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Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

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Union Budget 2018-19: Government may cut corporate tax for larger firms : 06-12-2017


In a move that will benefit larger companies, the government may cut corporate tax in the upcoming Union Budget.

ET Now reported quoting sources that the government is in discussion to slash corporate tax for larger companies in the Budget. Also, it is likely to give the glide path for reducing corporate tax for all companies to 25 per cent from the current 30 per cent.

For extending the tax cut, the government could consider companies with annual turnover of Rs 100 crore to Rs 500 crore.

A cut in corporate tax will also depend on revenue outlook for GST in the next fiscal.

Source : Economic Times

15th Finance Commission: To realise the goals under new India 2022, here is what Centre must remember : 05-12-2017


The appointment of the Fifteenth Finance Commission (15th FC) has not come a day sooner. The Commission will require two years to make recommendations on tax devolution and grants for the period 2020-25 and many other issues referred to it in the terms of reference (TOR). Besides the chairman, it has two full-time members and two part-time members, and given their competence, experience and specialised knowledge, it is well-equipped to deal with the challenging TOR within the specified period. Most governments tend to be a little uneasy around the Finance Commission as the latter act independently, and the Union government has no control over what they recommend. The problem gets complicated as there is a tradition of accepting the core recommendations of the Commissions, making them awards. Although it is the Union government which issues the TOR through the president and tries to nudge the Commissions to make recommendation in its favour through various directives, most Commissions have taken the view that India is a Union of States and resources raised by the Union government belong to the nation to be deployed between the Union and states to meet their needs arising from Constitutional assignments. Indeed, the Constitutional provision under Article 270 for sharing of Union taxes is the recognition of the fact that for reasons of comparative advantage, centralised collection of the tax is necessary but the proceeds do not entirely belong to the Union and must be shared with the states to enable them to fulfil their Constitutional mandate. The transfers recommended by the Commissions through tax devolution under Article 270 and grant under Article 275 are not charities; they are meant to enable the states to provide comparable levels of services at comparable tax rates while ensuring a budget balance in the revenue account. Over the years, the presidential TORs have mandated the Commissions to deal with a number of matters other than the core tasks listed under Article 280 namely, devolution of taxes, grants in aid to be given to states and measures to supplement the consolidated funds of the states to supplement the resources of rural and urban local bodes. Under 280 (d) – “Any Other Matter in the Interests of Sound Finance”, they have been asked to make recommendations on a number of issues. The provision has also been used to give directives to the Commissions—and some of these have been controversial.

There are some important differences in the presidential TOR to the 15th FC. Unlike the past Commissions which were specifically asked to take into account the 1971 population when used in the devolution formula, the 15th FC has been asked to use the 2011 population. This is important for, public services have to be provided to the current population and not the population of any earlier date. The stipulation to use 1971 population for allocating resources arose from a parliamentary resolution. The Fourteenth Finance Commission (14th FC) was asked to take account of 1971 population and also subsequent demographic changes. Since the 12th Finance Commission, an important mandate given to the commission is to prescribe fiscal targets and recommend a roadmap for consolidation. While the states, by and large, have complied with the targets, the Union government has been flouting them on one pretext or another. In fact, after the 14th FC submitted a roadmap, the Fiscal Review Committee with NK Singh as the Chairman was asked to revisit the road map for the period until 2023, and the committee recommended more stringent targets. It will be interesting to see whether there will be any departure from this. While the TOR nudges the commission to adopt a more incentivised approach to making transfers to states, there is no such attempt to influence the behaviour of the Union government. Tax effort is an issue relevant to both the Union and the state governments and now that the power to levy GST rests with the GST Council, states have limited manoeuvrability. Populism is a bane arising from electoral politics, and both the Union and State governments are equally guilty. At least as far as the states are concerned, their resource assessment is done by taking taxable capacity rather than actual tax revenues in the assessments whereas Central taxes are simply projected for the period of the award. The two most important differences in the TOR of the 15th FC relate to (i) the issue of whether the revenue deficit grants to be provided at all and (ii) impact of substantially enhanced tax devolution to states following the recommendations of the 14th FC on the fiscal situation of the Union government, and to take into account the imperative of the national development programme, including New India 2022. Both raise issues of Constitutional propriety and will be questioned by the state governments.

The Constitution makes specific provision for giving “grants in aid of revenues” to the states under Article 275 (1), and to suggest that revenue deficit grants may not be provided is tantamount to asking the Commission to ignore Articles 275 and 280 3 (b). In fact, constitutional experts have questioned the legitimacy of giving grants under 282 for central schemes and consider Article 275 as the only legitimate channel. As a matter of fact, tax devolution is made on the basis of criteria representing revenue and cost disabilities and these still leave some states with uncovered expenditure needs over their revenue capacity and the commissions have used the grants under 275 (1) to target the transfers to bridge them. Is it the intention of the TOR to nudge the commission to act in violation of the Constitutional provisions? Similarly, to suggest that the 15th FC should review the impact of the “overly generous” devolution by the 14th FC and take into account the impending commitments arising from New India 2022 is to nudge the 15th FC to reduce the devolution to the states to meet the requirements of the central schemes. There are two issues with this. First, the 14th FC’s recommendation on increasing devolution from 32% to 42% is not as generous as it looks. It must be noted that unlike the previous Commissions, the 14th FC was asked to cover the requirements under both Plan and Non-Plan accounts which required it to subsume Gadgil formula grants, amounting to 5.5% of the divisible pool in their recommendation. In addition, the 14th FC avoided giving discretionary sectoral grants including environmental grants amounting to 1.5% of the divisible pool. Thus, the legitimate comparison should be between 39% and 42%. Furthermore, the 14th FC’s analysis showed that Union government’s spending on the State List increased from 14% during 2002-05 to 20% during 2005-11, and the increase in spending on Concurrent List was from 13% to 17%. The increase of three percentage points was only to give the states greater flexibility. The 15th FC has an important role at this juncture in strengthening the fabric of fiscal federalism and intergovernmental finance. Offsetting the fiscal disabilities of the states is critical to achieving and realising the goals under “New India 2022”

Source : Financial Express

CBEC calls for reality check to boost GST mop-up : 05-12-2017


Amid concerns over slowing goods and services tax (GST) collections, the Central Board of Excise and Customs (CBEC) has sought detailed field reports with a special focus on the top taxpayers.

Finance secretary Hasmukh Adhia will review the revenue position with senior officials in the department on December 9.

Field officers have been asked to submit a detailed analysis comparing tax payments, before and after GST was imposed, of the top 100 taxpayers in their jurisdictions as the government seeks to understand the reasons for collections slowing. The officials have been authorised to contact the assessees personally or even visit their premises.

India’s GST collections in October fell to Rs 83,346 crore from a high of over Rs 92,000 crore in September. Moreover, the Centre’s share has been low after payment of compensation cess to states. The total central GST collection in the first four months of the new tax — July, August, September and October — has been Rs 58,556 crore.

The government is looking to avoid any revenue shortfall as it’s keen to stick to the fiscal deficit roadmap while nurturing an economic revival. The fiscal deficit was at 96% of its full-year target by the end of October.

ET has seen the letter sent by CBEC directing field officials to analyse GST collections in detail.

Monthly Turnover Details

The department is providing data to field officials based on GSTR 3B filings by the big assessees to help them make comparisons with the pre-GST regime. Each commissionerate has to review the top 100 assessees as per central excise and service tax revenues according to FY17 data and match that with their tax payments in the GST regime. Where possible, the officials have to also consider valueadded tax and central sales tax revenues under the  previous regime.

Source : PTI

GST slows service activity in November, PMI at 3 month low : 05-12-2017


Sluggish demand and lower customer turnout due to the Goods and Services Tax (GST) rollout made India’s service activity contract for the first time in three months in November, a private survey showed on Tuesday.

The Nikkei India Services PMI Business Activity Index plunged from 51.7 in October to 48.5 in November.

A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.

“Following modest growth in the previous two months, hopes of a sustained recovery in November waned as marked growth in the manufacturing sector was broadly offset by a downturn in the service sector,” said Aashna Dodhia, Economist at IHS Markit, and author of the report.

As per the survey, underlying data highlighted that service activity fell in response to a drop in new business during November. According to anecdotal evidence, July’s GST continued to affect businesses as it led to sluggish demand and lower customer turnout. As with the case with activity, the rate of contraction in new work was modest.

A similar survey last week showed manufacturing activity in November expanding at its fastest pace in 13 months

Put together, the Nikkei India Composite PMI Output Index fell from 51.3 in October to a three-month low of 50.3 in November.

On employment front, despite unfavourable demand conditions, service providers continued to add to their workforce numbers. That said, employment growth eased to a modest pace and further away from September’s recent high.

Source : Economic Times

If this strategy of Modi works, then it could cement BJP’s position and set up his re-election in 2019 : 04-12-2017


Narendra Modi’s steady conquest of India’s state governments and his drive to unify taxes across the country are fueling a new competition between provincial chief ministers for investment in factories, businesses and jobs that is redrawing the country’s industrial map. The ruling Bharatiya Janata Party has extended control to a record 18 states, representing roughly 60 percent of India’s gross domestic product. That’s allowing Modi to erode decades of fighting between the central government and provincial leaders, who are responsible for everything from providing industrial land to law and order. While Modi’s lack of a majority in the upper house of parliament hinders his ability to implement change at the federal level, the state-level victories give him the chance to speed up reforms like land acquisition and labor laws across a large part of the country. And by forcing even non-BJP chief ministers to compete for investment by providing infrastructure and cutting bureaucracy, rather than through tax breaks and corruption, businesses are being encouraged to invest in states that previously had little to offer. “Over the past few years, we have seen a concerted effort by the central government to drive competitive federalism among states,” said Abhishek Gupta, Mumbai-based India analyst with Bloomberg Economics. “Irrespective of political affiliation, we should see state governments competing against each other for business investment.” Modi is fueling the new competition by sending state governments a higher share of federal tax revenue. If his strategy works, and more of the country sees an economic boost, it could cement the BJP’s position in power and set up Modi for re-election in 2019.

Rajasthan Reforms

Since the BJP took power in poor, landlocked Rajasthan in 2013, the state government has tried to promote industrial growth by reforming labor laws, land purchasing rules and power distribution. “Rajasthan is almost always among the leaders in terms of the highest number of positive regulatory changes,” said Richard Rossow at the Center for Strategic and International Studies in Washington, D.C. “We have seen several BJP states in addition to Rajasthan tend to be among the leaders in enacting reforms.” The BJP administration has purchased land for factories directly from farmers to set up dedicated industrial areas, removing one of the traditional bugbears of trying to build a factory in the country. Land negotiations have frequently become bogged down in talks with conflicting groups, such as farmers and local officials, giving rise to corruption and legal disputes that could hold a project up for years. One zone in Rajasthan, near the city of Neemrana was set up just for Japanese manufacturers, and now hosts Toyota Motor Corp. and Daikin Industries Ltd. “They are friendly to industry,” said Ram Narain Singh at his auto parts factory in Bhiwadi, Rajasthan. The BJP-ruled state of Madhya Pradesh is now emulating Rajasthan’s labor law reforms, Capital Economics analyst Shilan Shah said in a Sept. 13 note.

Political Consolidation

The BJP has spread across India at a remarkable rate. In March, it came to power in Uttar Pradesh, India’s most populous state with 200 million people, as well as in the smaller states of Goa and Manipur. In July, the BJP helped form the government in Bihar, a state of 100 million, after a governing coalition collapsed. Polls suggest the BJP will retain power in Gujarat in elections in December and could wrest control of mountainous Himachal Pradesh from the opposition Congress party. Rajasthan industry minister Rajpal Singh Shekhawat said economic growth gets a boost when both the central and state governments are the same party, because policy cooperation is more likely. “We believe that poverty cannot be alleviated by state investment alone,” Shekhawat said in his Jaipur office. “Poverty can only be eliminated by an accelerated pace of growth.” Despite a slump in India’s economic growth rate, partly thanks to the roll out of the goods and services tax and a shock move last November to demonetize much of the country’s currency, Modi remains popular among voters. A survey in May found he was the preferred prime minister for 44 percent of respondents and the BJP retained the level of support that gave it a sweeping victory in 2014. Still, the easier political gains at a provincial level may be coming to an end for the BJP.

‘Difficult States’

“What are left are the more difficult states — West Bengal, Kerala, Tamil Nadu — where our presence has been negligible at best,” said Yashwant Sinha, a senior party leader who was finance minister in a previous BJP government. BJP or not, with states still wielding so much power, investors suggest the quality of the local chief minister is a big factor in a state’s performance. In Uttar Pradesh, the ruling party appointed Hindu monk Yogi Adityanath as chief minister. He immediately channeled Hindu cow worship into a campaign against “illegal” slaughterhouses. Soon after, executives at legitimate meat export businesses complained of official harassment and a steep drop in business. Adityanath also came in for criticism after dozens of children reportedly died at a government-run hospital that wasn’t paying suppliers. Siddharth Nath Singh, Uttar Pradesh’s health minister, defended the chief minister’s actions and said the government acted firmly on the health crisis. In Haryana, another BJP-ruled state, the party appointed newly-elected legislator Manohar Lal Khattar to the top job in 2014. He has come under fire for the state’s handling of a series of violent riots in August related to the arrest of a religious leader, including one that killed more than 30 people The violence mirrored a week of angry protests in 2016 that prompted Maruti Suzuki India Ltd. to temporarily halt production at two factories. Khattar has defended the police response during the unrest, while Congress party members called for Khattar’s resignation.

Neeraj Daftuar, who works in Khattar’s office, said the protests have roots predating Khattar’s appointment and that “it would be unfair if we were to judge him just on the law and order situation.” “The recent law and order crisis in Haryana and the health tragedy in UP have complex causes, but the inability of the state to marshal an effective response cuts against Modi’s pledge to bring a dose of good governance to India’s states,” said Milan Vaishnav, a senior fellow at the Carnegie Endowment for International Peace. “This raises concerns not only for wary investors, but also for residents of the state.”

The BJP has also advocated populist policies such as waiving farmer loans that could widen state fiscal deficits. “Whether it’s a BJP state or a Congress state or a whatever state, it’s leadership that delivers results,” said Salil Singhal, an Indian businessman who works in both Rajasthan and Gujarat. “There is now a competition among the states to say, ‘Things are better here than elsewhere, so come and invest in my state.’”

First post-GST budget likely on February 1 : 04-12-2017


Finance Minister Arun Jaitley is likely to present India’s first post-GST and the current government’s last full Budget on February 1 next year.

The Budget session of Parliament may begin on January 30 with President Ram Nath Kovind addressing the Joint Session of both the Houses of Parliament, a senior government official said.

The Economic Survey, detailing the state of the economy, is likely to be tabled on January 31 and the Union Budget may be presented the following day, he said.

Scrapping the colonial-era tradition of presenting the Budget at the end of February, Jaitley had for the first time presented the annual accounts on February 1 this year.

The Budget presentation was advanced by a month to ensure that proposals take effect from April 1, the beginning of the new financial year.

Also, the nearly century old tradition of having a separate budget for the railways was scrapped and merged with the general budget.

The tentative schedule being drawn up for the Budget Session means that there would be less than a month’s gap between two sessions of Parliament. The Winter Session, which begins on December 15, will end on January 5.

The official said that at least on one occasion in the past — in 1976, when Indira Gandhi was the Prime Minister, had the winter session spilled into January. But in those days, the Budget was presented on the last day of February and so there was one-month gap between the two sessions.

The Union Budget 2018-19 would be the last full Budget of the BJP-led NDA government before the 2019 General Elections. As per the practice, a vote-on-account or approval for essential government spending for a limited period is taken in the election year and a full-fledged budget presented by the new government.

While P Chidambaram had presented the previous UPA government’s vote-on-account in February 2014, Jaitley had presented a full budget in July that year.

The official said this will be the first budget post implementation of the Goods and Services Tax (GST) regime.

Even though independent India’s biggest tax reform of GST was implemented from July 1, the Budget for 2017-18 (April- March), had followed the practice of tax revenue projections under the heads of customs duty, central excise and service tax alongside direct tax numbers.

With excise duty and service tax being subsumed in the Goods and Services Tax (GST), the classifications in the forthcoming budget may undergo change, he said.

While a new classification for revenues to be accrued from GST will be included in the Budget for next fiscal, for the current year two sets of accounting may be presented one for actual accruals during April-June for excise, customs and service tax, and the other for July-March period for GST and customs duty.

The official said that since the GST rates are decided by a GST Council, headed by Union Finance Minister and comprising of representatives of all states, the Budget for 2018-19 may not have any tax proposals concerning excise and service tax levies.

Only proposals for changes in direct taxes, both personal income tax and corporate tax, besides customs duty, are likely to be presented in the Budget along with new schemes and programmes of the government.

This will be Jaitley s 5th Budget in a row.

With the preponement of Budget, ministries are now allocated their budgeted funds from the start of the financial year beginning April. This gives government departments more leeway to spend as well as allow companies time to adapt to business and taxation plans.

Previously, when the Budget was presented at the end of February, the three-stage Parliament approval process used to get completed some time in mid-May, weeks ahead of onset of monsoon rains. This meant government departments would start spending on projects only from August-end or September, after the monsoon season ended.

Besides advancing the presentation date, the Budget scrapped the Plan and non-Plan distinction as well.

Source : PTI

Monetary panel set to hold rates citing inflation, growth revival : 04-12-2017


The Monetary Policy Committee (MPC) will likely vote to keep interest rates unchanged later this week citing inflationary pressure and a recovery in economic growth, according to an ET Poll conducted among 20 market participants.

In RBI’s bi-monthly policy announcement due on December 6, the MPC may also warn of rising prices and adopt a more hawkish tone, which could well be a prelude to a change in stance to tightening from neutral, said a majority of respondents. The MPC will meet on Tuesday and Wednesday.

“Growth concerns are likely to somewhat recede in the coming quarters as the positive impact of reform measures like GST (goods and services tax) will creep in,” said Shubhada Rao, chief economist at Yes Bank. With inflation and fiscal deficit remaining as risks, these factors collectively make a case for status quo while the markets look for the central bank’s assessment in the policy statement. “Room for rate cut is getting squeezed,” she said.

Retail Inflation may go up

India’s gross domestic product expanded 6.3% in the July-September quarter from a year earlier, reversing five quarters of slowing growth and up from a three-year low of 5.7% in the preceding quarter. That comes after disruptions caused by demonetisation in November last year and GST’s rollout on July 1

“India’s growth is below trend, temporarily disrupted by big-ticket reforms and a weak capex cycle,” said DBS Bank economist Radhika Rao. “The resultant negative output gap has helped contain price pressures, but this is likely to reverse if growth sets into motion next year, as businesses adjust to the new tax regime, (and) the deleveraging process hastens due to bank recap plans. Also, demand recovers, pulling up manufacturing activity alongside.”

Manufacturing activity expanded at its fastest pace in 13 months in November. The Nikkei Indian Manufacturing Purchasing Managers’ Index rose to 52.6 in November compared with 50.3 a month earlier.

“The domestic and global factors which may trigger a rise in inflation might prompt a hawkish response from the MPC, thereby signalling a change in the interest rate cycle,” said Saugata Bhattacharya, chief economist at Axis BankBSE 0.86 %. “MPC’s communication will be critical in this transition. More than rates, this review will be more about liquidity and transmission. Government’s reform measures are raising India’s potential output.”

The Consumer Price Index (CPI), the retail gauge for inflation, hit a seven-month high, led largely by higher vegetable and fuel prices.

It rose 3.58% in October over the same month last year. It may increase as much as 4.5% by March this fiscal year.

The MPC has maintained a neutral monetary policy stance with the objective of achieving the medium-term CPI target of 4% within a band of 2 percentage points on either side. State Bank of IndiaBSE 0.67 %, the country’s biggest lender, last week raised interest rates by about 100 basis points on bulk deposits.

Since the beginning of October, the benchmark bond yield has risen by about 42 basis points to 7.06%. A basis point is one-hundredth of a percentage point.

Earlier in August, the MPC cut its key policy rate by 25 basis points to 6%, the lowest since November 2010. “RBI’s current neutral stance has an option for rate increase, but nothing would happen immediately, be it change of stance or something else,” said Abheek Barua, chief economist at HDFC Bank. “An extended pause is expected in RBI’s policy action with the central bank anchoring the inflation cautiously.”

Source : Economic Times

CBDT PRESS RELEASE, DATED 1-12-2017


SECTION 92CC OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – ADVANCE PRICING AGREEMENT – INDIAN ADVANCE PRICING AGREEMENT REGIME MOVES FORWARD WITH SIGNING OF TWO MORE APAs BY CBDT IN NOV. 2017

CBDT PRESS RELEASEDATED 1-12-2017

The Central Board of Direct Taxes (CBDT) has entered into 2 Bilateral Advance Pricing Agreements (APAs) during the month of November, 2017. These Agreements are the first ever Bilateral APAs with The Netherlands. With the signing of these Agreements, the total number of APAs entered into by the CBDT has gone up to 186. This includes 171 Unilateral APAs and 15 Bilateral APAs.

These two APAs pertain to the Electronics and Technology sectors of the economy. The international transactions covered in these agreements include Distribution, Provision of Marketing Support Services, Provision of Business Support Services, etc.

The APA provisions were introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. The APA Scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Since its inception, the APA Scheme has been well-accepted by taxpayers.

The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

From GST to income tax to infra boost: India’s near term economic future in 6 points by Arun Jalitley : 01-12-2017


India’s economic growth made an impressive comeback in the second quarter of the fiscal year 2017-2018 at 6.3% after hitting a three-year low of 5.7% in the previous quarter, majorly due to structural reforms such as demonetisation and the massive destocking ahead of the implementation of the Goods and Services Tax. “The economic activities that registered a growth of over 6% in the Q2 of 2017-18 against the Q2 of 2016-17 are manufacturing, electricity, gas, water supply & other utility services, and trade, hotels, transport & communication and services related to broadcasting,” Ministry of Statistics & Programme Implementation said in a statement. Taking stock the second quarter performance, Finance Minister Arun Jaitley said, “It indicates that perhaps the impact of two very significant structural reforms – demonetisation and GST – is behind us and hopefully in coming quarters we can look for an upwards trajectory.” The Union Finance Minister yesterday, also gave a glimpse of India’s near term economic future. We take a look at six key takeaways.

 Reduction in GST slabs

Finance Minister Arun Jaitley on Thursday indicated that the number of slabs of Goods and Services Tax (GST) could be pruned to just three from four currently. The Goods and Services Tax (GST), rolled out on July 1, currently has four tax slabs of 5, 12 18 and 28 per cent. “We started the rationalization (of GST rates) ahead of schedule. Future rationalization will depend on how the revenue moves. We have thinned down the 28% slab. Moving ahead, we will rationalize it further to probably keep only luxury items in the highest bracket,” Arun Jaitley said. This will be achieved by merging the 12% and 18% slab. “We need to consider if we have the scope of merging the 12% and 18% slabs and have an interim rate. We have the lowest rate at 5%, then this new merged rate and the very thin slab of 28%. Eventually, that will be the direction,” Arun Jaitley said yesterday.

Focus on SMEs

The government is looking to prop up growth in the small scale enterprises sector. The Union minister said that the government is looking to focus on the informal as well as small-scale enterprises in the future. “Banks will fund SMEs and the informal sector from the leftover cash it received during demonetisation,” Arun Jaitley said. Further, Arun Jaitley pointed out that bulk of the job creation comes from this segment.

Fiscal Deficit Reduction

The government is looking to trim fiscal deficit to 3.2 percent of gross domestic product in 2017/18 compared with 3.5 percent in the previous year. “The last three years we have an exemplary record as far as maintaining that glide path is concerned. We intend to move on that track,” Arun Jaitley said on Thursday during the sidelines of an event.

Infrastructure Spending

In the last ten years, India has spent Rs 60 lakh crore in infrastructure. Finance Minister Arun Jaitley pointed out that the government has increased its allocation to infrastructure in the next budget. “In recent time, the government has increased infrastructure spending”, he said, adding the Budget 2017-18 made allocation of Rs 3.96 lakh crore for infrastructure sector.

Improving Tax Compliance

Arun Jaitley noted that one of the major hindrances to increase infrastructure spending in India has been the low tax compliance. “One of the great challenges which remained in India and that directly impinges on the creation of the world class infrastructure is that India was largely a tax non-complaint society,” he said. According to the Minister, “extraordinarily high taxation rates in the past” had encouraged people to evade taxes. Arun Jaitley also pointed out that  Indians need to be nudged to comply to economic norms and that the 5% income tax rate is a ploy to get people to start paying taxes.

Increased dependence on global economy

Arun Jaitley pointed out that India alone cannot generate a double digit growth, but would need the help of the global economy achieve it. “A 10 percent growth is a very challenging figure. It will not merely depend on domestic factors. It will also depend on how the world is moving,” Arun Jaitley said yesterday. According to Minister, exports contribute a lot to GDP, and if they fall due to a slomp in world economy, it could hamper India’s growth. “Exports contribute a sizeable portion to GDP (gross domestic product) itself. That is an area we certainly need to keep our fingers crossed, if the world were to slow down,” Arun Jaitley said.

Source : Financial Express

Manufacturing back in business, shrugs off GST, demonetisation blues : 01-12-2017


Stunning. That was the only word to describe the number flashing on television screens on the evening of August 31 this year. The first-quarter GDP numbers had just been released and growth had slipped to 5.7%, a three-year low.

While that in itself was shocking, what was even more stupefying was the collapse of manufacturing. Quarterly gross value added (GVA) growth for the sector slipped to 1.2% compared with 10.7% in the previous year. 1.2%!, that’s it.

Private sector growth, deduced from the data available from listed companies on the stock exchanges was even more stunning.

A negative 0.9% compared with a 10.2% growth in year-ago period! It took some time for the numbers to sink in. But when it did, the full extent of the problems in manufacturing induced by GST rollout became apparent. Businesses had stopped or sharply cut back production of goods in May-June ahead of the GST rollout on July 1. Small businesses still facing demonetisation after-effects suffered even more and that was fully reflected in the data captured by government’s statisticians.

Cut to November and the picture has changed. On Thursday, the second quarter GDP estimates were released showing a smart bounce in GDP and manufacturing. GVA for manufacturing rose 7% in the quarter compared with 1.2% in April-June, while private sector corporate growth was a healthy 11.4%. Of course, the numbers were still lower than 7.7% manufacturing growth in second-quarter of 2016/17 when the economy was humming along before the demonetisation shock in November last year. So there is  a lot of room to do more. This is obviously not the best performance and one should refrain from celebrating too much or calling this a spectacular turnaround. But there is no doubt that the woes caused by GST and demonetisation, at least for big and medium manufacturers, have ebbed and that they are on the cusp of faster growth.

Consider the following: GVA for mining and quarrying grew 5.5%, the highest growth rate the sector has posted in the first-half of the fiscal year since 2015/16. Electricity, gas water supply and utilities recorded a growth of 7.6% in GVA compared with 5.1% in the year-ago quarter.

The star performer here was electricity which grew by 6.1% in July-September compared with 3.1% last year.

Commercial vehicle sales jumped 21% in the second-quarter, while cargo handled by civil aviation grew by 18.9%; railway freight growth measured by net tonne kilometres was up 5.0%. Construction has been having a bad time but second-quarter numbers show that it has actually held up quite well. Now, construction here covers cement production, consumption of finished steel. These haven’t grown as much as the previous year but the category has grown 2.6%, which is up from 2.0% growth in the first-quarter.

An interesting anomaly needs to be mentioned here and that is the discrepancy between the cement production data and the actual volume growth reported by major cement companies in the three-months ended September 30.

Almost all the big cement firms reported double-digit volume growth in the second-quarter with ACC and UltraTech volumes rising 18% followed by Gujarat Ambuja’s 12% growth. Smaller JK Lakshmi Cement too reported 10% volume growth. New capacities through mergers helped support this growth but still this is surprising as the second-quarter is generally weak for cement companies due to monsoon and dull construction activity across the country. So one shouldn’t read too much into the dip  in cement production and I think a fuller analysis is needed to understand the demand conditions for cement companies.

On Thursday, we had another interesting data release and that was the performance of core industries. The eight core industries, that is cement, steel, fertiliser, natural gas, crude oil, refinery products, coal and electricity grew by 4.7%, compared with 7.1% last year. The figure was the same as previous month and the joint highest growth for this fiscal year. Once again, it shows a revival in manufacturing led by steel, refinery products, coal and electricity.

Source : PTI

GST: Anti-profiteering becomes a board issue : 01-12-2017


Anti-profiteering under the goods and services tax (GST) has gone from being a plain costing issue to one that’s worrying board members. Several directors have written to company CFOs and finance teams seeking an update on price reductions under GST, said people aware of the matter.

The government has been actively pushing companies to pass on the benefits of GST, especially after rate reductions earlier this month, and directors don’t want their companies to get caught up in complaints on this score with the anti-profiteering authority about to be established, experts said. On the other hand, they are also concerned about maintaining profitability

Central Board of Excise and Customs (CBEC) chairperson Vanaja Sarna recently wrote to about 100 consumer goods companies regarding GST benefits being passed on to consumers. Directors in most of these companies are asking for updates on anti-profiteering, said the people cited above. Some of the queries are also being directed at tax advisors, they said.

“Anti-profiteering has become a board issue, subsequent to the letter from CBEC,” said Sachin Menon, national head, indirect tax, KPMG India. “The basic question is what will be the benchmark price that companies must take, on the basis of which reduction has to be applied.”

Tax experts said companies are also concerned about profitability. While some companies have already announced by how much prices would be slashed, it’s just beginning of a complex pricing exercise, they said.

“While passing on rate reductions to end customers is a complex task in itself, considering the specific supply chain and pricing aspects that are relevant to a business, determining input tax credits that are required to be passed on is a very intricate exercise requiring significant cost accounting expertise,” said MS Mani, partner, Deloitte India.

India’s biggest fast-moving consumer goods (FMCG) including Hindustan Unilever, Proctor and Gamble, Marico, Dabur and Mondelez told ET they have already passed on the benefits of GST by either slashing the maximum retail price (MRP) or by increasing grammage.

Insiders said many boards are planning to discuss anti-profiteering at upcoming meetings, with CFOs and tax advisors asked to make presentations along with the latest updates.

“Many companies require external assistance in order to prepare a report card documenting the steps taken and outcomes achieved in order to comply with the anti-profiteering regulations,” said MS Mani, partner, Deloitte India.

FMCG companies, especially listed ones, need to balance the expectations of investors and consumers, experts said. While being penalised for profiteering is a risk, not able to show healthy margins could backfire on the company’s stock.

“The problem for several companies is maintaining a balance between price reductions and profitability,” said an independent director with one of the companies. “It’s a reputation risk if tomorrow the government pulls up the company but if margins dip, it could reflect on investor sentiment.”

Most companies are conducting extensive product-wise analysis, having cut prices to avoid being on the wrong side of the law, said tax experts. This is mainly because there is no mechanism to estimate anti-profiteering and whether companies can deduct compliance costs from the benefits they derive from GST rate cuts.

Tax experts also said there is no guides on cutting prices.

“Most products will have fluctuating price lines depending on the season/discounts during a year,” said Menon of KPMG India. “Though boards want to adhere to anti-profiteering norms, the costing is turning out to be a nightmare for most companies as there are no parameters as to how such a complex calculation–for example, product level or entity level–could be carried out.”

As it stands today, anti-profiteering mostly mandates companies to pass on benefits derived from input tax credits or output tax due to GST to consumers. The focus of the exercise is currently on companies that directly impact consumers and not passing on benefits of GST, which could trigger inflation going ahead.

Source : Economic Times

F.NO. DGIT(Vig.)/HQ/SI/2017-18 – 30-11-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – INSTRUCTIONS FOR UNAUTHORIZED EXPANSION OF SCOPE OF LIMITED SCRUTINY

LETTER [F.NO.DGIT(VIG.)/HQ/SI/2017-18]DATED 30-11-2017

CBDT has issued detailed guidelines/directions for completion of cases of limited scrutiny selected through CASS module. These guidelines postulate that an Assessing Officer, in limited scrutiny cases, cannot travel beyond the issues for which the case was selected. The idea behind such stipulations was to enforce checks and balances upon powers of an AO to do fishing and roving inquiries in cases selected for limited scrutiny.

2. Further, the guidelines for proper maintenance of order sheets have been given in the Manual of Office Procedure issued by the Directorate of Organisation and Management Services. The Manual clearly lays down:—

A. The minutes of the hearing must be entered with date, in the order-sheet.
B. Make proper order-sheet entries for each posting, hearing and seeking and granting of adjournments.
C. If nobody attends a hearing or the request for adjournment comes after the hearing date, enter the facts in the order-sheet.

Maintenance of a cursory and cryptic order sheet shows irresponsible, ad hoc and undisciplined working of any officer.

3. Instances have come to notice of CBDT where some Assessing Officers are travelling beyond their jurisdiction while making assessments in Limited Scrutiny cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT Instructions dated 26-9-2014, 29-12-2015 and 14-7-2016. These instances have been viewed very seriously by the CBDT and in one case the Central Inspection Team of the CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of limited scrutiny, no approval was taken from the PCIT for conversion of the limited scrutiny case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. The Officer concerned has been placed under suspension.

4. In view of discussion in the preceding paragraphs it is once again reiterated that the Assessing Officers should abide by the instructions of CBDT while completing limited scrutiny assessments and should be scrupulous about maintenance of note sheets in assessment folders.

India seen posting stronger growth as businesses adjust to new tax : 30-11-2017


India’s economic growth pace likely picked up in the three months ending in September, halting a five-quarter slide as businesses started to overcome teething troubles after the bumpy launch of a national sales tax. The economy also has moved past the disruptions encountered after India’s shock ban on high-value banknotes in November 2016, economists say. For July-September, the median in a Reuters poll of economists was for annual growth of 6.4 percent. Forecasts ranged from 5.9 percent to 6.8 percent. If there was 6.4 percent growth, that would mark a sound acceleration from 5.7 percent in April-June, but still lag China’s 6.8 percent and Philippines’ 6.9 percent for the three months through September.

The data could help Prime Minister Narendra Modi, who is facing criticism over the hasty July launch of Goods and Services Tax (GST) – aimed at transforming India’s 29 states into a single customs union – but hitting millions of small businesses due to complex rules and technical glitches. Big companies have largely adjusted to the changes while benefiting from reduced logistics costs. Prominent Indian firms had their best profit growth in last six quarters in July-September, according to Thomson Reuters data.

The results are an indication that firms are starting to recover after being hit earlier this year by uncertainty tied to the rollout of a new tax and a shock ban on cash in late 2016. In July-September, auto sales, manufacturing, electricity generation grew more quickly than in the previous quarter. “We expect a gradual recovery led by the industrial sector as businesses adjust to the GST regime,” said Aditi Nayar, an economist at ICRA, the Indian arm of Moody’s Investors Service.

RATINGS UPGRADE

On Nov. 17, Moody’s upgraded India’s sovereign credit rating for the first time in nearly 14 years, saying continued progress on economic and institutional reforms would boost its growth potential. It expects the economy to grow 6.7 percent in the fiscal year ending March 31, and 7.5 percent the following year. Many private-sector economists expect faster growth in the current quarter and January-March as consumers and businesses step up spending and global recovery gains traction.

 Urjit Patel, governor of the Reserve Bank of India (RBI), said last month that signs of an upturn were visible and growth was likely to top 7 percent in those quarters. Modi’s administration hopes the ratings upgrade can attract more foreign investors, who pumped $15 billion into Indian equities in July-September, up 44 percent from the previous quarter. The main NSE share index is up 27 percent in 2017.

Still, the world’s seventh largest economy, which grew at more than 9 percent a year from 2005 through 2008 is far from firing on all cylinders. Domestic demand and private investments remain weak. After front-loading state spending in the fiscal year’s first half, Finance Minister Arun Jaitley has limited room to spend amid slowing revenue growth.

Finance Ministry officials hope the central bank will cut interest rates soon, but analysts say that rising global oil prices, which could pinch consumers through higher inflation, may instead force the RBI to hike in the second half of 2018, denting growth momentum.

GST cuts: Get more for same price : 30-11-2017


The next time you visit the market to shop for your daily essentials, you may see bigger pack sizes at the same price as some consumer goods companies are planning to increase the weight of their products to pass on gains from revised GST rates.

Authorities had written to companies to pass on the benefits of cuts in GST to consumers. And companies are now devising ways to comply with these requests. Mondelez India, the maker of Bournvita, Cadbury and Oreo cookies, said, “To pass on the benefits to our consumers, we are either reducing prices where the coinage is not an issue or increasing grammage, which means giving more product to the consumer at the same price. This is important for a large number of our products at price points like Re 1, Rs 2, Rs 5 and Rs 10 — which are critical for consumer convenience and value.”

Similarly, Hindustan UnileverBSE -1.30 % (HUL), the maker of daily household products including Rin, Domex and Dove, has increased the grammage on Rin Powder Rs-10 pack from 125gm to 140gm. “This has also been advertised to ensure consumers are aware of the change,” said an HUL spokesperson.

In addition, around 600 of HUL’s stock keeping units (SKUs) are being impacted by the reduction in maximum retail price (MRP), or increase in weight. “As we pass on GST rate reductions, the benefits to consumers across categories will be between the range of 7% and 10%,” the spokesperson said. “We are confident that the transition of a sizeable part of our portfolio to reduced MRPs/increased grammage will be completed in the next few weeks.”

Other companies that TOI reached out to were Marico, ITC and GSK, which did not respond to queries on weight-increase of products. Pratik Jain, partner and leader indirect tax at consulting firm PwC, said, “From a consumer standpoint, increase in weight also results in effective reduction of price, hence it should be viewed as sufficient compliance of anti-profiteering laws.”

Source : PTI

Finance ministry, exporters spar over GST refunds, claims : 30-11-2017


The revenue department and the exporters are sparring over unpaid refunds and tax credits that have accrued to businesses since Goods and Services Tax (GST) was implemented in July. The finance ministry put out a release saying that exporters have claimed integrated GST refunds of Rs 6,500 crore during the first four months of the rollout, while input credit claims added up to Rs 30 crore.

But exporters contested the numbers. Citing discussions during an official meeting, exporters claimed that the finance ministry had said that Rs 6,500 crore was around 15% of the overall dues to exporters.

“On this basis, the total outstanding refund would be to the tune of Rs 43,000 crore. Central Board of Excise and Customs (CBEC) has no figure of GST refund due to services exports as the same is not routed through customs or where shipping bill is filed. The quarterly exports of services is to the tune of $50 billion,” said a source.

While the tax department advised exporters to file claims in proper form with matching shipping bills to facilitate early settlements, businesses said that problems with the system were making it tough to comply.

Many exporters using inland container depots have told the commerce department that their IGST refund claims were not traceable. Since they have received duty drawback, the shipping bills have moved into ‘history basket’ of the system. As a result, export manifest at the gateway port, which is now being filed, is not getting linked with the shipping bill to facilitate the claim. “This was not told in July. Now, they want us to do all this but even that is not showing. CBEC is in denial mode and that makes it difficult to find an effective solution,” said an exporter.

On its part, the finance ministry said, exporters can upload the final sales return for August in GSTR-1 on GST Network (GSTN) portal from December 4.

The CBEC had last month started refunds for exporters of goods who have paid IGST and have claimed refund based on shipping bills. Earlier this month, it allowed businesses making zero-rated supplies or those who have paid IGST on exports or those wanting to claim input credit to fill up a specified form.

Source : Times of India

Arun Jaitley cracks whip, says no loan waivers for capitalists : 29-11-2017


The government on Tuesday asserted that it hasn’t waived any loans of big defaulters, scotching rumours that debts of capitalists are being written off by banks. In a blog, finance minister Arun Jaitley said the time has come to be apprised of facts in this regard and one must ask at whose directive the loans, which have now turned non-performing assets (NPAs), were offered between 2008 and 2014 by public-sector banks (PSBs). “Government has not waived any loans of big NPA defaulters …,” Jaitley said. Under the new Insolvency and Bankruptcy Code, cases have been initiated in the National Company Law Tribunal for a timebound recovery from 12 largest defaulters, as recommended by the Reserve Bank of India. These defaulters alone account for non-performing assets (NPAs) worth around Rs 1.75 lakh crore. “The public needs to ask the rumour mongers at whose behest or under whose pressure were such loans disbursed.

They should also be asked that when these debtors delayed in repayment of their loans and interest thereon to public sector banks, what decision was taken by the then government,” the finance minister said. The finance minister said instead of taking firm and bold decision against debtors and defaulters, the then government eased loan classification norms to keep defaulters as non-NPA account holders. He added that the asset quality review (AQR) carried out for clean and fully provisioned balance-sheets in 2015 revealed high NPA. Consequently, loans of about Rs 4,54,466 crore, which were actually fit to be NPAs but were under the carpet, were recognised after intensive scrutiny under the AQR, said Jaitley.

Separately, the finance minister, after launching the Paytm Payments Bank, held that technology has changed the way the banking is done in the country. Digital transaction is fast replacing the need for more cash, thanks to a series of government initiatives to formalise the economy. “We are all realising that convenience, security and even proprietary lies in switchover itself,” he said. With the aim of boosting credit offtake as well as job creation, the government has taken the critical decision of infusing huge capital into state-owned banks, the finance minister said in his blog. Last month, the government announced a massive Rs 2.11 lakh crore capital infusion plan for the PSBs through 2018-19.

“Through capital infusion, banks weakened by NPAs would become strong and become capable of raising adequate capital from the market,” Jaitley said in the blog. However, even this infusion will be tied to strict conditions. The PSBs will have to carry out several reforms so that such situations do not recur, he added. The finance minister asserted that through strong steps taken over the last three years, “not only have the problems received as legacy” been addressed but reforms for rebuilding the strength of PSBs have been boosted. The consolidation in the public-sector banking space to create few strong banks started with the integration of State Bank of India and its associates, and the latest recapitalisation move will strengthen this process.

Source : Financial Express

Badri Narain Sharma named GST anti-profiteering body Chairman : 29-11-2017


Badri Narain Sharma, a Rajasthan cadre IAS officer of 1985 batch, has been appointed the first chairman of the National Anti-profiteering Authority (NAA), the body set up under the goods and services tax (GST) to ensure that the benefits of lower taxes under the new regime are shared with consumers.

Sharma, 58, at present an additional secretary in the department of revenue in the finance ministry, will have rank and pay of secretary at the Centre.

The Union cabinet last week cleared the setting up of the NAA, which will have a two-year tenure that can be extended by the GST Council.

The tenure of the authority will begin the day Sharma assumes charge. Prior to the revenue department, Sharma was additional secretary in the power ministry and before that in the Commercial Taxes Department in Rajasthan.

Sharma has been closely associated with the formulation of GST and its implementation, the finance ministry said in a statement. “As its first chairman, Shri BN Sharma is expected to give a direction to the Authority in boosting the confidence of consumers that GST is a ‘Good and Simple Tax’ in the overall national interest,” the statement said.

Sharma will be assisted by four senior officials of the rank of joint secretary and above who have been appointed as technical members in the authority – JC Chauhan, chairman, tax tribunal, Himachal Pradesh; Bijay Kumar, principal commissioner, GST, Kolkata; CL Mahar, principal commissioner GST, Meerut and R Bhagyadevi, ADG, Systems, Chennai .

A high-level committee headed by cabinet secretary PK Sinha selected the chairman and members. “The Authority is mandated to ensure that the benefits of input credit and the reduction in GST rates on specified goods or services are passed on to the consumers by way of a commensurate reduction in prices,” the statement said.

The authority has powers to order a business found not to have passed on benefits of GST to reduce its prices or return the undue benefit along with 18% interest to the consumers of goods or services. If the undue benefit cannot be passed on to the consumers, it can be ordered to be deposited in the Consumer Welfare Fund.

In grave cases of violation, the authority also has the power to impose penalty on the defaulting business.

Source : PTI

India’s government is getting one big reform right : 29-11-2017


According to one of India’s most respected bankers, it’s a once-in-a-lifetime opportunity — a mammoth sale of distressed assets, some $40 billion in the first round. Much could go wrong, of course, especially given that so many powerful interests have so much money at stake in the process. Fortunately, Prime Minister Narendra Modi’s government, which has stumbled in some of its biggest policy moves recently, appears to be handling this particular challenge with both agility and a sense  of urgency. That mindset should now be carried over into other parts of the reform agenda.

The fire sale of assets has been made possible by one of Modi’s true achievements: the passage of a modern law to replace the creaking, ineffectual bankruptcy mechanism India had used earlier. The law gives courts the power to appoint resolution professionals to sell off and revive investments and companies financed by loans that have turned bad. The hope is that India’s state-controlled banks will recover some of their money and that the economy-wide problem of stalled investment and stranded  assets might finally begin to shrink.

As has been made clear by the botched rollout of a nationwide goods-and-services tax, however, even a landmark reform can do great damage if not handled well. One problem with the new law has been apparent since the beginning: It didn’t say anything about who could or couldn’t bid for these distressed assets, leaving open the possibility that the same company owners who had bankrupted their firms — many of them powerful and politically connected families — could buy them back at pennies on  the dollar.

This might seem counterintuitive. Someone who’s deep in debt wouldn’t seem likely to be the winning bidder at a blind auction. In India, however, company owners (or “promoters,” in the local terminology) are adept at squirrelling away money — whether company revenues or funds borrowed with the firm’s assets as collateral — using complicated group holdings and privately held corporations. At least some owners undoubtedly saw the new bankruptcy act as a way to retain control of the firms they had mismanaged, while avoiding the need to repay the loans that state-controlled banks had unthinkingly handed them.

At first, state banks seemed happy to oblige. Some senior bankers argued that the existing owners at least understood the sectors they were in and, if they offered high bids, banks should accept them in order to preserve the value of the assets as far as possible. In one much-publicized example, one of the banking system’s largest debtors reportedly tied up with a Russian bank to bid for a steel company it had previously controlled.

This loophole threatened to discredit the whole process. Most observers have an understandably hard time understanding why owners who have demonstrated their inability to judge market conditions, or to abide by their promises, should be treated like any other bidder. Even if some of them had defaulted because of a shift in the economic climate rather than malfeasance or mismanagement, the damage done to the credibility of the process by including them in auctions outweighed any possible benefit.

So, it’s welcome that the government last week issued an ordinance modifying the bankruptcy law so that anyone who runs a company into the ground is forbidden to bid for a distressed asset. (Parliament still needs to ratify the change within six months.) The government says that its “amendments aim to keep out such persons who have willfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.”

If nothing else, this means that, in the future, owners will be quicker to try and push their companies into resolution; the law allows them one year to raise funds that would allow them to retain control. That should help clear the credit pipes a bit faster.

But there was always meant to be a larger purpose to bankruptcy reform as well: to revive a certain degree of faith in India’s corporate sector, which had sullied its reputation over the past decade as high-profile promoters took out loans they knew they couldn’t repay, defrauded investors and outright mismanaged their businesses. A bankruptcy process that ended with the same bunch of capitalists in control of the same sectors might have saved some banks — and taxpayers — money in the short run. But it wouldn’t have achieved the aim of restoring credibility, whether in state-controlled banks or in troubled infrastructure companies.

The new ordinance gives the investment-starved Indian economy a chance to regain some dynamism and for investors to begin to trust the private sector again. India Inc. needs new blood and new faces. The government’s trying to ensure it finds them.

Source : Economic Times

Central GST revenue less than states; government explains why : 28-11-2017


The Finance Ministry has explained the reason behind the revenue shortfall under the Central Goods and Service Tax, saying that the liabilities were “discharged using transition credit rather than by way of cash.” According to government data, states have collected Rs 87,238 crore by way of SGST between August and November 26, while the total CGST collected for the same period has been Rs 58,556 crore.

“Thus, taxpayers are using the balance credit available with them in the previous tax regime, which is the reason why there is an additional revenue gap in the Centre’s revenue,” the Finance Ministry tweeted. The government said that the total collection of the GST for the month of November so far has been Rs 83,346 crore and over 95.9 lakh taxpayers have been registered under the new regime. The Finance Ministry, in a series of tweets, said, “50.1 lakh returns have been filed for the month of October until 26th November.”

The government also said that states are being compensated for their revenue shortfall. “By way of settlement an amount of Rs. 31,821 crores have been released to the States for the months of August, September & October 2017. Rs. 13,882 crores are being released by way of settlement to all the States for the month of November 2017,” the government said.

As per the Goods and Services (Compensation to States) Act 2017, states’ revenues are fully protected against any shortfall in GST collections. A compensation amount of Rs. 10,806 crores have been released to all the States for July and August 2017.

A compensation of Rs 13,695 crores is also being released for the month of October and September, the Finance Ministry said, adding that states’ revenues have been fully protected taking 2015-16 as the base year. In addition to this, an amount of Rs 16,233 crore has been transferred from IGST account to CGST account by way of settlement of funds on account of Inter-State supply of goods and services in the month of August, September and October.

The total number of GSTR 3B returns filed for the return period July, August, September and October till November 26 has been Rs 58.7 lakh, Rs 58.9 lakh, Rs 57.3 lakh and Rs 50.1 lakh respectively.

Source : Financial Express

Tax advisers may come under Income Tax department’s scanner : 28-11-2017


Less than a month after International Consortium of Investigative Journalists (ICIJ) leaked financial data known as Paradise Papers, tax advisers of Indians named in the list of those with money stashed in tax havens could find themselves in the income tax net, said two people in the know. However, finance secretary Hasmukh Adhia was non-committal regarding the issue.

“In the investigation matter, we cannot disclose the processes which are initiated or which are going on. We therefore, cannot give point-wise reply to your questions. As and when the investigations are completed, we can let you know about the actions taken out of it,” said finance secretary Hasmukh Adhia in response to a detailed list of queries from ET.

The government is set to invoke an income tax provision introduced last year which provides power to the revenue authorities to penalise anyone aiding or advising in tax evasion. Names of about 700 Indians including several politicians, businessmen and film personalities figure in the leak.

According to one of the persons in the know, the government is looking to test a recently passed section under the income tax law where tax advisers can be pulled up under the new section—277A— which refers to “falsification of books of account or document” that breaks or circumvents domestic laws.

Most tax advisers ET spoke to say such an action would create panic among the tax community. “Often clients don’t even share all the details. How is the tax adviser supposed to know the exact details, and it’s quite harsh if the government is looking to bring action against tax advisers,” said a tax adviser based in New Delhi.

“It will be unfortunate if this happens. Revenue authorities must differentiate between tax avoidance and tax evasion, the latter is not a crime,” a tax adviser of an HNI whose name has figured in the earlier set of tax dodgers known as the Panama Leaks, told ET. The government has already announced a multi-agency probe in Paradise Papers.

As far as tax advisers go, there is one more weapon up the taxman’s sleeves. “Action can be taken against a tax adviser if it’s proven that an advice is being imparted with a sole intent to escape tax. Such penal provisions are embedded under Income-tax Act, the newly amended Benami Act. However, this distinction between tax planning and tax evasion is required to be understood. In case of any tax planning advice, penal consequences may not be attracted,” said Paras Savla, partner, KPB  & Associates.

Income tax experts say it’s not illegal to hold a foreign bank account and any Indian individual can open and hold a foreign currency account with any bank outside India for making remittances under LRS (Liberalised Remittance Scheme). However, this could be a grey area as there is a limit on remittances.

The Enforcement Directorate (ED) can still investigate for FEMA (Foreign Exchange Management Act) or PMLA (Prevention of Money Laundering Act) if they suspect money laundering or if the depositor has transferred more money than prescribed under the law.

According to another person in the know, the multi-agency body probing the Paradise Papers could also issue multiple summonses simultaneously to some of the Indians whose names have appeared in the leaks within next one month.

Source : PTI

Banks can now use provisional ratings for rejigging loans : 28-11-2017


The Reserve Bank of India has allowed lenders to rely on ‘provisional ratings’ — which will not be disclosed to the market — for rejigging loans to distressed companies before resorting to the insolvency mechanism. Over the next one month, large banks will attempt to spot distressed companies whose loans can be restructured based on provisional ratings .

Till now, all upgrades, downgrades and outlook on debts by credit rating agencies were put out in the public domain. Faced with a mountain of bad loans and few resolutions, financial regulators are making an exception.

NPA loans have a ‘D’ or ‘default grade’ rating. The provisional rating will capture whether the execution of the restructuring proposal would upgrade the rating to ‘investment grade’.

However, the information of a provisional ‘upgrade’ of the debt (from ‘D’ to ‘investment grade’) would be primarily meant for banks and RBI. In such cases, the Securities and Exchange Board of India has exempted rating agencies from the rule that requires any rating action to be immediately communicated to financial markets.

Such ratings have to be of minimum investment grade and obtained from two rating agencies. This will enable banks to evaluate the viability of a corporate borrower and its ability to service loans left after haircut.

“If there is provisional upgrade, banks and RBI would have comfort in approving the restructuring instead of referring the borrower to NCLT (National Company Law Tribunal). RBI has recently informed the decision to banks and agencies,” a banker told ET.

Provisional ratings will depend entirely on the loan restructuring terms — which typically entail easier repayment terms, lower interest and haircut against commitment of fund infusion, sale of idle or loss-making assets and furnishing of guarantee and additional security. Lenders will give rating agencies the mandate to evaluate whether a loan account qualifies for provisional upgrade based on a specific restructuring proposal.

“These will be largely out of pre-NCLT accounts and companies where bankers feel there is a possibility of turnaround,” said a banker. Soon after a default, any financial creditor (among others) can file a petition before NCLT to initiate proceedings under the Insolvency and Bankruptcy Code.

“Many earlier loan restructuring plans did not work out or result in any rating upgrades. So, we believe RBI wants rating agencies and banks to check the viability and see whether a company deserves a lifeline. Rating agencies have probably been brought in for external validation,” said a person dealing with stressed assets.

The regulator has clarified that rating agencies will not carry out advisory services in estimating a company’s ‘sustainable debt’ — the quantum of debt that a distressed company would be able to service. Say, of the Rs 1,000 crore debt on the books of a borrower, the unsustainable portion of Rs 400 crore is converted into equity while the balance Rs 600 left as debt as the sustainable part.

Rating agencies will evaluate whether this sustainable debt is worthy of investment grade rating while lenders will carry out due diligence to estimate the quantum of such debt. The exercise will test the ability of banks as well as rating agencies in finding a way out for debt-laden companies. The possibility of additional endorsement on loan restructuring by an external agency (like a rating agency) was flagged off by a regulatory official earlier this year. RBI has now formalised the mechanism through recent communications.

Source : Economic Times

Some promoters escape tight insolvency norms : 27-11-2017


Promoters of at least four small companies managed to pass their resolution plans before New Delhi tweaked the bankruptcy code, limiting the ability of erstwhile defaulting owners from buying back their assets at the conclusion of time-bound recovery proceedings.

Synergies-Dooray, Chhaparia Industries, Sree Metaliks, and the West Bengal Essential Commodities Supply Corporation have all presented successful resolution plans approved by respective chapters of the National Company Law Tribunal (NCLT).
“The ordinance is not retrospective,” said Sandeep Parekh, founder of Finsec Law Advisors. “Those companies were fortunate enough to go through successful resolution plans under the code, but without the new amendments. The outcome could have been different under the latest ordinance subject to promoters’ eligibility.”
In absence of adequate bidders, promoters have mostly regained control in all those companies where they were resolution applicants bidding for their own assets.
The first was Synergies Dooray, approved by Hyderabad NCLT. Creditors settled dues for just ?54 crore out of a total of about ?900 crore unpaid loans in the age-old case, which was once pending before the Board for Industrial & Financial Reconstruction (BIFR).
Kolkata-based resolution professional Mamta Binani had received plans from three entities, including Synergies Castings. The group company’s plan was finally submitted to the Hyderabad NCLT, which accepted it.
“There could be chances that those successful resolution cases may be challenged where the promoters are disqualified under the new ordinance,” said Babu Sivaprakasam, partner at Economic Laws Practice (ELP). “Whether those promoters were fortunate enough to regain control over their companies is to be seen.”
“The amended law suggests that even if a resolution plan is submitted for approval by promoter(s), it won’t go ahead unless all the tests are passed as prescribed in the Ordinance,” said Anil Goel, founder, AAA Insolvency Professionals. “Genuine promoters should always have an edge.” – www.economictimes.indiatimes.com [27-11-2017]
Source : Times of India

Government is keen to meet FY18 deficit target : 27-11-2017


The government is keen on sticking to the fiscal deficit target for the year and will look for ways to make up for any revenue shortfall that could hinder this plan. The thinking at the highest level of the government is that the fiscal deficit target of 3.2% of GDP for FY18 should be met, though there can be some relaxation in the consolidation roadmap beyond that.

“There seems to be some discomfort about letting go fiscal goals… The thinking as of now is that the target should be met,” said a senior government official aware of the matter.

There have been preliminary discussions on the issue but a final call will only be taken after the revenue position becomes clearer post December. The government has met budget targets in the last three years, which has helped establish budget credibility, something that it does not want to compromise.

Following a slump in growth in the third quarter to a three-year low, there had been speculation about a fiscal stimulus package aimed at boosting the economy but that’s abated amid signs of revival. Recent assessments by Moody’s, which upgraded its India rating, and Standard and Poor’s, which kept it unchanged, have cited the fiscal deficit as a key risk.

The NK Singh committee set up to review the fiscal roadmap has given the government some wriggle room to breach the target in years of “far-reaching structural reforms in the economy with unanticipated fiscal implications” but the government is not inclined to take advantage of this. Besides, fiscal slippage at this time won’t sit well with inflation set to accelerate and the current account deficit, though manageable, beginning to deteriorate.

A rising fiscal deficit at this stage could exacerbate both. Finance minister Arun Jaitley said last week that the government had an impeccable record on fiscal deficit.

“We intend to move forward on this,” he had said. “No pause but challenges arising from structural reforms which could change the glide path (of fiscal consolidation),” Jaitley had said earlier this month.

There had been concerns over the fiscal deficit running ahead of the trend halfway through the year. While that has eased somewhat, the government will find it difficult to stay within target with uncertainty over some revenue items. The dividend from the Reserve Bank of India at Rs 31,659 crore is well below what was budgeted. There is uncertainty over spectrum realisation with the telecom sector struggling and tax revenues uncertain with the rollout of the goods and services tax (GST) on July  1.

The government expects Rs 44,300 crore from spectrum auctions and Rs 74,901 crore in dividends from banks and RBI. There may be some additional spending as well, for instance, on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which may need more funds. At the end of September, the fiscal deficit was 91.3% of that budgeted for FY18, well ahead of 83.9% at the same time last year. The government expects the current year to be a challenging one.
“This is a year of transition, lots of reforms are being done, (structural) reforms, fundamental in nature, which have made their impact on growth, on revenues and others. But the commitment of the government to stay on course on fiscal consolidation, in the medium term, is completely there,” economic affairs secretary Subhash C Garg had said last week.

“Transition is challenging, definitely. But how much, whether it is substantial, whether it’s anything meaningful, for that, still the assessment is to be made,” Garg said. Independent experts believe slippage is unavoidable. “Notwithstanding the encouraging budget numbers in September, there is a risk of a modest miss to the FY18 deficit target, which is currently at 3.2% of GDP,” DBS economist Radhika Rao said in a recent note.

Consolidation Road Map
The NK Singh committee had suggested a new fiscal consolidation focus on government debt rather than the fiscal deficit. It suggested a total government debt of 60% of GDP by FY23 and provided fiscal goalposts to attain this target. It suggested a fiscal deficit of 3.0% for FY18 through FY20. It has allowed a deviation of 0.5 percentage point of GDP in a year under three conditions, one of them being the structural reforms cited above.

GST disruption would qualify as one such reform. If the government uses this relaxation next fiscal, it will mean a fiscal deficit target of 3.5% of GDP, instead of 3.0%. The government is expected to take a view on the report soon.

Source : PTI

 

Govt begins review of tax, other norms for startups : 27-11-2017


The government is reviewing the regime for startups in a bid to make it more attractive for entrepreneurs, especially on the tax front.

Sources told TOI that discussions have been initiated across ministries over the last few days, ahead of Prime Minister Narendra Modi’s meeting with several startups and their CEOs during the Global Entrepreneurship Summit in Hyderabad this week. While PM had announced a policy almost two years ago, several elements of the package need to be recalibrated due to feedback received from industry. Startups are a major thrust area for the Modi administration as they are not just seen to create jobs  but also encourage entrepreneurship.

Sources said that a large part of the agenda for the government includes tweaks in the taxation policy. For instance, the government had announced a tax benefit on profits earned in three years during a company’s first five years of operations. But based on industry feedback, the government allowed the tax benefit to be taken during the first seven years, as most startups do not make profits in the initial years of their operations.

There are concerns related to the taxation policy for a large number of angel investors, which face a levy on the capital gains. Nasscom recently attributed the 53% decline in angel funding during the first half of 2017 to the complicated tax rules. “For the last two years, the government has agreed that it needs to be done… There have been some concerns about misuse (of the provisions). But the fear of misuse is there for any law,” Nasscom president R Chandrashekhar told TOI during a recent  interaction.

Sources said there are concerns over the rules for taxation of employee stock options, which have been flagged and the government is looking into it. “The idea is to make the regime as attractive as possible and the concerns are sought to be addressed at the earliest,” said an official, adding that the PMO is monitoring the issue closely .

“The issue of startups being taxed on the investments received is far from over. While an exemption is provided to investors registered with Sebi and to foreign investors, domestic investors in general have to still defend the valuation. In fact, it continues to be common for companies to receive notices asking for a justification of the premium received,” said Abhishek Goenka, India leader — corporate and international tax at consulting firm PwC .

While the tax changes are unlikely before the budget, scheduled for February 1, some of the procedural issues can be fixed earlier if they only require change in rules through notifications.

Source : Economic Times

Income Tax Act, 1961 review: 4 remarkable ways Narendra Modi government’s new Direct Tax Law will benefit taxpayers : 25-11-2017


The Modi government has constituted a six-member task force to review the Income Tax Act, 1961, and draft a new Direct Tax Law in consonance with economic needs of the country. The Terms of Reference of the task force is to draft an appropriate Direct Tax Legislation keeping in view (i) the direct tax system prevalent in various countries, (ii) international best practices, (iii) economic needs of the country, and (iv) any other matter connected thereto. The task force will set its own procedures for regulating its work and is required to submit its report to the government within six months.

It may be recalled that during the Rajaswa Gyan Sangam held on 1st and 2nd September, 2017, Prime Minister Narendra Modi had said that the Income Tax Act, 1961 was drafted more than 50 years ago and needs to be re-drafted.

Commenting on the government move to draft a new direct tax legislation, Vikas Vasal, Partner & Tax Leader, Grant Thornton India LLP, says that it’s a move in the right direction, and in line with government’s stated intent to boost investor and business confidence in the country.

“It’s a long journey, and constitution of the task force is the first step. A simple, easier-to-interpret direct tax code with minimal conflicts will go a long way in providing certainty and clarity to the tax payers. Unnecessary litigation on otherwise settled issues only results in waste of productive time and effort. Hopefully, the new code will address these issues, incorporating the learnings from the current tax law, as well as the decade-long discussions on the earlier Direct Tax Code that was shelved some time back,” he says.

Here’s how the new Direct Tax Law is expected to simplify tax-related issues and boost investor and business confidence:

1. Simplify Law and Declutter Redundant Provisions: The current Income Tax Act is more than 5 decades old and has suffered thousands of amendments over these years. Formation of a committee for drafting a new Direct Tax Code is a progressive step to do away with the past baggage and make the law relevant to the current business environment. A new code would simplify the law and declutter redundant provisions.

2. Pro-Business Development: This is a pro-business development as concerns of the industry can be addressed in the new law. “The government has in recent past taken several initiatives such as the issuance of clarification on debated issues, issuing detailed guidelines on new regulations, acceptance of judicial decisions etc. for the benefit of the taxpayers. One would expect that several of such measures would find a place in the new law,” says Vasal.

3. Reduce Litigation: The provisions of the Income Tax Act have been a subject matter of extensive litigation, which has led to complexity in the interpretation. A new law, without a baggage of past jurisprudence, would be simpler to interpret and is expected to reduce litigation.

4. Plug Loopholes in a Single Shot: The Direct Tax Code would provide an opportunity to the authorities to plug the loopholes in a single shot rather than making it an annual exercise. It is an excellent opportunity to make the law simpler, taxpayer-friendly, less prone to litigation and free from interpretational loopholes.

There is a word of caution though. “We need to learn from our past experience of the previous version of the direct tax code and make sure that a new law is developed on the threshold of simplicity rather than rehashing of the existing Income Tax Act in a new format,” says Vasal.

Source : Financial Express

Fewer GST slabs possible in future, says CEA Subramanian : 25-11-2017


Chief Economic Adviser (CEA) Arvind Subramanian today said going forward the Goods and Services Tax (GST) may “probably” have fewer rates by “collapsing” 12 per cent and 18 per cent tax slabs into one.

He said the new tax regime, rolled out from July 1, will stabilise in the next six to nine months and become a “model” for other countries.

“I am confident that over the next six to nine months the system will stabilise. It will also be a model for other countries to emulate.”Then over time, the 12 per cent and 18 per cent rate can probably be collapsed into one rate. So over time we will see fewer rates. We would not ever have one rate because that is too difficult to achieve,” he said.

The CEA was delivering a lecture at the ICFAI Institute of Higher Learning here.

Admitting there were some technical glitches in the filing systems under the regime, he said the new system is a bit “complicated” as states have different IT systems and these issues are being addressed by the GST Council.

Subramanian described the GST implementation as a “transformational fiscal reform” that the country had not seen in the past.

“The Centre and every state has its own tax officials and own IT system. I can’t tell you how complicated the system is. So the fact is the transitional glitches, I think, is not surprising. Perhaps I think we could have done better.

“But the most important thing for the GST Council is to decide all these things and take corrective action,” he said when asked about technical glitches the taxpayers were facing.

Source : PTI

All revised I-T returns post demonetisation under lens : 25-11-2017


In the days after demonetisation, thousands handled their hidden cash by dumping the currency in banks, filing a revised income-tax return, and forking out a little over 30% tax for the extra cash that was deposited.

This, they believed, was a neat way to take care of the cash and keep tax officers at bay. But things may turn out differently. On Friday, the government told all tax offices to accept only those revised tax returns where there is a “bona fide inadvertent error” or “a mistake” on part of the assessee. If inquiries indicate any dubious manipulation to legitimise undisclosed cash deposit, then an assessee should be taxed at a much higher rate under the anti-abuse provisions of the law.

The law, however, gives taxpayers a greater latitude than the government’s internal communique suggests. According to the Income-Tax Act, a revised return is permitted when a taxpayer “discovers any omission or any wrong statement”. Probably because the law does not specify conditions for filing revised returns, the communique mentions that the “guidelines are only suggestive”.

“An assessee can file revised returns under Section 139(5) of I-T Act. It could be due to various reasons, including intention to conceal income. The suggestion that a revised return can be filed only when there is a bona fide inadvertent error or a mistake is an interpretation contrary to the provision of the law,” said senior chartered accountant Dilip Lakhani. “Most of the high-denomination notes were deposited with banks. The success of demonetisation thus rests on the ability of the I-T  department in identifying the untaxed cash,” said senior CA Dilip Lakhani.

All revised I-T returns post demonetisation under lens

The email from Rohit Garg,director at the apex tax body Central Board of Direct Taxes (CBDT), to all principal chief I-T commissioners, points out the key factors that tax officers should keep an eye on while verifying the revised tax returns.

 These are:
Unsubstantiated reduction in closing stock in the revised return vis-à-vis the figures in original returns (a person regularising his black money held in cash may show higher sales and lower closing stock);
Higher sales in revised return;

Increase in cash-in-hand as on March 31, 2016, or March 31, 2015, (showing higher cash in revised returns for last two financial years could help in regularising undisclosed cash deposited in banks);

Additional cash inflow claimed to be out of earlier-year savings, receipts of loans or advances or gifts or sale of capital assets;

Use of cash to lower liabilities;

Lower closing stock as on March 31, 2015, or March 31, 2016, as compared to earlier years in belated returns (filed after due date).
When assessing officers come across such seemingly suspicious entries in the books of accounts, they are expected to examine the veracity in different ways. For instance, they may compare the higher sales (shown by a businessman in his revised return to justify large cash deposits) with central excise/VAT returns; cross-check the identity, credit-worthiness and source of cash of buyers who had paid in cash; analyse past profile of assessees whose books raise suspicion; and monitor expenditure to match it against any change in cash-in-hand.
In September, CBDT told its officials to target and tax the .`3 lakh crore of unexplained deposits that are estimated to have been made after demonetisation was announced.
Source : Economic Times

F.No. 225/391/2017/ITA.II – 24-11-2017


SECTION 143 OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – SOME OF IMPORTANT ISSUES TO BE CONSIDERED WHILE FRAMING SCRUTINY ASSESSMENT PERTAINING TO FILING OF REVISED/BELATED RETURN BY ASSESSEES, POST DEMONETIZATION

LETTER [F.NO.225/391/2017/ITA.II]DATED 24-11-2017

Post-demonetisation, it was found that some of the assessees tried to build an explanation for cash deposits in their bank account(s) by manipulating their books of account and filing revised/belated income-tax returns. In this regard, Finance Ministry issued a Press Release dated 14th December, 2016 in which it had cautioned that post-demonetisation exercise, provisions of Income-tax Act, 1961 (‘Act’) which permitted filing of a revised or a belated return in certain situations should not be misused. The Release further stated that any instance of a revised/belated return of income coming to the notice of Income-tax Department which reflected any manipulation of book of account, cash-in-hand, profits etc. to justify the cash deposit being made in bank account(s) might lead to taking necessary action under the relevant provisions of the Act by Income-tax Department. Based upon risk-assessment, several of such cases were selected for scrutiny in Computer Aided Scrutiny Selection (CASS) during this financial year.

2. Under the Act, revision of income-tax return is allowed only if any omission or wrong statement is discovered therein by the concerned assessee. Such omission or wrong statement should have occurred due to a bona fide inadvertent error or a mistake on the part of the assessee. Therefore, in situations where enquiries/verification in course of assessment proceedings suggest manipulations made fictitiously merely to build an explanation for cash deposits in bank account(s), the revised return itself becomes questionable and therefore, the transactions disclosed in it which are over and above the original return are liable to be taxed under anti-abuse provisions of the Act. Similarly, in case of a belated return, it would be crucial to examine the trend and business practices of a particular assessee while ascertaining the legitimacy of the transactions disclosed in a belated return, filed post-demonetisation. In such cases already under scrutiny, some instances which might indicate that assessee had filed revised or belated return merely as a cover up to explain the cash deposits in bank accounts are:

i. Unsubstantiated reduction in closing stock in the revised return vis-a-vis the figures in original return;
ii. Reporting of higher sales in the revised return;
iii. Cash-in-hand as on 31-3-2016 or 31-3-2015 was enhanced in the revised return;
iv. Additional cash inflow claimed to be out of earlier year savings, receipt of loans/advances /gifts/repayments/sale of capital assets;
v. In some cases, cash outflow might have been reduced by paying some of the liabilities in cash;
vi. Significantly lower closing stock as on 31-3-2015 or 31-3-2016 as compared to the earlier years in a belated return;
vii. Significantly higher cash-in-hand as on 31-3-2016 or 31-3-2015 compared to the preceding year in a belated return.

3. In such scenarios, following issues may be kept in consideration during verification and framing of assessments—

I. The claim of enhanced sales may be compared with the Central Excise/VAT returns;
II. Whether the parties to whom additional sales were disclosed have identity, creditworthiness and transaction was genuine or not;
III. Where the accounts are subjected to tax-audit, whether omission or wrong statement in the original return was pointed out by the audit or not;
IV. The source of cash-in-hands of the person who had made payments to the assessee has to be verified carefully;
V. The past profile of the concerned assessee should be thoroughly analysed;
VI. Where as a result of enquiries/investigations it emerges that figures in the revised/belated return are fudged, the figure of manipulated receipts/sales/stock etc. is liable to be taxed as a cash credit under section 68 and not merely on net profit basis;
VII. Any undisclosed expenditure detected after reduction of cash-in-hand by the assessee may be verified carefully;
VIII. Unaccounted income so assessed in scrutiny assessment is liable to be taxed at a higher rate without any set off of losses, expenses etc. under section 115BBE of the Act;
IX. In the scenario pertaining to Wealth tax returns of earlier years, it should be examined whether there is an attempt to build cash-in-hand or any other asset so as to justify deposit of cash, post-demonetisation.

4. The above guidance note may be brought to the notice of field authorities in your charge. The above guidelines are only suggestive. Therefore, depending upon specific facts and circumstances of a particular case, Assessing Officer should also look into other relevant issues as well.

Taxmen are now grilling leading eateries about menu prices before & after GST cut : 24-11-2017


Leading fast-food chains such as McDonald’s have got queries from tax officials seeking details about menu prices before and after GST rate cuts on November 15. The move follows reports of some food chains raising prices. The government is keen to ensure the benefit of GST reduction is passed on to consumers.

The National Restaurant Association of India (NRAI) has said it will soon be advertising price cuts. State GST authorities have made phone calls and sent questionnaires to restaurants. ET has seen a copy of the format in which restaurants have been asked to submit details. A government official said the exercise was aimed at collecting data. “Many restaurant associations and owners in the organised space have received communication from relevant authorities to outline the GST implementation  process,” a McDonald’s spokesperson said.

“We are in the process of furnishing the details appropriately.” This is besides a letter from Central Board of Excise and Customs (CBEC) chairman Vanaja Sarna to companies and restaurants individually asking them to pass on tax cuts and communicate price revisions to consumers. At the GST Council meeting on November 15, GST was cut to 5% from 18% for all standalone restaurants, irrespective of whether they were airconditioned or otherwise, without input tax credit.

Also, a flat 5% slab was imposed on takeaways and deliveries. Soon after GST reduction, many restaurants raised menu prices, citing withdrawal of credit for taxes paid on raw material and rent as the reason for ‘price adjustments.’ Brands such as Starbucks and McDonald’s had hiked base price of some products. GST on 178 goods was lowered to 18% from 28% as part of rationalisation approved by the GST Council.

“Like many businesses operating in India, Tata Starbucks adjusted prices following the recent revision of the goods and services tax (GST) structure,” a Tata Starbucks spokesperson said. “The GST revision included the elimination of the input tax credit, increasing costs for the industry.

As a result, we raised our base prices, while still providing savings for our customers after tax. Pricing is continually evaluated on a product-by-product basis in our stores to balance business needs while continuing to provide value to our customers.” Incidentally, a number of complaints before state screening committees on anti-profiteering were either against restaurants or real estate companies. The union cabinet last week cleared the setting up of an antiprofiteering authority to examine   such allegations under GST regime.

“The government has legitimate expectations that restaurant prices should go down, although for bigger ones the reduction may be relatively lower because of input credit loss,” said Pratik Jain, indirect tax leader, PwC. “One hopes that industry will support and follow the letter as well as spirit of the law. However, since there is already a process outlined for anti-profiteering-related proceedings, government should ensure that authorities do not make random enquiries and visits to restaurant . There is a need for issuance of a clear instruction to the field officers so that panic on the ground can be avoided.”

CUTS IN MENU PRICE

NRAI, which has some popular food chains as members, said restaurants are proposing cuts in menu price. “The move by the government has made the consumer bill come down, which will encourage demand and investment for our sector and we will soon be providing wide publicity of all the benefits,” said NRAI vice-president Rahul Singh. All major brands will engage in this exercise, he said.

“Changes came into effect from November 15 and all restaurants updated systems overnight in order to pass on the tax benefit to the consumers,” NRAI’s Singh said. “Depending on the category of the restaurant, price adjustment exercise to the base menu price had to be done to rationalise the removal of ITC (input tax credit).”

A Jubilant FoodWorks spokesperson said the GST cuts had been reflected in its prices. “Jubilant FoodWorks has passed on benefits of GST reduction to all our customers of both Domino’s Pizza and Dunkin’ Donuts,” the person said. “Since denial of input tax credit has led to increase in the input cost, we have adjusted prices of a few items to only partially cover this increased cost. However, our customers will now witness a significant reduction in effective prices immediately.”

Source : Financial Express

GST rollout: Anti-profiteering authority in place, but consumers not filing complaints : 24-11-2017


The recent Cabinet decision to set up a National Anti-profiteering Authority (NAA) and the message given to industry by policymakers that the benefits of the goods and services tax (GST) in the form of lower tax rates and higher input tax credits must reach the final consumers may have created the impression that consumers have inundated the respective authorities with pleas to crack down on non-compliant businesses. Far from it. FE spoke to eight state tax departments on how busy their anti-profiteering machinery has been, and it is clear that except in some states like Kerala, the number of serious actionable complaints have been few and far between.

Several states like Tamil Nadu and Gujarat are yet to receive any complaint against profiteering, even though the GST Council had in its latest meeting held at Guwahati cut the tax rates on over 200 items, including a large number of fast-moving consumer goods, and reduced the tax liability of restaurants, especially the relatively smaller ones. While the GST rate for restaurants except those at five-star hotels was cut to 5% (sans input tax credit or ITC) from 12% (non-AC) and 18% (AC) earlier, the industry is divided on whether this will reduce its tax liability. While the larger eateries that pay high rentals say the removal of ITC would pinch them, smaller outlets see scope for some price cuts.

Even Maharashtra, the most industrialised state in the country, has received only a few complaints against eateries while none of the petitions filed with the state’s tax department had a prima facie pan-India import and needed to be transferred to the standing committee at the central level. “We have received two to three complaints against restaurants in the last 10 days, after which we have deployed inspectors to verify these claims,” an official at Maharashtra’s anti-profiteering screening committee said on condition of anonymity.

The official added that the complaints were against small eateries and not against those with multiple outlets in various cities. The relatively lukewarm response of the consumers to the new mechanism that is still evolving is despite the recent missives sent by the Central Board of Excise and Customs to all major FMCG companies, asking them to immediately revise the maximum retail prices of products for which the tax cuts had been effected.  “Although we haven’t received any complaints, we are working on a pre-emptive mechanism to deal with profiteering,” a Gujarat tax official told FE. He declined to disclose the mechanism, saying he wasn’t authorised to discuss it.

Andhra Pradesh has received just one complaint which would soon be taken up by the screening committee, an official said, but didn’t disclose the details of the petition. The screening committees in eastern states of Bihar and Jharkhand too haven’t received any petition of substantial nature. A Jharkhand official said that while many GST-related complaints have been received by the tax department, none of these are related to profiteering. “We have received complaints against some businesses which are supposedly required to register under GST but haven’t done so yet,” the official said. Although Bihar has received petitions against profiteering, they are either one-line complaints, drafted poorly with little evidence, or do not stand prima facie scrutiny. “One of the complaints we have received says that milk prices haven’t gone down but this did not stand scrutiny as milk was not taxed before or after GST roll-out,” said a Bihar tax official.

 The NAA will have the authority to order the supplier/business concerned to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods or services. If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the Consumer Welfare Fund. The NAA can impose a penalty on the defaulting business entity and even order the cancellation of its registration under GST.

Source : PTI

India’s new insolvency ordinance: Blunt, unforgiving and political : 24-11-2017


For New Delhi, promoters of failed companies are as untrustworthy as those who bankrolled them. This is the message from the Ordinance that was moved on Thursday to amend the Insolvency & Bankruptcy Code.

Neither will the exiled promoter of a defaulting company be allowed to regain control nor will banks have the liberty to toss him a sweetheart deal or a lifeline. Even if the bankruptcy of a business is brought about by industrial upheavals or turbulent markets — and not by the loot and profligacy of its promoters — it’s goodbye to men who once called the shots.

The old order must change. Men who presided over the decline (and did not pay bankers for a year or more) do not deserve a second chance. This is the new rule of the game for insolvent companies looking for buyers who could turn them around .

It’s a politically powerful signal. It’s a blunt and unforgiving message. And it makes sharp headlines even if it doesn’t necessarily make great business sense for banks who have to salvage sunk loans by selling an insolvent company — preferably to a buyer who is willing to pay the most.

Banks, which are often — and sometimes unfairly — blamed for years of loose lending and their nexus with business houses, were probably not even consulted in deciding the terms of the Ordinance. Having lost the credibility that financial institutions once enjoyed, they are now left with little discretion. All they can do is obey inflexible rules that the government sets for them.

There are companies and assets which would only attract the promoters or founders due to the nature of the business, complications, and legacy; these promoters may even be willing to fork out premium to get back on the board of directors.

Before the Ordinance, most bankers would have been willing to cut a deal and accept a haircut on loans as long as such promoters were not perceived as corrupt or categorised as `wilful defaulters’; in other words, as long as there was no evidence or forensic audit show they had diverted funds to other group companies or personal accounts, or the company they ran had failed to service loan despite posting operating profits.

Today, they can’t – thanks to the Ordinance that makes it virtually impossible for banks to deal with most of the original promoters

Even though Indian banks have not exactly displayed great lending acumen, they should have been given the discretion (in choosing promoters who are not swindlers), simply to pave the way for quicker resolutions and help the Bankruptcy Code take off. The Ordinance should have simultaneously given bankers the freedom and protection to reject a top dollar bid from a promoter who may not figure in the list of `wilful defaulters’ but is nonetheless dodgy and do not enjoy a great reputation.

But banks, it seems, have lost the trust that could have let them retain that choice. (However, the flip side to the Ordinance is that it spares some bankers the ethical and financial dilemma while evaluating a bid from old, familiar clients.)

By shutting the doors to promoters of all hues, and by somewhat doing away with the difference between wilful and ordinary defaulter, banks would for first time treat an individual and corporate on a par.

How?

If a person loses her job – irrespective of whether the employer is hit by Chinese dumping, or she is found incompetent – lenders are quick to react. The borrower has to beg, borrow and starve to cough up EMIs to avert a foreclosure and save her family the trauma of homelessness. Such a fear of losing a prized and possibly only asset did not haunt a promoter group as long as it could escape the tag of a `wilful defaulter’.

Not anymore. The tycoon, like the EMI man, knows the price of dropping the ball.

The Ordinance can be misinterpreted as an exercise of political grandstanding. In reality, it’s a righteous, simplistic solution to an old complex problem.

Source : Economic Times

GST tax returns filed increase as compliance rises, tax mop-up jumps : 22-11-2017


Thanks to the proactive steps taken by the Goods and Services Tax (GST) Council to remove the sundry glitches that used to trouble taxpayers in the initial months after the GST launch and also the progressive lowering of tax rates by the council over its last few meetings, compliance and tax collections have picked up of late. This has not only reduced the states’ revenue shortfall considerably over the period but boosted the government’s confidence that GST would eventually expand the tax base and yield revenue higher than the taxes that collapsed into it did in the previous regime. Filings of the summary returns GSTR-3B — with which the tax needs to be paid or nil liability claimed — have increased over the months since July. Till the August 20 deadline for filing GSTR-3B for the month of July without fine, 34 lakh returns were filed; the returns filed before the respective deadline for September was higher at 39.4 lakh and the number for October grew further to 43.7 lakh.

On November 20, the last date for filing the summary returns for October without interest, as many as 14.76 lakh assessees rushed in, in what indicated that the tendency to defer compliance to the last hour hasn’t gone away. GST collectionstoo have shown commensurate increases over the period (see chart). Also, the overall GST registrations too have crossed 11crore from a level of 60 lakh in late August. Of course, a very large number of GSTR-3B filers (around 40%) continue to claim nil tax liability, a trend which vexes the government. “There is a steady rise in the number of taxpayers filing their GSTR-3B returns every month, which is encouraging to see. The trend of taxpayers postponing compliance to the last day continues, though. Taxpayers are urged to file their returns early enough to avoid last-minute rush and consequent hassles,” said Prakash Kumar, CEO, GST Network (GSTN). “There is an increase in filings month after month since July. This could be down to two reasons: One, taxpayers are becoming familiar with GSTR-3B, and two, the IT system as far as 3B is concerned has also stabilised. But the gap between eligible taxpayers and those filing returns by the deadline has continued to hover around 30 lakh, which would be a concern for the government,” said Abhishek Jain, tax partner, EY.

Meanwhile, the council is in the process of further simplifying the GST compliance process by relaxing the rules and procedures and addressing technical glitches at GSTN. A group of state finance ministers headed by Bihar deputy chief minister Sushil Kumar Modi is working with Infosys, the technology vendor, to resolve GSTN-related issues. On Tuesday, the government constituted a 10-member committee under GSTN chairman Ajay Bhushan Pandey to look into the requirements of filing returns in current financial year. “The committee, which has tax commissioners from the state of Gujarat, Karnataka, Punjab and Andhra Pradesh, will also suggest if modifications, including changes in rules, laws and format, are required in returns. It will submit its report by December 15,” PTI reported.

“The whole idea is that people who are nil filers, who have no sale/purchase transactions, have taken a registration for some future use, they should be able to file GSTR-1 and GSTR-3B by pressing just a few buttons. That is our ultimate aim,” Pandey was quoted by the agency as saying. The council had decided to allow filing of summary returns till March 31, 2018. Further, filing of GSTR-2 (inward supplies) and GSTR-3 — both required for smooth invoices-matching — was suspended till March 31. Taxpayers need to file GSTR-3B and GSTR-1 for the remaining part of the year.

Why Modi must stop pinning his hopes on those sectors whose time has gone : 22-11-2017


The government’s ‘Make in India’ drive is in trouble. It aims to increase the share of manufacturing from 16% of GDP to 25% by 2022, creating 100 million jobs. Alas, industrial growth has been weak in Modi’s three years in office, the investment rate has fallen, formal employment growth has been miserable, and exports have stagnated.

What’s gone wrong? I have long held that government attempts to boost this or that sector is a mistake. Far better is simply to improve the ease of doing business, remove constraints in all sectors, and then leave entrepreneurs to decide which area should soar, which should plod along, and which should close. In this approach, services will probably do better than manufacturing, and brain-intensive sectors better than labour-intensive ones. GoI needs to build on these strengths rather than hanker for labour-intensive areas whose time has gone.

Encroachment on Policy
The big picture is that India has lost competitiveness thanks to new policies that no party is keen to reverse. The recent land acquisition law has made land much more costly than in Asean competitors. Wages have shot up since 2008, thanks in part to MGNREGA.

Creating an independent Monetary Policy Committee entrusted with a single-minded focus on inflation control is not going to bring down interest rates to Asean levels. Electricity for industry costs twice as much as in Asean, because high industrial tariffs are used to subsidise farm and domestic consumption.

In sum, many politically popular initiatives of recent years have raised the cost of all industrial inputs: land, labour, capital and electricity. No wonder industrial output and exports are struggling. Yet, no political party has an explicit plan to slash these costs. Now, Indian entrepreneurship and jugaad can overcome many cost hurdles.

But in low-tech industries, value addition is so low that it’s difficult to overcome cost hurdles. These can more easily be overcome where value addition is high, in hi-tech areas. They can also be more easily overcome in service industries, which require less land, electricity, water, capital investment or working capital than manufacturing.

This surely explains why India’s service exports have risen so much faster than manufacturing exports, and why hi-tech exports like auto and pharma have done much better than textiles and leather. Hi-tech areas do not require political tricky steps to cut land and labour costs.

Yet, many experts keep arguing that India is labour-abundant and capital-scarce, and so, must focus on labour-intensive sectors that have created millions of jobs and billions in exports for neighbouring Asian countries. One example is the chapter by C Veeramani and Garima Dhir, ‘Make What in India?’ in the latest India Development Report 2017

They show that hi-tech auto exports grew by an amazing 34% a year during 2000-15, while labour-intensive apparel export growth was only 9%. They find India is locked out of global value chains (GVCs), in which products are assembled from components produced in a wide variety of locations. Many Asian countries are part of GVCs, which culminate in the assembly in China.

India is just not in the picture. How can it get in? By reducing its high input costs like land, labour capital and electricity. But will politics allow that?

Sci-Tech No Longer Sci-Fi

In another chapter in the report, ‘Services for Indian Manufacturing’, Rupa Chanda argues the case for emphasising more services embedded in manufacturing to improve competitiveness. This will include steps to slash India’s speed and costs of logistics: transport, warehousing, rail-road links, paperwork.

In another chapter, ‘One Size Does Not Fit All’, Sunil Mani argues the case for industrial policy, citing some successes and ignoring many failures. But his chapter is useful for emphasising the dynamism of hi-tech exports, which now include aircraft components and satellite launches.

Neither the report nor government experts are facing up to the threat of automation. Machines are being developed that can handle soft materials like cloth and leather. Once these machines are standardised, they will eliminate millions of jobs in apparel and leather goods. Should India make a huge, expensive effort to get into areas that had huge potential in the past but now face the risk of extinction?

Robots will take over brain-intensive areas too. But not to the same extent as labour-intensive ones. Broadly, the future of the world — and of India — lies more in services than in manufacturing, and more in brain-intensive than labour-intensive areas.

India is now a land of relatively expensive inputs like land, labour, capital and electricity. These cannot be offset by cheap manual labour, but can be by low-cost skills. This explains the runaway success of computer software and BPO, and of medical tourism. It explains the export success of autos and pharma.

The challenge of robotisation cannot be met through labour-intensive techniques. It means raising productivity fast enough to overcome cost disadvantages in land, labour and capital. It means improving efficiency of every sort; slashing corruption and waste; vastly improving government services; hugely enhancing skills. It means developing a workforce that is agile and can shift from one task to another depending on how the winds of technical change blow. That’s a big agenda.

Source : PTI

Next on Modi’s list? Mandatory Aadhaar linkage with property : 22-11-2017


When Prime Minister Narendra Modi announced demonetisation to fight black money, a valid criticism was that the black money is hoarded more in immovable property than cash. The government, however, has been saying that demonetisation was one step in fight against black money and more such steps would come.

Now the next big step against black money is round the corner, and this time it’s immovable property that’s on target. For the first time, a Union Cabinet minister has indicated that Aadhaar linkage with property transactions would be made mandatory.

Union Housing Minister Hardeep Puri has said that he has no doubt the linkage would happen. Speaking to Nayantara Rai of ET NOW, Puri said such a move would go a long way in sucking out black money from real estate and also help in crackdown on benami properties. “Seeding Aadhaar to property transaction is a great idea but I’m not going to make an announcement on that. We are already linking Aadhaar to bank accounts, etc, and we can take some additional steps for property market also,” he said.

Prime Minister Narendra Modi has indicated several times that the government would crack down on benami property. Aadhaar linkage could be one part of that drive.

When asked if seeding Aadhaar with property is a logical conclusion of the government’s drive to push Aadhaar to bring transparency in economy, Puri said, “Absolutely, that’s the way it’s heading anyways. I have no doubt that it will happen.”

However, according to Puri, while no one can absolutely enforce that a transaction between two individuals is completely transparent, large-value transactions such as property and air tickets could definitely be monitored.

“There is no economy in the world that is entirely cashless. However, people do not feel the need of carrying large wads of cash around in economies that have stable system. That’s the way we are heading,” he said.

Mandatory Aadhaar linkage to innumerable government schemes and for identification has generated a lot of debate. Several petitions against the Aadhaar linkage are being heard in the court.

Source : Economic Times

Moody’s India upgrade could help Modi consolidate his popularity : 21-11-2017


India’s longer-term financial health received a vote of confidence at a time when the government’s economic policies are facing criticism and growth has slipped to levels last seen in 2014. In a development that could help Prime Minister Narendra Modi consolidate his popularity, Moody’s Investors Service raised India’s sovereign rating for the first time in 14 years on Friday, offering a political victory to Modi and his at-times-controversial reform agenda. The praise for India’s new goods and services tax and efforts to reduce the size of the informal economy gives the prime minister’s Bharatiya Janata Party a boost ahead of a crucial election in his home state of Gujarat next month and their re-election bid in 2019.

 At the same time, the upgrade — to Moody’s second-lowest investment grade rating from its lowest — contrasts starkly with brewing problems on the domestic front. Dented by Modi’s cash ban last year, growth dropped to 5.7 percent in the April-June quarter from 7.9 percent a year ago. The chaotic rollout of the tax has further dampened sentiment, prompting government to tweak tax rates several times amid growing criticism about the lack of employment creation and fears that India may miss its fiscal deficit target.

“In the short-run, difficulties in adjusting to the new GST and the expanded digital economy have led to some downturn in economic activity, but the prospects for the next couple of years leading up to the 2019 general elections definitely look optimistic,” said Raghbendra Jha, Rajiv Gandhi professor of economics at Australian National University.

Reform Praise

Moody’s praised Modi’s efforts to broaden the tax base and tackle non-performing loans in India’s $2.3 trillion economy, Asia’s third-largest. Moody’s said these reforms provide stability and “enhance India’s high growth potential.” The agency also praised Modi’s disruptive demonetization policy, which sucked 86 percent of India’s currency out of circulation last November for helping reduce corruption, increase the size of the formal economy and improve tax collection. The upgrade’s timing is “opportune,” and corrects “undue bearish sentiment over the last few months,” according to Abhishek Gupta, a Mumbai-based analyst with Bloomberg Economics.

ANU’s Jha said the upgrade could provide political stability, lead to more foreign direct investment inflows and boost jobs as the ruling BJP faces crucial elections. “This will increase jobs and have positive spin off effects on Modi’s political prospects,” he said.

Domestic Situation

Still, India’s vast challenges meant the upgrade was greeted with skepticism. Some reforms praised by Moody’s “are of questionable value both in the near-and medium-term,” said Prasanna Ananthasubramanian, chief economist at ICICI Securities Primary Dealership, adding that the “loss of growth momentum in the last 12 months” outweighs benefits from additional savings.

The Moody’s upgrade also comes amid expectations of fiscal slippage because of falling revenue collections, higher oil prices and government expenditures as it tries up to make up for weak private investment. “We believe the central government will likely breach the FY18 fiscal deficit target of 3.2 percent of GDP by about 0.5 percent of GDP on lower revenues collections,” said Tanvee Gupta Jain, economist at UBS Group AG. That’s because of excise duty cuts on gasoline and diesel, lower telecom collections, a drop in the central bank dividend and higher government expenditures. State governments are also under pressure to fund additional spending to pay for billions of rupees in waived farmer loans and higher salaries for government employees.

The upgrade might be a “reflection of the improvements” in India, said Hugh Young, head of Asia for Standard Life Aberdeen Plc. “I don’t think in itself it will change much,” Young said. “India needs to keep on making business life easier and more transparent and the money will flow.”

Source : Financial Express

CBEC chief’s missive to FMCGs: Pass on benefits post GST tweak : 21-11-2017


Keeping up the pressure on the consumer goods sector, the Central Board of Excise and Customs (CBEC) chairman has written to the biggest companies to ensure that cuts in the goods and services tax (GST) are passed on to customers. The GST Council has cut rates on 178 products including chocolates, detergent, toothpaste, shampoo, air freshener and shaving cream to 18% from 28% and the government is keen that this translate into lower prices for buyers.

“We have reached out to over 100 companies,” CBEC chairman Vanaja Sarna told ET. “This is essentially an appeal asking them to pass on the tax cuts to consumers.” India’s biggest fast-moving consumer goods companies include Hindustan UnileverBSE 0.30 %, ITCBSE -0.50 %, NestleBSE -0.02 %, DaburBSE 0.87 %, Godrej Consumer ProductsBSE -0.02 %, Amul, Perfetti Van Melle, L’Oréal and Mondelez.

A top executive at a large diversified consumer products maker confirmed it had got the letter. “We received a letter from CBEC, asking that benefits of the tax reductions announced by the GST Council be passed on to buyers,” he said. “We received the letter on Friday.”

Finance secretary Hasmukh Adhia had told ET that it was up to companies to ensure the benefits of tax cuts were passed on. “It is the company’s responsibility to ensure that its entire retail chain follows its directives on pricing,” Adhia said in the November 20 interview. “If a trader is not selling a good at revised MRP (maximum retail price), then it is the responsibility of the company.”

Boost to Consumption “It (the company) will have to respond to the National Anti-profiteering Authority on this. Action can only be taken against organised players as they are the ones who decide MRP. We don’t want that industry should suffer, but at the same time consumers should also not suffer,” Adhia had told ET.

The cabinet last week approved the establishment of the National Anti-profiteering Authority (NAA) in this regard.

The GST Council had on November 10 moved 178 items, including washing powder, toothpaste, tooth powder, shaving cream, deodorants and chocolates, to the 18% GST slab from 28%. A day after the notification of reduced rates by the Centre and states, companies had begun instructing trade partners, including distributors, stockists and retailers, to sell products on which taxes were reduced at lower prices to consumers, irrespective of the printed MRP. Companies have until December to apply  new price stickers according to an order issued by the consumer affairs ministry.

But the government is keen that even before this happens, a process that may take time, companies direct the trade and also communicate to consumers directly on price reductions.

“Yes, we are in receipt of the letter over the weekend,” said a cosmetics company executive. “We are fast-tracking on packaging products with revised prices. There is no question of not passing on the benefits to consumers immediately.

The reduced pricing is expected to spur consumption in a category that has otherwise been subdued. The existing inventory is expected to be replaced with fresh stock bearing new price tags in about two-four weeks.

A government statement issued late Monday evening said CBEC chairman Sarna has written to all major fast-moving consumer goods companies, pointing out the need to immediately revise MRP for products on which tax rate has been reduced.

Source : PTI

12% & 18% GST slabs may be merged, 28% for demerit goods: Arvind Subramanian : 21-11-2017


The government may combine the 12 per cent and 18 per cent slabs for goods and services tax (GST) into one in the near future and reserve the 28 per cent rate only for demerit goods, said chief economic adviser Arvind Subramanian .

While India will never move to a single GST rate, over time there would be a “poor man’s” rate (0 per cent and 5 per cent), a “core” rate (the 12 per cent-18 per cent combination), and the demerit rate (28 per cent), Subramanian said during the course of a 90-minute interaction at the ET office.

Cement and white goods are not demerited goods, but the government was deliberately “going slow” on those items due to revenue considerations.

The chief economic adviser, who had last year proposed a revenue-neutral rate of 15.5 per cent, said GST collections were not doing badly and the government would take a call on the overall fiscal situation in a few weeks.

“I think we are certainly heading in the right direction (on the GST structure),” Subramanian said.

Tax Base Expanding

“I never liked the 28 per cent slab, which I think has created some of the transitional challenges. I think we are very close to making 28 per cent just for demerit goods… 0 per cent and 5 per cent has quite a lot of the tax base and there I think we will not be able to make that much progress as we have to protect the poor. But the 12 per cent and 18 per cent, at some point, can be combined in the foreseeable future into one rate,” the chief economic adviser said, outlining the structure.

“In India, we will never get one slab. We have too much of a socialist mindset and for a good reason,” said the IIM-Ahmedabad and Oxford-educated Subramanian, whose tenure as CEA was recently extended by a year. Subramanian said land, real estate and natural gas could soon come within the purview of GST, and added that he supported the early inclusion of electricity as well. “Last time, land and real estate were on the agenda of the GST Council, but we couldn’t discuss it. I think that will  happen sooner rather than later. I want electricity to come in very early because it will enhance competitiveness and help meet the ‘Make in India’ objectives,” he said.

GST collections were in line, Subramanian said, adding that everyone would be surprised by how much the tax base would expand.

“I think broadly on GST we are not doing badly. We are doing a growth of 12 per cent-13 per cent. Broadly, we are in line,” he said and added that states would not see a shortfall.

“At the risk of sounding a little over-enthusiastic, I think we would be pleasantly surprised about how much the base can expand. If you look at the number of registrants or if you look at implied tax base in the next six months we are going to look at a bigger tax base than we thought before starting this enterprise,” he added. Responding to a question about the rupee, Subramanian agreed that there was a section of the political class that wanted a strong rupee.

“There are parts of political class which like a strong rupee. I think that’s something that’s true and that’s something we need to deal with,” he said, pointing to how the Asean economies have used the exchange rate tool to grow.

He said India’s excessive focus on foreign capital has meant lesser control on exchange rate, which in turn had implications for export competitiveness.

“One of my pet peeves against all policymakers in India of all stripes is that we just seem to love foreign capital of all sorts. Every time there is a crisis we open the capital account even more and then the more you open the capital account the less able you are to control the exchange rate,” he said, adding that it is not possible to grow at 8 per cent-plus without strong contribution from exports. “If you love foreign capital then you have to pay the price for it. There is no free lunch in  .. this business.”

Source : Economic Times

GST regime: HC judges, experts brainstorm on likely litigations : 20-11-2017


With the Goods and Service Tax in place, top domain experts and officials from the GST Intelligence and the Central Board of Excise and Customs (CBEC) briefed judges about the new tax system recently, according to documents available in the public domain. 20 judges from 12 high courts brainstormed with experts and top government officials on identifying grey areas in the new regime that may throw up litigations in coming days. Topics ranging from ‘potential areas of conflict and litigation under GST’ to ‘comparative analysis of concepts: GST vis-a-vis Central Excise, Service Tax and VAT’, were discussed.  The deliberations took place at a recent national judicial conference for high court judges on the GST regime organised by the Bhopal-based National Judicial Academy. The conference assumes significance as litigations have already started surfacing before various courts. During the 3-day exercise, judges from Allahabad, Andhra Pradesh, Bombay, Calcutta, Delhi, Gujarat, Jammu and Kashmir, Karnataka, Kerala, Madhya Pradesh and Madras high courts interacted with nine resource persons on various issues related to the GST set-up.

The resources persons included officials from GST Intelligence and CBEC drawn from across India, according to the documents. A senior law ministry official said the Academy had discussed the GST issue in one of its programmes in 2015. “The academy had been sensitising judiciary about the new tax regime,” he said. Last week, the Delhi High Court had asked the Centre that if bindi, sindoor and kajal are kept out of the ambit of the GST, why cannot the sanitary napkin, which is an essential item, be exempted. A bench of Acting Chief Justice Gita Mittal and Justice C Hari Shankar said sanitary napkins are a necessity and there cannot be any explanation for taxing them and exempting other items by bringing them in the category of necessity.

The court expressed unhappiness over absence of any women in the 31-member GST council. The court was hearing a petition challenging the levying of 12 per cent GST on sanitary napkins. The plea has termed it illegal and unconstitutional. The central government standing counsel Sanjeev Narula said that if they will exempt sanitary napkins from tax, the cost of the product will go up.

Source : Financial Express

Government looks to cut GST on white goods : 20-11-2017


After consumer products and other daily-use items, the government is now looking to reduce goods and services tax (GST) on consumer durables like washing machines and refrigerators from the current level of 28% as part of the next round of rationalisation.

While the move is expected to help push demand in the sector, amid repeated complaints of a slowdown and excess capacity, the exercise will also be aimed at women and will reduce their daily workload by making such white goods cheaper, said a senior government official, who did not wish to be quoted.

The official said that a part of the reason for lower levy on restaurants was also to free women from household chores, which begin with packing lunch for children in the morning and extend till late at night. Globally, products such as dish washers and washing machines are seen to be items which have unburdened women, leaving them with more time for themselves or other productive work. Besides, products such as dish washers are largely imported into India and lower local levies through GST may also provide an incentive to companies to manufacture them in India, instead of shipping them from South Korea and other countries. Several white goods are already in the 12% and 18% brackets.

M S Mani, partner at Deloitte India, said, “All consumer durables, if taxed uniformly at 18%, would give a big fillip to domestic manufacturers as this would also lead to significant price reduction, leading to increased demand. Several of them — such as dishwashers and air-conditioners — have, over a period of time, ceased to be luxuries, making an 18% rate a reasonable request.”

Last week, GST rates on restaurants, other than those in five-star hotels, were slashed from 18% to 5%, although the withdrawal of input tax credit has prompted many chains to jack up prices. The cut came along with a reduction in levies for over 200 items, with 178 of them being from the top slab of 28%, leaving only 50 goods in the highest bracket.

In case of 176 products, GST has been reduced to 18% and ministers have indicated that further rationalisation will take place, depending on revenue buoyancy, with only luxury and sin goods facing higher taxes. In that sense, white goods and a few commodities like cement do not belong to the highest bracket but are continuing there due to revenue considerations as the government does not want to lose out on mop-up and put pressure on the fiscal situation. Over a period of time, the idea is to move to three rates by converging the 12% and 18% slabs into one, while leaving processed foods and other household items in the 5% bracket. Some ministers also discussed the possibility of a two-rate structure in the long run.

The GST Council decided against paring rates on cement as it would have resulted in an annual revenue loss of around Rs 15,000 crore over and above the potential loss of Rs 20,000 crore from the more than 200 items on which rates have been reduced. Although the timing for a cut in taxes on white goods has not been decided yet, the decision may be taken at the next meeting of the GST Council itself. The council, headed by finance minister Arun Jaitley, includes finance ministers from all the states and two Union territories — Delhi and Puducherry.

Source : Times of India

Companies have to ensure distribution chains pass on GST cuts to consumers : 20-11-2017


Companies must pass on the reduction in goods and services tax to consumers, says finance secretary Hasmukh Adhia. In an interview to Deepshikha Sikarwar, he said companies will have to respond to Anti-Profiteering Authority if trade does not pass on the tax cuts. Edited excerpts:

Lately, a lot of concerns were raised about the management of the Indian economy. Do you think the Moody’s upgrade answers this criticism?

International agencies have recognised and understood the long-term strategies of this government that would benefit the economy in the long run. India, in the past three years, has been the fastest-growing economy in the world. Our macroeconomic fundamentals remain robust. Inflation has been checked. Fiscal deficit that stood at more than 6% of GDP in 2008-09 will, as per this year’s target, be 3.2% of GDP. India’s tax-to-GDP [ratio] compared to other countries is lower. The government has taken steps that will bring down tax evasion in the long run. These steps have improved tax buoyancy. Structural reforms such as the GST (goods and services tax) will not just give a boost to indirect taxes but also direct taxes. In the last three years, a lot of work has been done in this country. To an extent, this upgrade is an endorsement of government’s policies. This will make the country more attractive to foreign capital. It will make overseas borrowing cheaper for Indian companies.

There is some uncertainty around GST collections and analysts see pressure on fisc…

Everyone knows GST is a huge structural reform. Whenever there is any new measure, people take time to adapt. There were some initial issues with compliances since it is a new tax. As these issues get addressed, GST compliance will improve. In the long term, this would have its impact. Tax buoyancy, going forward, would see a huge improvement. In the next one-two years, we should reap the benefits of GST. We have revenues trends for three months. Once we have the trend for one or two months more, we will be able to arrive at an estimate for the current year. So, we will have clarity by the time we formulate the budget. We will know if there is going to be a shortfall as per budget estimate for revenues. We are closely watching the GST trends.

There have been lot of changes to the GST framework since the rollout? Do you think the tax has now settled?

In the last two months, 90% of the problems based on the feedback we got have been resolved. There were two types of issues: one was related to compliance, the other to rate. Some of the items manufactured by SMEs were also placed in higher tax bracket based on earlier tax incidence. So, there was discontent. We have corrected that situation. These changes will not cause any major setback to revenues. Hopefully, we have been able to address most of the issues, so [we] won’t have to make changes  for another three months. If some issue comes up, then keeping in view the revenue trends, we can take a call.

There have been demands for inclusion of real estate and petroleum into GST…

When you have GST, then all sectors of the economy should be covered. If we have to have a perfect GST, we will have to include all sectors. Outside the [GST] Council, there may be demands, but within the council, rational decisions are taken after taking all aspects into account. Rational decision, in this case, would mean that until the revenue trends do not settle down, states would not want to part with revenues from the petroleum sector. We would be happy if these are included.

There have also been demands for further rationalisation in slabs?

We should move in the direction of two slabs. But this immediately would be regressive as some items would have to be moved from 5% to higher tax rate. At present, we have household common use items at 5%. The 5 % has edible oil, sugar. If we raise these to 12%, the poor will be hit immediately. If we want to move in the direction of two slabs, we need to resist the temptation or demands for bringing any item from 12% to 5% as raising them again would be difficult.

GST rate for restaurants was cut to 5%. What kind of signal is the GST Council trying to send?

When we decided the rate for the restaurant sector, we kept it at 12 % for non-AC and 18% for AC. We assumed the industry would pass on the benefit of credit that it gets in lieu of taxes paid on input uses and reduce menu price. Some restaurant chains indeed cut their menu price, but some did not. The country has over three lakh restaurants, so it’s difficult to check if each one has passed on the benefit or not. We received maximum complaints under anti-profiteering against restaurants and was that they straightaway levied 18% on menu price without any change in the menu price. Consumers did not find this palatable. We then looked into the issue. Some restaurants had to pay substantial commercial rent and could claim input credit for the tax paid, but some did not have large input tax credit as most items such as food items consumed by them are exempt. That’s why the council thought that input credit should not be allowed, but tax rate should be cut. This would mean that  customer would have to pay lesser tax. If restaurants increase menu price, competition will take care of that. With this step, not much anti-profiteering action would be required for this sector.

There are concerns in the industry over the functioning of Anti-profiteering Authority?

Industry need not worry about the functioning of the authority. It would not go after frivolous, small complaints. If there is a complaint against a big organised sector player, then it will come into picture.

GST Council has cut tax on 178 items to 18% from 28%. But, at retail level, consumers have not felt a substantial change…

It is necessary for a retailer to pass on the tax cuts. It should be clearly understood that MRP includes all taxes. If a good has old MRP, which was on basis of 28% tax, then the rate should come down automatically. This is responsibility of the company. Company has to ensure that their entire distribution chain — wholesalers, retailers — pass on this tax cut. I would like to appeal to FMCG companies that if they want to escape action from the Anti-profiteering Authority, they should ensure that this tax cut is passed to consumers. This argument that my stock is old and I paid 28% to the wholesaler cannot hold. A retailer when he sells to a consumer should charge only 18%. He will be able to get refund of any additional tax he may have paid to the wholesaler or input tax credit. Consumers also need to be conscious as taxes have been cut on so many products of mass consumption such as washing powder. The Consumer Affairs Ministry has given orders to paste new stickers by December for goods sold on MRP. But price revision should have happened immediately. I would request all FMCG companies to declare transparently in newspapers what was the MRP of their products earlier and after the revision.

An FMCG company directs its trade to pass on the benefit, but trade does not. Who will be held liable under anti-profiteering law?

It is the company’s responsibility to ensure that its entire retail chain follows its directives on pricing. If a trader is not selling a good at revised MRP, then it is the responsibility of the company. It will have to respond to the Anti-Profiteering Authority on this. Action can only be taken against organised players as they are the ones who decide MRP. We don’t want that industry should suffer. But, at the same time, consumers should also not suffer. Will the authority also act if the the consumer is a large company with a large number of suppliers? This is a subject of mutual negotiations. This provision is for the common man who is powerless.

Going forward, will we see some action on direct taxes?

In 2015, we gave a timetable for phase-out of all exemptions. We have been following that timetable and have stayed firm on it.

Source : Economic Times

Moody’s rating upgrade may have just made Modi govt’s job a lot harder : 18-11-2017


Credit rating agencies are a bit like strict school principals, but for governments and corporates. Countries undertake hard reforms, keep the macroeconomic climate stable, resist from overspending, and invest in good governance, so as to impress these agencies into a better rating.

There is an element of prestige involved. The previous government’s wake-up call from its reform stupor came in the form of Standard & Poor’s threatening to cut India’s credit rating to junk. That very week, Prime Minister Manmohan Singh hurriedly announced a spate of relaxation of FDI restrictions, including that of multi-brand retail.

There is also a commercial aspect to these ratings. When Indian companies choose to borrow from foreign markets, the higher is the cost of their loans the lower India’s sovereign credit rating is. After all, most companies will be judged at least as risky as the country they belong to.

In the last decade, loose monetary policy and near-zero policy interest rates by central banks of developed countries have encouraged Indian companies to increasingly seek raising finances offshore. The cost of servicing these loans increases sharply if the rupee suddenly depreciates, or the country’s credit rating suffers.

On Friday, major global credit rating agency Moody’s announced that India’s sovereign credit rating is to be upgraded from a notch above junk (Baa3) to a level up to Baa2. To quote Donald Trump, this is huge!

There are broadly two components of a credit rating: the actual rating, and the ‘outlook’, i.e., stable, positive or negative. The former generally takes a longer time to change, while the latter is more sensitive to economic developments. For instance, the current government managed to convince Moody’s and the others to change their outlook from ‘stable’ to ‘positive’ within a couple of years of its term. But cumulatively, it took India as long as 13 years for a rating upgrade.

No Longer Moody’s Blues

Rating agencies have been hard reality show judges to please. It is of little wonder that Prime Minister Narendra Modi and finance minister Arun Jaitley have been quick to reach to their Twitter accounts to acknowledge this feat. For the last couple of years, there have been numerous news reports of senior officials from GoI negotiating hard with these agencies to acknowledge their reforms. Former economic secretary Shaktikanta Das had once said in  exasperation that one can’t “wait till infinity” for the rating upgrade to happen.

Chief economic adviser Arvind Subramanian complained of this in the first chapter of his Economic Survey last year — comparing India with China, which was upgraded from A+ to AA– despite its indebtedness rising from 142% to over 200% of GDP between 2009 and 2015.

There are three key aspects of Moody’s appraisal that stand out. First is the focus on productivity and formalisation of the economy: logging in the impact of GST, rationalisation of government spending and better targeting of subsidies through Aadhaar.

Second is the curious timing of the ratings’ upgrade pretty much on cue with the government’s announcement of the massive Rs 1.35 trillion recapitalisation package for the banking sector to deal with the non-performing assets (NPAs) problem.

Clearly, the government’s previous package of Rs 700 billion under the Indradhanush programme was too inadequate to make an impression. The importance of arming public sector banks (PSBs) with capital is a key route to undertaking angioplasty of the choked investment pipeline; and a key impediment to falling growth.

But the third curious aspect of the Moody’s assessment is the focus it has put on improving fiscal rectitude. On the one hand, it is true that this government has been fiscally responsible and resisted the urge to indulge in expensive populism. It also seems to be in broad agreement with the Fiscal Responsibility and Budget Management (FRBM) Review Committee report that will potentially bind it to ambitious cuts in fiscal deficit. It is, however, curious because recent fiscal trends would suggest a strong possibility of GoI violating its fiscal deficit target of 3.2% of GDP.

It’s an Upgreat!

Second, the creation of Rs 1.3 trillion of government paper will eventually mean an escalation of interest payments, which already amount to 90% of the Centre’s fiscal deficit. With India’s debt-to-GDP ratio one of the highest among emerging markets, there should be little appetite for cleverly disguised off-balance sheet borrowing. Moody’s seems to inadvertently opine that the fiscal implication of the bank recapitalisation package is a justified trade-off.

Getting a rating upgrade is impressive. But given the importance that the assessment places on fiscal improvement, Moody’s indirect warning to the government is to refrain from having a populist Budget next year, and stay away from the temptation of undoing its fiscal consolidation in an effort to boost growth. To quote one of the early Spiderman movies: with great power comes great responsibility.

Source : PTI

Eateries may land in soup for profiteering post GST : 18-11-2017


Unhappy with the price hike introduced by restaurants after a steep reduction in the goods and services tax (GST) , the government is looking to invoke anti-profiteering provisions.

While restaurants are free to alter prices on account of higher costs, most have said the latest hike was the result of the GST Council’s decision to do away with input tax credit while lowering the levy from 18% to 5%.

“If the impact of withdrawal of input tax credit is a sharp increase, they should have also reduced prices by a similar margin when GST was introduced in July. It is a fit case of anti-profiteering action,” a senior finance ministry official told TOI.

The official said the law allowed the government to take suo motu action apart from acting on specific complaints. “We will levy the maximum possible penalty if profiteering is established,” the source, who did not wish to be identified, added.
A host of chains, from McDonalds, and Starbucks+ to Domino’s Pizza, have already hiked the base price, while others such as KFC are planning to follow suit by next week.

 The National Restaurants Association of India, which was lobbying on behalf of the organised sector, had estimated the input tax credit withdrawal would push up menu prices by 6-7%. In contrast, it had told the government that GST had resulted in a small gain of around 1% for restaurants.

While other associations have welcomed the move, NRAI members are seen to have moved to challenge the GST Council’s action, setting the stage for a possible escalation in the battle. On Thursday, the Union Cabinet had announced the establishment of an anti-profiteering body and has asked consumers to highlight cases of businesses pocketing gains since the launch of GST .

The finance ministry decided to withdraw the benefit of tax credit available on inputs as well as on rent after it noticed that the gain had not been passed on to consumers through a reduction in menu prices from July. Besides, it was finding it difficult to implement the scheme and convinced states to go ahead with the withdrawal of tax credits.

Source : Times of India

Moody’s gives thumbs up to GST, demonetisation : 18-11-2017


Moody’s Investors Service has hailed wide-ranging economic and institutional reforms of the BJP government over the last three, citing them as the big reasons for the agency’s first upgrade of India’s sovereign rating in almost 14 years.

The government is mid-way through a wide-ranging programme of economic and institutional reforms, the global ratings agency said in a statement on Friday, mentioning GST, improvements to the monetary policy framework, and measures to address bad loans of banks.

The reforms will help improve the business climate, enhance productivity, stimulate foreign and domestic investments, and foster strong and sustainable growth, Moody’s said while lifting India’s sovereign rating a notch to Baa2.

“Other important measures which have yet to reach fruition include planned land and labour market reforms which rely to a great extent on cooperation with and between the states,” it said.

The reforms will complement the existing shock-absorbance capacity provided by India’s strong growth potential and improving global competitiveness, Moody’s said.

“On the fiscal front, efforts to improve transparency and accountability, including through adoption of a new Fiscal Responsibility and Budget Management (FRBM) Act, are expected to enhance India’s fiscal policy framework and strengthen policy credibility,” it said.

Overall inflation rate in the country has declined markedly in recent times and forex reserves have increased to all-time highs, creating significant policy buffers to absorb potential shocks, Moody’s said.

The government’s move to recapitalise public sector banks (PSBs), along with the insolvency and bankruptcy code, would help address a key weakness in India’s sovereign credit profile.

“While the capital injection will modestly increase the government’s debt burden in the near term (by about 0.8% of GDP over two years), it should enable banks to move forward with the resolution of NPLs (nonperforming loans) through comprehensive write-downs of impaired loans and increase lending gradually,” it said.

If met by rising demand for investment and loans, bank capitalisation will help foster more robust growth, in turn supporting fiscal consolidation, Moody’s said.

The agency, however, said much still remains to be done

“Challenges with implementation of the GST, ongoing weakness of private sector investment, slow progress with resolution of banking sector asset quality issues, and lack of progress with land and labour reforms highlight still material government effectiveness issues,” it said.

ENDORSEMENT FOR GST AND DEMO

Moody’s said demonetisation and GST, along with other measures, will help reduce corruption, formalise economic activity, and improve tax collection and administration. The measures should contribute to further strengthening of India’s institutions, it said.

Measures such as demonetisation, the Aadhaar system of biometric accounts, and targeted delivery of benefits through the direct benefit transfer (DBT) would reduce informality in the economy, it said.

These measures increase the degree of formality in the economy, broaden the tax base (as with the GST), and promote expenditure efficiency through rationalisation of government schemes and better-targeted delivery (as with the DBT system) will support the expected, though very gradual, improvement in India’s fiscal metrics over time, it said .

BRIGHT OUTLOOK

Moody’s saw Indian economy picking up pace even though the GST and demonetisation have undermined growth over the near term. “However, as disruption fades, assisted by recent government measures to support SMEs and exporters with GST compliance, real GDP growth will rise to 7.5% in FY2018 with similarly robust levels of growth from FY2019 onward,” it said.

Moody’s expects real GDP growth to moderate to 6.7% in the fiscal year ending in March 2018 (FY2017), but said in the longer term India’s growth potential is significantly higher than most other Baa-rated sovereigns.

DEBT DECLINE

Reforms also offer greater confidence that the high level of public indebtedness, which is India’s principal credit weakness, will remain stable, even in the event of shocks, and will ultimately decline. General government debt stood at 68% of GDP in 2016, significantly higher than the Baa median of 44%.

Moody’s expects India’s debt-to-GDP ratio to rise by about 1 percentage point this fiscal year, to 69%, as nominal GDP growth has slowed following demonetisation and the implementation of GST.

The debt burden will likely remain broadly stable in the next few years, before falling gradually as nominal GDP growth continues and revenue broadening and expenditure efficiency-enhancing measures take effect.

Source : Economic Times

13 – 16-11-2017


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 81 MILLION TO GOVERNMENT OF REPUBLIC OF RWANDA

A.P. (DIR SERIES 2017-18) CIRCULAR NO.13DATED 16-11-2017

Export-Import Bank of India (Exim Bank) has entered into an Agreement on May 24, 2017 with the Government of the Republic of Rwanda for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 81 million (USD Eighty one million only) for the purpose of financing establishment of ten Vocational Training Centers and four Business Incubation Centers in the Republic of Rwanda. Under the arrangement financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from November 01, 2017. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC will have to be declared on Export Declaration Form as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD Category- I) banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category- I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

12 – 16-11-2017


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 500 MILLION TO SBM (MAURITIUS) INFRASTRUCTURE DEVELOPMENT COMPANY LTD.

A.P. (DIR SERIES 2017-18) CIRCULAR NO.12DATED 16-11-2017

Export-Import Bank of India (Exim Bank) has entered into an Agreement on May 27, 2017 with the SBM (Mauritius) Infrastructure Development Company Ltd. for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 500 million (USD Five hundred million only) for the purpose of financing its participation through Redeemable Preference Shares in public sector entities to implement infrastructure or other projects in Mauritius. Under the arrangement financing export of eligible goods and services from India would be allowed which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from October 03, 2017. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC will have to be declared on Export Declaration Form as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD Category- I) banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category- I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

 

New GST rates may lower CPI inflation by 20 bps, says Nomura : 15-11-2017


Decision to lower GST (goods and services tax) rates on over 200 items could help pull down retail inflation by 20 basis points from the current levels driven by lower food and beverage prices, says a report. Retail or CPI inflation rose to 7-month high of 3.58 per cent in October, driven up by costlier food items, particularly vegetables. According to global financial services major Nomura, recent decision by the central government to lower tax rates for 213 items including 178 items of daily consumer use is likely to lower CPI inflation by about 20 basis points (0.2 per cent). “The government expects these (GST) measures to be disinflationary. Our quantitative analysis suggests that if (a big if) the GST tax changes are fully passed on to consumers, they would lower CPI inflation by estimated 20 basis points,” Nomura said.

“This would be driven by lower food and beverage (chocolate, condensed milk and fish), household goods (detergent, sanitary ware and glassware) and personal care (shaving products, shampoos and cosmetics) prices,” it added. During the 23rd Goods and Services Tax (GST) council meeting, tax rates were lowered for 213 items. The largest changes were made in top 28 per cent tax bracket, where 178 (out of 228 items) were moved into the 18 per cent tax bracket.Tax rates on items ranging from chewing gum to chocolates to beauty products, wigs and wrist watches, were cut to provide relief to consumers and businesses amid economic slowdown.

As many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent, while a uniform 5 per cent tax was prescribed for all restaurants, both air- conditioned and non-AC. The new tax rates will be effective November 15.

Source : Financial Express

How companies in India are stepping in to help employees nearing retirement : 15-11-2017


While cutting a cake at her workplace to celebrate her 52nd birthday, Puja Shah (name changed), a VP at a business consultancy, momentarily shuddered — she would retire in six years and was anxious about issues relating to financial planning and health.

India’s demography is skewed towards the youth — by 2020, one third of its population will be aged 15-34 years. According to Census 2011, only 7% of India’s population of more than 121 crore fell in the band of 50-59 years.

Consequentially, HR policies of India Inc are largely veered towards recruiting, training and retaining millennials. The needs of employees nearing retirement often fall between the cracks.

Additionally, India has a low retirement age that varies between 58 and 60 years.The US, for instance, doesn’t have a prescribed retirement age, though a significant chunk retire around 65 years.

Some companies in India are stepping in to lend a helping hand to employees nearing retirement by organising workshops, continuing with the medical insurance policy for certain categories and keeping in touch after retirement via annual functions.

Indiainc

Bobby Kuriakose, HR director at Forbes Marshall, said, “We realise that retirement can be a very emotional time. At the beginning of each calendar year, we arrange a special programme called ‘Second Innings’.

Those due to retire in the next financial year are invited to this programme with their spouses. This full-day programme has sessions conducted by experts on financial planning, healthcare, dietary habits and yoga therapy.” Prince Augustin, EVP (group human capital and leadership development) at Mahindra & Mahindra, said, “While workshops are held by several group companies, Tech MahindraBSE 1.86 % has a specific programme called ‘The Employee Assistance Programme’.

Via an online confidential counselling process, the concerned employee is guided by a life coach or an expert on careers after retirement, financial planning, et al.”

Ramesh Shankar, EVP and HR head at Siemens India, adds, “In the year of retirement, external financial experts conduct workshops to enable employees to understand their past spending and investment pattern, take stock of the current, and plan for the future

These workshops are conducted once every six months. Health workshops are run by company affiliated doctors, who are broadly aware of an employee’s concerns and needs. These educational workshops help them adopt a fitter lifestyle.

At times, needs are also geographically centric — such as a higher incidence of diabetes in Delhi or obesity in Mumbai — and the workshops help these employee groups to deal with such problems.”

Cos focus on health issues of retiring staff

At ITCBSE -2.34 %, one or two years prior to retirement, the employee and his or her spouse are nominated for a dedicated weeklong programme.

In addition to covering financial topics, spiritual development, personal medical issues and advice for transition management between pre-retirement and post-retirement life are also dealt with. For those harbouring fears about life after retirement or how to utilise their time, help is on hand.

Shankar explains, “Counselling — whether face-to-face, online or over the phone — is available for all employees. The counsellors also help employees nearing retirement to tide over their concerns.” At Forbes Marshall, NGOs are also invited to advise employees nearing retirement on social activities that they can be involved in after they leave the company. Kuriakose says, “The management team and their immediate managers also interact with them informally.”

To help employees nearing retirement, there is a greater focus on health issues. At Siemens, those over 50 can avail of an annual medical check-up, which is less frequent for those below this age band. Shankar says, “Company affiliated doctors then step in for intervention as may be required. Medical records are maintained, monitored and suitable interventions planned based on the analysis.”

Retired employees of Forbes Marshall and their spouses can continue to avail of the free medical facility in the company’s 30-bed hospital.

At Siemens, for employees in the management category, the medical insurance for self and spouse continues even after retirement, albeit with a cap of Rs 5 lakh, with premium for any top-up borne by the retired employee.

Companies also stay in touch with their retired employees via invites to corporate events. A portal ‘Mahindra Remembers’ helps employees of certain group companies to be connected with ongoing corporate developments.

RPG Enterprises president (group HR) S Venkatesh says, “A cocktail and dinner programme is held annually in Mumbai for retired employees (vice-president level and above), which is presided over by group chairman Harsh Goenka. This helps bring former employees together.”

Source : Times of India

Buying groceries? Make sure to check GST ‘discounts’ : 15-11-2017


From Wednesday, consumers would do well to check their shopping bills closely. A host of packaged products such as chocolates, toothpastes, shampoos and shaving creams – with the maximum retail price printed on them – is set to become cheaper following a steep reduction in the goods and services tax.

Some companies manufacturing these products have asked traders to pass on the tax cuts to consumers immediately, without waiting to put revised maximum retail price stickers on them or printing new packs, both of which would take time.

A watch company and a printer maker plan to inform customers about the price reduction through newspaper advertisements. Still, consumers should be aware that not all companies may implement the price cuts right away.

The changes will affect a large number of products that are already in stores or on their way there. Pasting stickers with revised prices can be done only after the government gives the go ahead. Apart from taking time, some companies said pasting stickers costs the same as printing packs with the revised prices.

Buying groceries? Make sure to check GST 'discounts'

The maximum retail price of a product includes taxes and unless a company increases the base price or raises the margin for distributors and dealers, these products should become cheaper. The government is yet to issue fresh guidelines on pasting stickers with the revised prices.

“A number of products are in the MRP category, so companies will have to put a sticker or print new prices,” a government official said. The GST Council reduced the tax rate on about 200 products, of which 178 were moved to 18 per cent from the 28 per cent slab, at its 23rd meeting on November 10. The new rates are effective from midnight Tuesday, with both the states and the Centre issuing notifications.

“It’s good that the GST Council decided to bring in the changes from a particular date, that is November 15, as in a few cases earlier, different states had issued notifications from different dates,” said Pratik Jain, indirect tax partner, PwC.

“However, given the paucity of time, most companies have not been able to reduce the MRP of products but have communicated to dealers and retailers that prices should be brought down.” Consumers need to be aware about what prices are likely to come down and by how much, irrespective of the MRP printed on the product, he said. Gujarat Cooperative Milk Marketing Federation, which makes Amul, the country’s largest dairy brand, has told distributors to sell its products at the revised prices,  managing director RS Sodhi said.

“We have started the process of price revision. But there will be some transition time before which products with new MRPs reach end consumers,” he said. GST slabs on condensed milk and chocolate have been revised downwards, directly impacting the company’s products. Dabur, the maker of Real fruit juices and herbal and ayurvedic products, said it has not informed its trade channels about the revised prices.

“So far we have not communicated anything to our distributors as we are awaiting the notification,” Dabur chief financial officer Lalit Malik said. “We are in the process of evaluating the impact of this announcement and a final decision will be taken post the notification of the rate cut.” Some companies may not cut prices and instead increase pack sizes.
“When the tax slabs went up in July, we did not increase prices. Now that they have been revised downwards, we may not drop prices. We will wait and see how the market dynamics play out before taking a decision,” said the head of a large cosmetics company. Consumers should keep a tab on restaurant bills, too.

 

Source : Economic Times

 

Instruction No. 10/2017 – 15-11-2017


SECTION 143, READ WITH SECTION 119, OF THE INCOME-TAX ACT, 1961 – ASSESSMENT – GENERAL – PROCESSING OF INCOME-TAX RETURNS FILED IN FORMS ITR-2, 3, 4, 5 & 6 UNER SECTION 143(1) – APPLICABILITY OF SECTION 143(1)(a)(vi)

INSTRUCTION NO.10/2017 [F.NO.225/333/2017-ITA.II]DATED 15-11-2017

Sub-clause (vi) of clause (a) of sub-section (1) of section 143 of the Income-tax Act, 1961 (‘Act’) as introduced vide Finance Act, 2016, w.e.f. 1-4-2017, while processing the return of income, prescribes that the total income or loss shall be computed after making adjustment for addition of income appearing in Form 26 AS or Form 16A or Form 16 (the three Forms) which has not been included in computing the total income in the return.

2. In this regard, while processing income-tax returns filed in Forms ITR-2, 3, 4, 5 & 6, doubts have arisen regarding the nature, extent and scope of comparison of information as contained in the return of income with the three Forms which might lead to issuance of intimation proposing adjustments in the returned income. It has also come to notice that some of the information so available in the ITRs is incomparable with information contained in the three Forms. In this backdrop, it has become imperative to lay down suitable guidelines for CPC/AOs so that provisions of section 143(1)(a)(vi) of the Act are invoked only in appropriate cases.

3. After examining the matter, Central Board of Direct Taxes (CBDT), in exercise of its powers under section 119 of the Act, hereby lays down following guidelines regarding applicability of section 143(1)(a)(vi) of the Act while considering returns for processing pertaining to ITR Forms 2, 3, 4, 5 & 6:

3.1 For purposes of section 143(1)(a)(vi) of the Act, only the information so contained in the three Forms specified therein, would be taken into consideration.

3.2 In returns filed in ITR-4 Form, information about a particular head/item of income under the heads ‘salary’, ‘income from house property’, or ‘income from other sources’ is only on net basis and thus, complete data/information may not be available therein which may enable any comparison with the data/information as contained in the three Forms. Therefore, section 143(1)(a)(vi) shall not be applicable in such instances. However, if the receipts under these heads are completely omitted from the return, then the provisions of section 143(1)(a)(vi) shall be applicable. Further in ITR-4, wherever in the return Form, presumptive income under both Sections 44AD and 44AE is disclosed, it will be difficult to correlate the receipts in the return with the information in the three Forms. Hence, any likely difference in the receipts under these items in the return with the receipts in the three Forms under this scenario would be excluded from the purview of Section 143(l)(a)(vi). Similarly, it will be difficult to correlate the income under Section 44AE in the return with the information in the three Forms. However, where the presumptive income from business either u/s 44AD or profession u/s 44ADA alone are reported in the return and the gross receipts from presumptive business or profession shown in the return is less than the gross receipts as per the three Forms, intimation proposing adjustment would be issued.

3.3 For returns in Forms ITR-2 & 3, as receipts/income under the heads ‘salary’ is comparable with information available in the three Forms on a gross basis, provisions of section 143(l)(a)(vi) of the Act may be invoked in such cases wherever applicable.

3.4 In ITRs 3, 5 & 6, in respect of income under the heads ‘income from house property’ or ‘income from other sources’, there may be difficulties in ascertaining whether the receipt being shown in the three Forms is getting reflected under the head ‘income from house property’ or ‘income from other sources’ in the ITR Form or is being treated as business income under the head ‘income from business or profession’ by the concerned assessee. Under these circumstances, any likely difference in income shown under the head ‘income from house property’ or ‘income from other sources’ as contained in ITRs 3, 5 & 6 with the three Forms, being difficult to verify under section 143(1)(a)(vi) of the Act, would be excluded from purview of intimations proposing adjustments. However, there are certain types of income which are only taxable under the head ‘income from other sources’, in such situations, in case of mismatch at gross level, adjustments u/s 143(1)(a)(vi) of the Act shall be proposed. In respect of income under the head ‘income from house property’ being shown in ITR-2, as receipts/income are comparable with information available in the three Forms on a gross basis, provisions of section 143(1)(a)(vi) of the Act may be invoked.

3.5 In case of business receipts being taxable under the head ‘income from business or profession’ which are reported in ITRs 3, 5 & 6 Forms, comparison of such receipts in the three Forms with data in ITR at gross level may not be possible as receipts shown in the three Forms would get subsumed in the consolidated income in P&L A/c. Further, items in the P&L A/C such as commission, interest etc. may be shown at a net basis whereas the details in the three forms are reported on a gross basis. Hence, any likely difference in business receipts as contained in ITRs 3, 5 & 6 with the three Forms is excluded from the purview of intimations proposing adjustments under section 143(1)(a)(vi) of the Act since they may not be comparable.

3.6 In case of income under the head ‘capital gains’ being shown under any of the ITR Forms i.e. 2, 3, 5 & 6, for purposes of section 143(l)(a)(vi) of the Act, the information of payment, which may span multiple years, being reflected in the three Forms and the information being captured in the ITRs may not be comparable. Therefore, section 143(1)(a)(vi) of the Act shall not be applicable in case of income under the head ‘capital gains’ being shown under any of the ITR Forms i.e. 2, 3, 5 & 6. However, the credit for tax which is deducted at source and paid to the credit of the Central Government shall be governed by section 199 of the Act read with Rule 37BA of I.T. Rules, 1962. Further, information in the three Forms regarding TDS on immovable property in the case of persons engaged in real estate etc. may be in the nature of business income, such cases being covered under para 3.5 above, section 143(l)(a)(vi) would not be applicable on them.

4. This instruction may be brought to the notice of all concerned.

Notification No. 369/2017-RB : 14-11-2017


FEM (TRANSFER OR ISSUE OF ANY FOREIGN SECURITY) (AMENDMENT) REGULATIONS, 2017 – AMENDMENT IN REGULATION 15

NOTIFICATION NO. FEMA.369/2017-RB/GSR 1386(E)DATED 14-11-2017

In exercise of the powers conferred by clause (a) of sub-section (3) of Section 6 and sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 (Notification No. FEMA 120/RB-2004, dated July 7, 2004), as amended from time to time, (hereinafter called the Principal Regulations or the Notification) namely:—

Short Title & Commencement

1. (i) These Regulations shall be called the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) (Amendment) Regulations, 2017.

(ii) They shall come into force from the date of their publication in the Official Gazette.

Amendment to Regulation 15

2. In Regulation 15, in sub-regulation (v),

(i) for the existing clause (a), the following shall be substituted, namely;
“The Statutory Auditors of the Indian Party certify that law of the host country does not mandatorily require auditing of the books of accounts of JV/WOS and the figures in the APR are as per the un-audited accounts of the overseas JV/WOS”.
(ii) after existing clause (b), the following shall be added, namely;
“(c) The above exemption from filing the APR based on unaudited balance sheet will not be available in respect of JV/WOS in a country/jurisdiction which is either under the observation of the Financial Action Task Force (FATF) or in respect of which enhanced due diligence is recommended by FATF or the any other country/jurisdiction as prescribed by Reserve Bank of India.”

Notification No.96/2017 14-11-2017


SECTION 35(1)(ii) OF THE INCOME-TAX ACT, 1961 – SCIENTIFIC RESEARCH EXPENDITURE – APPROVED SCIENTIFIC RESEARCH ASSOCIATIONS/INSTITUTIONS

NOTIFICATION NO. 96/2017 (F.NO.203/33/2016/ITA-II)]DATED 14-11-2017

It is hereby notified for general information that the organization M/s International Crops Research Institute for the Semi-Arid Tropics (‘ICRISAT’) (PAN:- AAAJI0282L) has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5D of the Income-tax Rules, 1962 (said Rules), from Assessment year 2017-18 onwards in the category of ‘Scientific Research Association’, subject to the following conditions, namely:—

(i) The sole objective of the approved ‘Scientific Research Association’ ‘ICRISAT’ shall be to undertake scientific research;
(ii) The approved organization shall carry out scientific research by itself;
(iii) The approved organization shall maintain separate books of account for its activities and operations performed by it through grants received u/s.35(1)(ii) of the Act. ‘ICRISAT’ in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139 of the said Act;
(iii) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research for ‘ICRISAT’ and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.

2. The Central Government shall withdraw the approval if the approved organization:-

(a) fails to maintain separate books of account referred to in sub-paragraph (iii) of paragraph 1; or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5D of the said Rules.

More GST rate cuts on cards? Arun Jaitley hints at further relief : 14-11-2017


Finance Minister Arun Jaitley has hinted at further GST rate cuts in future depending on “revenue buoyancy”, while hitting out at the opposition for linking last week’s decision to lower rates on 178 items with the upcoming Gujarat elections. “In 4 months we have rationalised the 28 per cent slab. Such rationalisation (will happen in future) depending on revenue buoyancy will take place, ” PTI quoted Arun Jaitley as saying.

“Rationalisation process in the transition will always continue. So, wherever there is scope for improvement and procedural simplification will always continue,” the Finance Minister added. The GST Council, which is headed by Arun Jaitley, brought down tax rate on 178 products from 28% to 18% and pushed down several others in the lower bracket, and decided to bring down compliance burden.

Explaining the rationale behind not adopting the single tax system, Arun Jaitley said it was not fair to put luxury or sin items under the same tax umbrella as food. “Luxury goods, sin products and products hazardous to the environment and health cant be taxed at the same rate as aam admi (common man) product. So, wheat, rice, sugar cant be taxed at the rate as Mercedes car or yacht or tobacco.”

The Finance Minister also acknowledged problems faced by traders and businessmen while filing returns on GST Network and said, “You only have to address software (issue with the filing of the tax return). I think there is already a net advantage in the medium and long-term, smooth and a larger market and revenue buoyancy.”

Currently, the GST regime slots items under four primary tax rate slabs — low rate of 5%, standard rates of 12% and 18%, and high rate of 28%. Other than this, gold and jewellery are taxed at a concessional GST rate of 3%, while rough diamonds are having a 0.25% levy. The items of daily use have been kept tax-free, ie, either at zero tax rate or completely out of the ambit of tax under GST. Apart from this, an additional cess varying for item-to-item is levied — as in case of cigarettes and luxury cars — on sin and luxury items.

Source : Financial Express

GST glitches likely to hit exports in October : 14-11-2017


Exports are expected to shrink in October after several months of increase, with exporters blaming issues related to the implementation of goods and services tax (GST) as well as front-loading of shipments in September to avail of higher duty drawback rates, which are meant to be refunds for tax payments.

Exports had appeared to be back on track, registering a 26 per cent rise in September, the highest in six months.

Read more at:Data is due to be officially released in a day or two but sources told TOI that labour-intensive sectors such as textiles have been the worst performers. For cotton and viscose textiles, the duty drawback rates and refund of state levies (ROSL), which were in the range of 11-13 per cent, has now come down by 8-9 percentage points from October.

Garment manufacturers are also complaining of widespread loss of orders as buyers, including some of the top global brands, are preferring to source products from Vietnam and Bangladesh, which have cheaper labour but also enjoy preferential access to the US and European markets. While there has been discussion on restoring the rates, the government is yet to notify the changes.
Over the last two months, the government has sought to fix the glitches including offering a special dispensation to exporters to ensure that their funds do not get locked up. In addition, a new tool to enable merchant exporters, who source from manufacturers and export, has also been put in place but it is suffering from initial hiccups, which the revenue department is trying to fix .
Source : PTI

Government will soon revamp Make in India to meet its twin objectives of jobs, GDP growth : 14-11-2017


In a complete rethink of the ‘Make in India’ initiative, the government will come up with policy interventions in key sectors that can help create jobs and sustainable economic development in the country.

From 25 focus sectors presently, the government is selecting four or five to ‘nurture’ them, with emphasis likely on labour-intensive and high-potential sectors such as leather, textiles and garments, engineering, pharmaceuticals and automobiles.

High-level meetings have taken place in NITI Aayog, the industry department and the heavy industries ministries to restructure the policy for the auto industry – identified as a high-potential sector – to create more jobs. According to the Ministry of Labour and Employment, about 10 million youngsters join the race for jobs in India every year .

The government is deliberating on ways to push global automotive companies to engineer vehicles in India and not just assemble them here. “No country in the world has developed without a thriving auto industry… We need to nurture our auto sector in a fiercely competitive atmosphere,” a senior official said.

Invest India, the government’s investment promotion arm, has proposed several ideas for the auto sector to the heavy industries ministry. It suggested that the government should promote design in automotive engineering by incentivising companies willing to bring technology to India. “The future lies in technology transfer.

India needs to take a cue from countries such as China, which was making less cars than us in 1999 and has surpassed us today,” said Vikas Sehgal, vice chairman, Rothschild, South and South East Asia. “The government needs to promote design and exports in the auto industry.”

Rothschild has been engaged in devising policy strategies for key sectors by Invest India. On the table are stricter proposals for companies to engine er and design goods in India if they want to avail of benefits offered in the country. The government will also encourage JVs that bring international expertise to India such as the tie-up between M&M and Ford.

In India, benefits for the auto sector include rebates on land cost, stamp duty exemption on sale or lease of land, power tariff incentives, concessional interest rates on loans, investment subsidies, tax breaks, backward-area subsidies and special packages for mega projects.

“The government’s support to the auto industry has been crucial in all countries where the sector has flourished, including China, Japan, the US, France and Italy,” Sehgal said. India has the fifth-largest passenger and commercial vehicle market. It is estimated that 6 million-plus hybrid and electric vehicles will be sold annually in the country by 2020. FDI in the auto sector increased by 5% to $4.6 billion in the April-June quarter from the corresponding period last year.

Source : Economic Times

Items of common man’s consumption required some GST relief: Hasmukh Adhia : 13-11-2017


In the first major overhaul of the goods and services tax (GST) rates since its rollout on July 1, the GST Council on Friday reduced rates on 210 items of which 180 were in the top 28% bracket.

Hasmukh Adhia , who was designated as Union finance secretary early this week, replies in writing to ET’s 10 questions on GST and the reasons behind its rationalisation. Edited excerpts:

After over four months of the GST rollout, hitches still abound. Do you feel the government should have delayed its implementation?

I do not think that delaying would have made it so much better. Some of the problems were anticipated while some others cropped up only during implementation. As long as the government is alert in solving the glitches that come to light, it should be okay.

In hindsight, do you feel GST should not have been implemented so soon after demonetisation, another big shocker for the economy?

First of all, let me tell you that GST is not a shocker. It is a new system of taxation that has been debated for the last 10 years, and then brought into implementation. It has not come suddenly, out of the blue. Everybody knew the provisions of law, and the systems were designed in advance. GST reform is ideally complementing the government’s agenda of cracking down on unaccounted money. Therefore, it is logical in sequence to bring it soon after demonetisation.

Why do you think rationalisation of GST rates has become necessary?

The rationalisation of GST rates has become necessary because of three main reasons. First of all, the exercise of fitment of GST rates was done in a mechanical manner of adding up the existing tax rate of excise duty and VAT plus CST (Central Sales Tax) and putting that item in the nearest slab of tax. There were many items of production on which there was an excise duty of 12.5% but since these items were produced mainly by MSME (micro, small and medium enterprises) whose turnover was below Rs 1.5 crore, there was no payment of excise duty made by them. Therefore, such a rate became too excessive.

Second, there are certain similar-placed items in different chapters of HSN classification which were identical in nature but were placed in different tax rates. This would lead to classification disputes and, therefore, it is important to correct those. The third reason is that there were many items of common man’s consumption that also required some relief. These are the three main reasons why rejig of rates on a large scale becomes necessary.

 Exporters have been complaining about nonreceipt of refunds on time. Is there a move to address that issue?

We have already put in place a mechanism for refund for exporters. For the first three months of GST we continued the Duty Drawback scheme so that there was no need for refund. After that we have now continued the pre-GST regime of duty-free purchase of inputs by exporters, so now the question of refund will not arise. For the future, we are working on the ewallet  system which will be some kind of advance refund available to exporters so that their funds are not blocked in payment of taxes.

Do you concede GST and demonetisation played a role in dragging India’s GDP down in the first quarter of this fiscal? When will the economy recover?

The GDP growth rate of India was affected because of a large number of factors, both domestic and international. Some temporary impact of demonetisation was expected. The first quarter GDP is an aberration, not a trend. We do expect the GDP numbers to be much better in the subsequent quarters. India’s fundamental economic factors are still very strong and now that the government has found a way to solve the problem of bank recapitalisation, we can expect a buzz in the economy very soon.

What is your assessment of the impact of GST on indirect tax collection in this fiscal, and beyond?

So far, the indirect tax collection, including IGST (integrated GST, which a seller has to collect from a buyer in an inter-state transaction), is on expected lines. However, we will have to watch for another three months before concluding how GST will impact the indirect tax revenue of the Government of India in the current year. For the future, we are very optimistic about revenue buoyancy because of expansion of the tax net as well as better tax compliance .

Having plenty of experience in serving in Gujarat (Adhia is a Gujarat cadre IAS), what’s your take on the fierce opposition to GST in the state?

This question has political overtones, and so I would not like to respond.

The opposition parties have been making GST a political issue. How did you react when you heard GST being called ‘Gabbar Singh Tax’?

Again, I won’t like to respond.

Do you concede that some mistakes were made in implementing GST?

All I want to say is that the implementation of GST is a step in the right direction for the country. We should not be deterred by small glitches here and there. The GST Council and the Government of India are constantly attempting to solve all the difficulties that have arisen in the implementation of the GST, and we will continue to do so, if required, in future too.

The preparation for the coming budget has begun. How are you going about it?

Preparation of budget is an annual exercise done by the Ministry of Finance. All the departments of the ministry are involved in this exercise. We still have two and a half months to come out with some sensible proposals for the budget.

Source : Financial Express

India, Canada seek to put free trade pact in fast lane : 13-11-2017


India and Canada will make efforts for expeditious conclusion of a Comprehensive Economic Partnership Agreement on goods and services at the annual ministerial dialogue starting here tomorrow, said an official statement.

A high-level delegation led by the Canadian International Trade Minister Francois-Philippe Champagne is visiting India to attend the 4th Annual Ministerial Dialogue (AMD). The Indian delegation will be led by Commerce and Industry Minister Suresh Prabhu.

In the current round, India and Canada will be focusing on some of the key commercial drivers to enhance bilateral partnership, the release said.

“Efforts would be made to work towards the expeditious conclusion of the Comprehensive Economic Partnership Agreement (CEPA) for a progressive, balanced, and mutually beneficial agreement covering both goods and services,” it stated.

India-Canada merchandise trade stood at USD 6.13 billion in 2016-17, down 1.87 per cent from the previous year.

The negotiations for the agreement were launched in November 2010 to boost bilateral trade and investments.

According to the release, considering the high potential for bilateral trade, the trade ministers of both countries are likely to discuss issues to explore ways of expediting the early conclusion of the CEPA and the Foreign Investment Promotion and Protection Agreement.

“They would also explore options for Indian interests in addressing the Temporary Foreign Workers Programme of Canada, which is affecting the movement of Indian professionals seeking short-term visas, address equivalence by the Canadian Food Inspection Agency for Indian organic product exports and exploring two-way investment opportunities,” it said.

Though geographically separated by a long distance, the historical ties between the two countries date back to the late 19th century when Indians began migrating in small numbers to British Columbia in Canada.

Canada now has over 1.2 million Persons of Indian Origin (PIOs), comprising more than 3 per cent of its population.

“Though India’s commercial ties with the US have seen an upswing in the last few years, trade and investment relations between India and Canada are yet to realise their full potential,” the release said.

Given enormous complementarities, a concerted effort to boost bilateral trade and investment from both sides would provide a fruitful outcome, it added. NKD ARD

Source : Economic Times

Notification No. SO 3719(E) 13-11-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – MANGALORE SEZ LTD.

NOTIFICATION NO. SO 3719(E) [F.NO.F.2/120/2006-SEZ]DATED 13-11-2017

Whereas, M/s. Mangalore SEZ Limited, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for Petrochemicals and Petroleum at Baikampady, Near Mangalore, District Dakshin Kannada in the State of Karnataka;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified and de-notified the following areas at above Special Economic Zone as per the details given below:—

S. No. Notification No. Date Notified Area in Hectares De-notified area in hectares Total Area in Hectares
(i) S.O. 1885(E) 6-11-2007 587.921 - 587.921
(ii) S.O. 1477(E) 28-6-2011 55.776 5.641+17.316=22.957 620.740
(iii) S.O. 1909(E) 18-8-2011 4.046 - 624.786
(iv) S. O. 2298(E) 8-9-2014 35.0163 4.2980 655.5043

AND, WHEREAS, the sector the above mentioned SEZ was changed from “Petrochemcials and Petroleum” to “multi product” vide approval letter No.F.2./120/2006-SEZ dated 16th September, 2013;

AND, WHEREAS, M/s Mangalore SEZ Limited has now proposed for de-notification of 4.8722 hectares at the above Special Economic Zone;

AND, WHEREAS, the State Government of Karnataka has given its approval to the proposal vide letter No. VTPC/MD/MSEZ-NOC/2017-18, dated 3-10-2017;

AND, WHEREAS, the Development Commissioner, Mangalore Special Economic Zone has recommended the proposal for de-notification of an area of 4.8722 hectares of the Special Economic Zone;

NOW, WHEREAS, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby de-notifies an area of 4.8722 hectares, thereby making resultant area as 650.6321 hectares, comprising the survey numbers and the area given below in the table, namely:—

TABLE

S. No. Survey No. Name of Village Proposed denotified area in hectares
1. 33/4 part Kalavar 0.0904
2. 33/7 part 0.2485
3. 33/8 part 0.0271
4. 33/9 part 0.0097
5. 101/1 part 0.0283
6. 34/3 part 0.0200
7. 34/4B part 0.0031
8. 34/5 part 0.1105
9. 34/6 part 0.0425
10. 35/4 part 0.0458
11. 95/4 part 0.2380
12. 95/1 part 0.0946
13. 49/1 part 0.0658
14. 49/2 part 0.0629
15. 48/1 part 0.1412
16. 48/11 part 0.0547
17. 47/1 part 0.0100
18. 47/2 part 0.0741
19. 47/11B part 0.0414
20. 47/11A part 0.0308
21. 47/12 part 0.0686
22. 47/10 part 0.0328
23. 47/9 part 0.0526
24. 47/8 part 0.0531
25. 47/7 part 0.0723
26. 47/6 part 0.0384
27. 46 part 0.0247
28. 66/4A3 part 0.0828
29. 66/4A2 part 0.2408
30. 54/1 part 0.2137
31. 54/3 part 0.0992
32. 54/2 part 0.1970
33. 54/4A part 0.2046
34. 54/15 part 0.3339
35. 54/5 part 0.0178
36. 54/21&22 part 0.1947
37. 54/12 part 0.0045
38. 54/14 part 0.4223
39. 6/5 part 62, Thokur 0.0486
40. 6/1 part 0.4361
41. 6/2P1 part 0.2525
42. 10/3 part 0.2157
43. 10/6 part 0.0146
44. 10/10 part 0.0081
45. 10/7 part 0.0032
46. 10/8 part 0.0202
47. 10/13 part 0.0132
48. 9/1 part 0.0530
49. 9/9 part 0.0081
50. 5/8 full 0.0061
Total 4.8722
Grand total area of SEZ after above deletion 650.6321

Next step in GST recast: Lower end of tax slabs : 13-11-2017


The next rejig of goods and services tax will likely focus on the lower end of the rate slabs, as the country seeks to further streamline the structure by converging multiple rates into two or three. It will happen after the regime settles down and there is more clarity on revenue following the recast last week.

Simplification of laws, rules and procedures in line with industry’s feedback is also likely to top the GST Council’s agenda in the next few meetings.

The rates on some items such as cement and paint, still left at the highest rate of 28%, could be brought down if tax revenue remains robust.

A top official with a state government said the focus would now be to recast the lower 12% and 5% rate slabs.

Other issues to be considered by the council are inclusion of real estate and petroleum products under GST.

The government has set up a group with industry representation to review the tax regime, which has since its July 1 launch been criticised for having too many rates and being burdensome to comply with.

The latest recast, decided at a GST Council meeting in Guwahati last week, has seen the 18% rate emerging as the dominant slab with nearly half the goods, apart from most of the services, now taxed at that rate.

The Guwahati meeting decided to move 178 items to the 18% rate from 28% and cut the GST on eating at restaurants to 5% from Monday, in a decision that would reduce tax revenue by Rs 20,000 crore.

It may have been possible to move some more goods to the 18% slab from 28%, but that would have resulted a bigger revenue loss. Officials said cement and paint alone would have cost the government more than Rs 20,000 crore had the two been moved a slab lower.

“We need revenue as well,” said the state government official.

But eventually, the 28% slab would be left with very few items, mostly in the luxury and sin-goods category.

Other increasingly common-use items that are still in the 28% slab include air conditioners, refrigerators, washing machines, vacuum cleaners and digital cameras. In all, more than 50 items still remain on the 28% list.

A committee headed by chief economic adviser Arvind Subramanian had suggested a revenue-neutral rate of 15-15.5%, with a strong preference for the lower end of that range. It had recommended a standard rate — for services and most goods — of 17-18%, high or non-GST excise rate of 40% for items such as luxury goods and tobacco, and a low rate of 12% for essential goods.

With the latest recast, the rates have moved closer to this structure.

A further recast of the 5% rate, moving some up to 12% and scrapping the tax on others will further simplify the GST structure.

Lesser rates will bring stability to the overall tax regime, said experts.

“GST needs to be a simple, transparent and stable tax system. Multiple rate slabs result in classification disputes as businesses attempt to classify their products in lower slabs,” said Pratik Jain, indirect taxes leader, PwC.

In most countries, including Australia, Malaysia and Singapore, there is one standard rate, or at best a lower rate in addition to a standard rate. “Single rate will remove complexity from the structure as also alleviate revenue concerns,” said Bipin Sapra, partner, EY.

CONGRESS RAISES PRESSURE
Congress vice-president Rahul Gandhi in a tweet demanded that petroleum products and LPG cylinders be brought under GST.

He said the government should have a single rate that should not be more than 18%, and remove GST on products that the common man uses.

A day ahead of the council meeting in Guwahati, Congress-ruled states had demanded complete revamp of the GST structure.

Source : PTI

Union Budget 2018 to be presented on 1st February as government seeks continuity : 10-11-2017


The Narendra Modi-led government is set to present Union Budget 2018 on 1st February, just like it did last year. This budget which will be presented by finance minister Arun Jaitley will also be the last budget of the National Democratic Alliance (NDA) government before the 2019 Lok Sabha election.

The Narendra Modi-led government is set to present Union Budget 2018 on 1st February, just like it did last year. This budget which will be presented by finance minister Arun Jaitleywill also be the last budget of the National Democratic Alliance (NDA) government before the 2019 Lok Sabha election. Even though the winter session of Parliament will be truncated this time because of the Gujarat assembly elections, a senior government official told Livemint that there is no question of preponing the budget and (it) will be presented on February 1.

Earlier, the budget was presented on the last working day of the month but the current NDA government changed this practice in 2016 by presenting it on the first day of February. This step was taken to give more time to departments to spend the money allocated to them. Apart from this, the government had also merged the railway budget with the general budget last year. However, it is yet to take a call on shifting the financial year to January-December from April-March.

Union Budget 2018 will also be India’s first budget post-GST-implementation. Even though independent India’s biggest tax reform of GST was implemented from July 1, the Budget for 2017-18 (April- March), had followed the practice of tax revenue projections under the heads of customs duty, central excise and service tax alongside direct tax numbers. With excise duty and service tax being subsumed in the Goods and Services Tax (GST), the classifications will undergo change, an official said, according to PTI.

 He added that since the GST rates are decided by the GST Council, headed by Union Finance Minister and comprising of representatives of all states, the Budget for 2018-19 will not have any tax proposals concerning excise and service tax levies. Only proposals for changes in direct taxes, both personal income tax and corporate tax, besides customs duty are likely to be presented in the Budget along with new schemes and programmes of the government.

Source : Financial Express

Centre likely to announce procedure to address GST-related issues promptly : 10-11-2017


The government is looking to announce a procedure wherein the GST Council can address issues related to the indirect tax regime either suo motu or after being approached by companies or industry bodies, two people with the knowledge of the matter have said.

“There is a realisation that had a few proactive steps been taken, certain issues related to GST could have been addressed quickly. The government wants businesses to approach the GST Council rather than file writ petitions in courts,” a person in the know told

“The government is looking to prescribe a procedure by which companies can directly approach the GST Council or issues can directly be identified through social media interactions,” another person close to the development said. The idea is that the GST Council could take swift action or address a problem when a number of people start complaining on Twitter, he said.

Under the new mechanism, issues which are being tweeted to government’s Twitter handles around GST would be picked up on a priority basis and resolved or clarified immediately.

“Currently, Twitter handles are managed by tech professionals who often just repeat the stated lines. But the government does come to know about the magnitude of the problem and the GST Council can intervene and take immediate action,” the person close to the development added.

At last count, about 49 writ petitions have been filed across courts in issues related to GST, of which about 16 are by businesses seeking quick resolution.

“It would be good to see the various issues raised by businesses in various courts by filing writ petitions resolved by the GST Council as approaching courts on such issues is a sub-optimal solution.

While a resolution of some of the issues raised may require legislative changes which need to be taken up at the earliest, some of the issues can also be addressed by providing clarifications to business,” said MS Mani, partner-GST, Deloitte India. In some cases, leeway could be given where a sector could be faced with an unintended consequence.

According to people in the know, there is a feeling in the government that if issues are addressed promptly by the GST Council, most companies would avoid approaching the courts.

The procedure to sort out issues would be separate from the proposed advance authority for rulings, avowed both the people close to the development.

ET on October 4 reported that a few senior tax officials and corporates have urged the government to start AAR as early as possible to clear doubts on GST, as this will prevent companies and associations from approaching courts for clarity.

Source : PTI

Here’s what could become cheaper after GST Council’s meet today : 10-11-2017


GST Council meet in Guwahati: The GST Council may today consider reducing items in the 28 per cent tax slab and slash rates for daily use items, plastic products and hand-made furniture as it looks to provide relief to consumers.

Four months after the Goods and Services Tax (GST) was rolled out, the panel headed by Union Finance Minister Arun Jaitley will look at the most comprehensive overhaul of rates, easing returns filing and providing more relief to small and medium enterprises, official sources said.

The 23rd meeting of the Council, being held in Guwahati, will also deliberate on the suggestions made by Assam Finance Minister Himanta Biswa Sarma-headed GoM to cut tax rates for the composition scheme businesses to 1 per cent and lower rates for non-AC restaurants.

The Council, comprising state finance ministers, is also set to review the GST returns filing cycle and make it taxpayer friendly.

The Council may tomorrow rationalise rates in sectors where the total incidence of taxation has gone up because the goods were either exempt from excise or attracted lower VAT rates under the previous indirect tax regime.

As the Council tries to accommodate industry concerns on tax rates, after estimating the impact on revenue, a rationalisation of items in the 28 per cent tax bracket is expected.

“Most of the daily-use items like shampoo could be lowered to 18 per cent. Tax rate on items like furniture, electric switches and plastic pipes could be relooked at,” an official said.

Besides, making the composition scheme more attractive is on the agenda and as per the Group of Ministers (GoM) recommendations, the Council may decide to allow businesses in inter-state trade to opt for the arrangement.

The GoM had also suggested slashing tax rate to 1 per cent for manufacturers and restaurants opting for the scheme from 2 per cent and 5 per cent, respectively.

It was in favour of doing away with the tax rate distinction between AC and non-AC restaurants, those which are not covered under the composition scheme and tax them at a flat 12 per cent.

Currently, non-AC restaurants are taxed at 18 per cent.

It also suggested that eating out at hotels that have room tariff of more than Rs 7,500 should attract a uniform 18 per cent rate instead of any separate category for 5-star hotel, which currently falls under the 28 per cent bracket.

With regard to traders, the GoM came up with a two- pronged approach for taxation under the composition scheme.

It suggested that traders who want to exclude sale proceeds of tax-free items from turnover can pay 1 per cent GST. However, for those who pay tax on total turnover, the tax rate has been proposed at 0.5 per cent.

While a regular taxpayer has to pay taxes on a monthly basis, a composition supplier is required to file only one return and pay taxes on a quarterly basis.

With a view to easing compliance burden of taxpayers, the Council is also going to review the requirement of filing three returns every month under the GST set-up.

Businesses have to file returns in GSTR-1, GSTR-2 and GSTR-3 forms for every month. These forms detail outward supplies of taxable goods and/or services, inward supplies for claiming input tax credit and monthly returns.

The review follows businesses complaining about problems in matching invoices while filing July returns. Businesses have also complained of trouble in invoice matching while filing GSTR-2.

“It would be reviewed whether matching of invoices should be done every month or that should be made only quarterly,” the official added.

The Assam finance minister-headed GoM has already suggested allowing all businesses to file quarterly returns under the GST regime, akin to those businesses whose monthly turnover is up to Rs 1.5 crore.

The first three months of GST rollout have earned a cumulative revenue, including Integrated GST collections, of around Rs 2.78 lakh crore for the excheque

The businesses have initially filed sales returns or GSTR-3B and paid taxes.

GSTR-3B was introduced for making compliance easy and would be available only till December. The official further said that GSTR-3B might be extended beyond December as the government feels that businesses have adapted themselves to the system.

3B is required to be filed by the 20th of next month.

The final GST returns are to be filed by submitting forms GSTR-1, 2 and 3.

Over 47 lakh businesses have filed GSTR-1 return for July. These sales returns will have to be matched with the purchase invoice to be filed in GSTR-2.

Over 21 lakh businesses have filed July GSTR-2 and the due date for filing has been extended by a month to November 30.

After matching of GSTR-1 and 2, the businesses will have to file July GSTR-3, the last date for which is December 11.

Source : Economic Times

Notification No.94/2017 09-11-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 9th November, 2017

S.O. 3563(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the Haryana State Legal Services Authority, constituted by the Government of Haryana under the Legal Services Authorities Act, 1987, in respect of the following specified income arising to that Authority, namely:—

(a) grants received from Central Authority i.e. National Legal Services Authority (NALSA) for the purposes of The Legal Service Authorities Act, 1987;

(b) grants or donations received from the State Government of Haryana;

(c) amount received under the orders of Courts;

(d) fee received as recruitment application fees; and

(e) interest income earned on deposits.

2. This notification shall be effective subject to the conditions that Haryana State Legal Services Authority—

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the financial Years 2015-2016 & 2016-2017 and shall apply with respect to the financial years 2017-2018, 2018-2019 and 2019-2020.

 

[Notification No. 94/2017/F. No. 300196/11/2016-ITA-I]

DEEPSHIKHA SHARMA, Director

Explanatory Memorandum : It is certified that no person is being adversely affected by giving retrospective effect to this notification.

11 – 09-11-2017


Risk Management and Inter-Bank Dealings – Simplified Hedging Facility

RBI/2017-18/88
A.P. (DIR Series) Circular No. 11

November 09, 2017

To,

All Authorised Dealer Category – I Banks

Madam/Sir,

Risk Management and Inter-Bank Dealings – Simplified Hedging Facility

Attention of Authorised Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No.FEMA. 25/RB-2000 dated May 3, 2000) issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (Act 42 of 1999), as amended from time to time, the Master Direction – Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended from time to time, and the announcement made in the Statement on Developmental and Regulatory Policies Reserve Bank of India dated August 02, 2017 (para 7) on the simplified hedging facility

2. The scheme of simplified hedging facility was first announced by the RBI in August 2016 and the draft scheme was released on April 12, 2017. The facility is being introduced with a view to simplify the process for hedging exchange rate risk by reducing documentation requirements, avoiding prescriptive stipulations regarding products, purpose and hedging flexibility, and to encourage a more dynamic and efficient hedging culture.

3. Necessary amendments (Notification No. FEMA 388/2017-RB dated October 24, 2017) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R.No.1324 (E) dated October 24, 2017 a copy of which is given in the Annex II to this circular. These regulations have been issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (42 of 1999). The Master Direction on Risk Management & Interbank dealings dated July 5, 2016, as amended from time to time, has been updated accordingly.

4. The guidelines of this facility are given in Annex I to this circular and this facility will be effective from January 01, 2018.

5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.

6. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(T Rabi Sankar)
Chief General Manager


[Annex I to A.P. (DIR Series) Circular No. 11 dated November 09, 2017]

Simplified Hedging Facility Guidelines

Users: Resident and non-resident entities, other than individuals.

Purpose: To hedge exchange rate risk on transactions, contracted or anticipated, permissible under Foreign Exchange Management Act (FEMA), 19991.

Products: Any Over the Counter (OTC) derivative or Exchange Traded Currency Derivative (ETCD) permitted under FEMA, 1999.

Cap on Outstanding Contracts: USD 30 million, or its equivalent, on a gross basis.

Designated Bank: Any Authorised Dealer Category-I (AD Cat-I) bank designated as such by the user.

Operational Guidelines, Terms and Conditions

i. The user shall appoint an AD Cat-I bank as its “Designated Bank”. The designated bank will assess the hedging requirement of the user and set a limit up to the stipulated cap on the outstanding contracts.

ii. If hedging requirement of the user exceeds the limit in course of time, the designated bank may re-assess and, at its discretion, extend the limit up to 150% of the stipulated cap.

iii. Hedge contracts in OTC market can be booked with any AD Cat-I bank, provided the underlying cash flow takes place with the same bank.

iv. Cost reduction structures can be booked by users provided that resident unlisted companies can use such structures only if they have a minimum net worth of ₹ 200 crores

v. Users are not required to furnish any documentary evidence for establishing underlying exposure under this facility. Users may, however, provide basic details of the underlying transaction in a standardised format2, only in the case of OTC hedge contracts.

vi. Cancelled contracts may be freely rebooked with the same bank.

vii. In case of hedge contracts booked in OTC market, while losses will be recovered from the user, net gains i.e. gains in excess of cumulative losses, if any, will be transferred at the time of delivery of the underlying cash flow. In case of part delivery, net gains will be transferred on a pro-rata basis.

viii. For hedge contracts on underlying capital account transactions, gains/losses may be transferred to the user as and when they accrue if the underlying asset/liability is already in existence.

ix. On full utilisation of the limit or in case of breach of limit, user shall not book new contracts under this facility. In such a case, contracts booked earlier under this facility will be allowed to continue till they expire or are closed. Any further hedging requirements thereafter may be booked under other available hedging facilities.

x. Users booking contracts under this facility shall not book contracts under any other facility in OTC or ETCD market except as provided in para (ix).

xi. At the end of each financial year, the user will provide the designated bank with a statement signed by the head of finance or the head of the entity, to the effect that,

  • Hedge contracts booked in both OTC and ETCD market, under this facility, are backed by underlying exchange rate exposures, either contracted or anticipated.
  • The exposures underlying the hedge contracts booked under this facility are not hedged under any other facility.

xii. On being appointed, the designated bank shall report the details of the users and limits granted to the Trade Repository (TR). On a request by the TR, the exchanges shall report all contracts booked by such users to the TR on a daily basis.

xiii. The TR will compute user wise outstanding position (across OTC and ETCD market) and provide this information to the designated bank for monitoring. If the outstanding contracts of a user exceeds the limit (or the extended limit, if applicable) the designated bank shall advise the user to stop booking new contracts under this facility.

xiv. When user migrates to other available facilities, the designated bank shall report this information to the TR. The TR shall update this information in its records and notify the recognized stock exchanges to stop reporting data for the user concerned.

xv. Banks shall have an internal policy regarding the time limit up to which a hedge contract for a given underlying can be rolled-over or rebooked by the user.


1 Rupee denominated bonds issued overseas may be hedged provided it is permitted under contracted exposure hedging.

2 Standardized format will be devised by Foreign Exchange Dealers Association of India (FEDAI) and will include details like transaction type, i.e. current account (import, export) or capital account (ECB, FPI, FDI etc.), amount, currency and tenor.

Notification No.95/2017 09-11-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 9th November, 2017

S.O. 3564(E).—In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Telangana Building and Other Construction Workers Welfare Board’, a board established by the Government of Telangana, in respect of the following specified income arising to that board, namely:—

(a) Cess received;

(b) Registration and renewal fee collection from the Building and other construction workers; and

(c) Interest received on deposits.

2. This notification shall be effective subject to the conditions that Telangana Building and Other Construction Workers Welfare Board,—

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be applicable for the financial years 2017-2018, 2018-2019, 2019-2020, 2020- 2021 and 2021-2022.

[Notification No. 95/2017/F. No. 300196/23/2017-ITA-I]

DEEPSHIKHA SHARMA, Director

Fear of the taxman blights PM Modi’s quest to expand formal economy : 09-11-2017


Twice in the past year, Mohammed Mohsin’s textile design business was buffeted by major changes in the Indian economy. First, a ban on high-value notes, then a new tax system. Now, he senses yet another threat.

“There’s a new fear,” says Mohsin, 33, one of half a million people plying the saree trade in Varanasi, in the heart of Prime Minister Narendra Modi’s political constituency in the northern state of Uttar Pradesh. “It feels like the government is watching every move.”

While demonetization a year ago and the introduction of a goods and services tax in July were designed to fight black money and the shadow economy, and create a unified, common market across India, some business owners say the changes have left them vulnerable to accusations of tax evasion. And one way to avoid scrutiny is to slow transactions. In Varanasi, known internationally for its Banarasi woven-silk sarees, business is down about 60 percent from a year ago, Mohsin estimates.

India’s 50-Day Scramble to Cancel Old Banknotes: QuickTake Q&A

“There have been too many changes,” he said. “We hadn’t recovered from the cash ban when they introduced a new tax, which needs us to use computers and hire chartered accountants.”

Worthless Paper

The impact has spilled across the broader economy, which is slowing. The central bank expects annual private investment in India to fall by more than half to 694 billion rupees ($10.7 billion) in the year that began April 2017 from 1.54 trillion rupees the previous year. The amount of cash in circulation is a fifth less than in October last year, a month before Modi ordered invalid 500- and 1,000-rupee notes, essentially turning about 86 percent of the money in the $2.3 trillion economy into worthless paper.

“Unless this amount has been replaced by bank finance and there has been a rise in credit growth, it will be reflected in the production,” said Pronab Sen, country director at the New Delhi-based International Growth Centre and India’s former chief statistician.

But credit to industries shrank by 0.4 percent in September from a year earlier, the latest central bank data show. In the textile economy, India’s second-biggest employer at 45 million people, growth slowed to 1.7 percent in the financial year ended March 2017, compared with a 2.1 percent jump the previous year.

The reason for the downturn is obvious, according to Mohammad Zubair, who sells yarn in Varanasi from supplies he sources from Surat, in western India. He bemoans having to pay a chartered accountant 1,500 rupees ($23) a month to prepare and file his GST returns.

“I have to pay the tax, but I can’t pass the charge onto most of my weaver-buyers who are poor,” Zubair, 39, said. “So, who bears the extra cost? Me.”

Some businesses are finding creative ways to avoid the GST, which requires separate monthly, quarterly and annual filings. Zubair said he is aware of informal agreements between yarn suppliers and transport companies that routinely result in incomplete invoices.

 

Tax Evaders

Modi’s pledges to crack down on tax evaders after demonetization unnerved some traders, said Suresh Kesari, who runs a fabric store. Some people avoid completing business transactions altogether for fear that revealing higher earnings may attract the ire of taxation officials, he said.

“People are simply cutting down on their earnings by taking on fewer orders,” the 40-year-old said.

Yet in Modi’s Varanasi, where the manufacture of 4.5-meter (15-feet) sarees woven with gold and silver brocade dominates the city’s industrial output, the cash ban that started a cycle of job losses is the main villain of the economic slowdown.

“Business never really picked up after November,” said Zainul Abedin, 40, who has been forced to idle eight of his family’s 14 saree-making looms. “My fellow weavers are flocking to other cities in search of work. We don’t have jobs if we don’t have orders.”

Abedin said he believes Modi’s economic reforms will help business in the longer term. For one thing, he’s no longer chasing clients for cash payments, and those registered on the GST network are transferring money electronically to his recently opened bank account.

Still, Abedin and other business owners said they aren’t satisfied with the progress Modi pledged to make in bringing tax evaders and criminals to account for hoarding the 1.25 trillion rupees the government said it recovered after the cash ban.

“We welcomed the demonetization initially in spite of having to let workers go because we couldn’t pay them in the first three months or so,” said K. Velmurugan, treasurer of the Small and Tiny Industries Association in the southern state of Tamil Nadu. “But after everything, the government has still not caught any persons. So, what then was the meaning of all that suffering?”

Source : Financial Express

 

GST Council might take these measures to simplify the tax : 09-11-2017


GST Council, the apex decision-making body for the Goods and Services Tax, will meet in Guwahati later this week to deliberate on more measures to make the new tax regime smoother.

Revamp of the 28% slab

 

GST Council might take these measures to simplify the tax

GST Council might take these measures to simplify the tax

“Tax rates on 80% of 227 items in top slab is likely to be reduced from 28% to 18%. GST fitment committee has also recommended reducing rates from 18% to 12% on a number of goods.” Sushil Modi, Bihar Deputy Chief Minister .

GST Council might take these measures to simplify the tax

 

Source : PTI

 

GST Council meet on Friday, may announce new measures to boost digital payments, cut tax rates : 09-11-2017


A year after demonetisation, India is getting ready to give digital payments yet another push. It could consider providing incentives in the goods and services tax (GST) regime for payments that are settled electronically.

The GST Council meeting on Friday is likely to consider a proposal in this regard, a senior government official told ET

“There is a thinking that digital transactions need to be incentivised… The council will look at what could be done,” the person said.

The council could take up the proposal along with steps to cut GST on some items from the top 28% rate besides easing the compliance burden for businesses. As far as digital payments are concerned, the council has the option of incentivising merchants and customers.

Under the proposal, benefits in terms of credit or exemption could be provided within central and state GST to encourage such transactions. A merchant could, for instance, get credit for digital payments that can be adjusted against GST liabilities. Consumers, on the other hand, could be incentivised through lower tax when payments are made digitally.

The government feels built-in incentives in the tax structure could help in making digital transactions more acceptable to customers and merchants as the benefit is visible immediately. Another possible change could be through the merchant discount rate (MDR), a transaction charge levied for facilitating digital transactions, which is seen as a hurdle in the way of digital payments. The MDR on credit cards runs from 0.25% to 1%. There’s no limit on MDR for credit cards .

The Narendra Modi government is keen on pushing digital transactions and had set up a committee under the chairmanship of Andhra Pradesh chief minister N Chandrababu Naidu to discuss strategies to achieve this. This panel had suggested abolishing MDR charges.

The usage of cards for purchases, mobile wallets and newer options such as the Unified Payments Interface (UPI) have been increasing after demonetisation in November last year sucked out 86% of cash in circulation.

Card transactions for purchases rose from 230 million in October 2016 to over 380 million in August this year. The rise in mobile wallet transactions has been steeper over the same period, from 100 million to over 225 million.

The government had announced incentives for digital payments to encourage adoption. Payment by digital means for fuel purchases is rewarded by a cashback incentive.

Source : Economic Times

Demonetisation gets thumbs up! Experts say together with GST + Aadhaar linking will attack black money : 08-11-2017


Demonetisation completes 1 year today, and even as the Narendra Modi government and Opposition trade barbs over the effects of the demonetisation move, common man is left wondering whether the step was worth all the pain that had to be endured. Financial Express Online decided to poll 15 leading economists, researchers and analysts to better gauge the impact demonetisation – and majority of them have given a thumbs up to Modi government’s bold economic move. Few of us can forget the night of November 8, 2016 when Prime Minister Narendra Modi in a surprise address to the nation announced that old Rs 500 and Rs 1000 notes would cease to be legal tender money. The government over the next few days said the demonetisation was aimed at eliminating black money, remove counterfeit currencies and also promote digital transactions.

According to Finance Minister Arun Jaitley, demonetisation was a “watershed moment” that will make India a clean economy. However, even as the Modi government marks November 8 as the ‘Anti-Black’ money day, Oppositions has come out all guns blazing – calling demonetisation a blunder – and terming the anniversary a ‘Black Money’ day. So, what were the benefits of demonetisation? Did demonetisation help detect black money in the economy? Did demonetisation aid in curbing the generation of black money in the economy?

Demonetisation was “effective”, and combined with GST and Aadhaar linking would be the right step to move India to a more transparent system, say analysts polled by Financial Express Online. In a survey of 15 analysts, the verdict is clear that demonetisation proved to be helpful in tracing black money in the economy. While as many as eight analysts found demonetisation “somewhat effective”, three analysts even felt that the step was “effective to a great extent”. Only one economist disagreed with Modi government’s move, stating that it was “not at all effective” in detecting black money. Three economists “couldn’t say” to what extent the move was useful

But more importantly, analysts are of the view that demonetisation followed by GST rollout and Aadhaar linking to PAN and bank accounts are all steps that will work as effective deterrents to generation of black money. As many as 9 analysts feel that the three combined together work better than demonetisation alone. “All of them (demonetisation + GST + Aadhaar linking) are absolutely effective,” says Dhirendra Kumar, CEO of Value Research. Sahil Kapoor of Edelweiss is of the view that the “net effect of factors like GST, Aadhaar, Jan Dhan, Demo which has helped in reducing the generation of black money.”

Agrees Vikas Vasal, National Leader – tax at Grant Thornton India. “Demonetisation along with other measures has helped bring in more transparency in the system. India is largely a tax non-compliant society. Any behavioral change in the society, as large and as diverse like ours, takes time. Therefore, one should not expect overnight results. Demonetisation was indeed a bold step, which sent a strong message to the masses,” says Vasal. “Demonetisation along with a combination of other measures like GST, linking of Aadhaar with PAN, mobiles, bank accounts, and use of data analytics to detect tax evasion is likely to yield results over time,” he adds.

An economist from a leading global bank, who did not wished to be named, stresses on the need for other follow-on measures as well. “Demonetisation if combined by other measures to curb black money flow between asset classes, increasing regulatory checks, legal controls, clamping down on offshore accounts, and GST/Aadhaar linkage are necessary to materially slow black money growth,” the economist says.

Source : PTI

Here’s why small industries require some GST relief : 08-11-2017


At an elevation of 3,000 feet above sea level, Hosur has a temperate climate that is the envy of the rest of Tamil Nadu. Right now, even on winter eve, temperatures are running high in this industrial town, and climate change is not at fault. Blame it on the goods and services tax (GST)

Since the Tamil Nadu finance minister is too busy with the survival of the state’s sickly government to meet representatives of the Hosur Small and Tiny Industries Association, which comprises some 2,500 small units that together employ 85,000 men and women, its office-bearers had to come to Delhi to represent their case.

Their basic problem is the shock of seeing their tax burden go up from 17.5 per cent combined excise duty and Value Added Tax to 28 per cent GST. Their net tax burden goes up substantially. But this is not all. These are suppliers to the region’s large automobile manufacturing businesses.

The big buyers settle their payments typically after three months. This means that the small suppliers have to borrow money to pay the higher additional tax and bear the cost of interest on this for three months. Our banks prefer to lend to the Tatas and Birlas and leave small business as lunch for non-banking finance companies and money lenders.

SMEs borrow at rates ranging from 20 per cent to 100 per cent . GST increases their borrowing and, thereby, interest costs to an extent that they fear would wipe out their margins altogether.

They cannot show interest costs way out of line with bank rates, without inviting tax queries on their lenders and blocking off these lines of credit, the only ones they have.

They want their tax rate to be brought down to 18 per cent. And since they are input suppliers to automobile companies, the rate they are charged is immaterial for the government’s final tax take: whatever they pay is set off as an input credit by the final auto assemblers and the rate consumers pay on automobiles decides the government’s collection from the entire value added along the chain of supplies leading up to the fully assembled and retailed automobile.

The 28 per cent rate is an extortionate rate that should be reserved for a handful of goods, and not foisted on intermediate parts, only to generate business for the moneylender and drive small units out of business.

The Hosur industrialists point to some other anomalies. They buy food from independent food outlets for their workers. These outlets now have to pay 18 per cent GST and this is not eligible for an input tax credit. Industry can get over this problem by virtualising in-house canteens: the food procured to supply their workers can be tax-exempt, if for the period and to the extent of that supply, the food outlet is treated as a captive canteen. Taxmen must allow this.

Industry also suffers from not being able to take credit for taxes paid on their factory premises: real estate would have to be brought into the ambit of GST.

Some other suggestions: below a threshold for the supplier, collect GST as a tax deducted at source by the buyer — extend the so-called reverse tax ambit. This would take care of job work, say getting sheets of metal into strips of the desired size, getting entangled in tax and paperwork.

Even if the government cannot do the sensible thing of unifying all rates at say, 14 per cent, many of small industries’ problems can be solved, with some empathy and imagination

Source : Economic Times

Month after ‘relief’, exporters still feel pinch of GST : 08-11-2017


The government’s move to simplify the GST regime for exporters has not had the desired impact due to glitches in the process being implemented for merchant exporters.

Several exporters are also complaining of continued difficulty in getting refunds and credits under the new regime, which has made life tougher.

A month ago, the GST Council had decided to allow merchant exporters to pay a nominal GST of 0.1 per cent for procuring goods from domestic suppliers for export. But the rules finalised by the Central Board of Excise & Customs are seen to be so cumbersome that it has not benefited these exporters, who complain that their entire margin is wiped out if they pay the product-specific GST.

Government officials pointed out that merchant exporters, who source goods for manufacturers and export them, have been mandated to use only registered warehouses something that business is finding it tough to meet.

Similarly, the rules require an exporter to share details of a buyer along with the price at which it has been exported. “This is something that no businessman will share as it is commercially sensitive information,” explained an officer. While officers from revenue and commerce departments have met on this issue, CBEC has failed to address the concerns. Officers met again on Tuesday to find a solution with a revised notification expected soon.

A sources said that move is afoot to put in place a mechanism that the buyer’s name and the price is not visible to the manufacturer as the shipping bill has to be shared by the exporter to claim benefit. The finance and commerce ministries are also working out the details of how the duty drawback scheme is reworked to ensure that taxes are reimbursed to exporters. While a political clearance has been received, details are being worked out.

Source : Times of India

Notification No. 20(R)/2017-RB 07-11-2017


 

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 – 20(R)/ 2017-RB – Foreign Exchange Management

 

RESERVE BANK OF INDIA

(FOREIGN EXCHANGE DEPARTMENT)

(CENTRAL OFFICE)

NOTIFICATION No. FEMA 20(R)/ 2017-RB

Mumbai, the 7th November, 2017

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017

G.S.R. 1374(E).- In exercise of the powers conferred by clause (b) of sub-section (3) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession of Notification No. FEMA 20/2000-RB and Notification No. FEMA 24/2000-RB both dated May 3, 2000, as amended from time to time, the Reserve Bank makes the following regulations to regulate investment in India by a Person Resident Outside India, namely:-

1. Short title and commencement

(1) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017.

(2) They shall come into effect from the date of their publication in the Official Gazette except proviso (ii) to sub-regulation 1 of regulation 10 of these Regulations and proviso (ii) to sub-regulation 2 of regulation 10 of these Regulations which will come into effect from a date to be notified.

2. Definitions

In these Regulations, unless the context requires otherwise,-

(i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

(ii) ‘Asset Reconstruction Company’ (ARC) means a company registered with the Reserve Bank under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act);

(iii) ‘Authorised bank’ will have the same meaning as assigned to it in Foreign Exchange Management (Deposit) Regulations, 2016;

(iv) ‘Authorised dealer’ includes a person authorised under sub-section (1) of section 10 of the Act;

(v) ‘Capital Instruments’ means equity shares, debentures, preference shares and share warrants issued by an Indian company;

Explanation:

(a) Equity shares issued in accordance with the provisions of the Companies Act, 2013 shall include equity shares that have been partly paid. The expression ‘Debentures’ means fully, compulsorily and mandatorily convertible debentures. ‘Preference shares’ means fully, compulsorily and mandatorily convertible preference shares. Share Warrants are those issued by an Indian Company in accordance with the Regulations issued by the Securities and Exchange Board of India. Capital instruments can contain an optionality clause subject to a minimum lock-in period of one year or as prescribed for the specific sector, whichever is higher, but without any option or right to exit at an assured price.

(b) Partly paid shares that have been issued to a person resident outside India shall be fully called-up within twelve months of such issue. Twenty five percent of the total consideration amount (including share premium, if any), shall be received upfront.

(c) In case of share warrants at least twenty five percent of the consideration shall be received upfront and the balance amount within eighteen months of issuance of share warrants.

(d) Capital instruments shall include non-convertible/ optionally convertible/ partially convertible preference shares issued as on and up to April 30, 2007 and optionally convertible/ partially convertible debentures issued up to June 7, 2007 till their original maturity. Non-convertible/ optionally convertible/ partially convertible preference shares issued after April 30, 2007 shall be treated as debt and shall conform to External Commercial Borrowings guidelines regulated under Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.

(vi) ‘Convertible Note’ means an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument;

(vii) ‘Domestic Custodian’ means a custodian of securities, an Indian Depository, a Depository Participant, or a bank and having permission from Securities and Exchange Board of India to provide services as custodian;

(viii) ‘Domestic Depository’ means a custodian of securities registered with the Securities and Exchange Board of India and authorised by the issuing entity to issue Indian Depository Receipts;

(ix) ‘Depository Receipt’ means a foreign currency denominated instrument, whether listed on an international exchange or not, issued by a foreign depository in a permissible jurisdiction on the back of eligible securities issued or transferred to that foreign depository and deposited with a domestic custodian and includes ‘global depository receipt’ as defined in the Companies Act, 2013;

(x) ‘Employees’ stock option’ (ESOP) means an ESOP as defined under the Companies Act, 2013 and issued under the regulations issued by the Securities and Exchange Board of India;

(xi) ‘Escrow account’ means an Escrow account maintained in accordance with Foreign Exchange Management (Deposit) Regulations, 2016;

(xii) ‘FDI linked performance conditions’ means the sector specific conditions stipulated in regulation 16 of these Regulations for companies receiving foreign investment;

(xiii) ‘Foreign Venture Capital Investor’ (FVCI) means an investor incorporated and established outside India and registered with Securities and Exchange Board of India under Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000;

(xiv) ‘Foreign Central Bank’ means an institution/ organisation/ body corporate established in a Country outside India and entrusted with the responsibility of carrying out central bank functions under the law for the time being in force in that country;

(xv) ‘FCNR (B) account’ means a Foreign Currency Non-Resident (Bank) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016;

(xvi) ‘Foreign Currency Convertible Bond (FCCB)’ means a bond issued under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993;

(xvii) ‘Foreign Direct Investment’ (FDI) means investment through capital instruments by a person resident outside India in an unlisted Indian company; or in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company;

Note: In case an existing investment by a person resident outside India in capital instruments of a listed Indian company falls to a level below 10 percent of the post issue paid-up equity capital on a fully diluted basis, the investment shall continue to be treated as FDI.

Explanation: Fully diluted basis means the total number of shares that would be outstanding if all possible sources of conversion are exercised

(xviii) ‘Foreign Investment’ means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP; Explanation: If a declaration is made by persons as per the provisions of the Companies Act, 2013 about a beneficial interest being held by a person resident outside India, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment.

Note: A person resident outside India may hold foreign investment either as Foreign Direct Investment or as Foreign Portfolio Investment in any particular Indian company.

(xix) ‘Foreign Portfolio Investment’ means any investment made by a person resident outside India through capital instruments where such investment is less than 10 percent of the post issue paid-up share capital on a fully diluted basis of a listed Indian company or less than 10 percent of the paid up value of each series of capital instruments of a listed Indian company;

Explanation: The 10 percent limit for foreign portfolio investors shall be applicable to each foreign portfolio investor or an investor group as referred in Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014

(xx) ‘Foreign Portfolio Investor (FPI)’ means a person registered in accordance with the provisions of Securities Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014.

Explanation: Any Foreign Institutional Investor (FII) or a sub account registered under the Securities Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 and holding a valid

certificate of registration from Securities and Exchange Board of India shall be deemed to be a FPI till the expiry of the block of three years from the enactment of the Securities Exchange Board of India (FPI) Regulations, 2014.

(xxi) ‘Government approval’ means approval from the erstwhile Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Government of India and/ or the erstwhile Foreign Investment Promotion Board (FIPB) and/ or any of the ministry/ department of the Government of India as the case may be;

(xxii) ‘Group company’ means two or more enterprises which, directly or indirectly, are in a position to (a) exercise 26 percent, or more of voting rights in other enterprise; or (b) appoint more than 50 percent, of members of board of directors in the other enterprise;

(xxiii) ‘Indian company’ means a company incorporated in India and registered under the Companies Act, 2013;

(xxiv) ‘Indian Depository Receipts (IDRs)’ means any instrument in the form of a depository receipt created by a Domestic Depository in India and authorised by a company incorporated outside India making an issue of such depository receipts;

(xxv) ‘Indian entity’shall mean an Indian company or an LLP;

(xxvi) ‘Investing company’ means an Indian company holding only investments in other Indian company/ies directly or indirectly, other than for trading of such holdings/ securities;

(xxvii) ‘Investment’ means to subscribe, acquire, hold or transfer any security or unit issued by a person resident in India;

Explanation:

(a) This will include to acquire, hold or transfer depository receipts issued outside India, the underlying of which is a security issued by a person resident in India.

(b) For the purpose of LLP, investment shall mean capital contribution or acquisition/ transfer of profit shares.

(xxviii) ‘Investment on repatriation basis’ means an investment, the sale/ maturity proceeds of which are, net of taxes, eligible to be repatriated out of India, and the expression ‘Investment on nonrepatriation basis’, shall be construed accordingly;

(xxix) ‘Investment Vehicle’ means an entity registered and regulated under relevant regulations framed by Securities and Exchange Board of India or any other authority designated for the purpose and shall include Real Estate Investment Trusts (REITs) governed by the Securities and Exchange Board of India (REITs) Regulations, 2014, Infrastructure Investment Trusts (InvIts) governed by the Securities and Exchange Board of India (InvIts) Regulations, 2014 and Alternative Investment Funds (AIFs) governed by the Securities and Exchange Board of India (AIFs) Regulations, 2012;

(xxx) ‘Limited Liability Partnership (LLP)’ means a partnership formed and registered under the Limited Liability Partnership Act, 2008;

(xxxi) ‘Listed Indian Company’ means an Indian company which has any of its capital instruments listed on a recognized stock exchange in India and the expression ‘Unlisted Indian Company’ shall be construed accordingly;

(xxxii) ‘Manufacture’, with its grammatical variations, means a change in a non-living physical object or article or thing, (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.

(xxxiii) ‘NRE account’ means a Non-Resident External account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016;

(xxxiv) ‘NRO account’ means a Non-Resident Ordinary account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016;

(xxxv) ‘Non-Resident Indian (NRI)’ means an individual resident outside India who is citizen of India;

(xxxvi) ‘Overseas Citizen of India (OCI)’ means an individual resident outside India who is registered as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955;

(xxxvii) ‘Resident Indian citizen’ means an individual who is a person resident in India and is citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955;

(xxxviii) ‘Secretariat for Industrial Assistance’ means Secretariat for Industrial Assistance in the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India;

(xxxix) ‘Sectoral cap’ means the maximum investment including both foreign investment on a repatriation basis by persons resident outside India in capital instruments of a company or the  capital of an LLP, as the case may be, and indirect foreign investment, unless provided otherwise. This shall be the composite limit for the Indian investee entity;

Explanation:

(a) FCCBs and DRs having underlying of instruments being in the nature of debt shall not be included in the sectoral cap.

(b) Any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned under the sectoral cap.

(xl) ‘SNRR account’ means a Special Non-Resident Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016;

(xli) ‘Startup’ means an entity which complies with the conditions laid down in Notification No. G.S.R 180(E) dated February 17, 2016 issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India;

(xlii) ‘Startup company’ means a private company incorporated under the Companies Act, 2013 and recognised as such in accordance with notification number G.S.R. 180(E) dated February 17, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India and complies with the conditions laid down by it;

(xliii) ‘Sweat equity shares’ means sweat equity shares as defined under the Companies Act, 2013;

(xliv) ‘Transferable Development Rights (TDR)’ shall have the same meaning as assigned to it in the Regulations made under sub-section (2) of section 6 of the Act;

(xlv) ‘Unit’ means beneficial interest of an investor in an investment vehicle.

(xlvi) ‘Venture Capital Fund’ means a fund established in the form of a trust, a company including a body corporate and registered under the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996;

(xlvii) The words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3. Restriction on investment by a person resident outside India

Save as otherwise provided in the Act, or rules or regulations made thereunder, no person resident outside India shall make any investment in India.

Provided that an investment made in accordance with the Act or the rules or the regulations framed thereunder and held on the date of commencement of these Regulations, shall be deemed to have been made under these Regulations and shall accordingly be governed by these Regulations.

Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons, permit a person resident outside India to make any investment in India subject to such conditions as may be considered necessary.

4. Restriction on receiving investment

Save as otherwise provided in the Act, or rules or regulations made thereunder, an Indian entity or an investment vehicle, or a venture capital fund or a Firm or an Association of Persons or a proprietary concern shall not receive any investment in India from a person resident outside India or record such investment in its books.

Provided that the Reserve Bank may, on an application made to it and for sufficient reasons, permit an Indian entity or an investment vehicle, or a venture capital fund or a Firm or an Association of Persons or a proprietary concern to receive any investment in India from a person resident outside India or to record such investment subject to such conditions as may be considered necessary.

5. Permission for making investment by a person resident outside India

Unless otherwise specified in these Regulations or the relevant Schedules, any investment made by a person resident outside India shall be subject to the entry routes, sectoral caps or the investment limits, as the case may be, and the attendant conditionalities for such investment as laid down in these Regulations. A person resident outside India may make investment as under:

(1) A person resident outside India may subscribe, purchase or sell capital instruments of an Indian company in the manner and subject to the terms and conditions specified in Schedule 1.

Provided that a person who is a citizen of Bangladesh or Pakistan or is an entity incorporated in Bangladesh or Pakistan cannot purchase capital instruments without the prior Government approval.

Provided further, a person who is a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/ activities other than defence, space, atomic energy and sectors/ activities prohibited for foreign investment.

Note: Issue/ transfer of ‘participating interest/ right’ in oil fields by Indian companies to a person resident outside India would be treated as foreign investment and shall comply with the conditions laid down in Schedule 1.

(2) A Foreign Portfolio Investor (FPI) may purchase or sell capital instruments of a listed Indian company on a recognised stock exchange in India in the manner and subject to the terms and conditions specified in Schedule 2.

(3) A Non- Resident Indian or an Overseas Citizen of India may on repatriation basis purchase or sell capital instruments of a listed Indian company on a recognised stock exchange in India, in the manner and subject to the terms and conditions specified in Schedule 3.

(4) A Non- Resident Indian or an Overseas Citizen of India may, on non-repatriation basis, purchase or sell capital instruments of an Indian company or purchase or sell units or contribute to the capital of a LLP or a firm or proprietary concern, in the manner and subject to the terms and conditions specified in Schedule 4.

(5) A person resident outside India, permitted for the purpose by the Reserve Bank in consultation with Central Government, may purchase or sell securities other than capital instruments in the manner and subject to the terms and conditions specified in Schedule 5.

Note: A Foreign Portfolio Investor or a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI) may trade or invest in all exchange traded derivative contracts approved by Securities and Exchange Board of India from time to time subject to the limits prescribed by Securities and Exchange Board of India and conditions specified in Schedule 5

(6) A person resident outside India, other than a citizen of Bangladesh or Pakistan or an entity incorporated in Bangladesh or Pakistan, may invest, either by way of capital contribution or by way of acquisition/ transfer of profit shares of an LLP, in the manner and subject to the terms and conditions as specified in Schedule 6.

(7) A Foreign Venture Capital Investor may make investment in the manner and subject to the terms and conditions specified in Schedule 7.

(8) A person resident outside India, other than a citizen of Bangladesh or Pakistan or an entity incorporated in Bangladesh or Pakistan, may invest in units of an Investment Vehicle, in the manner and subject to the terms and conditions specified in Schedule 8.

(9) A person resident outside India may invest in the Depository Receipts (DRs) issued by foreign depositories against eligible securities in the manner and subject to the terms and conditions as specified in Schedule 9.

(10) A Foreign Portfolio Investor or Non- Resident Indian or an Overseas Citizen of India may purchase, hold or sell Indian Depository Receipts (IDRs) of companies resident outside India and issued in the Indian capital market, in the manner and subject to the terms and conditions specified in Schedule 10.

6. Acquisition through a rights issue or a bonus issue

A person resident outside India and having investment in an Indian company may make investment in capital instruments (other than share warrants) issued by such company as a rights issue or a bonus issue provided that:

(1) The offer made by the Indian company is in compliance with the provisions of the Companies Act, 2013;

(2) Such issue shall not result in a breach of the sectoral cap applicable to the company;

(3) The shareholding on the basis of which the rights issue or the bonus issue has been made must have been acquired and held as per the provisions of these Regulations;

(4) In case of a listed Indian company, the rights issue to persons resident outside India shall be at a price determined by the company;

(5) In case of an unlisted Indian company, the rights issue to persons resident outside India shall not be at a price less than the price offered to persons resident in India.

(6) Such investment made through rights issue or bonus issue shall be subject to the conditions as are applicable at the time of such issue.

(7) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

Note: Where the original investment has been made on a non-repatriation basis, the amount of consideration may also be paid by debit to the NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016

Provided an individual who is a person resident outside India exercising a right which was issued when he/ she was a person resident in India shall hold the capital instruments (other than share warrants) so acquired on exercising the option on a non-repatriation basis.

Explanation: The above conditions shall also be applicable in case a person resident outside India makes investment in capital instruments (other than share warrants) issued by an Indian company as a rights issue that are renounced by the person to whom it was offered.

7. Issue of shares under Employees Stock Options Scheme to persons resident outside India

An Indian company may issue “employees’ stock option” and/ or “sweat equity shares” to its employees/ directors or employees/ directors of its holding company or joint venture or wholly owned overseas subsidiary/ subsidiaries who are resident outside India, provided that:

(1) The scheme has been drawn either in terms of regulations issued under the Securities and Exchange Board of India Act, 1992 or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013, as the case may be;

(2) The “employee’s stock option”/ “sweat equity shares” so issued under the applicable rules/ regulations are in compliance with the sectoral cap applicable to the said company;

(3) Issue of “employee’s stock option”/ “sweat equity shares” in a company where investment by a person resident outside India is under the approval route shall require prior Government approval. Issue of “employee’s stock option”/ “sweat equity shares” to a citizen of Bangladesh/ Pakistan shall require prior Government approval.

Provided an individual who is a person resident outside India exercising an option which was issued when he/ she was a person resident in India shall hold the shares so acquired on exercising the option on a non-repatriation basis.

8. Issue of Convertible Notes by an Indian startup company

(1) A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered/ incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian startup company for an amount of twenty five lakh rupees or more in a single tranche.

(2) A startup company, engaged in a sector where investment by a person resident outside India requires Government approval, may issue convertible notes to a person resident outside India only with such approval. Further, issue of equity shares against such convertible notes shall be in compliance with the entry route, sectoral caps, pricing guidelines and other attendant conditions for foreign investment.

(3) A startup company issuing convertible notes to a person resident outside India shall receive the amount of consideration by inward remittance through banking channels or by debit to the NRE/ FCNR (B)/ Escrow account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Repayment or sale proceeds may be remitted outside India or credited to NRE/ FCNR (B) account maintained by the person concerned in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(4) A NRI or an OCI may acquire convertible notes on non-repatriation basis in accordance with Schedule 4 of these Regulations.

(5) A person resident outside India may acquire or transfer by way of sale, convertible notes, from or to, a person resident in or outside India, provided the transfer takes place in accordance with the entry routes and pricing guidelines as prescribed for capital instruments.

9. Merger or demerger or amalgamation of Indian companies

(1) Where a Scheme of merger or amalgamation of two or more Indian companies or a reconstruction by way of demerger or otherwise of an Indian company, has been approved by National Company Law Tribunal (NCLT)/ Competent Authority, the transferee company or the new company, as the case may be, may issue capital instruments to the existing holders of the transferor company resident outside India, subject to the following conditions, namely:

(a) The transfer or issue is in compliance with the entry routes, sectoral caps or investment limits, as the case may be, and the attendant conditionalities of investment by a person resident outside India;

Provided that where the percentage is likely to breach the Sectoral caps or the attendant conditionalities, the transferor company or the transferee or new company may obtain necessary approvals from the Central Government.

(b) The transferor company or the transferee company or the new company shall not engage in any sector prohibited for investment by a person resident outside India; and

(2) Where a Scheme of Arrangement for an Indian company has been approved by National Company Law Tribunal (NCLT)/ Competent Authority , the Indian company may issue non-convertible redeemable preference shares or non-convertible redeemable debentures out of its general reserves by way of distribution as bonus to the shareholders resident outside India, subject to the following conditions, namely:

(a) the original investment made in the Indian company by a person resident outside India is in accordance with these Regulations and the conditions specified in the relevant Schedule;

(b) the said issue is in accordance with the provisions of the Companies Act, 2013 and the terms and conditions, if any, stipulated in the scheme approved by National Company Law Tribunal (NCLT)/ Competent Authority have been complied with;

(c) the Indian company shall not engage in any activity/ sector in which investment by a person resident outside India is prohibited.

10. Transfer of capital instruments of an Indian company by or to a person resident outside India

A person resident outside India holding capital instruments of an Indian company or units in accordance with these Regulations or a person resident in India, may transfer such capital instruments or units so held by him in compliance with the conditions, if any, specified in the respective Schedules of these Regulations and subject to the terms and conditions specified hereunder;

(1) A person resident outside India, not being a non-resident Indian or an overseas citizen of India or an erstwhile overseas corporate body may transfer by way of sale or gift the capital instruments of an Indian company or units held by him to any person resident outside India;

Explanation: It shall also include transfer of capital instruments of an Indian company pursuant to liquidation, merger, de-merger and amalgamation of entities/ companies incorporated or registered outside India

Provided that

(i) prior Government approval shall be obtained for any transfer in case the company is engaged in a sector which requires Government approval.

(ii) where the person resident outside India is an FPI and the acquisition of capital instruments made under Schedule 2 of these regulations has resulted in a breach of the applicable aggregate FPI limits or sectoral limits, the FPI shall sell such capital instruments to a person resident in India eligible to hold such instruments within the time stipulated by Reserve Bank in consultation with the Central Government. The breach of the said aggregate or sectoral limit on account of such acquisition for the period between the acquisition and sale, provided the sale is within the prescribed time limit, shall not be reckoned as a contravention under these Regulations. The guidelines issued by Securities and Exchange Board of India in this regard shall be applicable.

(2) An NRI or an OCI holding capital instruments of an Indian company or units on repatriation basis may transfer the same by way of sale or gift to any person resident outside India;

Provided that

(i) prior Government approval shall be obtained for any transfer in case the company is engaged in a sector which requires Government approval.

(ii) where the acquisition of capital instruments by an NRI or an OCI under the provisions of Schedule 3 of these regulations has resulted in a breach of the applicable aggregate NRI/ OCI limit or sectoral limits, the NRI or the OCI shall sell such capital instruments to a person resident in India eligible to hold such instruments within the time stipulated by Reserve Bank in consultation with the Central Government. The breach of the said aggregate or sectoral limit on account of such acquisition for the period between the acquisition and sale, provided the sale is within the prescribed time, shall not be reckoned as a contravention under these Regulations.

(3) A person resident outside India, holding capital instruments of an Indian company or units in accordance with these Regulations may transfer the same to a person resident in India by way of sale/ gift or may sell the same on a recognised stock exchange in India in the manner prescribed by Securities and Exchange Board of India;

Provided that

(i) the transfer by way of sale shall be in compliance with and subject to the adherence to pricing guidelines, documentation and reporting requirements for such transfers as may be specified by Reserve Bank from time to time;

(ii) where the capital instruments are held by the person resident outside India on a non-repatriable basis, conditions at proviso (i) above shall not apply

(4) A person resident in India holding capital instruments of an Indian company or units, or an NRI or an OCI or an eligible investor under Schedule 4 of these Regulations, holding capital instruments of an Indian company or units on a non-repatriation basis, may transfer the same to a person resident outside India by way of sale, subject to the adherence to entry routes, sectoral caps/ investment limits, pricing guidelines and other attendant conditions as applicable for investment by a person resident outside India and documentation and reporting requirements for such transfers as may be specified by Reserve Bank from time to time;

Provided the entry routes, sectoral caps/ investment limits, pricing guidelines and other attendant conditions shall not apply in case the transfer is to an NRI or an OCI or an eligible investor under Schedule 4 of these Regulations acquiring such investment on non-repatriation basis.

(5) A person resident in India holding capital instruments or units of an Indian company or an NRI or an OCI an eligible investor under Schedule 4 of these Regulations holding capital instruments or units of an Indian company on a non-repatriation basis may transfer the same to a person resident outside India by way of gift with the prior approval of the Reserve Bank, in the manner prescribed, and subject to the following conditions:

(a) The donee is eligible to hold such a security under relevant schedules of these Regulations;

(b) The gift does not exceed 5 percent of the paid up capital of the Indian company/ each series of debentures/ each mutual fund scheme;

Explanation: The 5 percent will be on cumulative basis by a single person to another single person

(c) The applicable sectoral cap in the Indian company is not breached;

(d) The donor and the donee shall be ‘relatives’ within the meaning in section 2(77) of the Companies Act, 2013;

(e) The value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift during the financial year does not exceed the rupee equivalent of USD50,000;

(f) Such other conditions as considered necessary in public interest by the Reserve Bank;

(6) An NRI or an OCI or an eligible investor under Schedule 4 of these Regulations holding capital instruments of an Indian company or units on a non-repatriation basis, may transfer the same by way of gift to an NRI or an OCI or an eligible investor under Schedule 4 of these Regulations who shall hold it on a non-repatriable basis;

(7) A person resident outside India holding capital instruments of an Indian company containing an optionality clause in accordance with these Regulations and exercising the option/ right, may exit without any assured return, subject to the pricing guidelines prescribed in these Regulations and a minimum lockin period of one year or minimum lock-in period as prescribed in these Regulations, whichever is higher;

(8) An erstwhile OCB may transfer capital instruments subject to directions issued by the Reserve Bank from time to time in this regard.

Explanation: ‘Overseas Corporate Body (OCB)’ means an entity derecognized through Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003;

(9) In case of transfer of capital instruments between a person resident in India and a person resident outside India, an amount not exceeding twenty five percent of the total consideration

(a) can be paid by the buyer on a deferred basis within a period not exceeding eighteen months from the date of the transfer agreement; or

(b) can be settled through an escrow arrangement between the buyer and the seller for a period not exceeding eighteen months from the date of the transfer agreement; or

(c) can be indemnified by the seller for a period not exceeding eighteen months from the date of the payment of the full consideration, if the total consideration has been paid by the buyer to the seller.

Provided the total consideration finally paid for the shares shall be compliant with the applicable pricing guidelines.

(10) In case of transfer of capital instruments between a person resident in India and a person resident outside India, a person resident outside India may open an Escrow account in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Such Escrow account may be funded by way of inward remittance through banking channels and/ or by way of guarantee issued by an authorized dealer bank, subject to terms and conditions as specified in the Foreign Exchange Management (Guarantees) Regulations, 2000.

(11) The pricing guidelines prescribed in these Regulations shall not be applicable for any transfer by way of sale done in accordance with Securities and Exchange Board of India regulations where the pricing is prescribed by Securities and Exchange Board of India.

(12) The transfer of capital instruments of an Indian company or units of an Investment Vehicle by way of pledge is subject to the following terms and conditions:

(a) Any person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowing (ECB) in compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000 may pledge the shares of the borrowing company or that of its associate resident companies for the purpose of securing the external commercial borrowing (ECB) raised by the borrowing company subject to the following conditions:

(i) the period of such pledge shall be co-terminus with the maturity of the underlying external commercial borrowing;

(ii) in case of invocation of pledge, transfer shall be in accordance with these Regulations and directions issued by the Reserve Bank;

(iii) the Statutory Auditor has certified that the borrowing company will utilise/ has utilised the proceeds of the external commercial borrowing for the permitted enduse/s only;

(iv) no person shall pledge any such share unless a no-objection has been obtained from an Authorised Dealer bank that the above conditions have been complied with.

(b) Any person resident outside India holding capital instruments in an Indian company or units of an investment vehicle may pledge the capital instruments or units, as the case may be:

(i) in favour of a bank in India to secure the credit facilities being extended to such Indian company for bona fide purposes,

(ii) in favour of an overseas bank to secure the credit facilities being extended to such person or a person resident outside India who is the promoter of such Indian company or the overseas group company of such Indian company,

(iii) in favour of a Non-Banking Financial Company registered with the Reserve Bank to secure the credit facilities being extended to such Indian company for bona fide purposes,

(iv) subject to the Authorised Dealer bank satisfying itself of the compliance of the conditions stipulated by the Reserve Bank in this regard.

(c) In case of invocation of pledge, transfer of capital instruments of an Indian company or units shall be in accordance with entry routes, sectoral caps/ investment limits, pricing guidelines and other attendant conditions at the time of creation of pledge.

11. Pricing Guidelines

Unless otherwise specified in these Regulations or the relevant Schedules, the price of capital instruments of an Indian company -

(1) issued by such company to a person resident outside India shall not be less than:

(a) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;

(b) the valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm’s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company.

Explanation: in case of convertible capital instruments, the price/ conversion formula of the instrument should be determined upfront at the time of issue of the instrument. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of such instruments, in accordance with these Regulations.

(2) transferred from a person resident in India to a person resident outside India shall not be less than:

(a) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company;

(b) the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) regulations, 2009;

(c) the valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm’s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company.

(3) transferred by a person resident outside India to a person resident in India shall not exceed:

(a) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company;

(b) the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) regulations, 2009;

Provided that the price is determined for such duration as specified in the Securities and Exchange Board of India Guidelines, preceding the relevant date, which shall be the date of purchase or sale of shares;

(c) the valuation of capital instruments done as per any internationally accepted pricing methodology for valuation on an arm’s length basis duly certified by a Chartered Accountant or a Securities and Exchange Board of India registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company.

Explanation: The guiding principle would be that the person resident outside India is not guaranteed any assured exit price at the time of making such investment/ agreement and shall exit at the price prevailing at the time of exit.

(4) in case of swap of capital instruments, subject to the condition that irrespective of the amount, valuation involved in the swap arrangement will have to be made by a Merchant Banker registered with Securities and Exchange Board of India or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.

(5) where shares in an Indian company are issued to a person resident outside India in compliance with the provisions of the Companies Act, 2013, by way of subscription to Memorandum of Association, such investments shall be made at face value subject to entry route and sectoral caps.

(6) in case of share warrants, their pricing and the price/ conversion formula shall be determined upfront.

Provided these pricing guidelines shall not be applicable for investment in capital instruments by a person resident outside India on non-repatriation basis.

12. Taxes and Remittance of sale proceeds

12.1 Taxes

All transaction under these regulations shall be undertaken through banking channels in India and subject to payment of applicable taxes and other duties/ levies in India.

12.2 Remittance of sale proceeds

(1) No remittance of sale proceeds of an Indian security held by a person resident outside India shall be made otherwise than in accordance with these Regulations and the conditions specified in the relevant Schedule.

(2) An authorised dealer may allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India -

Provided -

(i) the security was held by the seller on repatriation basis; and

(ii) either the security has been sold in compliance with the pricing guidelines or the Reserve Bank’s approval has been obtained in other cases for sale of the security and remittance of the sale proceeds thereof;

13. Reporting requirements

13.1 The reporting requirement for any Investment in India by a person resident outside India shall be as follows:

(1) Advance Remittance Form (ARF): An Indian company which has received amount of consideration for issue of capital instruments and where such issue is reckoned as Foreign Direct Investment for the purpose of these regulations, shall report such receipt (including each upfront/ call payment) in ARF to the Regional Office concerned of the Reserve Bank, not later than 30 days from the date of receipt.

(2) Form Foreign Currency-Gross Provisional Return (FC-GPR): An Indian company issuing capital instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, for the purpose of these regulations, shall report such issue in Form FC-GPR to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, not later than thirty days from the date of issue of capital instruments. Issue of ‘participating interest/ rights’ in oil fields shall be reported Form FC-GPR.

(3) Annual Return on Foreign Liabilities and Assets (FLA): An Indian company which has received FDI or an LLP which has received investment by way of capital contribution in the previous year(s) including the current year, should submit form FLA to the Reserve Bank on or before the 15th day of July of each year.

Explanation: Year for this purpose shall be reckoned as April to March.

(4) Form Foreign Currency-Transfer of Shares (FC-TRS):

(a) Form FCTRS shall be filed for transfer of capital instruments in accordance with these Regulations between:

(1) a person resident outside India holding capital instruments in an Indian company on a repatriable basis and person resident outside India holding capital instruments on a nonrepatriable basis; and

(2) a person resident outside India holding capital instruments in an Indian company on a repatriable basis and a person resident in India,

The onus of reporting shall be on the resident transferor/ transferee or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may be.

Note: Transfer of capital instruments in accordance with these Regulations by way of sale between a person resident outside India holding capital instruments on a non-repatriable basis and person resident in India is not required to be reported in Form FC-TRS.

(b) Transfer of capital instruments on a recognised stock exchange by a person resident outside India shall be reported by such person in Form FC-TRS to the Authorised Dealer bank.

(c) Transfer of capital instruments prescribed in regulation 10(9), shall be reported in Form FC-TRS to the Authorised Dealer on receipt of every tranche of payment. The onus of reporting shall be on the resident transferor/ transferee.

(d) Transfer of ‘participating interest/ rights’ in oil fields shall be reported Form FC-TRS

The form FCTRS shall be filed with the Authorised Dealer bank within sixty days of transfer of capital instruments or receipt/ remittance of funds whichever is earlier.

(5) Form Employees’ Stock Option (ESOP): An Indian company issuing employees’ stock option to persons resident outside India who are its employees/ directors or employees/ directors of its holding company/ joint venture/ wholly owned overseas subsidiary/ subsidiaries shall submit Form-ESOP to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company operates, within 30 days from the date of issue of employees’ stock option.

(6) Form Depository Receipt Return (DRR): The Domestic Custodian shall report in Form DRR, to the Reserve Bank, the issue/ transfer of depository receipts issued in accordance with the Depository Receipt Scheme, 2014 within 30 days of close of the issue.

(7) Form LLP (I): A Limited Liability Partnerships (LLP) receiving amount of consideration for capital contribution and acquisition of profit shares shall submit Form LLP (I) to the Regional Office of the Reserve Bank under whose jurisdiction the Registered Office of the Limited Liability Partnership is situated, within 30 days from the date of receipt of the amount of consideration

(8) Form LLP (II): The disinvestment/ transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) shall be reported in Form LLP(II) to the Authorised Dealer Bank within 60 days from the date of receipt of funds.

(9) LEC(FII): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (FII) the purchase/ transfer of capital instruments by FPIs on the stock exchanges in India.

(10) LEC(NRI): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (NRI) the purchase/ transfer of capital instruments by Non-Resident Indians or Overseas Citizens of India stock exchanges in India.

(11) Downstream Investment: An Indian company making downstream investment in another Indian company which is considered as indirect foreign investment for the investee company in terms of these Regulations, shall notify the Secretariat for Industrial Assistance, DIPP and file Form DI within 30 days of such investment and, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme);

(12) Form Convertible Notes (CN):

(a) The Indian startup company issuing Convertible Notes to a person resident outside India shall report such inflows to the Authorised Dealer bank in Form CN within 30 days of such issue.

(b) A person resident in India, who may be a transferor or transferee of Convertible Notes issued by an Indian startup company shall report such transfers to or from a person resident outside India, as the case may be, in Form CN to the Authorised Dealer bank within 30 days of such transfer.

(c) The Authorised Dealer bank shall submit consolidated statements to the Reserve Bank.

Provided, the format, periodicity and manner of submission of such reporting shall be as prescribed by Reserve Bank in this regard.

Provided further that unless otherwise specifically stated in these regulations all reporting shall be made through or by an Authorised Dealer bank, as the case may be.

13.2 Delays in reporting

The person/ entity responsible for filing the reports provided in regulation 13.1 above shall be liable for payment of late submission fee, as may be decided by the Reserve Bank, in consultation with the Central Government, for any delays in reporting.

14. Downstream Investment

(1) For the purpose of this regulation:

(a) ‘Ownership of an Indian company’ shall mean beneficial holding of more than 50 percent of the capital instruments of such company. ‘Ownership of an LLP’ shall mean contribution of more than 50 percent in its capital and having majority profit share.

(b) ‘Company owned by resident Indian citizens’ shall mean an Indian company where ownership is vested in resident Indian citizens and/ or Indian companies, which are ultimately owned and controlled by resident Indian citizens. An ‘LLP owned by resident Indian citizens’ shall mean an LLP where ownership is vested in resident Indian citizens and/ or Indian entities, which are ultimately owned and controlled by resident Indian citizens.

(c) ‘Company owned by persons resident outside India’ shall mean an Indian company that is owned by persons resident outside India. An ‘LLP owned by persons resident outside India’ shall mean an LLP that is owned by persons resident outside India.

(d) ‘Control’ shall mean the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreement or voting agreement. For the purpose of LLP, ‘Control’ shall mean the right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have control over all the policies of an LLP.

(e) ‘Company controlled by resident Indian citizens’ means an Indian company, the control of which is vested in resident Indian citizens and/ or Indian companies which are ultimately owned and controlled by resident Indian citizens. An ‘LLP controlled by resident Indian citizens’ shall mean an LLP, the control of which is vested in resident Indian citizens and/ or Indian entities, which are ultimately owned and controlled by resident Indian citizens.

(f) ‘Company controlled by persons resident outside India’ shall mean an Indian company that is controlled by persons resident outside India. An ‘LLP controlled by persons resident outside India’ shall mean an LLP that is controlled by persons resident outside India.

(g) ‘Downstream Investment’ shall mean investment made by an Indian entity or an Investment Vehicle in the capital instruments or the capital, as the case may be, of another Indian entity:

(h) ‘Holding Company’ shall have the same meaning as assigned to it under Companies Act, 2013;

(i) ‘Indirect Foreign Investment’ means downstream investment received by an Indian entity from:

(i) another Indian entity (IE) which has received foreign investment and (i) the IE is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India; or

(ii) an investment vehicle whose sponsor or manager or investment manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India

Provided no person resident in India other than an Indian entity can receive Indirect Foreign Investment.

(j) ‘Total Foreign Investment’ means the total of foreign investment and indirect foreign investment and the same will be reckoned on a fully diluted basis;

(k) ‘Strategic downstream investment’ means investment by banking companies incorporated in India in their subsidiaries, joint ventures and associates.

(2) Indian entity which has received indirect foreign investment shall comply with the entry route, sectoral caps, pricing guidelines and other attendant conditions as applicable for foreign investment.

Explanation: Downstream investment by an LLP not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India is allowed in an Indian company operating in sectors where foreign investment up to 100 percent is permitted under automatic route and there are no FDI linked performance conditions.

(3) With effect from 31st day of July, 2012, downstream investment/s made under Corporate Debt Restructuring (CDR), or other loan restructuring mechanism, or in trading book, or for acquisition of shares due to defaults in loans, by a banking company, as defined in clause (c) of section 5 of the Banking Regulation Act, 1949, incorporated in India, which is not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India, shall not count towards indirect foreign investment. However, their strategic downstream investment shall be counted towards indirect foreign investment for the company in which such investment is being made.

(4) Guidelines for calculating total foreign investment in Indian companies:

(a) Any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned for total foreign investment;

(b) FCCBs and DRs having underlying of instruments in the nature of debt, shall not be reckoned for total foreign investment;

(c) The methodology for calculating total foreign investment would apply at every stage of investment in Indian companies and thus in each and every Indian company;

(d) For the purpose of downstream investment, the portfolio investment held as on March 31 of the previous financial year in the Indian company making the downstream investment shall be considered for computing its total foreign investment;

(e) The indirect foreign investment received by a wholly owned subsidiary of an Indian company will be limited to the total foreign investment received by the company making the downstream investment;

(5) Downstream investment made into Indian companies will be subject to the following conditions:

(a) The downstream investment should have the approval of the Board of Directors as also a Shareholders’ Agreement, if any;

(b) For the purpose of downstream investment, the Indian entity making the downstream investment shall bring in requisite funds from abroad and not use funds borrowed in the domestic markets. Downstream investments can be made through internal accruals. For this purpose, internal accruals will mean profits transferred to reserve account after payment of taxes.

Further raising of debt and its utilisation shall be in compliance with the Act, rules or regulations made thereunder.

(c) Capital instrument of an Indian company held by another Indian company which has received foreign investment and is not owned and not controlled by resident Indian citizens or is owned or controlled by persons resident outside India may be transferred to:

(i) A person resident outside India, subject to reporting requirements in Form FCTRS;

(ii) A person resident in India subject to adherence to pricing guidelines.

(iii) An Indian company which has received foreign investment and is not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India.

(d) The first level Indian company making downstream investment shall be responsible for ensuring compliance with the provisions of these regulations for the downstream investment made by it at second level and so on and so forth. Such first level company shall obtain a certificate to this effect from its statutory auditor on an annual basis. Such compliance of these regulations shall be mentioned in the Director’s report in the Annual Report of the Indian company. In case statutory auditor has given a qualified report, the same shall be immediately brought to the notice of the Regional Office of the Reserve Bank in whose jurisdiction the Registered Office of the company is located and shall also obtain acknowledgement from the RO.

(e) The provisions at (c) and (d) above shall be construed accordingly for an LLP.

Note: Downstream investment made in accordance with the guidelines in existence prior to February 13, 2009 would not require any modification to conform to these regulations. All other investments, after the said date, would come under the ambit of these regulations. Downstream investments made between February 13, 2009 and June 21, 2013 which is not in conformity with these regulations should have been intimated to the Reserve Bank by October 3, 2013 for treating such cases as compliant with these regulations.

15. Prohibited activities for investment by a person resident outside India

Unless otherwise specifically stated in the Act or the rules or regulations framed thereunder, investment by a person resident outside India is prohibited in:

(1) Lottery Business including Government/ private lottery, online lotteries

(2) Gambling and betting including casinos

(3) Chit funds.

Explanation: The Registrar of Chits or an officer authorised by the state government in this behalf, may, in consultation with the State Government concerned, permit any chit fund to accept subscription from Nonresident Indians and Oveseas Citizens of India who shall be eligible to subscribe, through banking channel and on non- repatriation basis, to such chit funds, without limit subject to the conditions stipulated by the Reserve Bank of India from time to time

(4) Nidhi company

(5) Trading in Transferable Development Rights (TDRs)

(6) Real Estate Business or Construction of Farm Houses.

Explanation: For the purpose of this regulation, “real estate business” shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014.

(7) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(8) Activities/ sectors not open to private sector investment e.g. (I) Atomic energy and (II) Railway operations

(9) Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities

16. Permitted sectors, entry routes and sectoral caps for total foreign investment

Unless otherwise specified in these Regulations or the relevant Schedules the entry routes and sectoral caps for the total foreign investment in an Indian entity shall be as follows:

A. Entry Routes

(1) Automatic Route means the entry route through which investment by a person resident outside India does not require the prior Reserve Bank approval or Government approval.

(2) Government Route means the entry route through which investment by a person resident outside India requires prior Government approval. Foreign investment received under this route shall be in accordance with the conditions stipulated by the Government in its approval.

(3) Aggregate Foreign Portfolio Investment up to 49 percent of the paid-up capital on a fully diluted basis or the sectoral/ statutory cap, whichever is lower, will not require Government approval or compliance of sectoral conditions as the case may be, if such investment does not result in transfer of ownership and control of the resident Indian company from resident Indian citizens or transfer of ownership or control to persons resident outside India. Other investments by a person resident outside India will be subject to conditions of Government approval and compliance of sectoral conditions as laid down in these regulations.

B. Sectoral Caps

SECTOR-SPECIFIC POLICY FOR TOTAL FOREIGN INVESTMENT

(1) Sectoral cap for the following sectors/ activities is the limit indicated against each sector. The total foreign investment shall not exceed the sectoral/ statutory cap.

(2) Foreign investment in the following sectors/ activities is, subject to applicable laws/ regulations, security and other conditionalities

(3) In sectors/ activities not listed below or not prohibited under regulation 15 of these Regulations, foreign investment is permitted up to 100 percent on the automatic route, subject to applicable laws/ regulations, security and other conditionalities.

Provided foreign investment in financial services other than those indicated under serial number “F” below would require prior Government approval.

(4) Wherever there is a requirement of minimum capitalization, it shall include premium received along with the face value of the capital instrument, only when it is received by the company upon issue of such instruments to the person resident outside India. Amount paid by the transferee during post-issue transfer beyond the issue price of the capital instrument, cannot be taken into account while calculating minimum capitalization requirement.

(5) Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company/ies, will require prior approval of the Government. A core investment company (CIC) will have to additionally follow the Reserve Bank’s regulatory framework for CICs.

(6) For undertaking activities which are under automatic route and without FDI linked performance conditions, an Indian company which does not have any operations and also has not made any downstream investment, may receive investment in its capital instruments from persons resident outside India under automatic route. However, approval of the Government will be required for such companies for undertaking activities which are under Government route. As and when such a company commences business or makes downstream investment, it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps.

(7) The onus of compliance with the sectoral/ statutory caps on such foreign investment and attendant conditions, if any, shall be on the company receiving foreign investment.

Sl. No

Sector/ Activity

Sectoral Cap

Entry Route

1.

Agriculture & Animal Husbandry

1.1

(a)  Floriculture, Horticulture and Cultivation of vegetables & mushrooms under controlled conditions;(b)  Development and production of seeds and planting material;(c)  Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture and Apiculture; and

(d) Services related to agro and allied sectors.

Note: Other than the above, foreign investment is not allowed in any other agricultural sector/ activity. 

100%

Automatic

1.2

Other Conditions
The term ‘under controlled conditions’ covers the following:‘Cultivation under controlled conditions’ for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically.

2.

Plantation

2.1

(a)  Tea sector including tea plantations(b)  Coffee plantations(c)  Rubber plantations

(d)  Cardamom plantations

(e)  Palm oil tree plantations

(f)  Olive oil tree plantation

Note: Foreign investment is not allowed in any plantation sector/ activity other than those listed above. 

100%

Automatic

2.2

Other Conditions
Prior approval of the State Government concerned is required in case of any future land use change.

3.

Mining

3.1

Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957.

100%

Automatic

3.2

Coal and Lignite
(a)  Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973.(b) Setting up coal processing plants like washeries, subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.

100%

Automatic

3.3

Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
(a) Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation) Act, 1957.

100%

Government

3.4

Other Conditions
(a) Foreign investment for separation of titanium bearing minerals & ores will be subject to the following conditions:(i) Value addition facilities are set up within India along with transfer of technology;(ii) Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.

(b) Foreign investment will not be allowed in mining of “prescribed substances” listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy.

Clarification:

(i) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce Synthetic Rutile or Titanium Slag as an intermediate value added product.

(ii) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of this regulation can be achieved, the conditions prescribed at (a)(i) above shall be deemed to be fulfilled.

4.

Petroleum & Natural Gas

4.1

Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/ pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies.

100%

Automatic

4.2

Petroleum refining by the Public Sector Undertakings (PSUs), without any disinvestment or dilution of domestic equity in the existing PSUs.

49%

Automatic

5.

Manufacturing

100%

Automatic

5.1

A manufacturer is permitted to sell its products manufactured in India through wholesale and/ or retail, including through e-commerce without Government approval.Notwithstanding the provisions of these regulations on trading sector, 100 percent foreign investment under Government approval route is allowed for trading, including through e-commerce, in respect of food products manufactured and/ or produced in India. Applications for foreign investment in food products retail trading would be processed in the Department of Industrial Policy & Promotion before being considered by the Government for approval.

6.

Defence

6.1

Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951; andManufacturing of small arms and ammunition under the Arms Act, 1959

100%

Automatic route up to 49% Government route beyond 49% wherever it is likely to result in access to modern technology or for other reasons to be recorded.

6.2

Other Conditions
(a)  Fresh foreign investment within the permitted automatic route, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.(b)  Licence applications will be considered and licences will be given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.(c)  Foreign investment in this sector is subject to security clearance and guidelines of the Ministry of Defence.

(d) Investee company should be structured to be self-sufficient in areas of product design and development. The investee/ joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.

7.

Broadcasting

7.1

Broadcasting Carriage Services

7.1.1

(a) Teleports (setting up of up-linking HUBs/ Teleports);(b) Direct to Home (DTH);(c) Cable Networks (Multi System Operators (MSOs) operating at National or State or District level and undertaking up-gradation of networks towards digitalization and addressability);

(d) Mobile TV;

(e) Head-end-in-the Sky Broadcasting Service (HITS)

100%

Automatic

7.1.2

Cable Networks (Other MSOs not undertaking up-gradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)).

100%

Automatic

7.1.3

Note: Infusion of fresh foreign investment for sectors specified in 7.1.1 and 7.1.2 above, beyond 49 percent in a company not seeking license/ permission from sectoral Ministry, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval

7.2

Broadcasting Content Services

7.2.1

Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information and Broadcasting, for grant of permission for setting up of FM Radio stations.

49%

Government

7.2.2

Up-Linking of ‘News & Current Affairs’ TV Channels

49%

Government

7.2.3

Up-linking of Non-’News & Current Affairs’ TV Channels/ Down-linking of TV Channels

100%

Automatic

7.3

Other Conditions
(a) Foreign investment in companies engaged in all the afore-stated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting.(b) Foreign investment in the afore-stated broadcasting carriage services will be subject to the terms and conditions as may be specified by the Ministry of Information and Broadcasting, from time to time, in this regard.(c) Licensee shall ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulations and public policy. In the l& B sector where the sectoral cap is up to 49 percent, the company should be owned and controlled by resident Indian citizens or Indian companies which are owned and controlled by resident Indian citizens.

(i) For this purpose, the equity held by the largest Indian shareholder shall be at least 51 percent of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956 or Section 2 (72) of the Companies Act, 2013, as the case may be. The term `largest Indian shareholder’ used in this clause, will include any or a combination of the following:

(1) In the case of an individual shareholder,

(aa) The individual shareholder,

(bb) A relative of the shareholder within the meaning of Section 2 (77) of Companies Act, 2013.

(cc) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest.

(2) In the case of an Indian company,

(aa) The Indian company

(bb) A group of Indian companies under the same management and ownership control.

3. For this purpose, “Indian company” shall be a company which must have a resident Indian or a relative as defined under Section 2 (77) of Companies Act, 2013/ HUF, either singly or in combination holding at least 51percent of the shares.

4. Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (d)(i) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company.

8.

Print Media

8.1

Publishing of newspaper and periodicals dealing with news and current affairs

26%

Government

8.2

Publication of Indian editions of foreign magazines dealing with news and current affairs

26%

Government

8.2.1

Other conditions
‘(a) Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news.(b) Foreign investment shall also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4-12-2008.

8.3

Publishing/ printing of Scientific and Technical Magazines/ specialty journals/periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting.

100%

Government

8.4

Publication of facsimile edition of foreign newspapers

100%

Government

8.4.1

Other conditions:
(a) Foreign investment should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India.(b) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 2013.(c) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31-3-2006.

9.

Civil Aviation

9.1

The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/ Seaplane services, Ground Handling Services, Maintenance and Repair organizations, Flying training institutes, and Technical training institutions.For the purposes of the Civil Aviation sector:(a) “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934;

(b) “Aerodrome” means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto;

(c) “Air transport service” means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights;

(d) “Air Transport Undertaking” means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward;

(e) “Aircraft component” means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment;

(f) “Helicopter” means a heavier than air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis;

(g) “Scheduled air transport service” means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public;

(h) “Non-Scheduled air transport service” means any service which is not a scheduled air transport service and will include Cargo airlines;

(i) “Cargo airlines” would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation;

(j) “Seaplane” means an aeroplane capable normally of taking off from and alighting solely on water;

(k) “Ground Handling” means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.

9.2

Airports
(a) Greenfield projects

100%

Automatic

(b) Existing projects

100%

Automatic

9.3

Air Transport Services
(a) (i) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline(ii) Regional Air Transport Service

49%

(100% for NRIs and OCIs)

Automatic

(b) Non-Scheduled Air Transport Service

100%

Automatic

(c) Helicopter services/ seaplane services requiring DGCA approval

100%

Automatic

9.4

Other Services under Civil Aviation sector
(a) Ground Handling Services subject to sectoral regulations and security clearance

100%

Automatic

(b) Maintenance and Repair organizations; flying training institutes and technical training institutions

100%

Automatic

9.5

Other Conditions
(a) Air Transport Services would include Domestic Scheduled Passenger Airlines, Non-Scheduled Air Transport Services, helicopter and seaplane services.(b) Foreign airlines are allowed to make foreign investment in Cargo airlines, helicopter and seaplane services, as per the limits and entry routes mentioned above.(c) Foreign airlines are allowed to invest in the capital of Indian companies, operating scheduled and nonscheduled air transport, services up to the limit 49 percent of the paid up capital of the Indian investee company. Such foreign investment would be subject to the following conditions:

(i) It shall be under the Government approval route.

(ii) The foreign investment shall comply with the relevant regulations of Securities and Exchange Board of India as well as other applicable rules and regulations.

(iii) A Scheduled Operator’s Permit can be granted only to a company:

a. (1) that is registered and has its principal place of business within India;

b. (2) the Chairman and at least two-thirds of the Directors of which are citizens of India; and

c. (3) the substantial ownership and effective control of which is vested in Indian citizens.

(iv) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such foreign investment shall be cleared from security view point before deployment; and

(v) All technical equipment that might be imported into India as a result of such foreign investment shall require clearance from the relevant authority in the Ministry of Civil Aviation.

Note: 

(1) The sectoral caps/ entry routes, mentioned at paragraph 9.3(a) and 9.3(b) above, are applicable in the situation where there is no investment by foreign airlines.

(2) The dispensation for NRIs and OCIs regarding foreign investment up to 100% shall also be applicable in respect of the investment regime specified at 9.5(c) above.

(3) The policy mentioned at 9.5(c) above is not applicable to M/s Air India Limited.

(4) The investee company additionally shall have to follow guidelines issued by the concerned ministry of the Central Government.

10

Construction Development: Townships, Housing, Built-up infrastructure

10.1

Construction-development projects (which would include development of townships, construction of residential/ commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships)

100%

Automatic

10.2

Other Conditions

10.2

(a) Each phase of the construction development project would be considered as a separate project.(b) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage.(c) Notwithstanding anything contained at (b) above, a person resident outside India will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed. Further, transfer of stake from a person resident outside India to another person resident outside India, without repatriation of foreign investment will neither be subject to any lock-in period nor to any government approval.

(d) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/ Municipal/ Local Body concerned.

(e) The Indian investee company will be permitted to sell only developed plots. For the purposes of this policy “developed plots” will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available.

(f) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/ layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/ bye-Laws/ regulations of the State Government/ Municipal/ Local Body concerned.

(g) The State Government/ Municipal/ Local Body concerned, which approves the building/ development plans, will monitor compliance of the above conditions by the developer.

Note:

(1) Foreign investment is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs).

(2) Condition of lock-in period will not apply to Hotels and Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs/ OCIs.

(3) Completion of the project will be determined as per the local bye-laws/ rules and other regulations of State Governments.

(4) Foreign investment up to 100 percent under automatic route is permitted in completed projects for operating and managing townships, malls/ shopping complexes and business centres. Consequent to such foreign investment, transfer of ownership and/ or control of the investee company from persons resident in India to persons resident outside India is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of foreign investment and transfer of immovable property or part thereof is not permitted during this period.

(5) “Transfer”, in relation to this sector, includes,-

a. the sale, exchange or relinquishment of the asset; or

b. the extinguishment of any rights therein; or

c. the compulsory acquisition thereof under any law; or

d. any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

e. any transaction, by acquiring capital instruments in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

(6) Real estate business’ means dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships;

Explanation:

a. Investment in units of Real Estate Investment Trusts (REITs) registered and regulated under the Securities and Exchange Board of India (REITs) regulations 2014 shall also be excluded from the definition of “real estate business”.

b. Earning of rent income on lease of the property, not amounting to transfer, will not amount to real estate business.

c. Transfer in relation to real estate includes,

(i) the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law; or

(iv) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or

(v) any transaction, by acquiring capital instruments in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

11.

  Industrial Parks                                                   100%                                   Automatic

11.1

For the purpose of this sector:(a) “Industrial Park” is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity.(b) “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), railway line/ sidings including electrified railway lines and connectivity to the main railway line, water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning.

(c) “Common Facilities” refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), railway line/ sidings including electrified railway lines and connectivity to the main railway line, water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/ conference halls, parking, travel desks, security service, first aid centre, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park.

(d) “Allocable area” in the Industrial Park means-

(i)  in the case of plots of developed land – the net site area available for allocation to the units, excluding the area for common facilities.

(ii) in the case of built up space – the floor area and built-up space utilized for providing common facilities.

(iii) in the case of a combination of developed land and built-up space – the net site and floor area available for allocation to the units excluding the site area and built-up space utilized for providing common facilities.

(e) “Industrial Activity” means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied research and development on bio-technology, pharmaceutical sciences/ life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities.

11.2

Foreign investment in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 10 above, provided the Industrial Parks meet with the under-mentioned conditions:(a) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50 percent of the allocable area;(b) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66 percent of the total allocable area.

12.

Satellites – Establishment and operation
Satellites Establishment and operation, subject to the sectoral guidelines of Department of Space/ ISRO

100%

Government

13.

Private Security Agencies

49%

Government

14.

Telecom services(including Telecom Infrastructure Providers Category-l)

14.1

All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United Access Services, Unified license (Access services), Unified License, National/ International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS), all types of ISP licenses, Voice Mail/ Audiotex/ UMS, Resale of IPLC, Mobile Number Portability services, Infrastructure Provider Category-I (providing dark fibre, right of way, duct space, tower) except Other Service Providers.

100%

Automatic up to 49%;  Government route beyond 49%

14.2

Other Conditions
The licensing and security conditions as notified by the Department of Telecommunications (DoT) from time to time, shall be observed by licensee as well as investors except for foreign investment in “Other Service Providers”, which is allowed up to 100 percent under the automatic route.

15.

Trading

15.1

Cash and Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs)

100%

Automatic

15.1.1

Definition:(a) Cash and Carry Wholesale trading (WT)/ Wholesale trading, shall mean sale of goods/ merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers.(b) Wholesale trading shall, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not shall be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading shall include resale, processing and thereafter sale, bulk imports with export/ exbonded warehouse business sales and B2B e-Commerce.

15.1.2

Other Conditions
(a)  For undertaking ‘WT’, requisite licenses/ registration/ permits, as specified under the relevant Acts/ Regulations/ Rules/ Orders of the State Government/ Government Body/ Government Authority /Local Self-Government Body under that State Government should be obtained.(b)  Except in cases of sales to Government, sales made by the wholesaler shall be considered as ‘cash and carry wholesale trading/ wholesale trading’ with valid business customers, only when WT is made to the following entities:(i)  Entities holding sales tax/ VAT registration/ service tax/ excise duty/Goods and Services Tax (GST) registration; or

(ii)  Entities holding trade licenses i.e. a license/ registration certificate/ membership certificate/ registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/ person holding the license/ registration certificate /membership certificate, as the case may be, is itself/ himself/ herself engaged in a business involving commercial activity; or

(iii)  Entities holding permits/ license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/ Local Self Government Bodies; or

(iv)  Institutions having certificate of incorporation or registration as a society or registration as public trust for their self-consumption.

Note: An Entity, to whom WT is made, may fulfil any one of the 4 conditions at (b)(i) to (iv) above.

(c)  Full records indicating all the details of such sales like name of entity, kind of entity, registration/ license/ permit etc. number, amount of sale etc. should be maintained on a day to day basis.

(d)  WT of goods shall be permitted among companies of the same group. However, such WT to group companies taken together shall not exceed 25 percent of the total turnover of the wholesale venture.

(e)  WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.

(f) A wholesale/ cash and carry trader can undertake single brand retail trading, subject to the conditions mentioned in para 15.3. An entity undertaking wholesale/ cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions under these Regulations for wholesale/ cash and carry business and for retail business have to be separately complied with by the respective business arms.

15.2

E-Commerce

15.2.1

B2B E-commerce activities

100%

Automatic

Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.

15.2.2

Market place model of e-commerce 100 % Automatic

15.2.3

Other Conditions:
(a) E-commerce’ means buying and selling of goods and services including digital products over digital & electronic network;‘(b) E-commerce entity’ means a company incorporated under Companies Act, 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in Section 2 (v) (iii) of FEMA, 1999, owned or controlled by a person resident outside India and conducting the e-commerce business;(c) ‘Inventory based model of e-commerce’ means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly;

(d) ‘Market place model of e-commerce’ means providing of an information technology platform by an ecommerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

(e) Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.

(f) Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.

(g) E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfilment, call centre, payment collection and other services.

(h) E-commerce entity providing a marketplace will not exercise ownership over the inventory i.e. goods purported to be sold. Such an ownership over the inventory will render the business into inventory based model.

(i) An e-commerce entity will not permit more than 25 percent of the sales value on financial year basis affected through its marketplace from one vendor or their group companies.

(j) Goods/ services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.

(k) Payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines issued by the Reserve Bank in this regard.

(l) Any warranty/ guarantee of goods and services sold will be the responsibility of the seller.

(m) E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.

(n) Guidelines on cash and carry wholesale trading as given in Sl No. 15.1.2 above shall apply to B2B ecommerce activities.

Note: Foreign investment is not permitted in inventory based model of e-commerce.

15.2.4

Sale of services through e-commerce shall be under automatic route subject to the sector specific conditions, applicable laws/ regulations, security and other conditionalities.

15.3

Single Brand Product Retail TradingForeign investment in Single Brand Product Retail Trading (SBRT) is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

100%

Automatic up to 49%; Government route beyond 49%

15.3.1

Other conditions
(a) (Products to be sold should be of a ‘Single Brand’ only.(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.(c) ‘Single Brand’ product-retail trading would cover only products which are branded during manufacturing.

(d) A person resident outside India, whether owner of the brand or otherwise, shall be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, directly or through a legally tenable agreement, with the brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/ franchise/ sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and the Government for cases involving approval.

(e) In respect of proposals involving foreign investment beyond 51 percent, sourcing of 30 percent of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. The procurement requirement is to be met in the first instance as an average of five years total value of goods purchased beginning 1st April of the year of the commencement of the business. Thereafter it shall be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single brand product retail trading.

(f) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

(g) Applications seeking permission of the Government for foreign investment exceeding 49 percent in a company which proposes to undertake single brand retail trading in India shall be made to the Department of Industrial Policy & Promotion. The applications would specifically indicate the product/ product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/ product categories to be sold under ‘Single Brand’ would require a fresh Government approval. In case of foreign investment up to 49 percent, the list of products/ product categories proposed to be sold except food products shall be provided to the Reserve Bank.

(h) Applications would be processed in the Department of Industrial Policy and Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered for Government approval.

Note:

(1) Conditions mentioned at (b) and (d) above shall not be applicable for undertaking SBRT of Indian brands.

(2) An Indian manufacturer is permitted to sell its own branded products in any manner i.e. wholesale, retail, including through e-commerce platforms.

(3) Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70 percent of its products in house, and sources, at most 30 percent from Indian manufacturers.

(4) Indian brands should be owned and controlled by resident Indian citizens and/ or companies which are owned and controlled by resident Indian citizens.

(5) Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible. Thereafter, condition mentioned at (e) above will be applicable.

15.4

Multi Brand Retail Trading (MBRT)

51%

Government

15.4.1

Other Conditions
(a) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, can be unbranded.(b) Minimum amount to be brought in as foreign investment would be USD 100 million.(c) At least 50 percent of the total foreign investment brought in the first tranche of USD 100 million, shall be invested in ‘back-end infrastructure’ within three years, where ‘back-end infrastructure’ will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back-end infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements.

(d) At least 30 percent of the value of procurement of manufactured/ processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant & machinery not exceeding USD2 million. This valuation refers to the value at the time of installation, without providing for depreciation. The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a ‘small industry’ for this purpose, even if it outgrows the said investment of USD2 million during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years total value of the manufactured/ processed products purchased, beginning 1st April of the year during which the first tranche of foreign investment is received. Thereafter, it would have to be met on an annual basis.

(e) Self-certification is required by the company, to ensure compliance of the conditions at serial nos. (b), (c) and (d) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors.

(f) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms. Around the municipal/ urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/ Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

(g) Government will have the first right to procure agricultural products.

(h) The above policy is an enabling policy only and the State Governments/ Union Territories would be free to take their own decisions in regard to implementation of the policy. Therefore, retail sales outlets may be set up in those States/ Union Territories which have agreed, or agree in future, to allow foreign investment in MBRT under this policy. The States/ Union Territories which have conveyed their agreement are mentioned at 15.4.2. Such agreement, in future, to permit establishment of retail outlets under this policy, would be conveyed to the Government of India through the Department of Industrial Policy and Promotion and additions would be made to the said list. The establishment of the retail sales outlets will be in compliance of applicable State/ Union Territory laws/ regulations, such as the Shops and Establishments Act etc.

(i) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with foreign investment engaged in multi-brand retail trading.

(j) Applications would be processed in the Department of Industrial Policy and Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered for Government approval.

15.4.2

States/ Union Territories are Andhra Pradesh, Assam, Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman & Diu and Dadra and Nagar Haveli (Union Territories)

15.5

Duty Free Shops

100%

Automatic

15.5.1

Other Conditions:
(a) Duty Free Shops would mean shops set up in custom bonded area at International Airports/ International Seaports and Land Custom Stations where there is transit of international passengers.(b) Foreign investment in Duty Free Shops is subject to compliance of conditions stipulated under the Customs Act, 1962 and other laws, rules and regulations.(c) Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country.

16

Pharmaceuticals

16.1

Greenfield

100%

Automatic

16.2

Brownfield

100%

Automatic up to 74%; Government route beyond 74%

16.3

Other Conditions
(a) ‘Non-compete’ clause would not be allowed except in special circumstances with the Government approval.(b) The prospective investor and the prospective investee are required to provide a certificate given at 16.4 along with the application submitted for Government approval.(c) Government approval may incorporate appropriate conditions for foreign investment in brownfield cases.

(d) Foreign investment in brownfield pharmaceuticals, irrespective of entry route, is further subject to the following conditions

(i) The production level of National List of Essential Medicines (NLEM) drugs and/ or consumables and their supply to the domestic market at the time of induction of foreign investment, being maintained over the next five years at an absolute quantitative level. The benchmark for this level would be decided with reference to the level of production of NLEM drugs and/ or consumables in the three financial years, immediately preceding the year of induction of foreign investment. Of these, the highest level of production in any of these three years would be taken as the level.

(ii) Research and Development (R&D) expenses being maintained in value terms for 5 years at an absolute quantitative level at the time of induction of foreign investment. The benchmark for this level would be decided with reference to the highest level of R&D expenses which has been incurred in any of the three financial years immediately preceding the year of induction of foreign investment.

(iii) The administrative Ministry will be provided complete information pertaining to the transfer of technology, if any, along with induction of foreign investment into the investee company.

(iv) The administrative Ministry (s) i.e. Ministry of Health and Family Welfare, Department of Pharmaceuticals or any other regulatory Agency/Development as notified by Central Government from time to time, will monitor the compliance of conditionalities.

Note :

(1) Foreign investment up to 100% under the automatic route is permitted for manufacturing of medical devices. The abovementioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry.

(2) Medical device means :-

(a) Any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of:-

(aa) Diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;

(ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;

(ac) investigation, replacement or modification or support of the anatomy or of a physiological process;

(ad) supporting or sustaining life;

(ae) disinfection of medical devices;

(af) control of conception;

and which does not achieve its primary intended action in or on the human body or animals by any pharmacological or

immunological or metabolic means, but which may be assisted in its intended function by such means;

(b) an accessory to such an instrument, apparatus, appliance, material or other article;

(c) a device which is reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of in vitro examination of specimens derived from the human body or animals.

(3) The definition of medical device at Note (2) above would be subject to the Drugs and Cosmetics Act, 1940.

16.4

Certificate to be Furnished by the Prospective Investor as well as the Prospective Recipient Entity  It is certified that the following is the complete list of all inter-se agreements, including the shareholders agreement, entered into between foreign investor(s) and investee brownfield pharmaceutical entity

  1. ……..
  2. ……..
  3. ……..

(copies of all agreements to be enclosed)

It is also certified that none of the inter-se agreements, including the shareholders agreement, entered into between foreign investor(s) and investee brownfield pharmaceutical entity contain any non-compete clause in any form whatsoever.

It is further certified that there are no other contracts/agreements between the foreign investor(s) and investee brownfield pharma entity other than those listed above.

The foreign investor(s) and investee brownfield pharma entity undertake to submit to the FIPB any inter-se agreements that may be entered into between them subsequent to the submission and consideration of this application.

17

Railway Infrastructure

17.1

Construction, operation and maintenance of the following:(i) Suburban corridor projects through PPP, (ii) high-speed train projects, (iii) Dedicated freight lines, (iv) Rolling stock including train sets, and locomotives/ coaches manufacturing and maintenance facilities, (v) Railway Electrification, (vi) Signalling systems, (vii) Freight terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/ sidings including electrified railway lines and connectivity to main railway line and (x) Mass Rapid Transport Systems.

100%

Automatic

17.2

Other Conditions
(a) Foreign investment in this sector open to private-sector participation is subject to sectoral guidelines of Ministry of Railways.(b) Proposals involving foreign investment beyond 49 percent sensitive areas from security point of view, will be brought by the Ministry of Railways before the Cabinet Committee on Security (CCS) for consideration on a case to case basis.

F

FINANCIAL SERVICESInvestment in financial services, other than those indicated below, would require prior Government approval.

F.1

Asset Reconstruction Companies

100%

Automatic

F.1.1

Other Conditions
  • Investment limit of a sponsor in the shareholding of an ARC will be governed by the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Similarly, investment by institutional/ non-institutional investors will also be governed by the said Act.
  • FPIs can invest in the Security Receipts (SRs) issued by ARCs. FPIs may be allowed to invest up to 100 percent of each tranche in SRs issued by ARCs, subject to directions/ guidelines of Reserve Bank. Such investment should be within the relevant regulatory cap as applicable.
  • All investments would be subject to provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

F.2

Banking – Private sector

74%

Automatic up to 49% Government route beyond 49% and up to

74%

F.2.1

Other conditions:
  • At all times, at least 26 percent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank.
  • In case of NRIs individual holdings is restricted to 5 percent of the total paid up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 percent of the total paid up capital both on repatriation and non-repatriation basis. However, NRI holdings can be allowed up to 24 percent of the total paid up capital both on repatriation and non-repatriation basis subject to a special resolution to this effect passed by the banking company’s general body.
  • Applications for foreign investment in private banks having joint venture/ subsidiary in insurance sector may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) in order to ensure that the 49 percent limit of investment applicable for the insurance sector is not breached.
  • Transfer of shares under FDI from residents to non-residents will require approval of the Reserve Bank and/ or the Government, wherever applicable
  • The policies and procedures prescribed by RBI and other institutions such as Securities and Exchange Board of India, Ministry of Corporate Affairs and IRDAI on these matters will apply.
  • RBI guidelines relating to acquisition by purchase or otherwise of capital instruments of a private bank, if such acquisition results in any person owning or controlling 5 percent or more of the paid up capital of the private bank will apply to foreign investment as well.
  • Setting up of a subsidiary by foreign banks
    • Foreign banks will be permitted to either have branches or subsidiaries but not both.
    • Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank’s licensing criteria will be allowed to hold 100 percent paid-up capital to enable them to set up a wholly-owned subsidiary in India.
    • A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 percent in a private bank.
    • A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 percent of the paid-up capital of the private sector bank is held by residents at all times consistent with para (c) above.
    • A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks.
    • Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI.
    • All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI.
  • The present limit of 10 percent on voting rights in respect banking companies may be noted by the potential investor.
  • All investments shall be subject to the guidelines prescribed for the banking sector under the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934.

F.3

Banking – Public Sector

F.3.1

Banking – Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts, 1970/ 80. This ceiling is also applicable to the State Bank of India.

20%

Government

F.4

Infrastructure Companies in the Securities Market

F.4.1

Infrastructure companies in Securities Markets, namely, stock exchanges, commodity derivative exchanges, depositories and clearing corporations, in compliance with Securities and Exchange Board of India Regulations

49%

Automatic

F.4.2

Other conditions:
  • Foreign investment, including investment by FPIs, will be subject to the Guidelines/ Regulations issued by the Central Government, Securities and Exchange Board of India and the Reserve Bank from time to time.
  • Words and expressions used herein and not defined in these regulations but defined in the Companies Act, 2013 (18 of 2013) or the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) or in the concerned Regulations issued by Securities and Exchange Board of India shall have the same meanings respectively assigned to them in those Acts/ Regulations.

F.5

  Commodities Spot Exchange     49%     Automatic

F.5.1

Investment shall be subject to guidelines prescribed by the Central/ State Government

Sl. No

Sector/ Activity

Sectoral Cap

Entry Route

F.6

Power Exchanges
Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010

49%

Automatic

F.6.1

Other conditions
  • Investment by FPIs shall be restricted to secondary market only.
  • A person resident outside India including persons acting in concert should not hold more than 5 percent.
  • The investment would be in compliance with Securities and Exchange Board of India Regulations, other applicable laws/ regulations, security and other conditionalities

F.7

Credit Information Companies 

100%

Automatic

F.7.1

Other conditions
  • Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005 and regulatory clearance from the Reserve Bank.
  • FPI investment would be permitted subject to the following conditions:
  • A single entityshall directly or indirectly hold below 10 percent equity;
  • Any acquisition in excess of 1 percent will have to be reported to Reserve Bank as a mandatory requirement; and
  • FPIs investing in Credit Information Companies shall not seek a representation on the Board of Directors based upon their shareholding.

F.8

Insurance

F.8.1

  • Insurance Company
  • Insurance Brokers
  • Third Party Administrators
  • Surveyors and Loss Assessors
  • Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)

49%

Automatic

F.8.2

Other Conditions
  • Foreign investment in this sector shall be subject to compliance with the provisions of the Insurance Act, 1938 and subject to necessary license/ approval from the Insurance Regulatory & Development Authority of India for undertaking insurance and related activities.
  • An Indian Insurance company shall ensure that its ownership and control remains at all times with resident Indian entities as determined by Central Government/ Insurance Regulatory and Development Authority of India as per the rules/ regulation issued.
  • Where an entity like a bank, whose primary business is outside the insurance area, is allowed by the Insurance Regulatory and Development Authority of India to function as an insurance intermediary, the foreign equity investment caps applicable in that sector shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e., non-insurance related) business must remain above 50 percent of their total revenues in any financial year.
  • The provisions of paragraphs F.2.1 relating to ‘Banking-Private Sector’, shall be applicable in respect of bank promoted insurance companies.
  • Terms ‘Control’, ‘Equity Share Capital’, ‘Foreign Direct Investment’ (FDI), ‘Foreign Investors’, ‘Foreign Portfolio Investment’, ‘Indian Insurance Company’, ‘Indian Company’, ‘Indian Control of an Indian Insurance Company’, ‘Indian Ownership’, ‘Non-resident Entity’, ‘Public Financial Institution’, ‘Resident Indian Citizen’, ‘Total Foreign Investment’ will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19th February, 2015 issued by Department of Financial Services and regulations issued by Insurance Regulatory and Development Authority of India from time to time.

F.9

Pension Sector

49%

Automatic

F.9.1

Other conditions
(a)  Foreign investment in this sector shall be in accordance with the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013.(b)  Foreign investment in Pension Funds will be subject to the condition that entities investing in capitalinstruments issued by an Indian Pension Fund as per Section 24 of the PFRDA Act, 2013 shall obtain necessary registration from the PFRDA and comply with other requirements as per the PFRDA Act, 2013 and Rules and Regulations framed under it for so participating in Pension Fund Management activities in India.

(c) An Indian pension fund shall ensure that its ownership and control remains at all times with resident Indian entities as determined by the Government of India/ PFRDA as per the rules/ regulation issued by them.

F.10

Other Financial Services

100%

Automatic

F.10.1

Other Conditions
  • Other Financial Services will mean financial services activities regulated by financial sector regulators, viz., Reserve Bank, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority, National Housing Bank or any other financial sector regulator as may be notified by the Government of India.
  • Foreign investment in ‘Other Financial Services’ activities shall be subject to conditionalities, including minimum capitalization norms, as specified by the concerned Regulator/Government Agency
  • ‘Other Financial Services’ activities need to be regulated by one of the Financial Sector Regulators. In all such financial services activity which are not regulated by any Financial Sector Regulator or where only part of the financial services activity is regulated or where there is doubt regarding the regulatory oversight, foreign investment up to 100 percent will be allowed under Government approval route subject to conditions including minimum capitalization requirement, as may be decided by the Government.
  • Any activity which is specifically regulated by an Act, the foreign investment limits will be restricted to those levels/ limit that may be specified in that Act, if so mentioned.
  • Downstream investments by any of these entities engaged in “Other Financial Services” will be subject to these Regulations.

[F. No. 1/22/EM/2016]

SHEKHAR BHATNAGAR, Chief General Manager-in-Charge

 

Schedule 1

[See Regulation 5(1)]

Purchase/ Sale of capital instruments of an Indian company by a person resident outside India

1. Purchase/sale of capital instruments of an Indian company by a person resident outside India

(1) An Indian company may issue capital instruments to a person resident outside India subject to entry routes, sectoral caps and attendant conditionalities specified in Regulation 16;

(2) A person resident outside India may purchase capital instruments of a listed Indian company on a stock exchange in India provided that:

(a) The person resident outside India making the investment has already acquired control of such company in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 and continues to hold such control;

(b) The amount of consideration may be paid as per the mode of payment prescribed in this Schedule or out of the dividend payable by Indian investee company in which the person resident outside India has acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 provided the right to receive dividend is established and the dividend amount has been credited to a specially designated non-interest bearing rupee account for acquisition of shares on the recognised stock exchange.

(3) A wholly owned subsidiary set up in India by a non-resident entity, operating in a sector where 100 percent foreign investment is allowed in the automatic route and there are no FDI linked performance conditions, may issue capital instruments to the said non-resident entity against pre-incorporation/ preoperative expenses incurred by the said non-resident entity up to a limit of five percent of its authorised capital or USD 500,000 whichever is less, subject to the following conditions:

(a) Within thirty days from the date of issue of capital instruments but not later than one year from the date of incorporation or such time as Reserve Bank or Central Government permits, the Indian company shall report the transaction in the Form FC-GPR to the Reserve Bank;

(b) A certificate issued by the statutory auditor of the Indian company that the amount of pre-incorporation/ pre-operative expenses against which capital instruments have been issued has been utilized for the purpose for which it was received should be submitted with the Form FC-GPR.

Explanation: Pre-incorporation/ pre-operative expenses shall include amounts remitted to Investee Company’s account, to the investor’s account in India if it exists, to any consultant, attorney or to any other material/ service provider for expenditure relating to incorporation or necessary for commencement of operations.

(4) An Indian company may issue capital instruments to a person resident outside India against swap of capital instruments if the Indian investee company is engaged in an automatic route sector.

(5) An Indian company may issue equity shares against any funds payable by it to a person resident outside India, the remittance of which is permitted under the Act or the rules and regulations framed or directions issued thereunder or does not require prior permission of the Central Government or the Reserve Bank under the Act or the rules and regulations framed or directions issued thereunder or has been permitted by the Reserve Bank under the Act or the rules and regulations framed or directions issued thereunder.

Provided in case where permission has been granted by the Reserve Bank for making remittance, the Indian company may issue equity shares against such remittance provided all regulatory actions with respect to the delay or contravention under FEMA or the rules or the regulations framed thereunder have been completed

(6) An Indian company may issue capital instruments to a person resident outside India with prior Government approval against:

(a) Swap of capital instruments if the Indian investee company is engaged in a sector under Government route;

(b) Import of capital goods/ machinery/ equipment (excluding second-hand machinery) subject to compliance with the conditions specified by the Central Government and the Reserve Bank from time to time; or

(c) Pre-operative/ pre-incorporation expenses (including payments of rent etc.), subject to compliance with the conditions specified by the Central Government and the Reserve Bank from time to time.

2. Mode of payment

(1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ Escrow account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

Explanation: The amount of consideration shall include:

(i) Issue of equity shares by an Indian company against any funds payable by it to the investor

(ii) Swap of capital instruments.

(2) Capital instruments shall be issued to the person resident outside India making such investment within sixty days from the date of receipt of the consideration.

Explanation: In case of partly paid equity shares, the period of 60 days shall be reckoned from the date of receipt of each call payment

(3) Where such capital instruments are not issued within sixty days from the date of receipt of the consideration the same shall be refunded to the person concerned by outward remittance through banking channels or by credit to his NRE/ FCNR(B) accounts, as the case may be within fifteen days from the date of completion of sixty days.

Provided Prior approval of the Reserve Bank shall be required for payment of interest, if any, as laid down in the Companies Act, 2013, for delay in refund of the amount so received.

(4) An Indian company issuing capital instruments under this Schedule may open a foreign currency account with an Authorised Dealer in India in accordance with Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2016.

3. Remittance of sale proceeds

The sale proceeds (net of taxes) of the capital instruments may be remitted outside India or may be credited to the NRE/ FCNR(B) of the person concerned.

Schedule 2

[See Regulation 5(2)]

Purchase/ Sale of capital instruments of a listed Indian company on a recognised stock exchange in India by Foreign Portfolio Investors

1. Purchase/sale of capital instruments

A Foreign Portfolio Investor (FPI) may purchase or sell capital instruments of an Indian company on a recognised stock exchange in India subject to the following conditions.

(1) The total holding by each FPI or an investor group as referred in SEBI (FPI) Regulations, 2014, shall be less than 10 percent of the total paid-up equity capital on a fully diluted basis or less than 10 percent of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company and the total holdings of all FPIs put together shall not exceed 24 percent of paid-up equity capital on a fully diluted basis or paid up value of each series of debentures or preference shares or share warrants. The said limit of 10 percent and 24 percent will be called the individual and aggregate limit, respectively.

Provided the aggregate limit of 24 percent may be increased by the Indian company concerned up to the sectoral cap/ statutory ceiling, as applicable, with the approval of its Board of Directors and its General Body through a resolution and a special resolution, respectively.

(2) In case the total holding of an FPI increases to 10 percent or more of the total paid-up equity capital on a fully diluted basis or 10 percent or more of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company, the total investment made by the FPI shall be re-classified as FDI subject to the conditions as specified by Securities and Exchange Board of India and the Reserve Bank in this regard and the investee company and the investor complying with the reporting requirements prescribed in regulation 13 of these Regulations.

(3) An FPI may purchase capital instruments of an Indian company through public offer/ private placement, subject to the individual and aggregate limits prescribed under this Schedule.

Provided:

(i) in case of Public Offer, the price of the shares to be issued is not less than the price at which shares are issued to residents, and

(ii) in case of issue by private placement, the price is not less than (a) the price arrived in terms of guidelines issued by the Securities and Exchange Board of India, or (b) the fair price worked out as per any internationally accepted pricing methodology for valuation of shares on arm’s length basis, duly certified by a Securities and Exchange Board of India registered Merchant Banker or Chartered Accountant or a practicing Cost Accountant, as applicable

(4) An FPI may, undertake short selling as well as lending and borrowing of securities subject to such conditions as may be stipulated by the Reserve Bank and the Securities and Exchange Board of India from time to time.

(5) Investments made under this schedule shall be subject to the limits and margin requirements prescribed by the Reserve Bank/ Securities and Exchange Board of India as well as the stipulations regarding collateral securities as specified by the Reserve Bank from time to time.

2. Mode of payment

(1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(2) The foreign currency account and SNRR account shall be used only and exclusively for transactions under this Schedule

3. Remittance of sale proceeds

The sale proceeds (net of taxes) of the investments made under this schedule may be remitted outside India or may be credited to the foreign currency account or a SNRR account of the FPI.

4. Saving

All investments made by deemed FPIs in accordance with the regulations prior to their registration as FPI shall be continued to be valid and taken into account for computation of aggregate limits.

Schedule 3

[See Regulation 5(3)]

Purchase/ Sale of Capital Instruments of a listed Indian company on a recognised stock exchange in India by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on repatriation basis

1. Purchase/sale of capital instruments

A Non-resident Indian (NRI) or an Overseas Citizen of India (OCI) may purchase or sell Capital Instruments of a listed Indian company on repatriation basis, on a recognised stock exchange in India, subject to the following conditions:

(1) NRIs or OCIs may purchase and sell Capital Instruments through a branch designated by an Authorised Dealer for the purpose;

(2) The total holding by any individual NRI or OCI shall not exceed 5 percent of the total paid-up equity capital on a fully diluted basis or should not exceed 5 percent of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company and the total holdings of all NRIs and OCIs put together shall not exceed ten percent of the total paid-up equity capital on a fully diluted basis or shall not exceed ten percent of the paid-up value of each series of debentures or preference shares or share warrants;

Provided that the aggregate ceiling of 10 percent may be raised to 24 percent if a special resolution to that effect is passed by the General Body of the Indian company.

2. Mode of payment

(1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a Non-Resident External (NRE) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(2) The NRE account will be designated as an NRE (PIS) Account and the designated account shall be used exclusively for putting through transactions permitted under this Schedule.

3. Remittance of sale proceeds

The sale proceeds (net of taxes) of the capital instruments may be remitted outside India or may be credited to NRE (PIS) account of the person concerned.

4. Saving

Any account designated as NRO (PIS) shall be re-designated as NRO account.

Schedule 4

[See Regulation 5(4)]

Investment on non-repatriation basis

A. Purchase or Sale of Capital Instruments or convertible notes of an Indian company or Units or contribution to the capital of an LLP by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on Non-Repatriation basis

1. Purchase/ sale of capital instruments or convertible notes or units or contribution to the capital of an LLP

(1) A Non-resident Indian (NRI) or an Overseas Citizen of India (OCI), including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, may purchase/ contribute, as the case may be, on non-repatriation basis the following:

(a) Any capital instrument issued by a company without any limit either on the stock exchange or outside it.

(b) Units issued by an investment vehicle without any limit, either on the stock exchange or outside it.

(c) The capital of a Limited Liability Partnership without any limit.

(d) Convertible notes issued by a startup company in accordance with these Regulations.

(2) The investment detailed at sub-para 1 above will be deemed to be domestic investment at par with the investment made by residents

2. Prohibition on purchase of capital instruments of certain companies.

Notwithstanding anything contained in paragraph 1, an NRI or an OCI including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, shall not make any investment, under this Schedule, in capital instruments or units of a Nidhi company or a company engaged in agricultural/ plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights.

Explanation: Real estate business will have the same meaning as laid down in regulation 16.

3. Mode of Payment

The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

4. Sale/ maturity proceeds

(1) The sale/ maturity proceeds (net of applicable taxes) of capital instruments purchased or disinvestment proceeds of a LLP shall be credited only to the NRO account of the investor, irrespective of the type of account from which the consideration was paid;

(2) The amount invested in capital instruments of an Indian company or the consideration for contribution to the capital of a LLP and the capital appreciation thereon shall not be allowed to be repatriated abroad.

B. Investment in a firm or a proprietary concern

1. Contribution to capital of a firm or a proprietary concern

An NRI or an OCI may invest, on a non-repatriation basis, by way of contribution to the capital of a firm or a proprietary concern in India provided such firm or proprietary concern is not engaged in any agricultural/ plantation activity or print media or real estate business.

Explanation: Real estate business will have the same meaning as laid down in regulation 16.

2. Mode of payment

The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

3. Sale/ maturity proceeds

(1) The disinvestment proceeds shall be credited only to the NRO account of the person concerned, irrespective of the type of account from which the consideration was paid;

(2) The amount invested for contribution to the capital of a firm or a proprietary concern and the capital appreciation thereon shall not be allowed to be repatriated abroad.

Schedule 5

[See Regulation 5(5)]

Purchase and sale of securities other than capital instruments by a person resident outside India

1. Permission to persons resident outside India

A. Permission to Foreign Portfolio Investors (FPIs)

An FPI may purchase the following instruments on repatriation basis subject to the terms and conditions specified by the Securities and Exchange Board of India and the Reserve Bank:

(a) dated Government securities/ treasury bills;

(b) non-convertible debentures/ bonds issued by an Indian company;

(c) commercial papers issued by an Indian company;

(d) units of domestic mutual funds;

(e) Security Receipts (SRs) issued by Asset Reconstruction Companies up to 100 percent of each tranche, subject to directions/ guidelines of the Reserve Bank;

(f) Perpetual Debt instruments eligible for inclusion as Tier I capital and Debt capital instruments as upper Tier II capital issued by banks in India to augment their capital (Tier I capital and Tier II capital as defined by Reserve Bank) provided that the investment by all eligible investors in Perpetual Debt instruments (Tier I) shall not exceed an aggregate ceiling of 49 percent of each issue and investment by a single FPI shall not exceed the limit of 10 percent of each issue;

(g) non-convertible debentures/ bonds issued by Non-Banking Financial Companies categorized as ‘Infrastructure Finance Companies’(IFCs) by the Reserve Bank;

Provided this will include such instruments issued on or after November 3, 2011 and held by deemed FPIs;

(h) Rupee denominated bonds/ units issued by Infrastructure Debt Funds;

Provided this will include such instruments issued on or after November 22, 2011 and held by deemed FPIs.

(i) Credit enhanced bonds;

(j) Listed non-convertible/ redeemable preference shares or debentures issued in terms of Regulation 9 of these Regulations;

(k) Security receipts issued by securitization companies subject to conditions as specified by the Reserve Bank and/ or Securities and Exchange Board of India;

(l) Securitised debt instruments, including (i) any certificate or instrument issued by a special purpose vehicle (SPV) set up for securitisation of asset/s with banks, Financial Institutions or NBFCs as originators; and/ or (ii) any certificate or instrument issued and listed in terms of the Securities and Exchange Board of India (Regulations on Public Offer and Listing of Securitised Debt Instruments), 2008.

Provided that FPIs may offer such instruments as permitted by the Reserve Bank from time to time as collateral to the recognized Stock Exchanges in India for their transactions in exchange traded derivative contracts as specified in sub-Regulation 5 of Regulation 5.

B. Permission to Non-resident Indians (NRIs) or Overseas Citizens of India (OCIs) – Repatriation basis

(1) A Non-resident Indian (NRI) or an Overseas Citizen of India (OCI) may, without limit, purchase the following instruments on repatriation basis,

(a) Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds;

(b) Bonds issued by a Public Sector Undertaking (PSU) in India;

(c) Shares in Public Sector Enterprises being disinvested by the Central Government, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids;

(d) Bonds/ units issued by Infrastructure Debt Funds;

(e) Listed non-convertible/ redeemable preference shares or debentures issued in terms of Regulation 9 of these Regulations;

(2) An NRI or an OCI may purchase on repatriation basis perpetual debt instruments eligible for inclusion as Tier I capital and Debt capital instruments as upper Tier II capital issued by banks in India to augment their capital, as stipulated by Reserve Bank. The investments by all NRIs or OCIs in Perpetual Debt Instruments (Tier I) should not exceed an aggregate ceiling of 24 percent of each issue and investments by a single NRI or OCI should not exceed 5 percent of each issue. Investment by NRIs or OCIs in Debt Capital Instruments (Tier II) shall be accordance with the extant policy for investment by NRIs or OCIs in other debt instruments.

(3) An NRI may subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority (PFRDA), provided such person is eligible to invest as per the provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable.

Provided that NRI/ OCIs may offer such instruments as permitted by the Reserve Bank from time to time as collateral to the recognized Stock Exchanges in India for their transactions in exchange traded derivative contracts as specified in sub-Regulation 5 of Regulation 5.

C. Permission to Non-resident Indians (NRIs) or Overseas Citizens of India (OCIs) – Non-Repatriation basis

(1) An NRI or an OCI may, without limit, purchase on non-repatriation basis, dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of money Market Mutual Funds, or National Plan/ Savings Certificates.

(2) An NRI or an OCI may, without limit, purchase on non-repatriation basis, listed non-convertible/ redeemable preference shares or debentures issued in terms of Regulation 9 of these Regulations.

(3) An NRI or an OCI may, without limit, on non-repatriation basis subscribe to the chit funds authorised by the Registrar of Chits or an officer authorised by the State Government in this behalf.

D. Permission to Foreign Central Banks or a Multilateral Development Bank for purchase of Government Securities

(1) A Foreign Central Bank may purchase and sell dated Government securities/ treasury bills in the secondary market subject to the conditions as may be stipulated by the Reserve Bank.

(2) A Foreign Central Bank, may purchase and sell dated Government securities/ treasury bills subject to the conditions as may be stipulated by Reserve Bank.

(3) A Multilateral Development Bank which is specifically permitted by Government of India to float rupee bonds in India may purchase Government dated securities.

E. Permission to other non-resident investors for purchase of securities

(1) Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds which are registered with Securities and Exchange Board of India as eligible investors in Infrastructure Debt Funds may purchase on repatriation basis Rupee Denominated bonds/ units issued by Infrastructure Debt Funds.

(2) Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks registered with Securities and Exchange Board of India may purchase, on repatriation basis the following instruments and subject to such terms and conditions as may be specified by the Reserve Bank and the Securities and Exchange Board of India:

(a) dated Government securities/ treasury bills;

(b) commercial papers issued by an Indian company;

(c) units of domestic mutual funds;

(d) listed non-convertible debentures/ bonds issued by an Indian company;

(e) listed and unlisted non-convertible debentures/ bonds issued by an Indian company in the infrastructure sector. The term ‘Infrastructure Sector’ has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012 as amended/ updated;

(f) non-convertible debentures/bonds issued by Non-Banking Finance Companies categorized as ‘Infrastructure Finance Companies (IFCs)’ by the Reserve Bank;

(g) security Receipts (SRs) issued by Asset Reconstruction Companies up to 100 percent of each tranche, subject to directions/ guidelines of the Reserve Bank;

(h) perpetual Debt instruments eligible for inclusion as Tier I capital and Debt capital instruments as upper Tier II capital issued by banks in India to augment their capital (Tier I capital and Tier II capital as defined by Reserve Bank) provided that the investment by all eligible investors in Perpetual Debt instruments (Tier I) shall not exceed an aggregate ceiling of 49 percent of each issue, and investment by a single long term investor shall not exceed the limit of 10 pe cent of each issue;

(i) primary issues of non-convertible debentures/ bonds provided such non-convertible debentures/ bonds are committed to be listed within 15 days of such investment. In the event of the instruments not being listed within 15 days of issuance then the long term investor shall immediately dispose such instruments by way of sale to a third party or to the issuer and the terms of offer to the long term investors should contain a clause that the issuer of such instruments shall immediately redeem/ buyback those securities from the long term investors in such an eventuality;

(j) credit enhanced bonds;

(k) listed non-convertible/ redeemable preference shares or debentures issued in terms of Regulation 9 of these Regulations;

(l) security receipts (SRs) issued by securitization companies subject to conditions as specified by Reserve Bank and/ or Securities and Exchange Board of India

2. Mode of Payment

(1) The amount of consideration for purchase of instruments by FPIs shall be paid out of inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. The foreign currency account and SNRR account shall be used only and exclusively for transactions under this Schedule.

(2) The amount of consideration for purchase of instruments by NRIs or OCIs on repatriation basis shall be paid out of inward remittances from abroad through banking channels or out of funds held in NRE/ FCNR(B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(3) The amount of consideration for (a) purchase of instruments by NRIs or OCIs on non-repatriation basis and (b) subscriptions to the National Pension System by NRIs shall be paid out of inward remittances from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(4) The amount of consideration for purchase of Government dated securities by a Foreign Central Bank or a Multilateral Development Bank shall be paid out of inward remittances from abroad through banking channels or out of funds held in an account opened with the specific approval of the RBI.

(5) The amount of consideration for purchase of instruments by other non-resident investors shall be paid out of inward remittances from abroad through banking channels.

3. Permission for Sale of instruments

A person resident outside India who has purchased instruments in accordance with this Schedule may sell/ redeem the instruments subject to such terms and conditions as may be specified by the Reserve Bank and the Securities Exchange Board of India.

4. Remittance/ credit of sale/ maturity proceeds

(1) The sale/ maturity proceeds (net of taxes) of instruments held by Foreign Portfolio Investors (FPIs) may be remitted outside India or may be credited to the foreign currency account or SNRR account of the FPI.

(2) The net sale/ maturity proceeds (net of taxes) of instruments held by NRIs or OCIs, may be:

(a) Credited to the NRO account person concerned where the instruments were held on non-repatriation basis

(b) Credited to the NRO account person concerned where the payment for the purchase of the instruments sold was made out of funds held in NRO account, or

(c) Remitted abroad or at the NRI/ OCI investor’s option, credited to his NRE/ FCNR(B)/ NRO account, where the instruments were purchased on repatriation basis.

(3) In all other cases, the sale/ maturity proceeds (net of taxes) may be remitted abroad or credited to an account opened with the prior permission of the Reserve Bank.

Schedule 6

[See Regulation 5(6)]

Investment in a Limited Liability Partnership (LLP)

1. Investment in an LLP

(1) A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity incorporated in Pakistan or Bangladesh), not being a Foreign Portfolio Investor (FPI) or a Foreign Venture Capital Investor (FVCI), may contribute to the capital of an LLP operating in sectors/ activities where foreign investment up to 100 percent is permitted under automatic route and there are no FDI linked performance conditions.

(2) Investment by way of ‘profit share’ will fall under the category of reinvestment of earnings

(3) Investment in an LLP is subject to the compliance of the conditions of Limited Liability Partnership Act, 2008.

(4) A company having foreign investment, engaged in a sector where foreign investment up to 100 percent is permitted under the automatic route and there are no FDI linked performance conditions, can be converted into an LLP under the automatic route.

(5) An LLP having foreign investment, engaged in a sector where foreign investment up to 100 percent is permitted under the automatic route and there are no FDI linked performance conditions, may be converted into a company under the automatic route.

(6) Investment in an LLP either by way of capital contribution or by way of acquisition/ transfer of profit shares, should not be less than the fair price worked out as per any valuation norm which is internationally accepted/ adopted as per market practice (hereinafter referred to as “fair price of capital contribution/ profit share of an LLP”) and a valuation certificate to that effect shall be issued by the Chartered Accountant or by a practicing Cost Accountant or by an approved valuer from the panel maintained by the Central Government.

(7) In case of transfer of capital contribution/ profit share from a person resident in India to a person resident outside India, the transfer shall be for a consideration not less than the fair price of capital contribution/ profit share of an LLP. Further, in case of transfer of capital contribution/ profit share from a person resident outside India to a person resident in India, the transfer shall be for a consideration which is not more than the fair price of the capital contribution/ profit share of an LLP.

2. Mode of payment

Payment by an investor towards capital contribution of an LLP shall be made by way of an inward remittance through banking channels or out of funds held in NRE or FCNR(B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

3. Remittance of disinvestment proceeds

The disinvestment proceeds may be remitted outside India or may be credited to NRE or FCNR(B) account of the person concerned.

Schedule 7

[See Regulation 5(7)]

Investment by a Foreign Venture Capital Investor (FVCI)

1. Investment by Foreign Venture Capital Investor

(1) Subject to the terms and conditions as may be laid down by the Reserve Bank, a Foreign Venture Capital Investor (FVCI) may purchase

(a) securities, issued by an Indian company engaged in any sector mentioned at para 4 of this Schedule and whose securites are not listed on a recognised stock exchange at the time of issue of the said securities;

(b) securities issued by a startup;

(c) units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) or units of a scheme or of a fund set up by a VCF or by a Cat-I AIF.

Provided if the investment is in capital instruments, then the sectoral caps, entry routes and attendant conditions shall apply;

(2) An FVCI may purchase the securities/ instruments mentioned above either from the issuer of these securities/ instruments or from any person holding these securities/ instruments. The FVCI may invest in securities on a recognized stock exchange subject to the provisions of the Securities and Exchange Board of India (FVCI) Regulations, 2000.

(3) The FVCI may acquire, by purchase or otherwise, from, or transfer, by sale or otherwise, to, any person resident in or outside India, any security/ instrument it is allowed to invest in, at a price that is mutually acceptable to the buyer and the seller/ issuer. The FVCI may also receive the proceeds of the liquidation of VCFs or of Cat-I AIFs or of schemes/ funds set up by the VCFs or Cat-I AIFs.

2. Mode of payment

(1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(2) The foreign currency account and SNRR account shall be used only and exclusively for transactions under this Schedule.

3. Remittance of sale/ maturity proceeds

The sale/ maturity proceeds (net of taxes) of the securities may be remitted outside India or may be credited to the foreign currency account or a Special Non-resident Rupee Account of the FVCI.

4. List of sectors in which a Foreign Venture Capital Investor is allowed to invest

(1) Biotechnology

(2) IT related to hardware and software development

(3) Nanotechnology

(4) Seed research and development

(5) Research and development of new chemical entities in pharmaceutical sector

(6) Dairy industry

(7) Poultry industry

(8) Production of bio-fuels

(9) Hotel-cum-convention centres with seating capacity of more than three thousand.

(10) Infrastructure sector. The term ‘Infrastructure Sector’ has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012 as amended/ updated.

Schedule 8

[See Regulation 5(8)]

Investment by a person resident outside India in an Investment Vehicle

1. Investment in units of an Investment Vehicle

(1) A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity incorporated in Pakistan or Bangladesh) may invest in units of Investment Vehicles.

(2) A person resident outside India who has acquired or purchased units in accordance with this Schedule may sell or transfer in any manner or redeem the units as per regulations framed by Securities and Exchange Board of India or directions issued by the Reserve Bank.

(3) An Investment vehicle may issue its units to a person resident outside India against swap of capital instruments of a Special Purpose Vehicle (SPV) proposed to be acquired by such Investment Vehicle.

(4) Investment made by an Investment Vehicle into an Indian entity shall be reckoned as indirect foreign investment for the investee Indian entity if the Sponsor or the Manager or the Investment Manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India.

Provided that for sponsors or managers or investment managers organized in a form other than companies or LLPs, Securities and Exchange Board of India shall determine whether the sponsor or manager or investment manager is foreign owned and controlled.

Explanation: ‘Control’ of the AIF should be in the hands of ‘sponsors’ and ‘managers/ investment managers’, with the general exclusion to others. In case the ‘sponsors and ‘managers/ investment managers’ of the AIF are individuals, for the treatment of downstream investment by such AIF as domestic, ‘sponsors’ and ‘managers/ investment managers’ should be resident Indian citizens.

(5) An Alternative Investment Fund Category III which has received any foreign investment shall make portfolio investment in only those securities or instruments in which a FPI is allowed to invest under the Act, rules or regulations made thereunder.

2. Mode of payment

The amount of consideration shall be paid as inward remittance from abroad through banking channels or by way of swap of shares of a Special Purpose Vehicle or out of funds held in NRE or FCNR(B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

3. Remittance of sale/ maturity proceeds

The sale/ maturity proceeds (net of taxes) of the units may be remitted outside India or may be credited to the NRE or FCNR(B) account of the person concerned.

Schedule 9

[See Regulation 5(9)]

Investment in Depository receipts by a person resident outside India

1. Issue/ transfer of eligible instruments to a foreign depository for the purpose of issuance of depository receipts by eligible person(s)

(1) Any security or unit in which a person resident outside India is allowed to invest under these regulations shall be eligible instruments for issue of Depository Receipts in terms of Depository Receipts Scheme, 2014 (DR Scheme, 2014).

(2) A person will be eligible to issue or transfer eligible instruments to a foreign depository for the purpose of issuance of depository receipts in accordance with the DR Scheme, 2014 and guidelines issued by Central Government in this regard.

(3) A domestic custodian may purchase eligible instruments on behalf of a person resident outside India, for the purpose of converting the instruments so purchased into depository receipts in terms of DR Scheme 2014.

(4) The aggregate of eligible instruments which may be issued or transferred to foreign depositories, along with eligible instruments already held by persons resident outside India, shall not exceed the limit on foreign holding of such eligible instruments under the Act, rules or regulations framed thereunder.

(5) The eligible instruments shall not be issued or transferred to a foreign depository for the purpose of issuing depository receipts at a price less than the price applicable to a corresponding mode of issue or transfer of such instruments to domestic investors under the applicable laws.

2. Saving

Depository Receipts issued under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 shall be deemed to have been issued under the corresponding provisions of DR Scheme 2014 and have to comply with the provisions laid out in this Schedule.

Schedule 10

[See Regulation 5(10)]

Issue of Indian Depository Receipts (IDRs)

1. Issue of IDRs

Companies incorporated outside India may issue IDRs through a Domestic Depository, to persons resident in India and outside India, subject to the following conditions

(1) the issue of IDRs is in compliance with the Companies (Registration of Foreign Companies) Rules, 2014 and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

(2) any issue of IDRs by financial/ banking companies having presence in India, either through a branch or subsidiary, shall require prior approval of the sectoral regulator(s);

(3) IDRs shall be denominated in Indian Rupees only;

(4) the proceeds of the issue of IDRs shall be immediately repatriated outside India by the companies issuing such IDRs .

2. Purchase/ sale of IDRs:

An FPI or an NRI or an OCI may purchase, hold or sell IDRs, subject to the following terms and conditions:

(1) NRIs or OCIs may invest in the IDRs out of funds held in their NRE/ FCNR(B) account, maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016;

(2) Limited two way fungibility of IDRs shall be permissible subject to the terms and conditions stipulated by Reserve Bank in this regard;

(3) IDR shall not be redeemable into underlying equity shares before the expiry of one year from the date of issue;

Redemption/ conversion of IDRs into underlying equity shares of the issuing company shall be a compliance the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004.

 

No.28/2017 Dated: 07-11-2017


Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 – 20(R)/ 2017-RB – Foreign Exchange Management

Circular No. 28/2017

F.No. 500/10/2017-FT&TR-IV

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated, the 7th of November, 2017.

Sub: Clarification on Indirect Transfer provisions in case of redemption of share or interest outside India under the Income-tax Act, 1961

Under the provisions contained in section 9(1)(i) of the Income-tax Act, 1961 (‘Act’), all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India or through the transfer of a capital asset situate in India, shall be deemed to accrue or arise in India. Explanations 5, 6 and 7 of section 9(1)(i) further define the scope of said provision.

2. Concerns have been expressed by investment funds, including private equity funds and venture capital funds, that on account of the extant indirect transfer provisions in the Act, non-resident investment funds investing in India, which are set up as multi-tier investment structures, suffer multiple taxation of the same income at the time of subsequent redemption or buyback. Such taxability arises firstly at the level of the fund in India on its short term capital gain/ business income and then at every upper level of investment in the fund chain on subsequent redemption or buyback. The Board has received representations to exclude investors above the level of the direct investor, who is already chargeable to tax in India on such income, from the ambit of indirect transfer provisions of the Act.

3. Addressing such concerns in his Budget speech on 1st February, 2017, the Finance Minister had stated that Category I and Category II Foreign Portfolio Investors (FPI) will be exempted from indirect transfer provisions. It was also stated that a clarification will be issued that indirect transfer provisions shall not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India.

4. Vide Finance Act, 2017, Category I and Category II FPls have already been exempted from indirect transfer provisions of the Act through insertion of proviso to Explanation 5 to section 9(1)(i) of the Act, with effect from 01.04.2015.

5. There could be situations in multi-tiered investment structures, where interest or share held indirectly by a non-resident in an Investment Fund or a Venture Capital Company or a Venture Capital Fund (hereinafter referred to as ‘specified funds’), is redeemed in an upstream entity outside India in consequence of transfer of shares or securities held in India by the specified funds, the income of which have been subject to tax in India. In such cases, application of indirect transfer provisions on redemption of share or interest in the upstream entity may lead to multiple taxation of the same income. In respect of Category I and Category II FPls though, such multiple taxation will not take place on account of the insertion of proviso to Explanation 5 to section 9(1)(i) of the Act, vide Finance Act, 2017.

6. The matter has been examined by the Board and it has been decided that the provisions of section 9(1)(i) of the Act read with Explanation 5 thereof shall not apply in respect of income accruing or arising to a non-resident on account of redemption or buyback of its share or interest held indirectly (i.e. through upstream entities registered or incorporated outside India ) in the specified funds if such income accrues or arises from or in consequence of transfer of shares or securities held in India by the specified funds and such income is chargeable to tax in India. However, the above benefit shall be applicable only in those cases where the proceeds of redemption or buyback arising to the nonresident do not exceed the pro-rata share of the non-resident in the total consideration realized by the specified funds from the said transfer of shares or securities in India. It is further clarified that a non-resident investing directly in the specified funds shall continue to be taxed as per the extant provisions of the Act.

For the purposes of this Circular,

(i) “Investment fund” shall have the meaning assigned to it in clause (a) of Explanation 1 to section 115UB of the Act.

(ii) “Venture capital company” and “venture capital fund” shall have the meanings respectively assigned to them in Explanation to clause (23FB) of section 10 of the Act.

(Amrit Agrahari)

Under Secretary

Notification No. GSR 1371(E) [F.No.1/19/2013-CL-V-PART], Dated 7-11-2017


COMPANIES (ACCOUNTS) AMENDMENT RULES, 2017 – SUBSTITUTION OF FORM NO.AOC-4

NOTIFICATION NO. GSR 1371(E) [F.NO.1/19/2013-CL-V-PART]DATED 7-11-2017

In exercise of the powers conferred by sub-sections (1) and (3) of section 128, sub-section (3) of section 129, section 133, section 134 and section 138 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Accounts) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Accounts) Amendment Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Accounts) Rules, 2014, in Annexure, for form AOC-4, the following Form shall be substituted, namely:—

FORM NO. AOC – 4

[Pursuant to section 137 of the Companies Act, 2013 and sub-rule (1) of Rule 12 of Companies (Accounts) Rules, 2014]

Form for filing financial statement and other documents with the Registrar

 

 

Government may review monthly GST return filing process : 07-11-2017


The government may review the requirement of filing at least three returns every month under the GST regime with a view to easing compliance burden of taxpayers, officials said. Presently, businesses have to file returns in GSTR-1, GSTR-2 and GSTR-3 forms for every month. These forms detail outward supplies of taxable goods and/or services, inward supplies for claiming input tax credit and monthly return. The review follows businesses complaining problems in matching invoices while filing July returns. “There will be a review of the norms to file GSTR-1, 2 and 3. Businesses have complained of trouble in invoice matching while filing GSTR-2. It would be reviewed whether matching of invoices would be pursued in the coming months,” a senior government official told PTI. Under the Goods and Services Tax (GST) regime rolled out from July 1, the government has allowed businesses to file initial returns and pay taxes by filing up form GSTR-3B by the 20th day of next month. This form is only for period July to December and would be discontinued from January. The official said the GST Council, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, may also consider extension of GSTR-3B filing beyond December as the Central Board of Excise and Customs (CBEC) feel that the filing the initial returns has stabilised and businesses have got used to the system.

 The first three months of GST roll out have earned a cumulative revenue, including Integrated GST collections, of around Rs 2.78 lakh crore to the exchequer. The final GST returns are to be filed by submitting form GSTR-1, 2 and 3. Businesses have filed GSTR-1 return, which is the sales returns, for the month of July and over 47 lakh business have filed it. These sales returns will have to be matched with the purchase invoice to be filed in GSTR-2. So far over 21 lakh businesses have filed July GSTR-2 and the due date for filing has been extended by a month to November 30. After matching of GSTR-1 and 2, the businesses will have to file July GSTR-3, the last date for which is December 11. “Invoice matching has been an issue and there is a thinking that we may give some time to settle down. In the meanwhile we can probably extend GSTR-3B beyond December,” the official added.

The official further said that a decision to this effect may be taken next month. A group of ministers headed by Assam Finance Minister Himanta Biswa Sarma had last week suggested that all taxpayers should be allowed to file returns quarterly, akin to those businesses whose monthly turnover is up to Rs 1.5 crore. The official further said that invoice matching is important in the GST regime to check tax evasion and hence the government wanted every taxpayer to understand how the system works and get used to it gradually.

Source : Financial Express

Major rejig in GST rates for goods in 28% slab on anvil : 07-11-2017


In a comprehensive overhaul of the four-month-old goods and services tax (GST), the Centre and states are reviewing nearly half of items in the top bracket of 28% and allowing even larger firms to file returns once a quarter instead of every month.

A senior official told TOI that the fitment committee, which decides on product-specific rates, is looking at proposals to pare the rates on 150-200 items with a majority of them being from the top bracket. The list includes several daily use products as well as sanitary and electrical fittings, construction material, furniture and goods are manufactured by the small scale sector.

As reported by TOI on October 9, several states have petitioned for a reduction, which has prompted the review and a final call is expected at Friday’s GST Council meeting in Guwahati. For the Centre, the main concern is finances as it has committed to compensate the states for revenue, while ensuring that it sticks to the fiscal consolidation plan.

A smaller list of goods and services, many of which will face an 18% levy, will signal the Centre’s resolve to move to a three-tier rate structure.

Finance minister Arun Jaitley has already indicated his backing for single standard rate, which is currently split into 12% and 18%.

“A large number of items which were not part of any schedule faced 14% tax and all these have moved into the top bracket. The idea is to limit the 28% levy to sin and luxury goods,” said a source, who did not wish to be identified. The review comes amid a perception that the government has raised the levy on several goods and services and growing instances of evasion, where shopkeepers are insisting that the payment be made by cash instead of through electronic means.

To tackle this concern, a panel of five state finance ministers has suggested doing away with the detailed tax break-up in the bills issued to consumers and instead revert to the earlier system of saying that the price is inclusive of all taxes. Ministers, especially from states ruled by BJP, believe that the split between central and state GST in the bills has created an impression that tax rates have increased, when on most items it had come down. “The ministers have looked at the practice in other countries, such as Australia, and no one follows this model,” said an officer.

In addition, the ministerial panel has recommended that all companies be allowed to file returns on a quarterly basis to do away with complaints of higher compliance burden. At the last meeting, the GST Council allowed quarterly filing for entities with annual turnover of up to Rs 1.5 crore. “This should be done for units with turnover of Rs 5-10 crore, if not for everyone,” said a source.

The government had argued that 90% of the taxpayers paid less than 5% of the taxes. The panel has also suggested a steep cut in late fee paid by those who miss the deadline from Rs 200 to Rs 50, again a move to address concerns expressed especially by those who do not have a liability but are required to submit returns.

Several proposals are expected to go through as PM Narendra Modi has already indicated that the government is looking at further simplification.

Source : PTI

Government’s policy activism must continue even though jury is out on its success : 07-11-2017


It is expected that a disruptive economic policy intervention will have some negative consequences in the short run, even if the expectation is that in the medium term, it would have a positive impact on economic activity. The reduction in fiscal deficit and tariffs in 1991-92, as part of an economic reform and stabilisation programme, had the initial impact of sharply bringing down the real GDP growth rate from 6.89 per cent in 1989-90 and 5.37 per cent in 1990-91 to a paltry 0.8 per cent in  1991-92.

The initial deceleration in growth was met with sharp criticism both from within the ranks of the political opposition as well as from within the ruling Congress party. However, a year later, the growth rate picked up and the short-term disruption imposed by fiscal stabilisation and trade reform initiatives gave way to long-term gains for the economy as a whole.

One did not require rocket science to have predicted that the withdrawal from circulation of the Rs 500 and Rs 1,000 notes a year ago would have a huge disruptive impact on the economy.

The debate this past year has been on the positive and negative consequences of that disruption. Truth be told, it is still too early to come to a final conclusion on this issue.

However, it is possible to evaluate the impact of this disruption against both its stated and unstated objectives. Days after the introduction of what has come to be called ‘demonetisation’, I had the opportunity to travel to some small towns as well as to big cities.

The long lines of people waiting to convert old notes into new were visible to all. What was, however, striking was the virtual absence of social protest, unruly behaviour or visible anger at having to endure the stress.

Only a few weeks earlier, the city of Chennai was brought to standstill on the issue of jallikattu. We have seen any number of issues bring anti-social elements out on streets where they have burned buses and inflicted loss to public and private property.

The social stress created by demonetisation did not manifest itself in any such public outrage. The stoic manner in which ordinary Indians were willing to be part of an economic and social experiment requires deeper sociological analysis.

Monetising Demonetisation

The stated objective of demonetisation was to reduce the size and scope of the black economy, to increase digital transactions and to bring all economic transactions into the open. The unstated objective was equally important: to create a new political discourse around economic reform and engage the civil society in that process.

It is now possible to suggest that all these objectives were met to different degrees. That the economy — or some sections of it — suffered a slowdown is the negative consequence against which the gains have to be measured.

For example, the impressive electoral victory of the BJP in the Uttar Pradesh legislative assembly elections in March, as well as the absence of any street-level violence as part of public protest, testifies to the success on the social and political fronts. Prime Minister Narendra Modi was able to change the political discourse in his favour after facing electoral defeats in Delhi and Bihar.

As for the impact of the disruption on the size and scope of the black economy, the jury is out. What the data clearly shows is that there has been a sharp increase in digital payment transactions. The number of economic transactions being made through credit and debit cards, National Electronic Funds Transfer (Neft), Real-Time Gross Settlement (RTGS), Bharat Interface for Money (BHIM), Paytm and Bharat Bill Payment System (BBPS) testifies to the significant impact of demonetisation on increasing such transactions.

The value of transactions through BHIM and Unified Payments Interface (UPI) has reportedly increased from Rs 100 crore in November 2016 to Rs 5,293 crore in September 2017. Transactions under BHIM and UPI have gone up from Rs 0.03 crore to Rs 5.21 crore in this period.

Similarly, the value of Aadhaar Enabled Payment System (AEPS) has nearly trebled from Rs 2.7 crore to Rs 8.2 crore in the same period. The volume of bill payment using BBPS has similarly shown a sharp increase since the beginning of this year. Almost every single instrument of digital transaction has shown a phenomenal increase over the last 11 months.

The increase in digital transactions, taken together with the introduction of the goods and services tax (GST), will also have the effect of increasing the size of the formal economy and reducing that of the informal economy.

Reform is the New Currency
The slowdown in economic growth over the last year may have been accentuated by this disruption, but it was not caused by it. It has been caused by a variety of factors, including the global economic situation, the delay in correcting for the negative impact of some policies that have contributed to a decline in the gross investment ratio over the last six years, unhelpful monetary and exchange rate policy and excessive fiscal prudence.

What this means is that the spurt in policy activism this year, on the part of the central government, must be sustained.

Source : Economic Times

 

Notification No. GSR 1372(E) [F.No.1/19/2013-CL-V] Dated 6-11-2017


COMPANIES (FILING OF DOCUMENTS AND FORMS IN EXTENSIBLE BUSINESS REPORTING LANGUAGE) AMENDMENT RULES, 2017 – SUBSTITUTION OF RULE 3, ANNEXURE-I & INSERTION OF ANNEXURE-IIA

NOTIFICATION NO. GSR 1372(E) [F.NO.1/19/2013-CL-V] DATED 6-11-2017

In exercise of the powers conferred by sub-sections (1) and (2) of Section 469 read with section 398 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, namely:—

Short title and commencement

1. (1) These rules may be called the Companies (Filing of Documents and Forms in Extensible Business Reporting Language), Amendment, Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015 (hereinafter referred to as the principal rules), for rule 3, the following rule shall be substituted, namely:—

“3. Filing of financial statements with Registrar.- The following class of companies shall file their financial statements and other documents under section 137 of the Act with the Registrar in e-form AOC-4 XBRL as per Annexure-I:-

(i) companies listed with stock exchanges in India and their Indian subsidiaries;
(ii) companies having paid up capital of five crore rupees or above;
(iii) companies having turnover of one hundred crore rupees or above;
(iv) all companies which are required to prepare their financial statements in accordance with Companies (Indian Accounting Standards) Rules, 2015:

Provided that the companies preparing their financial statements under the Companies (Accounting Standards) Rules, 2006 shall file the statements using the Taxonomy provided in Annexure-II and companies preparing their financial statements under Companies (Indian Accounting Standards) Rules, 2015, shall file the statements using the Taxonomy provided in Annexure-II A:

Provided further that non-banking financial companies, housing finance companies and companies engaged in the business of banking and insurance sector are exempted from filing of financial statements under these rules.”.

4. In the principal rules, for Annexure-I, the following Annexure shall be substituted, namely:—

“Annexure-I

(see rule 3)

FORM NO. AOC- 4 XBRL

[Pursuant to section 137 of the Companies Act, 2013 and rule 12(2) of Companies (Accounts) Rules, 2014]

Form for filing XBRL document in respect of financial statement and other documents with the Registrar

 

GSTR-3B returns: CAIT suggests form can be filed on monthly basis : 06-11-2017


Confederation of All India Traders today suggested that the Centre ask traders, whose turnover is up to Rs 100 crore annually, to file form GSTR-3B on a monthly basis rather than quarterly basis. “It is suggested that the Centre can ask traders, whose turnover is up to Rs 100 crore annually to file form GSTR3B on a monthly basis. They should be asked to pay tax monthly on a self-assessment basis,” CAIT President B C Bhartia told PTI over phone from Nagpur. His statement comes in the wake of GSTN, a portal for real-time tax return filing under GST, running into a technical snag. Bhartia suggested that the GST Council take a cue from the Maharashtra government, which he said had asked dealers to pay VAT on a monthly basis to save them from ‘harassment.’ Bhartia also said that since GST is a compliance-driven law led by technology, the designer should have discussed all this with the respective ministries.

 The GST council should have considered that there were enough number of competent human resources available,who would ensure compliance. The government should have constituted an inter-ministeri inter-ministerial group to ensure each ministry plays its due role to ensure ease in GST compliance, he said.

Source : Financial Express

GST could soon be in for the most comprehensive tweak since its launch : 06-11-2017


The goods and services tax could be in for a revamp that’s more comprehensive than the tweaks that have been made thus far to iron out kinks to make compliance less onerous. The GST Council has set up a new advisory group that includes industry representatives to look into such changes. Experts said these may apply to input credit apart from place of supply and valuation provisions.

The group will give its report to the law committee of the council by November 30. This will be reviewed by the committee and forwarded to the council for speedy action. “A group has been set up to give feedback about the issues faced by industry with regard to laws, rules and procedures,” said a government official

This is in addition to changes proposed to the composition scheme to bring relief to small businesses and traders that could be taken up by the GST Council at its upcoming meeting on November 10 in Guwahati. The council could also reduce the rate of tax on some goods from 28% to 18% at this meeting.

Traders and small businesses have complained about provisions in GST, which was rolled out on July 1, replacing multiple state and central taxes and cesses. They have sought the simplification of various rules in multiple representations to the government.

Among the key points that may be addressed in a revamp are rules that deal with input tax credit, how to arrive at the value of goods and services for taxation purposes, invoices and determining from where a service is provided.

The latest panel will have former revenue service officer Gautam Ray as co-convener and include representatives of small businesses and retail. The group will specifically look at the central, state and integrated GST laws and problems faced by stakeholders due to their provisions.

“Till now, the changes have been carried out by way of notifications and instructions,” said Pratik Jain, indirect tax leader, PwC. “There is a need to do a comprehensive review of changes required in the legislation as well, based on issues that have already been highlighted by industry.”

PM Modi had indicated on Saturday that the government could take up more measures to ease problems faced by small businesses.

The GST Council had at its last meeting raised the turnover threshold for the composition scheme to Rs 1crore from Rs 75 lakh. It also set up a group of ministers under Assam finance minister Himanta Biswa Sarma to look at other issues related to taxation under the composition scheme and GST for restaurants. The council is expected to lower the flat tax rate for traders availing of the composition scheme to 0.5% from 1% if they include both taxable and tax-exempt goods in their turnover.

Source : PTI

 

PM Narendra Modi’s big economic gamble in tatters as cash remains king : 06-11-2017


Corruption, black money, terrorism, fake currency — Prime Minister Narendra Modi resolved to eliminate all in one stroke when he announced India’s biggest-ever cash ban on Nov. 8 last year.

However, the short term costs of his move are outweighing the benefits. He invalidated 86 percent of currency in circulation, saying the move was essential to combat graft and terrorism, often funded with cash or counterfeit bills. He hasn’t had much success, though the outlook has dimmed substantially for Asia’s third-largest economy following the cash shock.

The biggest blow for Modi, who faces re-election early 2019, is that growth has slowed to levels last seen during his predecessor’s administration. India’s previous government was criticized for massive corruption scandals and a policy paralysis, helping Modi sweep to power in 2014 with the biggest mandate in three decades

“The process of curbing black money and corruption does not begin or end with demonetization,” said Sonal Varma, chief India economist at Nomura Holdings Inc. in Singapore, using the local term for cash stashed away to avoid taxes. “Black money is held not just in cash but also real estate and gold.”

Modi later widened his objectives to include digitization and boosting the number of tax payers. Here’s a look at how he’s fared:

Fake Currency

Modi had said the ban on 500- and 1,000-rupee notes was needed as these high-value bills helped “enemies from across the border run their operations.” While the detection of counterfeit currency increased in the 12 months through June 30, it was still just 0.08 percent of total currency in circulation compared with 0.07 percent the previous year.

More importantly, the Reserve Bank of India hasn’t been able to protect its new notes from counterfeiters, as fake versions of the 2,000-rupee note announced Nov. 8, 2016, have been detected.

Black Money

Soon after the cash ban was announced last year, the government’s counsel told the Supreme Court that about a third of the 15.44 trillion rupees of bills invalidated wouldn’t be deposited into banks, implying that Indians would rather forfeit this money rather than risk detection. However, 99 percent of the notes have been returned.

“As almost all cash withdrawn has been translated into a rise in bank deposits, one can question to what extent demonetization has really been effective in wiping out black money,” Arjen van Dijkhuizen, senior economist with ABN Amro Bank NV in Amsterdam, said by email.

Tax evasion
Widening the tax base is probably where analysts are most optimistic about demonetization. The government has said it will scrutinize the deposits that have flowed into banks since the cash ban to detect any tax evaders. Success in widening the tax base would ease pressure on public finances in a nation where less than 5 percent file tax returns.

“The exercise changed the public’s perception of what the government can, and will do to root out corruption,” said Shailesh Kumar, senior analyst for Asia at Eurasia Group. “In some ways Modi was rewarded for it, as he was seen taking on the issue of corruption which many believe is one of India’s biggest problems.”

The gamble seemed to have paid off in the electorally important state of Uttar Pradesh, where Modi’s Bharatiya Janata Party swept elections in March. However, growth has since slowed and there are rumblings of dissatisfaction going into elections in Modi’s home state of Gujarat next month. Opinion polls still call the vote for the BJP, and the party has said it will mark Nov. 8 — the anniversary of the decision — as anti-black money day every year. “It is clear that the short-term pains  from these currency operations have been more concrete and visible than potential long-term gains, but that does not mean that there aren’t any,” said Dijkhuizen.

A vanguard of digital payment providers have benefited from Modi’s move. The biggest player is Paytm, backed by China’s Alibaba Group Holding Ltd., which has seen its customer base surge since November. Demonetization also triggered record domestic inflows into mutual funds, which have gushed into the equity market and pushed the key indexes to multiple records.

While overall digital transactions have dipped as cash returns to the economy, the government points to relatively lower levels of currency in circulation as a win. If it wasn’t for demonetization, India would have had some 18 trillion rupees in high-value bills today — instead it has 12.5 trillion rupees, Economic Affairs Secretary Subhash Garg estimates. “So the potential of storing black money is so much reduced. You are doing the same economic activity with the money in circulation,” he said.

Instances of stone pelting in the border areas of Jammu & Kashmir fell drastically after the cash ban but started rising again. While the period immediately after demonetization showed a dip in fatalities in insurgent violence, a direct link isn’t clear.

Source : Economic Times

Aadhaar Card, mobile number linking: Constitution bench to take final call : 04-11-2017


Refusing to stay the linking of Aadhaar with mobile numbers and bank accounts, the Supreme Court on Friday left the issue to be decided by a Constitution bench in November. However, it sought response from the government on various petitions challenging the constitutional validity of the Aadhaar Act and linking of bank accounts and mobile numbers with the 12-digit unique biometric identification number. A bench led by Justice AK Sikri, while asking the public not to panic, told the government to direct mobile service providers and banks to specify the last dates for linking mobile numbers and bank accounts to Aadhaar in the SMSs and e-mails they send to their subscribers. Mobile service providers and banks have to specify that February 6, 2018 and December 31, 2017 are the last dates for linking Aadhaar to mobile numbers and banks, respectively.

It said that the question related to the validity of the Aadhaar scheme is scheduled to be heard in November-end and if by any chance the hearing is delayed or does not take place, the petitioners can seek extension for such linking from the Constitution bench. Attorney-general KK Venugopal agreed that there “is anyway time till December 31… heavens are not going to fall”.

Senior advocate Arvind Datar objected to how the government has threatened to close long-standing bank accounts if they are not linked to Aadhaar. He questioned how citizens can be asked to do so under money-laundering laws. Rule 2(b) of the Prevention of Money Laundering (Maintenance of Records) Second Amendment Rules of 2017 requires Aadhaar for opening new bank accounts and for verification of existing bank accounts by December 31, 2017, failing which the “bank accounts will cease to be operational”. Senior advocate Shyam Divan referred to a recently-filed affidavit by the Centre arguing that the government may extend the deadline for linking Aadhaar till March 31, 2018.

 “There is no doubt that these arguments need consideration. The matter is going to come up in the last week of November and the time (to link Aadhaar with bank accounts) has been extended till December 31,” the bench said.
Source : Financial Express

Small, medium firms were limping back after demonetisation when GST added to pain: Stakeholders : 04-11-2017


The backbone of India’s manufacturing sector — micro, small and medium enterprises (MSMEs) — had not yet recovered from the demonetisation move when the Goods and Services Tax (GST) came in to add to the pain, according to industry stakeholders.

The backbone of India’s manufacturing sector — micro, small and medium enterprises (MSMEs) — had not yet recovered from the demonetisation move when the Goods and Services Tax (GST) came in to add to the pain, according to industry stakeholders. “The base of the MSME pyramid is comprised of informal sector, which has traditionally done business in cash. With withdrawal of cash, this market seized up for a quarter or so. They (MSMEs) are limping back to normality,” Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small and Medium Enterprises (FISME), told IANS. “The recovery is slow because of the new disruption in the form of GST. In the short term, there could be loss of business opportunities because of lack of capital in the informal markets,” he said. Bhardwaj said that the housing sector, which had more than 60 product categories linked to MSMEs, was drastically hit, both directly and indirectly. According to D.S. Rawat, Secretary General of Assocham, except for some payment gateways, most of the sectors lost out. “The impact of demonetisation would have evaporated, but the GST roll-out issues are being braved by some sectors, particularly the SMEs and the traders,” Rawat told IANS.

In the Economic Watch report by Ernst & Young for September 2017, demonetisation has been blamed for an adverse impact on the economy in the short run, as its “benefits are yet to overtake” the costs. “The government and people at large did have to bear considerable costs in the immediate aftermath of demonetisation. Some of these costs may be difficult to quantify, but objective evidence of the short-term costs is available in at least some important dimensions,” the report said. “There was an erosion of growth, output and employment,” it added. The overall economic growth is still contested, however, as some argue that the downward spiral in gross domestic product (GDP) growth preceded demonetisation. “Though the GDP growth has been lower post the exercise, it will not be fair to conclude that demonetisation was the only factor responsible for this. The growth had started slowing right after the third quarter of 2016-17 and the trend continued post-November as well,” said Ranen Banerjee, Partner-Public Finance, Economics and Urban, at PwC India.

Others like the EY’s report indicate that demonetisation resulted in a “tangible adverse impact” on GDP growth. “Real GDP growth has been falling steadily quarter after quarter since the fourth quarter of FY16, when it was nine per cent. It fell to 5.7 per cent in first quarter FY18, a decrease of 3.3 percentage points,” the report pointed out. “The two quarters that can be considered as the demonetisation quarters in FY17 were the third quarter of FY17 and fourth quarter of FY17. In these two quarters, the GDP growth rate fell to seven per cent and 6.1 per cent, respectively.” It mentioned that the downward trend in growth preceded demonetisation and was largely caused by an investment slowdown. On the industrial production front, in December 2016, the Index of Industrial Production (IIP) had contracted by 0.4 per cent from a 13-month high of 5.7 per cent reported for November. However, it rose 2.7 per cent in January 2017. The latest IIP figures for August showed that factory output grew 4.3 per cent against the same month last year on the back of robust mining and electricity sector growth.

According to the Ministry of Statistics and Programme Implementation, manufacturing output in the country in July 2017 had grown marginally by 1.2 per cent. “The event clearly pushed the economy towards a higher degree of digitisation and financial inclusion. Accordingly, the digital finance sector seems to have gotten a push while over the longer term financial services should be the biggest gainer,” said Anis Chakravarty, Lead Economist, Deloitte.

Source : PTI

Corporate Affairs ministry considering multiple changes to Insolvency and Bankruptcy Code : 04-11-2017


The corporate affairs ministry is considering multiple changes to the Insolvency and Bankruptcy Code, including ways of ensuring that the process doesn’t allow a failed promoter to regain control while escaping liabilities.

The review is being conducted after seeing how the law has worked in the past few months and based on feedback received, said senior officials. A simpler framework for resolving individual insolvencies to allow matters to be handled by a mediator when there is no dispute is one such suggestion.

Bankers have pointed out that under the current law a founder could possibly get back the reins of a company. “The promoter should not be able to buy his own firm through a shell company after the insolvency proceedings,” a senior bank executive said.

The government has also received a suggestion to make the code more comprehensive to cover entities such as trusts, societies and Hindu Undivided Families (HUFs) as well.

“The law was created in a vacuum and as we gather more experience we will address the issues and make amendments,” a senior official said.

The Insolvency and Bankruptcy Code (IBC) received presidential assent in May 2016 with the first set of cases filed at the National Company Law Tribunal (NCLT) in December 2016.

Easing compliance requirements regarding routine disclosures while the insolvency process is on is another proposal as is the establishment of a detailed framework to deal with cr”The IBC is more predictable than the erstwhile laws. The government has to learn from the last one year’s experiences to ensure there are no hiccups as there are some gaps in the language leaving things to interpretation,” said Diwakar Maheshwari, partner, Khaitan & Co. Also, since the processes and transactions under the code require valuation of assets, the government is likely to consider regulating the profession of valuers and, if required, enable enforcement action against them. The Companies Act, 2013, has prescribed draft rules for registering and regulating valuers through the Insolvency and Bankruptcy Board of India. The code, however, does not stipulate any regulation for valuers.

Source : Economic Times

No.27/2017 Dated: 03-11-2017


Circular No. 27/2017

F. No. 370149/213/2017 -TPL

Government of India

Ministry of Finance

Department of Revenue

(Central Board of Direct Taxes)

New Delhi, Dated 3rd November, 2017

Clarification on Cash sale of agricultural produce by cultivators/agriculturist

 Representations have been received from the stakeholders. regarding applicability of income-tax provision to cash sale of agricultural produce by cultivators/agriculturists to traders.

2. In this context, it is stated that the provisions of section 40A (3) of the Income-tax Act, 1961 (‘the Act’) provides for the disallowances of expenditure exceeding Rs. 10000 made otherwise than by an account payee cheque/draft or use of electronic clearing system through a bank account. However, rule 6DD of the Income-tax Rules, 1962 (‘IT Rules’) carves out certain exceptions from application of the provisions of section 40A (3) in some specific cases and circumstances, which inter alia include payments made for purchase of agricultural produce to the cultivators of such produce. Therefore, no disallowance under section 40A (3) of the Act can be made if the trader makes cash purchases of agricultural produce from the cultivator.

3. Further, section 269ST, subject to certain cxceptions, prohibits receipt of Rs. 2 lakh or more otherwise than by an account payee cheque/draft or by use of electronic clearing system through a bank account from a person in a day or in respect of a single transaction or in respect of transactions relating to an event or occasion from a person. Therefore, any cash sale of an amount of Rs. 2 lakh or more by a cultivator of agricultural produce is prohibited under section 269ST of the Act.

4. Further also the provisions relating to quoting of PAN or furnishing of Form No.60 under rule 114B of the IT Rules do not apply to the sale transaction of Rs. 2 Lakh or less.

5. In view of the. above, it is clarified that cash sale of the agricultural produce by its cultivator to the trader for an amount less than Rs 2 Lakh will not:-

a) result in any disallowance of expenditure under section 40A (3) of the Act in the case of trader.

b) attract prohibition under section 269ST of the Act in the case of the cultivator; and Page 1 of 2

c) require the cultivator to quote his PAN/ or furnish Form No.60.

(Dr. T.S. M pwal)

Under Secretary to the Government India

Copy to:-

1. PS to FM/ OSD to FM/ OSD to MoS(R).

2. PS to Secretary (Revenue).

3. The Chairperson, Members and all other officers in CBDT of the rank of Under Secretary and above.

4. All Pro Chief Commissioners/ Pr. Director General of Income-tax – with a request to circulate amongst all officers in their regions/ charges.

5. Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pro DGIT (L&R).

6. CIT (M&TP), CBDT.

7. Web manager for posting on the departmental website.

Notification No. SO 3529(E) [F.No.01/12/2009-CL-I (VOL.IV)], Dated 3-11-2017


SECTION 435 OF THE COMPANIES ACT, 2013 – SPECIAL COURTS – ESTABLISHMENT OF – NOTIFIED SPECIAL COURT FOR PURPOSES OF PROVIDING SPEEDY TRIAL OF OFFENCES

NOTIFICATION NO. SO 3529(E) [F.NO.01/12/2009-CL-I (VOL.IV)]DATED 3-11-2017

In exercise of the powers conferred by sub-section (1) of section 435 of the Companies Act, 2013 (18 of 2013), the Central Government, with the concurrence of the Chief Justice of the High Court of Judicature at Madras, hereby designates the following Courts mentioned in column (1) the Table below as Special Court for the purposes of providing speedy trial of offences punishable with imprisonment of two years or more under the said sub-section, namely:—

TABLE

Courts Jurisdiction as Special Court
(1) (2)
XV Additional Court, XVI Additional Court of City Civil Court, Chennai State of Tamil Nadu except Districts of Coimbatore, Dharmapuri, Dindigul, Erode, Krishnagiri, Namakkal, Nilgiris, Salem and Tiruppur.

US shouldn’t label India ‘currency manipulator’: Raghuram Rajan : 03-11-2017


Former RBI governor Raghuram Rajan said the US Treasury should not label India as a “currency manipulator”, as the country needs to build forex reserves to protect the economy from surge in outflows.

Rajan, currently a professor at University of Chicago Booth School of Business, further said India runs a current account deficit, which could get larger on rise in crude oil prices in international market.

He said India needs to build reserves in order to protect against outflows, as it cannot keep running to the IMF for help as a large country and also it is very difficult politically.

The comments by Rajan in an interview to CNBC comes days after reports that the US Treasury had said it would be monitoring India’s foreign exchange reserves and economic policies.

“We need our own reserves, so reserves should be seen as macroprudential tool. Its only when you are holding exchange rate at the grossly under valued level and nobody could accuse India of doing that,” Rajan said.

He further said that India’s exchange rate is “very healthy” valued and in fact some people say it is overvalued.

“So given that it’s hard for me say that you look at one number, and then label the country as currency manipulator on that basis. I don’t suspect the Treasury will do that. But it should not even if it is thinking about it,” he said.

India has foreign exchange reserves of about $400 billion.

On bank recapitalisation

Replying to queries regarding government’s announcement to infuse Rs 2.11 lakh crore, Rajan termed the move as “good news” saying it is important for banks to have capital for lending going forward.

“Public sector banking system is a big part of Indian system. It is about 70 per cent. More importantly it allows them to take tough decisions, which they could not earlier because they had limited capital,” he said.

He further said that more needs to be done in the way of reforms over time in the banking sector and improve governance in public sector banks.

“For the immediate future, it is important to clean up bank-balance sheet. The healthier the projects that are restructured, the stronger the economic growth will be,” Rajan, who completed his three-year term in September 2016.

On Demonetisation anniversary (November 8)

Rajan said the government’s decision to scrap old Rs 500/1000 notes on November 8, 2016 did effect economic activities.

He, however added that GST will be positive in long run.

“Looking forward, these three — fixing the debt, the impact of demonetisation wanning, and GST — will be growth positive for India,” Rajan said.

Source : PTI

Goa government got no representation over GST on tiatr yet, says CM Manohar Parrikar : 03-11-2017


While some political parties in Goa, including the Shiv Sena, have expressed concerns over the imposition of GST on ‘tiatr’, a traditional form of theatre in the state, Chief Minister Manohar Parrikar said the government has not received any representation from any tiatrist or drama producers in this connection so far. Parrikar, in a letter written on October 30 in reply to Shiv Sena’s demand to look into the issue, also said that if his government gets any representation from a tiatrist or drama producer, then it would be taken up with the GST Council for consideration. Shiv Sena, however, said as the chief minister of the state it was his duty to reach out to the tiatr fraternity to inquire about their concerns. The Uddhav Thackeray-led party has raised concerns that the imposition of GST on tiatr would eliminate this traditional form of theatre. In the letter, Parrikar said, “In this regard, this is to inform you that so far no representation is received from any tiatrist or drama producer as almost all of them are not covered under GST.”

  Stating that GST falls under the Centre’s domain, the chief minister said, “However, if any representation is received from a tiatrist or drama producer, then the issue will be taken up with the GST Council for consideration and appropriate solutions.” Shiv Sena’s Goa unit spokesman Rakhi Naik told reporters in a press conference last evening that they don’t buy Parrikar’s argument that the state government has not acted as none of the tiatrist or drama producer has approached them with a representation.

“As a chief minister of the State it was his duty to reach to the tiatr fraternity to inquire about their concern. Moreover, it was also the duty of the state government to examine the impact of GST on tiatr and drama,” she said. Parrikar’s reply clearly indicates that the state government has not applied its mind over the crucial subject, Naik alleged. The Sena also demanded that Parrikar should take up the issue of GST on tiatr and drama immediately with the GST Council.

Source : Financial Express

MRP should include GST, suggests Sushil Modi : 03-11-2017


PATNA: Bihar deputy chief Minister Sushil Kumar Modi, who also heads a five-member panel on Goods and Services Tax Network, today suggested that the maximum retail price (MRP) of a product should always be inclusive of tax for the convenience of the consumers.

The deputy CM was interacting with businessmen at a function organised by Bihar Chamber of Commerce and Industries in association with a leading Hindi daily ‘Hindustan’.

“We (GoM) have suggested the inclusion of GST in maximum retail price. It has been seen across the globe that consumers react when they have to pay tax in addition to a product’s price but they usually do not mind paying the MRP when it is inclusive of tax,” he said

Sharing his experiences abroad, he said the situation was no different in Canada, Australia and Singapore.

“Even in Canada, Australia and Singapore, consumers’ perception changed when they had to pay tax in addition to a product’s price. The same consumers react differently when they were asked to pay a particular percentage of tax that had already been included in the price tag,” he said.

GST is a gigantic reform and people may face teething problems for the first five to six months but things will get smoother in due course of time, he said.

Stating that a firm having turnover of Rs 1.5 crore would now have to file quarterly returns instead of monthly, he said, “We are making efforts to implement this process of quarterly returns for the businessmen. They will have to deposit tax every month but returns can be filed quarterly.”

 He said that he also wanted the form for filing returns to be simplified further.

Making it clear that no state was entitled to take a decision on its own regarding taxes, Sushil Modi said that he wanted the quantum of fee for filing returns late -Rs 200 per day with a maximum cap of Rs 5,000 -to be reduced.

He also heard suggestions and grievances of the traders, in the presence of Bihar Chamber of Commerce and Industries president P K Agrawal, central GST commissioner of Patna Ranjit Kumar, and appealed to the lawyers and the chartered accountants to rationally charge them.

The deputy CM said that he would hold sector-specific meetings with the businessmen before the next GST council meeting.

Source : Economic Times

Notification No.93/2017 02-11-2017


MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION

New Delhi, the 2nd November, 2017

S.O. 3512(E).—Whereas, the Third Protocol to the Convention between the Government of the Republic of India and the Government of New Zealand for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (hereinafter referred to as the said Protocol) as set out in the Annexure to this notification, was signed at New Delhi on the 26 th day of October, 2016 ;

And whereas , the said Protocol entered into force on the 7th September, 2017 being the date of the later of the notifications of the completion of the procedures required by the respective laws for bringing into force the said Protocol, in accordance with Article 3 of the said Protocol;

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of said Protocol, as annexed hereto, shall be given effect to in the Union of India.

ANNEXURE

THIRD PROTOCOL TO THE CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND

THE GOVERNMENT OF NEW ZEALAND

FOR

THE AVOIDANCE OF DOUBLE TAXATION AND

THE PREVENTION OF FISCAL EVASION WITH RESPECT

TO TAXES ON INCOME

The Government of the Republic of India and the Government of New Zealand; Having regard to the Convention between the Government of Republic of India and the Government of New Zealand for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income done at Auckland on 17th day of October, 1986 (hereinafter referred to as “the Convention”), have agreed as follows:

Article 1

Article 26 of the Convention shall be deleted and replaced by the following:

“ARTICLE 26

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information (including documents) as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2.

2. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

 

b) to supply information (including documents) which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting state to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.”

Article 2

The Convention is amended by adding after Article 26 the following new Article:

“Article 26A ASSISTANCE IN THE COLLECTION OF TAXES

1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 and 2. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article.

2. The term “revenue claim” as used in this Article means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount.

3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State. That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State.

4. When a revenue claim of a Contracting State is a claim in respect of which that State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned State or is owed by a person who has a right to prevent its collection.

5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State.

6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State.

7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be

a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, or

b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that State may, under its laws, take measures of conservancy with a view to ensure its collection

the competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request.

8. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

b) to carry out measures which would be contrary to public policy (ordre public);

c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice;

d) to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State.”

Article 3

Each of the Contracting States shall notify to the other the completion of its procedures required by its laws for bringing into force of this Protocol. This Protocol shall enter into force on the date of the later of these notifications.

Article 4

The Protocol, which shall form an integral part of the Convention, shall remain in force as long as the Convention remains in force and shall apply as long as the Convention itself is applicable.

IN WITNESS whereof the undersigned duly authorized by their respective Governments have signed this Protocol.

DONE in duplicate at New Delhi, this 26th day of October, 2016, in the Hindi and English languages, both texts being equally authentic. In case of divergence between the two texts, the English text shall prevail.

 

FOR THE GOVERNMENT OF                                                        FOR THE GOVERNMENT OF

REPUBLIC OF INDIA                                                                      NEWZEALAND

 

Preeti Saran                                                                                   Andrea Smith

[Secretary (East),                                                                         [Deputy Secretary,

Ministry of External Affairs]                                                      Ministry of Foreign Affairs and Trade]

Ease of doing business: Here is the next step Narendra Modi government is set to take : 02-11-2017


Encouraged by India’s unprecedented 30-notch jump in the World Bank’s ease of doing business index this year and by what positive comments of stakeholders can potentially do, the government will further step up focus on sensitising such private-sector users, while continuing with the pace of reforms, according to a senior government official. Although the Modi government undertook several administrative reforms in recent years to improve ease of doing business, its engagement with stakeholders rose sharply only since last year, when its series of administrative reforms failed to drive up the ranking. “The decision to sensitise stakeholders in a big way was the obvious choice, as despite a series of strong administrative reforms, our rank hardly improved last year. So we wanted to sensitise them — the public-sector and private-sector stakeholders and states — about the measures taken by the government and how they can benefit from these,” the official told FE.

India was placed at 130 of 190 countries in the Bank’s ranking last year, only a notch above than the previous year. By contrast, the country was ranked 100th for the first time this year on the back of further administrative reforms and better stakeholder consultations. The fact that India’s rank in resolving insolvency rose 33 notches despite the fact that the first such resolution took place after the survey deadline was over further underscored the importance of positive reviews by stakeholders.

Fixing GST hurdles fast a must now

 Since the latest improvement in the overall ease of doing business was driven to a considerable extent by a massive 53-notch in the “paying taxes” parameter, the government has to fix any perceived glitches in the GST regime fast. This is because the World Bank’s survey period for “paying tax” runs from January through December (for other segments, it’s usually from June through May). While the GST wasn’t factored in in the latest ranking, as it was rolled out after the survey period was over, it will be a major driver of India’s ranking next year. So, the government has a tough job to fix GST-related hurdles before December to ensure that stakeholders give positive feedback on it.
Source : Financial Express

MNCs will have to furnish extra disclosures from March 2018 : 02-11-2017


Multinational companies operating in India will have to furnish additional disclosures from March 2018 in line with international principles adopted at the multilateral Organisation for Economic Cooperation and Development (OECD) to prevent tax evasion.

The Central Board of Direct Taxes (CBDT), the apex direct taxes body, has notified the final rules for MNCs to comply with country-by-country reporting norm. These deal with maintaining and furnishing of transfer pricing documentation in the Master File and Country-by-Country report (CbCR).

The government had inserted Section 286 in Income-tax Act, 1961 vide Finance Act, 2016 for furnishing of a country-by-country report in respect of an international group by its constituent or parent entity.

“Since it is the first reporting year for furnishing of the country-by-country report, the due date for filing the country-by-country report for reportable accounting year 2016-17 has already been extended to March 31, 2018…. Similarly, the date of compliance for furnishing the Master File for FY 2016-17 has been extended to March 31, 2018 as a one-time relief measure,” CBDT said in a statement on Wednesday.

Country-by-country reporting norms are in keeping with India’s commitment to implement OECD’s base erosion and profit shifting or BEPS project. MNCs will need to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the group.

It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in. The threshold for the country-by-country report is total consolidated group revenue of Rs 5,500 crore. The threshold for the master file is consolidated group revenue of Rs 500 crore.

Tax experts said the notification of the final rules denotes increased focus of Indian tax authorities on tax transparency and ensuring that the outcomes of transfer pricing policies are in line with value creation linked to Indian operations. “The notification of CbCR rules is likely to usher in a rigorous regime of compliance and disclosure for foreign MNCs working in India,” said Amit Agarwal, partner- transfer pricing, Nangia & Co LLP.

Source : PTI

Alternative Mechanism to suggest merger proposals: Finance Ministry : 02-11-2017


In a bid to push consolidation among state run lenders the government on Wednesday said that the Alternative Mechanism headed by finance minister Arun Jaitley may also direct banks to examine proposals for amalgamation.

The final schemes formulated will be approved by the central government, and laid in both the houses of Parliament, the finance ministry noted in a statement.

The other members of the panel include railway and coal minister Piyush Goyal and defence minister Nirmala Sitharaman.

“The proposals received from banks for in-principle approval to formulate schemes of amalgamation will be placed before the alternative mechanism. A Report on the proposals cleared by alternative mechanism will be sent to the cabinet every three months,” the finance ministry statement observed.

The alternative mechanism will also receive inputs from Reserve Bank of India (RBI) before according in-principle approval. In August, the cabinet had given its approval for an alternative mechanism, comprising a panel of ministers, for in-principle approvals to merger proposals. The finance ministry had then sent a letter to all state run banks informing them about the process.

“It shall devise its own procedure for appraisal of amalgamation proposals by banks, and be guided overall by the objectives of the Nationalisation Acts {Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980},” the statement said.

Alternative Mechanism will be serviced by the Department of Financial Services.

Earlier this week, financial services secretary Rajiv Kumar in a tweet had said, “Govt. walks the talk on banking reforms; constitutes Alternative Mechanism for PSBs consolidation; Finance Minister to head.”

Last week the government had announced a Rs 2.1 lakh crore capital infusion plan for state-owned banks. The finance minister had then said that the recapitalisation of state-owned banks would be followed by a series of reforms to make them more accountable.

At present, there are 21 state-run lenders. In April, the country’s largest bank State Bank of IndiaBSE 0.86 % had absorbed five of its associate lenders and Bharatiya Mahila Bank. SBIBSE 0.86 % is now a single bank with about 24,000 branches, over 59,000 ATMs, 6 lakh POS machines and over 50,000 business correspondents.

Source : Economic Times

Notification No.92/2017 31-10-2017


MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 92/2017

New Delhi, the 31st, October, 2017

INCOME-TAX

S.O. 3497(E).- In exercise of the powers conferred by proviso to sub-section (1) of section 92D and sub-section (8) of section 286 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. Short title and commencement.

(1) These rules may be called the Income-tax (Twenty-fourth Amendment) Rules, 2017.

(2) They shall come into force from the date of its publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (hereafter referred to as the Principal Rules), in Part II, after rule 10D, the following rules shall be inserted, namely:-

“Information and documents to be kept and maintained under proviso to sub-section (1) of section 92D and to be furnished in terms of sub-section (4) of section 92D.

10DA. (1) Every person, being a constituent entity of an international group shall,-

(i) if the consolidated group revenue of the international group, of which such person is a constituent entity, as reflected in the consolidated financial statement of the international group for the accounting year, exceeds five hundred crore rupees; and

(ii) the aggregate value of international transactions,-

(A) during the accounting year, as per the books of accounts, exceeds fifty crore rupees, or

(B) in respect of purchase, sale, transfer, lease or use of intangible property during the accounting year, as per the books of accounts, exceeds ten crore rupees,

keep and maintain the following information and documents of the international group, namely:-

(a) a list of all entities of the international group along with their addresses;

(b) a chart depicting the legal status of the constituent entity and ownership structure of the entire international group;

(c) a description of the business of international group during the accounting year including,-

(I) the nature of the business or businesses;

(II) the important drivers of profits of such business or businesses;

(III) a description of the supply chain for the five largest products or services of the international group in terms of revenue and any other products including services amounting to more than five per cent. of consolidated group revenue;

(IV) a list and brief description of important service arrangements made among members of the international group, other than those for research and development services;

(V) a description of the capabilities of the main service providers within the international group;

(VI) details about the transfer pricing policies for allocating service costs and determining prices to be paid for intra-group services;

(VII) a list and description of the major geographical markets for the products and services offered by the international group;

(VIII) a description of the functions performed, assets employed and risks assumed by the constituent entities of the international group that contribute at least ten per cent. of the revenues or assets or profits of such group; and

(IX) a description of the important business restructuring transactions, acquisitions and divestments;

(d) a description of the overall strategy of the international group for the development, ownership and exploitation of intangible property, including location of principal research and development facilities and their management;

(e) a list of all entities of the international group engaged in development and management of intangible property along with their addresses;

(f) a list of all the important intangible property or groups of intangible property owned by the international group along with the names and addresses of the group entities that legally own such intangible property;

(g) a list and brief description of important agreements among members of the international group related to intangible property, including cost contribution arrangements, principal research service agreements and license agreements;

(h) a detailed description of the transfer pricing policies of the international group related to research and development and intangible property;

(i) a description of important transfers of interest in intangible property, if any, among entities of the international group, including the name and address of the selling and buying entities and the compensation paid for such transfers;

(j) a detailed description of the financing arrangements of the international group, including the names and addresses of the top ten unrelated lenders;

(k) a list of group entities that provide central financing functions, including their place of operation and of effective management;

(l) a detailed description of the transfer pricing policies of the international group related to financing arrangements among group entities;

(m) a copy of the annual consolidated financial statement of the international group; and

(n) a list and brief description of the existing unilateral advance pricing agreements and other tax rulings in respect of the international group for allocation of income among countries.

(2) The report of the information referred to in sub-rule (1) shall be in Form No. 3CEAA and it shall be furnished to the Director General of Income-tax (Risk Assessment) on or before the due date for furnishing the return of income as specified in sub-section (1) of section 139:

Provided that the information in Form No. 3CEAA for the accounting year 2016-17 may be furnished at any time on or before the 31st day of March, 2018.

(3) Information in,__

(i) Part A of Form No. 3CEAA shall be furnished by every person, being a constituent entity of an international group, whether or not the conditions as provided in sub-rule (1) are satisfied;

(ii) Part B of Form No. 3CEAA shall be furnished by a person, being a constituent entity of an international group, in those cases where the conditions as provided in sub-rule (1) are satisfied.

(4) Where there are more than one constituent entities resident in India of an international group, then the report referred to in sub-rule (2) or information referred to in clause (i) of sub-rule (3),as the case may be, may be furnished by that constituent entity which has been designated by the international group to furnish the said report or information, as the case may be, and the same has been intimated by the designated constituent entity to the Director General of Income-tax (Risk Assessment) in Form 3CEAB.

(5) The intimation referred to in sub-rule (4) shall be made at least thirty days before the due date of filing the report as specified under sub-rule (2).

(6) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, shall specify the procedure for electronic filing of Form No. 3CEAA and Form No. 3CEAB and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the information furnished under this rule.

(7) The information and documents specified in sub-rule (1) shall be kept and maintained for a period of eight years from the end of the relevant assessment year.

(8) The rate of exchange for the calculation of the value in rupees of the consolidated group revenue in foreign currency shall be the telegraphic transfer buying rate of such currency on the last day of the accounting year.

Explanation.- For the purposes of this rule,-

(A) “telegraphic transfer buying rate” shall have the same meaning as assigned in the Explanation to rule 26;

(B) the terms ‘accounting year’, ‘consolidated financial statement’ and ‘international group’ shall have the same meaning as assigned in sub-section (9) of section 286.

Furnishing of Report in respect of an International Group

10DB. (1) For the purposes of sub-section (1) of section 286, every constituent entity resident in India, shall, if its parent entity is not resident in India, intimate the Director General of Income-tax (Risk Assessment) in Form No. 3CEAC, the following, namely:-

(a) whether it is the alternate reporting entity of the international group; or

(b) the details of the parent entity or the alternate reporting entity, as the case may be, of the international group and the country or territory of which the said entities are residents.

(2) Every intimation under sub-rule (1) shall be made at least two months prior to the due date for furnishing of report as specified under sub-section (2) of section 286.

(3) Every parent entity or the alternate reporting entity, as the case may be, resident in India, shall, for every reporting accounting year, furnish the report referred to in sub-section (2) of section 286 to the Director General of Income-tax (Risk Assessment) in Form No. 3CEAD.

(4) A constituent entity of an international group, resident in India, other than the entity referred to in sub-rule (3), shall furnish the report referred to in sub-rule (3) within the time specified therein if the provisions of sub-section (4) of section 286 are applicable in its case.

(5) If there are more than one constituent entities resident in India of an international group, other than the entity referred to in sub-rule (3), then the report referred to in sub-rule (4) may be furnished by that entity which has been designated by the international group to furnish the said report and the same has been intimated to the Director General of Income-tax (Risk Assessment) in Form No. 3CEAE.

(6) For the purposes of sub-section (7) of section 286, the total consolidated group revenue of the international group shall be five thousand five hundred crore rupees.

(7) Where the total consolidated group revenue of the international group, as reflected in the consolidated financial statement, is in foreign currency, the rate of exchange for the calculation of the value in rupees of such total consolidated group revenue shall be the telegraphic transfer buying rate of such currency on the last day of the accounting year preceding the accounting year.

(8) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, shall specify the procedure for electronic filing of Form No. 3CEAC, Form No. 3CEAD and Form No. 3CEAE and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the information furnished under this rule.

Explanation.- For the purposes of this rule,-

(A) “telegraphic transfer buying rate” shall have the same meaning as assigned in the Explanation to rule 26;

(B) the terms ‘accounting year’, ‘alternate reporting entity’, ‘consolidated financial statement’, ‘international group’ and ‘reporting accounting year’ shall have the same meaning as assigned in sub-section (9) of section 286.”

3. In the Principal Rules, in Appendix II, after Form No. 3CEA, the following forms shall be inserted, namely:-

“FORM NO. 3CEAA

[See rule 10DA]

MASTER FILE

Report to be furnished under sub-section (4) of section 92D of the Income-tax Act, 1961

PART – A

1. Name of the assessee –

2. Address of the assessee –

3. Permanent account number of the assessee –

4. Name of the international group of which the assessee is a constituent entity –

5. Address of the international group of which the assessee is a constituent entity –

6. Accounting Year for which the report is being submitted –

7. Number of constituent entities of the international group operating in India –

8. Name, permanent account number and address of all the constituent entities included in item No. 7-

Serial Number Name of the constituent entities of the international group Permanent account number of the constituent entities of the international group Address of the constituent entities of the international group

PART – B

1. List of all entities of the international group along with their addresses –

Serial Number Name Address

2. Chart depicting the legal status of the constituent entity and ownership structure of the entire international group–

3. Written description of the business of the international group during the accounting year in accordance with clause (c) of sub-rule (1) of rule 10DA containing the following, namely:-

(i) the nature of the business or businesses;

(ii) the important drivers of profits of such business or businesses;

(iii) a description of the supply chain for the five largest products or services of the international group in terms of revenue and any other products including services amounting to more than five per cent. of the consolidated group revenue;

(iv) a list and brief description of important service arrangements made among members of the international group, other than those for research and development services;

(v) a description of the capabilities of the main service providers within the international group;

(vi) the transfer pricing policies for allocating service costs and determining prices to be paid for intra-group services;

(vii) a list and description of the major geographical markets for the products and services offered by the international group;

(viii) the functions, assets and risks analysis of the constituent entities of the international group that contribute at least ten per cent. of the revenues or assets or profits of such group; and

(ix) a description of the important business restructuring transactions, acquisitions and divestments.

4. Description of the overall strategy of the international group for the development, ownership and exploitation of intangible property, including location of principal research and development facilities and their management –

5. List of all entities of the international group engaged in development of intangible property and in management of intangible property along with their addresses –

Serial Number Name Address

6. List of all the important intangible property or groups of intangible property owned by the international group along with the names and addresses of the group entities that legally own such intangible property –

Serial Number Intangible property /group of intangible property Name of the entity who legally owns the intangible property/group of intangible property Address of the entity

7. List and brief description of important agreements among members of the international group related to intangible property, including cost contribution arrangements, principal research service agreements and license agreements –

8. Description of the transfer pricing policies of the international group related to research and development and intangible property –

9. Description of important transfers of interest in intangible property, if any, among entities of the international group, including the names and addresses of the selling and buying entities and the compensation paid for such transfers –

10. Detailed description of the financing arrangements of the international group, including the names and addresses of the top ten unrelated lenders –

11. List of group entities that provide central financing functions, including their addresses of operation and of effective management –

12. Detailed description of the transfer pricing policies of the international group related to financing arrangements among group entities –

13. A copy of the annual consolidated financial statement of the international group –

14. A list and brief description of the existing unilateral advance pricing agreements and other tax rulings in respect of the international group for allocation of income among countries –

I ………… son/daughter/wife* of Shri …………… hereby declare that I am furnishing the information in my capacity as …………(designation) of ………(name of the assessee) and I am competent to furnish the said information and verify it.

……………………

Signature

……………………

Address of the declarant

……………………………

PAN of the declarant

Place: …………

Date: ……………

Note 1: *Strike off whichever is not applicable.

**This form has to be signed by the person competent to verify the return of income under section 140.

FORM NO. 3CEAB

[See rule 10DA]

Intimation by a designated constituent entity, resident in India, of an international group, for the purposes of sub-section (4) of section 92D of the Income-tax Act, 1961

1. Name of the designated constituent entity –

2. Address of the designated constituent entity –

3. Permanent account number of the designated constituent entity –

4. Name of the international group –

5. Name of the parent entity of the international group –

6. Address of the parent entity of the international group –

7. The country of residence of the parent entity –

8. Accounting Year for which the report is being submitted –

I, ……………, son/daughter/wife* of Shri ………… hereby declare that I am furnishing the information in my capacity as ……… (designation) of ………… (name of the assessee) and I am competent to furnish the said information and verify it.

…………………

Signature

…………………..

Address of the declarant

……………………………

PAN of the declarant

Place: ……………

Date: ……………..

Note: *Strike off whichever is not applicable.

**This form has to be signed by the person competent to verify the return of income under section 140.

FORM NO. 3CEAC

[See rule 10DB]

Intimation by a constituent entity, resident in India, of an international group, the parent entity of which is not resident in India, for the purposes of sub-section (1) of section 286 of the Income-tax Act, 1961

1. Name of the constituent entity –

2. Address of the constituent entity –

3. Permanent account number of the constituent entity –

4. Name of the international group –

5. Name of the parent entity of the international group –

6. Address of the parent entity of the international group –

7. The country of residence of the parent entity –

8. Whether the international group has designated an alternate reporting entity in place of the parent entity to furnish the report referred to in sub-section (2) of section 286 – Yes/No

9. If yes, name and address of the alternate reporting entity of the international group –

(i) Name of alternate reporting entity

(ii) Address

10. The country of residence of the alternate reporting entity –

11. Reportable Accounting Year –

I, ………, son/daughter/wife* of Shri ………… hereby declare that I am furnishing the information in my capacity as …………… (designation) of ………… (name of the assessee) and I am competent to furnish the said information and verify it.

…………………

Signature**

……………………

Address of the declarant

……………………………

PAN of the declarant

Place: ……………

Date: ……………

Note: *Strike off whichever is not applicable.

**This form has to be signed by the person competent to verify the return of income under section 140.

FORM NO. 3CEAD

[See rule 10DB]

COUNTRY-BY-COUNTRY REPORT

Report by a parent entity or an alternate reporting entity or any other constituent entity, resident in India, for the purposes of sub-section (2) or sub-section (4) of section 286 of the Income-tax Act, 1961

Name of the reporting entity
PAN of the reporting entity
Address of the reporting entity
Whether the reporting entity is the parent entity of the international group

PART A: OVERVIEW OF ALLOCATION OF INCOME, TAXES AND BUSINESS ACTIVITIES BY TAX JURISDICTION

Name of the Multinational Enterprise group:Reportable accounting year:Currency used:
TaxJurisdiction Revenues Profit(Loss)beforeIncome Tax IncomeTax Paid (on Cash Basis) Income TaxAccrued –Reportable Accounting Year Stated Capital Accumulated Earnings Number of Number of Employees Tangible Assets other than Cash and CashEquivalents
UnrelatedParty RelatedParty Total

PART C: ADDITIONAL INFORMATION

Name of the Multinational Enterprises group:Reportable accounting year :
Please include any further brief information or explanation that is considered necessary or that would facilitate the understanding of the compulsory information provided in Part A and Part B. (e.g. Source of Data)

I ……………… son/daughter/wife* of Shri ………… hereby declare that I am furnishing the information in my capacity as …………… (designation) of ………(name of the assessee) and I am competent to furnish the said information and verify it.

……………………

Signatur

……………………

Address of the declarant

……………………………

PAN of the declarant

 

Place: …………

Date: ……………

Note 1: *Strike off whichever is not applicable

**This form has to be signed by the person competent to verify the return of income under

section 140.

Note 2: Specific instructions

Part A

1. In the column titled “Tax Jurisdiction”, the Reporting multi-national enterprise (MNE) should list all of the tax jurisdictions in which Constituent Entities of the MNE group are resident for tax purposes. A tax jurisdiction is defined as a State as well as a non-State jurisdiction which has fiscal autonomy. A separate line should be included for all Constituent Entities in the MNE group deemed by the Reporting MNE not to be resident in any tax jurisdiction for tax purposes. Where a Constituent Entity is resident in more than one tax jurisdiction, the applicable tax treaty tie breaker should be applied to determine the tax jurisdiction of residence. Where no applicable tax treaty exists, the Constituent Entity should be reported in the tax jurisdiction of the Constituent Entity’s place of effective management.

2. In the three columns of the template under the heading “Revenues”, the Reporting MNE should report the following information: (i) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with associated enterprises; (ii) the sum of revenues of all the Constituent Entities of the MNE group in the relevant tax jurisdiction generated from transactions with independent parties; and (iii) the total of (i) and (ii). Revenues should include revenues from sales of inventory and properties, services, royalties, interest, premiums and any other amounts. Revenues should exclude payments received from other Constituent Entities that are treated as dividends in the payer’s tax jurisdiction.

3. Under the column titled “Profit (Loss) before Income Tax”, the Reporting MNE should report the sum of the profit (loss) before income tax for all Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The profit (loss) before income tax should include all extraordinary income and expense items.

4. Under the column titled “Income Tax Paid (on Cash Basis)”, the Reporting MNE should report the total amount of income tax actually paid during the relevant fiscal year by all Constituent Entities resident for tax purposes in the relevant tax jurisdiction. Taxes paid should include cash taxes paid by the Constituent Entity to the residence tax jurisdiction and to all other tax jurisdictions. Taxes paid should include withholding taxes paid by other entities (associated enterprises and independent enterprises) with respect to payments to the Constituent Entity. Thus, if company A resident in tax jurisdiction A earns interest in tax jurisdiction B, the tax withheld in tax jurisdiction B should be reported by company A.

5. Under the column titled “Income Tax Accrued – Reportable Accounting Year”, the Reporting MNE should report the sum of the accrued tax expense recorded on taxable profits or losses of the year of reporting of all Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The tax expense should reflect only operations in the reportable accounting year and should not include deferred taxes or provisions for uncertain tax liabilities.

6. Under the column titled “Stated Capital”, the Reporting MNE should report the sum of the stated capital of all Constituent Entities resident for tax purposes in the relevant tax jurisdiction. With regard to permanent establishments, the stated capital should be reported by the legal entity of which it is a permanent establishment unless there is a defined capital requirement in the permanent establishment tax jurisdiction for regulatory purposes.

7. Under the column titled “Accumulated Earnings”, the Reporting MNE should report the sum of the total accumulated earnings of all Constituent Entities resident for tax purposes in the relevant tax jurisdiction as of the end of the year. With regard to permanent establishments, accumulated earnings should be reported by the legal entity of which it is a permanent establishment.

8. Under the column titled “Number of Employees”, the Reporting MNE should report the total number of employees on a full-time equivalent (FTE) basis of all Constituent Entities resident for tax purposes in the relevant tax jurisdiction. The number of employees may be reported as of the year-end, on the basis of average employment levels for the year, or on any other basis consistently applied across tax jurisdictions and from year to year. For this purpose, independent contractors participating in the ordinary operating activities of the Constituent Entity may be reported as employees. Reasonable rounding or approximation of the number of employees is permissible, providing that such rounding or approximation does not materially distort the relative distribution of employees across the various tax jurisdictions. Consistent approaches should be applied from year to year and across entities.

9. Under the column titled “Tangible Assets other than Cash and Cash Equivalents”, the Reporting MNE should report the sum of the net book values of tangible assets of all Constituent Entities resident for tax purposes in the relevant tax jurisdiction. With regard to permanent establishments, assets should be reported by reference to the tax jurisdiction in which the permanent establishment is situated. Tangible assets for this purpose do not include cash or cash equivalents, intangibles, or financial assets.

Part B

10. Under the column titled “Constituent Entities Resident in the Tax Jurisdiction”, the Reporting MNE should list, on a tax jurisdiction-by-tax jurisdiction basis and by legal entity name, all the Constituent Entities of the MNE group which are resident for tax purposes in the relevant tax jurisdiction. As stated above with regard to permanent establishments, however, the permanent establishment should be listed by reference to the tax jurisdiction in which it is situated. The legal entity of which it is a permanent establishment should be noted (e.g. XYZ Corp – Tax Jurisdiction APE).

11. Under the column titled “Tax Jurisdiction of Organization or Incorporation if different from Tax Jurisdiction of Residence”, the Reporting MNE should report the name of the tax jurisdiction under whose laws the Constituent Entity of the MNE is organised or incorporated if it is different from the tax jurisdiction of residence.

12. Under the column titled “Main Business Activity(-ies)”, the Reporting MNE should determine the nature of the main business activity(ies) carried out by the Constituent Entity in the relevant tax jurisdiction, by ticking one or more of the appropriate boxes. In this column, if the Reporting MNE chooses the option ‘Other’, then it shall be required to specify the nature of the activity of the Constituent Entity in the “Part C: Additional Information” section.

FORM NO. 3CEAE

[See rule 10DB]

Intimation on behalf of the international group for the purposes of the proviso to sub-section (4) of section 286 of the Income-tax Act, 1961

1. Name of the international group –

2. Name of the parent entity of the international group –

3. Address of the parent entity of the international group

4. Name of the constituent entity designated to furnish the report under sub-section (4) of section 286 of the Income-tax Act, 1961 –

5. Address of the constituent entity designated to furnish the report under sub-section (4) of section 286 of the Income-tax Act, 1961 –

6. Permanent account number of the designated constituent entity –

7. Names, permanent account numbers and addresses of all other constituent entities of the international group resident in India –

Sl. No. Name of the constituent entity Permanent account number Address

I ………… son/daughter/wife* of Shri ………… hereby declare that I am furnishing the information in my capacity as ……… (designation) of……………(name of the assessee) and I am competent to furnish the said information and verify it.

 

…………………

Signature**

…………………..

Address of the declarant

……………………………

PAN of the declarant

 

Place: ……………

Date: ……………..

 

Note: *Strike off whichever is not applicable.

**This form has to be signed by the person competent to verify the return of income under section 140.

[F. No. 370142/25/2017-TPL]

NIRAJ KUMAR, Under Secy. (Tax Policy and Legislation)

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969 (E) dated the 26th March, 1962 and were last amended vide notification number G.S.R No. 1221(E), dated the 5th of October, 2017.

Notification No. SO 3535(E) 30-10-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – GIGAPLEX ESTATE PRIVATE LIMITED

NOTIFICATION NO. SO 3535(E) [F.NO.F.1/5/2011-SEZ]DATED 30-10-2017

WHEREAS, M/s. Gigaplex Estate Private Limited, a private organization, had proposed under Section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services at Plot No. IT-5, Airoli Knowledge Park-TTC Industrial Area, Villages Airoli and Dighe, District Thane in the State of Maharashtra;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules, 2006, had notified the following areas at above Special Economic Zone as per the details given below:—

S. No. Notification No. Date Notified Area in Hectares Total Area in Hectares
(i) S.O. 1695(E) 11.06.2013 11.74 11.74
(ii) S.O. 595(E) 18.02.2015 1.170 12.91

AND WHEREAS, M/s. Gigaplex Estate Private Limited, has now proposed to include an area of 3.61 hectares at above Special Economic Zone and Central Government has granted approval on 08.03.2017;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an additional area of 3.61 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 16.52 hectares, comprising the survey numbers and the area given below in the table namely:—

TABLE

S.No. Village Survey No. Area in hectares
1. Airoli 145(PT) 0.574
2. 146 (PT) 1.99
3. 147 (PT) 0.574
4. 148 (PT) 0.15
5. 149 (PT) 0.191
6. 153 (PT) 0.131
Total 3.61
Grand total area of SEZ after above addition 16.52 

Notification No. SO 3534(E) 30-10-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION

NOTIFICATION NO. SO 3534(E) [F.NO.F.2/578/2006-SEZ]DATED 30-10-2017

WHEREAS, M/s. Maharashtra Industrial Development Corporation, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for engineering sector at Kesurde Village, District Satara in the State of Maharashtra;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zone Rules 2006, had notified an area of 111.12 hectares vide Ministry of Commerce and Industry Notification Number S.O. 2653(E), dated 12th November, 2008;

AND, WHEREAS, M/s. Maharashtra Industrial Development Corporation has now proposed to de-notify the an area of 61.12 hectares from the above Special Economic Zone;

AND, WHEREAS, the State Government of Maharashtra has given its “No Objection” to the proposal vide letter no. SEZ-2015/CR-55/2014/Ind-2 dated 24th August, 2016.

AND, WHEREAS, the Development Commissioner, SEEPZ Special Economic Zone has recommended the proposal for de-notification of an area of 61.12 hectares from the Special Economic Zone;

NOW, WHEREAS, the Central Government is satisfied that the requirements under sub-section (8) of Section 3 of the said Act and other related requirements are fulfilled;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of Section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby de-notifies an area of 61.12 hectares, thereby making resultant area as 50.00 hectares, comprising the Gat numbers and the area given below in the table, namely:—

TABLE

S. No. Gat No. Area to de-notified (in Hectares)
1. 613 Pt 2.84
2. 614 16.86
3. 617/A Pt 24.58
4. 622/1 Pt 4.52
5. 622/2 Pt 4.51
6. 624/A/1 Pt 0.10
7. 626/A Pt 0.25
8. 626/B Pt 2.18
9. 627/A Pt 2.06
10.. 628/A Pt 2.22
11. 632 Pt 1.00
12. Total 61.12
13. Total Area of SEZ after above deletion 50.00 

Notification No. SO 3719(E) 30-10-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – MANGALORE SEZ LTD.

NOTIFICATION NO. SO 3719(E) [F.NO.F.2/120/2006-SEZ]DATED 13-11-2017

Whereas, M/s. Mangalore SEZ Limited, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for Petrochemicals and Petroleum at Baikampady, Near Mangalore, District Dakshin Kannada in the State of Karnataka;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified and de-notified the following areas at above Special Economic Zone as per the details given below:—

S. No. Notification No. Date Notified Area in Hectares De-notified area in hectares Total Area in Hectares
(i) S.O. 1885(E) 6-11-2007 587.921 - 587.921
(ii) S.O. 1477(E) 28-6-2011 55.776 5.641+17.316=22.957 620.740
(iii) S.O. 1909(E) 18-8-2011 4.046 - 624.786
(iv) S. O. 2298(E) 8-9-2014 35.0163 4.2980 655.5043

AND, WHEREAS, the sector the above mentioned SEZ was changed from “Petrochemcials and Petroleum” to “multi product” vide approval letter No.F.2./120/2006-SEZ dated 16th September, 2013;

AND, WHEREAS, M/s Mangalore SEZ Limited has now proposed for de-notification of 4.8722 hectares at the above Special Economic Zone;

AND, WHEREAS, the State Government of Karnataka has given its approval to the proposal vide letter No. VTPC/MD/MSEZ-NOC/2017-18, dated 3-10-2017;

AND, WHEREAS, the Development Commissioner, Mangalore Special Economic Zone has recommended the proposal for de-notification of an area of 4.8722 hectares of the Special Economic Zone;

NOW, WHEREAS, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby de-notifies an area of 4.8722 hectares, thereby making resultant area as 650.6321 hectares, comprising the survey numbers and the area given below in the table, namely:—

TABLE

S. No. Survey No. Name of Village Proposed denotified area in hectares
1. 33/4 part Kalavar 0.0904
2. 33/7 part 0.2485
3. 33/8 part 0.0271
4. 33/9 part 0.0097
5. 101/1 part 0.0283
6. 34/3 part 0.0200
7. 34/4B part 0.0031
8. 34/5 part 0.1105
9. 34/6 part 0.0425
10. 35/4 part 0.0458
11. 95/4 part 0.2380
12. 95/1 part 0.0946
13. 49/1 part 0.0658
14. 49/2 part 0.0629
15. 48/1 part 0.1412
16. 48/11 part 0.0547
17. 47/1 part 0.0100
18. 47/2 part 0.0741
19. 47/11B part 0.0414
20. 47/11A part 0.0308
21. 47/12 part 0.0686
22. 47/10 part 0.0328
23. 47/9 part 0.0526
24. 47/8 part 0.0531
25. 47/7 part 0.0723
26. 47/6 part 0.0384
27. 46 part 0.0247
28. 66/4A3 part 0.0828
29. 66/4A2 part 0.2408
30. 54/1 part 0.2137
31. 54/3 part 0.0992
32. 54/2 part 0.1970
33. 54/4A part 0.2046
34. 54/15 part 0.3339
35. 54/5 part 0.0178
36. 54/21&22 part 0.1947
37. 54/12 part 0.0045
38. 54/14 part 0.4223
39. 6/5 part 62, Thokur 0.0486
40. 6/1 part 0.4361
41. 6/2P1 part 0.2525
42. 10/3 part 0.2157
43. 10/6 part 0.0146
44. 10/10 part 0.0081
45. 10/7 part 0.0032
46. 10/8 part 0.0202
47. 10/13 part 0.0132
48. 9/1 part 0.0530
49. 9/9 part 0.0081
50. 5/8 full 0.0061
Total 4.8722
Grand total area of SEZ after above deletion 650.6321

 

Notification No. SO 3537(E) 30-10-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED

NOTIFICATION NO. SO 3537(E) [F.NO.F.2/2/11/2000-SEZ]DATED 30-10-2017

Whereas, M/s. Andhra Pradesh Industrial Infrastructure Corporation Limited, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a Multi Product Special Economic Zone at Atchutapuram and Rambilli Mandals, Visakhapatnam District in the State of Andhra Pradesh;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of Section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified and de-notified the following areas at above Special Economic Zone as per the details given below:—

S.No. Notification No. Date Notified Area in Hectares De-notified Area in Hectares Total Area in Hectares
(i) S.O. 571 (E) 12.04.2007 2206.03 - 2206.03
(ii) S.O. 2553 (E) 02.08.2017 - 905.21 1300.82

AND, WHEREAS, M/s. Andhra Pradesh Industrial Infrastructure Corporation Limited has proposed for de-notification of 518.22 hectares;

AND, WHEREAS, the State Government of Andhra Pradesh has given its approval to the proposal vide letter No.5544/Infra/A3/2016, dated 12.07.2017;

AND, WHEREAS, the Development Commissioner, Visakhapatnam Special Economic Zone has recommended the proposal for de-notification of an area of 518.22 hectares of the Special Economic Zone;

NOW, WHEREAS, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby de-notifies an area of 518.22 hectares, thereby making resultant area as 782.6 hectares, comprising the survey numbers and the area given below in the table, namely:-

TABLE

S. No. Name of the Village and Mandal Survey Numbers Area to de.notified (in hectares)
1. Moturupalem, Rambilli 131 2.55
2. 132 1.49
3. 133 0.16
4. 134 0.29
5. 135 3.09
6. 136 2.81
7. 137 4.93
8. 138 2.54
9. 139 2.10
10. 140 2.75
11. 141 1.69
12. 197 0.28
13. 198 0.35
14. Dibbapalem, Rambilli 56 0.38
15. 57 0.45
16. 58 0.36
17. 59 0.49
18. 60 0.84
19. 61 3.82
20. 62 0.16
21. 63 0.15
22. 64 0.21
23. 65 0.30
24. 67 3.78
25. 68 1.31
26. 69 0.31
27. 70 0.20
28. 71 0.14
29. 72 0.96
30. 73 3.27
31. 74 1.70
32. 75 0.98
33. 76 0.23
34. 77 0.14
35. 78 4.48
36. 79 0.17
37. 80 0.35
38. 81 0.89
39. 82 0.62
40. 83 0.19
41. 84 0.05
42. 85 0.83
43. 88 2.42
44. 89 0.15
45. 90 1.53
46. 91 0.22
47. 95 0.36
48. 96 1.86
49. 97 0.83
50. 98 0.18
51. 99 0.85
52. 100 0.76
53. 101 2.97
54. 102 0.05
55. 103 2.51
56. 104 1.03
57. 105 2.17
58. 106 0.24
59. 107 2.14
60. 108 0.69
61. 109 0.37
62. 110 0.85
63. 111 0.77
64. 112 0.16
65. 113 0.31
66. 114 0.36
67. 115 0.37
68. 116 0.52
69. 117 0.06
70. 118 0.21
71. 119 0.38
72. 120 0.46
73. 121 0.10
74. 122 0.38
75. 123 0.03
76. 124 0.33
77. 125 0.19
78. 126 0.36
79. 127 2.65
80. 128 1.06
81. 129 0.71
82. 130 0.38
83. 131 1.19
84. 132 2.00
85. 133 1.54
86. 134 0.49
87. 135 0.59
88. 136 0.36
89. 137 0.30
90. 138 0.95
91. 139 1.06
92. 140 1.67
93. 141 4.46
94. 142 0.11
95. 143 0.40
96. 144 0.15
97. 145 1.40
98. 146 0.15
99. 147 1.08
100. 148 1.23
101. 149 0.30
102. 150 1.39
103. 151 0.36
104. 152 0.28
105. 153 0.20
106. 154 0.12
107. 155 0.67
108. 156 2.44
109. 157 0.04
110. 159 0.36
111. 160 0.23
112. 161 0.28
113. 162 0.04
114. 163 0.06
115. 164 0.40
116. 165 3.72
117. 166 6.66
118. 167 0.18
119. 168 0.13
120. 169 0.68
121. 170 0.27
122. 171 0.79
123. 172 0.18
124. 173 0.13
125. 174 0.21
126. 176 0.39
127. 177 0.53
128. 178 0.32
129. Rajakoduru, Rambilli 27 2.13
130. 29 2.96
131. 30 0.74
132. 31 0.40
133. 35 2.60
134. 36 5.44
135. Krishnampalem, Rambilli 188 14.76
136. 189 3.00
137. 190 1.89
138. 191 1.81
139. 192 2.10
140. 193 2.22
141. 194 0.76
142. 195 2.63
143. 196 2.93
144. 197 10.26
145. 198 4.95
146. 199 5.51
147. 200 1.71
148. 201 0.20
149. 202 0.20
150. 203 0.92
151. 207 15.74
152. Pudi, Rambilli 270 0.79
153. 271 0.75
154. 272 4.12
155. 273 4.37
156. 274 1.22
157. 276 0.10
158. 284 0.41
159. 285 2.64
160. 286 3.21
161. 287 3.26
162. 288 1.04
163. 289 2.65
164. 300 4.16
165. 301 2.39
166. 302 4.30
167. 303 5.03
168. 305 0.64
169. 306 2.43
170. 307 3.76
171. 308 1.99
172. 309 0.17
173. 311 2.57
174. Maruturu, Atchutapuram 7 pt 0.31
175. 16 pt 0.12
176. 21 0.03
177. 23 pt 0.40
178. 25 0.62
179. 26 1.18
180. 27 2.25
181. 28 2.51
182. 29 1.23
183. 45 0.10
184. 47 1.32
185. 48 0.44
186. 49 0.46
187. 50 0.84
188. 51 4.48
189. 52 0.51
190. 53 0.20
191. 54 0.15
192. 55 2.82
193. 56 1.63
194. 57 2.71
195. 58 1.11
196. 59 0.22
197. 60 0.23
198. 61 1.84
199. 62 0.21
200. 63 0.14
201. 64 0.11
202. 65 1.30
203. 66 2.65
204. 67 0.90
205. 68 3.18
206. 69 0.41
207. 70 3.14
208. 71 0.13
209. 72 0.15
210. 73 0.38
211. 74 3.16
212. 75 pt 0.59
213. 76 6.58
214. 77 3.06
215. 78 1.12
216. 79 0.76
217. 80 1.43
218. 81 0.30
219. 82 1.09
220. 83 0.37
221. 84 0.06
222. 85 0.26
223. 86 0.22
224. 87 0.09
225. 88 0.75
226. 89 2.40
227. 90 0.40
228. 91pt 6.90
229. 92 1.88
230. 93 6.89
231. 94 0.48
232. 95 0.12
233. 96 5.54
234. 97 0.31
235. 98 0.45
236. 99 0.41
237. 100 0.42
238. 101 0.28
239. 102 0.28
240. 103 0.41
241. 104 0.16
242. 105pt 4.57
243. 106 0.14
244. 107 0.35
245. 108 1.82
246. 109 6.30
247. 110 0.42
248. 111 0.54
249. 112 0.85
250. 113pt 0.26
251. 117pt 0.61
252. 122pt 4.39
253. 123 6.11
254. 125 5.36
255. 126 3.02
256. 170 2.29
257. Nakkapalem, Rambilli 304 3.63
258. 310 0.86
259. Gurajapalem, Rambilli 1 11
260. 4 0.88
261. 5 0.85
262. 6 3.29
263. 7 3.24
264. 8 2.16
265. 9 0.26
266. 10 0.20
267. 11 0.17
268. 12 0.21
269. 13 3.83
270. 14 5.86
271. 15 1.84
272. 16 1.36
273. 17 8.26
274. 18 1.20
275. 19 1.27
276. 20 2.85
277. 21 3.43
278. 22 1.95
279. 23 2.99
280. 24 3.19
281. 25 2.33
282. 26 0.15
283. 27 2.23
284. 28 2.23
285. 29 3.04
286. 30 1.85
287. 31 2.12
288. 32 0.38
289. 33 3.24
290. 34 1.42
291. 35 0.13
292. 36 4.39
293. 37 0.11
294. 38 1.50
295. 39 2.14
296. 40 1.61
297. 41 2.38
298. 42 0.19
299. 43 0.18
300. 44 0.27
301. 45 1.00
302. 46 1.69
303. 61 0.08
304. 62 0.10
305. 63 1.27
306. 64 0.10
307. 65 1.35
308. 111 0.77
309. 112 0.08
310. 113 0.75
311. 117 2.39
312. 118 1.10
313. 119 1.93
314. 120 1.37
315. 121 0.31
316. 122 0.19
317. 123 2.82
318. 124 0.24
319. 125 0.40
320. 126 2.98
321. 127 1.08
322. 128 2.12
323. 129 1.89
324. 130 7.72
325. Total 518.22
326. Grand Total after above deletion 782.60

Notification No.91/2017 27-10-2017


SECTION 43(5) OF THE INCOME-TAX ACT, 1961 – SPECULATIVE TRANSACTION – NOTIFIED EXCHANGE AS A RECOGNIZED ASSOCIATION

NOTIFICATION NO.91/2017 [F.NO.225/216/2017-ITA-II]DATED 30-10-2017

In exercise of the powers conferred by clause (iii) in the Explanation of clause (e) of the proviso to sub-section (5) of Section 43 of the Income-tax Act, 1961 (43 of 1961) read with sub-rule (4) of Rule 6DDD of the Income-tax Rules, 1962, the Central Government hereby notifies Indian commodity Exchange Limited (PAN:AABCI9479D) as a ‘recognised association’ for the purpose of said clause with effect from the date of publication of this notification in the Official Gazette.

2. The Central Government shall withdraw the recognition granted to Indian Commodity Exchange Limited, if it—

(i) ceases to have the approval of the Forward Markets Commission established under the Forward Contracts (Regulation] Act, 1952 (74 of 1952)(merged with Securities and Exchange Board of India vide Gazette Notification No. S.O. 2630(E), dated 24-9-2015) in respect of trading in derivatives and shall function in accordance with the guidelines or conditions laid down by it; or
(ii) fails to ensure that the particulars of the client (including unique client identity number and PAN) are duly recorded and stored in its databases; or
(iii) fails to maintain a complete audit trail of all transactions (in respect of derivative market) for a period of seven years on its system; or
(iv) fails to ensure that transactions (in respect of derivative market) once registered in the system are not erased; or
(v) fails to ensure that the transactions (in respect of derivative market) once registered in the system are modified only in cases of genuine error (as mentioned in Circular of SEBI dated 19-8-2016 in SEBI/HO/CDMRD/DMP/CIR/P/2016/73) and maintain data regarding all transactions (in respect of derivative market) registered in the system which have been modified and submit a monthly statement in Form No. 3BC to the Director General of Income-tax (Intelligence and Criminal Investigation), New Delhi within fifteen days from the last day of each month to which such statement relates.

3. This notification shall remain in force—

a. until the approval granted by the Securities and Exchange Board of India is withdrawn or expires; or
b. if any of the conditions stipulated in para 2 above, are violated; or
c. under exercise of powers vested in Central Government under sub-rule (5) of rule 6DDD of the Income-tax Rules, 1962, this notification shall stand rescinded on 31-10-2018 with liberty to the applicant to file a fresh application for approval under clause (e) of the proviso to sub-section (5) of section 43 of the Act for the subsequent period.

whichever is earlier.*

ANNEXURE

*An ‘eligible transaction’ in respect of trading in derivatives carried out on Indian Commodity Exchange Limited (PAN Number: AABCI9479D) with effect from ……. shall not be deemed to be speculative transaction. The expression ‘eligible transaction’ is defined in clause (ii) of the Explanation of clause (e) of the proviso to sub-section (5) of section 43 of the Income-tax Act, 1961.

Notification No.90/2017 27-10-2017


SECTION 286 OF THE INCOME-TAX ACT, 1961 – REPORT IN RESPECT OF INTERNATIONAL GROUP – FURNISHING OF – CBDT NOTIFIES RULES IN RESPECT OF COUNTRY BY COUNTRY REPORTING AND FURNISHING OF MASTER FILE

CBDT PRESS RELEASEDATED 1-11-2017

In keeping with India’s commitment to implement the recommendations of 2015 Final Report on Action 13, titled “Transfer Pricing Documentation and Country-by-Country Reporting”, identified under the OECD Base Erosion and Profit Shifting (BEPS) Project, section 286 of the Income-tax Act, 1961 (‘the Act’) was inserted vide Finance Act, 2016, providing for furnishing of a Country-by-Country report in respect of an international group by its constituent or parent entity. Section 92D of the Act was also amended vide Finance Act, 2016 to provide for keeping and maintaining of Master File by every constituent entity of an international group, which was to be furnished as per rules prescribed in this regard.

Subsequent to the aforesaid amendments to the Act, comments and suggestions were invited on the proposal to insert rules 10DA, 10DB and form nos. 3CEBA to 3CEBE in the Income-tax Rules, 1962 (‘the Rules’), laying down the guidelines.

After examining the recommendations of the Committee set up in this regard, and comments and suggestions received from stakeholders and general public, the Central Board of Direct Taxes has notified the rules for maintaining and furnishing of transfer pricing documentation in the Master File and Country-by-Country report.

Since it is the first reporting year for furnishing of the Country-by-Country report, the due date for filing the Country-by-Country report for reportable accounting year 2016-17 has already been extended to 31st of March, 2018 vide Circular No. 26/2017 dated 25-10-2017. Similarly, the date of compliance for furnishing the Master File for FY 2016-17 has been extended to 31st of March, 2018 as a one-time relief measure.

The salient features of the Country-By-Country Report and Master File rules are as under:

The threshold for the Country-By-Country Report is total consolidated group revenue of Rs. 5,500 crore or more.
The threshold for the Master File is consolidated group revenue exceeding Rs. 500 crore and either the aggregate value of international transactions as per the books of accounts exceeding Rs. 50 crore or aggregate value of international transactions in respect of intangible property exceeding Rs. 10 crore.
Report of Master File has to be submitted in Form 3CEAA and the Country-by-Country Report in Form 3CEAD.
An international group having multiple Indian constituent entities may designate one constituent entity to file the Master File.
Part A of Form 3CEAA is to be filled by every constituent entity of an international group regardless of whether it qualifies under the threshold for furnishing Master File. However, to reduce the compliance burden, such international group having multiple Indian constituent entities can designate one constituent entity to file Part A on its behalf.
Form 3CEAD for furnishing Country-by-Country Report follows OECD template.

The notification is available on www.incometaxindia.gov

Notification No.89/2017 27-10-2017


SECTION 10(46) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – STATUTORY BODY/AUTHORITY/BOARD/COMMISSION – NOTIFIED BODY OR AUTHORITY

NOTIFICATION NO. SO 3442(E) [NO.89/2017 (F.NO.300196/30/2017-ITA-I)], DATED 27-10-2017

In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, Madhya Pradesh Pollution Control Board, a Board constituted by Government of Madhya Pradesh, in respect of the following specified income arising to that Board, namely:—

(a) consent fee or no objection certificate fees under the Water and Air Act;
(b) renewal of consent issued fees;
(c) analysis fees on air quality and water quality or noise level survey fees;
(d) authorization fees;
(e) cess re-imbursement and cess appeal fees;
(f) reimbursement of the expenses received from the Central Pollution Control Board towards National Air Monitoring Program, the monitoring of Indian National Aquatic resources and like schemes;
(g) sale of books relating to environmental law, regulations, important judicial orders and environmental issues where no profit element is involved and the activity is not commercial nature;
(h) interest on deposits;
(i) public hearing fees;
(j) vehicle emission monitoring test fees;
(k) fees received for processing by State Environmental Impact Assessment Authority;
(l) fees collected for training conducted by the Environmental Training Institute of the Board where no profit element is involved and the activity is not commercial in nature;
(m) fees received under the Right to Information Act, 2005 (22 of 2005) and appeal fees;
(n) pollution cost or forfeiture or bank guarantee due to non-compliance; and
(o) income from sale of old or scrap items, tender fees.

2. This notification shall be effective subject to the conditions that Madhya Pradesh Pollution Control Board,—

(a) shall not engage in any commercial activity;
(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and
(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the Financial Year 2016-2017* and shall apply with respect to the Financial Years 2017-2018, 2018-2019, 2019-2020 and 2020-2021.

 

Notification No.88/2017 27-10-2017


SECTION 10(46) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – STATUTORY BODY/AUTHORITY/BOARD/COMMISSION – NOTIFIED BODY OR AUTHORITY

NOTIFICATION NO. SO 3440(E) [NO.88/2017 (F.NO.300196/22/2017-ITA-I)], DATED 27-10-2017

In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘Swasthya Sathi Samiti’, Kolkata, a body established by the Government of West Bengal, in respect of the following specified income arising to that body, namely:—

(a) Grant received from the Government of West Bengal; and
(b) Interest income on grants.

2. This notification shall be effective subject to the conditions that Swasthya Sathi Samiti, Kolkata,—

(a) shall not engage in any commercial activity;
(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and
(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3. This notification shall be deemed to have been applied for the Financial Years 2016-2017* and shall apply with respect to the Financial Years 2017-2018, 2018-2019, 2019-2020 and 2020-2021.

No.26/2017 Dated: 25-10-2017


SECTION 286, READ WITH SECTION 139, OF THE INCOME-TAX ACT, 1961 – REPORT IN RESPECT OF INTERNATIONAL GROUP – FURNISHING OF – EXTENSION OF DUE DATE FOR FURNISHING OF REPORT IN RESPECT OF INTERNATIONAL GROUP FOR REPORTING ACCOUNTING YEAR 2016-17 TO 31-3-2018

CIRCULAR NO.26/2017 [F.NO.370142/25/2017-TPL]DATED 25-10-2017

In keeping with India’s commitment to implement the recommendations of 2015 Final Report on Action 13, titled “Transfer Pricing Documentation and Country-by-Country Reporting”, identified under the OECD Base Erosion and Profit Shifting (BEPS) Project, section 286 of the Income-tax Act, 1961 (‘the Act’) was inserted vide Finance Act, 2016, providing for furnishing of a Country-by-Country report (CbCR) in respect of an international group by its constituent or parent entity. Under sub-section (2) of section 286 of the Act, the ‘due date’ for furnishing the Country-by-Country Report is the date specified under section 139(1) for furnishing the return of income for the relevant accounting year.

FY 2016-17 will be the first reporting year for furnishing of CbCR. The rules for furnishing of CbCR are also still under consideration.

On consideration of the matter, the Central Board of Direct Taxes, in exercise of its powers conferred under section 119 of the Act, in respect of all assessees covered under sub-section (2) of section 286 of the Act, hereby extends the ‘due date’ prescribed therein for furnishing of report in respect of international group for reporting accounting year 2016-17 to 31st March, 2018.

 

Notification No. 388/2017-RB/GSR 1324(E) 24-10-2017


FEM (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (SECOND AMENDMENT REGULATIONS, 2017- INSERTION OF REGULATION 5C

NOTIFICATION NO. FEMA.388/2017-RB/GSR 1324(E) (F.NO.1/15/EM/2015)DATED 24-10-2017

In exercise of the powers conferred by clause (h) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), namely:—

1. Short Title and Commencement

i. These regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Second Amendment) Regulations, 2017.
ii. These regulations come into force with effect from the date of their publication in the Official Gazette.

2. Amendment to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000):

i. Under the principal regulations, a new para 5C to be added :

5C. Permission to resident and non-resident entities to undertake hedge transactions with simplified procedures

Notwithstanding anything contained in paras 4, 5, 5A and 5B, resident entities with foreign currency exposures and non- resident entities with rupee exposures, other than individuals, may hedge underlying exchange rate risk arising out of transactions permitted under Foreign Exchange Management Act, 1999, or rules or regulations or directions or orders made or issued thereunder, subject to such simplified terms and conditions as may be set forth in the directions issued by the Reserve Bank from time to time.

Notification No. SO 3401(E) [F.No.1/27/2013-CL-V (PART-I)], Dated 23-10-2017


SECTION 247, READ WITH SECTION 458, OF THE COMPANIES ACT, 2013 – REGISTERED VALUERS – VALUATION BY – DELEGATION OF POWERS AND FUNCTIONS VESTED IN CENTRAL GOVERNMENT TO INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

NOTIFICATION NO. SO 3401(E) [F.NO.1/27/2013-CL-V (PART-I)]DATED 23-10-2017

In exercise of the powers conferred by section 458 of the Companies Act, 2013 (18 of 2013), the Central Government hereby delegates the powers and functions vested in it under section 247 of the said Act to the Insolvency and Bankruptcy Board of India, subject to the condition that the Central Government may revoke such delegation of powers or it may exercise the powers under the said section, if in its opinion such a course of action is necessary in the public interest.

2. This notification shall come into force with effect from the date of its publication in the Official Gazette.

No.25/2017 Dated: 23-10-2017


SECTION 6 OF THE INCOME-TAX ACT, 1961 – RESIDENTIAL STATUS – DETERMINATION OF PLACE OF EFFECTIVE MANAGEMENT (POEM) OF A COMPANY – CLARIFICATION RELATED TO GUIDELINES FOR ESTABLISHING PLACE OF EFFECTIVE MANAGEMENT (POEM) IN INDIA

CIRCULAR NO.25 OF 2017 [F.NO.142/11/2015-TPL (PART-I)]DATED 23-10-2017

The concept of ‘Place of Effective Management’ (PoEM) for deciding residency status of a company, other than an Indian company, was introduced in the Income-tax Act, 1961 (the Act) which has become effective from 1st April, 2017, i.e., Assessment Year 2017-18 onwards.

2. Guiding Principles for determination of PoEM of a company were issued on 24th January, 2017 vide Circular No. 06 of 2017. Further, vide Circular No 08 of 2017 dated 23rd February, 2017, it has been clarified that the PoEM provisions shall not apply to a company having turnover or gross receipts of Rs 50 crore or less in a financial year.

3. Representations have been received from the stakeholders wherein concerns have been raised that as per the extant guidelines, PoEM may be triggered in cases of certain multinational companies with regional headquarter structure merely on the ground that certain employees having multi-country responsibility or oversight over the operations in other countries of the region are working from India, and consequently, their income from operations outside India may be taxed in India.

4. In this regard, it may be mentioned that Para 7 of the guidelines provides that the place of effective management in case of a company engaged in active business outside India (ABOI) shall be presumed to be outside India if the majority meetings of the board of directors (BoD) of the company are held outside India.

4.1 However, Para 7.1 of the guidelines provides that if on the basis of facts and circumstances it is established that the Board of directors of the company are standing aside and not exercising their powers of management and such powers are being exercised by either the holding company or any other person (s) resident in India, then the PoEM shall be considered to be in India.

4.2 It has also been provided that for this purpose, merely because the BoD follows general and objective principles of global policy of the group laid down by the parent entity which may be in the field of Pay roll functions, Accounting, Human resource (HR) functions, IT infrastructure and network platforms, Supply chain functions, Routine banking operational procedures, and not being specific to any entity or group of entities per se; would not constitute a case of BoD of companies standing aside.

5. In view of the above, it is clarified that so long as the Regional Headquarter operates for subsidiaries/group companies in a region within the general and objective principles of global policy of the group laid down by the parent entity in the field of Pay roll functions. Accounting, HR functions, IT infrastructure and network platforms, Supply chain functions, Routine banking operational procedures, and not being specific to any entity or group of entities per se; it would, in itself, not constitute a case of BoD of companies standing aside and such activities of Regional Headquarter in India alone will not be a basis for establishment of PoEM for such subsidiaries/group companies.

6. It may be mentioned that the provisions of General Anti-Avoidance Rule contained in Chapter X-A of the Income-tax Act, 1961 may get triggered in such cases where the above clarification is found to be used for abusive/aggressive tax planning.

Notification No. SO 3393(E)[F.No.1/27/2013-CL-V], Dated 18-10-2017


SECTION 1 OF THE COMPANIES ACT, 2013 – ACT – ENFORCEMENT OF – NOTIFIED DATE ON WHICH PROVISIONS OF SECTION 247 OF SAID ACT SHALL COME INTO FORCE

NOTIFICATION NO. SO 3393(E)[F.NO.1/27/2013-CL-V]DATED 18-10-2017

In exercise of the powers conferred by sub-section (3) of section 1 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints the 18th October, 2017 as the date on which the provisions of section 247 of the said Act shall come into force.

Notification No.GSR 1316(E) [F.No.1/27/2013-CL-V], Dated 18-10-2017


COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017

NOTIFICATION NO.GSR 1316(E) [F.NO.1/27/2013-CL-V]DATED 18-10-2017

In exercise of the powers conferred by section 247 read with sections 458, 459 and 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:-

CHAPTER I

PRELIMINARY

Short title and commencement

1. (1) These rules may be called the Companies (Registered Valuers and Valuation) Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2. (1) In these rules, unless the context otherwise requires 

(a) “Act” means the Companies Act, 2013 (18 of 2013);
(b) “authority” means an authority specified by the Central Government under section 458 of the Companies Act, 2013 to perform the functions under these rules;
(c) “asset class” means a distinct group of assets, such as land and building, machinery and equipment, displaying similar characteristics, that can be classified and requires separate set of valuers for valuation;
(d) “certificate of recognition” means the certificate of recognition granted to a registered valuers organisation under sub-rule (5) of rule 13 and the term “recognition” shall be construed accordingly;
(e) “certificate of registration” means the certificate of registration granted to a valuer under sub-rule (6) of rule 6 and the term “registration” shall be construed accordingly;
(f) “partnership entity” means a partnership firm registered under the Indian Partnership Act, 1932 (9 of 1932) or a limited liability partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009);
(g) “Annexure” means an annexure to these rules;
(h) “registered valuers organisation” means a registered valuers organisation recognised under sub-rule (5) of rule 13;
(i) “valuation standards” means the standards on valuation referred to in rule 18; and
(j) “valuer” means a person registered with the authority in accordance with these rules and the term “registered valuer” shall be construed accordingly.

(2) Words and expressions used but not defined in these rules, and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014, shall have the same meanings respectively assigned to them in the Act or in the said rules.

CHAPTER II

ELIGIBILITY, QUALIFICATIONS AND REGISTRATION OF VALUERS

Eligibility for registered valuers

3. (1) A person shall be eligible to be a registered valuer if he-

(a) is a valuer member of a registered valuers organisation;
Explanation.─ For the purposes of this clause, “a valuer member” is a member of a registered valuers organisation who possesses the requisite educational qualifications and experience for being registered as a valuer;
(b) is recommended by the registered valuers organisation of which he is a valuer member for registration as a valuer;
(c) has passed the valuation examination under rule 5 within three years preceding the date of making an application for registration under rule 6;
(d) possesses the qualifications and experience as specified in rule 4;
(e) is not a minor;
(f) has not been declared to be of unsound mind;
(g) is not an undischarged bankrupt, or has not applied to be adjudicated as a bankrupt;
(h) is a person resident in India;
Explanation.─ For the purposes of these rules ‘person resident in India’ shall have the same meaning as defined in clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999) as far as it is applicable to an individual;
(i) has not been convicted by any competent court for an offence punishable with imprisonment for a term exceeding six months or for an offence involving moral turpitude, and a period of five years has not elapsed from the date of expiry of the sentence:
Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be registered;
(j) has not been levied a penalty under section 271J of Income-tax Act, 1961 (43 of 1961) and time limit for filing appeal before Commissioner of Income-tax (Appeals) or Income-tax Appellate Tribunal, as the case may be has expired, or such penalty has been confirmed by Income-tax Appellate Tribunal, and five years have not elapsed after levy of such penalty; and
(k) is a fit and proper person:

Explanation.─ For determining whether an individual is a fit and proper person under these rules, the authority may take account of any relevant consideration, including but not limited to the following criteria-

(i) integrity, reputation and character,
(ii) absence of convictions and restraint orders, and
(iii) competence and financial solvency.

(2) No partnership entity or company shall be eligible to be a registered valuer if-

(a) it has been set up for objects other than for rendering professional or financial services, including valuation services and that in the case of a company, it is not a subsidiary, joint venture or associate of another company or body corporate;
(b) it is undergoing an insolvency resolution or is an undischarged bankrupt;
(c) all the partners or directors, as the case may be, are not ineligible under clauses (c), (d), (e), (g), (h), (i), (j) and (k) of sub-rule (1);
(d) three or all the partners or directors, whichever is lower, of the partnership entity or company, as the case may be, are not registered valuers; or
(e) none of its partners or directors, as the case may be, is a registered valuer for the asset class, for the valuation of which it seeks to be a registered valuer.

Qualifications and experience

4. An individual shall have the following qualifications and experience to be eligible for registration under rule 3, namely:-

(a) post-graduate degree or post-graduate diploma, in the specified discipline, from a University or Institute established, recognised or incorporated by law in India and at least three years of experience in the specified discipline thereafter; or
(b) a Bachelor’s degree or equivalent, in the specified discipline, from a University or Institute established, recognised or incorporated by law in India and at least five years of experience in the specified discipline thereafter; or
(c) membership of a professional institute established by an Act of Parliament enacted for the purpose of regulation of a profession with at least three years’ experience after such membership and having qualification mentioned at clause (a) or (b).

Explanation-I─ For the purposes of this clause the ‘specified discipline’ shall mean the specific discipline which is relevant for valuation of an asset class for which the registration as a valuer or recognition as a registered valuers organisation is sought under these rules.

Explanation-II.─ Qualifying education and experience and examination or training for various asset classes, is given in an indicative manner in Annexure-IV of these rules.

Valuation Examination

5. (1) The authority shall, either on its own or through a designated agency, conduct valuation examination for one or more asset classes, for individuals, who possess the qualifications and experience as specified in rule 4, and have completed their educational courses as member of a registered valuers organisation, to test their professional knowledge, skills, values and ethics in respect of valuation:

Provided that the authority may recognise an educational course conducted by a registered valuers organisation before its recognition as adequate for the purpose of appearing for valuation examination:

Provided also that the authority may recognise an examination conducted as part of a master’s or post graduate degree course conducted by a University which is equivalent to the valuation examination.

(2) The authority shall determine the syllabus for various valuation specific subjects or assets classes for the valuation examination on the recommendation of one or more Committee of experts constituted by the authority in this regard.

(3) The syllabus, format and frequency of the valuation examination, including qualifying marks, shall be published on the website of the authority at least three months before the examination.

(4) An individual who passes the valuation examination, shall receive acknowledgement of passing the examination.

(5) An individual may appear for the valuation examination any number of times.

Application for certificate of registration

6. (1) An individual eligible for registration as a registered valuer under rule 3 may make an application to the authority in Form-A of Annexure-II along with a non-refundable application fee of five thousand rupees in favour of the authority.

(2) A partnership entity or company eligible for registration as a registered valuer under rule 3 may make an application to the authority in Form-B of Annexure-II along with a non-refundable application fee of ten thousand rupees in favour of the authority .

(3) The authority shall examine the application, and may grant twenty one days to the applicant to remove the deficiencies, if any, in the application.

(4) The authority may require the applicant to submit additional documents or clarification within twenty- one days.

(5) The authority may require the applicant to appear, within twenty one days, before the authority in person, or through its authorised representative for explanation or clarifications required for processing the application.

(6) If the authority is satisfied, after such scrutiny, inspection or inquiry as it deems necessary, that the applicant is eligible under these rules, it may grant a certificate of registration to the applicant to carry on the activities of a registered valuer for the relevant asset class or classes in Form-C of the Annexure-II within sixty days of receipt of the application, excluding the time given by the authority for presenting additional documents, information or clarification, or appearing in person, as the case may be.

(7) If, after considering an application made under this rule, the authority is of the prima facie opinion that the registration ought not be granted, it shall communicate the reasons for forming such an opinion within forty-five days of receipt of the application, excluding the time given by it for removing the deficiencies, presenting additional documents or clarifications, or appearing in person, as the case may be.

(8) The applicant shall submit an explanation as to why his/its application should be accepted within fifteen days of the receipt of the communication under sub- rule (7), to enable the authority to form a final opinion.

(9) After considering the explanation, if any, given by the applicant under sub-rule (8), the authority shall either -

(a) accept the application and grant the certificate of registration; or
(b) reject the application by an order, giving reasons thereof.

(10) The authority shall communicate its decision to the applicant within thirty days of receipt of explanation.

Conditions of Registration

7. The registration granted under rule 6 shall be subject to the conditions that the valuer shall -

(a) at all times possess the eligibility and qualification and experience criteria as specified under rule 3 and rule 4;
(b) at all times comply with the provisions of the Act , these rules and the Bye-laws or internal regulations, as the case may be, of the respective registered valuers organisation;
(c) in his capacity as a registered valuer, not conduct valuation of the assets or class(es) of assets other than for which he/it has been registered by the authority;
(d) take prior permission of the authority for shifting his/ its membership from one registered valuers organisation to another;
(e) take adequate steps for redressal of grievances;
(f) maintain records of each assignment undertaken by him for at least three years from the completion of such assignment;
(g) comply with the Code of Conduct (as per Annexure-I of these rules) of the registered valuers organisation of which he is a member;
(h) in case a partnership entity or company is the registered valuer, allow only the partner or director who is a registered valuer for the asset class(es) that is being valued to sign and act on behalf of it;
(i) in case a partnership entity or company is the registered valuer, it shall disclose to the company concerned, the extent of capital employed or contributed in the partnership entity or the company by the partner or director, as the case may be, who would sign and act in respect of relevant valuation assignment for the company;
(j) in case a partnership entity is the registered valuer, be liable jointly and severally along with the partner who signs and acts in respect of a valuation assignment on behalf of the partnership entity;
(k) in case a company is the registered valuer, be liable alongwith director who signs and acts in respect of a valuation assignment on behalf of the company;
(l) in case a partnership entity or company is the registered valuer, immediately inform the authority on the removal of a partner or director, as the case may be, who is a registered valuer along with detailed reasons for such removal; and
(m) comply with such other conditions as may be imposed by the authority.

Conduct of Valuation

8. (1) The registered valuer shall, while conducting a valuation, comply with the valuation standards as notified or modified under rule 18:

Provided that until the valuation standards are notified or modified by the Central Government, a valuer shall make valuations as per-

(a) internationally accepted valuation standards;
(b) valuation standards adopted by any registered valuers organisation.

(2) The registered valuer may obtain inputs for his valuation report or get a separate valuation for an asset class conducted from another registered valuer, in which case he shall fully disclose the details of the inputs and the particulars etc. of the other registered valuer in his report and the liabilities against the resultant valuation, irrespective of the nature of inputs or valuation by the other registered valuer, shall remain of the first mentioned registered valuer.

(3) The valuer shall, in his report, state the following:-

(a) background information of the asset being valued;
(b) purpose of valuation and appointing authority;
(c) identity of the valuer and any other experts involved in the valuation;
(d) disclosure of valuer interest or conflict, if any;
(e) date of appointment, valuation date and date of report;
(f) inspections and/or investigations undertaken;
(g) nature and sources of the information used or relied upon;
(h) procedures adopted in carrying out the valuation and valuation standards followed;
(i) restrictions on use of the report, if any;
(j) major factors that were taken into account during the valuation;
(k) conclusion; and
(l) caveats, limitations and disclaimers to the extent they explain or elucidate the limitations faced by valuer, which shall not be for the purpose of limiting his responsibility for the valuation report.

Temporary surrender

9. (1) A registered valuer may temporarily surrender his registration certificate in accordance with the bye-laws or regulations, as the case may be, of the registered valuers organisation and on such surrender, the valuer shall inform the authority for taking such information on record.

(2) A registered valuers organisation shall inform the authority if any valuer member has temporarily surrendered his/its membership or revived his/ its membership after temporary surrender, not later than seven days from approval of the application for temporary surrender or revival, as the case may be.

(3) Every registered valuers organisation shall place, on its website, in a searchable format, the names and other details of its valuers members who have surrendered or revived their memberships.

Functions of a Valuer

10. A valuer shall conduct valuation required under the Act as per these rules and he may conduct valuation as per these rules if required under any other law or by any other regulatory authority.

Transitional Arrangement

11. Any person who may be rendering valuation services under the Act, on the date of commencement of these rules, may continue to render valuation services without a certificate of registration under these rules upto 31st March, 2018:

Provided that if a company has appointed any valuer before such date and the valuation or any part of it has not been completed before 31st March, 2018, the valuer shall complete such valuation or such part within three months thereafter.

Explanation.─ It is hereby clarified that conduct of valuation by any person under any law other than the Act, or these rules shall not be effected by virtue of coming into effect of these rules unless the relevant other laws or other regulatory bodies require valuation by such person in accordance with these rules in which case these rules shall apply for such valuation also from the date specified under the laws or by the regulatory bodies.

CHAPTER III

RECOGNITION OF REGISTERED VALUERS ORGANISATIONS

Eligibility for registered valuers organisations

12. (1) An organisation that meets requirements under sub-rule (2) may be recognised as a registered valuers organisation for valuation of a specific asset class or asset classes if ─

(i) it has been registered under section 25 of the Companies Act, 1956 (1 of 1956) or section 8 of the Companies Act, 2013 (18 of 2013) with the sole object of dealing with matters relating to regulation of valuers of an asset class or asset classes and has in its bye laws the requirements specified in Annexure-III;
(ii) a professional institute established by an Act of Parliament enacted for the purpose of regulation of a profession;

Provided that, subject to sub-rule (3), the following organisations may also be recognised as a registered valuers organisation for valuation of a specific asset class or asset classes, namely:-

(a) an organisation registered as a society under the Societies Registration Act, 1860 (21 of 1860) or any relevant state law, or;
(b) an organisation set up as a trust governed by the Indian Trust Act, 1882 (2 of 1882).

(2) The organisation referred to in sub-rule (1) shall be recognised if it –

(a) conducts educational courses in valuation, in accordance with the syllabus determined by the authority, under rule 5, for individuals who may be its valuers members, and delivered in class room or through distance education modules and which includes practical training;
(b) grants membership or certificate of practice to individuals, who possess the qualifications and experience as specified in rule 4, in respect of valuation of asset class for which it is recognised as a registered valuers organisation ;
(c) conducts training for the individual members before a certificate of practice is issued to them;
(d) lays down and enforces a code of conduct for valuers who are its members, which includes all the provisions specified in Annexure-I;
(e) provides for continuing education of individuals who are its members;
(f) monitors and reviews the functioning, including quality of service, of valuers who are its members; and
(g) has a mechanism to address grievances and conduct disciplinary proceedings against valuers who are its members.

(3) A registered valuers organisation, being an entity under proviso to sub-rule (1), shall convert into or register itself as a company under section 8 of the Companies Act, 2013 (18 of 2013), and include in its bye laws the requirements specified in Annexure- III, within one year from the date of commencement of these rules.

Application for recognition

13. (1) An eligible organisation which meets the conditions specified in rule 12 may make an application for recognition as a registered valuers organisation for asset class or classes to the authority in Form-D of the Annexure-II alongwith a non-refundable application fee of rupees one lakh in favour of the authority.

(2) The authority shall examine the application, and may grant twenty-one days to the applicant to remove the deficiencies, if any, in the application.

(3) The authority may require the applicant to submit additional documents or clarification within twenty-one days.

(4) The authority may require the applicant to appear, within twenty-one days, before the Authority through its authorised representative for explanation or clarifications required for processing the application.

(5) If the authority is satisfied, after such scrutiny, inspection or inquiry as it deems necessary that the applicant is eligible under these rules, it may grant a certificate of recognition as a registered valuers organisation in Form-E of Annexure-II.

(6) If, after considering an application made under sub-rule (1), the authority is of the prima facie opinion that recognition ought not to be granted, it shall communicate the reasons for forming such an opinion within forty-five days of receipt of the application, excluding the time given by it for removing the deficiencies, presenting additional documents or clarifications, or appearing through authorised representative, as the case may be.

(7) The applicant shall submit an explanation as to why its application should be accepted within fifteen days of the receipt of the communication under sub- rule (6), to enable the authority to form a final opinion.

(8) After considering the explanation, if any, given by the applicant under sub- rule (7), the authority shall either -

(a) accept the application and grant the certificate of recognition; or
(b) reject the application by an order, giving reasons thereof.

(9) The authority shall communicate its decision to the applicant within thirty days of receipt of explanation.

Conditions of Recognition

14. The recognition granted under rule 13 shall be subject to the conditions that the registered valuers organisation shall-

(a) at all times continue to satisfy the eligibility requirements specified under rule 12;
(b) maintain a register of members who are registered valuers, which shall be publicly available;
(c) admits only individuals who possess the educational qualifications and experience requirements, in accordance with rule 4 and as specified in its recognition certificate, as members;
(d) make such reports to the authority as may be required by it;
(e) comply with any directions, including with regard to course to be conducted by valuation organisation under clause (a) of sub-rule (2) of rule 12, issued by the authority;
(f) be converted or registered as company under section 8 of the Act, with governance structure and bye laws specified in Annexure-III, within a period of one year from the date of commencement of these rules if it is an organisation referred to in proviso to sub-rule (1) of rule 12;
(g) shall have the governance structure and incorporate in its bye laws the requirements specified in Annexure-III within one year of commencement of these rules if it is an organisation referred to in clause (i) of sub-rule (1) of rule 12 and existing on the date of commencement of these rules;
(h) display on its website, the status and specified details of every registered valuer being its valuer members including action under rule 17 being taken against him; and
(i) comply with such other conditions as may be specified by authority.

CHAPTER IV

CANCELLATION OR SUSPENSION OF CERTIFICATE OF REGISTRATION OR RECOGNITION

Cancellation or suspension of certificate of registration or recognition

15. The authority may cancel or suspend the registration of a valuer or recognition of a registered valuers organisation for violation of the provisions of the Act, any other law allowing him to perform valuation, these rules or any condition of registration or recognition, as the case may be in the manner specified in rule 17.

Complaint against a registered valuer or registered valuers organisation

16. A complaint may be filed against a registered valuer or registered valuers organisation before the authority in person or by post or courier along with a non-refundable fees of rupees one thousand in favour of the authority and the authority shall examine the complaint and take such necessary action as it deems fit:

Provided that in case of a complaint against a registered valuer, who is a partner of a partnership entity or director of a company, the authority may refer the complaint to the relevant registered valuers organisation and such organisation shall handle the complaint in accordance with its bye laws.

Procedure to be followed for cancellation or suspension of registration or recognition certificate

17. (1) Based on the findings of an inspection or investigation, or a complaint received or on material otherwise available on record, if the authorised officer is of the prima facie opinion that sufficient cause exists to cancel or suspend the registration of a valuer or cancel or suspend the recognition of a registered valuers organisation, it shall issue a show-cause notice to the valuer or registered valuers organisation,:

Provided that in case of an organisation referred to in clause (ii) of sub-rule (1) of rule 12 which has been granted recognition, the authorised officer shall, instead of carrying out inspection or investigation, seek the information required from the registered valuers organisation within the time specified therein and in the case of a default, give one more opportunity to provide the information within specified time failing which or in the absence of sufficient or satisfactory information provided, either initiate the process under this rule or refer the matter to the Central Government for appropriate directions.

(2) The show-cause notice shall be in writing and shall state-

(a) the provisions of the Act and rules under which it has been issued;
(b) the details of the alleged facts;
(c) the details of the evidence in support of the alleged facts;
(d) the provisions of the Act or rules or certificate of registration or recognition allegedly violated, or the manner in which the public interest has allegedly been affected;
(e) the actions or directions that the authority proposes to take or issue if the allegations are established;
(f) the manner in which the person is required to respond to the show-cause notice;
(g) consequences of failure to respond to the show-cause notice within the given time; and
(h) procedure to be followed for disposal of the show-cause notice.

(3) The show-cause notice shall be served in the following manner by-

(a) sending it to the valuer or registered valuers organisation at its registered address by registered post with acknowledgment due; or
(b) an appropriate electronic means to the email address provided by the valuer or registered valuers organisation to the authority.

(4) The authorised officer shall dispose of the show-cause notice by reasoned order in adherence to the principles of natural justice.

(5) The order in disposal of a show-cause notice may provide for-

(a) no action;
(b) warning; or
(c) suspension or cancellation of the registration or recognition; or
(d) change in any one or more partner or director or the governing board of the registered valuers organisation.

(6) An order passed under sub-rule (5) cancelling the recognition of a registered valuers organisation, shall specify the time within which its members may take membership of another registered valuers organisation recognised for valuation of relevant asset class without prejudice to their registration.

(7) The order passed under sub-rule (5) shall be issued to the concerned person immediately, and published on the website of the authority.

(8) The order passed under sub-rule (5) shall not become effective until thirty days have elapsed from the date of issue of the order unless stated otherwise.

(9) Any person aggrieved by an order of the authorised officer under sub-rule (5) may prefer an appeal before the authority.

Explanation.─ For the purposes of this rule, the authorised officer shall be an officer as may be specified by the authority.

CHAPTER V

VALUATION STANDARDS

Valuation Standards

18. The Central Government shall notify and may modify (from time to time) the valuation standards on the recommendations of the Committee set up under rule 19.

Committee to advise on valuation matters

19. (1) The Central Government may constitute a Committee to be known as “Committee to advise on valuation matters” to make recommendations on formulation and laying down of valuation standards and policies for compliance by companies and registered valuers.

(2) The Committee shall comprise of-

(a) a Chairperson who shall be a person of eminence and well versed in valuation, accountancy, finance, business administration, business law, corporate law, economics;
(b) one member nominated by the Ministry of Corporate Affairs;
(c) one member nominated by the Insolvency and Bankruptcy Board of India;
(d) one member nominated by the Legislative Department;
(e) upto four members nominated by Central Government representing authorities which are allowing valuations by registered valuers;
(f) upto four members who are representatives of registered valuers organisations, nominated by Central Government.
(g) upto two members to represent industry and other stakeholder nominated by the Central Government in consultation with the authority;

(3) The Chairperson and Members of the Committee shall have a tenure of three years and they shall not have more than two tenures.

CHAPTER VI

MISCELLANEOUS

Punishment for contravention

20. Without prejudice to any other liabilities where a person contravenes any of the provision of these rules he shall be punishable in accordance with sub-section (3) of section 469 of the Act.

Punishment for false statement

21. If in any report, certificate or other document required by, or for, the purposes of any of the provisions of the Act or the rules made thereunder or these rules, any person makes a statement,—

(a) which is false in any material particulars, knowing it to be false; or
(b) which omits any material fact, knowing it to be material, he shall be liable under section 448 of the Act.

ANNEXURE-I

MODEL CODE OF CONDUCT FOR REGISTERED VALUERS

(See clause (g) of rule 7 and clause (d) of sub-rule (2) of rule 12)

Integrity and Fairness

1. A valuer shall, in the conduct of his/its business, follow high standards of integrity and fairness in all his/its dealings with his/its clients and other valuers.
2. A valuer shall maintain integrity by being honest, straightforward, and forthright in all professional relationships.
3. A valuer shall endeavour to ensure that he/it provides true and adequate information and shall not misrepresent any facts or situations.
4. A valuer shall refrain from being involved in any action that would bring disrepute to the profession.
5. A valuer shall keep public interest foremost while delivering his services.
Professional Competence and Due Care
6. A valuer shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgment.
7. A valuer shall carry out professional services in accordance with the relevant technical and professional standards that may be specified from time to time
8. A valuer shall continuously maintain professional knowledge and skill to provide competent professional service based on up-to-date developments in practice, prevailing regulations/guidelines and techniques.
9. In the preparation of a valuation report, the valuer shall not disclaim liability for his/its expertise or deny his/its duty of care, except to the extent that the assumptions are based on statements of fact provided by the company or its auditors or consultants or information available in public domain and not generated by the valuer.
10. A valuer shall not carry out any instruction of the client insofar as they are incompatible with the requirements of integrity, objectivity and independence.
11. A valuer shall clearly state to his client the services that he would be competent to provide and the services for which he would be relying on other valuers or professionals or for which the client can have a separate arrangement with other valuers.
Independence and Disclosure of Interest
12. A valuer shall act with objectivity in his/its professional dealings by ensuring that his/its decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the valuation assignment or not.
13. A valuer shall not take up an assignment if he/it or any of his/its relatives or associates is not independent in terms of association to the company.
14. A valuer shall maintain complete independence in his/its professional relationships and shall conduct the valuation independent of external influences.
15. A valuer shall wherever necessary disclose to the clients, possible sources of conflicts of duties and interests, while providing unbiased services.
16. A valuer shall not deal in securities of any subject company after any time when he/it first becomes aware of the possibility of his/its association with the valuation, and in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 or till the time the valuation report becomes public, whichever is earlier.
17. A valuer shall not indulge in “mandate snatching” or offering “convenience valuations” in order to cater to a company or client’s needs.
18. As an independent valuer, the valuer shall not charge success fee.
19. In any fairness opinion or independent expert opinion submitted by a valuer, if there has been a prior engagement in an unconnected transaction, the valuer shall declare the association with the company during the last five years.
Confidentiality
20. A valuer shall not use or divulge to other clients or any other party any confidential information about the subject company, which has come to his/its knowledge without proper and specific authority or unless there is a legal or professional right or duty to disclose.
Information Management
21. A valuer shall ensure that he/ it maintains written contemporaneous records for any decision taken, the reasons for taking the decision, and the information and evidence in support of such decision. This shall be maintained so as to sufficiently enable a reasonable person to take a view on the appropriateness of his/its decisions and actions.
22. A valuer shall appear, co-operate and be available for inspections and investigations carried out by the authority, any person authorised by the authority, the registered valuers organisation with which he/it is registered or any other statutory regulatory body.
23. A valuer shall provide all information and records as may be required by the authority, the Tribunal, Appellate Tribunal, the registered valuers organisation with which he/it is registered, or any other statutory regulatory body.
24. A valuer while respecting the confidentiality of information acquired during the course of performing professional services, shall maintain proper working papers for a period of three years or such longer period as required in its contract for a specific valuation, for production before a regulatory authority or for a peer review. In the event of a pending case before the Tribunal or Appellate Tribunal, the record shall be maintained till the disposal of the case.
Gifts and hospitality.
25. A valuer or his/its relative shall not accept gifts or hospitality which undermines or affects his independence as a valuer.
Explanation.─ For the purposes of this code the term ‘relative’ shall have the same meaning as defined in clause (77) of Section 2 of the Companies Act, 2013 (18 of 2013).
26. A valuer shall not offer gifts or hospitality or a financial or any other advantage to a public servant or any other person with a view to obtain or retain work for himself/ itself, or to obtain or retain an advantage in the conduct of profession for himself/ itself.
Remuneration and Costs.
27. A valuer shall provide services for remuneration which is charged in a transparent manner, is a reasonable reflection of the work necessarily and properly undertaken, and is not inconsistent with the applicable rules.
28. A valuer shall not accept any fees or charges other than those which are disclosed in a written contract with the person to whom he would be rendering service.
Occupation, employability and restrictions.
29. A valuer shall refrain from accepting too many assignments, if he/it is unlikely to be able to devote adequate time to each of his/ its assignments.
30. A valuer shall not conduct business which in the opinion of the authority or the registered valuer organisation discredits the profession.

ANNEXURE-II

FORM-A

(See sub-rule (1) of rule 6)

Application for registration as a valuer by an individual

To

The Authority

[Insert address]

From

[Name and address]

Subject: Application for registration as a valuer

Sir/Madam,

I, having been enrolled as a member with the (please write the name of the Registered valuers organisation), hereby apply for registration as a valuer under section 247 of the Companies Act, 2013 read with sub-rule (1) of rule 6 of the Companies (Registered Valuers and Valuation) Rules, 2017 for the following class(es) of assets:-

(a) ………………

(b) ………………

My details are as under:

A. PERSONAL DETAILS

1. Title (Mr/Mrs/Ms):
2. Name:
3. Father’s Name:
4. Mother’s Name:
5. Date of Birth:
6. PAN No.:
7. AADHAAR No.:
8. Passport No.:
9. Address for Correspondence:
10. Permanent Address:
11. E-Mail Address
12. Mobile No:

B. EDUCATIONAL, PROFESSIONAL AND VALUATION EXAMINATION QUALIFICATIONS

1. Educational Qualifications

[Please provide educational qualifications from Bachelor's degree onwards]
Educational Qualification Year of Passing Marks (Per cent.) Grade/ Class University/College Remarks, if any

2. Professional Qualifications [excluding valuation specific courses]

Professional Qualification [exncluding valuation specific education/courses] Institute/ Professional Body Membership No. (if applicable) Date of enrolment Remarks, if any

3(a) Details of valuation examination passed (for all partners/directors who are registered valuers)

Date of examination Asset class, if any Marks secured Percentage

3(b) Valuation Qualifications (for all partners/directors who are registered valuers)

Valuation specific qualification/course Recognised Registered Valuers Organisation Asset class Membership No. in Registered Valuers Organisation Remarks, if any.
Name Recognition No

C. WORK EXPERIENCE

1. Are you presently in practice/employment? (Yes or No)
2. Number of years in practice or of work experience in the relevant profession or in valuation (in years and months):
3. If in practice, address for professional correspondence:
4. Number of years in employment (in years and months):
5. Experience Details
Sl. No. From Date To Date Employment/ Practice If employed, Name of Employer and Designation If in practice, experience in the relevant profession/ valuation Area of work

D. REGISTERED VALUERS ORGANISATION

1. Please give details of the registered valuers organisation of which you are a member.
2. Please state your membership number.

E. ADDITIONAL INFORMATION

1. Have you ever been convicted for an offence? Yes or No. If yes, please give details.
2. Are any criminal proceedings pending against you? (Yes or No) If yes, please give details.
3. Have you ever been declared as an undischarged bankrupt, or applied to be adjudged as Bankrupt? (Yes or No)
If yes, please give details.
4. Please provide any additional information that may be relevant for your application.

F. ATTACHMENTS

1. Copy of proof of residence.
2. Copies of documents in support of educational qualifications, professional qualifications and Registered Valuation Examination qualifications.
3. Copies of documents demonstrating practice or work experience for the relevant period.
4. Copies of certificate of employment by the relevant employer(s), specifying the period of such employment.
5. Income Tax Returns for the last three years.
6. Copy of proof of membership with a registered valuers organisation.
7. Passport-size photo.
8. Evidence of deposit/payment of five thousand rupees.

G. AFFIRMATIONS

1. Copies of documents, as listed in section F of this application form have been attached/ uploaded. The documents attached/ uploaded are ……
I undertake to furnish any additional information as and when called for.
2. I am not disqualified from being registered as a valuer under the Companies (Registered Valuers and Valuation) Rules, 2017.
3. This application and the information furnished by me along with this application is true and complete. If found false or misleading at any stage, my registration shall be summarily cancelled.

I hereby undertake to comply with the requirements of the Companies Act, 2013, the rules made thereunder, the directions given by the authority, and the bye-laws, directions and guidelines issued or the resolutions passed in accordance with the bye-laws by the registered valuers organisation with which I am enrolled.

4. The applicable fee has been paid.

Name and Signature of applicant

Place:

Date:

………………………………………………………………

VERIFICATION BY THE REGISTERED VALUERS ORGANISATION

We have verified the above details submitted by … who is our member with membership no. … and confirm these to be true and correct. We recommend registration of … as a valuer.

(Name and Signature)

Authorised Representative of the Registered Valuers Organisation

Seal of the Registered Valuers Organisation

Place:

Date:

FORM-B

(See sub-rule (2) of rule 6)

Application for registration as a valuer by a partnership entity/Company

To

The Authority,

[Insert address]

From

[Name and address]

Subject: Application for registration as a valuer

Sir/Madam,

I, being a partner/director (strike off whichever is not applicable), being duly authorised for the purpose by the partnership entity/company through a resolution/deed (strike out whichever is not applicable) apply on behalf of [ name and address of applicant partnership entity/company], and on behalf of its partners/directors, for registration as a valuer under section 247 of the Companies Act, 2013 read with sub-rule (2) of rule 6 of the Companies (Registered Valuers and Valuation) Rules, 2017 for the following class(es) of assets :-

(a) ………………

(b) ………………

The details are as under:

A. DETAILS OF THE PARTNERSHIP ENTITY/COMPANY

1. Name:
2. Registration Number/ LLP Number/CIN Number:
3. PAN No.:
4. Address for Correspondence or registered office:
5. Permanent Address:
6. E-Mail Address
7. Telephone No.:
8. Others:

B. PERSONAL DETAILS OF EACH PARTNER/DIRECTOR

Title (Mr/Mrs/Ms):

1. Name:
2. Father’s Name:
3. Mother’s Name:
4. Date of Birth:
5. PAN No.:
6. AADHAAR No.:
7. Passport No.:
8. Address for Correspondence:
9. Permanent Address:
10. E-Mail Address
11. Mobile No.:
12. Others:

C. EDUCATIONAL, PROFESSIONAL AND VALUATION EXAMINATION QUALIFICATIONS OF PARTNERS/ DIRECTORS

1. Educational Qualifications

[Please provide educational qualifications from Bachelor's degree onwards for each partner/director]
Educational Qualification Year of Passing Marks (per cent.) Grade/ Class University/College Remarks, if any

2. Professional Qualifications for each partner/director

Professional Qualification Institute/ Professional Body/ registered valuers organization Membership No. (if applicable) Date of enrolment Remarks, if any

3(a) Details of valuation examination passed (for all partners/directors who are registered valuers)

Date of examination Asset class, if any Marks secured Per centage

3(b) Valuation Qualifications (for all partners/directors who are registered valuers)

Valuation specific qualification/course Recognised Registered Valuers Organisation Asset class Membership No. in Registered Valuers Organisation Remarks, if any.
Name Recognition No

D. REGISTERED VALUERS ORGANISATION

1. Please give details of the registered valuers organisation of which you are a member. Please state your membership number.
2. Please give details of the registered valuers organisations of which your partners are members. Please state your membership number.

E. ADDITIONAL INFORMATION

1. Have you or any of your partners/directors ever been convicted for an offence? (Yes or No).
If yes, please give details.
2. Are any criminal proceedings pending against you or your partners/directors? (Yes or No)
If yes, please give details.
3. Are you or any of your partners/directors undischarged bankrupt, or have applied to be adjudged as a bankrupt? (Yes or No)
If yes, please give details.
4. Please provide any additional information that may be relevant for your application.

F. ATTACHMENTS

1. Copy of proof of residence of itself and its partners/directors.
2. Copies of documents in support of educational qualifications, professional qualifications and valuation qualifications of partners/directors.
3. Financial statements/ Income Tax Returns for the last three years.
4. Copy of proof of membership with a registered valuers organisation .
5. Passport-size photo.
6. Evidence of deposit/payment of ten thousand rupees.

G. AFFIRMATIONS

1. Copies of documents, as listed in section F of this application form have been attached/ uploaded. The documents attached/ uploaded are ……
I undertake to furnish any additional information as and when called for.
2. I am not disqualified from being registered as a valuer under the Companies (Registered Valuers and Valuation) Rules, 2017.
3. This application and the information furnished by me along with this application is true and complete. If found false or misleading at any stage, the registration of the applicant shall be summarily cancelled.
4. I hereby undertake that the partnership entity/company and its partners/directors shall comply with the requirements of the Companies Act, 2013, the rules made thereunder, the directions given by the authority, and the bye-laws, directions and guidelines issued or the resolutions passed in accordance with the bye-laws by the registered valuers organisation with which I am enrolled.
5. The applicable fee has been paid.

Name and Signature of applicant’s representative

Place:

Date:

………………………………………………………..

VERIFICATION BY THE REGISTERED VALUERS ORGANISATION

We have verified the above details submitted by … who is our member with membership no. … and confirm these to be true and correct. We recommend registration of … as a valuer.

(Name and Signature)

Authorised Representative of the Registered Valuers Organisation

Seal of the Registered Valuers Organisation

Place:

Date:

FORM-C

(See sub-rule (6) of rule 6)

CERTIFICATE OF REGISTRATION

Valuer Registration No. __

1. In exercise of the powers conferred by Section 247 of the Companies Act, 2013 read with sub-rule (6) of rule 6 of the Companies (Registered Valuers and Valuation) Rules, 2017 the Authority hereby grants a certificate of registration to [insert name], to act as a valuer in respect of [insert asset class] in accordance with these rules.
2. This certificate shall be valid from [insert start date].

(Name and Designation) For and on behalf of the Authority

Place :

Date:

APPENDIX

FORM-D

(See sub-rule (1) of rule 13)

Application for Recognition

To

The Authority

[Insert address]

From

[Name and address]

Subject: Application for grant of certificate of recognition as a registered valuers organisation

Madam/Sir,

1. I, being duly authorised for the purpose, hereby apply on behalf of [name and address of the applicant] for grant of certificate of recognition as a registered valuers organisation in respect of the following class(es) of assets:
(a)
(b)
and enclose a copy of the board resolution authorising me to make this application and correspond with the authority in this respect.
2. Copies of the articles of association, memorandum of association, trust deed, bye-laws and code of conduct, as applicable, of the applicant are enclosed.
3. I, on behalf of [insert name], affirm that the applicant is eligible to be recognised as a registered valuers organisation for the abovementioned class(es) of assets.
4. I, on behalf of [insert name], hereby affirm that –
(a) all information contained in this application is true and correct in all material respects,
(b) no material information relevant for the purpose of this application has been suppressed, and
(c) recognition granted in pursuance of this application may be cancelled summarily if any information submitted is found to be false or misleading in material respects at any stage.
5. If granted recognition, I, on behalf of [insert name], undertake to comply with the requirements of the Act, the rules, directions or guidelines issued by the authority, and such other conditions and terms as may be contained in the certificate of recognition or be specified or imposed by the authority subsequently, including the requirement to convert into a company registered under section 8 of the Companies Act, 2013 within the required period, if applicable.

Yours faithfully,

Authorised Signatory

(Name)

(Designation)

Date :

Place :

APPENDIX TO FORM-D

PART I

GENERAL

1. Name of the applicant.
2. Address of registered office and principal place of business of the applicant.
3. Corporate Identification Number (CIN)/ PAN/ Other Identification Number.
4. Name, designation and contact details of the person authorised to make this application and correspond with the authority in this respect.

PART II

STRUCTURE AND GOVERNANCE

1. Please provide brief details of the applicant’s-
(i) form of establishment
(ii) ownership structure
(iii) governance structure

PART III MEMBERSHIP AND EXAMINATION

1. Please provide brief details of the
(i) number of members who practice valuation and are already registered with the applicant
(ii) specific discipline (in terms of rule 4):
(iii) other criteria/ qualifications for and manner of registration with the applicant
Note: In case of organisations referred to in clause (ii) of sub-rule (1) of rule 12, in lieu of information at (i), they may provide brief details of the number of members who have passed the valuation specific course conducted by the organisation.
2. Please provide brief details of any examination conducted for registration of members with the applicant.
3. Please provide brief details of the requirements of continuous education of the applicant’s members.

PART IV

CODE OF CONDUCT

1. Please state if the Code of Conduct of the applicant is in compliance with the Companies (Registered Valuers and Valuation) Rules, 2017.
2. Please specify the clause number of the provisions of the Code of Conduct which are in addition to the provisions of the model Code of Conduct specified in the Companies (Registered Valuers and Valuation) Rules, 2017 (if any).

PART V

MONITORING AND DISCIPLINE

1. Please provide details mechanisms employed by the applicant to monitor its members.
2. Please provide details of mechanisms employed by the applicant to redress grievances against its members and itself.
3. Please provide details of disciplinary mechanisms employed by the applicant. Please provide any other details you consider relevant in support of the application.

Authorised Signatory

(Name)

(Designation)

Date :
Place :

FORM-E

(See sub-rule (5) of rule 13)

CERTIFICATE OF RECOGNITION REGISTERED VALUERS ORGANISATION Recognition No. __

1. In exercise of the powers conferred by sub-rule (5) of rule 13 of the Companies (Registered Valuers and Valuation) Rules, 2017 the Registration hereby grants a certificate recognising [insert name], as a registered valuers organisation for the valuation of [insert class(es) of assets].
Conditions of Recognition
2. [Insert Name] shall admit as members who possess the educational qualifications and experience as specified herein under:
3. Conditions as laid down in rule 14 [give in detail]
4. This certificate of recognition shall be valid from [insert start date].

(Name and Designation)

(Name and Designation) For and on behalf of the Authority

Place :

Date:

ANNEXURE – III

(See sub-rule (3) of rule 12 and clauses (f) and (g) of rule 14)

Governance Structure and Model Bye Laws for registered valuers organisation

Part I

1. Governance Structure

No person shall be eligible to be recognised as an registered valuers organisation unless it is a company registered under section 8 of the Companies Act, 2013 with share capital, and –

(a) its sole object is to carry on the functions of a registered valuers organisation under the Companies Act, 2013;
(b) it is not under the control of person(s) resident outside India,
(c) not more than forty-nine per cent. of its share capital is held, directly or indirectly, by persons resident outside India; and
(d) it is not a subsidiary of a body corporate through more than one layer: Explanation: “layer” in relation to a body corporate means its subsidiary;
(e) itself, its promoters, its directors and persons holding more than ten percent. of its share capital are fit and proper persons.

2. REGISTERED VALUERS ORGANISATION TO HAVE BYE-LAWS

(1) The registered valuers organisation shall submit to the authority its bye-laws along with the application for its registration as a registered valuers organisation.
(2) The bye-laws shall provide for all matters specified in the model bye-laws in Part II.
(3) The bye-laws shall at all times be consistent with the model bye-laws.
(4) The registered valuers organisation shall publish its bye-laws, the composition of all committees formed, and all policies created under the bye-laws on its website.

3. AMENDMENT OF BYE-LAWS

(1) The Governing Board may amend the bye-laws by a resolution passed by votes in favour being not less than three times the number of the votes, if any, cast against the resolution, by the directors.
(2) A resolution passed in accordance with sub-bye law (1) shall be filed with the authority within seven days from the date of its passing, for its approval.
(3) The amendments to the bye-laws shall come into effect on the seventh day of the receipt of the approval, unless otherwise specified by the authority.
(4) The registered valuers organisation shall file a printed copy of the amended bye-laws with the authority within fifteen days from the date when such amendment is made effective.

4. Composition of the Governing Board.

(1) The Governing Board shall have a minimum of ____ [Insert number] directors.
(2) More than half of the directors shall be persons resident in India at the time of their appointment, and at all times during their tenure as directors.
(3) Not more than one fourth of the directors shall be registered valuers.
(4) More than half of the directors shall be independent directors at the time of their appointment, and at all times during their tenure as directors:
Provided that no meeting of the Governing Board shall be held without the presence of at least one independent director.
(5) An independent director shall be an individual –
(a) who has expertise in the field of finance, law, management or valuation;
(b) who is not a registered valuer;
(c) who is not a shareholder of the registered valuers organisation; and
(d) who fulfils the requirements under sub-section (6) of section 149 of the Companies Act, 2013.
(6) The directors shall elect an independent director as the Chairperson of the

Governing Board.

Explanation - For the purposes of bye laws, any fraction contained in

(a) ‘more than half’ shall be rounded off to the next higher number; and
(b) ‘not more than one- fourth’ shall be rounded down to the next lower number.

Part II

MODEL BYE-LAWSOFAREGISTEREDVALUERSORGANISATION

I. GENERAL

1. The name of the registered valuers organisation is “………………” (hereinafter referred to as the ‘Organisation’).

2. The ‘Organisation’ is registered as a company under section 8 of the Companies Act, 2013 (18 of 2013) with its registered office situated at [provide full address].

3. These bye-laws may not be amended, except in accordance with this Annexure.

II. DEFINITIONS

4. (1) In these bye-laws, unless the context otherwise requires -

(a) “certificate of membership” means the certificate of membership of the Organisation granted under bye-law 10;
(b) “Act” means the Companies Act, 2013 (18 of 2013);
(c) “Governing Board” means the Board of Directors or Board of the Organisation as defined under clause (10) of section 2 of Companies Act, 2013 (18 of 2013);
(d) “relative” shall have the same meaning as assigned to it in clause (77) of section 2 of the Companies Act, 2013 (18 of 2013);

(2) Unless the context otherwise requires, words and expressions used and not defined in these bye-laws shall have the meanings assigned to them in the Companies Act, 2013 (18 of 2013).

III. OBJECTIVES

5. (1) The Organisation shall carry on the functions of the registered valuers organisation under the Companies (Registered Valuers and Valuation) Rules, 2017, and functions incidental thereto.

(2) The Organisation shall not carry on any function other than those specified in sub-clause (1), or which is inconsistent with the discharge of its functions as a registered valuers organisation .

IV. DUTIES OF THE ORGANISATION

6. (1) The Organisation shall maintain high ethical and professional standards in the regulation of its members.

(2) The Organisation shall -

(a) ensure compliance with the Companies Act, 2013 and rules, regulations and guidelines issued thereunder governing the conduct of registered valuers organisation and registered valuers;
(b) employ fair, reasonable, just, and non-discriminatory practices for the enrolment and regulation of its members;
(c) be accountable to the authority in relation to all bye-laws and directions issued to its members;
(d) develop the profession of registered valuers;
(e) promote continuous professional development of its members;
(f) continuously improve upon its internal regulations and guidelines to ensure that high standards of professional and ethical conduct are maintained by its members; and
(g) provide information about its activities to the authority.

V. COMMITTEES OF THE ORGANISATION

Advisory Committee of Members.

7. (1) The Governing Board may form an Advisory Committee of members of the Organisation to advise it on any matters pertaining to-

(a) the development of the profession;
(b) standards of professional and ethical conduct; and
(c) best practices in respect of Valuation.

(2) The Advisory Committee may meet at such places and times as the Governing Board may provide.

Other Committees of the Organisation.

8. (1) The Governing Board shall constitute-

(a) one or more Membership Committee(s) consisting of such members as it deems fit;
(b) a Monitoring Committee consisting of such members as it deems fit;
(c) one or more Grievance Redressal Committee(s), with not less than three members,;
(d) one or more Disciplinary Committee(s) consisting of at least one member nominated by the authority.

(2) The Chairperson of each of these Committees shall be an independent director of the Organisation.

VI. MEMBERSHIP

Eligibility for Enrolment.

9. No individual shall be enrolled as a member if he is not eligible to be registered as a registered valuer with the authority:

Provided that the Governing Board may provide additional eligibility requirements for enrolment:

Provided further that such additional requirements shall not discriminate on the grounds of religion, race, caste, gender, place of birth or professional affiliation.

Process of Enrolment as Member.

10. (1) An individual may apply for enrolment as a member by submitting an application in such form, in such manner and with such fees as may be specified by the Organisation.

(2) The Organisation shall examine the application in accordance with the applicable provisions of the rules, regulations and guidelines thereunder.

(3) On examination of the application, the Organisation shall give an opportunity to the applicant to remove the deficiencies, if any, in the application.

(4) The Organisation may require an applicant to submit additional documents, information or clarification that it deems fit, within reasonable time.

(5) The Organisation may reject an application if the applicant does not satisfy the criteria for enrolment or does not remove the deficiencies or submit additional documents or information to its satisfaction, for reasons recorded in writing.

(6) The rejection of the application shall be communicated to the applicant stating the reasons for such rejection, within thirty days of the receipt of the application, excluding the time given for removing the deficiencies or presenting additional documents or clarification by the Organisation, as the case may be.

(7) The acceptance of the application shall be communicated to the applicant, along with a certificate of membership.

(8) An applicant aggrieved of a decision rejecting his application may appeal to the Membership Committee of the Organisation within thirty days from the receipt of such decision.

(9) The Membership Committee shall pass an order disposing of the appeal in the manner it deems expedient, within thirty days of the receipt of the appeal.

Membership Fee.

11. The Organisation may require the members to pay a fixed sum of money as its annual membership fee.

Register of Members.

12. (1) The Organisation shall maintain a register of its professional members, containing their-

(a) name;
(b) proof of identity;
(c) contact details;
(d) address;
(e) date of enrolment and membership number;
(f) date of registration with the authority and registration number;
(g) details of grievances pending against him with the Organisation;
(h) details of disciplinary proceedings pending against him with the Organisation; and
(i) details of orders passed against him by the authority or Disciplinary Committee of the Organisation.

(2) The records relating to a member shall be made available for inspection to-

(a) the authority,
(b) any other person who has obtained the consent of the member for such inspection.

VII. DUTIES OF MEMBERS

13. (1) In the performance of his functions, a member shall-

(a) act in good faith in discharge of his duties as a registered valuer;
(b) discharge his functions with utmost integrity and objectivity;
(c) be independent and impartial;
(d) discharge his functions with the highest standards of professional competence and professional ethics;
(e) continuously upgrade his professional expertise;
(f) comply with applicable laws in the performance of his functions; and
(g) maintain confidentiality of information obtained in the course of his professional activities unless required to disclose such information by law.

14. The Organisation shall have a Code of Conduct that shall be consistent with, and that shall provide for all matters in the Code of Conduct as specified in the Annexure-I.

VIII. MONITORING OF MEMBERS

15. The Organisation shall have a Monitoring Policy to monitor the professional activities and conduct of members for their adherence to the provisions of the Act, rules, regulations and guidelines issued thereunder, these bye-laws, the Code of Conduct and directions given by the Governing Board.

16. A member shall submit information about ongoing and concluded engagements as a registered valuer, in the manner and format specified by the Organisation, at least twice a year stating inter alia, the date of assignment, date of completion and reference number of valuation assignment and valuation report.

17. The Monitoring Committee shall review the information and records submitted by the members in accordance with the Monitoring Policy.

18. The Monitoring Policy shall provide for the following -

(a) the frequency of monitoring;
(b) the manner and format of submission or collection of information and records of the members, including by way of inspection;
(c) the obligations of members to comply with the Monitoring Policy;
(d) the use, analysis and storage of information and records;
(e) evaluation of performance of members; and
(f) any other matters that may be specified by the Governing Board.

19. The Monitoring Policy shall –

(a) have due regard for the privacy of members,
(b) provide for confidentiality of information received, except when disclosure of information is required by the authority or by law, and
(c) be non-discriminatory.

20. The Organisation shall submit a report to the authority in the manner specified by the authority with information collected during monitoring, including information pertaining to -

(a) the details of the appointments made under the Act/these Rules,
(b) the transactions conducted with stakeholders during the period of his appointment;
(c) the transactions conducted with third parties during the period of his appointment; and
(d) the outcome of each appointment.

IX. GRIEVANCE REDRESSALMECHANISM

21. (1) The Organisation shall have a Grievance Redressal Policy providing the procedure for receiving, processing, redressing and disclosing grievances against the Organisation or any member of the Organisation by-

(a) any member of the Organisation;
(b) any person who has engaged the services of the concerned members of the Organisation; or
(c) any other person or class of persons as may be provided by the Governing Board.

(2) The Grievance Redressal Committee, after examining the grievance, may-

(a) dismiss the grievance if it is devoid of merit; or
(b) initiate a mediation between parties for redressal of grievance.

(3) The Grievance Redressal Committee shall refer the matter to the Disciplinary Committee, wherever the grievance warrants disciplinary action.

22. The Grievance Redressal Policy shall provide for-

(a) the format and manner for filing grievances;
(b) maximum time and format for acknowledging receipt of a grievance;
(c) maximum time for the disposal of the grievance by way of dismissal, reference to the Disciplinary Committee or the initiation of mediation;
(d) details of the mediation mechanism
(e) provision of a report of the grievance and mediation proceedings to the parties to the grievance upon dismissal or resolution of the grievance;
(f) action to be taken in case of malicious or false complaints;
(g) maintenance of a register of grievances made and resolutions arrived at; and
(h) periodic review of the Grievance Redressal Mechanism.

X. DISCIPLINARY PROCEEDINGS

23. The Organisation may initiate disciplinary proceedings by issuing a show-cause notice against members-

(a) based on a reference made by the Grievances Redressal Committee;
(b) based on monitoring of members;
(c) following the directions given by the authority or any court of law; or
(d) suo moto, based on any information received by it.

24. (1) The Organisation shall have a Disciplinary Policy, which shall provide for the following -

(a) the manner in which the Disciplinary Committee may ascertain facts;
(b) the issue of show-cause notice based on the facts;
(c) disposal of show-cause notice by a reasoned order, following principles of natural justice;
(d) timelines for different stages of disposal of show cause notice; and
(e) rights and obligations of the parties to the proceedings.

(2) The orders that may be passed by the Disciplinary Committee shall include-

(a) expulsion of the member;
(b) suspension of the member for a certain period of time;
(c) admonishment of the member;
(d) imposition of monetary penalty;
(e) reference of the matter to the authority, which may include, in appropriate cases, recommendation of the amount of restitution or compensation that may be enforced by the authority; and
(f) directions relating to costs.

(3) The Disciplinary Committee may pass an order for expulsion of a member if it has found that the member has committed-

(a) an offence under any law for the time being in force, punishable with imprisonment for a term exceeding six months, or an offence involving moral turpitude;
(b) a gross violation of the Act, rules, regulations and guidelines issued thereunder, bye-laws or directions given by the Governing Board which renders him not a fit and proper person to continue acting as a registered valuer.

(4) Any order passed by the Disciplinary Committee shall be placed on the website of the Organisation within seven days from passing of the said order, with one copy each being provided to each of the parties to the proceeding.

(5) Monetary penalty received by the Organisation under the orders of the Disciplinary Committee shall be used for the professional development.

25. (1) The Governing Board shall constitute an Appellate Panel consisting of one independent director of the Organisation, one member each from amongst the persons of eminence having experience in the field of law and field of valuation, and one member nominated by the authority.

(2) Any person aggrieved of an order of the Disciplinary Committee may prefer an appeal before the Appellate Panel within thirty days from the receipt of a copy of the final order.

(3) The Appellate Panel shall dispose of the appeal in the manner it deems expedient, within thirty days of the receipt of the appeal.

XI. SURRENDEROFMEMBERSHIPANDEXPULSIONFROMMEMBERSHIP Temporary Surrender of Membership.

26. (1) A member shall make an application for temporary surrender of his membership of the Organisation at least thirty days before he-

(a) becomes a person not resident in India;
(b) takes up employment; or
(c) starts any business, except as specifically permitted under the Code of Conduct; and upon acceptance of such temporary surrender and on completion of thirty days from the date of application for temporary surrender, the name of the member shall be temporarily struck from the registers of the Organisation, and the same shall be intimated to the authority.

(2) No application for temporarily surrender of membership of the Organisation shall be accepted if -

(a) there is a grievance or disciplinary proceeding pending against the member before the Organisation or the authority, and he has not given an undertaking to cooperate in such proceeding; or
(b) the member has been appointed as a registered valuer for a process under the Companies Act, 2013, and the appointment of another registered valuer may be detrimental to such process.

(3) A member may make an application to revive his temporarily surrendered membership when the conditions for temporary surrender as provided in sub-clause (1) cease to be applicable, and upon acceptance of the application for revival, the name of the member shall be re-inserted in the register of the Organisation, and the same shall be intimated to the authority.

Surrender of Membership

27. (1) A member who wishes to surrender his membership of the Organisation may do so by submitting an application for surrender of his membership.

(2) Upon acceptance of such surrender of his membership, and completion of thirty days from the date of such acceptance, the name of the member shall be struck from the registers of the Organisation, and the same shall be intimated to the authority.

28. Any fee that is due to the Organisation from a member surrendering his membership shall be cleared prior to his name being struck from the registers of the Organisation.

29. The Organisation may refuse to accept the surrender of membership by any member if -

(a) there is any grievance or disciplinary proceeding pending against the member before the Organisation or the authority; or
(b) the member has been appointed as a registered valuer process under the Companies Act, 2013, and the appointment of another registered valuer may be detrimental to such process.

Expulsion from Membership.

30. A member shall be expelled by the Organisation–

(a) if he becomes ineligible to be enrolled under bye-law 9;
(b) on expiry of thirty days from the order of the Disciplinary Committee, unless set aside or stayed by the Appellate Panel;
(c) upon non-payment of membership fee despite at least two notices served in writing;
(d) upon the cancellation of his certificate of registration by the authority;
(e) upon the order of any court of law.

ANNEXURE-IV

Indicative Matrix on requisite qualifications/experience in specified discipline

(See Explanation II to rule 4 )

Asset Class Educational qualification in specified discipline Experience in specified discipline Valuation Specific Education Course
Graduate level Post Graduate level
(I) (II) (III) (IV) (V)
Land and Building (A) Graduate in Civil Engineering, Architecture or town planning of a recognised University   Five years of experience in the discipline after completing Graduation Courses as per syllabus specified under rule 5
(B) Graduate in Civil Engineering, Architecture or town planning of a recognised University post-graduate in Civil Engineering, Architecture or town planning of a recognised University three years of experience in the discipline after completing Post Graduation Courses as per syllabus specified under rule 5
(C) Graduate in a discipline specified by the Authority for a registered valuers organisation in its conditions of recognition post-graduate in valuation of land and building or real estate from a recognised university five years of experience in the discipline after completing Post Graduation Courses as per syllabus specified under rule 5
Any other graduate level qualification in accordance with rule 4 as may be specified by the Authority for a registered valuers organisation in its conditions of recognition. Any other post graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered valuers organisation in its conditions of recognition. At least five years and three years of experience in case of graduate level degree and post graduate level degree respectively. Courses as per syllabus specified under rule 5
Plant and Machinery (A) Graduate in Mechanical or Electrical Engineering of a recognised University ——— Five years of experience in the discipline after completing Graduation Courses as per syllabus specified under rule 5
(B) Graduate in Mechanical or Electrical Engineering of a recognised University Post Graduate in Mechanical or Electrical Engineering of a recognised University Three years of experience in the discipline after completing Post Graduation Courses as per syllabus specified under rule 5
(C) Graduate in valuation of machinery and plant from a recognised university Post-graduate degree in valuation of machinery and plant from a recognised university Three years of experience in the discipline after completing Post Graduation Courses as per syllabus specified under rule 5
Any other graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered valuers organisation in its conditions of recognition. Any other post graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered valuers organisation registered valuers organisation in its conditions of recognition. At least five years and three years of experience in case of graduate level degree and post graduate level degree respectively. Courses as per syllabus specified under rule 5
Securities or Financial Assets Graduate in any stream (1) Member of the Institute of Chartered Accountants or The Institute of Cost Accountants of India or the Institute of Company Secretaries of India;

(2) MBA/PGDBM specialisation in finance or;

(3) Post Graduate Degree in Finance

Three years of experience in the discipline after completing graduation. Courses as per syllabus specified under rule 5
Any other graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered valuers organisation in its conditions of recognition. Any other post graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered valuers organisation in its conditions of recognition. At least five years and three years of experience in case of graduate level degree and post graduate level degree respectively. Courses as per syllabus specified under rule 5
Any other asset class along with corresponding qualifications and experience in accordance with rule 4 as may be specified by the authority for a registered valuers organisation in its conditions of recognition.

Notification No. SO 3423(E) 17-10-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – JUBILANT INFRASTRUCTURE LTD. – AMENDMENT IN NOTIFICATION NO. SO 2964(E) [F.NO.F.2/270/2006-SEZ], DATED 5-9-2017

NOTIFICATION NO. SO 3423(E) [F.NO.F.2/270/2006-SEZ], DATED 17-10-2017

The Central Government, in exercise of the powers conferred by sub-section (1) of Section 4 of the Special Economic Zone Act, 2005 (28 of 2005) and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby makes the following amendment in the notification of Ministry of Commerce & Industry, Department of Commerce, number S.O. 2964(E), dated 5-9-2017 for Sector Specific SEZ for chemicals at Village Vilayat & Vorasamni, Taluka Vagra, Distt. Bharuch, in the State of Gujarat by M/s. Jubilant Infrastructure Ltd, namely:—

The total area ”125.72.07″ hectares may be read as ”125.72.42″.

Notification No. GSR 1267(E) [F.No.05/17/2017-IEPF], Dated 13-10-2017


INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY (ACCOUNTING, AUDIT, TRANSFER AND REFUND) SECOND AMENDMENT RULES, 2017 – AMENDMENT IN RULES 6 & 7

NOTIFICATION NO. GSR 1267(E) [F.NO.05/17/2017-IEPF]DATED 13-10-2017

In exercise of the powers conferred by sub-sections (1), (2), (3), (4), (8), (9), (10) and (11) of section 125, sub-section (6) of section 124 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, namely:—

1. (1) These rules may be called the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2017.

(2) They shall come into force from the 13th October, 2017.

2. In the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, (hereinafter referred to as the principle rules), in rule 6—

(I) in sub-rule (1),—

(a) for the second proviso, the following proviso shall be substituted, namely:—
“Provided further that in cases where the period of seven years provided under sub-section (5) of section 124 has been completed or being completed during the period from 7th September, 2016 to 31st October, 2017, the due date of transfer of such shares shall be deemed to be 31st October, 2017.”;
(b) after the second proviso, the following proviso shall be inserted, namely:—
“Provided further that transfer of shares by the companies to the Fund shall be deemed to be transmission of shares and the procedure to be followed for transmission of shares shall be followed by the companies while transferring the shares to the fund.”.

(II) in sub-rule(3), for clause (d), the following clause shall be substituted, namely;—

‘(d) For the purposes of effecting the transfer shares held in physical form—
(i) the Company Secretary or the person authorised by the Board shall make an application, on behalf of the concerned shareholder, to the company, for issue of a new share certificate;
(ii) on receipt of the application under clause (a), a new share certificate for each such shareholder shall be issued and it shall be stated on the face of the certificate that”Issued in lieu of share certificate No…… for the purpose of transfer to IEPF” and the same be recorded in the register maintained for the purpose;
(iii) particulars of every share certificate shall be in Form No. SH-1 as specified in the Companies (Share Capital and Debentures) Rules, 2014;
(iv) after issue of a new share certificate, the company shall inform the depository by way of corporate action to convert the share certificates into DEMAT form and transfer in favour of the Authority.’;

(III) after sub-rule (12), the following sub-rules shall be inserted, namely:—

“(13) Any amount required to be credited by the companies to the Fund as provided under sub-rules (10), (11) and sub-rule (12) shall be remitted into the specified account of the IEPF Authority maintained in the Punjab National Bank.
(14) Authority shall furnish its report to the Central Government as and when non-compliance of the rules by companies came to its knowledge.”.

3. In the principle rules, in rule 7—

(a) after sub-rule (2), the following sub-rule shall be inserted, namely:—
“(2A) Every company which has deposited the amount to the Fund shall nominate a Nodal Officer for the purpose of coordination with IEPF Authority and communicate the contact details of the Nodal Officer duly indicating his or her designation, postal address, telephone and mobile number and company authorized e-mail ID to the IEPF Authority, within fifteen days from the date of publication of these rules and the company shall display the name of Nodal Officer and his e-mail ID on its website.”;
(b) after sub-rule (3), the following proviso shall be inserted, namely:—
“Provided that in case of non receipt of documents by the Authority after the expiry of ninety days from the date of filing of Form IEPF-5, the Authority may reject Form IEPF-5, after giving an opportunity to the claimant to furnish response within a period of thirty days.”;
(c) after sub-rule (7), the following proviso shall be inserted, namely:-
“Provided that in case of non receipt of rectified documents by the Authority after the expiry of ninety days from the date of such communication, the Authority may reject Form IEPF-5, after giving an opportunity to the claimant to furnish response within a period of thirty days.”.

10 – 12-10-2017


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD 1 BILLION TO GOVERNMENT OF MONGOLIA

A.P. (DIR SERIES 2017-18) CIRCULAR NO.10DATED 12-10-2017

Export-Import Bank of India (Exim Bank) has entered into an Agreement on April 28, 2016 with the Government of Mongolia for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 1 billion (USD One billion only) for the purpose of development of railways and related infrastructure projects in Mongolia as may be agreed between the borrower and Government of India. The credit is available for financing export of eligible goods and services from India for the purpose of financing development of railways and related infrastructure projects in terms of the Agreement and those which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from August 25, 2017. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC will have to be declared on Export Declaration Form as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD Category- I) banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category- I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

 

09 – 12-10-2017


EXIM BANK’S GOVERNMENT OF INDIA SUPPORTED LINE OF CREDIT OF USD318 MILLION TO GOVERNMENT OF SRI LANKA

A.P. (DIR SERIES 2017-18) CIRCULAR NO.9DATED 12-10-2017

Export-Import Bank of India (Exim Bank) has entered into an Agreement on June 06, 2017 with the Government of Sri Lanka for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 318 million (USD Three hundred and eighteen million only) for the purpose of financing (i) Procurement of rolling Stock for Sri Lanka Railway USD 177 million (USD One hundred seventy seven million only) (ii) Upgrading railway track from Moho-Anuradhapura-Omanthai or any other sector USD 136 million (USD One hundred thirty six million only) and (iii) Utilization of the balance amount in Sri Lanka as may be agreed between the borrower and Government of India. The credit is available for financing export of eligible goods and services from India for the purpose of financing rolling stock and upgrading railway track in terms of the Agreement and those which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement. The goods include plant, machinery and equipment and services include consultancy services. Out of the total credit by Exim Bank under this agreement, goods and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.

2. The Agreement under the LoC is effective from August 22, 2017. Under the LoC, the terminal utilization period is 60 months after the scheduled completion date of the project.

3. Shipments under the LoC will have to be declared on Export Declaration Form as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable for export under the above LoC. However, if required, the exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD Category- I) banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.

5. AD Category- I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from their website www.eximbankindia.in

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

08 – 12-10-2017


RISK MANAGEMENT AND INTER-BANK DEALINGS – FACILITIES FOR HEDGING TRADE EXPOSURES INVOICED IN INDIAN RUPEES

A.P. (DIR SERIES 2017-18) CIRCULAR NO.8DATED 12-10-2017

Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA. 25/RB-2000 dated May 3, 2000) and Master Directions on Risk Management and Inter-Bank Dealings dated July 5, 2016 as amended from time to time.

2. In terms of para 6 under Section II (Facilities for Persons Residents outside India) of the aforementioned master direction, non-residents are permitted to hedge the currency risk arising out of INR invoiced exports from and imports to India with AD Category I banks in India. On a review of this facility, it has been decided to permit the central treasury (of the group and being a group entity) of such non-residents to undertake hedges for and behalf of such non-residents with AD Category I banks in India as per the existing Model I and Model II. The revised operational guidelines, terms and conditions are placed at Annex to this circular.

3. The directions contained in this circular have been issued under Sections 10 (4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions/approvals, if any, required under any other law.

ANNEX

Facilities for Hedging Trade Exposures, invoiced in Indian Rupees in India

Purpose

To hedge the currency risk arising out of genuine trade transactions involving exports from and imports to India, invoiced in Indian Rupees, with AD Category I banks in India.

Products

Forward foreign exchange contracts with rupee as one of the currencies, foreign currency-INR options.

Operational Guidelines, Terms and Conditions

The AD Category I banks can opt for either Model I or Model II as given below:

Model I

Non-resident exporter/importer or its central treasury (of the group and being a group entity) dealing through their overseas bank (including overseas branches of AD banks in India)

i. Non-resident exporter/importer, or its central treasury approaches his banker overseas with appropriate documents with a request for hedging their Rupee exposure arising out of a confirmed import or export order invoiced in Rupees.
ii. The overseas bank in turn approaches its correspondent in India (i.e. the AD bank in India) for a price to hedge the exposure of its customer along with documentation furnished by the customer that will enable the AD bank in India to satisfy itself that there is an underlying trade transaction (scanned copies would be acceptable). The following undertakings also need to be taken from the customer:
a. That the same underlying exposure has not been hedged with any other AD Category I bank/s in India
b. If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately
c. In case of a central treasury, an authorization from the entity having INR exposure to hedge on its behalf.
iii. A certification on the end client KYC may also be taken as a one-time document from the overseas bank by the AD bank in India.
iv. The AD bank in India based on documents received from the overseas correspondent should satisfy itself about the existence of the underlying trade transaction and offer a forward price (no two-way quotes should be given) to the overseas bank who, in turn, will offer the same to its customer. The AD bank, therefore, will ‘not be’ dealing directly with the overseas importer/exporter.
v. The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of payment/realization of the proceeds.
vi. On due date, settlement is to be done through the correspondent bank’s Vostro or the AD bank’s Nostro accounts.
vii. The contracts, once cancelled, cannot be rebooked.
viii. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure.
ix. On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure.
x. In case the underlying trade transaction is extended, rollover can be permitted once based on the extension of the underlying trade transaction for which suitable documentation is to be provided by the overseas bank and the same procedure followed as in case of the original contract.

Model II

Non-resident exporter/importer or its central treasury (of the group and being a group entity) dealing directly with the AD bank in India

i. The overseas exporter/importer or its central treasury approaches the AD bank in India with a request for forward cover in respect of underlying transaction for which he furnishes appropriate documentation (scanned copies would be acceptable), on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an underlying trade transaction, and details of his overseas banker, address etc. The following undertakings also need to be taken from the customer
a. That the same underlying exposure has not been hedged with any other AD Category I bank/s in India.
b. If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately.
c. In case of a central treasury, an authorization from the entity having INR exposure to hedge on its behalf.
ii. The AD bank may obtain certification of KYC/AML in the format in Annex XVIII. The format can be obtained through the overseas correspondent/bank through SWIFT authenticated message. In case the AD bank has a presence outside India, the AD may take care of the KYC/AML through its bank’s offshore branch.
iii. AD banks should evolve appropriate arrangements to mitigate credit risk. Credit limits can be granted based on the credit analysis done by self/the overseas branch.
iv. The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of payment/realization of the proceeds.
v. On due date, settlement is to be done through the correspondent bank’s Vostro or the AD bank’s Nostro accounts. AD banks in India may release funds to the beneficiaries only after sighting funds in Nostro/Vostro accounts.
vi. The contracts, once cancelled, cannot be rebooked.
vii. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure.
viii. On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure.
ix. In case the underlying trade transaction is extended, rollover can be permitted once based on the extension of the underlying trade transaction for which suitable documentation is to be provided by the overseas bank and the same procedure followed as in case of the original contract.
x. AD banks shall report hedge contracts booked under this facility to CCIL’s trade repository with a special identification tag.

Notification No. SO 3423(E) 17-10-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – JUBILANT INFRASTRUCTURE LTD. – AMENDMENT IN NOTIFICATION NO. SO 2964(E) [F.NO.F.2/270/2006-SEZ], DATED 5-9-2017

NOTIFICATION NO. SO 3423(E) [F.NO.F.2/270/2006-SEZ], DATED 17-10-2017

The Central Government, in exercise of the powers conferred by sub-section (1) of Section 4 of the Special Economic Zone Act, 2005 (28 of 2005) and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby makes the following amendment in the notification of Ministry of Commerce & Industry, Department of Commerce, number S.O. 2964(E), dated 5-9-2017 for Sector Specific SEZ for chemicals at Village Vilayat & Vorasamni, Taluka Vagra, Distt. Bharuch, in the State of Gujarat by M/s. Jubilant Infrastructure Ltd, namely:—

The total area ”125.72.07″ hectares may be read as ”125.72.42″.

 

Notification No.87/2017 05-10-2017


SECTION 80G OF THE INCOME-TAX ACT, 1961 – DEDUCTIONS – DONATION TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS – NOTIFIED PLACE OF HISTORIC IMPORTANCE AND A PLACE OF PUBLIC WORSHIP OF RENOWN THROUGHOUT STATE OF TAMIL NADU

NOTIFICATION NO. SO 3441(E) [NO.87/2017 (F.NO.176/9/2017-ITA-I)]DATED 27-10-2017

In exercise of the powers conferred by clause (b) of sub-section (2) of section 80G of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies “Arulmigu Kapaleeswarar Thirukoil, Mylapore, Chennai,” to be place of historic importance and a place of public worship of renown throughout the state of Tamil Nadu for the purposes of the said section.

Notification No.86/2017 05-10-2017


INCOME-TAX (TWENTY THIRD AMENDMENT) RULES, 2017 – AMENDMENT IN RULE 11N

NOTIFICATION NO. GSR 1221(E) [NO.86/2017 (F.NO.370142/29/2017-TPL]DATED 5-10-2017

In exercise of powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—

1. (1) These rules may be called the Income-tax (23rd Amendment) Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962, in rule 11N, in sub-rule (2), in clause (i), for the words, letters and figures “3000″, the words, letters and figures “Sitting fee of Rs. 6000″ shall be substituted.

07 – 28-09-2017


INVESTMENT BY FOREIGN PORTFOLIO INVESTORS (FPI) IN GOVERNMENT SECURITIES MEDIUM TERM FRAMEWORK

A.P. (DIR SERIES 2017-18) CIRCULAR NO.7DATED 28-9-2017

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB, dated May 3, 2000, as amended from time to time. Attention is also drawn to RBI/2017-18/12 A.P.(Dir Series) Circular No.1 dated July 3, 2017.

Revision of Limits for the next quarter Oct-Dec 2017

2. The limits for investment by FPIs for the quarter October-December 2017 is increased by INR 80 billion in Central Government Securities and INR 62 billion in State Development Loans. The revised limits are allocated as per the modified framework prescribed in the RBI/2017-18/12 A.P.(Dir Series) Circular No.1 dated July 3, 2017, and given as under.

Limits for FPI investment in Government Securities
Rs. Billion
Quarter Ending Central Government securities State Development Loans Aggregate
General Long Term Total General Long Term Total
Existing Limits 1877 543 2420 285 46 331 2751
December 1897 603 2500 300 93 393 2893

3. The revised limits will be effective from October 3, 2017.

4. The operational guidelines relating to allocation and monitoring of limits will be issued by the Securities and Exchange Board of India (SEBI).

5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approval, if any, required under any other law.

 

Notification No.85/2017 26-09-2017


SECTION 10(39) OF THE INCOME-TAX ACT, 1961 – EXEMPTIONS – INTERNATIONAL SPORTING EVENT HELD IN INDIA, SPECIFIED INCOME ARISING FROM – NOTIFIED INTERNATIONAL SPORTING EVENT/PERSONS/SPECIFIED INCOME

NOTIFICATION NO. SO 3129(E)[NO. 85/2017(F. NO. 200/24/2017-ITA-I)], DATED 26-9-2017

In exercise of the powers conferred by clause (39) of the section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the following as the international sporting event, persons and specified income for the purpose of the said clause namely:—

(a) Fédération internationale de Football Association under-17 Football World Cup as the international sporting event;
(b) the Fédération internationale de Football Association, as the person;
(c) the following income as specified income arising to Fédération internationale de Football Association, from organising the Fédération internationale de Football Association under-17 Football World Cup, 2017, India:—
(i) income arising from the receipt from National supporters namely Hero Motocorp Ltd., Bank of Baroda and Coal India Ltd. – rupees twenty-nine crore eighty-nine lakhs fifty-two thousand and two hundred and fifty-two (Rs. 29,89,52,250) only; and
(ii) income arising from the receipt of ticket sales-rupees six crore eighty-one lakhs fifteen thousand one hundred and forty-eight (Rs. 6,81,15,148) only.

06 – 22-09-2017


ISSUANCE OF RUPEE DENOMINATED BONDS (RDBs) OVERSEAS

A.P. (DIR SERIES 2017-18) CIRCULAR NO.6, DATED 22-9-2017

Attention of Authorized Dealer Category – I (AD Category – I) banks is invited to the provisions contained in paragraphs 2 and 8 of A.P. (DIR Series) Circular No. 60 dated April 13, 2016 on issuance of Rupee denominated bonds overseas and paragraphs 3.2 and 3.3.9 of Master Direction No.5 dated January 1, 2016 on “External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers”, as amended from time to time.

2. It has been decided, in consultation with the Government of India, to exclude issuances of RDBs from the limit for investments by FPIs in corporate bonds with effect from October 3, 2017 vide A.P. (DIR Series) Circular No. 05 dated September 22, 2017.

3. Consequently, reporting requirement in terms of paragraph 8 (additional email reporting of RDB transactions for onward reporting to depositories) of A.P. (DIR Series) Circular No. 60 dated April 13, 2016 has been dispensed with. However, it should be noted that the reporting of RDBs will continue as per the extant ECB norms.

4. All other aspects of the ECB policy remain unchanged. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.

5. The aforesaid Master Direction No. 5 dated January 01, 2016 will be updated to reflect the changes.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

 

05 – 22-09-2017


REVIEW OF INVESTMENT BY FOREIGN PORTFOLIO INVESTORS IN CORPORATE DEBT SECURITIES

A.P. (DIR SERIES 2017-18) CIRCULAR NO.5, DATED 22-9-2017

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB, dated May 3, 2000, as amended from time to time.

2. Currently, the limit for investment by Foreign Portfolio Investors (FPIs) in corporate bonds is Rs. 244,323 crore. This includes issuance of Rupee denominated bonds overseas (Masala Bonds) by resident entities of Rs. 44,001 crore (including pipeline). The Masala Bonds are presently reckoned both under Combined Corporate Debt Limit (CCDL) for FPI and External Commercial Borrowings (ECBs). On a review, and to further harmonise norms for Masala Bonds issuance with the ECB guidelines, the following changes are made:

a. With effect from October 3, 2017, Masala bonds will no longer form a part of the limit for FPI investments in corporate bonds. They will form a part of the ECBs and will be monitored accordingly. Eligible Indian entities proposing to issue Masala Bonds may approach Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai as required in terms of A.P. (DIR Series) Circular No. 47, dated June 7, 2017.
b. The amount of Rs. 44,001 crore arising from shifting of Masala bonds will be released for FPI investment in corporate bonds over the next two quarters as specified in Table 1.
Table 1 – Limit for FPI Investments in Corporate Bonds Amount (Rs. crore)
1. Current FPI limits for corporate bonds (including masala bonds) 2,44,323
(a) of which Masala bonds (including pipeline) 44,001
2. FPI limit after shifting Masala bonds to ECB (1-(a)) 2,00,322
3. Additional limit for Q3 FY18 27,000
4. FPI limit for corporate bonds from 03 Oct 2017 (2+3) 2,27,322
of which reserved for investment by long term FPIs in infrastructure 9,500
5. Additional limit for Q4 FY18 17,001
6. FPI limit for corporate bonds from January 01, 2018 (4+5) 2,44,323
of which reserved for investment by long term FPIs in infrastructure 9,500

3. An amount of Rs. 9,500 crore in each quarter will be available only for investment in infrastructure sector by long term FPIs (i.e., Sovereign Wealth Funds, Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks). The definition of ‘Infrastructure’ shall be the same as defined under the Master Direction on ECBs issued by the Reserve Bank of India. Long term FPIs will continue to be eligible to invest in sectors other than infrastructure.

4. All other existing conditions for investment by FPIs in the debt market remain unchanged.

5. AD Category-I banks may bring the contents of the circular to the notice of their customers/constituents concerned.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

 

Notification No. GSR 1176(E) [F.No.01/13/2013-CL-V (VOL.III)], Dated 20-9-2017


COMPANIES (RESTRICTION ON NUMBER OF LAYERS) RULES, 2017

NOTIFICATION NO. GSR 1176(E) [F.NO.01/13/2013-CL-V (VOL.III)]DATED 20-9-2017

In exercise of the powers conferred under proviso to clause (87) of section 2, section 450 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:—

Short title and Commencement

1. (1) These rules may be called the Companies (Restriction on number of layers) Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

Restriction on number of layers for certain classes of holding companies

2. (1) On and from the date of commencement of these rules, no company, other than a company belonging to a class specified in sub-rule (2), shall have more than two layers of subsidiaries:

Provided that the provisions of this sub-rule shall not affect a company from acquiring a company incorporated outside India with subsidiaries beyond two layers as per the laws of such country:

Provided further that for computing the number of layers under this rule, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.

(2) The provisions of this rule shall not apply to the following classes of companies, namely:—

(a) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(b) a non-banking financial company as defined in clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which is registered with the Reserve Bank of India and considered as systematically important non-banking financial company by the Reserve Bank of India;
(c) an insurance company being a company which carries on the business of insurance in accordance with provisions of the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory Development Authority Act, 1999 (41 of 1999);
(d) a Government company referred to in clause (45) of section 2 of the Act.

(3) The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of section 186 of the Act.

(4) Every company, other than a company referred to in sub-rule (2), existing on or before the commencement of these rules, which has number of layers of subsidiaries in excess of the layers specified in sub-rule (1—

(i) shall file, with the Registrar a return in Form CRL-1 disclosing the details specified therein, within a period of one hundred and fifty days from the date of publication of these rules in the Official Gazette;
(ii) shall not, after the date of commencement of these rules, have any additional layer of subsidiaries over and above the layers existing on such date; and
(iii) shall not, in case one or more layers are reduced by it subsequent to the commencement of these rules, have the number of layers beyond the number of layers it has after such reduction or maximum layers allowed in sub-rule (1), whichever is more.

(5) If any company contravenes any provision of these rules the company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

Annexure

Form CRL-1

Return regarding number of layers

(see clause (i) of sub-rule (4) of Rule 2)

1. (a) Name of the company : . . . . . . . . . . . . . . . .

(b) CIN of the company : . . . . . . . . . . . . . . . .

2. Number of layers of subsidiaries as on the date of commencement of these rules

3. Layer wise details of subsidiary companies

S.N. Name of subsidiary CIN of subsidiary company Name of holding company CIN of holding company Percentage of shares held by holding company
Layer 1
1 SL1-1
2 SL1-2
3 SL1-3
Layer 2 ……..
.. SL2-1
.. SL2-2
.. SL2-3
Layer 3.. …..
.. SL3-1
.. SL3-2
.. SL3-3
Layer 4. …….
.. SL4-1
.. SL4-2
.. SL4-3
.. ……
..Upto last layer ….. ….. ….

I (Name of director of the company signing the Form) am authorised by the Board of Directors of the company vide resolution number . . . . . dated . . . . . (DD/MM/YYYY) to sign this form and declare that —

(1) the information of the subsidiaries and the layers as contained in the form is true, correct and complete and no information has been suppressed or concealed.
(2) I have read the provisions of section 448 and 449 of Companies Act, 2013 which provide for punishment for false statement and punishment for false evidence respectively.

To be digitally signed by

Director           DSC

Director Identification Number of the Director

Date:

Place:

Notification No. SO 3085(E) [F.No.1/5/2001-CL-V (PART VI)], Dated 20-9-2017


SECTION 132 OF THE COMPANIES ACT, 2013, READ WITH SECTION 210A OF THE COMPANIES ACT, 1956 – NATIONAL FINANCIAL REPORTING AUTHORITY – CONSTITUTION OF – NOTIFIED COMMITTEE – AMENDMENT IN NOTIFICATION NO. SO 3118(E), DATED 3-10-2016

NOTIFICATION NO. SO 3085(E) [F.NO.1/5/2001-CL-V (PART VI)]DATED 20-9-2017

In exercise of the powers conferred by sub-section (1) of section 210A of the Companies Act, 1956, (1 of 1956), the Central Government hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Corporate Affairs, number S.O. 3118(E), dated the 3rd October, 2016, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) dated the 3rd October, 2016, namely:—

2. In the said notification,—

(i) in paragraph 1, for serial number 2 and the entries relating thereto, the following serial number and the entries shall be substituted, namely:—
“(2) Shri Sanjay Gupta, President, Nominee of the Institute of Cost Accountants of India Member, [nominated under clause (b) of sub-section (2) of section 210A of the said Act].”;
(ii) in paragraph 2, for the words “one year” the words “two years” shall be substituted.

Notification No. GSR 1172(E) [F.No.1/8/2013-CL-V] 19-9-2017


COMPANIES (ACCEPTANCE OF DEPOSITS) SECOND AMENDMENT RULES, 2017 – AMENDMENT IN RULE 3, AND SUBSTITUTION OF FORM DPT-3

NOTIFICATION NO. GSR 1172(E) [F.NO.1/8/2013-CL-V]DATED 19-9-2017

In exercise of the powers conferred by sections 73 and 76 read with sub-section (1) and sub-section (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Acceptance of Deposits) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Acceptance of Deposits) Second Amendment Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Acceptance of Deposits) Rules, 2014 (hereinafter referred to as the principal rules), in rule 3, in sub-rule (3), for the proviso, the following shall be substituted, namely:—

“Provided that a Specified IFSC Public company and a private company may accept from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in Form DPT-3.

Explanation.—For the purpose of this rule, a Specified IFSC Public company means an unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006:

Provided further that the maximum limit in respect of deposits to be accepted from members shall not apply to following classes of private companies, namely:—

(i) a private company which is a start-up, for five years from the date of its incorporation;
(ii) a private company which fulfils all of the following conditions, namely:—
(a) which is not an associate or a subsidiary company of any other company;
(b) the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is less ; and
(c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under section 73:

Provided also that all the companies accepting deposits shall file the details of monies so accepted to the Registrar in Form DPT-3.”.

3. In the principal rules, in the Annexure, for Form DPT-3, the following shall be substituted, namely:—

FORM DPT-3Return of deposits[Pursuant to rules 3 and 16 of the Companies (Acceptance of Deposits) Rules, 2014]

Notification No.09/2017 19-09-2017


SECTION 90, READ WITH SECTIONS 90A AND 139, OF THE INCOME-TAX ACT, 1961 AND RULES 12 AND 128 OF THE INCOME-TAX RULES, 1962 – DOUBLE TAXATION RELIEF – FOREIGN TAX CREDIT – PROCEDURE FOR FILING STATEMENT OF INCOME FROM A COUNTRY OR SPECIFIED TERRITORY OUTSIDE INDIA AND FOREIGN TAX CREDIT

NOTIFICATION NO.9 [DGIT(S)-ADG(S)-3/E-FILING NOTIFICATION/FORM 67/2017, DATED 19-9-2017

Foreign Tax Credit. — An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in rule 128 of the Income tax (18th amendment) rules, 2016.

As per sub-rule (9) of rule 128 the statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income.

In exercise of the powers delegated by Central Board of Direct Taxes (‘Board’) under rule 12(4) of the Income tax Rules, 1962, the Principal Director General of Income-tax (Systems) hereby lays down the following procedures:

Online filing of Form 67:
1. All assessee’s who are required to file return of income electronically under section 139(1) as per rule 12(3) of the income tax rules 1962, are required to prepare and submit form 67online along with the return of income if credit for the amount of any foreign tax paid by the assessee in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India.
Preparation and Submission of Form 67
2. Form 67 shall be available to all the assessee’s login. The assessee is required to login into the e-filing portal using their valid credentials. A link for filing the Form has been provided under “e-File → Prepare and Submit Online Forms (Other than ITR)”. Select form 67 and assessment year from the drop down. Instructions to fill the form are enclosed along with the form. The completed Form 67can be submitted by clicking on “Submit” button. Digital Signature Certificate or Electronic Verification Code is mandatory to submit Form 67.
3. Submission of Form 67 shall precede filing of return of income.

Notification No. SO 3113(E) 15-09-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – PHOENIX IT CITY PRIVATE LTD.

NOTIFICATION NO. SO 3113(E) [F.NO.F.1/10/2017-SEZ], DATED 15-9-2017

WHEREAS, M/s. Phoenix IT City Private Limited had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for IT/ITES at Gachibowli Village, Serilingampally Mandal, Ranga Reddy District, in the State of Telangana;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 1.78 hectares as Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 2006 (E) dated 19th June, 2017;

AND WHEREAS, M/s. Phoenix IT City Private Limited, has now proposed to include an area of 0.8 hectares as a part of above Special Economic Zone;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an additional area of 0.8 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 2.58 hectares, comprising the survey numbers and the area given below in the table namely:—

TABLE

S.No. Village Survey No. Area in hectares
1. Gachibowli 53/paiki/part 0.8
Total 0.8
Grand total area of SEZ after above addition 2.58

04 – 15-09-2017


FEM (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (SECOND AMENDMENT REGULATIONS, 2017- INSERTION OF REGULATION 5C

NOTIFICATION NO. FEMA.388/2017-RB/GSR 1324(E) (F.NO.1/15/EM/2015)DATED 24-10-2017

In exercise of the powers conferred by clause (h) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), namely:—

1. Short Title and Commencement

i. These regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Second Amendment) Regulations, 2017.
ii. These regulations come into force with effect from the date of their publication in the Official Gazette.

2. Amendment to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000):

i. Under the principal regulations, a new para 5C to be added :

5C. Permission to resident and non-resident entities to undertake hedge transactions with simplified procedures

Notwithstanding anything contained in paras 4, 5, 5A and 5B, resident entities with foreign currency exposures and non- resident entities with rupee exposures, other than individuals, may hedge underlying exchange rate risk arising out of transactions permitted under Foreign Exchange Management Act, 1999, or rules or regulations or directions or orders made or issued thereunder, subject to such simplified terms and conditions as may be set forth in the directions issued by the Reserve Bank from time to time.

Is your restaurant or hotel still asking for service charge? Here is what Narendra Modi government plans to do : 14-09-2017


Even though the central government had issued guidelines in April this year stating that it was not compulsory for customers to pay service charge, many hotels and restaurants still do it. The government had directed these eating outlets to put up notices at appropriate places explaining that service charges are discretionary. According to a PTI report, some hotels and restaurants are charging a service charge in the range of 5-20 per cent, in lieu of tips, despite the government’s guidelines to make the levy of such charge as optional. If these hotels or restaurants are still charging you or asking for extra money for their services it comes under the unfair trade practices under the Consumer Protection Act of 1986, as per the guidelines issued by the government.

 Now, the problem is that even though a lot of people know that they don’t have to pay this amount, they are helpless when the hotels ask for it. But soon you’ll have a solution to this problem.

To solve this problem, the Consumer Affairs Ministry has asked the Central Board of Direct Taxes (CBDT) to consider service charge as income while assessing the tax returns. The news was confirmed by Consumer Affairs Minister Ram Vilas Paswan on Tuesday who said that the renowned hotel and restaurants have complied with the guidelines but consumer complaints are still being received through the National Consumer Helpline (NCH) about service charge.

“Hotels/restaurants have been asked either to leave the column of service chargeblank or mention on the bill that it is optional,” he tweeted. Paswan added that the complaints against those insisting payment of service charge compulsorily are being received through the NCH and are being reported in the media. “In view of seriousness of issue, the Department of Consumer Affairs has written to the CBDT to consider inclusion of Service Charge while assessing Tax,” he said.

The ministry has also ordered the Legal Metrology officers in all states to monitor the cases of charging more than MRP.

Source : Financial Express

FinMin releases timelines for submission of budget proposals : 14-09-2017


The finance ministry today released timelines for submission of proposals by different ministries and departments towards preparation of the first post-GST Budget, scheduled to be presented in February.

As per the circular for the Budget 2018-19, the pre- budget meetings of ministries and departments will start from October 9.

“All data, as per the prescribed formats, will need to be submitted on UBIS (Union Budget Information System) platform. Data entered in the UBIS shall form the basis for generating both Statement of Budget Estimates and the Detailed Demand for Grants,” the circular said.

The basis of the final budgetary allocations will be the ceilings indicated in the Medium-term Expenditure Framework (MTEF) statement, it added.

The MTEF statement was tabled in Parliament in the monsoon session in August, 2017. Using the allocations indicated in the MTEF statement, each ministry would decide the allocations and forward them to the budget division.

As per the timeline, estimates of capital receipts have to submitted to the budget division by October 16 and for revenue receipts by November 15.

Further, the outcome budget framework would also need to be prepared as per the allocations indicated in the MTEF statement.

“The outcome budget would need to be duly approved by NITI Aayog and Public Finance, Department of Expenditure,” the circular said.

For the central sector and centrally sponsored schemes, tentative ceilings would be discussed during the pre-budget meetings.

The government expects GDP estimates, a key macro- economic data used in preparation of the budget, from the Central Statistics Office by January 6. It also contains revised estimates of revenue and expenditure.

The annual exercise of budgeting is a means for detailing the roadmap for efficient use of public resources taking into account socio-economic and political priorities.

Source : Business Standard

Exporters seek clarity on incentives under GST : 14-09-2017


Exporters say they’re facing difficulties owing to ambiguity about benefits continuing under goods and services tax (GST) from the previous tax regime and queries over accessing input credit, further clouding their prospects amid a dull global market and an appreciating rupee. Some of them have sought clarity on the matter from the government ahead of the peak export season, said people in the know.

The development has led to exporters being unsure about pricing products set for the European Union (EU) and the US and warnings that overseas sales could suffer a setback in the upcoming quarter. The Foreign Trade Policy, FTP 2015-2020, has several incentives based on the earlier levies such as excise duty and service tax. It had been expected that these incentives would be recalibrated under GST but that hasn’t happened, exporters said.

“There is an urgent need for the government to clarify on the incentives available to exporters as their tax outgo has changed in GST,” said MS Mani, partner, Deloitte India, adviser to some top exporters. “It is expected that the newly constituted committee headed by the revenue secretary (Hasmukh Adhia) would fast track its recommendations so that exporters get much needed clarity ahead of the peak export season and are able to plan accordingly.”

Sales surge in EU and the US during the Christmas period and exporters need to ensure that goods are shipped in September or at least October to catch that bump. “This is the need of the hour as the objective of the FTP is to ensure that goods are exported and not the taxes associated with the procurement or manufacture of these goods,” said a person with direct knowledge of the matter. “Since the GST rates are not identical to the erstwhile indirect tax rates and because there is no exemption  on procurements for exporters, the exporting community is not clear on whether the incentives would increase, decrease or remain the same.”

While one option would have been to provide an exemption in the GST legislation to procurements made by exporters, the government has provided a mechanism under which exporters pay the applicable tax to vendors and claim a refund on input taxes. “There are very stringent timelines provided for grant of refunds to exporters in the GST law,” admitted the person cited above. But exporters aren’t sure whether these would actually be followed, based on their past experience with refunds, the person added.

Many exporter groups have raised the matter with the government in the past few months. The Adhia committee is set to evaluate the problems faced by exporters. “Since the export incentives/schemes are regulated by the commerce ministry, it’s expected that the committee headed by Adhia would also have representatives from the commerce ministry in order to fast track the recommendations and to avoid inter-ministerial roadblocks,” said another person close to the development.

Exporters are also facing problems over claiming input credit for goods exported because of mismatches in Harmonised System Nomenclature codes for about 230 products — mainly dyes and dye intermediates. The code is used globally to classify goods for taxation and for claiming domestic benefits. This means that purchase invoices and shipping bills appear to be those of different products to GST’s information technology (IT) network. Exporters are therefore unable to get credit, impacting their cash flows.

“HSN Code No. for 233 products have been revised in 2017 and results (in a) mismatch with what is on India’s GST Network — that is the HSN code of 2012,” a Mumbai-based exporter of sodium meta nitro benzene told ET. “Now the purchase in invoice and shipping bills for the same product will be a mismatch due to different HSN Code number for the same product.”

Sachin Menon, national head of indirect tax at KPMG, said, “There seems to be no harmony between HSN codes in the GST portal and ICEGATE (portal run by the CBEC) for a few products. This means that some of the exporters may not be able to take input credit for the exports and would directly impact their cash flows till this issue is resolved.”

Source : Economic Times

Four Aadhaar linking deadlines you should not miss : 13-09-2017


There are certain deadlines that you need to meet related to your Aadhaar in order to avoid pain in the coming year, 2018.

Here’s the list of various deadlines set by the government regarding Aadhaar.

1. Aadhaar and PAN linking deadline is now December 31, 2017
The government had earlier notified that income tax returns (ITR) filed after July 1, 2017 would be accepted only after a tax assessee linked his/her PAN with Aadhaar. However, many people faced difficulty in doing so even by the extended deadline for filing returns of Aug 5, 2017.

One of the often cited reasons for inability to link was mismatch of PAN and Aadhaar details due to spelling and other errors. Therefore, the government has given a relaxation to individuals who have filed their ITRs on or before August 5, 2017 but have not linked their PAN with Aadhaar. The new deadline set by the government is now December 31, 2017. Individuals must link their PAN with Aadhaar by this date in order for their returns to be processed.

Government has made it mandatory to link Aadhaar and PAN for every PAN holder (except certain categories exempted via notification dated May 11, 2017) by amending the income tax laws in the last Union budget.

However, the above deadline is only for those filing income tax returns this year. If you are not required to file your ITR as per tax laws, i.e., your gross total income in a financial year is less than the exemption limit of Rs 2.5 lakh (for the FY 2017-18), then the last date to link your PAN with your Aadhaar is yet to be notified by the government.

2. Deadline for providing Aadhaar to financial institutions is December 31, 2017
Government has asked banks, financial institutions, and intermediaries to ensure that all their customers are know-your-customer (KYC) compliant which, as per new rules, requires verification of their Aadhaar. An amendment has been made in the Prevention of Money Laundering Rules (Maintenance and Records), 2005 to this effect.

As per the new rules, one has to mandatorily submit his/her Aadhaar and PAN details to be KYC-compliant. If this is not done before December 31, 2017, his/her account will become inoperable till the time the required details are submitted.

This means that you are required to submit your Aadhaar and PAN details to financial institutions such as banks or where you have made investments like mutual funds, stocks, National Pension System (NPS) etc. You will also need to submit these details if you have taken a loan from any bank, housing finance company or non-banking finance company.

While submitting these details, you are also required to undergo an authentication process to verify that the Aadhaar submitted by you is actually yours, as per the notified rules.

3. Aadhaar based e-KYC verification for all mobile phone subscribers must be done by February 6, 2018
The department of telecommunications (DoT), after the Supreme Court judgment on February 6, 2017, has asked telecom operators to re-verify all the existing mobile subscribers (pre-paid and post-paid) via Aadhaar-based e-KYC. It has also become mandatory to provide Aadhaar details while buying new mobile SIM connections.

As per the Supreme Court order, the process of re-verification of all existing mobile subscribers must be completed by February 6, 2018.

However, as per the directive issued by DoT in its circular dated March 23, 2017, it is not clear what will happen if Aadhaar details are not linked to a customer’s mobile number by February 6, 2018. At the same time, the telecom companies, on their websites, are cautioning users that their mobile connection services might get restricted or their numbers might become inactive in case Aadhaar-based compliance is not done. There have been news reports that all unlinked mobile numbers will be deactivated after the deadline.

4. Aadhaar details must be submitted by December 31, 2017 to enjoy benefits of social security schemes
Recently, government in the Supreme Court said that it has extended the deadline for mandatorily providing Aadhaar details in order to avail benefits of social schemes. The new extended deadline is now December 31, 2017. Earlier deadline for the same was September 30, 2017.

Aadhaar details are required for various benefits such as availing subsidy on LPG cylinders, the Human Resource Development ministry’s scholarship schemes, availing pensions and subsided ration under Public Distribution System scheme.

Source : Financial Express

Notification No.08/2017 13-09-2017


TDS on interest on deposits made under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased — reg. – 08/2017

 

Government of India

Ministry of Finance

Central Board of Direct Taxes

Directorate of Income-tax (Systems)

New Delhi

Notification No. 08/2017

          New Delhi, 13th, September, 2017

 Subject: – TDS on interest on deposits made under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased – reg.

It has been brought to the notice of CBDT that in cases of deceased depositor  who has made deposits under the Capital Gains Accounts Scheme, 1988; the banks are deducting TDS on the interest earned on such deposits in the hand of the deceased depositor and issuing TDS certificates in the name of the deceased depositor, which is not in accordance with the law. Ideally in such type of situations, the TDS certificate on the interest income for and upto the period of  death of the depositor is required to be issued on the PAN of the deceased depositor and for the, period after death of the depositor is required to be issued on the PAN of the legal heir.

2.  Under sub-rule (5) of Rule 31A of the Income-tax Rules, 1962, the Director General of Income-tax (Systems) is authorized to specify the procedures, formats and standards for the purposes of furnishing and verification of the statements or claim for refund in Form 26B and Shall be responsible for the day-to-day administration in relation to furnishing and verification of the statements or claim for refund in Form 26B in the manner so specified.

3.  In -exercise of the powers delegated by the Central Board of Direct Taxes (Board) under sub-rule (5) of Rule 31Aof the Income-tax Rules, 1962, the Principal Director General of Income-tax (Systems) hereby specifies that in case of deposits under the Capital Gains Accounts Scheme, 1988 where the depositor has deceased:

(i) TDS oh the interest income accrued for and upto the period of death of the depositor is required to be deducted and reported against PAN of the  depositor, and

(ii) TDS on the interest income accrued for the period after death of the  depositor is required to be deducted and reported against PAN of the legal heir,

unless a declaration is filed under sub-rule(2) of Rule 37BA of the Income-tax Rules, 1962 to that effect.

4.  This issues with approval of the Principal Director General of Income-tax (system).

(P.S. Thuingaleng)

Dy. Commissioner of Income-tax (CPC-TDS),

O/o the Pr. Director General of Income-tax (System),

New Delhi

 

Narendra Modi Cabinet meet: From Dearness Allowance to tax free gratuity, here are top 5 decisions taken today : 13-09-2017


Narendra Modi cabinet met on Tuesday and took a number of key decisions. The highlights of the cabinet meet included pacts with Morocco and Armenia, doubling tax-free gratuity to Rs 20 lakh, hiving off BSNL mobile towers into separate company, hiking of DA to 5 pct for 1.1 cr employees and pensioners, and doubling of Daund-Manmad railway line. Here’s a detailed look at the key decisions:

DA for Central Government employees, pensioners hiked to 5 pc

Centre approved hiking of dearness allowance (DA) and dearness relief by 1 per cent to 5 per cent, benefiting 50 lakh employees and 61 lakh pensioners. This decision was taken at the Union Cabinet meeting chaired by Prime Minister Narendra Modi here. “Release of additional installment of DA is an increase of 1 per cent over the existing rate of 4 per cent of the basic pay/pension, to compensate for price rise,” according to an official statement.

Pacts with Morocco and Armenia

In a key decision, Union Cabinet approved the signing of an agreement with Morocco on healthcare and another one with Armenia on cooperation in disaster management. As per PTI, the memorandum of understanding with Morocco will see cooperation in the fight against child cardiovascular diseases and cancer. While the memorandum of understanding with Armenia is signed for cooperation in the field of disaster management.

Centre clears bill to double tax-free gratuity to Rs 20 lakh

The Union Cabinet approved an amendment bill that doubled the tax-free gratuity for formal sector employees to Rs 20 lakh. “The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to introduction of the Payment of Gratuity (Amendment) Bill, 2017, in Parliament,” an official statement said. A PTI report says that the current upper ceiling on gratuity under the Act is Rs 10 lakh. The provisions for central government employees under Central Civil Services (Pension) Rules, 1972, with regard to gratuity are also similar.

Hiving off BSNL mobile towers into separate company

The Cabinet has okayed hiving off mobile towers of state-run telecom firm BSNL into a separate company. There are around 4,42,000 mobile towers in the country, out of which BSNL owns more than 66,000.  “The Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval for hiving off mobile tower assets of Bharat Sanchar Nigam Limited (BSNL) into a separate company, fully-owned by BSNL,” an official statement said.

Doubling of Daund-Manmad railway line

The Centre okayed the doubling of Daund-Manmad railway line which affects the passengers and goods across Pune, Ahmednagar and Nashik in Maharashtra.  The Cabinet Committee on Economic Affairs gave the nod for the project at an estimated cost of Rs 2,081.27 crore and expected completion cost of Rs 2330.51 crore. The railway line is 247.5 km long and is expected to be completed in five years.

Source : PTI

Tax experts under income-tax lens for valuation of startups : 13-09-2017


Indian tax authorities have begun questioning consultants and accountants on the methodology of their enterprise-value estimates after challenging the valuations of startups. Since August, the authorities have started questioning valuers and tax experts on their valuation assessments, four people with direct knowledge of the matter told ET.

In particular, the taxmen want to know the reason behind high valuations given to several startups in 2014 and 2015. For their part, the financial experts say that their estimates were based on the startups’ projected revenue and growth – something most failed to achieve.

The tax authorities say that the funding received over and above the fair market value of a startup must be considered as its income and not capital.

Many tax officials believe that the relevant section of the Income Tax Act gives them the power to levy tax on the excess consideration.

“Startups were valued in 2014/15 based on the macro economic scenario, the revenue projections and similar valuations that were prevailing then. While it may be true that many startups weren’t able to achieve their revenue projections, it may not be fair to question the valuer unless it is glaringly illogical or incorrect,” said Jeenendra Bhandari, partner at MGB and Co LLP.

ET spoke to several valuation experts who have been questioned in the past month. Tax experts say that the valuation of startups was conducted in the macroeconomic situations prevalent in 2014, and to question these valuations in 2017 is unfair.

An income-tax officer based in Mumbai confirmed to ETthat valuation experts were now being questioned. “We are investigating if some of these investments were for converting black money (unaccounted money) to white (legal money). Why would someone pay a high amount in investments when the real value is much less?” he said.

This argument, however, did not cut ice with the experts. “Valuation is an art and there are many factors that determine valuation at a given point in time. While the department may want to target the shell companies, questioning valuation experts of startups where genuine investments have been made is quite alarming,” said Paras Savla, partner, KPB & Associates.

ET had on September 7 reported that startups received tax demands on amount paid over the fair value of compulsorily convertible preference shares.

Amit Singhal, CA and co-founder of Start-up Buddy, said: “A reading of the Section 56(2)(vii)(b) clarifies that the provision is applicable to resident investors if securities premium is charged on shares. It is a commonly accepted practice among startups to calculate fair market value of shares based on the discounted cash flow (DCF) method, which is based on the present value of cash flow expected to be earned by the business in the future.”

Fair market value is assessed by the tax department based on past transactions and the record of similar, comparable companies. The Section is often applied when it’s suspected that companies may be issuing shares at a premium over the fair value for laundering unaccounted cash.

Many startup owners are worried about the fresh set of tax notices in last couple of months. Sourabh Deorah, CEO of startup Advantage Club, says: “We already have an uphill battle and we try our best to be compliant. Even after ensuring compliance, if the government still sends us unnecessary notices, it not only costs us lawyer fees but also the time of promoters, taking our focus away from running the core business.”

Source : Economic Times

Notification No. SO 3066(E) 12-09-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LTD.

NOTIFICATION NO. SO 3066(E) [F.NO.F.2/62/2006-SEZ]DATED 12-9-2017

Whereas, M/s. Andhra Pradesh Industrial Infrastructure Corporation Limited, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a Sector Specific Special Economic Zone for IT/ITES at Madhurwada Village, Visakhapatnam District in the State of Andhra Pradesh;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 16 hectares videMinistry of Commerce and Industry Notification Number S.O. 565(E) dated 11-4-2007;

AND, WHEREAS, M/s. Andhra Pradesh Industrial Infrastructure Corporation Limited has now proposed to de-notify the entire area of 16.00 hectares area of the the above Special Economic Zone;

AND, WHEREAS, the State Government of Andhra Pradesh has given its approval to the proposal vide letter No. nil, dated 29-3-2016;

AND, WHEREAS, the Development Commissioner, Visakhapatnam Special Economic Zone has recommended the proposal for de-notification of the entire area of 16.00 hectares of the Special Economic Zone;

NOW, THEREFORE, in exercise of the powers conferred by first proviso to rule 8 of the Special Economic Zones Rules 2006, the Central Government hereby rescinds the above notification except as respects things done or omitted to be done before such rescission.

Artisans with Rs 20 lakh turnover exempt from GST registration The GST Council today exempted artisa : 12-09-2017


The GST Council today exempted artisans and folk artists with an annual turnover of up to Rs 20 lakh from registration under the just introduced Goods and Services Tax (GST). West Bengal Finance Minister Amit Mitra said besides exempting artisans, the 21st meeting of the highest decision making body of the GST exempted clay idols from the tax. Also, no registration would be required for inter-state job works, he said. “For artisans, artists, folk arts and tribal arts, no registration will be required up to Rs 20 lakh (turnover). Clay idols are exempt now,” he said, adding that “job work inter-state, you don’t need any registration now up to Rs 20 lakh turnover.”

 On government work contract, the tax rate has been reduced to 12 per cent from 18 per cent. “That will save government a lot of tax.” A committee of ministers has been formed to look into technical issues facing the GST-Network, the IT backbone and portal for registration and tax returns under the GST regime. “GSTN has major problems. We had much discussions and all that has to be settled and a committee of ministers has been formed along with a committee of officers,” he said.

The panels would look into the glitches, he said. “Small and medium enterprises are suffering today, this has to be corrected.” Jammu and Kashmir Finance Minister Haseeb Drabu said the deadline for filing of sales return or GSTR-1 for the month of July – the first month of implementation of the new tax regime, has been extended by a month to October 10. Drabu said hike in cess on cars was not discussed.

On the functioning of GSTN, he said it “is a real concern. We have acknowledged that it is a concern. An inter- ministerial group has been formed in-principle. The Chairman (Finance Minister Arun Jaitley) has been authorised to select ministers. A group of ministers will be formed and they will talk to GSTN and private parties.” On revenues accruing to states in the first month of the GST, Drabu said he does not “see a pattern right now in it. This time there will be a lot of backlog. Let it stabilise for one cycle”.

Goa State Panchayat Minister Mouvin Godinho said the 18 per cent interest levied on delayed filing of returns has been waived.

A dummies guide to India GST rates in 2017 : 12-09-2017


Here is the complete updated list

Under the Goods and Services Tax (GST) the government categorised 1211 items under various tax slabs. Here is a low-down on the tax slab these items would attract:

No tax

No tax will be imposed on items like fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom etc.

5% slab

Goods
Items such as fish fillet, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, lifeboats will attract tax of 5 %.

Services
Transport services (Railways, air transport), small restraurants will be under the 5% category because their main input is petroleum, which is outside GST ambit. Textile job work will be taxed at 5%.

12%

Goods
Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, Bhutia, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones, Ketchup & Sauces, All diagnostic kits and reagents, Exercise books and note books, Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs, Spectacles, corrective, Playing cards, chess board, carom board and other board games. Table and kitchenware, Batters, including idli / dosa batter, Textile caps,sprinklers,Cotton quilts(quilts exceeding Rs 1000 per piece),Statues, statuettes, pedestals,ceramic articles, porcelain items, ornamental articles, bells, gongs, non-electric of base metal,animal carving material.

Services
State-run lotteries, Non-AC hotels, business class air ticket, fertilisers, work contracts.

28%

Goods
Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with choclate, pan masala, aerated water, paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use.

Services
Private-run lotteries authorised by the states, hotels with room tariffs above Rs 7,500, 5-star hotels, race club betting, cinema.

18% slab

Most items are under this tax slab which include flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, note books, steel products, printed circuits, camera, speakers and monitors.

All you need to know about the RERA Act

The real estate sector is set to finally get its own regulator from May 1, 2017. The Real Estate (Regulation and Development) Act, 2016 (RERA) becomes effective in the entire country from tomorrow.

Each state and UT will have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act.

Here is what the RERA has in store for home buyers..

Real estate prices

The prices haven’t come down to the extent it was expected. Huge unsold inventory, lack of new demand, demonetisation amongst others has not led the builders bringing
the rack rate down albeit few discounts and freebies to the customers.

Impact of RERA:
Rohit Gera, MD, Gera Developments and VP Credai – Pune Metro, says, “Before RERA, the risk of delays, quality, title, and changes were borne by the customer. These will now be borne by the developer and there will be a premium that the flat purchasers will have to pay for transferring this risk to the developer. There is no room for developers to absorb these costs and so they may be transferred on to the customers by way of price increase.”

Delayed delivery

Untimely delivery of real estate projects has been the biggest bane for the buyers. Of late, almost all projects especially projects launched 2010-2013 have defaulted in delivery within the stipulated time primarily because funds were diverted to new projects by the builders instead of using them in completing the existing ones.

Impact of RERA:
Now, as per the RERA Act, the promoter has to maintain a ‘separate account’ for every project undertaken wherein 70 per cent of the money received from the buyers shall be deposited. Such funds can only be used for the purposes of construction and land cost.

Real estate developers will have to furnish additional information regarding the ongoing projects for the benefit of the buyers besides depositing 70% of the unused funds in a separate bank account to ensure their completion.

Ongoing projects

Developers will have to make public the original sanctioned plans and changes made later, total amount collected from allottees, money used, original timeline for completion and the time period within which the developer will complete the project, certified by an Engineer/Architect/practicing Chartered Accountant.

Role of Regulatory Authority

Each Regulatory Authority in the state will have the responsibility to register and regulate real estate projects and real estate agents registered under this Act.

It will also be required to maintain a website for public viewing, of all real estate projects for which registration has been given.

Quality of construction

The quality of the construction has also been a matter of concern with several builders. The RERA rules provides for protection against this up to 5 years after possession.

In case any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale is brought to the notice of the promoter within a period of five years, it shall be the duty of the promoter to rectify such defects without further charge, within 30 days.

What you get to see

No promoter shall advertise, market, book, sell or offer for sale, or invite persons to purchase in any manner any plot, apartment or building, as the case may be, in any real estate project or part of it, in any planning area, without registering the real estate project with the RERA established under this Act.

Each advertisement has to carry the RERA registration number.

Registration of projects

Make sure you buy a project which is registered with the RA. Once the state has its RA established, builders will be required to register their projects with it by furnishing all the information including, financial statements, copy of legal title deed and other documents.

The builders will get a registration number project-wise i.e. tower wise.

Booking amount

Currently, most builders ask for 10 percent of the total cost of the property as a booking amount.

Now as per RERA, a promoter cannot accept more than 10 of the cost of the property, as an advance payment or an application fee, without first entering into a registered agreement for sale.

Text: Sunil Dhawan,

Source : Times of India

GST cess pulls cigarette sales down 8-9% in July-August : 12-09-2017


India’s legal cigarette sales volume declined by 8-9 per cent in July and August over the same period last year due to the steep increase in cess under the goods and services tax (GST).

Sales declined across segments with the maximum fall seen in the entry and premium-end where the tax hike was maximum, three analysts said. It is one of the highest in recent months.

A recent report by Macquarie said its channel check across distributors reveal significant pressure on cigarette volumes led by higher decline in the king size filter (length 84 mm) and regular size filter (69 mm) where prices have gone up by 20 per cent and 23 per cent respectively in the last nine Months.

Macquarie said since a significant portion of the entry level cigarettes of 64 mm length is now priced more than Rs 5 per stick, this segment too is contributing to volume pressure. At the same time, consumers are downgrading from 69 mm length to the 64 mm length where the price is almost half.

“The maximum impact is in the 64 mm segment since consumers shift to the illegal and smuggled cigarettes which are sold at Rs 2 to Rs 4 per stick. Normally, cigarette makers are quite hesitant to increase prices in this segment since it’s price sensitive, but they were compelled due to tax hike, which will lead to significant volume decline,” said EdelweissBSE 0.72 % Securities senior vice president Abneesh Roy.

Revised estimates suggest that market leader ITC’s cigarette sales volume for the fiscal will fall by 4-5 per cent as compared to earli er estimates of flat cigarette sales. ITCBSE 1.06 % accounts for three of the four cigarettes sold legally in India. Cigarette sales volume had been flat in the January to March period, while in April to June quarter it had declined marginally by 1-2 per cent.

An email sent to ITC did not elicit any response till Monday press time. Macquarie said the higher price increases during FY 14-16 led to significant sales volume decline, but the expectation was of less of a decline this time on account of phased price increases and an improvement in demand environment which, however, has not played out in the first two months of price increases.

ITC in July increased cigarette prices by 4-8 per cent due to the increase in GST cess across its brands such as Classic, Gold Flake, Navy Cut, Bristol, Flake, Scissors and Capstan. The overall price increase for cigarettes in the last nine months has been about 14 per cent.This is the sixth straight year of tax increase and price hike for the cigarette industry.

Analysts believe illegal cigarette and bidi sales will further thrive this year due to rising price difference with cigarettes. As per industry body, The Tobacco Institute of India (TII), legal cigarette industry volume shrunk by more than 25 per cent since 2012-13 due to recurrent increase in taxation and prices. It said illegal cigarette trade constitutes one-fifth of the industry in the country and India is the fourth largest market for illegal cigarettes in the world.

Source : Economic Times

Notification No. SO 3025(E) 11-09-2017


SECTION 4 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 – WIPRO LIMITED

NOTIFICATION NO. SO 3025(E) [F.NO.F.1/12/2017-SEZ]DATED 11-9-2017

WHEREAS, M/s. Wipro Limited has proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for IT/ITES at Plot No. 2, MIDC, Phase-1, Hinjewadi, Mulshi Taulka, Pune, in the State of Maharashtra;

AND, WHEREAS, the Central Government is satisfied that requirements under sub-section (8) of section 3 of the said Act, and other related requirements are fulfilled and it has granted letter of approval under sub-section (10) of section 3 of the said Act for development, operation and maintenance of the above sector specific Special Economic Zone on 31st March, 2017;

NOW, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby notifies the 9.15 hectares area at above location with survey number given in the table below as a Special Economic Zone, namely:—

TABLE

Sl. No. Name of Village Survey No. Area (in hectares)
1. Plot No. 2, MIDC, Phase-I, Hinjewadi 153/4 9.15
Total 9.15

AND, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 13 of the Special Economic Zones Act, 2005 (28 of 2005), hereby constitutes a Committee to be called the Approval Committee for the above Special Economic Zone for the purposes of section 14 of the said Act consisting of the following Chairperson and Members, namely:—

1. Development Commissioner of the Special Economic Zone Chairperson ex officio;
2. Director or Deputy Secretary to the Government of India, Ministry of Commerce and Industry, Department of Commerce or his nominee not below the rank of Under Secretary to the Government of India Member ex officio;
3. Zonal Joint Director General of Foreign Trade having territorial jurisdiction over the Special Economic Zone Member ex officio;
4. Commissioner of Customs or Central Excise having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;
5. Commissioner of Income Tax having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;
6. Director (Banking) in the Ministry of Finance, Banking Division, Government of India Member ex officio;
7. Two officers, not below the rank of Joint Secretary, to be nominated by the State Government Member ex officio;
8. Representative of the Developer of the zone Special invitee

AND, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (2) of section 53 of the Special Economic Zones Act, 2005 (28 of 2005), hereby appoints the 11th day of September, 2017 as the date from which the above Special Economic Zone shall be deemed to be Inland Container Depot under section 7 of the Customs Act, 1962 (52 of 1962).

 

TDS, TCS deductors can apply for GST registration from Sep 18 : 11-09-2017


GST registrations for entities mandated to collect and deduct tax at source will start from September 18. However, the date from which tax deducted at source (TDS) or tax collected at source (TCS) will be done will be notified later. The Goods and Services Tax (GST) Council, at its 21st meeting in Hyderabad, decided to open registration of persons liable to deduct TDS and TCS from September 18. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1 per cent on payments to suppliers of goods or services in excess of Rs 2.5 lakh. Also, e-commerce companies are required to collect 1 per cent TCS while making payment to suppliers under GST, which kicked in from July 1.

Following industry demands, the government in June had decided to defer the TDS and TCS provision for smooth rollout of GST. GST subsumed a host of levies including excise and service tax and transformed India into a single market for seamless movement of goods and services. Also, accommodating industry demands, the GST Council, chaired by Union Finance Minister Arun Jaitley and comprising state counterparts, yesterday decided to extend the deadline for filing TRAN-1 form by a month to October 31. TRAN-1 is to be filed by those businesses that want to claim credit for taxes paid before the launch of GST. This form can now be revised once by businesses in the case of any discrepancy.

According to states, the transitional credit claimed by businesses is huge running up to Rs 60,000 crore. In the maiden returns for July, as much as Rs 95,000 crore taxes have been earned from about 45 lakh assessees. With regard to people opting for the composition scheme, the GST Council has decided to give businesses time till September 30 to avail of it. “Such registered person shall be permitted to avail of the benefit of the composition scheme with effect from October 1,” an official statement said. Besides, the over 10 lakh registered businesses who have already opted for the composition scheme will be required to file their returns for the July-September quarter by October 18 and pay their taxes. Under GST, as many as 72 lakh businesses have migrated from excise, service tax and VAT registration.

The composition scheme is an alternative to the levy of tax designed for small taxpayers whose turnover is up to Rs 75 lakh — Rs 50 lakh in the case of eight north-eastern states and the hilly state of Himachal Pradesh. The objective is to bring simplicity and reduce the compliance cost for small taxpayers. The scheme is optional under which manufacturers other than those of ice cream, pan masala and tobacco products have to pay a 2 per cent tax on their annual turnover. The tax rate is 5 per cent for the rest. Besides, input service distributors will have to file their returns for July by October 13. For easier compliance, the GST council has already allowed businesses to file simplified GSTR-3B for four more months till December. It also relaxed the deadline for businesses to file sales return in GSTR-1 by a month to October 10.

Revenue Secretary Hasmukh Adhia said that for companies with turnover of over Rs 100 crore, the last date for filing GSTR-1 will be October 3. For the rest, it will be October 10. Also, filing of GSTR-2 or purchase return for July will have to be done by October 31, and GSTR-3 by November 10. Till September 8, over 45 lakh GSTR-3B, 17 lakh GSTR-1 and over 13 crore invoices have been filed on the GSTN portal. Due to huge rush of July GSTR-3B return filing, the GSTN software had witnessed some glitches and the last date of filing had to be extended.

Last week, the date of final return filing for GSTR-1 was first extended to September 10 in view of rush in invoice uploading, instead of September 5 earlier. GSTR-2 was required to be filed by September 25 instead of September 10 earlier. GSTR-3, which is the match of GSTR-1 and GSTR-2, was needed to be filed by September 30, in place of September 15. These dates have been further extended by the GST Council at its meeting on September 9. Also, a group of ministers has been constituted to monitor and resolve technological challenges faced during GST return filing.

Source : Financial Express

How India’s failed note ban move taught the world what not to do : 11-09–2017


Almost a year on, India’s ban on large-denomination bills has been deemed a “total failure.” That’s not quite fair. True, the primary goal of flushing out tax cheats has been a flop. But a secondary goal — “to move toward the cashless society,” as India’s finance minister put it — still has real promise. The rest of the world, in fact, could learn a lot from this botched experiment.

A report last month showed that 99 percent of invalidated bills have now made their way back to banks, suggesting the government’s plan to extinguish illicit cash has foundered. At the same time, though, currency in circulation is down by about 25 percent from where it would otherwise have been, according to Bloomberg Intelligence, while electronic transactions are up.

If that trend continued, it could be a big deal. India has inefficient banks and lots of corruption. Its cost of cash — in access fees, maintenance expenses and so on — is among the highest in the world.

Eventually going cashless would slash such costs, while also impeding crime and corruption. It would be a big help to the poor, who could borrow and send money more cheaply. More powerfully, it would give central banks a new tool for boosting aggregate demand when conventional measures won’t work — significantly negative interest rates. It’s no wonder that so many governments are now thinking through the concept, and its attendant problems.

But an essential precondition for doing away with cash is trust. And on that score, India’s experiment provides an example of what not to do.

For one thing, the note swap was undertaken rashly. The public was given a mere 50 days to exchange their big bills for smaller ones, and the central bank couldn’t print enough new notes to meet demand. Lines lengthened at bank branches, small businesses folded for lack of capital, supply chains collapsed, and agricultural prices plummeted. Growth and investment stalled. Perhaps 5 million jobs were lost.

For other countries, a better approach would be to phase out big bills over a period of years, making it easy to swap them at first, then progressively more difficult — say, by exchanging them at fewer locations. That would allow time to publicize the plan, fix inevitable flaws and help the public adjust. Meanwhile, electronic alternatives would have an incentive to evolve. In time, bills of all denominations would dwindle of their own accord.

Which suggests a second problem for India. After invalidating 86 percent of the currency in circulation, the government was left scrambling to encourage digital payments, using subsidies and other gimmicks. Only about half of Indian adults have bank accounts, and only about a quarter have internet access. Mobile payments remain relatively rare. Even if everyone had wanted to go digital, they couldn’t have.

The takeaway for other countries is to ensure reliable alternatives are available first, along with legal protections and privacy safeguards. One promising approach is digital legal tender, which might combine the advantages of electronic currencies with the stability of a central bank.

India deserves credit for trying to move its economy into the digital age. Unfortunately, it also exemplified all that can go wrong along the way. As the cashless society comes into view, the rest of the world should take heed.

Source : Business Standard

GST rates changed for 40 items, deadline for GSTR 1 filing extended to October : 11-09-2017


The Goods and Services Tax Council on Saturday raised the cess on motor vehicles–mid-size cars, large cars and sports utility vehicles by 2%, 5% and 7% respectively instead of whole 10% increase effected in the law, while keeping the overall tax incidence within 50%.

This increase in cess rate would take the overall tax incidence on mid size cars to 45%, large cars to 48% and SUVs to 50% from 43%( 28% GST+ 15% cess) now.

Industry had pitched for differential hike –lower increase for mid-sized cars arguing that this price increase in this segment would impact middle class.The GST Council had at its last meeting approved a proposal for an amendment in the compensation law to raise the cess to 25% from 15%. The industry, which had cut prices in the high-end segment after GST roll out, opposed an across the board increase in cess. There is no change in cess rate for hybrid vehicles, 13 seaters and small cars.

GST rates slashed for over 40 items

The council cut GST rate for Walnuts, broom, clay idols custard powder, idly-dosa batter, rubber bands, raincoat, dhoop batti, saree fall, corduroy fabric, computer monitors, table and kitchenware, prayer beads. Khadi sold at KVIC outlets and clay idols have been exempted from the levy of GST, which replaced 40 state and central taxes and cesses.

Return filing date extended
The Council gave a breather to the industry struggling to meet the return filing deadline as the GSTN portal face hiccups due to heavy load.The GSTR1, which was to be filed by September 10, can be filed till October 10 by smaller businesses and large ones by October 3.

Also for easier compliance, the Council has allowed businesses to file Simplified GSTR-3B for four more months till December.

Revenue Secretary Hasmukh Adhia said Companies with turnover of over Rs 100 crore the last date for filing GSTR1 will be October 3 and for the rest it will be October 10. Filing of GSTR-2 for July will have to be done by October 31, and GSTR-3 by November 10. ” For GSTR-1,2,3 we are giving a long rope and we are staggering the return filing date for July,” Adhia said.

Date of GSTR 1, 2, 3 return filing for month of August will be communicated later, he said.

Adhia said the Tran1 form will be allowed to be amended.

Till Friday over 45 lakhs GSTR-3B, 17 lakhs GSTR-1 and over 13 crore invoices have been filed on GSTN portal. Earlier this week, The date of final return filing for GSTR-1 was first extended to September 10 in view of rush in invoice uploading instead of September 5 earlier. Purchase returns or GSTR-2 was required to be filed by September 25 instead of September 10 earlier. GSTR-3 which is the match of GSTR-1 and GSTR-2 was needed to be filed by September 30, in place of September 15.

Ministerial group to look at GSTN

The Council also decided to set up an group of ministers to review the functioning of GSTN. “The council has decided to set up a committee of ministers for interaction with the GSTN for smooth transition,” finance minister Arun Jaitley said. Its composition will be given later, he said.

Revenues on track
The minister, who is the chairman of the council, said the council reviewed implementation of the new tax regime and held a detailed presentation on on migration of tax payers from the old regime to new regime. It also reviewed the revenue collections.
“overall revenue collections have been robust with more than 70% of taxpayers having filed their returns,” the minister said adding that there is large unutilised tax credit.

New framework for branded packaged foods
The issue of avoidance of 5% GST on pulses, cereals and flours, put up in unit container and bearing a registered brand name, was also discussed by the GST Council. Any brand registered on May 15, 2017 irrespective of whether it is de-registered later will face 5% tax.A mark or name in respect of which an actionable claim is available shall also be deemed to be a registered brand name and face 5% GST, a provision that could bring in-house brands of large retailers in the 5% tax bracket.

Relief for handicraft makers
Handicraft traders who sell to other states will not have to register if their turnover is below Rs 20 lakh.

Jaitley said GST on about 30 items have been lowered after anomalies in the fixation of rates were pointed out.

To deal with businesses which are deregistering brands post GST to avoid taxes, the panel decided May 15, 2017 as the cut-off date for considering as a registered brand for the purpose of GST levy, irrespective of whether or not the brand is subsequently deregistered.

Unbranded food items are exempted from the GST, whereas branded and packaged food items attract 5 per cent rate. Hence, many businesses are deregistering their brands to avoid the levy.

The tax has been lowered on dried tamarind, custard power, oil cakes, dhoop batti, dhoop and other similar items, plastic raincoast, rubber bands, rice rubber rolls for paddy de-husking, computer monitors and kitchen gas lighters and brooms and brushes.

Also, the deadline for filing of sales return or GSTR-1 for the month of July, the first month of implementation of the new tax regime, has been extended by a month to October 10.

Deadlines for other three returns to be filed under the GST regime have also been extended.
Jaitley said overall GST collections have been robust with over 70 per cent of eligible taxpayers filing returns of about Rs 95,000 crore.

The meeting, the second since the implementation of GST, reviewed the functioning of GST Network — the IT backbone and portal for registration and tax returns under the GST regime.

GSTN on “two-three occasions got overloaded. These are transient challenges and glitches in technology. The council has decided to appoint a committee to interact with GSTN for smooth transition”, the finance minister said.

Since the work is huge, the period of filing of returns has been extended, he said.

Jaitley further said that food stuff sold in open was categorised at zero per cent tax rate while the branded ones attracted 5 per cent.

Some businesses were deregistering their brands and selling under corporate brand name, creating inequality of trade, “so we amended the rule”, he said.

“If you fall in either of two categories, you will pay 5 per cent tax — one, if on May 15, 2017, you had a registered trade mark you have to pay 5 per cent GST. Two, if you have a mark or a name on which you are entitled to maintain actionable claim or exclusivity, then you have to pay 5 per cent,” Jaitley added.

Khadi fabric sold through KVIC stores would be exempted, he said adding inter-state sales where turnover is less than Rs 20 lakh as also for artisans will not need registration.

Similar dispensation for certain categories of job work, excluding gold, has also been approved.

At its last meeting on August 5, the panel had approved hike in cess on mid, large size cars, SUVs, hybrid and luxury ones to up to 25 per cent, from 15 per cent. Subsequently, an Ordinance promulgated and the council today looked into the quantum of hike.

Car prices had dropped by up to Rs 3 lakh as the tax rates fixed under the GST that came into effect from July 1, was lower than the combined central and state taxes in the pre-GST days.

To fix this anomaly, the council raised the cess.

Revenue Secretary Hasmukh Adhia said the council has decided that GSTR-3B will be filed for four more months till December.

“For GSTR-1, 2, 3, we are giving a long rope and we are staggering the return filing date for July,” he said.

“(For) companies with turnover of over Rs 100 crore, the last date for filing GSTR-1 will be October 3. For the rest, it will be October 10,” he said.

GSTR-2 for July will have to be filed by October 31 and GSTR-3 by November 10.

Date of GSTR 1, 2, 3 return filing for month of August will be informed later.

Jaitley said businesses can opt for Composition Scheme till September 30 and the council has also allowed businesses to make rectification in transition form TRAN-1 once.
Under the GST, which replaced over a dozen central and state levies in the biggest tax reform since independence, cars attract the top tax rate of 28 per cent.

On top of this, a cess of 1 to 15 per cent has been levied for the creation of a corpus to compensate states for any loss of revenue from implementation of GST.

Source : PTI

 

Jaitley seriously considering auto makers’ GST cess hike concern: Minister : 08-09-2017


Finance Minister Arun Jaitley is “seriously” considering the demand of automobile manufacturers which have raised concerns over rise in cess on luxury vehicles, Union Heavy Industries Minister Anant Geete said today.

“We have requested the finance minister (on the cess issue). Industry has given its memorandum and we have forwarded that to the finance minister and he is seriously considering that,” Geete told reporters here.

Luxury vehicle manufacturers have hit out at the move to hike cess on large cars and sports utility vehicles (SUVs) to 25 per cent, saying it was against the spirit of liberal market dynamics and would affect future plans of expansion under Make in India initiative.

Toyota Kirloskar Motor, Mercedes-Benz, Audi and BMW were unanimous that increase in cess on large, luxury cars and SUVs that had become cheaper after GST rollout would dampen the spirits of the industry across the entire value chain.

The companies also stated that a constant shift in policy makes long-term planning for the market highly risky, and it would only have an adverse impact on India’s financial ratings.

The government has notified hike in GST cess on a range of cars from mid-size to hybrid variant to luxury ones to a maximum of 25 per cent, from earlier 15 per cent.

The Heavy Industries and Public Enterprises Minister also said that the ministry has given six months extension to FAME India Scheme [Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India].

“We are promoting hybrid and electric cars … The main cost of electric car is lithium battery, so we trying to see how we can cut the battery price,” he told reporters.

Speaking at the inaugural session of the event, the minister said that the government is committed to supporting the sector in all possible way.

He said that the sector is moving from BS-IV to BS-VI emission norms.

NITI Aayog CEO Amitabh Kant said that the auto sector, which provides 13 million jobs and accounts for 49 per cent of manufacturing, plays a critical role in the country’s growth and development.

“Therefore I am great believer that the policy regime has to be predictable, it must be consistent and there must be a clarity … And government and courts must keep them at arms length,” he said.

Kant said that there will be huge disruptions in this sector in the coming 15 years.

“We must be able to bring the electric vehicle (EV) mobility to India much quicker and faster. We must be able to make EV component manufacturing infrastructure, we must be able to leverage India’s renewable energy mission and we must make India a centre for EV export,” he added.

Kant said that India has a low per capita car ownership at 20 vehicles per 1,000 citizens as compared to 800 per 1,000 in the US and 85 per 1,000 in China.

This gives India an unique opportunity to pursue a very different model of growth in this sector, he added.

Kant said that there are several challenges to the sector which includes indigenous battery production and pushing India towards zero emission.

 

Source : Financial Express

Window for small businesses: Composition scheme under GST may return : 08-09-2017


The composition scheme, which is applicable to specific categories of small businesses whose turnover is Rs 75 lakh and below and had been closed on August 16, may return soon.

With just about a million taxpayers opting for the scheme, the goods and services tax (GST) Council will consider reopening the window in its meeting on Saturday in Hyderabad, giving another opportunity to small players to avail of it.

“Smaller players reportedly faced challenges with respect to registration. Some wanted more time to evaluate their business models to comply with the requirements of the composition scheme. So, we want to give them another chance,” said a senior government official.

The popularity of the scheme was increasing, when the scheme ended, with 980,000 entities registering for it by August 16, compared to just about 100,000 as of July 21, the earlier deadline.

In other words, about 11 per cent of the GST taxpayers have opted for the scheme.

The scheme is applicable to certain categories of small taxpayers — traders, restaurants, and manufacturers/suppliers. One per cent GST is levied on traders, two per cent on manufacturers, and five per cent on restaurants. The eligibility threshold was raised to Rs 75 lakh, from Rs 50 lakh decided earlier. A composition dealer needs to furnish one return, i.e., GSTR-4, on a quarterly basis and an annual return in Form GSTR-9A, against three forms every month by others.

According to the current rules, those who did not register by August 16 can have an opportunity next year.

If approved by the Council, those with incomplete registrations will also get a chance to opt for the flat rate scheme.

Revenue Secretary Hasmukh Adhia, in an address at the Business Standard GST Round Table in New Delhi on Wednesday, pointed out that at least 1.1 million people had not completed their registration with the GST Network. He urged them to fill Part B of the form.

Another official said: “We are not looking at expanding the scope of the scheme or the threshold as of now. It is about reopening the window to give another chance to taxpayers to opt for the scheme. It will require amending the rules and law.”

“Small businesses will welcome this move as composition is a very simple scheme and it will also help in expanding the tax base,” said Pratik Jain of PwC India.

The stringent conditions to avail of the scheme were a deterrent. For example, it is not available for those engaged in interstate supplies of goods. Besides, a composition dealer does not get input tax credit and cannot issue a tax invoice. Therefore, someone buying from a composition dealer will not be able to claim input tax on such goods. In addition, the reverse charge mechanism, by which the receiver and not the supplier pays the tax, is not covered under the scheme.

The turnover threshold is lower in the north-eastern and hilly states at Rs 50 lakh a year.

Jaitley and Adhia have said that the scheme will benefit small businesses.
Source : PTI

Government moves to rework direct tax law after PM Narendra Modi’s nudge : 08-09-2017


After indirect taxes, the government has now set its sights on overhauling the 56-year-old direct taxes law covering income and corporation tax as it seeks to make the Indian regime more contemporary and tailor it to current requirements.

Senior government officials told TOI that the finance ministry was in the process of setting up a task force to write the new tax law, an attempt which was last made in 2009 when Pranab Mukherjee released the Direct Taxes Code (DTC) prepared by P Chidambaram and his team, only to significantly dilute it a few years later.

The Bill was never legislated and the Narendra Modi government had dropped plans to rewrite the Income Tax Act as it got down to removing the clutter in indirect tax through goods and services tax (GST). But with the Prime Minister himself commenting on the outdated nature of the law during last week’s Rajaswa Gyan Sangam, the annual retreat of tax officers, the finance ministry has now started a review.

Sources said the plan is to have the draft legislation ready by the Budget before it is put out for public comments. With general elections due in 2019, the government is unlikely to move to the new regime at the start of 2019-20 financial year, but may want to complete the ground work. While it is still early days, DTC had originally proposed to do away with several tax exemptions, including those available on provident fund and public provident fund at the time of withdrawal.

Government moves to rework direct tax law after PM Narendra Modi’s nudge

Proposing an exemption of up to Rs 3 lakh, it had suggested that the peak rate of 30% tax apply to those with income above Rs 25 lakh, while those earning Rs 10-25 lakh were to face 20% levy. The idea was to simplify the regime and increase the threshold for taxation. For companies, too, several exemptions were to be withdrawn. While tax experts are in favour of a new law, the question is timing.

“The government should give a breather to India Inc since it is already dealing with several changes such as GST, the new Companies Act and the new accounting standards,” said Sudhir Kapadia, national tax leader at Ernst & Young. Rahul Garg, who leads the direct tax practice at PricewaterhouseCoopers, said starting from a zero-based approach was essential to deal with the global alignment of tax systems as well as technological invasion.0

Source : Times of India

GSTN system overload: What really caused the tremor; big answer revealed : 07-09-2017


A habitual deferment of compliance to the last minute by big businesses is the principal reason behind the GST Network systems coming under strain on Monday, the day before the earlier deadline for filing the details of sales invoices (GSTR-1), a source privy to the situation said, adding that the GSTN’s capability to handle traffic is indeed more than satisfactory. Between July 24 and August 29, only 36 lakh GSTR-1 invoices had been uploaded on to the system compared with the estimated 3 crore monthly bills the goods and services tax (GST) base would generate. In the week before Tuesday, taxpayers inundated the GSTN portal with over 2.5 crore invoices, causing it to wobble and compelling the government to a give a special window till September 10 to file the first of the triplicate returns (GSTR-1).

The portal is capable of handling 60,000 taxpayers at a time. The deadlines for filing GSTR-2 (inward supplies) and GSTR-3 (aggregate details of input tax credit) too were extended by 15 days each to September 25 and 30, respectively.

“The big businesses which generate lakhs of invoices every month need to develop the habit of uploading invoices periodically if not daily. If they wait for the last few days, it will crowd out the system, and make smaller businesses suffer without any fault on their part,” the source said. He added that deadline extension may provide immediate relief to taxpayers but businesses needed to adapt sooner for system to run smoothly in the long term.

To be sure, the novelty of the return-filing process has also contributed to a general sense of confusion among taxpayers. “There are cases where assessees have paid more tax than required as they aren’t sure how to calculate the exact amount. Many taxpayers failed to fill out TRAN-1 and TRAN-2 forms, meant for claiming transitional credit, as it proved to be too complex and elaborate for assessees,” Archit Gupta, CEO of ClearTax said.

Although revenue collection under GST for July exceeded government’s own internal assessment, some tax experts feel a lot of taxpayers weren’t able to calculate their tax liability correctly. On August 29, over 64% of 60 lakh eligible taxpayers had filed returns using the interim summarised GSTR-3B form for July. The total GST revenue to government under different heads till that day was Rs 92,283 crore.
Also, while tax experts have by and large welcomed extension of the deadline, they are wary that it may not be enough as taxpayers are likely to take longer to adjust to the system.

“Big corporations with large number of invoices are wary of uploading all of them on the GSTN portal without proper scrutiny. In the case of most firms, only a tiny portion of invoices may need amendments but the process holds up the upload of the rest as well. Also, most chief financial officers of the firms give approvals closer to the deadline than earlier. Besides, there are companies with invoices coming from different verticals that use different ERPs. These processes are expected to be expedited over a couple of months making companies capable of uploading invoices right from the start of the month,” Rajat Mohan, partner, AMRG and Associates said.

“Given the magnitude of data and issues in hand, extension of five days in filing of GSTR 1 for July may not be sufficient. We have requested the government to continue with GSTR 3B (summary return) till December 2017 and extend the timelines for other returns till such time. Since tax would be collected on a monthly basis, revenue will not get impacted. This will give adequate time to the industry as well as GSTN and the government to sort out the glitches in their respective systems and processes,” said Pratik Jain, partner and leader, indirect tax, PwC.
Meanwhile, after Navin Kumar retired as the chairman GSTN on July 29, revenue secretary Hasmukh Adhia has taken over as the interim chairman. A search committee formed by the government is looking for Kumar’s replacement.

Source : Economic Times

Weak investment demand bigger challenge than GST, noteban, say experts : 07-09-2017


India’s economic activity lost momentum in the June quarter and critics blamed GST as well as demonetisation for the slip, but its weak investment demand that is a bigger challenge, experts say. According to Kotak Institutional Equities, weak investment demand which accounts for 30 per cent of GDP is a far bigger ‘structural’ challenge. India’s economic growth slipped to a three-year low of 5.7 per cent in April-June quarter, underscoring the disruptions caused by uncertainty related to the GST rollout amid slowdown in manufacturing activities. “We believe market participants may be ignoring the structural challenges to India’s GDP growth by overly focusing on the cyclical factors of demonetisation and GST,” the report said, adding that weak investment demand is a far bigger structural challenge for the economy.

 The report further noted that investment demand has been subdued for a fairly long time and the slowdown in investment demand started from the second quarter of 2016-17 (well before demonetisation or GST). Meanwhile another report by Capital Economics also said that the weakness of second quarter GDP data can not be attributed solely to demonetisation as growth had already slowed sharply in the first quarter to 6.1 per cent, from 7.5 per cent in third quarter of 2016 (the last quarter before demonetisation).

It said though on the face of it, demonetisation has been an abject failure given its lack of success in rooting out illicit wealth while also causing growth to slow sharply, it is likely to have some positive effects in the long run, like boosting digital transactions and widening the tax base. The government estimates that demonetisation led to the opening of more than 20 million bank accounts, with more than 9 million new taxpayers being registered as a result.

In its annual report the Reserve Bank estimated that over 99 per cent of the Rs 500 and Rs 1,000 notes that were demonetised by the government in November 2016 have either been deposited or exchanged for new currency.

Source : Financial Express

BS GST Round Table 2017: Slabs for taxes may be reduced to three in 2-3 yrs : 07-09-2017


The slabs under the goods and services tax (GST) regime may be reduced to just three from the current four over the next two to three years as the new tax system stabilises.

“We are looking at three clear rates, I will say two to three years down the line,” Manish Kumar Sinha, commissioner, Central Board of Excise and Customs (CBEC), said at the Business Standard Round Table on the goods and services tax here on Wednesday. He, however, added that it was his opinion, and a final decision would be taken by the political leadership.

Sinha said there could be one standard rate, and two more rates — one each below and above the standard rate — for a few items. The first big restructuring of rates could come in the next Budget or before that.

Currently, there are four GST rates: 5 per cent, 12 per cent, 18 per cent and 28 per cent. A standard rate may mean merging the 12 and 18 per cent slabs. There are also cesses above the 28 per cent rate, and gold is taxed at 3 per cent.

Sinha said rates were not fixed in a vacuum. When the rates were fixed on the basis of revenue neutral rates (RNR), not much consultation was done with industry. “However, when the rates are rationalised, industry would be consulted widely,” he said. “Rationalisation of rates is much more complex exercise. We have to see that a particular sector is not adversely affected.”

The panelists at the round table included Sinha, former GST Network (GSTN) chairman Navin Kumar, GSTN CEO Prakash Kumar, PwC India indirect tax head Pratik Jain, Pepsico CFO Rajdeep Duttagupta, NSDL e-governance CEO Gagan Rai, and Nishant Shah, a partner with ELP.

At the event, Jain said that while the GST might be a good tax, it was certainly not simple. He questioned whether e-way bill would improve the ease of doing business. “Why is it (e-way bill) required? Do you really need it?” he wondered.

Sinha, however, said e-way bill was in a much liberal form than what states had asked for. He said e-way bill would help reduce the border check posts.

Jain said over Rs 92,000 crore that came in July from the GST might be an indicator of healthy revenue collections, as input credits on pre-GST stock were yet to be claimed.

Asked if there was any difference between the levels of preparedness regarding GST transition in large corporates and smaller businesses, PepsiCo India CFO Duttagupta said his company had started preparing early and found the transition to be relatively smooth. “It is not necessary that if you are bigger, you are faster. There have been smaller companies which are very well informed and well prepared,” he said.

Former GSTN chairman Navin Kumar said the network worked on moving targets. He said that when the GSTN conducted a study on the growth rate of assessees under the GST, it estimated 400,000 assesses. However, there were 2 million new registrations, handsomely beating the internal estimates. “These were beyond our expectations, but we still coped (with it),” Kumar said.

GSTN CEO Prakash Kumar said 30,000 new businesses were registering on the GSTN every day, which means one million per month on average. “We started all clean because we did not take invalid PAN cards,” he said. In the pre-GST regime, there were many entities which were giving invalid PAN cards for the purposes of VAT, he added.

Given the huge amount of data being gathered under the GST, NSDL CEO Rai spoke of the need to protect, encrypt and retrieve huge stash of data and be alert against cyberattacks. “The survival of any organisation depends on how secure the data is. We have seen a lot of attacks coming from Pakistan and China. We have had days with 450 attacks per day,” Rai said. NSDL is one of the many GST solutions provider.

Nishant Shah of ELP said that in spite of teething problems in the initial stages, trade and industry had realised that in the long-run the GST was good for the economy. “Most businesses have undertaken preparatory steps, and have worked with their supply chain or distributors,” Shah said.

To a question on GST jitters leading to a slowdown in the economic growth, Sinha said de-stocking of goods in the month of June was a blip.

Stressing that GDP growth was slower because of many factors, he said, “I don’t see any slowdown (due to GST).”

He said the GST was successful on three counts — it did not lead to spike in prices, or any scarcity of goods and services and the common man accepted it. Sinha said the country was in a sweet spot so far as inflation was concerned.

On why the GST rate was 5 per cent on ghee and zero per cent on mutton, he said the principle was that items which were not processed would be zero rated.

Source : PTI

Centre’s food subsidy bill set to be slashed courtesy Aadhaar, PoS : 06-09-2017


The new systems for monitoring transactions at fair price shops (FPSs) are promising to help slash the Centre’s food subsidy bill, the most sticky among its revenue expenditures, after pension and interest payments. Around a quarter of ration card holders in Haryana haven’t apparently turned up for collecting the provisions since June, when all 9,500 FPSs in the state started using electronic point of sale (ePoS) machines and Aadhaar-seeding of ration cards was made mandatory.

The state government believes that the sudden drop in the number of buyers is due to ePoS-induced transparency, which curtailed the scope for manipulation of purchase records and diversion of grains meant for the public distribution system (PDS) to the open market.

Earlier, Rajasthan had reported a similar weeding out of fictitious beneficiaries under the National Food Security Act (NFSA): After the state’s 25,000 odd FPSs were ePoS-enabled in September last year, the beneficiary list got pruned by about 20%.

The Centre’s food subsidy bill is projected to be Rs 1.45 lakh crore in FY18, under the medium-term expenditure framework released by the finance ministry recently, and the subsidy is seen to rise to Rs 2 lakh crore in FY20.

According to SS Prasad, additional chief secretary, Haryana, who heads the state’s Food Civil Supplies Department, after the state government stopped providing monthly entitlement of grains to around 40 lakh PDS beneficiaries among the 1.24 crore people covered under NFSA in June, around 10 lakh got their Aadhaar cards made and seeded with ration cards while others haven’t since turned up at the retail shops.

Against a monthly allocation of around 66,000 tonnes of wheat from Food Corporation of India for distribution to NFSA beneficiaries, the Haryana Civil Supplies Corporation is now lifting around 50,000 tonnes of grain mainly because of the reduction in the number of beneficiaries.

Of course, death, migrant labourers going back to their respective states, persons shifting out of the state after marriage, etc, prune the PDS list. “Compulsory Aadhaar seeding has made fake ration cards redundant,” Prasad said. The Haryana government has also introduced ‘portability’ of ration cards where each beneficiary can claim 5 kg of highly subsidised wheat as monthly entitlement under NFSA across any ration shop in the state.

Haryana has 29.68 lakh ration card holders of whom more than 90% so far have had their cards seeded with Aadhaar. Those who have not seeded their ration cards have been allowed to approach any FPS in the state to submit their details.

Haryana is one of six states to have installed e-PoS machines in all FPSs, the other five being Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Chhattisgarh and Rajasthan. In coming months, these and other states are also expected to get rid of the redundant ration cards through Aadhaar-seeded PDS transactions and e-PoS-enabled tracking.

The government wants to make Aadhaar mandatory for receiving subsidised foodgrains under PDS, but what the Supreme Court says on this after the recent judgment making privacy a fundamental right is crucial.

Since 2013, 2.48 crore bogus/duplicate ration cards have been eliminated in the country, with potential savings of Rs 14,000 crore to the exchequer. Of a total 5.27 lakh FPSs in the country, around 47% or 2.45 lakh have installed ePoS machines. Around 80% of the total 23 crore ration cards in the country have been seeded with Aadhaar.

Source : Financial Express

All eyes are on GST as government plans higher social pension : 06-09-2017


The government has readied a draft proposal to increase the quantum of the three key “social pensions” but all eyes are on the state of revenues post GST, with the revamp now hinging on whether the Centre will have resources to fund the revision.

According to estimates, restructuring the ‘National Social Assistance Programme (NSAP)’ – old-age pension, widow pension and disability pension -will incur an additional expenditure of Rs 10,000-12,000 crore over the present annual budget of Rs 9,500 crore.

While the rural development ministry has worked out the proposal, it is learnt that it will be put to the Expenditure Finance Committee only when the picture becomes clear on the availability of funds.

“GST will be the main factor in deciding the fate of the proposal. If the funds are available, we are ready,” a source said.

According to observers, revenue collections in the first quarter far exceeded the Centre’s expectations, raising hope that funds may not be a hurdle in the way of such revisions.

The Sumit Bose committee had recommended that the government link pensions under NSAP, given to BPL households, to the consumer price index and reduce the eligibility age for widow pension from 40 years to 18 years.

While accepting these recommendations, the ministry may also seek to absorb the increased outgo on pensions by restructuring the funding pattern.

Against the present arrangement of bearing the total cost alone, the Centre may ask states to foot 40% of the bill. Crucially, the extent of coverage is still to be finalised, possibly in view of the uncertainty over resources.

While the expert panel said pensions should be extended to all households except those “automatically excluded“ under the `socioeconomic caste census’ -the measure of deprivation levels -the rural development ministry is learnt to have kept it open whether to limit its schemes to families with “one deprivation” or “two deprivations”. As per the preliminary proposal, the ministry may raise the old-age pension from Rs 200 to Rs 500, of which the Centre will pay Rs 300 and states Rs 200.  While the pension covers 3.5 crore households, extending it to those with “one deprivation“ will spread the net to 8.72 crore households and extending it to those with “two deprivations” will spread it to 5.5 crore households.

The ministry favours instituting widow pension for those aged 18-39 years while agreeing to pay a one-time grant for remarriage.

On disability, the ministry is ready to change the eligibility criteria from 18 years to the person’s date of birth, and from 80% disability to 40% disability . The pension too is to be raised from Rs 300 to Rs 500.

Source : Business Standard

Exporters demand total exemption from GST : 06-09-2017


Exporters have petitioned the government for an outright exemption on payment of goods and services tax, saying that the time it takes to get reimbursements under the current mechanism was causing a working capital crunch.

According to industry claims, about Rs 1.85 lakh crore of working capital will get stuck annually due to the implementation GST. Several exporters said they are already facing a capital shortage and have begun to turn away orders .

Prior to the implementation of GST on July 1, exporters were exempted from paying duties. Now, they have to pay the tax first and then seek a refund, a process that ties up a portion of their working capital and pushes up manufacturing costs as they have to pay duties on inputs. This has particularly hit small exporters, who work on meagre resources and for whom getting bank financing is tough.

Moradabad-based brass handicraft manufacturer and exporter Paragon Metals has Rs 6 lakh of drawback blocked with the government. Proprietor Ajay Kumar Gupta said it might have to lay off artisans and those doing job work if the refund claim is not processed soon.

Similarly, Rajkot-based exporter of bathroom accessories, Valiant Overseas, has stopped shipments for the time being and refused orders worth Rs 1 crore in the past few weeks as Rs 50 lakh of capital is blocked for the past two months, proprietor Kalrav Malaviya said. “We have no idea when we’ll get the refund. As of now, we have said no to five-six clients from Dubai.”

Besides seeking a blanket exemption from payment of GST and a deferred payment on goods not exported, as a likely solution to the problem exporters are also favouring use of e-currency where no physical exchange of money is involved.

Source : Economic Times

Notification No. SO 2964(E) 05-09-2017


Central Government notifies an additional area of 18.55.92 hectares at Village Vilayat and Vorasamni in Taluka Vagra, District Bharuch, in the State of Gujarat – S.O. 2964(E)

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 5th September, 2017

S.O. 2964(E).- Whereas, M/s. Jubilant Infrastructure Limited, had proposed under Section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for Chemicals at Village Vilayat and Vorasamni in Taluka Vagra, District Bharuch, in the State of Gujarat;

And, Whereas, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 107.16.50 hectares as Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 290 (E) dated 11th February, 2008;

And Whereas, M/s. Jubilant Infrastructure limited, has now proposed to include an area of 18.55.92 hectares as a part of above Special Economic Zone;

Now, Therefore, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an additional area of 18.55.92 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 125.72.07 hectares, comprising the survey numbers and the area given below in the table namely:-

TABLE

S.No.

Village

Survey No.

Area in hectares

1.

Vilayat

436

0.68.86

2.

440

02.11.85

3.

441

02.21.07

4.

442

0.50.73

5.

443

01.89.00

6.

444

01.87.00

7.

445

0.87.00

8.

446

0.02.70

9.

455

02.01.55

10.

456

01.24.00

11.

457

01.78.55

12.

458

03.33.61

Total

18.55.92

 Grant total area of SEZ after above addition

125.72.07

[F. No. F.2/270/2006-SEZ]

SUNIL KUMAR, Addl. Secy.

Supreme Court refuses to stay new Finance Act : 05-09-2017


The Supreme Court today refused to grant interim stay on the newly-amended Finance Act which provides that the search-cum-selection committee to select administrative members of the CAT will be headed by a nominee of the central government. A bench comprising Chief Justice Dipak Misra and justices A M Khanwilkar and D Y Chandrachud asked the counsel for the Central Administrative Tribunal (CAT) to supply a copy of its plea to the Centre and said it cannot stay the impugned provisions of the Act without hearing the other side.

The CAT, represented by senior advocate C A Sundaram, has challenged the constitutional validity of certain provisions of the ‘Tribunals, Appellate Tribunals and Other Authorities (qualifications, experience and other conditions of service of members) Rules, 2017’.

Sundaram said the power of the judiciary in selection and appointment of administrative members of CAT has been taken away by the new law and the government should be asked not to fill up vacancies for the time being. The court posted the matter for hearing on September 25.

The CAT said the ‘Tribunals, Appellate Tribunals and Other Authorities (qualifications, experience and other conditions of service of members) Rules, 2017’, framed under the Finance Act, provides that the search-cum-selection committee to select its administrative members will be headed by a nominee of the central government.

Earlier, the Chief Justice of India (CJI) or his nominee had a role in the selection of administrative members of CAT, the tribunal had told the court. The panel had also sought an interim stay on the provisions of the new Act and the Rules, under which a new Search-cum-Selection Committee for the post of Administrative Member would be set up.

However, on the issue of selection of CAT’s chairperson and judicial members, the 2017 Rules provide that this committee would be headed by the CJI or his nominee.

The Finance Act, which came into effect from April 1, led to the framing of the 2017 Rules which allegedly gave “unbridled” powers to the Executive to decide on the qualification of the members, their appointment and removal among other issues, one of the petitions filed by Congress leader Jairam Ramesh said.

The apex court had earlier issued notice to the Centre on two other similar pleas filed by Ramesh and an NGO Social Action for Forest and Environment (SAFE).

The NGO had sought the quashing of Part 14 of the Finance Act and Rules framed under it. It alleged that the alterations brought about by the Finance Act would weaken the functioning of tribunals including the National Green Tribunal (NGT) and curtail their powers.

Senior advocate Mohan Parasaran, who had appeared for Ramesh, had submitted that the power of judiciary has been compromised by the provisions of the new law.

The petition has said the changes brought about by the Act would weaken the functioning of tribunals including the NGT and curtail their powers.

Source : Financial Express

‘GST Council may lower tax rates if high collections continue’ : 05-09-2017


The all powerful GST Council may consider lowering tax on items of common consumption if the high trajectory of collections continues over the next few months, an official said today.

The first-month collection under the new Goods and Services Tax (GST) regime has been encouraging and if the rising trend continues till December, it would make a case for reduction of tax rate, he said.

The tax reduction could be either on items of common consumption or a cut in headline rate which will benefit consumers, said the official who did not wish to be identified.

The GST Council headed by Finance Minister Arun Jaitley could look at the aspect once the clear trend is available, the official said, adding that it would be evident from the November tax collection.

India’s maiden GST revenue mop-up got off to a strong start with collection of Rs 92,283 crore in July from just 64.42 per cent of the total taxpayer base.

Of this, as much as Rs 14,894 crore has come in from the Central GST (CGST), Rs 22,722 crore from State GST (SGST), Rs 47,469 crore from Integrated GST (IGST) and Rs 7,198 crore from compensation cess levied on demerit and luxury goods

July was the first month from which a unified Goods and Services Tax (GST) was implemented across the country, replacing more than a dozen central and state levies like excise duty, service tax and VAT.

The collections are likely to go up further when all the tax payers file returns.

The collections were higher than the finance ministry’s internal estimate of Rs 91,000 crore.

So far, 38.38 lakh taxpayers, accounting for 64.42 per cent of the total businesses who had registered in July, have filed returns. As per the registration, 59.57 lakh businesses should file return for July. DP CS SA

Source : Business Standard

GST return filing stumps millions of taxpayers, filing portal keeps throwing tantrums : 05-09-2017


It was well known that the real test of GST would be when companies and taxpayers start filing their returns and the initial feedback show it has been frustrating and messy for millions. From the GST portal crashing under load, to a very complicated process of filing returns, taxpayers across the country are facing major hurdles when it comes to filing GSTR-1.

The government on Monday extended the date of filing GSTR 1 to September 10, but the taxpayers are still facing issues uploading their returns, which they have filled in offline utility mode .

On visiting the portal, many users are still facing real time errors such as GST portal is experiencing an abrupt surge in traffic and hence, it is unable to process the request. This is suggestive that the GST portal needs adequate time to get itself up and running. A situation of distress and confusion can be repetitively felt among millions of taxpayers looking to upload their invoices.

“We have filed Trans 1 and GSTR 3B and started with GSTR- 1 on August 31, but the going has been difficult. The additional data and columns that the GSTR-1 has is different from the format which was notified. For example, there is a column which asks the reasons for giving a debit note. It even asks if the debit note is corresponding to pre-GST or post-GST time frame. This is not there in the notified rule, but when you go online to file the return, such additional data gets thrown up,” says an account executive at a copper company on conditions of anonymity as he is not authorized to speak to the media.

He adds that there are times when companies are uploading invoices, but the system automatically says the invoices cannot be from the pre-GST regime. “There are many errors which we would not have expected from the GST portal. Currently only 15% of my invoices have been uploaded,” says the source.

What has stumped many is the auto-checks the system has been built around. Any divergence and the system refuses to take an entry. “Taxpayers are navigating through a complex web of auto checks, which many a time is not allowing valid transactions, keeping them at tenterhooks. For instance, supplies to SEZ has an IGST component, but the system is not allowing IGST if the supplier is in the same state,” says KPMG, Partner, Priyajit Ghosh.

Ghosh adds that ‘unusual traffic’ should have been expected and showing an error message asking people to ‘try again’ does not help. “While this is certainly the most voluminous filing, however, the quality of the filing would determine the input tax credit to the buyers. It is good that the Government has extended the date of filing for GSTR-1 but they should do the same for tax payment, the deadline for which is September 20. This would be in the interest of the Government and the taxpayer and help to sort out the teething issues,” says Ghosh.

For many, it is a foreboding of what the future holds. If uploading invoices is so much of an issue, companies are not sure what would happen in the GSTR-2 stage where they will get to know if their invoices match with their vendors and suppliers.

“There are big technological issues with the system and because of it millions of businesses are facing problem. At the moment a large part of my time is devoted to filing returns, which is absolutely unproductive for me. What is worrying is that the festive system starts in about 10 days, leading up to Diwali and if this continues it will be very difficult to get business done,” says President- Faridabad Small Industries Association and JaiRaj Group, Rajiv Chawla.

If companies are stuck filing returns for July, many wonder when they would file for September and ultimately what would happen to their income tax returns. The entire chain has been disrupted. “My accounts team is working in two shifts now. One during the day and one at night to only upload returns,” says Chawla. For millions of small enterprises, that is not even an option.

Source : Economic Times

Despite robust GST receipts, Centre faces shortfall, will have to look for more revenue avenues : 04-09-2017


Determined to keep the brisk pace of spending achieved in the initial months of the fiscal year, the Centre might look for avenues other than the budgeted to boost receipts as it sees shortfalls under some key revenue heads like the telecom spectrum and dividend from the RBI. Even though initial signs are that GST receipts will be robust and direct taxes too have got some post-demonetisation fillip, only eleven months’ GST receipts could be accounted for in the current year, finance secretary Ashok Lavasa told FE in an interview. Even as the GDP growth slowdown is posing another fiscal risk, he said the finance ministry will ensure that the budgeted fiscal deficit of 3.2% of the GDP for 2-17-18 is not breached.

In the pre-GST regime, excise and service taxes for any month were paid by the end of  the same month, which meant all twelve months’ revenues were accounted for in the same financial year; however, under GST, revenue for a month will be accounted for in the subsequent month when the taxes are actually paid by the assessees. So, the GST revenue for the next March will reflect in 2018-19, instead of  this year. “We have to make an assessment to see what will be the impact because of this,” Lavasa said, adding that accounting will self-correct from the next financial year. A month’s GST revenue is equal to roughly Rs 1 lakh crore, half of which the Centre can lay hands on.

“Most of the schemes where implementation is good, we have allocated money,” the official said.   Spending on schemes such as housing, rural drinking water supply and rural electrification would continue to get budgeted funds, he said. “We don’t foresee any slowing down in terms of spending this year,” he reiterated.

Although the finance secretary hasn’t revealed the revenue areas being tapped to bridge any potential shortfall from budget estimate and keep the spending momentum which is crucial for the slowing economy largely deprived of private investments, more aggressive PSU privatisation, unlocking of government’s holdings in private firms held via SUUTI and monetisation of government land etc. are among the possible options.

Of course, ONGC’s acquisition of majority stake HPCL will yield the government some Rs 28,000 crore or so, but this, sources said, was seen when the disinvestment target of Rs 72,500 crore was set