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.

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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 25.07.2022 till 25.08.2022

 

Executive Summary

Income Tax

  • The procedure, Timeline, and Form has been specified for deposit the withholding tax deducted under section 194S relating to TDS on transfer of Virtual Digital Assets.
  • Cost Inflation Index for Financial year 2022-23 is 331.
  • Applicability of Safe Harbor Rules extended till Assessment year 2022-23.

Goods & Services Tax (GST) & Customs

  • Guidelines issued for procedures relating to sanction, post-audit and review of refund claims.
  • News and update has been issued to taxpayers for availing ITC as per law and GSTR-2B.
  • New functionalities have been made available for taxpayers relating to Bank account validation, HSN validation and refund to un-registered persons.

Companies Act 2013/ Other Laws.

  • Ministry of Corporate Affairs (MCA) has notified the National Financial Reporting Authority (NFRA) Amendment Rules 2022
  • Ministry of Corporate Affairs (MCA) has issued a notification to notify the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
  • Ministry of Corporate Affairs (MCA) has issued a clarification w.r.t Micro-Finance/Micro Credit as an Object in the Object Clause of MOA of Section 8 companies registered under the Companies Act, 2013.
  • SEBI has extended the timeline by one month to August 01, 2022, for commencing validation of all KYC records (new and existing) by (Know Your Client) Registration Agency (KRA).
  • RBI has decided to hike the Repo Rate by 50 basis points to 4.90% and the Standing Deposit Facility Rate stands adjusted to 4.65%, and the Marginal Standing Facility rate and Bank Rate to 5.15%.

Income Tax

  • CBDT vide Notification No. 67/2022, dated 21 June 2022, issued the details relating to a time limit to deposit the withholding tax deducted u/s 194S relating to TDS on transfer of Virtual Digital Assets, form and manner of filing withholding tax return and the issue of tax deducted at source (TDS) certificate to deductee has now been prescribed by CBDT.
  • TDS u/s 194S is required to be deposited to the Government of India within 30 days from the end of the month in which tax is deducted
  • TDS return is to be submitted in the prescribed Challan-cum-statement in Form 26Q.
  • TDS certificate in Form 16E to be issued to the deductee within 15 days from the due date of filing Form 26QE in a prescribed format.
  • CBDT vide Notification No. 65/2022, dated 16 June 2022 has exempted/waived the requirement to withhold tax on payment of lease rent to a Unit located in IFSC for the lease of aircraft provided after complying with some prescribed conditions.

The exemption is applicable provided the lessor furnishes a declaration in Form no. 1 prescribed in the notification to the lessee giving details of 10 assessment years for which the lessor has opted for claiming deduction u/s 80LA(2) r.w.s 80LA(1A) of the Income-tax Act. The lessee shall not deduct tax at source for those 10 years on receipt of such declaration and make the disclosure accordingly in the withholding tax returns to be filed by the lessee (for other years, lessee shall continue to withhold tax at source).

  • CBDT vide Notification No. 62/2022 dated 14 June 2022 notified the Cost Inflation Index for Financial year 2022-23 is 331. This notification shall come into force with effect from 1st April, 2023 and shall accordingly apply to the Assessment Year 2023-24 and subsequent years.
  • CBDT vide Notification No. 57/2022 dated 31 May 2022 notified New Rule 44FA to provide form and manner of filing appeal to the High Court on ruling pronounced or order passed by the Board for Advance Rulings. The form and manner of filing appeal will be the same as the procedure laid down by the jurisdictional High Court for filing an appeal to the High Court.
  • CBDT vide Notification No. 59/2022 dated 6 June 2022 provide relaxation of conditions for investment funds to whose fund manager is located in an International Financial Service Center Authority (IFSC).
  • CBDT vide Notification No. 1 of 2022, dated 09 June 2022, enables the Compliance check functionality for Section 206AB & 206CCA of the Income-tax Act 1961 to facilitate tax Deductors and Collectors in identification of Specified persons.
  • CBDT vide Notification No. 2 of 2022, dated 24 June 2022, Format, Procedure and Guidelines for submission of Form No. 1, Form No. 2 and Form No. 2A for Securities Transaction Tax (STT) has been issued. A new Form No. 2A has also been introduced as per the said notification, to be filed by Insurance Company for furnishing Securities Transaction Tax return along with procedures, formats and standards for ensuring secure capture and transmission of data.
  • Guidelines and clarification relating to Provisions of Section 194R issued dated 16.06.2022 on Tax on benefits or perquisites or Reformed Fringe Benefit Tax. For Detailed clarification, kindly refer link: https://knmindia.com/cases/section-194r-tax-on-benefit-or-perquisite-or-reformed-fringe-benefit-tax/.

 

International Taxation

 

  • CBDT vide Notification No. 66 of 2022, dated 17 June 2022, Extends the Applicability of Safe Harbor Rules till Assessment year 2022-23. A list of eligible international transactions where the transfer price declared by the taxpayer shall be required to be accepted by the tax authorities (safe harbor) prescribed under Rule 10TD of the Income-tax Rules, 1962 extended until AY 2022-23.

Goods & Services Tax

  • Guidelines No. 02/2022 dated 14 June 2022 issued for procedures relating to sanction, post-audit and review of refund claims which provides that
  • the commissioner may review any decision or order, including an order of refund, with respect to its legality or propriety and he may direct any officer subordinate to him to file an appeal against the said decision or order within 6 months of the date of communication of the said decision or order.
  • To ensure uniformity in processing of refund claims, while passing the refund sanction order in Form GST RFD-06, the proper officer should also upload a detailed speaking order along with refund sanction order in Form GST RFD-06.
  • Details required in speaking order for all categories is clarified in order to ensure uniformity in issuance of such speaking order.
  • ACES-GST portal provides the facility for uploading a document in pdf format along with the Form GST RFD-06 order. The same is made available to the refund applicant as well as Post-audit/ Reviewing Authority online.
    • Updates has been issued for availing ITC as per law and GSTR-2B. For some of the taxpayers, there was an issue in relation to duplicate entries in GSTR2B which has since been fixed and correct GSTR 2B has been generated. In this regard, taxpayers while filing GSTR3B are advised to check and ensure that the value of ITC they are availing is correct as per the law.
      They may check the correct ITC value from download of Auto drafted ITC statement GSTR2B or pdf of System Generated GSTR3B or on the ITC observed and prefilled GSTR-3B accordingly
    • New functionalities have been made available for taxpayers dated 06 June, 2022 as below:
      • Bank Account validation status of taxpayers can be verified by registered taxpayers in their profile by clicking on the Bank Account Status link under Quick Links.
      • Improvements made in filing process of GSTR-4 (Annual) for the taxpayers who opt for Composition Levy
      • A phase wise AATO based validation has been built into the system to ensure that taxpayers with AATO of up-to Rs 5 crore have to report minimum 2 digit HSN and more than Rs 5 crore have to report minimum 4 digit HSN in table 12 of GSTR-1 in the phase 1 of HSN validation at the portal.
      • The un-registered persons will now be able to apply for Temp User ID on GST Portal by selecting the reason for registration as, “To claim Refund”. They will be able to add their bank account details at the time of applying for Temp ID and subsequently edit their profile in respect of Authorized Signatory, Address and Bank Account details, if required. They can subsequently file for refund under the appropriate category on the Portal using their Temp ID credentials.

Companies Act, 2013

 

According to the National Financial Reporting Authority (NFRA) amendment rules 2022, Rule 13 is amended to provide the revised penalty provision for non-compliance or contravention with any of the provisions. It is provided that any non-compliance or contravention with any of the provisions will attract a penalty of ₹5,000/- and where the contravention is a continuing one, a further fine of ₹500/- for every day during the period of contravention. This applies to offenses for which the penalty is not specified elsewhere in the law. The rule has been amended to drop a reference to Section 450 of the Companies Act which specifies a cap of ₹200,000/- in the case of a company and ₹50,000/- for an officer in default or any other person for offenses that persist.

 

MCA has tightened the norms for the appointment of any person, as director in an Indian Company, who is a national of a country that shares a land border with India. Accordingly, in case the person seeking appointment is a national of a country that shares a land border with India, necessary security clearance from the Ministry of Home Affairs, the Government of India shall also be attached along with the consent. Further, no application number shall be generated in case of the person applying for the Director Identification Number is a national of a country that shares a land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with an application for Director Identification Number.

 

 

The issues taken up in this report are based on a review of stakeholder suggestions, raised in stakeholder consultations conducted by the MCA and the IBBI or sent as public comments to the MCA. The Insolvency Law Committee in its 5th report has made key recommendations to strengthen the bankruptcy framework in India. Key recommendations include i) Mandating Reliance on IUs for Establishing Default; ii) Grant of exemptions from Scope of Moratorium only in exceptional circumstances; iii) Issues related to Avoidable Transactions and Improper Trading; iv) Curbing Submission of Unsolicited Resolution Plans and Revisions of Resolution Plans; v) Timeline for approval or rejection of resolution plan; vi) Standard of conduct of the Committee of Creditors (CoC); vii) Stakeholders Consultation Committee (SCC); viii) Secured Creditor’s Contribution; ix) Voluntary Liquidation Process: x) Operationalising the Insolvency & Bankruptcy Fund (IBC Fund); xi) Additional changes w.r.t Appellate mechanism for Orders issued under Section 220   etc. The recommendations of the committee will further strengthen the Insolvency & Bankruptcy framework in India by providing clarity and improving the process under the code. The committee will monitor further developments and keep striving to enhance the effectiveness of the Indian Insolvency framework.

 

 

The amendment is brought under Rule 6 which deals with compliances required by a person eligible and willing to restore his name in the independent director databank. Accordingly, any individual whose name has been removed from the databank may apply for restoration of his name on payment of fees of one thousand rupees and the institute shall allow such restoration subject to the conditions, that his name shall be shown in a separate restored category for a period of one year from the date of restoration within which, he shall be required to pass the online proficiency self-assessment test and thereafter his name shall be included in the databank, only, if he passes the said online proficiency self-assessment test and in such case, the fees paid by him at the time of initial registration shall continue to be valid for the period for which the same was initially paid; and in case he fails to pass the online proficiency self-assessment test within one year from the date of restoration, his name shall be removed from the data bank and he shall be required to apply afresh for inclusion of his name in the databank.

 

 

The amendment brought revisions to the procedure for striking off a company. Accordingly, where the Registrar, on examining the application made in Form STK-2, finds that it is necessary to call for further information or finds such application or any document annexed therewith is defective or incomplete in any respect, he shall inform the applicant to remove the defects and re-submit the complete Form within fifteen days from the date of such information, failing which the Registrar shall treat the Form as invalid in the electronic record, and shall inform the applicant. After the re-submission of the Form or document, if the Registrar finds that the Form or document is defective or incomplete in any respect, he shall give the further time of fifteen days to remove such defects or complete the Form, failing which the Registrar shall treat the Form as invalid in the electronic record and shall inform the applicant, accordingly. Any re-submission of the application in Form STK-2 made prior to the commencement of the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022 shall not be counted for the purposes of reckoning the maximum number of re-submissions of such Form.

 

 

Through this amendment, MCA has added a new sub-rule 4 in Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, to provide that in case of a compromise or an arrangement or merger or demerger between an Indian company and a company or body corporate which has been incorporated in a country which shares a land border with India, a declaration in Form No. CAA-16 shall be required at the stage of submission of an application under Section 230 of the Act. Accordingly, a new Form CAA – 16 is also notified which is to be signed by the authorised representative of the companies involved and a declaration to be provided that whether the company/body corporate is not required to obtain prior approval under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 or not. A copy of the approval is also required to be attached with the Form CAA-16.

 

MCA has been observed that various Section 8 companies are altering their object clause for carrying out micro-finance activities by way of passing Special Resolution, changing Activity code and subsequently filing of e-form MGT-14 with the concerned ROCs, even though at initial incorporation, the ROC (CRC) is not allowing Section 8 companies to get incorporated with the objects of microfinance activities in view of Ministry’s direction letter no. No. 05/33/2017-CL.V dated 10.02.2020 and letter dated 31.8.2020. It is clarified that immediate action on the part of RoCs is required as per law, including changing their objects to prevent such companies from carrying out micro-finance activities. Further, the Office of DGCoA shall ensure strict compliance by all the ROCs with the instructions contained in the letters issued earlier by the Ministry on this subject. Further, the ROCs shall also circulate these directions to all the officers/officials to ensure examination in accordance with the law, while processing e-forms relating to Incorporation of Companies and Change in Objects of the MOA of Section 8 companies registered under the Companies Act, 2013.

Other Laws

SEBI

 

As per Clause 9 of SEBI KYC (Know Your Client) Registration Agency (KRA) Regulations, 2011. The KYC records of all existing clients (who have used Aadhaar as an officially valid document (OVD) shall be validated within a period of 180 days from August 01, 2022. and for those clients who have completed KYC using non-Aadhaar OVD, their records will be validated only after they have given their Aadhaar number.

 

 

All Demat accounts maintained by stock brokers should be appropriately tagged. All Demat accounts of stock brokers which are untagged need to be appropriately tagged by June 30, 2022, under the categories which include Proprietary Account to Hold Own Securities; Pool account for Settlement Purposes; Client Unpaid Securities Account to Hold Unpaid Securities of Clients; Client Securities Margin Pledge Account for Margin obligations to be given by way of Pledge/ Re-pledge, and Client Securities under Margin Funding Account to Hold funded securities in respect of margin funding. Further, credit of securities shall not be allowed in any Demat account left untagged from July 01, 2022, onwards. Credits on account of corporate actions shall be permitted. The debit of securities shall also not be allowed in any Demat account left untagged from August 01, 2022. Stock Broker shall obtain permission from Stock Exchanges to allow tagging of such Demat accounts from August 01, 2022, onwards. Stock Exchange shall grant such approval within two working days after imposing the penalty as per their internal policy.

 

 

Based on the representations received from REITs/InvITs, SEBI has decided to further extend the facility to conduct annual meetings through VC/OAVM. Besides, the Ministry of Corporate Affairs (MCA), last month, extended the facility of holding AGMs and EGMs through VC/OAVM till December 31, 2022. For conducting such meetings, they need to comply with the procedure prescribed by the regulator. Among other requirements, recorded transcripts of the meetings held through VC or OAVM should be maintained in the safe custody of the investment managers of InvIT or managers of the REIT. Also, InvITs and REITs are required to upload the transcripts on their respective websites as soon as possible after the conclusion of the meetings.

 

 

For any dispute between the member and the client relating to or arising out of the transactions in the Stock Exchange, which is of civil nature, the complainant/ member shall first refer the complaint to the IGRC and/ or to Arbitration Mechanism provided by the Stock Exchange before resorting to other remedies available under any other law. A complainant/member, who is not satisfied with the recommendation of the IGRC shall avail the arbitration mechanism of the Stock Exchange for settlement of complaints within three months from the date of IGRC recommendation. For the arbitration application received without going through the IGRC mechanism, the time period of three months will not apply, and for such cases, the limitation period for filing arbitration will be governed by the law of limitation i.e., The Limitation Act, 1963.

 

 

The new framework will come into force with effect from 1st June 2022. The Arbitration Mechanism shall be initiated post exhausting all actions for resolution of complaints including those received through the SCORES Portal. The Arbitration reference shall be filed with the Stock Exchange where the initial complaint has been addressed. In case of arbitration matters involving a claim of up to Rs. 25 lakhs, a sole arbitrator shall be appointed and, if the value of the claim is more than Rs. 25 lakhs, a panel of three arbitrators shall be appointed. The arbitration and appellate arbitration shall be conducted at the regional center of the stock exchange nearest to the shareholder(s) /investor(s). The stock exchanges shall preserve the documents related to arbitration for five years from the date of the Arbitral award, appellate arbitral award or Order of the Court, as the case may be; and register the destruction of records relating to the above, permanently. The stock exchanges shall disclose on its website, details of the disposal of arbitration proceedings and details of arbitrator-wise disposal of arbitration proceedings as per the formats prescribed by SEBI for already available arbitration mechanisms.

 

RBI

 

 

The Monetary Policy Committee of the Reserve Bank of India has decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth. The Rural cooperative banks can now extend finance to commercial real estate (loans to residential housing projects) within the existing aggregate housing finance limit of 5% of total assets. To further augment customer convenience and facilitate recurring payments like subscriptions, insurance premia and education fees of larger value, the limit per transaction for e-mandate-based recurring payments increased from ₹5,000 to ₹ 15,000.

 

 

The directions shall apply to the Non-centrally cleared foreign exchange derivative contracts undertaken in terms of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 and non-centrally cleared interest rate derivative contracts undertaken in terms of the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 and any other non-centrally cleared derivative (NCCD) contract as may be specified by the Reserve Bank. The entities which shall be classified as Domestic Covered Entities under these Directions include Entities regulated by a financial sector regulator (including branches of foreign banks operating in India) and having an Average Aggregate Notional Amount (AANA) of outstanding NCCDs of ₹25,000 crore and above, on a consolidated group-wide basis and Other resident entities having an AANA of outstanding NCCDs of ₹60,000 crore and above, on a consolidated group-wide basis. The Non-resident financial entities have an AANA of outstanding NCCDs of USD 3 billion and above, on a consolidated group-wide basis and Other non-resident entities have an AANA of outstanding NCCDs of USD 8 billion and above, on a consolidated group-wide basis shall be classified as Foreign Covered Entities under these Directions.

 

FSSAI

 

 

Submission of returns physically or through email will not be considered. As per regulation 2.1.13 of Food Safety and Standards (Licensing and Registration of Food Businesses) Regulations, 2011, every licensee shall on or before 31st May of each year, submit a return, in ‘Form D-1’ to the Licensing Authority in respect of each class of food products handled by him during the previous financial year. Provided however that every licensee engaged in manufacturing of milk and/or milk products shall file half yearly returns for the periods 1st April to 30th September and 1st October to 31st March of every financial year in the form D-2, as provided in Schedule-2 of these regulations. Such returns will be filed within a month from the end of the period. A separate return shall be filed for every license issued under the Regulations, irrespective of whether the same Food Business Operator holds more than one license.

View 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 25.05.2022 till 25.06.2022

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