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:

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 26^th Feb till 25^th Mar. 2023.

Resident Director Requirement under Companies Act 2013

• 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

• 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

• MCA has issued the companies (Removal of names of companies from the Register of companies) Second Amendment Rules, 2022

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.

• MCA has issued FAQs on V3 Company Forms (Director KYC, Charge & Deposit Forms).

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 Ministry of Corporate Affairs has notified the companies (accounts) fourth amendment rules, 2022 which shall come into force on the date of their publication in the official gazette i.e05-08-2022.

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.

• MCA has notified a new update on MCA21-version 3 that 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 August 27, 2022 (00:00 am) to August 28, 2022 (23:59 hrs).

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.

• MCA HAS NOTIFIED THE COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) THIRD AMENDMENT RULES, 2022

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

• SEBI has notified the new guidelines for alternative investment funds (AIFs) and venture capital funds (VCFs) for investing abroad, under which overseas investee firms won’t need to have an Indian connection.

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.

• SEBI HAS NOTIFIED THE SECURITIES AND EXCHANGE BOARD OF INDIA (PORTFOLIO MANAGERS) (AMENDMENT) REGULATIONS, 2022, WHICH SHALL COME INTO FORCE ON THE THIRTIETH DAY FROM THE DATE OF THEIR PUBLICATION IN THE OFFICIAL GAZETTE I.E. 21-09-2022.

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.

• SEBI pursuant to the order of the Hon’ble Securities Appellate Tribunal (“SAT”) dated may 13, 2022 in the matter of illiquid stock options, has framed a settlement scheme (“scheme, 2022”)

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

• SEBI has enhanced the disclosure norms for Credit Rating Agencies (CRA) in order to allow investors and other stakeholders to properly use disclosures in a fair assessment of CRAs. 

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.

• SEBI has come out with a circular amending its guidelines for the preferential issue and institutional placement of units by listed Real Estate Investment Trusts (REITs)and Infrastructure Investment trusts (INVITS). 

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

• RBI has issued a circular to provide clarification regarding the implementation of recommendations of the working group on digital lending.

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 published the foreign exchange management (Overseas Investment) Regulations, 2022 which shall come into force on the date of their publication in the official gazette i.e. 22-08-2022. 

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.

• RBI has published the foreign exchange management (overseas investment) Rules, 2022 in supersession to the foreign exchange management (transfer or issue of any foreign security) regulations, 2004 and the foreign exchange management (acquisition and transfer of immovable property outside India) regulations, 2015.

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

• 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. 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

• 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

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 1^st 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

• MCA has notified the National Financial Reporting Authority (NFRA) Amendment Rules 2022 which shall come into force on the date of their publication in the Official Gazette i.e. 17-06-2022.

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 issued a notification to notify the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 which shall come into force on the date of their publication in the Official Gazette 01-06-2022.

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.

• MCA has released the 5th Report of the Insolvency Law Committee which provides recommendations in respect of the Corporate Insolvency Resolution Process (CIRP) and Liquidation Processes. 

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.

• MCA has notified the Companies (Appointment and Qualification of Directors) Second Amendment, Rules,2022 to further amend the Companies (Appointment and Qualification of Directors) Rules, 2014 which shall come into force on the date of their publication in the Official Gazette 10-06-2022.

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.

• MCA has notified the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022, which shall come into force on the date of their publication in the Official Gazette 09-06-2022. 

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.

• MCA has issued a notification to notify the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2022 which shall come into force on the date of their publication in the Official Gazette i.e. 30-05-2022.

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 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.

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

• The Securities and Exchange Board of India 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). 

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.

• SEBI has issued a circular to clarify that stock brokers are required to maintain Demat accounts only under 5 categories. 

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.

• SEBI has issued a circular to allow Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) to conduct the Annual Meetings of their unitholders and other meetings through video-conferencing and other audio-visual means till the end of December. 

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.

• SEBI has issued a circular to further strengthen the Investor Grievance Redressal Mechanism (IGRC). The new mechanism will come into effect from July 1, 2022. 

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.

• SEBI has notified the Standard Operating Procedure for dispute resolution under the Stock Exchange arbitration mechanism for disputes between a Listed Company and/ or Registrars to an Issue and Share Transfer Agents(RTAs) and its Shareholder(s)/ Investor. 

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

• 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%.

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.

• RBI has published the Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022 which shall come into force with effect from December 1, 2022. 

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

• FSSAI has issued an Order for an extension of the last date for online submission of annual returns for the FY 2021-2022 till June 30, 2022. FSSAI has mandated the online submission of annual returns only through the FoSCoS portal. 

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

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

Contents:

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

Background- 194R

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Download PDF From Here:

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.