The PULSE

Updates from the MCA

1. COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) AMENDMENT RULES, 2022:

The Ministry of Corporate Affairs released a notification dated 01^st June 2022 to amend the Companies (Appointment and Qualification of Directors) Rules, 2014.

Below mentioned are a short summary of changes mentioned in the amendment notification:

a. Amendment to Rule 8 (i.e Consent to Act as Director)

In case the person seeking appointment as Director in an Indian Company is a national of a country which shares a land border with India, will have to necessarily attach a security clearance letter from the Ministry of Home Affairs, Government of India along with the consent letter to act as a Director.

b. Amendment to Rule 10 (i.e Application and allotment of Director Identification Number [DIN])

No application number shall be generated in case of the person applying for Director Identification Number is a national of a country which shares a land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with the application for Director Identification Number.

c. Format of the Consent Letter (Form DIR-2) and application for allotment of DIN (Form DIR-3) has been revised to include a declaration from the applicant that the necessary security clearance from the Home Ministry is not required/required to be obtained before seeking an appointment as Director/before applying for Director Identification Number and the checkbox(s) have to be marked accordingly whichever applicable.

Click here to access the Notification.

2. COMPANIES (REMOVAL OF NAMES OF COMPANIES FROM REGISTER OF COMPANIES) AMENDMENT RULES, 2022:

The Ministry of Corporate Affairs (MCA) through the notification dated 09th June 2022, issued the Companies (Removal of Names of Companies from Register of Companies) Amendment Rules, 2022 by amending provisions of Companies (Removal of Names of Companies from Register of Companies) Rules, 2016. The Central Government has made this Amendment in the exercise of powers conferred by Section 248 sub-sections (1), (2) and (4) and Section 469 of the Companies Act, 2013.

With this amendment, MCA has amended and directed the number of resubmissions allowed for Form STK-2 (Application for removal of the name of Company):

i. Where the Registrar examines the application made in Form STK-2 may call for further information or finds such application or any documents annexed is defective or incomplete, then the applicant is informed to remove the defects and resubmit the complete Form STK-2 within 15 days from the date of such intimation from Registrar.

ii. Upon the re-submission of the Form STK-2 or document, if the Registrar finds that the Form or document is further defective or incomplete, then the Registrar will give the subsequent additional time of 15 days to the applicant to remove such defects or complete the Form.

If the applicant fails to re-submit the revised form in both (i) and (ii) before the said timeline, then the Registrar shall treat the form as invalid and inform the applicant accordingly.

iii. Further it is clarified that any re-submission of Form STK-2 made prior to the commencement of the Amendment rules, 2022 shall not be counted for the purpose of reckoning the maximum number of “2” re-submissions.

MCA has further amended the formats of the following forms with regard to the removal of names of Companies from the Register of Companies:

• Form No. STK – 1 [Notice by Registrar for removal of name of a company from the register of companies]
• Form No. STK – 5 [Publication of public notice pursuant to sub-section (1) and sub-section (4) of section 248 of the Companies Act, 2013 and rule 7 of the Companies (Removal of Names of Companies from the Register of Companies Rules, 2016)]
• Form No. STK – 5A [Publication of public notice pursuant to sub-section (1) and sub-section (4) of section 248 of the Companies Act, 2013 and second proviso to rule 7(1) of the Companies (Removal of Names of Companies from the Register of Companies Rules, 2016)]

Click here to access the Notification.

3. COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) SECOND AMENDMENT RULES, 2022:

The Ministry of Corporate Affairs (MCA) released a notification dated 10th June 2022 to amend the Companies (Appointment and Qualification of Directors) Rules 2014 by inserting a sub-rule in Rule 6 as follows:

Rule 6, sub-rule (5):

If any individual whose name has been removed from the databank under sub-rule (4) of Rule 6, (i.e., Individuals who failed to pass an online proficiency self-assessment test conducted by the Institute within a period of two years from date of inclusion of his name in databank, his name shall stand removed from the databank of the institute) may apply for restoration of his name on payment of Rupees One Thousand (Rs. 1,000) and the Institute shall allow such restoration subject to fulfilling below following conditions:

During the restoration process, his name shall be shown in a separate restored category for a period of one year from the date of restoration within the said period of one year-

• he shall be required to pass the online proficiency self-assessment test and thereafter his name shall be included in the databank;
• and only if he passes the said online proficiency self-assessment test and then in such case, the fees paid by him at the time of initial registration shall continue to be valid for the period for which the same was initially paid;
• and in case he fails to pass the online proficiency self-assessment test within a period one year from the date of restoration, then his name shall be removed from the data bank and he shall be required to apply afresh application with the Institute for inclusion of his name in the databank.

Click here to access the Notification.

4. NATIONAL FINANCIAL REPORTING AUTHORITY AMENDMENT RULES, 2022:

The Ministry of Corporate Affairs (MCA) released a notification dated 17th June 2022 to amend the National Financial Reporting Authority Rules, 2018 by substituting Rule 13, i.e punishment in case of Non-Compliance of National Financial Reporting Authority Rules, 2018 as follows:

On failure of compliance of any of the provisions of these rules shall be punishable with fine not exceeding Rupees Five Thousand (Rs. 5,000), and

Where there is a continuing contravention of the compliances during the period of the first contravention, there will be a further fine not exceeding Rupees Five Hundred (Rs. 500) for every day. 

Click here to access the Notification.

5. EXTENSION OF TIMELINE AND RELAXATION IN ADDITIONAL FEE ON FILING FORM 11 (ANNUAL RETURN) BY LIMITED LIABILITY PARTNERSHIPS UP TO 15TH JULY, 2022:

The Ministry of Corporate Affairs through the circular dated 29^th June, 2022 has extended the timeline and allowed Limited Liability Partnerships to file e-Form 11 (Annual Return) for the Financial Year 2021-22 without paying additional fees up to 15^th July, 2022.

Click here to access the circular

Updates from the SEBI

1. INVESTOR REDRESSAL GRIEVANCE MECHANISM:

SEBI vide its circular dated June 03, 2022 amended Circular No.  SEBI/HO/MIRSD/DOC/CIR/P/2020/2 dated November 6, 2020, in order to further strengthen the Investor Grievance Redressal Mechanism. The SEBI vide this circular amended clause 4 of the circular dated November 6, 2020.  The Stock Exchange and Depositories are advised to make necessary amendments to the relevant bye-laws, rules and regulations and bring the provisions of this circular to the notice of their constituents and also disseminate the same on the website

The amended clause 4 can be accessed by clicking the link mentioned below:

Click here to access the Circular

2. DISCLOSURE OF HOLDING OF SPECIFIED SECURITIES AND HOLDING OF SPECIFIED SECURITIES IN DEMATERIALIZED FORM:

Regulation 31 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”), deals with the disclosure of shareholding patterns and the manner of maintaining shareholding in dematerialized format.

SEBI vide Circular No.CIR/CFD/CMD/13/2015 dated November 30, 2015, prescribed formats for disclosure of holding of specified securities and shareholding patterns. To provide further clarity and transparency SEBI vide it’s Circular dated June 30, 2022, partially modified the formats.

The revised format along with the specification to disclose details pertaining to foreign ownership limits are prescribed as an Annexure to the circular and shall come into force with effect from the quarter ending September 30, 2022.

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

Click here to access the Circular

Updates from the RBI

1. RBI NOTIFIES CHANGE IN THE FOLLOWING RATES:

The Reserve Bank of India (RBI) on 8 June 2022 has issued a notification on changes in the following rates: (W.E.F. June 8th 2022)

• Repo rate under the Liquidity Adjustment Facility (LAF) has been increased by 50 basis points from 4.40% to 4.90%.

Standing deposit facility (SDF) rate shall be at 4.65 %

Marginal standing facility (MSF) rate shall be at 5.15%

• The Standing Liquidity Facility provided to Primary Dealers (PDs) (collateralised liquidity support) from the Reserve Bank would be available at the revised repo rate of 4.90%.

    Click here to access circular on Liquidity adjustment Facility

    Click here to access circular on Standing Liquidity Facility

2. ENHANCEMENT IN LIMITS OF INDIVIDUAL HOUSING LOANS:

The RBI on 08th June 2022 has enhanced the limit on individual housing loans as follows:

• Loans by Urban Co-operative Banks:

Click here to access the Circular

• Loans by State Co-operative Banks and District Central Co-operative Banks:

Click here to access the Circular

3. PROCESSING OF E-MANDATES FOR RECURRING TRANSACTIONS:

The Reserve Bank of India (RBI) on June 16, 2022, has issued a notification on the e-mandate framework:

The e-mandate framework prescribed an Additional Factor of Authentication (AFA), inter alia, while processing the first transaction in case of e-mandates / standing instructions on cards, prepaid payment instruments and Unified Payments Interface. For subsequent transactions with transaction values up to ₹5,000/- (AFA limit), the prescription of AFA was waived.

On a review of the implementation of the e-mandate framework and the protection available to customers, it has been decided to increase the aforesaid AFA limit from ₹5,000/- to ₹15,000/- per transaction.

Click here to access the Circular.

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

The Reserve Bank of India (RBI) on June 24, 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 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 and the timeline for implementing this was given until 30th June 2022.

Reviewing the pertinent concerns the RBI has observed that significant advancement has been made in terms of token production. Although it has started, transaction processing based on these tokens has not yet taken off across all types of merchants. Additionally, the industry’s stakeholders have not yet adopted a backup system for transactions where cardholders choose to manually enter their card information at the time of the transaction (often known as “guest checkout transactions”). RBI now extended the time limit for storing CoF data by three months, i.e., till September 30, 2022.

Click here to access the Circular

Income Tax Updates

1. CLARIFICATION REGARDING FORM NO. 10AC ISSUED TILL THE DATE OF THIS CIRCULAR:

The Finance Act, 2022 has inserted amended provisions of the Income-tax Act allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any ‘specified violation’ by the trust or institution registered or provisionally registered. After examination, an order is required to be passed for either cancellation of the registration or refusal to cancel the registration.

In view of the amendments made vide Finance Act, 2022, the conditions subject to which the registration/approval or provisional registration/ provisional approval was granted to trusts and institutions need to be revised to align the same with the amendments made by Finance Act, 2022.

Thus, the Central Board of Direct Taxes (CBDT) has issued a circular clarifying that:

1. Conditions for grant of registration under sections 12AB, 10(23C), and 80G. The Board has listed down the revised conditions that should be followed by the trust or institution seeking:

• Re-registration and provisional registration under section 12AB,
• Re-approval and provisional approval under section 10(23C), and
• Re-approval and provisional approval under section 80G

The conditions contained in Form No. 10AC, issued between 01.04.2021 till the date of issuance of Circular, i.e., 03-06-2022, shall be read as if the said conditions had been substituted with the conditions as provided by the board with effect from 1st April 2022.

2. Provisional registration/approval to be deemed as registration/approval

The Board has clarified that if due to technical glitches, Form No. 10AC has been issued during FY 2021-2022 with the heading “Order for provisional registration” or “Order for provisional approval” instead of “Order for registration” or “Order for approval”, then all such Form No. 10AC shall be considered as an “Order for registration or approval”.

Click here to access the circular

2. CBDT MODIFIES CONDITIONS FOR ELIGIBLE INVESTMENT FUND – SECTION 9A(8A):

The CBDT vide Notification No. 59/2022-Income Tax dated 6^th June 2022 has modified the conditions for eligible investment funds – Section 9A(8A).

Section 9A of the Income-tax provides for a special regime in respect of offshore funds. It provides that in the case of an eligible investment fund, the fund management activity carried out through an eligible fund manager acting on behalf of such fund shall not constitute a business connection in India of the said fund.

Sub-section (3) and sub-section (4) of Section 9A list down conditions which shall be fulfilled by the eligible investment fund and eligible fund manager to claim the benefit.

Sub-section (8A) of Section 9A also empowers the Central Government to notify any one or more of the conditions as specified in respect of eligible investment fund or eligible fund manager shall not apply or shall apply with such modifications, as may be specified in such notification, if such fund manager is located in an International Financial Services Centre as defined Section 80LA, and which has commenced its operations on or before the 31-03-2024.

Click here to access the circular

3. PROCEDURE FOR SHARING INFORMATION WITH TAX DEDUCTORS/COLLECTORS:

The CBDT vide Circular no. 10/2022, dated 17^th May 2022, had amended the logic of the functionality ‘Compliance Check for Sections 206AB & 206CCA’ incorporating the changes introduced by the Finance Act, 2022 in the provisions of such sections.

Now the board has revised the procedures laid down for sharing information with tax deductors/collectors for Sections 206AB & 206CCA. The Board has earlier laid down the procedure vide Notification No. 01 of 2021 dated 22^nd June 2021. The procedures have been laid down with respect to:

• Registration of deductors/collectors on the e-filing portal;
• Accessing the Compliance Check functionality;
• Using compliance check through ‘PAN’ search mode; and
• Using compliance check through ‘Bulk Search’ mode.

 Click here to access the circular

4. “331” NOTIFIED AS COST INFLATION INDEX FOR THE FINANCIAL YEAR 2022-23:

The CBDT notifies the Cost of Inflation Index (CII) every year.

The CBDT has notified ‘331’ as CII for the Financial Year 2022-23 vide Notification No. 62/2022 dated 14^th June, 2022.

CII of 331 shall be used to compute long-term capital gains or losses on the capital assets which have been or are planned to be sold during the Financial Year 2022-23. The CII for the last financial year, i.e., the financial year 2021-22 was 317.

Click here to access the circular

5. SECTION 194R OF INCOME-TAX ACT, 1961 – GUIDELINES & FAQS:

CBDT issued Guidelines for removal of difficulties under sub-section (2) of section 194R of the Income-tax Act, 1961 vide Circular No. 12 of 2022-Income Tax dated 16th, June 2022. Section 194R casts an obligation on the person responsible for providing any benefit or prerequisite to a resident, to deduct tax at source @10%.

Click here to access the circular

6. CBDT INSERTED NEW INCOME TAX RULE 21AIA & REVISED FORM NO.10-IG:

The Central Board of Direct Taxes vide Notification No. 64/2022-Income Tax amended Rule 21AI/21AJ/21AJA/21AJAA, Inserted new Rule 21AIA – Other conditions required to be fulfilled by a specified fund referred to in clause (4D) of section 10 of the Act and issued revised Form No. 10-IG – Statement of exempt income under clause (4D) of section 10 of the Income-tax Act, 1961.

Click here to access the circular

7. SECTION 194I DEDUCTION ON PAYMENT OF LEASE /SUPPLEMENTAL LEASE RENT- REG.:

The CBDT issues Notification No. 65/2022 dated 16^th June 2022 providing for relaxation from TDS u/s 194I of Income-tax Act, 1961 in respect of lease rentals paid to aircraft-leasing units located in International Financial Services Centre (IFSC) claiming exemption u/s 80LA of the Act. It will come into force w.e.f. 1^st July 2022.

Click here to access the circular

8. APPLICABILITY OF TP SAFE HARBOUR RULES EXTENDED TILL AY 2022-23: CBDT:

The CBDT has extended the validity of provisions of Rule 10TD(1) & Rule 10(2A) till Assessment Year (A.Y.) 2022-23. Rule 10TD(1) and Rule 10TD(2A) prescribe a list of eligible international transactions where the transfer price declared by the assessee shall be required to be accepted by the Income-tax Authorities.

Sub-rule (3A) to Rule 10TD sets a time limit for the application of the provision of sub-rules (1) and (2A). It provides that provisions shall apply for the A.Y. 2017-18 and two A.Y. immediately following that.

The Board has now amended Rule 10TD(3B) to further extend the applicability of Safe Harbour Rules until A.Y. 2022-23.

Click here to access the circular

9. CBDT NOTIFIES REVISED/NEW TDS RETURNS FOR TDS UNDER SECTION 194R, 194S:

The Central Board of Direct Taxes (CBDT) has notified Income-tax (19th Amendment) Rules, 2022 amending the Income-tax Rules, 1962 to incorporate changes introduced by the Finance Act, 2022 related to TDS.

The Board vide Notification No. 67/2022-Income Tax amended Income Tax Rule 30, 31 and 31A, Inserted new Forms –

• Form No. 16E – Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source,
• Form No. 26QE – Challan-cum-statement of deduction of tax under section 194S by specified persons,

And Amended

• Form No. 26QB – Challan-cum-statement of deduction of tax under section 194-IA,
• Form No. 26QC – Challan-cum-statement of deduction of tax under section 194-IB,
• Form No. 26Q, FORM NO. 26QC – Challan-cum-statement of deduction of tax under section 194-IB, and
• Form No.26QD – Challan-cum-statement of deduction of tax under section 194M.

Click here to access the circular

10. GUIDELINES W.R.T. SECTION 194S TDS ON PAYMENT FOR VIRTUAL DIGITAL ASSETS:

CBDT released vide Circular No. 13 of 2022 dated 22^nd June 2022 the guidelines for removal of difficulties under sub-section (6) of section 194S of the Income-tax Act, 1961 which relates to the deduction of TDS on payment for the transfer of a virtual digital asset.

Click here to access the circular

11. TOLERANCE BAND FOR AY 2022-23 IN CASE OF WHOLESALE TRADING & OTHERS:

Central Government Notifies Tolerance Band for Assessment Year 2022-23 in case of “wholesale trading and others” vide Jurisdiction Notification No. 70/2022-Income Tax, dated 28^th June, 2022.

Click here to access the circular

12. SECTION 194S TDS ON TRANSACTIONS OTHER THAN THOSE TAKING PLACE ON OR THROUGH AN EXCHANGE:

CBDT released vide Circular No. 14 of 2022 dated 28^th June 2022 w.r.t. Order under section 119 of the Income-tax Act, 1961 in relation to tax deduction at source under section 194S of the Act for transactions other than those taking place on or through an Exchange.

Finance Act, 2022 inserted a new section 194S in the Act with effect from 1st July 2022. The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for the transfer of a virtual digital asset (VDA), to deduct an amount equal to 1% of such sum as income tax thereon. The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier.

Click here to access the circular

13. CBDT AMENDS RULE 31A AND INSERTS NEW:

Amendment of Income Tax rule 31A and insertion of Form No. 26QF (Quarterly statement of tax deposited in relation to transfer of virtual digital asset under section 194S to be furnished by an exchange for the quarter) vide Notification No. 73/2022- Income Tax dated 30^th June, 2022.

Click here to access the circular

GST Updates

1. KARNATAKA GST DEPT. INTRODUCED NEW MODULE TO REVOKE CANCELLED GSTIN BEYOND 90 DAYS: CIRCULAR:

In order to revoke the cancelled registration after 90 days, which was allowed by the concerned appellate authority or the High Court, there was no electronic module in place to revoke such cancelled registration.

Now, a new module has been developed and tested for the proper officers in order to revoke cancelled GSTIN beyond 90 days which was allowed by the concerned appellate authority or the High Court. In this regard, the Karnataka GST department has issued a circular.

Click here to access the circular

2. GOVT. WAIVES INTEREST ON DELAY IN FILING GSTR-8 FOR CERTAIN ELECTRONIC COMMERCE OPERATORS:

The Government has notified that the ‘Nil’ rate of interest shall be levied on delay in filing GSTR-8 for certain Electronic Commerce Operators who had deposited the taxes in the electronic cash ledger but failed to file returns within the due date due to technical glitches on the portal.

There shall be no levy of interest from the date of depositing the tax collected in the electronic cash ledger till the date of filing of GSTR-8. In this regard, notification has been issued which also provides a class of registered persons to whom this benefit shall be available.

Click here to access the circular

3. CBIC ISSUED PROCEDURE FOR SANCTION, POST AUDIT & REVIEW OF GST REFUND CLAIMS:

It has been observed by the CBIC that in several cases, speaking orders are not issued where a refund is sanctioned in full. For ensuring uniformity in procedure and enabling effective monitoring of refunds, the CBIC has issued detailed procedures for sanction, post audit and review of refund claims under GST.

Also, the post audit shall be conducted only for refund claims amounting to Rs. 1 lakh or more and it should be concluded within 3 months from the date of issue of FORM GST RFD-06 order. In this regard, instruction has been issued by the CBIC. 

Click here to access the circular

4. LEVY OF COMPENSATION CESS IS EXTENDED UP TO 31ST MARCH, 2026: NOTIFICATION:

The Compensation Cess was initially imposed for five years i.e. up to June 2022 on specified goods. This period has further been extended up to March 31, 2026. The Compensation Cess is levied for compensating the states for losses arising from GST implementation. In this regard, notification has been issued and Goods and Services Tax (Period of Levy and Collection of Cess) Rules, 2022 are notified which shall be effective from July 1st, 2022.

Click here to access the circular

5. RECOMMENDATIONS OF 47TH MEETING OF GST COUNCIL: PRESS RELEASE:

The 47^th Meeting of GST Council held at Chandigarh on 28^th & 29^th June 2022 was chaired by the Union Finance Minister Nirmala Sitharaman. The GST Council has made several recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure. The rate changes recommended by the 47^th GST Council will be made effective from 18^th July, 2022.

Key Recommendations of 47th GST Council Meeting:

• Group of Ministers (GoM) on Casino, Race Course and Online Gaming to re-examine the issues based on further inputs from States and submit its report within a short duration.
• GoM is to be constituted to address various concerns raised by the States on GST Appellate Tribunal and amendments in CGST Act.
• GoM on IT Reforms, inter alia, recommended that the GSTN should put in place the AI/ML-based mechanism.
• All rate changes recommended by the 47^th GST Council will be made effective from 18^th July 2022.

Click here to access the circular