Regulatory Updates_The PULSE_May 2026

MCA Updates

The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026

The Ministry of Corporate Affairs (MCA) has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026, effective from the date of publication in the Official Gazette. The amendment introduces a framework enabling companies to undertake CSR activities through Zero Coupon Zero Principal (ZCZP) Instruments issued by eligible Not-for-Profit Organizations (NPOs) listed on the Social Stock Exchange.

Key Changes

• New Definitions Introduced
  • Not for Profit Organization (NPO): Defined by reference to Regulation 292A of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
  • Zero Coupon Zero Principal Instrument (ZCZP): A security issued by a registered NPO and listed on the Social Stock Exchange segment of a recognized stock exchange, in accordance with SEBI regulations.
• CSR Implementation Through ZCZP Instruments (New Rule 4A)
  • Companies may use ZCZP instruments to carry out CSR activities.
  • Investment through such instruments is capped at 10% of the company’s total CSR expenditure for the relevant financial year.
  • Companies subscribing to ZCZP instruments are exempt from conducting impact assessments for projects funded through these instruments.
• Obligations of Issuing NPOs
  • Funds raised through ZCZP instruments must be utilized for projects with a duration of not more than three succeeding financial years from the date of issuance.
  • Upon delisting or termination of the instrument, any unspent amount must be transferred to a fund specified under Schedule VII of the Companies Act, 2013, and a compliance report must be submitted to SEBI.
• Applicability of Existing CSR Rules
  • The provisions of Rule 4 of the CSR Rules will apply to CSR implementation through ZCZP instruments, except for sub-rules (5) and (6).

The amendment broadens CSR implementation mechanisms by allowing companies to channel a portion of their CSR spending through Social Stock Exchange-listed NPOs. It promotes greater participation in social impact financing, provides companies with a simplified compliance route through exemption from impact assessment requirements, and strengthens accountability for NPOs through project duration limits and mandatory treatment of unspent funds.

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Amendment of Schedule VII of the Companies Act, 2013

The Central Government, exercising its powers under Section 467(1) of the Companies Act, 2013, has amended Schedule VII of the Act to expand the list of permissible Corporate Social Responsibility (CSR) activities.

• Key Amendment

A new item (xiii) has been inserted in Schedule VII, recognizing as an eligible CSR activity:

xiii. “Subscription to Zero Coupon Zero Principal (ZCZP) Instruments on the Social Stock Exchange”

• Effective Date

The amendment comes into force from the date of its publication in the Official Gazette.

• Significance

This amendment aligns Schedule VII with the recently introduced CSR framework permitting companies to undertake CSR activities through ZCZP instruments issued by eligible Not-for-Profit Organizations (NPOs) listed on the Social Stock Exchange. Consequently, companies can now treat subscriptions to such instruments as qualifying CSR expenditure, subject to the conditions prescribed under the Companies (CSR Policy) Rules, 2014, as amended.

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RBI Updates

Foreign Exchange Management (Authorised Persons) Regulations, 2026

The Reserve Bank of India has notified the Foreign Exchange Management (Authorised Persons) Regulations, 2026, replacing the existing framework for authorised persons dealing in foreign exchange.

Key changes and provisions:

• New Authorised Person (AP) framework: Applications for fresh authorisation will be considered under three categories:
  • AD Category-I: Banks licensed by RBI.
  • AD Category-II: RBI-licensed banks, RBI-registered NBFCs, and eligible FFMCs/Forex Correspondents meeting specified turnover criteria.
  • AD Category-III: Entities requiring foreign exchange dealings incidental to their business or offering innovative forex-related products/services.
• No new FFMC licences: Fresh applications for Full-Fledged Money Changer (FFMC) licences will generally not be accepted, except applications already under process when the regulations come into force.
• Eligibility requirements: Applicants must:
  • Be companies incorporated under the Companies Act, 2013.
  • Have foreign exchange activities included in their Memorandum of Association.
  • Meet prescribed net worth thresholds (₹10 crore for AD Category-II and ₹2 crore for AD Category-III).
  • Satisfy enhanced “fit and proper” criteria for promoters, directors and key managerial personnel.
• Existing entities: Existing authorised persons may continue until expiry of their current authorisation and may seek renewal subject to prescribed net worth and compliance requirements.
• Permitted activities:
  • AD Category-I: All current and capital account transactions permitted under FEMA.
  • AD Category-II: Non-trade current account transactions (excluding gifts and donations) and trade transactions up to ₹25 lakh per transaction.
  • AD Category-III: Activities specifically approved by RBI.
  • FFMCs: Limited to money changing activities and MTSS agency functions.
• Authorisation validity: Authorisations will remain valid until revoked or surrendered. For banks and NBFCs, authorisation will be linked to the validity of their banking licence or registration.
• Ongoing compliance obligations: Non-bank authorised persons must maintain prescribed net worth, achieve minimum annual forex turnover (₹50 crore for AD Category-II and ₹10 crore for FFMCs), report material changes, and obtain RBI approval for significant changes in ownership or control.
• Forex Correspondent Scheme (FCS):
  • AD Category-I and II entities may appoint Forex Correspondents (FxCs) under a principal-agent model.
  • FxCs can undertake money-changing activities and act as MTSS sub-agents.
  • Principals must establish governance, due diligence, reporting and customer protection frameworks.
• Phase-out of franchisee model: No new franchisee arrangements will be permitted. Existing franchisee arrangements must be discontinued within two years and may transition to the Forex Correspondent model subject to eligibility.
• Appeal mechanism: Applicants whose authorisation is rejected, or authorised persons whose authorisation is revoked, may appeal to the Executive Director, Foreign Exchange Department, RBI, within 45 days.

Overall impact:

The regulations consolidate and modernise the authorisation framework for foreign exchange activities, introduce a new AD Category-III licence, strengthen governance and fit-and-proper requirements, promote the Forex Correspondent model, and gradually phase out the traditional FFMC franchisee structure.

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Issuance of Foreign Exchange Management (Authorised Persons) Regulations, 2026

The Reserve Bank of India has notified the Foreign Exchange Management (Authorised Persons) Regulations, 2026 (Notification No. FEMA 401/2026-RB dated April 30, 2026; published on May 6, 2026) following a review of the existing authorisation framework under FEMA, 1999. The revised framework aims to streamline the authorisation process, enhance the delivery of foreign exchange services, and reduce compliance burdens for authorised persons.

Consequent to the notification, relevant provisions of the Master Direction – Money Changing Activities and Master Direction – Other Remittance Facilities have been amended, and specified A.P. (DIR Series) Circulars have been superseded. All authorised persons are required to comply with the new regulations as applicable.

The directions have been issued under Sections 10(4) and 11 of the Foreign Exchange Management Act, 1999, without prejudice to any other approvals or permissions required under applicable laws.

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GST Updates

Filing of Annexure-B for Refund Applications involving Accumulated ITC using the offline utility in GST portal

Until now, while filing refund applications under specific categories involving accumulated Input Tax Credit (ITC), taxpayers were uploading Annexure-B in a PDF format, in terms of extant guidelines. In order to further automate the refund filing process and enable system-based verification of invoices and documents, a standardized Annexure-B Offline Utility has now been deployed on the portal. In order to bring uniformity, taxpayers are required to furnish Annexure-B through this prescribed utility going forward.

Taxpayers are advised to carefully note the following instructions while filing refund applications under the below mentioned refund categories where refund is claimed on account of accumulated Input Tax Credit (ITC).

• Introduction of Annexure-B in Offline Utility for following categories

Annexure-B is required to be furnished through an offline utility for the following refund categories:

• • • Exports of Goods/Services without payment of tax (accumulated ITC) (excluding electricity)
    • Supplies made to SEZ Unit/SEZ Developer without payment of tax
    • ITC accumulated due to Inverted Tax Structure [Clause (ii) of first proviso to section 54(3)]
    • Export of Electricity without payment of tax (accumulated ITC)
• Annexure-B Offline Utility

An offline utility in Excel format has been introduced to enable taxpayers to enter invoice-wise details of inward supplies for which refund is claimed. The details in the offline utility are required to be reported HSN/SAC-wise, by segregating invoices into separate line items based on distinct HSN/SAC codes and categories of input supplies (Inputs, Input Services, Capital Goods), wherever applicable.

Further, all other columns in the utility must be filled specifically with respect to the HSN/SAC code and category of input supply reported in that line item, including the corresponding taxable value, tax amount, and whether such ITC is blocked under section 17(5) of the CGST Act or otherwise. A maximum of 10,000 entries can be made in one offline utility file. If there are more than 10,000 entries, the user should use multiple offline utility files to enter the data.

• Structure of Annexure-B Offline Utility

The utility contains the following two tables:

• • • Table 1 – Reversal Details
    • Table 2 – HSN/SAC-wise Inward Invoice Details for which ITC has been claimed in GSTR-3B
• Reporting of Invoices with Multiple Categories / HSN-SAC Codes

In cases where a single invoice includes: Multiple categories of supplies such as Inputs, Input Services, and Capital Goods, and/or Multiple HSN/SAC codes

• • • Taxpayers are required to split the invoice into separate line items in the offline utility.
    • Each line item must represent only one category of input supply mapped to one HSN/SAC code.
    • Invoice value and tax amounts must be proportionately distributed across such line items.

A specific note has been added in the Read Me section (Point 6) of the utility for taxpayer guidance. Users are requested to read these instructions clearly before entering the data in the utility to avoid validation errors.

• Duplicate Document Validation

(Validation is applied separately for each type of inward supply and each document type):

• • • Supplier GSTIN
    • Invoice Number
    • Invoice Date
    • Category of Input Supply
    • HSN/SAC

For the same invoice, where the category of input supply and HSN/SAC are identical, only one line item should be reported.

Multiple entries under identical parameters will not be accepted.

• Reporting of ITC Reversals

Taxpayers are required to correctly report ITC reversals as applicable:

• • • Reversals made under Rules 38, 42, 43 of the CGST Rules and section 17(5) shall be reported as per the corresponding month’s GSTR-3B.
    • Other ITC reversals reflected in Table 4(B)(2) of GSTR-3B shall also be reported accordingly.
    • In cases where multiple offline utility files are used, reversal amounts shall be entered only in the final utility file, with all previous utility files reflecting reversal amounts as zero. The system recalculates the consolidated Net ITC after upload of all JSON files. Taxpayers are advised to review the consolidated summary carefully prior to submission.
• Uploading Annexure-B JSON File

Upon generation of the Annexure-B JSON file, the taxpayer shall upload the same on the RFD-01 screen by clicking on the hyperlink “Click to upload the Statement of invoices (Unutilized ITC)” and proceed further for validation.

• Post-Upload Validation and Reports
  • • Uploaded invoices shall be validated with GSTR-2B.
    • Where validation against GSTR-2B is performed, results shall be displayed in the Valid documents sheet, indicating whether the invoices are present in GSTR-2B or not.
    • In respect of invoices pertaining to GSTR-2B periods up to October 2024 or earlier, the system will not carry out validation with GSTR-2B data. However, taxpayers will be allowed to enter details of such invoices in the utility and upload on the portal. In such cases, the system will display a generic message indicating that the invoices are not validated, however, these invoices will be part of the validated documents. This is an expected system behavior and shall not be treated as an error. Taxpayers may proceed with filing the refund application in such scenarios.
    • Any mismatches or validation failures in invoices pertaining to November 2024 or later period, shall be reflected in an Invalid documents Report.
• Following details may be noted in respect of the Annexure B offline utility, namely :
  • • Copy-paste functionality has been enabled for dropdown values in the offline utility. While using this feature, users must ensure that the value that user if copying and pasting must match with the exact dropdown value. Any deviation, including leading or trailing spaces, may result in validation errors. Additionally, users should not paste data into any frozen/protected fields, as this may lead to processing or validation issues.
    • Before using the newly downloaded utility, users should ensure that any previous version of the Annexure B Offline Utility is completely closed. Keeping an older version open simultaneously may cause issues with the enhanced copy-paste functionality.
    • Users are advised to avoid using unnecessary spaces while entering or copy-pasting data (for example, extra spaces after supplier name or in other fields), as such inconsistencies may result in errors during JSON generation or upload.
    • Users are requested to ensure that no changes are made directly to the JSON file after it has been generated. In case any modifications are required, the same should be made in the offline utility, followed by revalidation and generation of a fresh JSON file for upload. Further, the name of the JSON file should not be altered after creation, as this may lead to upload issues.
• Line-Item Upload Limit in offline utility uploaded with Refund Applications

Present system functionality allows taxpayers to enter up to 10,000 line items in one offline utility file and upload up to 25 such files, i. e. a total of 2,50,000 line items can be entered in a single refund application. In cases where the number of line items exceeds this limit, taxpayers should upload up to 2,50,000 line items through the offline utility, and the remaining invoices can be submitted as supporting documents after converting them into PDF format. Approaches to support higher-volume data ingestion are being evaluated and will be implemented in upcoming enhancements.

Taxpayers are requested to ensure accurate reporting in the offline utility to facilitate smooth and timely processing of refund applications. A detailed user manual along with screenshots explaining the process will be shared shortly.

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Advisory to Taxpayers and Stakeholders – Enhancements in the E-Way Bill (EWB) Portal

• Background

It is hereby informed that certain functional enhancements are being implemented in the e-Way Bill (EWB) system with a view to strengthening data integrity, improving traceability of goods movement, and enabling system-driven closure of transactions. All taxpayers, transporters, ERP/API integrators, and other stakeholders are requested to take note of the following changes and initiate necessary system readiness measures.

• Mandatory Capture of “Ship To GSTIN” in Bill-To/Ship-To Transactions 
  • In cases involving Bill-To/Ship-To scenarios, the field relating to the “Ship To GSTIN”shall now be captured as a mandatory data element during e-Way Bill generation.
  • Where the consignee is an unregistered person, the value “URP” shall be entered in the “Ship To GSTIN” field.
• Introduction of Voluntary e-Way Bill Closure Facility
  • A new e-Way Bill Closure facility has been introduced in the e-Way Bill system on voluntary basis to enable closure of the e-Way Bill once delivery of goods is completed. The e-Way Bill may be closed by: 
    • Supplier
    • Recipient
    • Transporter involved in the transaction
    • Driver or authorized person whose mobile number has been provided for closure
  •  For suppliers, recipients, and transporters, the e-Way Bill Closure option is available after login under the e-Way Bill section of the portal. Closure can be performed:
    • e-Way Bill-wise, or
    • Date-wise
  •  A mobile number may be entered at the time of e-Way Bill generation specifically for closure purposes. Currently, this option is voluntary in nature. If required, the mobile number can also be updated during:
    • Vehicle updation
    • Consolidated e-Way Bill operations
    • Extension of validity
  •  The mobile number–based closure facility has been provided under the Search option on the e-Way Bill Common Portal. All active e-Way Bills linked to the concerned mobile number are displayed, enabling closure by the authorized person. Closure can be performed:
    • e-Way Bill-wise, or
    • Date-wise
  •  A mobile number may be entered at the time of e-Way Bill generation specifically for closure purposes. Currently, this option is voluntary in nature. If required, the mobile number can also be updated during:
    • Vehicle updation
    • Consolidated e-Way Bill operations
    • Extension of validity
  • The mobile number–based closure facility has been provided under the Search option on the e-Way Bill Common Portal. All active e-Way Bills linked to the concerned mobile number are displayed, enabling closure by the authorized person. e-Way Bills can be closed on:
    • The same day of delivery, or
    • The immediately succeeding day
  •  An API has also been provided for system integrators and API users. For closure through API, the following details are required to be transmitted:
    • e-Way Bill number
    • Closure date
    • Remarks

Click here to access the notification