Regulatory Updates_The PULSE_August 2022

Updates from the MCA

THE MINISTRY OF CORPORATE AFFAIRS (MCA) UPDATE ON THE MCA21 V3 PORTAL:

The Ministry of Corporate Affairs gave an important update on 15^th July, 2022 regarding the launch of the first set of Company Forms on MCA21 V3 portal.

It is further said that the following forms will be rolled-out in this phase under MCA21 V3 Portal: DIR3-KYC Web, DIR3-KYC E form, DPT-3, DPT-4, CHG-1, CHG-4, CHG-6, CHG-8 & CHG-9. These forms will be launched on 31st August, 2022 at 12:00 AM.

To facilitate the implementation of these forms in MCA21 V3 portal, it is advised to note the following points:

• Company e-Filings on V2 portal will be disabled from 15th Aug 2022, 12:00 AM for the above 9 forms and it is advised to ensure that there are no SRNs in pending payment and Resubmission status.
• Offline payments for the above 9 forms in V2 portal using Pay later option would be stopped from 07th Aug 2022 12:00 AM. All stakeholders are requested to make payments for these forms in V2 through online mode (Credit/Debit Card and Net Banking).

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CLARIFICATION ON SPENDING OF CSR FUNDS FOR “HAR GHAR TIRANGA” CAMPAIGN:

The Ministry of Corporate Affairs (MCA) through the circular dated 26^th July, 2022 clarified that spending of CSR funds for the activities related to ‘Har Ghar Tiranga’* campaign are eligible CSR activities under item no. (ii) of Schedule VII of the Companies Act, 2013 relating to the promotion of education relating to culture.

* ‘Har Ghar Tiranga’ is a campaign to protect Azadi ka Amrit Mahotsav (Independence Day) and aimed to invoke the feeling of patriotism and promote awareness of the Indian National Flag.

 Activities such as the mass scale of production and supply of the National Flag and, outreach and amplification efforts and any other related activities to achieve the above-mentioned goal shall be considered as spending of CSR Funds.

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CBDT NOTIFICATION FOR PAN/TAN INTEGRATION WITH LLP INCORPORATION FORM FiLLiP:

The Ministry of Finance released a notification dated 26^th July, 2022 in relation to furnishing of Permanent Account Number (PAN) through a common application form by specifying the classes of persons, forms and format along with the procedure for safe and secure transmission of such forms and formats as under:

It mentions that an applicant may apply for allotment of Permanent Account Number (PAN) through a Common Application Form (CAF) in the form FiLLiP which is a Simplified Proforma for incorporating Limited Liability Partnership (LLP) and the same has been notified by the Ministry of Corporate Affairs (MCA) vide notification G.S.R 173(E) dated 04/03/2022.

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Updates from the SEBI

LEVY OF GOODS & SERVICES TAX (GST) ON THE FEES PAYABLE TO SEBI:

The GST Council in its meeting held on June 28 and June 29, 2022, recommended inter alia to withdraw the exemption granted to services by SEBI.

Accordingly, the SEBI vide the circular dated July 18, 2022, informed that all the Market Infrastructure Institutions, Companies who have listed/are intending to list their securities, other intermediaries and persons who are dealing in the securities market, are hereby informed that the fees and other charges payable to SEBI shall subject to GST at the rate of 18% with effect from July 18, 2022.

The detailed circular can be accessed by clicking the link mentioned below:

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OPERATION CIRCULAR FOR LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS FOR NON-CONVERTIBLE SECURITIES, SECURITIZED DEBT INSTRUMENTS AND/OR COMMERCIAL PAPER:

Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015(‘Listing Regulations’), prescribes the continuous disclosure requirements for issuers of listed Non-convertible Securities, Securitized Debt Instruments and Commercial Paper. Multiple circulars have been issued, over the years, covering the operational and procedural aspects thereof.

For effective regulation of the corporate bond market and to enable the issuers and other market stakeholders to get access to all the applicable circulars in one place, SEBI has issued this Operational Circular dated July 29, 2022. This Operational Circular is a compilation of the relevant existing circulars, with consequent changes.

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Updates from the RBI

MASTER DIRECTION ON INTEREST RATE ON DEPOSITS REGARDING FOREIGN CURRENCY (NON-RESIDENT) ACCOUNTS (BANKS) SCHEME [FCNR(B)] AND NON-RESIDENT (EXTERNAL) RUPEE (NRE) DEPOSIT:

RBI on July 06, 2022, has issued a notification on Master Direction on Interest Rate on Deposits regarding Foreign Currency (Non-resident) Accounts (Banks) Scheme [FCNR(B)] and Non-Resident (External) Rupee (NRE) Deposit in which banks were advised that with effect from July 07, 2022, the interest rate ceiling applicable to FCNR (B) deposits is being temporarily withdrawn for incremental FCNR (B) deposits mobilized by banks for the period until October 31, 2022 and interest rates on NRE deposits shall not be higher than those offered by the banks on comparable domestic rupee term deposits.

The restriction with respect to interest rates offered on incremental NRE deposits mobilized by banks shall be temporarily withdrawn with effect from July 07, 2022, for the period until October 31, 2022. The above relaxation shall not be applicable to Ordinary Non-Resident (NRO) Deposits.

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FULLY ACCESSIBLE ROUTE (FAR) FOR INVESTMENTS BY NON-RESIDENTS IN GOVERNMENT SECURITIES:

In pursuance of the announcement made in the Union Budget 2020-21 that certain specified categories of Central Government securities would be opened fully for non-resident investors without any restrictions, apart from being available to domestic investors as well, the RBI on 7th July 2022 has designated the following two Securities as ‘specified securities’ under the Fully Accessible Route (FAR):

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INVESTMENT BY FOREIGN PORTFOLIO INVESTORS (FPI) IN DEBT – RELAXATIONS:

As per the Master Direction issued vide dated 15^th June 2018, a cap of 30% of the total investment by FPI was prescribed for its investments in government securities (Central Government securities, including Treasury Bills and State Development Loans) and corporate bonds. Now it has been decided that investments by FPIs in government securities and corporate bonds made between July 08, 2022 and October 31, 2022 (both dates included) shall be exempted from the limit on short-term investments till the maturity or sale of such investments.

Further, a relaxation to the requirement of a minimum residual maturity requirement of one year in the investments in corporate bonds was announced, whereby, the FPIs are now allowed to invest in commercial papers and non-convertible debentures with an original maturity of up to one year, during the period between July 08, 2022 and October 31, 2022 (both dates included).

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SETTLEMENT OUTSIDE THE ASIAN CLEARING UNION (ACU) MECHANISM – INDO-SRI LANK TRADE:

As per the existing regulations of Foreign Exchange Management (Manner of Receipt and Payment) Regulations 2016, all the export/import transactions between ACU member countries are to be routed through the ACU mechanism. Now, the RBI has notified, vide its circular dated 8th July 2022, that all eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism until further notice.

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INTERNATIONAL TRADE SETTLEMENT IN INDIAN RUPEES (INR):

Vide this circular dated 11^th July 2022, the RBI has opened up an additional arrangement for invoicing, payment, and settlement of exports/imports in INR. This initiative was made to promote the growth of global trade with India and to support the increasing interest of the global trading community in INR.

For settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country. Further, to allow settlement of international trade transactions through this arrangement, it has been decided that:

1. Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
2. Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.

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RESTRICTION ON STORAGE OF ACTUAL CARD DATA [I.E. CARD-ON-FILE (COF)]:

The Reserve Bank of India (RBI) on July 28, 2022 has issued a notification on Restriction on storage of actual card data i.e. Card-on-File (CoF):

As per the circulars issued earlier, the RBI had mandated that with effect from 1^st October, 2022, no entity in the card transaction/payment chain, other than the card issuers and/or card networks, shall store the CoF data, and any such data stored previously shall be purged.

Now it has been advised that, for ease of transition to an alternate system in respect of transactions where cardholders decide to enter the card details manually at the time of undertaking the transaction (commonly referred to as “guest checkout transactions”), the following are being permitted as an interim measure:

1. Other than the card issuer and the card network, the merchant or its Payment Aggregator (PA) involved in the settlement of such transactions, can save the CoF data for a maximum period of T+4 days (“T” being the transaction date) or till the settlement date, whichever is earlier. This data shall be used only for settlement of such transactions and must be purged thereafter.
2. For handling other post-transaction activities, acquiring banks can continue to store CoF data until January 31, 2023.

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EXTERNAL COMMERCIAL BORROWINGS (ECB) POLICY – LIBERALISATION MEASURES:

As a part of measures to enhance the forex inflows, the RBI vide its notification dated 28^th July, 2022 has announced that the limit of ECB borrowing of USD 750 million or equivalent per financial year is temporarily increased to USD 1500 million or equivalent. This dispensation will be available for ECBs raised till December 31, 2022.

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Income Tax Updates

DGIT NOTIFIES INCOME TAX FORMS, AND RETURNS FOR ELECTRONIC SUBMISSION:

Directorate of Income Tax (Systems) notifies a few Forms that shall be furnished electronically and shall be verified in the manner prescribed under Income tax Rule 131(1). These forms are now available on the e-Filing portal as per DGIT(S) Notification No. 3/2022 dated 16^th July 2022.

In exercise of the powers conferred under sub-rule (1) and sub-rule (2) of Rule 131 of the Income-tax Rules, 1962 (‘the Rules’), the Director General of Income Tax (Systems), with the approval of the Board, hereby specifies that the following Forms, returns, statements, reports, orders, by whatever name called, shall be furnished electronically and shall be verified in the manner prescribed under sub-rule (1) of Rule 131:

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PROCEDURE OF PAN APPLICATION & ALLOTMENT THROUGH FORM FILLIP FOR LLPS:

The procedure of PAN application & allotment through Simplified Proforma for incorporating Limited Liability Partnerships (LLPs) electronically via Form: FiLLiP of the Ministry of Corporate Affairs.

Rule 114(1) of the Income-tax Rules, 1962 notifies that “an applicant may apply for allotment of permanent account number through a common application form notified by the Central Government in the Official Gazette, and the Principal Director General of Income Tax (Systems) or Director General of Income-tax (Systems) shall specify the classes of persons, forms and format along with the procedure for safe and secure transmission of such forms and formats in relation to furnishing of Permanent Account Number (PAN). 

A Common Application Form (CAF) in the form of Simplified Proforma for incorporating Limited Liability Partnership (LLP) (Form — FiLLiP) has been notified by the Ministry of Corporate Affairs.

The Director General of Income-tax (Systems) lays down the classes of persons, forms, format and procedure for Permanent Account Number (PAN) as under:

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CBDT REDUCES THE TIME LIMIT FOR VERIFICATION F ITR TO 30 DAYS:

The time limit for verification of Income Tax Return (ITR) has been reduced from within 120 days to 30 days of transmitting the data of ITR electronically. ITR-V is the acronym for the ‘Income Tax Return–Verification’ Form. It is a single-page document that is received when an ITR is filed online without using a digital signature. ITR-V is provided by the Income Tax Department to verify the authenticity of income tax returns and is sent by email to the taxpayer.

Initially, the Central Board of Direct Taxes (CBDT) vide Circular No. 3/2009 dtd. 21^st May, 2009 notified the new Income Tax Return (ITR) forms for the Assessment Year 2009-10 and provided the facility of furnishing ITR in the following manner:

1. Furnishing the return in paper form
2. Furnishing the return electronically under a digital signature
3. Transmitting the data in the return electronically and thereafter submitting the verification of the return in form ITR-V to CPC within 30 days after transmitting the data electronically
4. Furnishing a bar-coded return in paper form.

Then further as per the clarification provided in the said circular, the date of transmitting the data electronically will be the date of furnishing the return if the form ITR-V is submitted within 30 days after the date of transmitting the data. In case, form ITR-V is submitted after the above-mentioned period, it will be deemed that the return in respect of which the form ITR-V has been filled was never submitted and it shall be incumbent on the assessee to electronically re­transmit the data and follow it up by submitting the new form ITR-V within 30 days.

Later, the CBDT extended the time limit for filing ITR-V to 120 days from the date of uploading the return of income.

The CBDT also notified through Rule 14 of the Centralised Processing of Returns Scheme, 2011 to delegate the power to specify the mode, manner and time for verification of ITR-V.

The time limit for e-verification or submission of ITR-V shall now be 30 days from the date of transmitting/uploading the data of the return of income electronically on or after this notification comes into effect.

It is clarified that where the return data is electronically transmitted before the date on which this Notification comes into effect the earlier time limit of 120 days would continue to apply in respect of such returns.

Duly verified ITR-V in the prescribed format and in the prescribed manner should be sent by speed post only to the CPC IT Department address. And the date of dispatch of Speed Post of duly verified ITR-V shall be considered for the purpose of determination of the 30 days period, from the date of transmitting the data of Income-tax return electronically.

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GST Updates

EXEMPTION OF TAXPAYERS FROM FILING OF ANNUAL RETURNS FOR THE F.Y. 2021-22:

As per Section 44 of the Central Goods and Service Tax Act, 2017 (CGST Act) –

“The Annual GST Return is a summary of the monthly/quarterly returns filed by a taxable person. It is basically a comprehensive return containing all the transactions that occurred and reported in the periodical returns filed during the financial year.”

In accordance with the power conferred under section 44(1) of the CGST Act, the commissioner has exempted the registered persons and whose aggregate turnover in the financial year 2021-22 is up to two crore rupees, from filing the annual returns for the said financial year vide Notification No. 10/2022 – Central Tax dated 5^th July, 2022.

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THE DUE DATE OF FORM GST CMP-08 HAS BEEN EXTENDED FOR THE QUARTER ENDING 30^TH JUNE, 2022 TILL THE 31^ST JULY, 2022:

Form GST CMP-08 is used to declare the details or summary of self-assessed tax which is payable for a given quarter by taxpayers who are registered as composition taxable persons or taxpayers who have opted for composition levy.

Composition taxpayers’ self-assessment tax statement (Form CMP-08) deadline for the quarter April 2022 – June 2022 is extended from 30^th June, 2022 to 31^st July, 2022.

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CBIC EXTENDS WAIVER OF LATE FEE FOR DELAY IN FILING FORM GSTR-4 FOR THE F.Y.2021-22:

Form GSTR-4 (Annual Return) is a yearly return to be filed, for each financial year, by the taxpayers who have opted for the composition scheme during the financial year, or were in the composition scheme for any period, during the said financial year, from 1st April 2019 onwards.

The Central Government, on the recommendations of the GST Council, hereby extend the waiver of the late fee for delay in filing FORM GSTR-4 for the F.Y. 2021-22 vide the said notification.

The date of filing the aforementioned form has been extended till 28^th July, 2022 from the earlier date of 30^th June, 2022.

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CBIC NOTIFIES CENTRAL GOODS AND SERVICES TAX (AMENDMENT) RULES, 2022 VIDE NOTIFICATION NO. 14/2022 – CENTRAL TAX DATED 05^TH JULY, 2022:

A. Notification amends the following CGST Rules –

1. Rule 21A – Suspension of registration
2. Rule 43 – Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases
3. Rule 46 – Tax Invoice
4. Rule 86 – Electronic Credit Ledger
5. Rule 87 – Electronic Cash Ledger
6. Rule 89 – Application for refund of tax, interest, penalty, fees or any other amount
7. Rule 96 – Refund of integrated tax paid on goods or services exported out of India

B. Inserts New Rule 88B – Manner of calculating interest on delayed payment of tax,

C. Omitted Rule 95A – which relates to the Refund of taxes to the retail outlets established in the departure area of an international Airport beyond immigration counters making tax-free supply to an outgoing international tourist shall be deemed to have been omitted with effect from the 1^st July 2019.

D. Introduces New FORM GST PMT –03A under rule 86(4B) which is a form for Order for re-credit of the amount to an electronic credit ledger.

E. Refund of IGST paid on export of goods: Rule 96 has been retrospectively amended from July 2017 to make refund claims for exports of goods contingent on the matching of shipping details with GSTR-1 and, to provide for withholding of refunds where additional verification may be required.

F. GSTR 3B: The format of GSTR-3B has been revised for reporting the supply of services through aggregators/e-commerce operators, the tax on which shall be paid by such operators. A New Table 3.1.1 has been inserted in GSTR-3B for Electronic Commerce Operator. Table 4 for the ITC claims has also been revised.

According to section 9(5) of CGST Act, 2017, an Electronic Commerce Operator (ECO) is required to pay tax on the supply of certain services notified by the government such as Passenger Transport services, Accommodation services, Housekeeping services & Restaurant services, if such services are supplied through ECO. For reporting of such supplies, a new Table 3.1.1 is being added in GSTR-3B as per Notification No. 14/2022 – Central Tax dated 05th July, 2022 wherein both ECOs and registered persons can report their supplies made under section 9(5) respectively.

G. GSTR-9/9C: The format for GSTR-9 and 9C for F.Y. 2021-22 and other forms have been amended/inserted in line with the changes in relevant provisions.

Form GSTR-9 is an annual return to be filed once for each financial year, by the registered taxpayers who were regular taxpayers, including SEZ units and SEZ developers. The taxpayers are required to furnish details of purchases, sales, input tax credit or refund claimed or demand created etc.

GSTR 9C – Every registered person whose turnover during a financial year exceeds the prescribed limit of rupees two crores shall get his accounts audited by a chartered accountant or a cost accountant. GSTR-9C is a statement of reconciliation between:

• the Annual Returns in GSTR-9 filed for a FY, and
• the figures as per the audited annual Financial Statements of the taxpayer.

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CHANGE IN GST RATE FOR PETROLEUM OPERATIONS AND COAL BED METHANE OPERATIONS UNDERTAKEN UNDER SPECIFIED CONTRACTS:

The Central Government on the recommendations of the GST Council hereby amends vide Notification No. 08/2022 – Central Tax dated 13^th July, 2022, a concessional rate of GST is being rationalized on Petroleum/ Coal bed methane from 5% to 12%.

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WITHDRAWAL OF PRE-PACKAGED AND PRE-LABELLED RETAIL PACKS:

GST is exempted on specified food items, grains, etc. which were not branded or the right on the brand has been foregone voluntarily. W.e.f. 18th July, 2022, the exemption has been withdrawn from pre-packaged and pre-labelled retail packs in terms of Legal Metrology Act, including pre-packed, pre-labelled curd, lassi and buttermilk. A few more entries of tax rate on the Goods like leather, solar water heater, Cheque, etc. has been amended.

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SEEKS TO AMEND NOTIFICATION NO 13/2017- CENTRAL TAX (RATE) DATED 28.06.2017 W.R.T. LIST OF SUPPLIES COVERED UNDER REVERSE CHARGE MECHANISM:

• All taxable service of Department of Posts would be subject to forward charge. Hitherto, certain taxable services of Department of post were taxed on reverse charge basis.
• Goods transport agency (GTA) is being given option to pay GST at 5% or 12% under forward charge; option to be exercised at the beginning of Financial Year. RCM option to pay GST liability will continue.
• Renting of residential dwelling to business entities (registered persons) are covered in the Reverse Charge.

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WITHDRAWAL OF EXEMPTION FOR SUPPLY OF SERVICES VIDE NOTIFICATION NO. 04/2022 – CENTRAL TAX DATED 13TH JULY, 2022:

• Hotel accommodation priced up to Rs.1000/day
• Residential dwelling rented to a registered person
• Transport of passengers by air to and from North Eastern States & Bagdogra by other than economy class
• Transportation by rail, storage or warehousing of commodities which attract tax, GSTN, Services by RBI, IRDA, SEBI, FSSAI etc.

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AMENDMENT IN THE TAX RATE ON SUPPLY OF SERVICE:

• Room rent (excluding ICU) exceeding Rs 5,000 per day per patient charged by a hospital shall be taxed to the extent of amount charged for the room at 5% without ITC.
• Common bio-medical waste treatment facilities will attract GST @ 12%
• GST rate has been rationalized from 12% to 18% on Works contract for roads, bridges, railways, metro, and Works contract supplied to Central and State Governments or local authorities for historical monuments.
• GST rate has been rationalized from 5% to 12% on work contracts involving predominantly earth work (that is, constituting more than 75% of the value of the works contract) provided to the Central Government or State Government. Similarly, the rate on supply of works contract provided by a sub-contractor to the main contractor providing the services to the Central Government or State Government has been rationalized from 5% to 12%.

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