Monthly Archives: August 2016

Relaxations for EOUs, STPIs, EHTPs

  • DGFT has vide its notification dated 13th August, 2016 granted some relaxations to Export Oriented Units (EOUs), Software technology parks of India (STPI), and electronic hardware technology parks (EHTPs). The gist of the notification is as under:
    1. Para 6.01(g) of the Foreign Trade Policy 2015-20 has been revised as under.

    EOU engaged in agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture, viticulture, poultry or sericulture may be permitted to remove specified goods in connection with its activities for use outside the premises of the unit.

    Earlier this was permitted only outside the bonded area of the unit.

    1. Para 6.13(a) is changed as under:

    Transfer of manufactured goods from one EOU/ EHTP/STP/BTP unit to another EOU/EHTP/STP/BTP unit is allowed with prior intimation to the concerned Development Commissioners of the transferor and transferee units as well as concerned Customs authorities as per following procedure for movement of goods:

    • Any procurement by one unit to another should be supported by a Procurement Certificate or pre-authenticated procurement certificates as applicable,
    • The supply of goods from one unit to another shall be based upon usual commercial documents such as invoice and delivery challan;
    • Upon receipt of goods, copies of documents shall be provided to the jurisdictional office of the sending and receiving unit by way of intimation.

     

    Earlier they had to follow the procedure of in-bond movement of goods.

    1. Para 6.19(b) is changed as under:

    Existing EHTP/ STP units may also apply for conversion/ merger to EOU unit and vice versa. In such cases, units will avail exemptions in duties and taxes as applicable.

    Earlier units had also to remain in bond.

    1. Para 6.28 has been deleted.

    The para stated as follows:

    EOU which intends to set up warehousing facilities outside the EOU premises and outside the DC jurisdiction at a place near to the port of export to reduce lead time for delivery of goods overseas and to address unpredictability of supply orders, is permitted to do so, subject to the provisions related to export warehousing as per terms and conditions of notifications issued by department of revenue.

    The impact of this, is that EOU is free to set up warehousing facilities without any conditionalities.

     

     

     

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Foreign Investment in other financial services sector

PIB press release dated 10th August, 2016

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to amend regulation for foreign investment in the Non- Banking Finance Companies (NBFCs).

The amendment in the existing Foreign Exchange Management (Transfer or Issue of Security by the Person Resident Outside India) regulations on Non- Banking Finance Companies (NBFCs) will enable inflow of foreign investment in “Other Financial Services” on automatic route provided such services are regulated by any financial sector regulators (RBI, SEBI, PFRDA etc.) / Government Agencies. Foreign investment in “Other Financial Services”, which are not regulated by any regulators / Government Agency, can be made on approval route.

Further, minimum capitalisation norms as mandated under FDI policy have been eliminated as most of the regulators have already fixed minimum capitalisation norms. This will induce FDI and spurt economic activities. It will cover whole India and is not limited to any State/Districts.

Background

In the Budget 2016-17 Speech, the Hon’ble Finance Minister had announced that “FDI will be allowed beyond the 18 specified NBFC activities in the automatic route in other activities which are regulated by financial sector regulators”. The present regulations on “Non-Banking Finance Companies” stipulates that FDI would be allowed on automatic route for only 18 specified NBFC activities after fulfilling prescribed minimum capitalisation norms mentioned therein. In the proposed regulations, FDI is allowed on automatic route for all “Other Financial Services” provided such services are regulated by any regulators (RBI, SEBI, PFRDA etc.) / Government Agencies. Further, minimum capitalisation norms as mandated under FDI policy have been eliminated as most of the regulators have already fixed minimum capitalisation norms.

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Factories Act, Amendment

PIB press release dated 10th August, 2016

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its ex-post facto approval for amendment of Section 64 and section 65 and consequential amendment of section 115 of the Factories Act, 1948 by introducing the Factories (Amendment) Bill, 2016 in the Parliament.

The approved amendments will give boost to the manufacturing sector and facilitate ease of doing business with an aim to enhance employment opportunities.

These amendments relate to increase in overtime hours from the existing 50 hours per quarter to 100 hours (Section 64) and existing 75 hours per quarter to 125 hours (Section 65).

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Maternity Benefit Act, Amendment

PIB press release dated 10th August, 2016

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its ex-post facto approval for amendments to the Maternity Benefit Act, 1961 by introducing the Maternity Benefit (Amendment) Bill, 2016 in Parliament.

The maternity benefit Act 1961 protects the employment of women during the time of her maternity and entitles her of a ‘maternity benefit’ – i.e. full paid absence from work – to take care for her child. The act is applicable to all establishments employing 10 or more persons. The amendments will help 1.8 million (approx.) women workforce in organised sector.

The amendments to Maternity Benefit Act, 1961 are as follows:

• Increase Maternity Benefit from 12 weeks to 26 weeks for two surviving children and 12 weeks for more than two childern.

• 12 weeks Maternity Benefit to a ‘Commissioning mother’ and ‘Adopting mother’.

• Facilitate’Work from home’. • Mandatory provision of Creche in respect of establishment having 50 or more employees.

Justification:

• Maternal care to the Child during early childhood – crucial for growth and development of the child.

• The 44th, 45th and 46th Indian Labour Conference recommended enhancement of Maternity Benefits to 24 weeks.

• Ministry of Women & Child Development proposed to enhance Maternity Benefit to 8 months.

• In Tripartite consultations, all stake holders, in general supported the amendment proposal.

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Companies (Incorporation) Rules Amendment

MCA has amended the Companies (Incorporation) Rules, by its amendment dated 27th July, 2016. Salient features of these amendments are as follows:

I) Rule 3(2) has been substituted as follows:

(2) A natural person shall not be member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a one Person Company”.

Rule 3 pertains to incorporation of a One Person Company. Earlier the rule read

(2) No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company.

So natural person replaces person and it goes beyond incorporation of the OPC. An example of bad drafting being undone, or so I hope.

II) Rule 8(2)(ii) has been substituted as under:

..(ii) it includes the name of a trade mark registered or a trade mark which is subject of an application for registration under the Trade Marks Act, 1999 and the rules framed thereunder unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters;”

Rule 8 pertains to undesirable names for a company.

This is again a case of bad drafting being corrected. There is nothing new here, only “trade mark registered” has replaced “registered trade mark” and the name of the Act i.e. Trade Marks Act and its Rules mentioned.

III) Rule 8(6) disallows names or a combination of names from becoming part of the company’s name for eg. Board, Commission, Authority cannot be part of a company’s name. Clause (n) had mentioned Financial, Corporation and the like. The comma between the words Financial and Corporation has been removed vide this amendment. Now a name is undesirable only if it contains Financial Corporation not if it contains Financial and Corporation separately. Again another example of bad drafting.

IV) After Rule 13(2), the following Explanation has been added, viz.

“Explanation.- For the purposes of sub-rule (1) and sub-rule (2), the type written or printed particulars of the subscribers and witnesses shall be allowed as if it is written by the subscriber and witness respectively so long as the subscriber and the witness as the case may be appends his or her signature or thumb impression, as the case may be.”

Rule 13 pertains to signing of the memorandum and articles of association of the company. Earlier the stipulation was that the name, address, occupation, description was to be written in the respective handwriting of the promoters of the company. Now it has been allowed that such particulars can be type written, only the signature or thumb impression needs to be done physically.

Probably another example of “ease of doing business”.

V) After Rule 16(1)(m) the following explanation is added, viz.

“Explanation.- In case the subscriber is already holding a valid DIN, and the particulars provided therein have been updated as on the date of application, and the declaration to this effect is given in the application, the proof of identity and residence need not be attached.”‘

Rule 16 pertains to particulars of every subscriber to be filed with the Registrar at the time of incorporation. There are humongous details to be filled in such as name, father’s name, nationality, date of birth, place of birth, educational qualifications, occupation, PAN, permanent and present address. Clause (m) pertains to proof of identity for which the subscriber is required to give some additional documents like PAN, voter’s card, driving licence etc. Now this explanation provides that if the subscriber is holding a valid DIN, then he need not attach proof of identity and residence.

Strange that MCA overlooked clauses (a) to (l) of Rule 16(1), the details of all of which are available in the MCA database at the time when the subscriber has obtained his DIN. Why these details as enumerated in clauses (a) to (l) of Rule 16(1) are required at all, when the DIN has been obtained by the subscriber and at the time of applying for DIN all these details are already provided by the subscriber. Strange that MCA starts the explanation with “in case the subscriber is already holding a valid DIN” because it the present MCA 21 system, a person cannot apply for name availability for a new company, if the does not have a DIN in his name. Another example of bad drafting and bad thinking I would say.

A half baked measure at “ease of doing business”

VI) Clause (q) in Rule 16(1) has been omitted.

Clause (q) envisaged that the specimen signature and latest photograph duly verified by the banker or notary public in form INC-10 was required to be attached as a document while incorporating a company. Thankfully it has been done away with. An “ease of doing business” measure.

VII) In Rule 16(2)(g), the words “or partnership firm” has been omitted.

The clause (g) before omission read as under:

(g)  if the body corporate is a limited liability partnership or partnership firm, certified true copy of the resolution agreed to by all the partners specifying inter alia the authorization to subscribe to the memorandum of association of the proposed company and to make investment in the proposed company, the number of shares proposed to be subscribed in the body corporate, and the name of the partner authorized to subscribe to the Memorandum;

Rule 16(2) pertains to incorporation of a company by a subscriber who is a body corporate then the prescribed details to be filed with the Registrar. “Partnership Firm” should never have been included in the said clause in the first instance as it is not an example of a body corporate within the meaning of the Companies Act, 2013. Another example of bad drafting.

VIII) Rule 26 has been substituted as follows:

“26. Publication of name by company.- (1) Every company which has a website for conducting online business or otherwise, shall disclose/publish its name, address of its registered office, the Corporate Identity Number, Telephone number, fax number if any, email and the name of the person who may be contacted in case of any queries or grievances on the landing home page of the said website.

(2) The Central Government may as and when required, notify the other documents on which the name of the company shall be printed.”.

The earlier Rule 26 contained only one clause which was the present clause (2). Clause (1) has been added to require every company which has a website, whether it conducts online business or otherwise to carry some mandatory details regarding the company such as name, address, e-mail, telephone number etc. This is a mandatory compliance for all companies who have a website regardless of whether they are doing business online or otherwise. I guess this was introduced after the rape incident last year in New Delhi where an Uber car driver raped a woman and when the police tried to contact the Uber people they were clueless and even their website contained absolutely no details whatsoever.

IX) After Rule 28(2), the following proviso shall be added as the third proviso.

“Provided also that on completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, shifting of registered office shall be allowed.”.

Rule 28 pertains to shifting of registered office of the company within the same State and for that certain requirements to be met and certain documentations to be completed.

The second proviso after Rule 28(2) as it stands before the amendment is as follows, viz.

“Provided further that the shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.”

So the third proviso seeks to limit the damage caused by poor drafting of the second proviso.

X) Rule 29(1) has been substituted as under:

“( I ) The change of name shall not be allowed to a company which has not filed annual returns or financial statements due for filing with the Registrar or which has failed to pay or repay matured deposits or debentures or interest thereon:

Provided that the change of name shall be allowed upon filing necessary documents or payment or repayment of matured deposits or debentures or interest thereon as the case may be.”

Rule 29 pertains to alteration of memorandum by change of name. The hitherto rule did not carry the proviso as above, so it has been added to take care of those companies which complies with all those defaults.

Another example of poor drafting of the Rules.

XI )   In Rule 30(1), following clause is added as clause (j) after existing clause (i), viz.

“(j) a copy of the No Objection Certificate from the Reserve Bank of India where the applicant is a registered Non-Banking Financial Company”

Rule 30 pertains to shifting of registered office of the company from one state to another and the procedures to be followed thereby and documentations to be submitted.

So where the applicant is a NBFC, it has to obtain a clearance from the Reserve Bank of India before approaching ROC for its approval.

XII)   In Rule 30(6)(c ) the words “and to the Securities and Exchanse Board in the case of listed companies” shall be omitted;

Rule 30(6) pertains to what the company has to do at least fourteen days before the date of the hearing, Clause (c ) in its entirety reads as follows:

(c) serve, by registered post with acknowledgement due, a notice together with the copy of the application to the Registrar and to the Securities and Exchange Board of India, in the case of listed companies and to the regulatory body, if the company is regulated under any special Act or law for the time being in force.

Pursuant to this amendment, companies seeking shifting of registered office from one state to another need not send copy of the application to the SEBI.

XIII)  In Rule 30(10), following explanation is inserted after the proviso, viz.

“Explanation.- On completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, shifting of registered office shall be allowed.”.

Rule 30(10) before the amendment reads as follows:

(10.)   The Central Government may make an order confirming the alteration on such terms and conditions, if any, as it thinks fit, and may make such order as to costs as it thinks proper:

Provided that the  shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

XIV) New Rule 37 has been inserted to provide for procedures for conversion of an unlimited liability company into a limited liability company by shares or guarantee.

 

 

 

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Motor Vehicles (Amendment) Bill, 2016

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for Motor Vehicle (Amendment) Bill 2016.  Every year 5 lakh road accidents are reported in the country in which 1.5 lakh people lose their lives.  Government is committed to reduce the accidents and fatalities by 50% in five years.

To address the issue of road safety, a draft Road Transport & Safety Bill was prepared soon after NDA Government came to power.  However, most of the States have expressed reservations.

To address the issue of road safety and to improve the facilitation of the citizens while dealing with transport departments, Ministry of Road Transport & Highways constituted a Group of Transport Ministers (GoM) of the States.  The GoM headed by Sh. Yoonus Khan, Hon. Transport Minister of Rajasthan held three meetings.  A total of 18 Transport Ministers from different political parties participated in these meetings and they have submitted three interim reports.

The GoM recommended that to address the pressing issue of road safety and improving transport scenario, Government should immediately bring amendments to the present Motor Vehicle Act.    On the basis of recommendations of the GoM and other pressing requirements, MoRTH introduced the Motor Vehicle (Amendment) Bill 2016 for consideration of the Cabinet. Today Cabinet Chaired by Hon’ble Prime MinisterShri Narendra Modi has approved the bill.

In the present Motor Vehicle Act, there are 223 Sections out of which the Bill aims to amend 68 sections whereas Chapters 10 has been deleted and a Chapter 11 is being replaced with new provisions to simplify third party insurance claims and settlement process.

The important provisions include increase in compensation for Hit & Run cases from Rs. 25000 to Rs. 2 lakhs. It also has provision for payment of compensation upto Rs 10 lakh in road accidents fatalities.

The Bill also proposes insertion of 28 new sections. The amendments mainly focus on issues relating to improving road safety, citizens’ facilitation while dealing with the Transport Department. Strengthening rural transport, last mile connectivity and public transport, automation and computerization and enabling online services.

The Bill propose to improve the transport scenario in the country by permitting the States to grant exemptions in Stage carriage and contract carriage permits for promoting rural transport, public transport, last mile connectivity and for passenger convenience and road safety.

The Bill proposes that the State Government can specify a multiplier, not less than one and not greater than ten, to be applied to each fine under this Act and such modified fine.

The bill proposes that the State Government can regulate the activities in a public place of pedestrians and such means of transport.

Improving delivery of services to the stakeholders using e-Governance is one of the major focuses of this Bill.  This include enabling online learning licenses, increasing validity period for driving licenses,  doing away with the requirements of educational qualifications  for transport licenses are some of the features.

The Bill proposes offences committed by Juveniles.   The Guardian / owner shall be deemed to be guilty in cases of offences by the Juveniles and Juvenile to be tried under JJ Act. Registration of Motor Vehicle to be cancelled

To improve the registration process for new vehicles, registration at the end of the dealer is being enabled and restrictions have been imposed on temporary registration.

In the area of road safety, bill proposes to increase penalties to act as deterrent against traffic violations.  Stricter provisions are being proposed in respect of offences like juvenile driving, drunken driving, driving without licence, dangerous driving, over-speeding, overloading etc.  Stricter provisions for helmets have been introduced along with provisions for electronic detection of violations.  To help the road accident victims, Good Samaritan guidelines have been incorporated in the Bill.  The Bill also proposes to mandate the automated fitness testing for the transport vehicles with effect from 1st October 2018.  This would reduce corruption in the Transport Department while improving the road worthiness of the vehicle.  The penalties are also proposed for deliberate violation of safety/environmental regulations as well as body builders and spare part suppliers.

To bring harmony of the registration and licensing process, it is proposed to create National Register for Driving Licence and National Register for Vehicle registration through “Vahan” & “Sarathi” platforms. This will facilitate uniformity of the process across the country.

The process for testing and certification for automobiles is proposed to be regulated more effectively.  The testing agencies issuing automobile approvals have been brought under the ambit of the Act.

The driving training process has been strengthened enabling faster issuance of transport licenses.  This will help in reducing the shortage of commercial drivers in the country.

To facilitate transport solutions for Divyang, the bottlenecks have been removed in respect of grant of driving licenses as well as alterations in the vehicles to make it fit for use of Divyang.

Hon’ble Transport Minister Shri Nitin Gadkari has termed the Motor vehicle (Amendment) 2016 passed by cabinet as biggest reforms in the Road Safety & transport sector.  He has expressed his gratitude toHon’ble Prime Minister for his guidance & Support. He has also expressed his special appreciation for the efforts put in by Group of State Transport Ministers to formulate these amendments.   He has also expressed his confidence that parliament shall take up the amendments next week and has appealed to all parties to support the bill which a step in right direction to provide safe & public friendly transport eco system

Proposed Amendments in Various Penalties under Motor Vehicle Amendment Bill – 2016

Section   Old Provision / Penalty New Proposed Provision / Minimum Penalties
177 General Rs 100 Rs 500
New 177A Rules of road regulation violation Rs 100 Rs 500
178 Travel without ticket RS 200 Rs 500
179 Disobedience of orders of authorities Rs 500 Rs 2000
180 Unautorized use of vehicles without licence Rs 1000 Rs 5000
181 Driving without licence Rs 500 Rs 5000
182 Driving despite disqualification Rs 500 Rs 10,000
182 B Oversize vehicles New Rs 5000
183 Over speeding Rs 400 Rs 1000 for LMV

Rs 2000 for Medium passenger vehicle

184 Dangerous driving penalty Rs 1000 Upto Rs 5000
185 Drunken driving Rs 2000 Rs 10,000
189 Speeding / Racing Rs 500 Rs 5,000
192 A Vehicle without permit upto Rs 5000 Upto Rs 10,000
193 Aggregators (violations of licencing conditions) New Rs 25,000 to

Rs 1,00,000

194 Overloading Rs 2000 and

Rs 1000 per extra tonne

Rs 20,000 and

Rs 2000 per extra tonne

194 A Overloading of passengers   Rs 1000 per extra passenger
194 B Seat belt Rs 100 Rs 1000
194 C Overloading of two wheelers Rs 100 Rs 2000, Disqualification for 3 months for licence
194 D Helmets Rs 100 Rs 1000 Disqualification for 3 months for licence
194 E Not providing way for emergency vehicles New Rs 10,000
196 Driving Without Insurance RS 1000 Rs 2000
199 Offences by Juveniles New Guardian / owner shall be deemed to be guilty. Rs 25,000 with 3 yrs imprisonment. For Juvenile to be tried under JJ Act. Registration of Motor Vehicle to be cancelled
206 Power of Officers to impound documents   Suspension of driving licenses u/s 183, 184, 185, 189, 190, 194C, 194D,194E
210 B Offences committed by enforcing authorities   Twice the penalty under the relevant section

 

 

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faqs on Goods & Services Tax

PIB press release dated 3rd August, 2016

Frequently Asked Questions (FAQs) on Goods and Services Tax (GST)
Following are the answers to the various frequently asked questions relating to GST:

Question 1.What is GST? How does it work?

Answer: GST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Question 2. What are the benefits of GST?

Answer:The benefits of GST can be summarized as under:

  • For business and industry

o   Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

o   Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

o   Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

o   Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

o   Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

  • For Central and State Governments

o        Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

o        Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

o        Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

  • For the consumer

o        Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

o        Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

Question 3.  Which taxes at the Centre and State level are being subsumed into GST?

Answer:                  

At the Central level, the following taxes are being subsumed:

  1. Central Excise Duty,
  2. Additional Excise Duty,
  3. Service Tax,
  4. Additional Customs Duty commonly known as Countervailing Duty, and
  5. Special Additional Duty of Customs.

At the State level, the following taxes are being subsumed:

  1. Subsuming of State Value Added Tax/Sales Tax,
  2. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
  3. Octroi and Entry tax,
  4. Purchase Tax,
  5. Luxury tax, and
  6. Taxes on lottery, betting and gambling.

Question 4.  What are the major chronological events that have led to the introduction of GST?

Answer: GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:

  1. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
  2. A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.
  3. Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).
  4. Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.
  5. In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.
  6. In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.
  7. Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.
  8. This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.
  9. The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-

(a)      Committee on Place of Supply Rules and Revenue Neutral Rates;

(b)      Committee on dual control, threshold and exemptions;

(c)      Committee on IGST and GST on imports.

  1. The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.
  2. The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.
  3. The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.
  4. The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.
  5. In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.
  6. Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country.  The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.

Question 5.How would GST be administered in India?

Answer:Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

Question 6.How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?

Answer :The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.

    

A diagrammatic representation of the working of the Dual GST model within a State is shown in Figure 1 below.

dual gst

 

Question 7.Will cross utilization of credits between goods and services be allowed under GST regime?

 Answer :Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.

Question 8.How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

Answer:In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

 

A diagrammatic representation of the working of the IGST model for inter-State transactions is shown in Figure 2 below.

igst

Question  9.How will IT be used for the implementation of GST?

Answer:For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.

GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.

There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.

Question 10.How will imports be taxed under GST?

Answer :The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

Question 11.What are the major features of the Constitution (122nd Amendment) Bill, 2014?

Answer :The salient features of the Bill are as follows:

  1. Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;
  2. Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs;
  3. Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling;
  4. Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;
  5. Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;
  6. GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;
  7. Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;
  8. Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.

Question 12.What are the major features of the proposed registration procedures under GST?

Answer:The major features of the proposed registration procedures under GST are as follows:

i. Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.

ii. New dealers: Single application to be filed online for registration under GST.

iii.The registration number will be PAN based and will serve the purpose for Centre and State.

iv. Unified application to both tax authorities.

v. Each dealer to be given unique ID GSTIN

vi. Deemed approval within three days.

vii. Post registration verification in risk based cases only.

Question 13.What are the major features of the proposed returns filing procedures under GST?

Answer:The major features of the proposed returns filing procedures under GST are as follows:

  1. Common return would serve the purpose of both Centre and State Government.
  2. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.
  3. Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.
  4. Filing of returns shall be completely online. All taxes can also be paid online.

Question 14.What are the major features of the proposed payment procedures under GST?

Answer:The major features of the proposed payments procedures under GST are as follows:

i. Electronic payment process- no generation of paper at any stage

ii. Single point interface for challan generation- GSTN

iii. Ease of payment – payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and through cheque/cash at the bank

iv. Common challan form with auto-population features

v. Use of single challan and single payment instrument

vi. Common set of authorized banks

vii.            Common Accounting Codes

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On tap banking license guidelines

RBI press release dated 1st August, 2016.

The Reserve Bank of India today released on its website, “Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector”.

Some of the key aspects of the Guidelines include: (i) resident individuals and professionals having 10 years of experience in banking and finance at a senior level are also eligible to promote universal banks; (ii) large industrial houses are excluded as eligible entities but are permitted to invest in the banks up to 10 per cent; (iii) Non-Operative Financial Holding Company (NOFHC) has been made non-mandatory in case of promoters being individuals or standalone promoting/converting entities who/which do not have other group entities; (iv) Not less than 51 per cent of the total paid-up equity capital of the NOFHC shall be owned by the promoter/promoter group, instead being wholly owned by the promoter group; and (v) Existing specialised activities have been permitted to be continued from a separate entity proposed to be held under the NOFHC subject to prior approval from the Reserve Bank and subject to it being ensured that similar activities are not conducted through the bank as well.

Key features of the guidelines:

(I) Eligible Promoters

(i) Individuals/professionals who are ‘residents’ and have 10 years of experience in banking and finance at a senior level.

(ii) Entities/groups in the private sector that are ‘owned and controlled by residents’ [as defined in FEMA Regulations, as amended from time to time] and have a successful track record for at least 10 years, provided that if such entity/group has total assets of ₹ 50 billion or more, the non-financial business of the group does not account for 40 per cent or more in terms of total assets/in terms of gross income.

(iii) Existing non-banking financial companies (NBFCs) that are ‘controlled by residents’ and have a successful track record for at least 10 years. For the sake of clarity, it is added here that any NBFC, which is a part of the group that has total assets of ₹ 50 billion or more and that the non-financial business of the group accounts for 40 per cent or more in terms of total assets/in terms of gross income, is not eligible.

(II) ‘Fit and Proper’ criteria

Promoter/promoting entity/promoter group should have a past record of sound financials, credentials, integrity and have a minimum 10 years of successful track record.

(III) Corporate structure

The requirement of Non-Operative Financial Holding Company (NOFHC) is not mandatory for individual promoters or standalone promoting/converting entities who/which do not have other group entities. Individual promoters/promoting entities/converting entities that have other group entities, shall set up the bank only through an NOFHC. Not less than 51 per cent of the total paid-up equity capital of the NOFHC shall be owned by the Promoter/Promoter Group. Specialised activities would be permitted to be conducted from a separate entity proposed to be held under the NOFHC subject to prior approval from the Reserve Bank and subject to being ensured that similar activities are not conducted through the bank. No shareholder, other than the promoters/promoter group, shall have significant influence and control in the NOFHC.

(IV) Minimum capital requirement

The initial minimum paid-up voting equity capital for a bank shall be ₹ five billion. Thereafter, the bank shall have a minimum net worth of ₹ five billion at all times.

The promoter/s and the promoter group / NOFHC, as the case may be, shall hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which shall be locked-in for a period of five years from the date of commencement of business of the bank. The promoter group shareholding shall be brought down to 15 per cent within a period of 15 years from the date of commencement of business of the bank.

(V) Foreign shareholding in the bank

The foreign shareholding in the bank would be as per the existing foreign direct investment (FDI) policy subject to the minimum promoter shareholding requirement indicated in paragraph (IV) above. At present, the aggregate foreign investment limit is 74 per cent.

(VI) Corporate governance, prudential and exposure norms

The bank shall comply with the provisions of Banking Regulations Act, 1949 and the existing guidelines on prudential norms as applicable to scheduled commercial banks. The bank is precluded from having any exposure to its promoters, major shareholders who have shareholding of 10 per cent or more of paid-up equity shares in the bank, the relatives of the promoters as also the entities in which they have significant influence or control.

(VII) Business plan for the bank

The business plan submitted by the applicant should be realistic and viable and address how the bank proposes to achieve financial inclusion.

(VIII) Other conditions

The bank shall get its shares listed on the stock exchanges within six years of the commencement of business by the bank. The bank shall open at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the latest census). The bank shall comply with the priority sector lending targets and sub-targets as applicable to the existing domestic scheduled commercial banks. The board of the bank should have a majority of independent directors.

(IX) Procedure for application

  • The licensing window will be open on-tap, and the applications in the prescribed form along with requisite information could be submitted to the Reserve Bank at any point of time.
  • The applications will be referred to a Standing External Advisory Committee (SEAC) to be set up by the Reserve Bank.
  • The Committee will submit its recommendations to the Reserve Bank for consideration. The Internal Screening Committee (ISC), consisting of the Governor and the Deputy Governors, will examine all the applications and then submit its recommendations to the Committee of the Central Board of the Reserve Bank for the final decision to issue in-principle approval.
  • The validity of the in-principle approval issued by the Reserve Bank will be 18 months from the date of granting in-principle approval and would thereafter lapse automatically.
  • Applicants aggrieved by the decision of the Committee of the Central Board can prefer an appeal against the decision to the Central Board of Directors, within one month from the date of receipt of communication from the Reserve Bank relating to the application not being considered.
  • In order to ensure transparency, the names of the applicants for bank licences and the names of applicants that are found suitable for grant of in-principle approval will be placed on the Reserve Bank’s website periodically.

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Extn of last date in filing annual returns

MCA has revised form AOC-4 and in the process of revising AOC-XBRL and AOC-CFS. So companies have been given exemption from paying any additional filing fees if they file financial statements and annual returns in respect of financial year 2015-16 on or before 29th October, 2016.

Surprisingly, the subject line of the said circular no. 08/2016 dated 29th July, 2016 mentions form MGT-7, but the body of the said circular does not specifically mention this form i.e. MGT-7. However last para mentions “financial statements and annual returns” so it is presumed that the exemption is available for filing form MGT-7 also.

So this facility is beneficial to those companies who have their annual general meetings in the period upto 29th September, 2016.

 

 

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