Chamber Voice – March 2020

While our Government both at the Central and State level have gone into battle mode to combat this pandemic the results are at best uncertain. I would like to especially commend the Kerala Government for the positive steps taken by it to try and stem the tide.

The country is currently in a total lockdown which appears the only way to combat this pandemic. However the economic fall out of the measures adopted by the Government remain to be seen. There is no doubt that the world economy as well as ours is going to take a severe beating. Governments across the world are scrambling to offset the negative impact that this pandemic is creating. Our Government too is announcing several measures to mitigate the negative impact. Let us hope that these measures will help tide over this mammoth crisis. Several crucial sectors have already taken big hits. Time will tell.

For India, as for most other countries, the outbreak presents twin challenges: containing the disease spread even while limiting the economic impact in an already slowing economy. The Coronavirus has so far affected India’s manufacturing and export sectors — notably medicines, electronics, textiles, and chemicals. Aviation, tourism, retail etc. are already bearing the brunt. India anticipates possible disruptions to the supply chain and a decrease in demand that could, in turn, affect businesses. India has a very large informal sector which could be particularly impacted by the lockdown because there are people who don’t necessarily have a permanent job.

Though India’s first cases of COVID-19 were detected in January, stringent measures including self-isolation orders, travel restrictions and screenings at airports initially have kept India’s reported numbers relatively low. We hope that this trend will continue to hold.

The impact of COVID-19 on India’s economy will definitely impact our growth rate though the magnitude is hard to predict. Though economic indicators have shown signs of improvement in recent months, March is likely to be a drag on the quarter due to the outbreak. If India faces an out-of-control epidemic like Italy, for example, then the impact is likely to be more severe.

The most valuable resources in a health emergency are also the most vulnerable. Health workers will have to be protected against burnout from the increased workload, the discomfort of working wearing protective gear and fear of infection. We will need to augment our workforce to deal with the increased number of patients.

Coming to our activities this month, we conducted the CEO Forum Breakfast Meeting on the 6th of March 2020. Ms. Revathi Krishna, Executive Director/Chief Communication Officer, Suyati Technologies was the Speaker for the meeting and she spoke on the topic “Hiring Women and Its Impact on a Company’s Bottom Line.” The Session was well appreciated by all the attendees.

On the 11th of March, we had the privilege of hosting the representatives from the Thai Trade Centre, Ms. Supatra Sawaengsri, Executive Director & Consul (Commercial) and Ms. Anjali Dwivedi, Trade Officer. The purpose of their visit was to discuss improving the trade relations between India and Thailand.

In light of the rising concerns over Covid-19 cases in Kerala, we have postponed all the upcoming events of the Chamber. The revised dates for the events will be announced once the situation is under control.

The Cochin Chamber is fully committed to the safety of our members and well-wishers during this unprecedented situation and requests everyone to maintain social distancing, ensure personal and community hygiene and co-operate with the instructions from the Government to help tackle this dangerous situation.

We hope that our combined efforts will help break the chain of the virus spread and that it will be possible to resume normal life as we knew it at the earliest.

Stay safe everyone!

V Venugopal

Income Tax

VIVAD SE VISHWAS SCHEME – Date extended to 30th June, 2020 from 31st March, 2020. No 10% additional charge will be levied for all applications made till this date.

Investment benefits under income tax act, capital gains reinvestments, Chapter VI-A deposit benefits to be extended to 30th June, 2020 (from 31st March, 2020)

IT Returns

IT Returns last date for FY 2018-19 (AY 2019-20) extended to 30th June, 2020

Delayed payments till 30th June, 2020 – Interest reduced from 12% to 9% (AY 2019-20)

TDS

No extension of TDS date. But on delayed deposit of TDS, reduced interest of 9% will be charged

Aadhar PAN linking date extended to 30th June, 2020 from 31st March, 2020

Due Dates for Issue of Notice, Intimation, Filing of Appeal, Furnish Returns, Sanctions, Applications and other compliances by Tax Payers also extended to 30th June, 2020

GST

Last date to file GST returns extended to 30th June, 2020 for March, April & May. Specific staggered dates will be intimated

No Late Fee, No Penalty for companies having turnover of less than Rs.5 crore

Date for opting for composition scheme extended to 30th June, 2020.

• Financial Services:
  Debit card holders who withdraw cash from any bank ATM can do it free of charge for the next three months. The measure has been taken to ease the burden on customers who need urgent cash and avoid overcrowding of bank branches.
  There will be no charges on not keeping the minimum balance requirement. Country’s largest lender State Bank of India had already waived the requirement of holding a minimum balance in savings accounts.
  Reduced  digital charges for trade transactions.
• Tax measures
  For Financial year 2018-19, the last date for returns extended to June 30, 2020. For delayed payments made till June 30, interest rate reduced to 9% from 12%.
  For delayed deposit of TDS, interest has been reduced to 9 % from 18%
  Aadhaar-pan linking extended to June 30 from March 31
  Vivaad se Vishwaas scheme extended to June 30. And no additional payment of 10% to be paid
  All compliances under Income Tax Act, Wealth Tax Act, Benami Transaction Act, Black Money Act, Vivaad se Vishwaas, have been extended to June 30, 2020
• GST
  All GST returns for March, April, May and composition returns extended to June 30, 2020
  For companies less than 5 cr no late fee and penalty to be charged. For above Rs 5 cr, only int at the rate of 9%
• Customs
  Sabka Vishwaas scheme for indirect taxes having the last date till March 31 has been extended to June 30,2020. No interest to be levied.
  Customs clearance till June 30 to work 24×7.
• Companies
  In respect of the MCA21 registry, there is a moratorium being issued from April 1 till Sep 30 no additional fees for late filing.
  There is a mandatory requirement for holding Board meetings. We are relaxing it for 60 days for the next two quarters.
  For newly incorporated cos, additional time of six more months is being given for filing declaration of commencement of business
  If there is a company director who does not comply with the minimum residency requirement of 182 days, this was treated as a violation. It shall not be treated as one.
• Insolvency and Bankruptcy Code
  Threshold of default is Rs one lakh as of now. From Rs one lakh it is being raised to Rs one crore to prevent triggering of insolvency proceedings for SMEs.
  If it continues like this beyond April, then sec 7, 9, 10 of the IBC will be suspended for a period of six months.

• Indian banking sector is safe & sound. Depositors of commercial banks including pvt banks need not worry on the safety of their funds: RBI Governor
• RBI has injected liquidity of Rs 2.8 lakh crore via various instruments equal to 1.4% of GDP. Along with today’s measures liquidity measures equal to 3.2% of GDP. RBI will take continous measures to ensure liquidity in the system: RBI Governor
• Incremental CCB (capital conservation buffer) implementation deferred from March 30, 2020 to Sep 30, 2020: RBI Governor
• Offshore Rupee NDF Market has been growing rapidly. Net Stable Funding Ratio (NSFR) was required to be introduced from April 1, 2020. Will defer NSFR implementation to October, 2020: RBI Governor
• Lending companies, banks are allowed tom defer interest on working capital repayments by three months. Banks may also reassess working capital cycle and will not be treated as non-performing assets: RBI Governor
• All banks, lending institutions may allow a three-month moratorium on all loans: RBI Governor
• Investments will be classified as HTM, even in excess of 25% requirement. First auction of Rs 25000 crore will be conducted later on March 27: RBI Governor
• Investments will be classified as held to maturity (HTM), even in excess of 25% requirement: RBI Governor
• Mitigating debt servicing burden to prevent transmission of financial stress to real economy, provide relief to borrowers. A three month moratorium is announced on payment of installments of loans outstanding on March 1, 2020: RBI Governor
• Measures will result in total liquidity injection of Rs 3.74 lakh crore to system: RBI Governor
• Large sell offs in markets have intensified pressure. RBI will conduct auctions of long term repo operation (LTRO) of three-year tenure upto Rs1 lakh crore at floating rate linked to policy rate: RBI Governor
• Cash Reserve Ratio cut by 100 bps to 3% of NTDL with effect from March 28, 2020: RBI Governor
• Appropriate that MPC decisions and other RBI actions must be seen as a comprehensive package with force multipliers. First are measures to expand liquidity in the system. Strong fiscal steps necessary to deal with situation, steps to enforce monetary transmissions and efforts to ease financial stress caused by COVID-19: RBI Governor
• Outlook is highly uncertain and negative: RBI Governor
• RBI has taken several measures to inject substantial liquidity. Priority is to undertake strong and purposeful action to protect domestic economy, Need for all stakeholders to fight against the pandemic and banks should do all they can to keep credit flowing: RBI Governor
• India has locked down economic activity. Keeping finance flowing is the paramount objective of the RBI. India has locker down economic activity and financial activity is under severe stress: RBI Governor
• LAF cut by 90 bps to 4%: RBI Governor
• Repo rate now stands at 4.20% vs 5.15% earlier: RBI Governor
• MPC voted for a sizable reduction in Repo Rate and maintaining Accommodative Stance. There were some differences in quantum of reduction and MPC voted by 4:2 majority to reduce policy repo rate by 75 bps to 4.4%: RBI Governor
• In view of COVID-19 pandemic, MPC advanced its meeting. MPC met on 24th, 26th and 27th March and took care of evaluation of macroeconomic and financial conditions: RBI Governor
• Addressing you amid extraordinary circumstances. We have decided to address media virtually to ensure social distancing in these times: RBI Governor
• RBI repo rate cut by 75 basis points to 4.4%: RBI Governor
• The MPC decided to advance its meeting due on April 3 was decided for March 24, 25, 27 undertook careful evaluation: RBI Governor

All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)

All Primary (Urban) Co-operative Banks

All All-India Financial Institutions

All Non-Banking Finance Companies (including Housing Finance Companies)

Madam/Dear Sir,

COVID-19 – Regulatory Package

Please refer to the Statement of Development and Regulatory Policies released on March 27, 2020 where inter alia certain regulatory measures were announced to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. In this regard, the detailed instructions are as follows:

(i) Rescheduling of Payments – Term Loans and Working Capital Facilities

2. In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all instalments1 falling due between March 1, 2020 and May 31, 2020. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.

(i) Instalments will include the following payments falling due from March 1, 2020 to May 31, 2020: (i) principal and/or interest components; (ii) bullet repayments; (iii) Equated Monthly instalments; (iv) credit card dues.

3. In respect of working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions are permitted to defer the recovery of interest applied in respect of all such facilities during the period from March 1, 2020 upto May 31, 2020 (“deferment”). The accumulated accrued interest shall be recovered immediately after the completion of this period.

(ii) Easing of Working Capital Financing

4. In respect of working capital facilities sanctioned in the form of CC/OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may recalculate the ‘drawing power’ by reducing the margins and/or by reassessing the working capital cycle. This relief shall be available in respect of all such changes effected up to May 31, 2020 and shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19. Further, accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.

Classification as Special Mention Account (SMA) and Non-Performing Asset (NPA)

5. Since the moratorium/deferment/recalculation of the ‘drawing power’ is being provided specifically to enable the borrowers to tide over economic fallout from COVID-19, the same will not be treated as concession or change in terms and conditions of loan agreements due to financial difficulty of the borrower under paragraph 2 of the Annex to the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 7, 2019 (“Prudential Framework”). Consequently, such a measure, by itself, shall not result in asset classification downgrade.

6. The asset classification of term loans which are granted relief as per paragraph 2 shall be determined on the basis of revised due dates and the revised repayment schedule. Similarly, working capital facilities where relief is provided as per paragraph 3 above, the SMA and the out of order status shall be evaluated considering the application of accumulated interest immediately after the completion of the deferment period as well as the revised terms, as permitted in terms of paragraph 4 above.

7. The rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting and reporting to Credit Information Companies(CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

Other Conditions

8. Lending institutions shall frame Board approved polices for providing the above- mentioned reliefs to all eligible borrowers, inter alia, including the objective criteria for considering reliefs under paragraph 4 above and disclosed in public domain.

9. Wherever the exposure of a lending institution to a borrower is ` 5 crore or above as on March 1, 2020, the bank shall develop an MIS on the reliefs provided to its borrowers which shall inter alia include borrower-wise and credit-facility wise information regarding the nature and amount of relief granted.

10. The instructions in this circular come into force with immediate effect. The Board of Directors and the key management personnel of the lending institutions shall ensure that the above instructions are properly communicated down the line in their respective organisations, and clear instructions are issued to their staff regarding their implementation.

Yours faithfully,

(Saurav Sinha)

Chief General Manager-in-Charge

• Q: My EMI is due soon. Will the payment not be deducted from my account?A: The RBI has said it has permitted allowed banks to extend a moratorium.
  “Lending institutions shall frame board-approved policies for providing the abovementioned reliefs to all eligible borrowers,” the RBI later said in its guidelines.
  This means that individual banks will have to frame policies allowing relief to customers. Whether it will cover all customers or only customers that request for relief will be decided by individual banks.
  However, SBI chief Rajnish Kumar in a conference call said that all EMIs on term loans stand cancelled.

  Q: Will non-payment result in impact on my credit score?
  A: Once relief has been granted by your bank, non-payment will not result in any impact on credit score.

  Q. Which banks can offer this deferment to their customers?
  A: All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) can extend the moratorium.

  Q. Is this a waiver of EMIs or a deferment of EMIs?
  A: This is not a waiver, but a deferment. RBI has recommended that the repayment schedule and all subsequent due dates as also the tenor for such loans may be shifted across the board by 3 months.

  “Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period,” the RBI said in its guidelines.

  Q: Does this mean that I will have to pay all 3 EMIs at one go in June?
  A: Unlikely, as the RBI’s statement suggests the tenor may be shifted. That is: the loan may end 3 months later than was originally slated. But more clarity is awaited on this.

  Q: Does the moratorium cover both principal and interest?
  A: Yes. It does. You will be exempt from payment of your entire EMI, including payment and interest for three months. This will be applicable on all loans outstanding as on March 1, 2020.

  Q. What kind of loans does the moratorium cover?
  A: The RBI policy statement explicitly mentions term loans, including agriculture term loans and crop loans besides retail loans.

  Retail loans are typically home loans, personal loans, education loans, auto  and any loans that have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc

  Q: Does the moratorium cover credit card payments?
  A: While credit cards are defined as revolving credit and not term loans, the RBI’s operational guidelines made it clear that credit card dues are also covered.

  Q: Does the moratorium cover loans taken on credit cards?
  A: The RBI guidelines do not address this specifically but since credit card dues are covered, it is likely that loans taken on credit card may also be covered.

  Q: I have taken a project loan for setting up a factory. Can I not pay my EMI?
  A: The RBI guidelines specifically mention retail loans. So a business loan is unlikely to qualify.

  Q: What has the RBI announced for businesses?
  A: The RBI has allowed deferment for interest payments for all working capital loans taken by businesses. This will be applicable in respect of all working capital facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period. Moratorium/deferment will not be treated as change in terms and conditions of loan agreements and will not result in asset classification downgrade.

Vivad se Vishwas: Direct Tax Dispute Resolution Scheme, 2020

The Government of India tabled ‘The Direct Tax Vivad se Vishwas Bill, 2020’  the Bill or the Scheme) on 5 February 2020 before the Parliament with the objective of inter alia reducing pending income tax litigation and generating timely tax revenue. After certain amendments, the Lok Sabha has now passed the amended Bill on 4 March 2020. The Bill will be enacted after the Rajya Sabha passes it and it receives the assent of the President of India. Meanwhile, the Central Board of Direct Taxes has issued detailed answers regarding the Scheme in the form of answers to frequently asked questions (FAQs) The salient features of the Scheme along with key FAQs have been summarised here:

The Scheme can be availed by a taxpayer in whose case:

• Appeal/ Writ petition (Writ)/ Special Leave Petition (SLP) is pending before any appellate forum as on 31 January 2020 (specified date).
• The Income-tax authorities, Income-tax Appellate Tribunal (Tribunal) or High Court has passed orders in a writ on or before the specified date and the time limit for filing an appeal against such an order has not expired.
• Objections have been filed before the Dispute Resolution Panel (DRP). However, directions have not been issued on or before the specified date.
• Although the DRP has issued directions, the final assessment order has not been passed on or before
• the specified date.
• Application for revision under section 264 of the Income-tax Act, 1961 (the Act) before the Commissioner of Income tax (CIT) is pending as on the specified date.

The Scheme carves out certain eligibility related exceptions such as search and seizure cases with disputed tax of more than INR50m, cases of undisclosed assets outside India, etc.
The key clarifications about the eligibility of the Scheme, as provided by the FAQs are as follows:

• Where an order has been passed by the TO before the specified date and timeline for filing appeal has not expired as on the specified date –Tax payable in accordance with such order.
• Objections filed before DRP and directions are pending as on the specified date –Tax payable if the variations are confirmed by the DRP.
• DRP has issued directions and final order by the TO is awaited as on the specified date –Tax payable as per the final order to be passed.
• Revision application under section 264 of the Act is pending before the CIT on the specified date – Tax payable if such application is rejected.

Where a notice of enhancement has been issued by the CIT(A) on or before the specified date – Disputed tax to be increased by tax payable on the proposed enhancement
Additionally, it has been specified that in a case involving reduction of tax credit under sections 115JAA or 115JD of the Act or reduction of loss/ depreciation, the following options are available to the taxpayer in the manner to be prescribed:

• To include amount of tax related to such credits/loss/depreciation in the amount of disputed tax; or
• To carry forward the reduced tax credit/ loss/ depreciation

Interest as determined under the provisions of the Act, which is not charged or chargeable on the disputed tax and an appeal has been filed in respect of such interest.

Penalty as determined under the provisions of the Act, which is not levied or leviable on the disputed tax or disputed income and an appeal has been filed in respect of such penalty.

Fee determined under the Act in respect of which appeal has been filed. The key clarifications on disputed tax, as provided by the FAQs are as follows:

The Scheme provides for different scenarios under which the amount payable by the taxpayer will be determined basis the specified percentage of the disputed tax, interest, penalty or fee. The scenarios have been tabulated as follows:

*The amount so determined to not exceed aggregate amount of disputed tax, interest and penalty.

If the appeal is pending before the CIT(A) or objections are pending before DRP and the issue is covered by the taxpayer’s own case by the order of the Tribunal [not reversed by High Court or Supreme Court] or High Court (not reversed by the Supreme Court) in earlier years, then the amount would be restricted to 50% of I, II and III above.
Similarly, if an appeal is pending before the Tribunal and the issue is covered in the taxpayer’s own case by the order of the High Court (not reversed by the Supreme Court) in earlier years then the amount would be restricted to 50% of I, II and III above.
The key clarifications on the amount payable, as provided by the FAQs are as follows:

• The taxpayer would have to file a declaration before the Designated Authority (DA) in the prescribed form.
• DA would issue a certificate determining the amount payable within 15 days from the date of receipt of the declaration.
• Proceedings before the CIT(A) and the Tribunal would be deemed to have been withdrawn from the date of issuance of such certificate.
• The taxpayer would have to pay the amount so determined within 15 days from the receipt of such certificate.
• Taxpayer will have to withdraw the respective appeal/ writ/ SLP/arbitration/ conciliation/mediation proceedings.
• Taxpayer will have to intimate the details of payment of amount determined and proof of withdrawal of appeal to the DA in the prescribed form.
• Taxpayer will have to also furnish an undertaking waiving the right to seek any remedy/ claim with respect to the matters involved in the declaration and payments made in pursuance thereof.
• The DA will pass an order stating that the payment has been made.

The key clarifications about the procedure, as provided in the FAQs are as follows:

The declaration will be presumed to have never been made and all the proceedings and the claims, which were withdrawn, will be deemed to have been revived, in the following cases.

• Any material furnished in the declaration is found to be false at any stage.
• Conditions referred to in this Scheme are violated.
• Taxpayer acts in any manner not in accordance with the undertaking for not seeking any other remedy.

• Any dispute resolved through this Scheme will not tantamount to conceding of the tax position.
• Any amount paid in pursuance to the declaration made will not be refundable. However, where the amount already paid exceeds the amount as determined by the DA, such excess amount would be refundable, but no interest under section 244A of the Act will be granted.

• Rules for implementing the provisions of the Scheme to be prescribed.
  Some of the other key clarifications, as provided in the FAQs are as follows:

PwC comments: This dispute resolution Scheme is a welcome step towards addressing long-pending  Income tax litigation. With complete waiver of interest, penalty and prosecution, this would be an opportune moment for taxpayers to review their income-tax disputes for early closure. The Government has proactively clarified ambiguities through FAQs. The Revenue authorities are also reaching out to taxpayers to explain the nuances of the Bill, to make it a success. Taxpayers would now need to determine whether they should take the benefit of the Scheme by considering various parameters, viz. merits of the issues involved, quantum involved, cost of litigation and repetition of issues across multiple years, etc. Considering that a short duration that has been provided for availing the benefits of lower tax outflows, taxpayers should proactively undertake a feasibility analysis.

Supreme Court holds that unutilised balance of MODVAT credit at year end not deductible under section 43B of the Act

In a recent decision, the Supreme Court of India has upheld the order of the Delhi High Court denying deduction claimed under section 43B of the Income-tax Act, 1961 (the Act) for unutilised balance of MODVAT credit. The Supreme Court observed that the manufacturer of raw materials and inputs (which are used by the taxpayer) is liable to pay the excise duty. Thus, the credit of input excise duty availed by the taxpayer under the MODVAT scheme and remaining unutilised is not in the nature of ‘sum payable’ by way of tax, duty, etc. as envisaged in section 43B of the Act. Accordingly, the Supreme Court held that the MODVAT credit remaining unutilised at year-end does not qualify for deduction under section 43B of the Act.

PwC comments: This is an important judgement, wherein the Supreme Court has confirmed that unutilised credits of indirect tax (excise duty) cannot be treated as sum ‘actually paid’ by the taxpayer. Such credits cannot be termed as ‘sum payable’ by the taxpayer which is a prerequisite of claiming deduction under section 43B of the Act. The Supreme Court has also clearly laid down the conditions required to be fulfilled to claim deduction under section 43B of the Act for tax, duty, cess, etc.

Delhi High Court upholds initiation of reassessment proceedings based on investigation authorities report

Recently, the Delhi High Court held that information received from investigation authorities post closure of assessment proceedings constitutes a valid “reason to believe” for the Tax Officer (TO) to initiate reassessment proceedings under section 147 of the Income-tax Act, 1961 (the Act).

PwC comments: According to the facts of this case, Delhi High Court holds that the report of investigation authorities is a tangible material for initiating reassessment proceedings, if the same highlights new material that were not available and analyzed during the course of the original assessment proceedings and it would not be construed as a change in opinion.

Companies Act, 2013 update – MCA looks to streamline the operational aspects with new amendments and rules

To further promote ease of doing business for companies and simplifying the operational aspects, the Ministry of Corporate Affairs (MCA) has recently notified various amendments to the Companies Act, 2013 (the Act) and introduced new rules and notifications thereunder.

We have summarized the key highlights from the following recent amended rules/ new rules/ notifications issued by the MCA:

Companies (Incorporation) Amendment Rules, 2020 (Incorporation Rules);

• The MCA, as a part of ease of doing business initiatives and to reduce the time taken for companies to commence operations (upon incorporation), will be introducing, with effect from 15 February 2020, a new web-based SPICe+ incorporation Form replacing the existing e-Form SPICe.
• The new SPICe+ Form will be accompanied by an updated Form AGILE-PRO, which will have the functionality to obtain various mandatory statutory registrations such as Goods & Service Tax Number, Provident Fund, Employee State Insurance Corporation, Profession Tax (for Maharashtra) and also initiate the opening of a bank account.
• The existing name reservation Reserve User Name (RUN) service would be applicable only for “change of name” of an existing company.

Companies (Winding up) Rules, 2020 (Winding-up Rules);

• The MCA has introduced the Winding-up Rules under section 271 of the Act for cases that are other than on account of “inability to pay-off debts” (which are now under the Insolvency and Bankruptcy Code, 2016).
• These Winding-up Rules shall come into force from 1 April 2020.
• Further, the Winding-up Rules prescribe the procedure for a company to be wound-up by the National Company Law Tribunal (NCLT), along with the templates of various Forms applicable for the liquidation and dissolution of companies.
• In addition, the Winding-up Rules have outlined the “summary procedure” for liquidation of certain classes of companies as under, having:
• Assets of book value not exceeding INR 10m; and
• Taken deposit and total outstanding deposits is not exceeding INR 2.5m; or
• Total outstanding loan including secured loan not exceeding INR 5m; or
• Turnover of up-to INR 500m; or
• Paid-up capital not exceeding INR 10m.
• In case of the summary procedure for liquidation, the adjudicating authority shall be the Regional Director, instead of the NCLT. This could reduce the existing burden on the NCLT.

Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020;

• Previously, every listed, public and private company having a paid-up capital of INR 50m was required to appoint a whole-time company secretary. By way of this amendment, the limits for the mandatory appointment of a whole-time company secretary is increased from INR 50m to INR 100m.
• In addition, the requirement for secretarial audit under the Act has been extended to every company having outstanding loans or borrowings from banks and financial institutions exceeding INR 1bn.
• These Rules shall come into force from 1 April 2020.

Commencement notification of sub-section (11) and (12) of section 230 of the Act and Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2020;

• The MCA vide notification dated 3 February 2020 notified the commencement of sub-sections (11) and (12) of section 230 of the Act.
• Unlisted companies may include takeover offers in schemes of compromise or arrangement. Also, an aggrieved party, as per the provisions, can apply to the NCLT in case of any grievances about the takeover offer of companies.
• The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules lay down the procedure by which a member holding at least 75% of shares of the company may make an application for takeover of the remaining shares of the company.
• Any application of arrangement for takeover shall contain a report from a registered valuer disclosing the details of the valuation of the shares proposed to be acquired and details of the bank account opened separately by the member, wherein a sum of not less than one-half of the total consideration of the takeover offer is deposited.

Notification extending applicability of section 460 of the Act to Limited Liability Partnerships (LLPs)

• With effect from 30 January 2020, the MCA has extended the applicability of section 460 of the Act to LLPs.
• LLPs will now be permitted to apply for condonation of delay in the following cases:
  • Delay in filing application with the Central Government; and
  • Delay in filing any document with the Registrar of Companies.

PwC Comments: The above amendments are positive steps towards streamlining of the operational aspects of the Act, considering the objective of making it easier for companies to do business. The key takeaway would be the introduction of the new incorporation Form SPICe+, which would indeed reduce the time required for a company to commence operations. In addition, the introduction of the Rules for the summary procedure for liquidation is a welcome step to ensure that there are alternative methods of winding up, for eligible entities.

Monitoring of FTAs usage to become more stringent with proposed amendments in the Finance Bill, 2020

Over the last decade, the Government of India (GoI) has actively entered into several bilateral and multilateral Free Trade Agreements (FTAs). The purpose of such FTAs has been to gain access to the foreign markets and enhance our exports while eliminating the trade barriers and opening the domestic market.

While India’s imports have sharply increased from most of these FTA countries, its exports to these countries have not been encouraging. According to reports in the public domain, India has recorded trade deficit with respect to most of the FTAs.

While India enjoys trade surplus with the SAFTA countries, there has been significant trade deficit of 7% to 12% from financial years 2009-10 to 2018-19 with the ASEAN countries. Similarly, the trade deficit of 4.7% in financial year 2009-10 with South Korea has increased to 6.5% in financial year 2018-19. Interestingly, in case of Japan, the trade deficit has not only increased between financial years 2011-12 to 2018-19 but has grown faster than India’s cumulative trade deficit.

In addition, there have been several reported instances of importers in India or overseas manufacturer-exporters or both rampantly misusing FTAs by not complying with the value addition requirements, submission of unauthentic Certificates of Origin (CO), routing of ineligible goods for availing benefits, etc.

In its endeavour to reduce/ check misuse of FTAs, the GoI, in the Union Budget 2020-21, has proposed incorporation of the following stringent measures/ provisions under the legal framework of the Customs Act, 1962:

• The importer needs to declare the origin of the goods and compliance with value addition requirements by the overseas manufacturer.
• Fastening legal onus of declarations being made in respect of CO and FTA on the importer of goods.
• The importer mandatorily needs to possess value-addition/ costing-related data in respect of the goods being imported using an FTA. Hence, before utilising an FTA, the companies will have to obtain such costing-related information from their overseas suppliers, although the customs authorities in India may ask for such information on a need basis.
• Inability to share requisite information with the customs authorities may lead to following consequences –
• Temporary suspension of benefit till completion of verification by the customs authorities.
• In the interim, the goods can be released on furnishing security amount equal to differential duty (benefit under an FTA).
• Confiscation of goods.
• In case of proven instance of non-compliance, there can be confiscation of goods and penal consequences. In addition, all future FTA benefit on import of same goods from the same supplier will be denied, unless the importer can prove compliance.
• The customs authorities will outrightly deny the FTA benefit in following circumstances –
• Where incorrect tariff item has been disclosed for the purpose of claiming FTA benefit in respect of goods that are otherwise not covered in the FTA;
• Incomplete description of goods in CO;
• Any unauthorised alteration in CO that is not made by the issuing authority in the exporting country;
• Expired CO.
• Retrospective verification of costing data, value-addition compliance and CO can be conducted by the customs authorities over a period of five years from the date of import, unless there is a specific time-limit prescribed in the FTA text.

• Check coverage of goods.
• Understand and comply with eligibility and compliance requirements from the rules of origin perspective, i.e. review –
• overall business activity from an eligibility standpoint;
• cost-related information of the manufacturer-exporter, e.g. production costs, overheads, expense allocation principles and procurement pattern, to comply with value-addition.
• Set-up in-house standard operating procedures to making correct FTA claims.
• Maintain records and relevant information supporting FTA claims for five years.
• Evaluate valuation-related disclosures in the country of export and implications in India.
• Regularly monitor sourcing/ origin related facts with the manufacturer-exporter or the foreign supplier – so that in case of any material change affecting value-addition, FTA claims can be instantly discontinued to avoid any violation.

PwC Comments: The existing procedures under most of the FTAs contain provisions for the suspension of preferential treatment and counter-verification with the customs authorities of the exporting country, if there is a reasonable doubt regarding the authenticity of the CO or accuracy of the information declared by the importer. Nevertheless, by proposing the introduction of strong statutory provisions within the scheme of the Customs Act, 1962 the Government is seeking to fasten accountability on the Indian importers to responsibly and rightfully use FTAs. Hence, in future for FTA claims mere presentation of a CO may not suffice as the importer can be legally asked to substantiate its claim through supporting data and documents. The importers will no longer be able to take the plea of non-possession of costing information of the overseas manufacturer as a legitimate reason for any FTA related violation. In view of greater scrutiny of future FTA claims and proposal for statutory incorporation of such measures, the importers need to prepare on data, information and documentary support for the validity of their claims.

Implementation of faceless e-assessment proposed in customs – Comments sought from stake-holders

One of the recent initiatives taken by Central Board of Indirect Taxes and Customs (CBIC) was the introduction of the concept of faceless e-assessment in Customs. The faceless e-assessment is an initiative under the project “Turant Customs”. The objective of faceless e-assessment are as follows –

• Bringing anonymity in assessment and remove/ reduce physical interface with Customs through paperless customs, intelligent e-Sanchit.
• Ensuring the uniformity of assessment across locations.
• Promoting sector specific approach and functional specialisation.
• Improving workload for efficient utilisation of manpower and resources in Customs through machine release i.e. end-to-end automated clearance, Advance Cargo Information etc.

Last year CBIC conducted a pilot project of faceless e-assessment on certain Customs ports and basis the outcome, it has now been decided to implement faceless e-assessment on full swing across the country.

In this regard, the CBIC has released a concept paper of faceless e-assessment which is proposed to be implemented shortly. Comments/ response from trade/ stakeholders is sought by 3 March 2020 on the concept paper. The response is to be provided at [email protected] or [email protected].

What is proposed in faceless e-assessment?

The key features of the proposed are summarised below:

• The existing Customs Commissionerates will be reorganised into 12 ‘Virtual Commissionerates’ with all India jurisdiction known as “National Assessment Commissionerates” (NACs).

Further, the Assistant Commissioners and the Deputy Commissioners from different NACs will form various Faceless Assessment Groups (FAGs).

The Customs Automation system will randomly allocate the Bills of Entry for the purpose of assessment to the FAGS irrespective of the port of entry of imported goods. The selection will be based on tariff entry in terms of either duty payable or highest assessable value. Hence, the assessment will be delinked with the geographical location of the goods.

NACs will also inter-alia discharge following functions:

• Monitoring the assessment practice followed by FAGs to ensure uniformity of assessment.
• Ensuring adherence to and adoption of best practices followed internationally.
• Coordinating with other authorities on issues and audit objection vis-à-vis assessment.
• Interacting with sectoral trade and industry for addressing issues.

Further, there will be Jurisdictional Port Commissionerates (JPCs) who will continue to have one Port Assessment Group to assess cases referred to by FAGs in specific circumstances.

• Turant Suvidha Kendra to be set up by JPCs for various document/ report submission/ generation for the assessment.
• FAGs, such as the present practice, may accept the self-assessment or re-assess the Bill of Entry and pass a speaking order (within 15 days of the date of re-assessment after giving an opportunity for hearing) in case the importer does not agree with the re-assessment. The hearing is to be conducted through video conferencing or other reliable technological means.
• The assessment or speaking order passed by FAGs shall be deemed to be passed by the local assessment group of the jurisdictional Commissionerate.
• An appeal against the assessment order or speaking order lies with the Commissioner (Appeals) having jurisdiction over the JPC.
• An assessment or speaking order passed by a FAG shall be reviewed by the NAC.
• All queries for assessment or re-assessment to be raised and responded to electronically including those between FAGs and JPCs.
• Specified procedure prescribed to be followed for “first check” or “second check” by FAGs.
• FAGs in specific cases can transfer a Bill of Entry for assessment to JPCs. The reason for such transfer to be recorded in the India Customs Electronic Data Interchange System. In addition, JPCs at the direction of the Commissioner, at any stage, under specific circumstances may, pull back a Bill of Entry.

The specific format, mode, procedure and processes for functioning of FAGs in an automated environment will be prescribed by the CBIC in the due course of time.

PwC Comments: The proposed faceless e-assessment is a welcome initiative for the ease of doing business as it obviates physical interface between the importer and customs authorities thereby significantly reducing the cargo clearance time and transaction cost. It should also encourage importers and companies to handle import and export clearances by themselves. The proposed system is also expected to reduce disputes and bring about uniformity in assessment. However, the effectiveness and success of faceless e-assessment in complex scenarios can only be established over a passage of time. All stakeholders should proactively provide their inputs for roll-out of an efficient and trade friendly system.

During the last few weeks, we have tried to analyse the different aspects of the new bill as well as a comparative of various Personal Data Protection Laws across the Globe. In India, the endeavour to regulate the collection and use of personal data dates to 2012 when the A.P. Shah led committee released its report on privacy. It took nearly seven years for the Personal Data Protection Bill, 2019 (referred to as “2019 Bill”) to be introduced in the Parliament.

The 2019 Bill retains much of the draft bill proposed by the Justice Srikrishna Committee (referred to as “2018 Bill”). However, the 2019 Bill also introduces new concepts and deviates from the PDPB 2018 in certain respects. In this article, we understand the differences between 2019 Bill and 2018 Bill.

Insertion of additional provisions to 2019 Bill:

Following are the key deletions made from the PDPB 2018:

Following this article and from the next addition onwards, we will understand and analyse concepts under the 2019 Bill and how the law has evolved over time for these concepts.

2. The Ministry of Corporate Affairs has invited comments on the Draft Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020. Deadline:28th March. Submission link http://feedapp.mca.gov.in/csr/

3. The Ministry of Environment, Forest and Climate Change has invited comments on the draft Environment Impact Assessment Notification, 2020. Deadline: 12th May. Contact id: [email protected]

4. The Securities and Exchange Board of India has invited comments on the Consultation Paper on E-voting facility to shareholders for all shareholders resolutions. Deadline : 31st March. Contact id : [email protected]