Thursday, March 28, 2024
Home Blog Page 35

EXTENDING DEBT INSTRUMENT MATURITY IS LIKE DEFAULT: SEBI CIRCULAR – BUSINESS STANDARD

EXTENDING DEBT INSTRUMENT MATURITY IS LIKE DEFAULT: SEBI CIRCULAR – BUSINESS STANDARD

Any extension given to a corporate entity by extending the debt instrument’s maturity needs to be considered a ‘default’ for the purpose of valuation, according to the Securities and Exchange Board of India (Sebi). The norm was laid out in a circular issued on Tuesday night, a day before Essel Group announced that lenders had granted it more time to repay its dues.

Earlier, Sebi Chairman Ajay Tyagi had stated that the regulator didn’t acknowledge ‘standstill’ agreements between mutual funds (MFs) and promoters. However, Sebi had not yet formally laid down norms to govern such arrangements.

Sources say the move could impact those fund houses that are giving extensions to the Essel Group promoters and have exposure to debt papers that are maturing in September.

“Valuation agencies will now be required to give pricing in line with these new norms when the maturities of debt instruments are extended,” said a debt fund manager, requesting anonymity.

The current norms require MFs to take a markdown of 75 per cent on secured exposures that are downgraded to default grade or ‘D’.

“The regulator can decide to give an exception to MFs in Essel’s case as fund houses had entered into discussions on another extension with the promoters before the circular was issued by Sebi,” said another executive, also asking to remain unidentified.

“MFs holding papers maturing beyond September 30 are unlikely to get impacted by this move,” the fund manager added.

MF exposures to Essel Group firms are secured against the pledged shares of the promoters as part of the loan-against-share (LAS) structures.

In January, MFs along with other lenders had entered into a ‘standstill’ agreement with Essel promoters where it was agreed that no ‘default’ will be declared on account of a steep fall in the price of Zee shares, which were pledged by the promoters as collateral. Also, the creditors decided to give time to the promoters till September 30 to settle the dues. This also extended the maturity of certain debt instruments till the end of September.

On Wednesday, Essel Group said its lenders had agreed to further extend the timeline beyond September-end, enabling the group to ‘optimise value output from the sale of its assets’.

Earlier this month, the group cleared part of its dues by transferring the proceeds from the promoters’ stake sale in Zee Entertainment. The payment halved the outstanding exposure of most MFs exposed to LAS structures of Essel Group firms.

Tax Audit & Penalty of Rs. 10,000/- on chartered Accountants for error in the audit report

Tax Audit & Penalty of Rs. 10,000/- on chartered Accountants for error in the audit report

The Tax Audit due date is on peak. In an attempt to complete the audit to save client from penalty, CA’s make commit error.

All the Chartered Accountants are busy completing their works. Note carefully that any mistake by the Chartered Accountant in the Tax Audit Report will cost him Rs. 10,000/- as per Section 271J of the Income Tax Act, 1961. Needless to say, clients will not come forward to pay this penalty or share the burden of CA.

Section 271J of the Income Tax Act, 1961 reads as under:

271J. Without prejudice to the provisions of this Act, where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Act, finds that an accountant or a merchant banker or a registered valuer has furnished incorrect information in any report or certificate furnished under any provision of this Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct that such accountant or merchant banker or registered valuer, as the case may be, shall pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate.

Explanation.—For the purposes of this section,—

(a) “accountant” means an accountant referred to in the Explanation below sub-section (2) of section 288;

(b) “merchant banker” means Category I merchant banker registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(c) “registered valuer” means a person defined in clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]

In this article we will discuss the most serious mistakes which Chartered Accountants may commit or may be held for professional negligence. One must take following observation, points, information while finalizing the tax audit report:

Interest, Late fees, Penalties under GST:

Since the Goods and Services Tax (GST) regime is a new one, tax payers have committed mistakes in the same. Either they have delayed their registrations or have uploaded the returns lately. The GST Act levies penalties/ fines on the contraventions to the provisions of the act. In few circumstances waiver have been given by the Government. But yes the contraventions are still chargeable in many cases. The Income Tax Act, 1961 does not permit the deduction of penalties, fees, fines from the turnover for calculation of Profit as per section 37. Section 37 disallows the expenditure incurred for any purpose that is an offence or which is prohibited by any law.

But many Chartered Accountants are permitting the Debit of Late Fees/ Interest to Profit and Loss and are not even reporting it in the Tax Audit Report.

Another mistake is ignoring Section 145A of the Income Tax Act, 1961 as substituted by Finance Act 2018 with retrospective effect. Clause (ii) of Section 145A reads as under:

145A. For the purpose of determining the income chargeable under the head “Profits and gains of business or profession”,

(ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation;

As per this clause, while doing stock valuation of inventory the value shall include the amount of any tax, duty, cess or fees. The amount of taxes on the goods shall be included in cost. Taxes included Goods and Service Tax. Also this is a retrospective amendment and shall be applicable from FY 2016-17. The amount of both opening and closing stock shall be including the amount of tax. The difference in the opening balances may be showed as tax difference.

Over and above this there may be various small mistakes that can be ruled off by applying full care and due diligence.

3.The receipts and TDS as shown in 26AS may be checked with the receipts and TDS in the books of accounts. The same should be shown in ITR. If there is any mismatch in details furnished in ITR and 26AS, then one may receive notice for such mismatch.

4.CA should not forget to take care of sec 14A of Income Tax Act, 1961 which provides for disallowance of expenses incurred for earning tax exempt income as read with Rule 6D.

5.In ITR form now, reporting of GST turnover is required and in case GST turnover and turnover as per books do not match, one may have to reply to notice. CA’s should keep the reconciliation of differences in turnover and may ascertain that there is explainable error and nothing like a sort of professional negligence.

6.In ITR, there is a new reporting requirement. Trading and manufacturing account are required to be furnished separately. Verify with above perspective if there are vast variation.

7.Non compliance or non reporting of ICDS will tantamount to professional negligence and will be a fit case for levy of penalty u/s 271J

8.Payment of interest to NBFC also attracts TDS and is not exempt like payment of interest to Bank. Needless to say, just casualness in incorporate it in the TAR will result in adverse consequences. Similarly, acceptance & repayment of loan from NBFC will also form the part of section 269SS & 269T reporting.

9.While furnishing amount of other expenses in ITR, if substantial amount is reported in other expense, CA should check if anything is of personal or political nature and ensure to report it in Tax Audit Report

A healthy fruit juice brand based in Mumbai looking to raise Equity Investment of about Rs.150 to Rs.200 Lakhs.

A healthy fruit juice brand based in Mumbai looking to raise Equity Investment of about Rs.150 to Rs.200 Lakhs.

Currently Sales of about Rs.200 Lakhs plus per annum

Breaking even currently.

All sales through Vending machines in Malls , Corporate Offices , Hospitals etc.

Already invested about own Rs.200 Lakhs. Looking to raise about Rs.200 Lakhs to grow the business

Interested Investors may call / WhatsApp on 98200-88394 for further discussion.

Intellex Consulting is a One-Stop-Consulting for Syndication of Finance ( Debt as well as Equity), Manage your Accounting and Taxation (Income Tax & GST) , Companies Act & R.O.C compliance and all other Legal and Statutory Compliances.

Team – Intellex
WhatsApp – 98200-88394

www.intellexconsulting.com,
www.startupstreets.com

Co-Working Space Business Promotions.

Co-Working Space Business Promotions.

Officelounges.com , a market place for Co-Working Space undertakes Online and Offline Business Development purely on Commission basis.

WhatsApp on 98200-88394 with your requirements.

Officelounges.com – A market place Portal for Co-Working Office Rental listing and searching with emphasis on Virtual Offices and Co-Working and Shared Working spaces.

We invite offers from Direct owners to list and promote their Coworking Offices for renting in India in any of the following catagaries. Please email the office details to us along with a few attractive pictures of the office.

Our mail I’d  officelounges.com@gmail.com or WhatsApp on 98200-88394

We have the following categories in the portal. 1) Virtual Offices , 2) Table Space , 2) Cabins 4) Small Offices,  5) Suits , 6) Meeting Rooms,  6 ) Conference Halls 7) Training Rooms etc.

We provide both online and offline services related to properties in many Indian cities.

Team – Officelounges.com

Portal Sponsors: Startupstreets.com & Intellexconsulting.com

Here are 5 changes in income tax rules that come into effect from September 1, 2019

0

Income Tax Update

Here are 5 changes in income tax rules that come into effect from September 1:

1) The government has introduced a new Section called 194N in income tax laws under which cash withdrawals exceeding ₹1 crore in aggregate in a year from banks, post offices or co-operative society engaged in carrying on the business of banking will attract a TDS @2. Payments made on or after September 1 will attract the provisions of Section 194N.

The income tax department has clarified that cash withdrawal prior to 1 September, 2019, will not be subjected to TDS under Section 194N. However, since threshold of ₹1 crore is with respect to the previous year, the calculation of amount of cash withdrawal for triggering deduction under section 194N will be counted from 1 April, 2019.

2) The government has amended 194-IA of Income Tax Act to include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property, under immovable property, for levy of TDS. This comes into effect from 1 September. It is to be noted that the TDS is levied @1% if the value of the property exceeds ₹50 lakh. So now, charges like club membership fee, car parking fee, electricity or water facility fee will also be included for calculation of TDS.

3) The government has introduced a new Section called 194M in income tax laws under which individual is required to deduct TDS @5% for paying a sum in excess of ₹50 lakh for carrying out any work in pursuance of a contract or by way of fees for professional services during a financial year. Payments made on or after September 1 will attract the provisions of Section 194M.

4) A higher TDS of 5%, from 1% earlier, will be levied if life insurance maturity proceeds received that are taxable in your hands. According to current tax laws, if the annual premium paid on the insurance policy is less than 10% of the sum assured the amount received on maturity are exempt from tax. (For insurance policies purchased before April 2012, the premium must be less than 20% of the sum assured to get the tax benefit on maturity).

It is to be noted that TDS is levied if the maturity proceeds exceeds ₹1 lakh.

5) In Budget 2019, Finance Minister Nirmala Sitharaman had proposed to allow interchangeability between Permanent Account Number (PAN) and Aadhaar with effect from 1 September 2019.

Those who don’t have PAN can quote Aadhaar in transactions that otherwise require quoting of PAN like cash deposit above ₹50,000.

Latest amendments in GST Rules

Latest amendments in GST Rules

  1. Rule 10A has been inserted – Taxpayers are required to furnish bank account information on the portal within 45 days of the grant of registration or the due date of GSTR-3B, whichever is earlier.

Effective date = 28 June 2019;

2.Rule 21 has been amended- GST registration is liable to be cancelled of a person not furnishing the details required as per Rule 10A referred above.
Effective date = 28 June 2019.

  1. Rule 32A has been inserted – For the purpose of charging GST, the value of supply of good or services shall not include the value of Kerala Flood Cess charged thereon. Effective date = 01st July 2019.
  2. Rule 46 and Rule 49 has been amended- A proviso has been inserted to provide the requirement of Quick Response (QR) code on tax invoice and bill of supply, subject to certain conditions and restrictions, as may be specified.

Effective date = To be Notified.

  1. Rule 66(2), 67(2) and 87(9) has been amended – Rules relating to the procedure of claiming TDS / TCS deducted has been amended.

Effective date = 28 June 2019.

  1. Rule 87 has been amended– A new Sub-rule 13 has been inserted to provide that a registered person can transfer any amount of tax/interest/penalty/fee to any other head in the electronic cash ledger, In this regard, form GST PMT-09 has also been introduced.

Effective date = To be Notified.

  1. Rule 95A has been inserted – Rule 95A has been inserted to provide the refund mechanism to the retail outlets established in the departure area of an International Airport. In this regard, form GST RFD-10B has also been introduced.

Effective date = 01st July 2019.

  1. Rule 128, 129, 132 and 133 have been amended- Rules relating to anti-profiteering has been amended.

Effective date = 28 June 2019.

  1. Rule 138(10) and 138 have been amended – Proviso has been inserted to provide that the validity of e-way bill may be extended within eight hours from the time of its expiry. Rule 138E has been amended to provide that taxpayers claiming the benefit of notification number 02/2019-Central Tax dated 07 March 2019 shall not be allowed to fill form GST EWB-01 if the return has not been filed for two consecutive quarters.

Effective date = 28 June 2019.

  1. Amendment to GSTR-9 format:- Tables of Annual Return has been amended to provide the details from April 2018 to March 2019 instead of April 2018 to September 2018; Instructions of table 8A has been amended to provide that FORM GSTR-2A generated on 1 May 2019 shall be auto-populated in table 8A.
    Formats of Forms REG-01, REG-07, REG-12, GSTR-04, RFD-05 and DRC-03 have also been changed to suit the amendments.

Effective date = 28 June 2019.

Govt uses GST alerts for better compliance.

Govt uses GST alerts for better compliance

Directors, Promoters To GetMessages For Mismatch

An independent director ofa large public sector company recently received a message that there was a mismatch in GST return filed by the state-run metals player.The board member immediately contacted the company management, which rectified the mistake.

The PSU director was not alone, several directors on the boards of companies and promoters have been receiving such messages if there is a mismatch between the initial and revised returns. This is only one of the five “red flags” being used by the government and the GST Network, which provides the IT backbone for the indirect tax, to coax companies into fixing problems or even filing returns in case they have not done so within the prescribed deadline.

Sources said such text messages are sent to promoters and directors of companies that pay over Rs1 lakh a month. “Often, the finance people don’t comply with the filing requirement but they immediately file once it is brought to the notice of the management,” said an official, adding that it is not worthwhile chasing small amounts.

The first “red flag” goes up if returns are not filed by the deadline, which is the 20th of every month,and a reminder is sent.A second reminder is sent if the company fails to file the returns by the 27th. There are alerts which are also sent to non-filers or stop filers, which are entities that do not file returns for two months, sources told TOI.

The GST authorities also raise an alarm in case the input tax credit (ITC) does not match with the claims made in GSTR 2A return form and GSTR 3B filing.And, those who issue an e-way bill but do not use it are also being tracked. “All this is possible because of the database available with us.There is no intrusion and an inspector does not landup if the returns do not match,” said an official.

Going forward, GSTN is working on putting together a dashboard which will point to gaps, including asudden jump in ITC claimsand other such gaps. All the tools will be available to officials concerned, just at the click of a mouse.

?? published in TOI today

FRAMEWORK FOR ISSUANCE OF DIFFERENTIAL VOTING RIGHTS (DVR) SHARES

FRAMEWORK FOR ISSUANCE OF DIFFERENTIAL VOTING RIGHTS (DVR) SHARES

SEBI has held a Board Meeting on 27th June 2019 and discuss on following- I. Framework for Issuance of Differential Voting Rights (DVR) Shares II. Amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 – payment relating to royalty and brand usage III. Disclosure of Encumbrances IV. Review of Risk Management Framework of Liquid Funds, Investment Norms and Valuation of Money Market and Debt Securities by Mutual Fund V. Amendments to SEBI (PIT) Regulations and VI. SEBI Annual Report: 2018-19.

Securities and Exchange Board of India PR No. 16/2019 SEBI Board Meeting

The SEBI Board met in Mumbai today and took the following decisions:

I. Framework for Issuance of Differential Voting Rights (DVR) Shares

There is an increasing debate about the need to enable issuance and listing of shares with differential voting rights, commonly known as DVRs in India. Such shares have rights disproportionate to their economic ownership.

The Board approved a framework for issuance of differential voting rights shares along with amendments to the relevant SEBI Regulations to give effect to the framework.

The key proposals approved are as follows:

  1. Eligibility: A company having superior voting rights shares (SR shares) would be permitted to do an initial public offering (IPO) of only ordinary shares to be listed on the Main Board, subject to fulfillment of eligibility requirements of the SEBI(Issue of Capital and Disclosure Requirements) Regulations, 2018 and the following conditions:

i) The issuer company is a tech company (as per the definition in Innovators Growth Platform) i.e. intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition.

ii) The SR shareholder should be a part of the promoter group whose collective net worth does not exceed Rs 500 Crores. While determining the collective net worth, the investment of SR shareholders in the shares of the issuer company shall not be considered.

iii) The SR shares have been issued only to the promoters/ founders who hold an executive position in the company.

iv) The issue of these SR shares has been authorized by a special resolution passed at a general meeting of the shareholders.

v) SR shares have been held for a period of at least 6 months prior to the filing of Red Herring Prospectus (RHP).

vi) SR shares have voting rights in the ratio of minimum 2:1 to maximum 10:1 compared to ordinary shares.

  1. Listing and Lock-in: SR shares shall also be listed on Stock Exchanges after the issuer company makes a public issue. However, SR shares shall be under lock-in after the IPO until their conversion to ordinary shares. Transfer of SR shares among promoters shall not be permitted. No pledge/ lien shall be allowed on SR shares.
  2. Rights of SR shares: SR shares shall be treated at par with the ordinary equity shares in every respect, including dividends, except in the case of voting on resolutions. The total voting rights of SR shareholders (including ordinary shares), post listing, shall not exceed 74%.
  3. Enhanced corporate governance: Companies having SR shareholders shall be subject to enhanced corporate governance as follows:

i) Atleast 1/2 of the Board and 2/3rd of the Committees (excluding Audit Committee) as prescribed under SEBI (LODR) Regulations, 2015 shall comprise of Independent Directors.

ii) Audit Committee shall comprise of only Independent Directors.

  1. Coat-tail Provisions: Post-IPO, the SR Equity Shares shall be treated as ordinary equity shares in terms of voting rights (i.e. one SR share shall have only one vote) in the following circumstances:

i) Appointment or removal of independent directors and/or auditor;

ii) In case where promoter is willingly transferring control to another entity

iii) Related Party Transactions in terms of SEBI(LODR) Regulations involving SR shareholder

iv) Voluntary winding up of the company;

v) Changes in the company’s Article of Association or Memorandum – except any changes affecting the SR instrument

vi) Initiation of a voluntary resolution plan under IBC;

vii) Utilization of funds for purposes other than business

viii)Substantial value transaction based on materiality threshold as prescribed under LODR;

ix) passing of special resolution in respect of delisting or buy-back of shares; and

x) Any other provisions notified by SEBI in this regard from time to time.

  1. Sunset Clauses: SR shares shall be converted into ordinary shares in following circumstances/ events:

i) Time Based: The SR shares shall be converted to Ordinary Shares on the 5th anniversary of listing. The validity can be extended once by 5 years through a resolution. SR shareholder would not be permitted to vote on such resolutions.

ii) Event Based: SR shares shall compulsorily get converted into ordinary shares on occurrence of certain events such as demise, resignation of SR shareholders, merger or acquisition where the control would be no longer with SR shareholder, etc.

  1. Fractional Rights Shares: Henceforth, issue of fractional rights shares by existing listed companies shall not be allowed. The need for allowing issue of fractional rights shares by listed companies may however be reviewed after gaining enough experience with the use of SR shares.

The Board, while approving the amendments, considered the recommendations of the Primary Market Advisory Committee (PMAC) and the public comments on the Consultation Paper.

II. Amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 – payment relating to royalty and brand usage

  1. SEBI (Listing Obligations and Disclosure Requirements) Regulations had prescribed that payments made to related parties towards brand usage or royalty are to be considered material if the transaction(s) exceed 2% of the annual consolidated turnover of the listed entity during a financial year. This required approval of the shareholders, with no related party having a vote to approve such resolutions. This provision was to come into effect from April 1, 2019. In view of the representations received on the subject and with a view to analyse them, the Board had decided to defer the implementation of this provision for three months i.e. till June 30, 2019.
  2. The Board has now, after considering the representations, decided that payments made to related parties towards brand usage or royalty may be considered material if the transaction(s) exceed 5% of the annual consolidated turnover of the listed entity during a financial year and would require approval of the shareholders, with no related party having a vote to approve such resolutions.

III. Disclosure of Encumbrances

The Board has approved the following proposals:

  1. The term “encumbrance” as defined in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 shall henceforth include, –

i) any restriction on the free and marketable title to shares, by whatever name called, whether executed directly or indirectly;

ii) pledge, lien, negative lien, non-disposal undertaking;

iii) any covenant, transaction, condition or arrangement in the nature of encumbrance, by whatever name called, whether executed directly or indirectly.

  1. Promoters shall be required to disclose separately detailed reasons for encumbrance whenever the combined encumbrance by the promoters and persons acting in concert (PACs) crosses 20% of the total share capital in the company or 50% of their shareholding in the company. The stock exchanges will maintain the details of such encumbrance along with purpose of encumbrance, on their websites.
  2. The promoters shall be required to declare to the audit committee of the company and to the stock exchanges on a yearly basis, that they along with PACs, have not made any encumbrance directly or indirectly, other than already disclosed, during the financial year.

The Board has taken the above measures in the context of recent concerns w.r.t. promoter/ companies raising funds from Mutual Funds/ NBFCs through structured obligations, pledge of shares, non-disposal undertakings, corporate/ promoter guarantees and various other complex structures.

IV. Review of Risk Management Framework of Liquid Funds, Investment Norms and Valuation of Money Market and Debt Securities by Mutual Fund

In light of a few credit events in the fixed income market that led to increase in liquidity risk of Mutual Funds, a need was felt to review the regulatory framework and take necessary steps to safeguard the interest of investors and maintain the orderliness and robustness of Mutual Funds.

In this context, SEBI had constituted working groups representing AMCs, industry and academia to review the risk management framework with respect to liquid schemes and to review the existing practices on valuation of money market and debt securities. Further, an internal working group within SEBI was constituted to inter-alia review norms for Mutual Funds for investment in various debt and money market securities.

The analysis along with recommendations of the working groups were placed in a meeting of Mutual Fund Advisory Committee (MFAC). In this regard, MFAC made several recommendations.

The Board after deliberations, inter-alia, approved the following proposals:

Risk Management Framework of Liquid Funds and prudential norms governing investments in debt and money market instruments

  1. Liquid Schemes shall be mandated to hold at least 20% in liquid assets such as Cash, Government Securities, T-bills and Repo on Government Securities.
  2. The cap on sectoral limit of 25% shall be reduced to 20%. The additional exposure of 15% to HFCs shall be restructured to 10% in HFCs and 5% exposure in securitized debt based on retail housing loan and affordable housing loan portfolios.
  3. The valuation of debt and money market instruments based on amortization shall be dispensed with completely and shall be based on mark to market.
  4. Liquid and overnight schemes shall not be permitted to invest in Short Term Deposits, debt and money market instruments having structured obligations or credit enhancements.
  5. A graded exit load shall be levied on investors of liquid schemes who exit the scheme upto a period of 7 days.
  6. Mutual Fund schemes shall be mandated to invest only in listed NCDs and the same would be implemented in a phased manner. All fresh investments in Commercial Papers (CPs) shall be made only in listed CPs pursuant to issuance of guidelines by SEBI in this regard.
  7. All fresh investments in equity shares by Mutual Fund schemes shall only be made in listed or to be listed equity shares.
  8. Prudential limits on total investment by a Mutual Fund scheme in debt and money market instruments having credit enhancements and on investment by Mutual Fund scheme in such debt securities of a particular group, as percentage of debt portfolio of the respective scheme have been prescribed at 10% and 5% respectively.
  9. There should be adequate security cover of at least 4 times for investment by Mutual Fund schemes in debt securities having credit enhancements backed by equities directly or indirectly.

Valuation of Money Market and Debt Securities by Mutual Funds

  1. In order to make existing provisions on valuation of money market and debt securities more reflective of best practices, various proposals for amending the extant provisions were approved.
  2. Further, in order to bring uniformity and consistency in valuation, various proposals on the waterfall approach for valuation of non-traded money market and debt securities by Mutual Funds were approved, along with acknowledging that valuation agencies may need a certain degree of flexibility in order to ensure fair pricing of securities. Nevertheless, in terms of the Principles of Fair Valuation, AMCs are responsible for ensuring fairness of valuation and they may deviate from the valuation guidelines, subject to appropriate documentation and disclosure.
  3. In order to increase the robustness of valuation and address possible mis-use, various proposals related to valuation of Inter-scheme Transfers (ISTs), disallowing the use of own trades for valuation etc., were approved.

Suitable grandfathering wherever applicable and adequate time period shall be provided for implementation of the above proposals.

V. Amendments to SEBI (PIT) Regulations

The Board considered representations received from the market on certain aspects relating to Code of Conduct prescribed in the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations).

Upon consideration, the Board approved amendments clarifying that trading window closure for listed companies shall be applicable from end of every quarter till 48 hours after declaration of financial results. The amendments clarify that such closure shall not be applicable in respect of transactions such as off-market inter-se transfer between insiders, transaction through block deal window mechanism between insiders, transaction due to statutory or regulatory obligations, exercising of stock options, pledging of shares for bona fide transaction such as raising of funds and transactions for acquiring shares under further public issue, right issue and preferential issue, exercising conversion of warrants / debentures, tendering shares under buy-back, open offer and delisting etc. under respective regulations, subject to conditions specified. The Board also approved amendments clarifying material financial relationships.

VI. SEBI Annual Report: 2018-19

The Board considered and approved the SEBI Annual Report: 2018-19. In compliance with Section 18(2) of SEBI Act, 1992, the Annual Report would be submitted to the Central Government.

SEBI Approves Tighter Norms For Mutual Funds

SEBI Approves Tighter Norms For Mutual Funds

The chairman said that the regulator does not recognise any standstill agreement between promoters and mutual funds. “Mutual funds are not banks, so there’s nothing called standstill. There are investing, not lending.” Tyagi said that restrictions have been introduced in consultation with the industry to bring in more discipling and protect investors’ money.

Tyagi said the regulator has taken a cautious approach with differential voting rights in shares. This is the first time this is being tried in India, he said. There’s also a counter argument that corporate governance needs to be tightened, Tyagi noted, adding that SEBI has tried to address those concerns.

Tighter Norms For Mutual Funds

SEBI had constituted a working group to review its risk management framework for mutual fund schemes, in light of credit events in fixed income market that led to a increase in liquidity risk of mutual funds.

SEBI had constituted a working group to review its risk management framework for mutual fund schemes, in light of credit events in fixed income market that led to a increase in liquidity risk of mutual funds.

The regulator has approved the following proposals:

Liquid schemes will be mandated to hold at least 20 percent in liquid assets like cash, government securities and treasury bills.

The cap on sectoral limit has been reduced to 20 percent from 25 percent earlier.

The valuation of debt and money market instruments based on amortisation will be dispensed with completely and now be on mark-to-market Value.

Liquid and overnight schemes will not be permitted in short term deposits, debt or money market instruments having structured obligations.
Mutual fund schemes will be mandated to invest only in listed non-convertible debentures.

All fresh investments in commercial papers will be made only in listed ones.

All fresh investments in equity by mutual fund schemes will be only made in listed or to be listed shares.

New provisions of Tax & Corporate Laws applicable w.e.f April1, 2019

New provisions of Tax & Corporate Laws applicable w.e.f April1, 2019

As we are heading towards the beginning of a new financial year, i.e., Financial Year 2019-20, it’s important to know about the provisions of law applicable from April 1, 2019. The Government had made various changes under Income-tax law, GST and Corporate laws which shall be applicable from April 1, 2019.

Income tax

  1. Section 87A rebate

The amount of tax rebate under Section 87A has been increased from Rs. 2,500 to Rs. 12,500. Further, it shall be available to a resident individual whose total income does not exceed Rs. 5,00,000.

  1. Standard deduction from salary

The limit of standard deduction for the salaried class taxpayers has been increased from Rs. 40,000 to Rs. 50,000.

  1. No deemed rental income on having two residential house properties

If an individual owns more than one self-occupied house property then only one house property as per his choice is treated as self-occupied and its annual value is computed as nil. The other house property is deemed to be let-out as per section 23 and a notional rent is computed and charged to tax under the head ‘Income from House Property’.

Section 23 has been amended with effect from 1/4/2019 to provide relief to the taxpayers by allowing them an option to claim nil annual value in respect of any two houses declared as self-occupied.

Though from F.Y. 2019-20, an assessee can claim annual value as nil in respect of two-self occupied house properties. However, there is no change in aggregate limit for deduction in respect of interest on housing loan. The aggregate deduction for interest on housing loan for both houses cannot exceed Rs. 30000 or Rs. 2,00,000.

  1. Section 54 relief extended to 2 residential houses

Any long-term capital gains, arising to an Individual or HUF, from the sale of residential house property is exempted to the extent such capital gains are invested in another residential house property. The taxpayer is allowed to invest only in one residential house in India to claim section 54 relief.

From financial Year 2019-20, an assessee shall be able to claim exemption under section 54 even if he invests in two residential houses in India. However, this benefit shall be available where the amount of the capital gain does not exceed two crore rupees. Further, if the assessee exercises this option, he shall not be subsequently entitled to exercise the option for the same or any other assessment year, i.e., the assessee can exercise this option only once in a lifetime.

  1. TDS on interest income

Section 194A deals with deduction of TDS on interest income other than interest on securities like interest on Fixed Deposits.

Section 194A has been amended to ease the burden of compliance by way of increasing the threshold limit from Rs. 10,000 to Rs. 40,000 for deduction of tax at source on interest income, other than interest on securities, paid by a banking company, co-operative society or a post office

  1. TDS on rental income

The threshold limit for deduction of tax at source under section 194-I on rental income has been increased from Rs. 1,80,000 to Rs. 2,40,000.

  1. Amendment to DTAA with Singapore and Mauritius

Protocols with Mauritius and Singapore were signed in year 2016 to tax capital gains. The protocol gave India the right to tax capital gains on transfer of shares of an Indian Company acquired on or after 1 April, 2017. Up to March 31, 2019 tax rates on capital gains is charged at 50% of the prevailing domestic rates. With effect from April 1, 2019 capital gains shall be charged at full domestic tax rates.

GST

  1. New Scheme is now available @ 6% to Intra-State Suppliers of Goods or Services.

A new scheme has recently been introduced wherein an Intra-State supplier can now pay GST at the rate of 6% (3% for Central and 3% for respective State) on first supplies of goods or services for Rs. 50 lakhs.

With effect from April 1, 2019 the benefit of this scheme can be availed. This scheme shall be available only if the aggregate turnover of supplier does not exceed Rs. 50 lakhs during the previous financial year. This has been made effective vide Notification No. 02/2019 – Central Tax (Rate) dated March 7, 2019.

The benefit of this scheme shall not be available to service providers who are rendering services in multiple States or through e-commerce websites. Thus, Chartered Accounts, Architects, etc. may not avail, this scheme if they have clients in different States.

  1. Threshold Limit for composition scheme has been increased to Rs. 1.5 crores

The existing threshold limit on gross turnover in previous financial year to avail of the composition scheme has been increased from Rs. 1 crore to Rs. 1. 5 crores. In respect of special category States (North-Eastern States), the threshold limit has been increased from Rs. 50 lakhs to Rs. 75 lakhs. Consequently, the taxable persons can substantially reduce their compliance burden as they would be required to file GST returns on quarterly basis instead of monthly basis. This benefit has been extended vide Notification No. 14/2019 – Central Tax dated March 7, 2019 and this notification shall come into force from April 1, 2019.

  1. Threshold limit to take registration has been increased to Rs. 40 lakhs

As per Section 23 of the CGST Act, every person is required to obtain the GST registration if his turnover from supply of goods or services exceeds Rs. 20 lakhs. This threshold limit has been increased to Rs. 40 lakhs only if supplier is engaged in supply of goods. In other words, any person who is engaged in supply of goods and his total turnover in the current financial year does not exceed Rs. 40 lakhs, he is not required to take registration under GST. This exemption from GST registration is subject to various conditions, inter alia, he is not making any Inter-State supply, he is not a non-resident taxable person, etc. This has been made applicable by Notification No. 10/2019 – Central Tax dated March 7, 2019 and this notification shall come into force from April 1, 2019.

  1. Due dates for filing of GSTR-1 and GSTR-3B have been announced

The due dates for filing of GSTR-1 and GSTR-3B for the months of April, May and June of 2019 have been notified, which shall be as follows:

In case of GSTR-1

If the turnover of registered person is up-to Rs. 1.50 crores for the months of April to June, 2019, he shall file his GSTR-1 on a quarterly basis and the due date shall be 31st July, 2019.

If the turnover of registered person exceeds Rs. 1.50 crores for the months of April to June, 2019, he shall file his GSTR-1 on a monthly basis and the due date shall be 11th of succeeding month.

In case of GSTR-3B

Form GSTR-3B shall be filed on a monthly basis by every tax payer who is required to file GSTR-3B and due date shall be 20th of the succeeding month.

This has been made effective vide Notification No. 11/2019, Notification No. 12/2019, and Notification No. 13/2019- Central Tax dated March 7, 2019.

  1. Option to opt for Composition Scheme

Any registered person who wants to pay tax under Composition Scheme for the F.Y. 2019-20 shall file an intimation, duly signed and verified, on the GST common portal, latest March 31, 2019.

  1. Last chance to avail Input Tax Credit relating to F.Y. 2017-18

The registered person can avail input tax credit of GST paid from July, 2017 to March, 2018, latest by the due date of furnishing the return for the month of March, 2019 i.e. by April 20, 2019. Legal wording can also be referred to removal of difficulty order no. 2/2018 dated 31.12.2018.

  1. Availing benefit of reduced GST Rates by real estate developers or builders

The GST Council in its 33rd and 34th meeting had recommended the GST rate of 1% in case of affordable houses and 5% in other cases, without input tax credit. The promoters shall be given an one -time option to continue to pay tax at the old rates (i.e., at 8% or 12% with ITC) on ongoing projects (if construction and actual booking have started before 01-04-2019) which have not been completed by March 31, 2019.The option shall be exercised once within a prescribed time frame and where the option is not exercised within the prescribed time limit, new rates shall apply.

However, new tax rates in real estate sector are recommendations of the GST Council and date of applicability of new tax rates have not been notified yet.

  1. Due date to file Form ITC-04 for Goods sent to Job-worker.

The last date to furnish a declaration in Form GST ITC-04 in respect of goods dispatched to the job-worker or received from a job-worker during the period from July, 2017 to December, 2018 is March 31, 2019 vide Notification No.-78/2018-Central Tax dated December 31, 2018.

  1. Benefits related to Specific Industry

(a) Money changer (Forex Dealer); or
(b) Air travel agent; or
(c) Dealer of second hand goods opting for ‘Margin Scheme’; or
(d) Taxpayer engaged in Life insurance business
Are given the option to determine the value of such supply as per rule 32 of the CGST Rules, 2017. It is suggested that the above mentioned eligible registered persons intended to determine the value of their supplies as per the valuation rules can exercise the option at the beginning of the Financial Year that is on or before April 1, 2019.

  1. Availing Input tax credit by Banks, Financial Institutions or NBFC.

Banks or financial institution or NBFC have been given an option to avail 50% of the eligible Input tax credit on inputs, capital goods and input services. It is suggested that this option to be exercised at the beginning of the F.Y. that is on or before April 1, 2019 as the option once exercised cannot be withdrawn during the remaining part of the financial year.

  1. Following Amendment Acts made applicable from February 1, 2019

(a) CGST (Amendment) Act, 2018
(b) IGST (Amendment) Act, 2018
(c) UTGST (Amendment) Act, 2018
(d) GST (Compensation to States) Amendment Act, 2018
Some of the Major changes are as follows:

(a) Manner of utilization of ITC has been amended by inserting Section 49A in CGST Act. Now the credit of IGST needs to utilized first fully for the payment of IGST, CGST, SGST and UTGST respectively.
(b) Section 9(4) relating to reverse charge applicability on purchases made by registered person from unregistered person is replaced and now it applies to specific class.
(c) Now only e-commerce operators who are required to collect tax at source under Section 52 of the CGST Act, 2017 are mandatorily required obtain GST registration.
(d) Composition dealers as per section 10 of CGST Act, 2017 are allowed to supply services to the extent higher of 10% of the turnover in the preceding financial year or Rs. 5 lakhs.
(e) Multiple GST registrations within same state for each place of business has been allowed. The concept of business vertical is done away with.
(f) Issue of consolidated debit/credit note is allowed in respect of multiple invoices issued in a financial year rather than single debit/credit note in respect of each invoice.
(g) The receipt of payment in Indian rupees which is permitted by Reserve Bank of India for services exported out of India, will be covered in the definition of ‘export of services’ as per the IGST Act, 2017.
Company law and FEMA

SEBI (LODR) Regulations

SEBI has come up with amendment vide SEBI (Listing Obligations and Disclosures Requirements) (Sixth Amendment) Regulations, 2018 on November 16, 2018. SEBI has provided a phased timeline from October 1, 2018 to April 1, 2020 for most of the amendments, in this write up we have discussed certain key amendments which shall become effective from April 1, 2019:

  1. Change in the criteria for determining material subsidiary

The amendment provides that the unlisted material subsidiaries referred to under sub-regulation 1 of regulation 24 shall include the companies “whether incorporated in India or not”. Accordingly, foreign subsidiary companies shall also be included within the ambit of material subsidiaries. Prior to the amendment, regulation 24 of Listing Regulations provided the material subsidiaries to include only those subsidiary companies which were incorporated in India.

  1. Disclosure of related party transactions on consolidation basis

Regulation 23 of SEBI (LODR) (Amendment) Regulations, 2018 requires disclosure of related party transactions by listed entities on a consolidated basis to the stock exchange and should also be published in the website of the Company within a period of 30 days from the date of publication of its standalone and consolidated financial results

  1. Secretarial Audit report by all listed entity and its material unlisted subsidiaries

Regulation 24A of the amended regulation requires annexing of Secretarial Audit report for F.Y. 2018-19 by all listed entity and its material unlisted subsidiaries incorporated in India.

  1. Appointment of Independent Women Director

Those Companies falling in the list of top 500 listed entities based on market capitalization as on March 31, 2019 will be required to appoint a woman Independent Director w.e.f. April 1, 2019

  1. Maximum no. of directorship

w.e.f April 1, 2019, maximum number of directorships that can be held at any point of time in equity listed entities is 8.

  1. Change in minimum number of directors in board for top 1000 listed Cos –

As per Regulation 17 (1) (a) of the Amended Regulations, w.e.f April 1, 2019, the board of directors of the top 1000 listed entities should comprise of not less than six directors. Therefore, the Companies in which minimum number of director are less than 6 shall have to appoint additional directors, subject to shareholders’ approval, whose appointment should be regularized at the ensuing AGM.

  1. Revised quorum for Board meeting for top 1000 listed Cos.

W.e.f Apr 01, 2019, the revised quorum requirement for Board Meeting for top 1000 listed companies shall be one-third of its total strength or three directors whichever is higher, including atlest one Independent Director

  1. Change in definition of Independent director

The definition of Independent director shall now exclude the following categories of person as well: (a) those persons who are members of the promoter group of a listed entity; (b) person who neither himself nor whose relative is a CEO/ MD/ WTD / Manager, CS & CFO, of any non- profit organisation which receives 25% or more of its receipts or corpus from the listed entity, any of its promoters, directors or its holding, subsidiary or associate company or that holds 2 % or more of the total voting power of the listed entity; (c) persons who are non-independent directors of another company on the board of which any non-independent director of the listed entity is an independent director

  1. Shareholders’ approval by Special Resolution required in certain cases

Where remuneration of a Non-executive director exceeds 50% of total remuneration payable

The approval of shareholders by special resolution shall be obtained every year, in which the annual remuneration payable to a single non-executive director (NED) exceeds fifty per cent of the total annual remuneration payable to all non-executive directors, giving details of the remuneration thereof.

where the company is certain that the remuneration payable to its NED shall exceeds the limit, there the company should obtain approval before April 1, 2019, i.e. before the commencement of the amendment

Compensation payable to executive directors who are promoters or members of the promoter group

Reg. 17 (6)(e) requires listed entities to obtain approval of shareholders by special resolution for the fees or compensation payable to executive directors who are promoters or members of promoter group in case in excess of thresholds: (a) where listed entity has 1 executive director who is a promoter or member of promoter group: Rupees 5 crore or 2.5 % of the net profits of the listed entity; (b) where listed entity has more than 1 executive directors who are promoters or members of promoter group: 5 % of the net profits of the listed entity

Appointment/continuation of Non-executive Director above 75 yrs

Effective from April 01, 2019, no listed entity should appoint a person or continue the directorship of any person as a NED who has attained the age of 75 years unless a special resolution is passed to that effect- [ Regulation 17 (1A) of the Amendment Regulations]

SEBI (Prohibition of Insider Trading) Regulations, 2015

On December 31, 2018, SEBI notified the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, which are effective from April 01, 2019. The Key changes in the Regulations deals with the following:

  1. Amendment in definition of Unpublished price sensitive information

In order to remove ambiguity, the ‘material events in accordance with listing agreement’ has been deleted as it was noted that the material events may or may not be price sensitive information.

  1. Policy for determination ‘legitimate purpose

As per the regulation, No person shall procure from or cause the communication by any insider of unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purpose, performance of duties or discharge of legal obligations. The term legitimate purpose is not defined under the regulation and gives various meaning of interpretation. Therefore, SEBI has mandated the board of directors of the listed company or intermediaries to define their own policy or definition relating to legitimate purposes which means listed company have freedom to decided what may or may but be legitimate purposes of its business-related need but the director would be required to justify.

  1. Creation of database of persons with whom UPSI is shared

There was no provision for creating a data base of person with whom UPSI is shared. Now, listed entities are required to maintain an electronic record containing name of person whom UPSI is shares and the nature of UPSI. Along with that, the listed entity serve a notice or sign NDA with the concerned person.

  1. Code of conduct for intermediaries

The regulations currently required a common code of conduct applicable for all the listed entities, intermediaries and other person who are required to handle UPSI during the course of business operations.