI). In the past, it was observed that a Registrar and Transfer Agent and a few key personnel of a Mutual Fund have redeemed its units or their holdings in the schemes while in possession of certain sensitive information, therefore, to harmonize the provisions in PIT Regulations and to initiate serious enforcement actions against those who misuse the sensitive non-public information pertaining to the scheme of Mutual fund, directly or indirectly, which they have access, by virtue of their fiduciary capacity.  Accordingly, PIT Regulations are proposed to be aligned with the SEBI circular by amending the definition of ‘securities’ to do away with the exclusion of MF units; by amending the definition of ‘trading’ to include redeeming, switching, or agreeing to redeem or switch securities; by insertion of Chapter IIA dealing with Restrictions on communication in relation to, and trading by insiders in MF units. Only Chapter IIA. The public comments may be sent via email to pit-mf@sebi.gov.in, no later than July 29, 2022.
  • SEBI has notified the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 through which it has notified a new chapter X-A which deals with the Social Stock Exchange. The provisions of this Chapter shall apply to a Not-for-profit Organization seeking to get registered with an SSE; To a Not-for-profit Organization seeking to get registered and raise funds through an SSE and to a For-Profit Social Enterprise seeking to be identified as a Social Enterprise under the provisions of this Chapter. The SSE will be accessible only to institutional investors and non-institutional investors. Every SSE will constitute a Social Stock Exchange Governing Council to oversight on its functioning. This chapter also covers the eligibility conditions for being identified as a Social Enterprise. Further, a Not-for-Profit Organization must mandatorily seek registration with an SSE before it raises funds through an SSE. Other features covered under this chapter include Fundraising by the social enterprise; Ineligibility for raising funds; Issuance of Zero Coupon Zero Principal Instruments; Eligibility for issuance of Zero Coupon Zero Principal Instruments; Procedure for public issuance of Zero Coupon Zero Principal Instruments by a Not-for-Profit Organization; Procedure for private issuance of Zero Coupon Zero Principal Instruments by a Not-for-Profit Organization; Contents of the fund-raising document; Deemed compliance with Securities Contracts (Regulation) Rules, 1957; Termination of listing of Zero Coupon Zero Principal Instruments from the Social Stock Exchange.
  • SEBI has issued a Circular to make an amendment to Investor Grievance Redressal Mechanism regarding the Online Web-Based Complaints Redressal System. SEBI has implemented an online platform (SCORES) designed to help investors to lodge their complaints, pertaining to the securities market against listed companies and SEBI registered intermediaries. In line with the same, to enable investors to lodge and follow up on their complaints and track the status of redressal of such complaints from anywhere, all Recognized Stock Exchanges including Commodity Derivatives Exchanges/Depositories are advised to design and implement an online web-based complaints redressal system of their own, which will facilitate investors to file complaints and escalate complaints for redressal through Grievance Redressal Committee (GRC), Arbitration, Appellate Arbitration, etc. in accordance with their respective bye-laws, rules, and regulations. SEBI has decided that the Stock Exchanges shall continue with the hybrid mode (i.e., online and offline) of conducting the GRC and Arbitration/Appellate Arbitration process. Further, a client, who has a claim/ counterclaim up to Rs.20 lakh (Rs. Twenty lakh) and files an Arbitration reference, will be exempted from payment of the specified fees. All Recognized Stock Exchanges including Commodity Derivatives Exchanges / Depositories are directed to make necessary amendments to the relevant bye-laws, rules, and regulations for the implementation of the above decision immediately.
  • SEBI has issued a circular to notify that all chargers payable to SEBI shall be subjected to GST at the rate of 18% with effect from July 18, 2022. SEBI has instructed that any fees payable by Market Infrastructure Institutions, Companies who have listed/are intending to list their securities, other intermediaries, and persons who are dealing in the securities market, shall be subject to GST. This move has been taken after the GST Council last month recommended withdrawing the exemption granted to services by SEBI and the same was notified on July 13, 2022. The charge would be applicable to all market infrastructure institutions, companies who have listed/are intending to list their securities, other intermediaries, and persons who are dealing in the securities market. Market infrastructure institutions include stock exchanges, clearing corporations, and depositories.
  • SEBI has proposed a regulatory framework for the online bond platforms that are selling listed debt securities. Under the proposal, bond platforms should register as stock brokers (debt segment) with the SEBI or be run by SEBI-registered brokers, according to a consultation paper. This will also enhance the confidence among investors, particularly non-institutional investors, as the platforms would be provided by SEBI-regulated intermediaries. Additionally, the stock-broker regulations will be applicable to these entities, which would govern their code of conduct and other aspects related to their operations and risk management. It has been proposed that listed debt securities issued on a private placement basis, and offered for sale on bond platforms should be locked in for a period of six months from the date of allotment of such debt securities by the issuer. The transactions executed on the online bond platforms should be routed through the trading platform of the debt segment of exchanges or through the RFQ (Request for Quote) platform of the stock exchanges, where the transactions will be cleared and settled on a Delivery Versus Payment basis. In addition, the net worth and deposit requirements prescribed for stock brokers will ensure that the bond platform has sound and stable financial health and the applicability of the code of conduct mandated for stock brokers will ensure fairness in their dealings with clients. They will be subjected to regulatory inspection and oversight, providing more confidence to investors and hence, will have the potential to attract more investors. The regulator has sought comments from the public on the proposal till August 12.
  • SEBI has notified the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022 through which it has notified a new chapter IX-A which deals with obligations of social enterprises. The provisions of this Chapter shall apply to Profit Social Enterprise whose designated securities are listed on the applicable segment of the Stock Exchange(s) and Not for Profit Organization that is registered on the Social Stock Exchange(s). A Social Enterprise whose designated securities are listed on the Social Stock Exchange(s) or the Stock Exchange(s), as the case may be, shall frame a policy for determination of materiality, duly approved by its board or management, as the case may be, which shall be disclosed on the Social Stock Exchange(s) or the Stock Exchange(s). The board and management of the Social Enterprise shall authorize one or more of its Key Managerial Personnel for the purpose of determining the materiality of an event or information and for the purpose of making disclosures to the Social Stock Exchange(s) or the Stock Exchange(s), as the case may be, under this regulation and the contact details of such personnel shall also be disclosed to the Social Stock Exchange(s) or the Stock Exchange(s). Further, a Social Enterprise, which is either registered with or has raised funds through a Social Stock Exchange or a Stock Exchange, as the case may be, shall be required to submit an annual impact report to the Social Stock Exchange or the Stock Exchange in the format specified by the Board from time to time. The annual impact report shall be audited by a Social Audit Firm employing Social Auditor.
RBI
  • RBI has released the Master Direction on Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016. The master direction is revised for the purpose of enabling the Bank to regulate the financial system to the advantage of the country and to prevent the affairs of any Systemically Important Non-Deposit taking Non-Banking Financial Company (NBFC-ND-SI) and Deposit taking Non-Banking Financial Company (NBFC-D) from being conducted in a manner detrimental to the interest of investors and depositors or in any manner prejudicial to the interest of such NBFCs. Further, this Master Direction has been significantly amended, it has been replaced rather than showing the changes in track mode for reader convenience, and all the changes are listed at the end of Master Direction in any case.
  • RBI has issued a notification to relax provisions for overseas investments in the debt market and foreign currency lending by banks, measures which were announced as part of efforts to shore up the rupee. Accordingly, Banks can utilize the funds raised from overseas foreign currency borrowing between July 8 and October 31, 2022, for lending in foreign currency to constituents in India, as per the notification on ‘Overseas foreign currency borrowing of Authorised Dealer Category-I banks. At present, banks can undertake Overseas Foreign Currency Borrowing (OFCB) up to a limit of 100 percent of their unimpaired Tier 1 capital or USD 10 million, whichever is higher. The funds so borrowed cannot be used. Currently, short-term investments by an FPI in government securities (central government securities, including treasury bills and state development loans) and corporate bonds should not exceed 30 percent of the total investment of that FPI in any category. Further, FPIs will be provided with a limited window till October 31, 2022, during which they can invest in corporate money market instruments like commercial paper and non-convertible debentures with an original maturity of up to one year. FPIs can continue to stay invested in these instruments till their maturity or sale. These investments will not be included in reckoning the short-term limit for investments in corporate securities.
  • The Reserve Bank of India has released a Circular which allows for International Trade settlements in Indian Rupees (INR). This measure is aimed at facilitating the growth of global trade with emphasis on export from India and to support the interests of the global trading community in Indian rupees. It has also placed an additional arrangement for invoicing, payment, and settlements of exports/imports in Indian rupees. Further, states that the exchange rate between currencies of two trading partner countries may be market determined and the entire process will be carried out using a special VOSTRO account. It is also stated that the Rupee surplus balance accumulated in such account may be used for permissible capital and current account transactions in accordance with mutual agreement. The decision to allow INR in international trade settlements is considered an important step to facilitate trade with Russia, Iran, and Sri Lanka. INR in international trade settlements is also expected to gradually contribute to the global acceptance of rupees for international trade transactions. However, the RBI has given the flexibility that additional surplus generated through exports by partner countries can be invested in Indian government securities and bonds without considering the fact that the rupee is not a convertible currency.
Special Economic Zones

The Ministry of Commerce and Industry has notified the Special Economic Zones (Third Amendment) Rules, 2022 to further amend the Special Economic Zones Rules, 2006. Through this amendment a new Rule 43A which deals with work from home has been notified to provide that a Unit may permit its employees, including contractual employees, to work from home or from any place outside the Special Economic Zone in accordance with this rule. The Unit shall submit its proposal for work from home to the Development Commissioner through email or physical application, which shall contain the terms and conditions of work from home, including the date from which the permission for work from home shall be utilized and the details of the employees to be covered by such permission for work from home. Further, every proposal for permission to work from home or an application for extension of the permit shall be submitted, at least fifteen days in advance, to the Development Commissioner, except in the case of the employees who are temporarily incapacitated or traveling. The proposal for work from home shall cover a maximum of fifty percent of the total employees, including contractual employees, of the Unit and the Unit shall maintain an accurate attendance record for the entire period of permission for work from home and shall submit to the Development Commissioner, from time to time. The Unit may provide to an employee such goods, including a laptop, computer, video projection system, other electronic equipment, and secured connectivity (for virtual private network, virtual desktop infrastructure) to establish a connection between the employee and work related to the project of the unit with the prior permission of the Specified Officer to temporarily remove such goods to the Domestic Tariff Area without payment of duty or integrated goods and services tax.

Securities Contracts (Regulation) Act, 1956

The Department of Economic Affairs has issued a notification to declare Zero Coupon Zero Principal instruments as securities under the Securities Contracts (Regulation) Act, 1956. It is further clarified that “zero coupons zero principal instruments” means an instrument issued by a Not for Profit organization that shall be registered with the Social Stock Exchange segment of a recognized Stock Exchange in accordance with the regulations made by the Securities and Exchange Board of India. The Social Stock Exchange (SSE) is a novel concept in India and such a move is meant to serve private and non-profit sector providers by channeling greater capital to them. Social enterprises eligible to participate in the SSE should be entities — NPOs and for-profit social enterprises having social intent and impact as their primary goal. With regard to fundraising, it has been proposed that eligible NPOs may raise funds through equity, zero coupons zero principal bonds, mutual funds, social impact funds, and development impact bonds. Further, NPOs desirous of raising funds on the SSE will be required to be registered with the exchange. This move will help many organizations including corporates to utilize their fund marked for social responsibility and also help non-profit organizations to get funds in a more transparent manner. In simple words, neither any interest is paid nor principal is repaid under Zero coupon zero principal.

FSSAI

The Food Safety and Standards Authority of India has issued clarification regarding the applicability of GST on services provided by FSSAI. It is notified to all stakeholders that GST at the prescribed rate would be applicable on all services provided by FSSAI commencing July 18, 2022. The rates for various services such as the issue of Central license, product approval fee, Food Safety Mitra fee, import clearance fee, etc, will be revised accordingly.

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 25.06.2022 till 25.07.2022

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