SEBI Updates
Master Circular – Issue and Listing of Non-Convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Papers
Securities and Exchange Board of India (“SEBI”) has released a Master Circular dated July 07, 2023, 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. The process of merging all existing erstwhile regulations into the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 also includes consolidation of all related existing circulars into a single operational circular, with consequent changes.
This circular covers instruments issued under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 and certain chapters in the circular have indicated provisions applicable to the issue of securities under SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 and SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015.
The Master Circular can be accessed by clicking on the link below:
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Master Circular – Compliance by Listed entities with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
SEBI published this Master Circular dated July 11, 2023, on the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “LODR Regulations”) in order to enable the users to have access to the provisions of the applicable circulars, issued in this regard till June 30, 2023.
This Master Circular provides a chapter-wise framework for compliance with various obligations under the LODR Regulations. With the issuance of this Master Circular, all the previous circulars issued by SEBI as listed in the Appendix of this Master Circular will stand rescinded.
For ease of reference, each chapter of this circular contains footnotes corresponding to the respective circulars which can be accessed by clicking on the link below:
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Online Dispute Resolution in Indian Securities Market
The existing dispute resolution mechanism in the Indian securities market is being streamlined by expanding its scope and by establishing a common Online Dispute Resolution Portal (“ODR Portal”) which harnesses online conciliation and online arbitration for resolution of disputes arising in the Indian Securities Market.
In view of the above, SEBI introduced a Circular on July 31, 2023, prescribing the ambit of ODR, the Dispute Resolution Process, a brief on the ODR portal and allocation system, Arbitration and conciliation procedure etc. for resolving disputes online in the Indian Securities Market.
The detailed circular can be accessed by clicking on the link below:
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Master Circular – ESG Rating Providers (ERPS)
Currently, the ESG Rating Providers are regulated under the provisions of the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 (“CRA Regulations”) which prescribe guidelines for the registration of ERPs, general obligations of ERPs, manner of inspection and code of conduct applicable to ERPs
SEBI vide its Master Circular dated July 12, 2023, outlines the procedural requirements, disclosure obligations, and general guidelines applicable to ERPs. Further, ERPs are directed to maintain the necessary system and infrastructure to implement the aforesaid circular.
By consolidating all relevant directions in one place, this circular aims to enhance clarity and facilitate compliance for ERPs.
The detailed circular can be accessed by clicking on the link below:
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Disclosure of Material Events/ Information by Listed Entities under Regulations 30 and 30A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulation’)
In order to bring more transparency and to ensure timely disclosure of material events /information by listed entities, the proposal to amend LODR Regulations was deliberated by the Committee and pursuant to the approval by the Board amendments to the LODR Regulations were notified vide SEBI Notification dated June 14, 2023.
In this regard, the SEBI circular dated September 09, 2015, has now become a part of Section V-A of Chapter V of the Master Circular issued on July 11, 2023 (“Master Circular”).
Accordingly, SEBI vide its circular dated July 13, 2023, specifies the four annexures with respect to disclosure requirements under regulations 30 and 30A (inserted by the aforesaid amendment) of the LODR Regulations which shall specify the details that need to be provided while disclosing events specified in Part A of Schedule III of SEBI LODR Regulations, timelines, guidance on when an event/ information can be said to occur and determining the criteria for determination of materiality.
The detailed amendments to LODR regulations can be accessed by clicking the following link:
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Trading Window Closure Period – Extending framework for restricting Trading by Designated Persons (“DPS”) by freezing PAN at security level to all Listed Companies in a phased manner
SEBI vide its circular dated July 19, 2023, rationalized the compliance requirement to improve ease of doing business and to prevent inadvertent non-compliance of provisions of PIT Regulations by Designated Persons (DPs).
A framework to restrict the trading by Designated Persons (DPs) by way of freezing the PAN at security level during the Trading Window closure period has been developed and put in place by the Depositories and the Stock Exchanges which was initially made applicable for those listed companies that were part of benchmark indices i.e. NIFTY 50 and SENSEX vide Master Circular issued on Surveillance of Securities Market dated March 23, 2023.
Vide this circular, the above framework is hereby extended to all the listed companies in a phased manner. A glide path is prescribed in this Circular along with the procedure for implementation, the flowchart for the same and its relevant reporting.
The Circular can be accessed by clicking on the link below:
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BRSR Code – Framework for Assurance and ESG Disclosures for Value Chain
Based on the recommendation of the Environmental, Social and Governance (ESG) Advisory Committee and pursuant to public consultation, the Board vide Gazette Notification dated June 14, 2023, has introduced the Business Responsibility and Sustainability Report Core (BRSR Core) for assurance and further introduced disclosures and assurance for the value chain of listed entities, as per the BRSR Core.
In view of the same, SEBI vide its circular dated July 12, 2023, prescribes the framework and format of BRSR core for assurance and its applicability. Further, it also prescribes the disclosure for the value chain which shall be made by the listed company as per BRSR Core, as part of its Annual Report.
The Circular can be accessed by clicking on the link below:
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Income Tax Updates
Conditions for Exchange of Movable Property in Resultant Fund for Relocated Shares or Units
Any movable property, such as shares or units, received by the fund management entity of the resultant fund in exchange for shares or units held by the investment manager entity in the original fund due to relocation, must adhere to the following conditions:
- At least 90% of shares or units in the fund management entity of the resultant fund are held by the same entity (ies) or person(s) in the same proportion as their holdings in the investment manager entity of the original fund.
- At least 90% of the total shares, units, or interest in the investment manager entity of the original fund was held by such entity (ies) or person(s)
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Powers Specified for Tax Deduction Exemption on Dividend Income from Aircraft Leasing in IFSC
The Central Government, in accordance with sub-section (1F) of section 197A along with clause (34B) of section 10 of the Income-tax Act, 1961, hereby states that no income tax deduction shall be made under section 194 of the Income-tax Act from dividend income of a unit in an International Financial Services Centre primarily engaged in aircraft leasing (referred to as ‘payer’) to another unit of the same centre primarily engaged in similar business (referred to as ‘payee’), subject to the following:
The payee shall:
- Submit a statement-cum-declaration in Form No. 1 to the payer, detailing the relevant previous year for the assessment year in which the dividend income qualifies for exemption under clause (34B) of section 10 of the Income-tax Act.
- Ensure that this statement-cum-declaration is furnished and validated as prescribed in Form No. 1 for the preceding year relevant to the assessment year in which the dividend income qualifies for exemption under clause (34B) of section 10 of the Income-tax Act.
The payer shall:
- Refrain from deducting tax on payments to the dividend recipient (payee) upon receiving a copy of the statement-cum-declaration in Form No. 1 from the payee.
- Specify the details of all payments made to the dividend recipient, for which tax has not been deducted due to this Notification, in the tax deduction statement mentioned in sub-section (3) of section 200 of the Income-tax Act, in line with rule 31A of the Income-tax Rules, 1962.
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Clarification regarding the taxability of income earned by a non-resident investor from off-shore investments in an investment fund routed through an Alternative Investment Fund
In relation to the taxation of income earned by non-resident investors through offshore investments channelled through an Alternative Investment Fund (AIF), the Central Board of Direct Taxes (CBDT) issued Circular No. 14/2019 on July 3, 2019. This circular aimed to provide clarity on the tax treatment of such income. It was specifically applicable to Category I or Category II Alternative Investment Funds that are regulated by the Securities and Exchange Board of India (SEBI) under their regulations.
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Condonation of delay under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961 for returns of income claiming deduction U/s 80P of the Act for various assessment years from A Y 2018-19 to AY 2022-23
The Central Board of Direct Taxes (CBDT) has issued a directive concerning the condonation of delay under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961. This pertains to claim deduction under section 80P of the Act for various assessment years spanning from AY 2018-19 to AY 2022-23. Section 80P allows for deductions for income of cooperative societies.
Notably, the Finance Act, 2018 replaced Section 80AC of the Act on April 1, 2018, whereby deduction under Section 80P was allowed only if the assessee furnishes the return of income for the relevant assessment year on or before the due date provided under Section 139(1) of the Act.
Applications have been received in the Central Board of Direct Taxes (hereafter referred to as ‘the Board’) from co-operative societies claiming deduction U/s 80P of the Act for various assessment years from AY 2018-19 to AY 2022-23, regarding condonation of delay in furnishing return of income and to treat such returns as ‘returns furnished within the due date under sub-section (I) of section 139 of the Act stating that delay in furnishing return of income was caused due to delay in getting the accounts audited under respective State Laws.
The CBDT acknowledges applications from cooperative societies seeking delay condonation due to the late auditing of accounts as mandated by State Laws. To alleviate genuine hardships, the CBDT has directed the Chief Commissioners of Income Tax (CCsIT) and Directors General of Income Tax (DGsIT) to handle these applications and make decisions based on merit, in line with the law. It is further directed that CCsIT/DGsIT should consider cases for delay condonation cautiously, examining circumstances beyond control, audit completion dates, and potential tax avoidance. Cases involving tax evasion will be addressed accordingly. The CBDT emphasizes a timely disposition of such applications and ensures that no rejection occurs without offering the applicant an opportunity to be heard.
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Standard Operating Procedure (SOP) for making an application for re-computation of the total income of a co-operative society engaged in the business of manufacture of sugar, as provided for in the sub-section (19) of section 155 of the Income-tax Act, 1961
The interaction between sugar factories operating in India’s cooperative sectors and sugarcane growers involves the payment of a Final Cane Price (FCP), which surpasses the Statutory Minimum Price (SMP) established by the Central Government through the Sugarcane Control Order, 1996.
This additional payment, meant to foster cooperative movement, has led to tax disputes. Cooperative sugar factories sought to claim this excess as business expenditure, but tax authorities disallowed it, contending that the surplus payment constitutes profit appropriation and isn’t deductible. To resolve this, a new clause (xvii) was introduced, amending section 36(1) of the Income-tax Act, to permit deductions for sugarcane purchases by cooperatives if the price equals or is below the price fixed by or with the approval of the Government.
While this provision took effect from April 1, 2016, with applicability from Assessment Year 2016-17, unresolved demands and litigation persisted for prior years. To bring closure and extend the benefit, the Finance Act of 2023 introduced amendments to section 155.
Now, if an assessee’s sugarcane expense deduction was denied wholly or partially for any year starting on or before April 1, 2014, and if the price was equal to or less than the government-fixed price, the Assessing Officer can reassess the total income based on an application from the assessee. This provision, guided by a set of standard operating procedures (SOP), ensures re-computation while taking into account pertinent documents and following a specific timeline.
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Effective from August 1st, 2023, the threshold limit for GST E-Invoicing has been reduced from ten crore rupees to five crore rupees.
The threshold limit for E-invoicing turnover has been lowered to 5 Crores starting from August 1st, 2023. Consequently, registered individuals whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds 5 Crores will be required to implement E-invoicing as of August 1st, 2023. If the aggregate turnover surpasses 5 Crores in any preceding year from FY 2017-18 (starting from July 1st, 2017) onwards, E-invoicing becomes mandatory. Further, E-invoicing shall not be applicable to the following categories of registered persons, irrespective of the turnover.
i) An insurer or a banking company or a financial institution, including an NBFC
ii) A Goods Transport Agency (GTA)
iii) A registered person supplying passenger transportation services
iv) A registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services
v) An SEZ unit (excluded via CBIC Notification No. 61/2020 – Central Tax)
vi) A government department and local authority (excluded via CBIC Notification No. 23/2021 – Central Tax)
vii) Persons registered under the Rule 14 of CGST Rules (OIDAR)
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CBDT modifies FATCA & CRS Guidance Note for certain funds
The CBDT issued a clarification on July 26, 2023, modifying the Guidance Note from November 30, 2016, regarding the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS). The clarification addresses three key areas:
i) Treaty Qualified Retirement Fund: Such a fund won’t be considered a non-reporting financial institution for maintaining and reporting information, except for US reportable accounts as defined in Rule 114F(11).
ii) Non-public Fund of the Armed Forces: This fund won’t be treated as a financial institution, excluding US reportable accounts under Rule 114F (11).
iii) Gratuity Fund:
- Gratuity funds solely managed by non-financial entities qualify as passive non-financial entities under Rule 114F (6)-Explanation (D)(i), (ii)
- If a Gratuity Fund is a Managed Investment Entity under Rule 114F (3)(c)(B), it qualifies as a Financial Institution and a Reporting Financial Institution under CRS.
- If a Gratuity Fund meets specified conditions under Rule 114F (1), relevant accounts fulfilling those conditions are treated as excluded accounts for reporting purposes.
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IT Department addresses concerns on NRI’s inoperative PAN
Non-resident Indians (NRIs) faced difficulties due to ‘inoperative’ Permanent Account Number (PAN) cards, preventing them from filing tax returns. While they’re exempt from linking PAN with Aadhaar, NRIs and Overseas Citizens of India (OCIs) expressed concern. The tax department clarified that exempt individuals needn’t worry about inoperative PANs.
Inoperable PANs could result from factors like non-filing of income tax returns or not updating residential status with the Jurisdictional Assessing Officer. Affected NRIs and OCIs should contact JAOs with documents to update the PAN database. Inoperative PANs don’t halt income tax return filing, but bring potential refund delays and higher TDS/TCS rates.
The tax department’s clarification entails:
i) NRIs: Inoperative PANs arise if no recent ITR filing or residential status update with JAO. NRIs with inoperative PANs should inform JAOs with proof to update the PAN database.
ii) OCIs/Foreign Citizens: Inoperative PANs for OCIs/foreign citizens applying under resident status and not updating JAO or not filing ITR in recent years. They should notify JAOs with proof of PAN database update.
iii) Inoperative PAN Consequences: One can still file ITR with inoperative PANs, but consequences include withheld refunds, higher TDS under section 206AA, and higher TCS under section 206CC.
Inoperable PANs could result from factors like non-filing of income tax returns or not updating residential status with the Jurisdictional Assessing Officer. Affected NRIs and OCIs should contact JAOs with documents to update the PAN database. Inoperative PANs don’t halt income tax return filing, but bring potential refund delays and higher TDS/TCS rates.
It’s essential for NRIs and OCIs to update their residential status with JAOs to avoid PAN-related inconveniences. Maintaining accurate PAN data helps ensure smooth tax filing and mitigates associated challenges.
CBDT amends Rule 21AK to include NRs income from offshore derivatives
The amendment primarily focuses on provisions related to non-resident income, offshore banking units, alternative investment funds, and reporting requirements. Notably, it offers exemptions for income derived from non-deliverable forward contracts or offshore derivative instruments, with certain conditions. The amendment further modifies the reporting form (FORM NO. 10CCF Report under section 80LA(3) of the Income-tax Act, 1961) and elucidates eligibility criteria for deductions under section 80LA. These changes are geared towards harmonizing the Income Tax Rules with the changing International Financial Services Centre (IFSC) environment, aiming to streamline compliance procedures.
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CBDT amends circular on Sec.115UB scope, includes Fund under IFSCA
The CBDT clarified the taxability of income earned by non-resident investors from offshore investments channelled through an “investment fund” as per Chapter XII-FB of the Income-tax Act. The Circular applied to Category I or Category II Alternative Investment Funds (AIFs) is regulated under SEBI regulations.
The Finance Act 2023 extended the definition of ‘investment fund’ to encompass funds regulated by the International Financial Services Centres Authority (IFSCA) under the IFSCA Act 2019.
These changes are geared towards harmonizing the Income Tax Rules with the changing International Financial Services Centre (IFSC) environment, aiming to streamline compliance procedures.
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IT Department creates ‘Know Your Refund Status’ facility
The IT Department creates a ‘Know Your Refund Status’ facility on its website; the status of the refund can be checked by providing the PAN, AY and mobile number, which will be followed by verification through a one-time password.
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GST Updates
The Central Government Seeks to notify special procedure to be followed by a registered person engaged in the manufacturing of certain goods regulatory updates
The Central Government, acting on the recommendations of the Council, has introduced a specialized procedure for registered entities involved in the manufacturing of specific goods outlined in the Schedule. These goods are classified under corresponding tariff items, sub-headings, headings, or Chapters as indicated in the Schedule. The new procedure requires all currently registered manufacturers of the goods mentioned in the Schedule to submit information about their packing machines used for filling and packaging pouches or containers. This information, in the form of FORM SRM-I, must be electronically provided on the common portal within 30 days from the issuance of this notification.
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Exemption of filing Annual Return for the Financial Year 2022-23 regulatory updates
This notification provides relief to registered persons with a turnover of up to two crore rupees in the financial year 2022-23 by exempting them from the requirement of filing the annual return. The exemption is effective as of 31st July 2023.
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The Central Government seeks to notify “Account Aggregator” as the systems with which information may be shared by the common portal under section 158A of the CGST Act, 2017
The notification empowers ‘Account Aggregators,’ which are non-financial banking companies operating under the policy guidelines of the Reserve Bank of India, to facilitate information sharing on the common portal based on consent. This move is expected to improve data accuracy, compliance, and ease of access for taxpayers and tax authorities.
By recognizing ‘Account Aggregator’ as a reliable platform for data sharing, the Ministry of Finance takes a step towards modernizing and simplifying the GST system. This notification will foster greater transparency, security, and effectiveness in tax administration, benefitting businesses and taxpayers alike. The effective date of 1st October 2023 marks a new era of enhanced information management within the CGST Act.
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The Central Government seeks to waive the requirement of mandatory registration under section 24(ix) of the CGST Act for persons supplying goods through ECOs, subject to certain conditions
The Central Government, acting on the recommendations of the Council, has outlined a set of conditions for certain suppliers of goods through an electronic commerce operator to be exempted from registration under the said Act.
- These suppliers must meet the criteria of having an aggregate turnover that falls below the registration threshold set for their respective State or Union territory.
- They are required to: refrain from conducting inter-state supply of goods; and limit their supply through a single electronic commerce operator in a solitary State or Union territory
- Possess a valid Permanent Account Number (PAN) issued under the Income Tax Act, 1961
- Declare their PAN, business address, and intended State or Union territory of supply on the common portal, subject to validation
- Receive an enrolment number upon successful PAN validation
- Be granted only one enrolment number per State or Union territory
- Conduct no supply through an electronic commerce operator without an issued enrolment number; and cease using the enrolment number upon being subsequently registered under section 25 of the said Act.
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Clarification on the charging of interest under section 50(3) of the CGST Act, 2017, in cases of wrong availment of IGST credit and reversal regulatory updates
The CBIC provides clarification on the charging of interest for the wrong availment of IGST credit. It specifies that the total input tax credit available in the electronic credit ledger, including IGST, CGST, and SGST, should be considered for interest calculation. The circular also clarifies that the credit of compensation cess cannot be utilized for interest calculation purposes. Suitable trade notices are requested to disseminate the circular’s information effectively.
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Clarification to deal with the difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01.04.2019 to 31.12.2021
The circular highlights that rule 36(4) of CGST Rules allowed additional credit during specific periods, subject to certain conditions. It clarifies different time frames and provides an illustration to explain the calculation of eligible ITC. It also mentions the changes in rule 36(4) and section 16 of the CGST Act from 01.01.2022 and emphasizes that ITC can only be availed if reported by suppliers in FORM GSTR-1 or using IFF and communicated through FORM GSTR-2B.
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Clarification on TCS liability under Sec 52 of the CGST Act, 2017 in case of multiple E-commerce Operators in one transaction regulatory updates
The circular highlights the distinction between the platform-centric model of e-commerce and the Open Network for Digital Commerce (ONDC), where multiple Electronic Commerce Operators (ECO) may be involved in a single transaction. It clarifies that the ECO responsible for collecting TCS and ensuring compliance under Section 52 of the CGST Act depends on the specific scenario. If the supplier-side ECO is not the supplier of the goods or services, the supplier-side ECO is liable for compliances and TCS collection. On the other hand, if the supplier-side ECO is also the supplier, the buyer-side ECO is responsible for collecting TCS.
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Clarification on taxability of shares held in a subsidiary company by the holding company
The circular clarifies that shares held by a holding company in a subsidiary company are considered neither goods nor services under the definition of the CGST Act. The purchase or sale of shares alone does not qualify as a supply of goods or services. To be treated as a supply of services, there must be a supply as defined under Section 7 of the CGST Act. The circular emphasizes that holding shares of a subsidiary company by a holding company does not constitute a supply of services and, therefore, is not taxable under GST.
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Clarification on refund-related issues
The CBIC’s issuance of this circular brings clarity to several crucial aspects of GST refunds. The circular’s clarifications regarding the refund of the accumulated input tax credit, the requirement of an undertaking in FORM RFD-01, the calculation of adjusted total turnover and the admissibility of refunds after compliance with Rule 96A provide valuable guidance to taxpayers and promote a standardized approach. By addressing these issues, the CBIC aims to enhance transparency, streamline processes and ensure fairness in the implementation of GST refund provisions.
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Clarification on issues pertaining to e-invoice
The circular clarifies that Government Departments, establishments, agencies, local authorities, and PSUs registered solely for the purpose of tax deduction at source under Section 51 of the CGST Act are considered registered persons under the GST law. As a result, registered persons whose turnover exceeds the prescribed threshold for e-invoicing must issue e-invoices for supplies made to these entities. The clarification ensures uniformity in implementing e-invoicing requirements for transactions with the Government Department and related entities.
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Clarification regarding the taxability of services provided by an office of an organization in one State to the office of that organization in another State, both being distinct persons
The circular provides essential clarification on the taxability of services exchanged between offices of an organization located in different states, deemed as distinct persons. It explains the options available for availing input tax credit for common input services and highlights the valuation principles for internally generated services. Field formations are urged to publicize the contents of this circular through suitable trade notices, and any implementation difficulties should be brought to the attention of the Board.
