Greetings from the Chamber!
The Indian economy, severely hit by the coronavirus pandemic, is projected to contract by a massive 10.3 percent this year, according to the International Monetary Fund. However, India is likely to bounce back with an impressive 8.8 percent growth rate in 2021, thus regaining the position of the fastest growing emerging economy according to the IMF.
India’s strategy of dealing with the COVID-19 crisis has apparently paid off and the country’s economy is set to bounce back and emerge stronger. India took the path of a strict lockdown to ramp up health infrastructure and focused on human lives. This strategy has paid off.
Today, the number of newly reported cases has fallen below 50,000. This hopefully indicates that the rate of spread of infection is being contained. India’s recovery rate and case fatality ratio are much better when compared to similar ratios for many other countries. However, we must continue to educate on prevention and stay vigilant while gearing up for the vaccine.
The initial green shoots of recovery have begun. The PMI for Manufacturing and Services recovered to 56.8 and 49.8 respectively in September 2020. “There has been a pick-up in e-way bill volumes, improvement in revenue earning freight traffic of major commodities, positive growth in exports and most significantly increase in the September GST collections to almost pre-COVID-19 level. These incremental trends are heartening and we hope that we will be able to stage a full recovery in the near future.
Kerala is gearing up to tap the post-Covid industrial potential fully on the strength of a set of investment-friendly legislations enacted by the State Government.
A Special Investment Promotion Task Force with the Chief Secretary as Chairman and Principal Secretary Industries and Commerce as Vice-Chairman has been constituted to take forward the efforts in a time-bound manner.
Key legislations that have significantly improved the investment-friendly atmosphere in the State include; the Kerala Investment Promotion and Facilitation Act 2018, the Kerala Micro Small Medium Enterprises Facilitation Act 2019 and the Kerala Single Window Boards and Industrial Township Area Development (Amendment) Act, 2019.
These reform-oriented legislative initiatives have ushered in transparency and a time and cost-saving investment climate. They have also done away with several unnecessary rules. Simplification of rules pertaining to land registration, building permits, pollution control measures and power and water connections are some of the measures introduced to promote the ease of doing business in the State,
As many as seven Acts and 10 rules have been amended while enacting the Kerala Investment Promotion Facilitation Act 2018, based on which the Government has created an e-platform that enables investors to submit proposals in a common application form and secure approvals through an online clearance mechanism. The procedures of the pollution control board in giving clearance to projects having an investment of up to Rs 10 crore have been simplified under MSME Facilitations Act 2019. Fast Clearance Centres have been set up to ensure that all required approvals are provided within 30 days. The single-window clearance mechanism has been entrusted with powers to facilitate clearances from various Departments for investment proposals. Reforms in the MSME sector have substantially contributed to the economic development of the State. They seek to channelize Kerala’s energies as a State with high social development index and skilled human resources for entrepreneurial activities, especially in the start-up ecosystem
Key sectors identified for promotion include transit-oriented logistics development, electronics and high- tech sectors, tourism and hospitality, manufacturing industries, waterways development and food and spices processing units.
At the Chamber level, we conducted a couple of ‘Virtual Programmes’ during the month gone by.
The first one on the 3rd of October 2020 was the CEO FORUM Virtual Meeting at which Dato Dr. Jai Mohan, Adviser to Nichi – Asia Center for Stem Cell & Regenerative Medicine, Malaysia, was the Guest Speaker. At the meeting, he spoke on “Regenerative Medicine and Stem Cell Therapy.”
The Chamber also organized a Virtual Meeting on the “Remission of Duties and Taxes on Export Products” (RoDTEP) on Friday, 16th October 2020. The existing Merchandise Exports from India (MEIS) Scheme met with an unfavorable fate at the WTO wherein the USA filed a complaint against this scheme stating that the scheme gave an undue benefit to Indian exporters which was against the WTO rules. India has now proposed to introduce a WTO Compliant scheme- Remission of Duties or Taxes on Export Products Scheme (RoDTEP). RoDTEP scheme aims to reimburse the taxes and duties incurred by exporters which are not specifically exempted or refunded under any other scheme. The scheme intends to make Indian products cost-competitive in the international market.
Sri. Mohd. Yusuf I.R.S, Customs Commissioner, Cochin, inaugurated the Session. Mr. G. Shivadass, Senior Advocate, Karnataka High Court was the main Speaker at the Session. Mr. Ashwin Shah, Chairman, Jayanti Group, Bangalore highlighted the pain points that businesses and trade face.
On Wednesday, 21st October 2020, the Chamber conducted a Virtual Meeting on the ‘Key Changes in Corporate Taxation and Recent updates on Companies Act.’ The Speakers at the session were Mr. Aditya Narwekar, Partner, Mergers and Acquisitions and Mr. Dinesh Daga, Partner, Corporate Tax, PwC Bangalore.
On the 30th of October 2020, the Chamber organised a virtual meeting on the “Practical Issues in Administering Social Security and the new Social Security Code 2020.” Mr. Madhu Damodaran, Group Head – Legal of Quess Corp., Bangalore, an expert on the subject with more than two decades experience in Labour Laws and HR outsourcing services, was the Speaker at the Session.
The Session covered issues such as; Employer –Employee Issues, Wages, Aadhar vs. Universal Account Number, how to approach Disputes with the Authority and the upcoming Changes in Social Security.
Incidentally on Friday the 6th of November we will be conducting the next virtual CEO Forum Meeting at which Mr. G Vijayaraghavan, Founder CEO of Technopark and Former Member, Kerala State Planning Board will speak on “Government and Business?” I do hope you will all take this opportunity to participate in the meeting.
I would also like to inform you all that the Chamber has submitted two representations to the Government highlighting certain concerns regarding;
- the Government of India’s decision to implement Cargo Restrictions for Foreign Carriers which has resulted in a serious drop in the export of air cargo particularly from Kochi. We feel that this is a discriminatory move which has impacted producers and exporters in Kerala negatively. We have requested the Central Government to reconsider its decision and maintain the status quo ante.
- the proposed amendments to the Kerala Police Act
These representations are carried in full elsewhere in this edition of the Newsletter.
We as a Chamber have always maintained that law-making should happen only after mandatory stakeholder consultations. We have requested the Government to consider the option of placing all draft bills in the public domain for at least a thirty-day period to ensure stakeholder participation in the policymaking process.
As always, I wish you all the very best and exhort you all to stay safe and well.
CEO FORUM 2020 - GOVERNMENT AND BUSINESS? | 06.11.2020
The next CEO FORUM Virtual Meeting is scheduled for Friday, 6th November 2020.
Shri G. Vijayaraghavan, Founder CEO of Technopark and Former Member, Kerala State Planning Board has agreed to be the Guest Speaker and to speak on “Government and Business?”.
The meeting will be held between 8.00 a.m. and 9.30 a.m. I.S.T. on Friday, 6th November 2020 on the Zoom Meet platform.
Advance registration is mandatory for participation.
Click Here to register
The meeting link will be sent to the registered participants separately in due course.
CCCI - Ease of Doing Business Information Survey
The Kerala Government has constituted a Committee of Secretaries vide Order dated 7th October 2020 as Phase 1 of exercising minimum regulatory compliance on businesses. The Cochin Chamber of Commerce & Industry wishes to contribute quality policy inputs to the Government to improve Ease of Doing Business in the State.
Questionnaire on Business Information Survey (click on the link given to view the same)
We request you to send your valuable inputs by filling the above Questionnaire and kindly co-operate with us.
CEO FORUM 2020 - Regenerative Medicine and Stem Cell Therapy | 03.10.2020
The 9th CEO FORUM Virtual Meeting was organised on Saturday, 3rd October 2020.
Dato Dr. Jai Mohan, Adviser to Nichi – Asia Center for Stem Cell & Regenerative Medicine, Malaysia, was the Guest Speaker on the occasion and he spoke about “Regenerative Medicine and Stem Cell Therapy”.
Commencing the meeting Mr. V. Venugopal, President of the Chamber delivered the Welcome Address and introduced Dr. Jai Mohan to the participants.
In the initial part of his address, Dr. Jai Mohan stressed the importance of healthy living, given the increasing fatalities due to lifestyle diseases. He spoke about the increasing prevalence of chronic diseases globally. He quoted the Indian Journal of Palliative Care’s report from the year 2015, which reported that the premature death rate due to chronic diseases had doubled in the last 10 years.
Life style related diseases like, Obesity, Cancer, Diabetes, Asthma and Cardio Vascular diseases contributed to this. He also pointed out that the failure of the Public Health and Medical Care System to address chronic diseases satisfactorily had led to this situation. He also pointed to the economic impact of these chronic diseases in India, which was estimated at a loss of nearly $300 Billion as against $9 Billion back in 2005.
Dr. Jai Mohan addressed the ‘Aging Mechanism’ in the next part of his presentation and clarified some common misconceptions about aging in general. He said that aging is considered an irreversible biological process and characterized by a gradual decline of physiological functions, occurring at molecular, cellular, and tissue levels which leads to aging and eventually driving towards age-related diseases or organ failures such as cardiovascular disease, diabetes, cancer, Alzheimer’s disease, osteoarthritis, etc.
Moving on, he introduced the concept of Stem Cells to the participants. He explained that Stem cells are basically, biological cells that can continue to multiply and become other different specialised cells that are regenerative. He added that Stem Cells are available in our bodies and can continue to produce new healthy cells and maintain their population and act as a repair system. Some of the sources of Stem cells in the human body are Bone Marrow, Dental Pulp, Adipose Tissue, Placenta, the Umbilical Cord etc.
Based on the research and clinical trial reports on Stem cells, treatment on Spinal cord injuries, Diabetes Mellitus. Leukaemia, Baldness, Erectile Dysfunction etc. are some of them. Studies indicate that growing or repair of the liver, kidneys and other organs where the stem cells are already dead are expected to be possible in the future.
Dr. Jai Mohan also addressed the issue of evidence based medicine and the related authorities not accepting stem cell therapy and the effectiveness of this regenerative medicine. He hoped that attitudes would change over time.
The most exciting part of the session was where Dr. Jai Mohan spoke about the emerging phase of Stem Cell Therapy called the Exosome Therapy. The Exosomes, as he explained are substances produced by the cells in our body which have complex genetic materials in themselves. According to him, these exosomes can apparently change the genetic properties in different parts of the body since they move through all body fluids. Several studies on Exosome therapy claim that it can become the future for cancer therapy, lung, kidney, brain and heart diseases.
Following his extremely informative talk, there was a brief discussion wherein the Speaker clarified some queries from the member CEOs who attended the meeting.
The meeting ended with the Vice President of the Chamber, Mr. K Harikumar thanking Dr. Jai Mohan and all the participants.
Virtual Meeting - Remission of Duties and Taxes on Export Products Scheme (RoDTEP)
The Cochin Chamber of Commerce & Industry organised a two hour Virtual Session on the Remission of Duties and Taxes on Export Product (RoDTEP) on the 16th of October, 2020.
The Session commenced at 4 p.m. with a Welcome Address by the President of the Cochin Chamber, Mr. V. Venugopal. In his speech, Mr. Venugopal gave a brief introduction about RoDTEP, its importance and the expectations the industry has about the new scheme. Thereafter he introduced the Speakers for the Session, Mr. Mohd. Yusuf I.R.S – Customs Commissioner, Cochin, Mr. G. Shivadas – Senior Advocate at the High Court of Karnataka and Mr. Ashwin Shah, Chairman, Jayanti Group, Bangalore.
Inaugurating the programme, Mr. Yusuf expressed his thanks to the Chamber and the President for having invited him to participate in the event. The Commissioner started off his address by saying that the Exporters are the economic lifeline of our country and that they must be taken care of well. He then talked about the MEIS Scheme and its drawbacks. He said that this is the reason why the new RoDTEP Scheme is being introduced. He concluded by saying that the Committee formed to assess and improve the RoDTEP Scheme may not be able to directly visit the exporters to get feedback as planned because of the pandemic, but hoped that
Industry bodies such as the Cochin Chamber will help in voicing their views on the new Scheme with the Committee and help them improve it for the better, for the overall benefit of the exporting community.
After the Inaugural Address, Mr. Ashwin Shah, Chairman of the Jayanti Group, Bangalore, representing Industry, pointed out certain concerns he found in the previous scheme and his expectations about the new one. His opening statements were on the history of export incentives in India. Mr. Shah said that the main objective of having incentives in exports is to make the Indian markets stronger. He pointed out that, as fuel prices in India do not come under GST, the cost of producing goods in India have become costlier as compared to other countries and this has become a huge burden for the exporters. The total tax collected including fuel and other accounts on the exports comes to nearly 7% of the export value. On top of this, the current basis for export incentives are undefined and there are major challenges to fix in tax refunds too. He emphasised that his expectations on the new scheme and the Government are high.
Mr. Shivadass took over the session after Mr. Shah’s presentation. Mr. Shivadass praised Mr Shah’s presentation and said it was quite elaborate. Thereafter, he introduced the agenda of his presentation. Mr. Shivadass went on to explain the major features of the new Scheme. He talked in detail about the Duty Exemption and Remission, Duty Free Import Authorization (DFIA) Scheme, Duty drawback of Customs and EOU, EHTP and STP.
Mr. Shivadass then elaborated on the Export Promotion Schemes in India prior to MEIS. The Schemes which included, Focus Market Scheme, Focus Product Scheme, Market linked Focus Scheme, Visehesh Krishi Gramin Vdyoga Yojna, and the Argi infrastructure incentive Scheme. Following this, he talked about the MEIS Scheme in detail, the reasons why the MEIS Scheme should be replaced as per the WTO’s direction, etc.
Towards the end of his presentation, Mr. Shivadass described the objectives, features, structure, and the timeline of the new RoDTEP Scheme. While concluding his session, Mr. Shivadass pointed out instances in the new Scheme where corrective measures/action is required to make it suitable for Indian exporters.
After Mr. Shivadass’s presentation, the meeting was open for Questions from the participants.
Mr. Venugopal concluded the meeting by thanking all the speakers and the participants.
Around 74 participants attended this session.
Virtual Meeting - Key Changes in Corporate Taxation and Recent Updates in the Companies Act
A Virtual Meeting on the “Key Changes in Corporate Taxation and Recent Updates in the Companies Act” was conducted by the Cochin Chamber of Commerce & Industry on the 21st of October, 2020. The Session was handled by Mr. Aditya Narwekar, Partner, Deals (Tax), PricewaterhouseCoopers Private Limited, Bangalore, Mr. Himanshu Aggarwal, Associate Director in PwC India’s deals team and Mr. Dinesh Daga, who is a subject expert.
Mr. V. Venugopal, the President of the Cochin Chamber, welcomed all the participants and the Speakers to the Meeting. He thanked PricewaterhouseCoopers, the Cochin Chamber’s Knowledge Partner for associating with the Chamber in this programme. After welcoming everyone, Mr. Venugopal gave a quick overview of the topic for the day. “As we near the due date for filing the Corporate Tax Returns, this session will throw some light in the introduction of Faceless Assessment to maximise Governance and to minimise Government,” he said. Mr. Venugopal said that the Companies Amendment Bill 2020, which received the approval of the President of India on the 21st of
September, amended various acts from the Companies Act of 2013, to promote the ease of doing business. These changes will also be elaborated upon by the experts handling the session. Thereafter he introduced the Speakers to the participants.
Mr. Narwekar thanked the President and the Chamber on behalf of PwC for having organised the Session. He then started off with the first part of the presentation pertaining to the Companies Act, 2020. He said that the Companies Act of 2013 has undergone several changes from the time it was introduced. Mr. Narwekar said that the plan of the Government over the years was to relax the provisions that came under this Act since, when it was introduced, there hardly was any difference between a private company and a listed company. This apparently created a lot of complications and burden on the private companies. Mr. Narwekar took the participants through the background of the Companies Act. He explained that there was a Company Law Committee that was set up in 2019 to make recommendations to the Government to make changes and promote ease of doing business. This Committee was also tasked to re-categorise certain compoundable offences. Following this, Mr. Narwekar explained the timeline of the development of the new Act and touched upon the highlights of the amendments. He spoke in detail about the amendments under the CSR provisions, Periodical Financial Statements for unlisted companies to monitor Private Companies, remuneration to independent Directors and Non-Executive Directors in case of losses, and overseas listing of public companies.
Mr. Himanshu Aggarwal commenced his presentation with the Exclusion from the definition of listed companies and other amendments relating to the ease of doing business in India. He explained in detail regarding the Decriminalisation of offences by reducing the quantum of penalty, omission of imprisonment, shift of fine to penalty and omission of penal provisions. Following this there was a quick Q&A session to clarify any doubts that the participants had.
Addressing the meeting Mr. Dinesh Daga elaborating on the Key Changes in Corporate Taxation. He spoke about the Faceless Assessment Scheme and its background. Mr. Daga said that the Faceless Assessment Scheme began in 2015, and it gradually evolved and improved to become a reality in 2020. The intention of introducing the Faceless Scheme is to improve efficiency, transparency and accountability in the entire process, he said. He also spoke about the scope, expectation and the process of the Faceless Assessment Scheme.
The Faceless Appeal process which was introduced on the 25th of September, 2020 was also explained in detail. The various aspects of the Faceless Appeal process and the open issues were also discussed.
Tax Collected at Source (TCS) on sale of goods was the next topic addressed by Mr. Daga. The TCS has come into effect from the 1st of October, 2020, he said. The CBDT clarification on TCS on sale of goods was also explained. The last part of the presentation was on Taxation and other Laws Amendment Act (TOLA). Mr. Daga helped the participants understand the highlights and features of TOLA before he opened the meeting for Q&A.
Mr. Venugopal concluded the session by thanking Ms. Nisha Menon of PwC for coordinating the meeting, and the speakers and the participants who attended the programme.
The session was attended by around 45 participants.
Virtual Meeting - Practical Issues in Administering Social Security and the New Social Security Code - 2020
The Cochin Chamber organised a Virtual Meeting on Practical Issues in administering Social Security and the New Social Security Code, 2020 on Friday, 30th October 2020. Mr. Madhu Damodaran, Group Head – Legal & Compliance of Quesscorp, India’s largest private sector employer, was the Guest Speaker.
Mr. V. Venugopal, President of the Cochin Chamber delivered the Welcome Address and introduced the Guest Speaker.
Mr. Madhu Damodaran in his opening remarks said that the Social Security Code, 2020 which has received Presidential assent on September 28, 2020 has been enacted to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers in the organised, unorganised and other sectors.
Mr. Damodaran, continued his talk with the Employer-Employee issues vis-à-vis On-boarding of new employees, PF Member and Employee transactions and Exit of employees. He also shared his experiences as a large private sector employer on handling practical issues and suggested proactive solutions to some of the common issues faced by HR & Compliance practitioners.
He said that the EPFO’s decision in 2017 to make it mandatory to link the Aadhaar with their Universal Account Number (UAN) in order to On-board a new employee from the age- old paper based documentation was a welcome step. However, the failure of verification even with the linking of the Aadhar and the UAN proved to be extremely difficult for employers nationwide, as it prevented remission of contributions from the Employer’s side and any transactions being made by the member employees. He further suggested tips to the participants to ensure on-boarding of new employees and their EPFO Account creation simultaneously.
The session on the Wages Definition and how wages or allowances need to be structured when it comes to both PF and ESIC schemes was noteworthy. Mr. Damodaran explained the importance of the approach to Dispute with Authority for Companies is for all organisations with some examples from his personal experience. He explained how important it is to manage documentation in connection to the allowances and align it with the organisational policies to ensure compliance. He also discussed some scenarios where PF related Notices, Inspections and Hearings need to be dealt with judiciously.
Mr. Madhu Damodaran spoke of how the Social Security Code, 2020 subsumes the 9 acts namely Employees’ Provident Fund Act, Employees’ State Insurance Act, Employment Exchange Act, Payment of Gratuity Act, Employees’ Compensation Act, Maternity Benefit Act, Building Workers Act, Cine Workers Welfare Fund Act and Unorganised Workers’ Social Security Act.
He said, the new Social Security Code expands the scope of social security by providing for registration of all types of workers including gig workers, unorganised workers and platform workers. He also spoke on the salient features of the new Code and the significant changes that are expected with the enactment of the Code. He also explained the upcoming changes like Registration of Establishments and Cancellation, Employment Information and Monitoring, Maintenance of Records and Registers, Gratuity, Maternity Benefit to name a few.
Mr. Venugopal thanked Mr. Madhu Damodaran for all his efforts in making the Session extremely useful for the participants and the wonderful deliberations that followed, inspite of his busy schedule.
The programme came to an end by 12:45 pm and had a participation of around 40 participants.
In a welfare State, it is the responsibility of the Governments to protect and take care of the senior citizens, at least to some extent, by ensuring that they have sufficient means to cover their day to day needs and health care, without depending on their children or family members. When the Employees’ Pension Scheme was framed under the Provident Fund Act in 1995, the intention of the Central Government was to ensure that the retired pensioners should be supported with a decent amount as pension after their retirement. But the whole purpose got diluted over the years, mainly on account of the negative interpretations to the provisions of the Pension Scheme. This has led to the employees, who are covered by the Pension Scheme, being offered only meagre amounts as pension after their retirement. The unfortunate retired pensioners are now battling a long drawn litigation in the High Courts and the Supreme Court of India to redress their grievances. It is most unfortunate that they are deprived of the benefits of higher pension in spite of Court verdicts in their favour. The purpose of this Note is to provide the background of the whole issue and to create awareness among the beneficiaries.
EPF Act & Pension Scheme
The Employees Provident Fund and Miscellaneous Provisions Act, 1952 and the Employees’ Pension Scheme, 1995, hereinafter referred to as the “EPF Act” and the “Pension Scheme” respectively, is applicable to Organisations covered by the definition of the “Employer” under the EPF Act. The EPF Act and the Pension Scheme are welfare laws framed for the benefit of the Employees. Accordingly, the Employees of such organisations are members of the Contributory Provident Fund and regularly contribute to the said Fund till they retire from the services of the organisation.
Contribution to the Pension Scheme and payment of Pension
The EPF Act was amended by introducing Section 6A, authorizing the creation of a Scheme for the purpose of providing pension to the employees. Thus the Central Government framed the Employees’ Pension Scheme, 1995 for the purpose of providing superannuation pension, retiring pension, family pension etc. to the employees. Section 6A of the EPF Act does not prescribe any ceiling limit on contributions or cut-off date. The corpus of the Pension Fund was to be constituted by transferring 8.33% out of employer’s contribution under the EPF Act. As per the Pension Scheme, the maximum pensionable salary was initially fixed at Rs.5000/- and was later enhanced to Rs.6500/- with effect from 01.07.2001. The contribution to the Pension Scheme was therefore payable only in respect of the said amount when the Pension was framed in 1995. The employees exit from the Pension Scheme on they attaining the age of 58 years and, on such exit/retirement from the Pension Scheme, EPFO would issue a Pension Pay Order to each employee and pays pension to the employees.
Proviso to Clause 11(3) – Pension payable on actual salary & cut off imposed to avail benefit
Subsequently, a proviso was added to Paragraph 11(3) of the Pension Scheme with effect from 16.03.1996, as per G.S.R.134 dated 28.02.1996, granting option to the employer and the employee to contribute amounts to the Pension Fund at the rate of 8.33% of the actual salary drawn by the employee, where the salary exceeded Rs.6500/- per month. Subsequently, the Regional Provident Fund Commissioner (RPFC), Ernakulam issued an order that the benefit of the proviso has to be opted for on or before 01.12.2004, while there is no cut-off date fixed in either the EPF Act or the Pension Scheme. The EPF Act or the Pension Scheme does not empower anybody to fix such a cut-off date. Hence the cut-off date fixed by the RPFC is colourable exercise of power and is legally unsustainable.
WPC No.6643 of 2007 – High Court of Kerala
Imposing cut off date set aside. Proviso to Clause 11(3) Pension Scheme retrospective
When requests made by some employees were rejected on the ground that the option was not exercised before the cut-off date of 01.12.2004, the said action was challenged before the High Court of Kerala through WPC No.6643 & 9929 of 2007. Central Government and RPFC were respondents in the said Writ Petition. The question as to the validity of the cut-off date 01.12.2004 fixed by the RPFC, Ernakulam and also the question as to the proviso added to Clause 11(3) has any retrospective effect were considered by the a Single Judge of the
High Court in the said Writ Petition and were answered in favour of the employees. By judgement dated 04.11.2011, the High Court held that the proviso to Paragraph 11(3) of the Pension Scheme, added with effect from 16.03.1996, was retrospective in operation and is applicable from the date of commencement of the Scheme. It was further held that the cut-off date of 01.12.2004, on the basis of which some of the options made by the employees were rejected, was legally unsustainable. Consequently, it was also held that the Petitioner therein was entitled to avail the benefit of the proviso to Clause 11(3), provided he makes good the contribution in respect thereof. The Writ Appeals filed by the Employees Provident Fund Organisation (EPFO) as WA Nos.568 & 569 of 2012 was dismissed by a Division Bench of the High Court of Kerala by judgement dated 05.03.2013, thereby upholding the judgement of the Single Bench. The Special Leave Petitions filed by the EPFO were dismissed by the Supreme Court of India by judgement dated 31.03.2016 passed in SLP No.7074 of 2014 and connected cases. Thus the judgements of the Single Bench and the Division Bench is law of the land and an employee can exercise option to change the pension contribution from the salary limited by ceiling to actual salary drawn at any point of time without any cut-off date.
The Employees of organisations covered by the EPF Act and the Pension Scheme are therefore entitled to avail the benefit of the proviso to Clause 11(3) of the Pension Scheme with retrospective effect from 16.11.1995, when the Pension Scheme was introduced. In order to avail the said benefit, the employees should make good the arrears in respect of the pension contribution by remitting the required amount with applicable interest to their respective Pension Funds. EPFO and RPFC are required to do the needful to collect arrears of contributions payable by the employees for availing the benefit of the proviso to Clause 11(3) and remit the same to the respective Pension Funds of the employees.
WPC No.13120/2015 – High Court of Kerala
2014 amendment to the Pension Scheme fixing average of sixty months’ salary to arrive at pensionable salary set aside and held that pension is payable on actual last drawn salary
The Pension Scheme was later amended with effect from 01.09.2014 by the Employee’s Pension (Amendment) Scheme, 2014, vide Notification No.GSR. 609(E) dated 22.08.2014, enhancing the pensionable salary to Rs.15000/-. As per the said amendment, the pensionable salary has been altered to mean the average monthly pay during the contributory period of service comprising of a span of sixty months preceding the date of exit from the membership of the Pension Fund. This amendment restricted employees from exercising the option to have the pension fixed in accordance to their actual last drawn salary and thus employees stood to lose all the benefits conferred under Scheme 1995. The said Notification and the irregularities were challenged by similarly aggrieved employees and the batch of Writ Petitions was heard by a Division Bench of the High Court of Kerala, on reference made by a Single Judge. The High Court of Kerala, vide judgment dated 12.10.2018 in WPC No.13120/2015 and connected cases in P.Sasikumar & others Vs Union of India & others, set aside the Employee’s Pension (Amendment) Scheme, 2014 brought into force by the above Notification No.GSR. 609(E) dated 22.08.2014 and quashed all consequential orders and proceedings issued by the EPFO on the basis of the said amendment. The various proceedings issued by the EPFO declining to grant opportunities to the employees to exercise a joint option along with their employer to remit contributions to the Pension Scheme on the basis of the actual salaries drawn by them and to have their monthly pension recomputed in proportion to their actual salary as per the provisions of the Pension Scheme were set aside by the judgement dated 12.10.2018. The Supreme Court of India, by its Order dated 01.04.2019, dismissed the Special Leave Petitions filed by the EPFO as SLP Nos.8658 & 8659 of 2019 and connected cases, challenging the High Court Division Bench judgment and connected cases. The Employees of organisations covered by the EPF Act and the Pension Scheme are therefore entitled to exercise the option from limited salary to actual salary now for the purpose of pension based on actual last drawn salary.
WPC No.3846 of 2019 – High Court of Kerala
RPFCs directed to implement the verdicts to accept options to avail higher Pension and to recompute Pension based on actual last drawn salary
Aggrieved by the inaction of the EPFO authorities, employees of various organisations filed Writ Petitions in the High Court of Kerala claiming suitable benefits and seeking appropriate directions to avail the benefit of higher pension. Those employees whose requests to recompute the pension has not been acted upon by the EPFO had approached the High Court of Kerala again and, based on the directions issued by the High Court, the pension of many such employees have already been recomputed and revised by the respective RPFCs. One such Writ Petition is WPC No.3846 of 2019 which was disposed of by the High Court of Kerala by judgement dated 25.02.2020. In WPC No.3846 of 2019, the High Court held that the employers of the establishments shall co-operate with the employees as well as the Employees Provident Fund Organisation and they shall render all assistance in quantifying the amount, that in the case of serving employees, the Provident Fund Commissioner shall make book adjustments and shall credit the contribution to the EPF Account on the basis of actual salary and that after verification of the accounts and after making book adjustments as stated above, the EPF Organisation shall calculate and grant enhanced pension on the basis of actual salaries received by the employees. Accordingly, the Employees of the organisations covered by the EPF Act and the Pension Scheme are also equally aggrieved and are entitled to the relief granted as above and are eligible to get their monthly pension also recomputed in compliance with the various Court Verdicts cited above.
No depletion of Pension Fund
The arguments raised by the EPFO that there will be depletion of Pension Funds if higher pension is granted were considered and rejected by High Court of Kerala. Such claims are raised with a view to deprive the subscribers/retired pensioners of the higher pension, which they are otherwise entitled to. The claims of the EPFO regarding depletion of funds are incorrect and unsustainable for the reasons stated below also.
- There is no return of capital in the Employees’ Pension Scheme, 1995 as in the case of LIC Superannuation Scheme and other similar pension schemes. The corpus will always be with the Pension Fund of the Employees’ Pension Scheme. Only a part of the interest earned out of the corpus contributed by the members over the years is given out as pension till the life of the pensioner and thereafter a portion of it to the spouse till his/her lifetime. In the event of the pensioner and his/her spouse prematurely dying, the corpus contributed by the unfortunate pensioner over the years will vest with the EPS and is actually a bonus for the EPFO.
- The formula for working out the pension is the same, whether it is based on a pensionable salary of Rs.5000/-, Rs.6500/- or Rs.15000/-, as the case may be, or the last drawn salary. There is no difference in the working. The computation and pay out of the pension is the same – proportionate to the contribution as conceived in the original scheme, irrespective of the variation in the amounts.
- The short remittances in the contribution to the Pension Fund from the employee is collected at 8.33% of the PF earnings and EPFO also collects interest applicable periodically for the delayed remittances from the retired employees. The interest so collected for the short remittances is exactly at the same rate paid to the members for their contribution and this is always higher than the prevailing Bank Fixed Deposit rates.
- The definition/calculation of the last drawn salary is very clearly established and concluded by Court verdicts. Even in other similar laws like the Employees Gratuity Act, salary for computation of the pay outs means the last month’s salary or the average of the last three months’ salary. This principle is followed even now in all similar laws and calculations thereon.
- Although the EPFO has already recomputed and paid higher pension to thousands of retired employees till date, based on the Court verdicts, the EPFO has not paid any interest for the arrears of the pension amount remained with the EPFO all these years, in spite of the fact that the EPFO has collected interest from the retired employees for delayed remittances to the Pension Fund.
- Admittedly, EPFO has been holding the funds of the subscribers for long periods and has been earning higher rates of interests for their investments all these years. Moreover, it is also evident that there is a huge corpus remaining with the EPFO as funds not claimed by subscribers/pensioners for various reasons. Such funds could only be used for the benefit of the Provident Fund subscribers/pensioners and not to make undue enrichment for the EPFO.
- Central Government also every year contributes 1.16% to the Pension Fund from the commencement of the Employees’ Pension Scheme, 1995 and this amount also is available as corpus with the EPFO for computing and paying pension to the employees.
- PF contribution is an ongoing system and the Pension Fund under the EPS is also like that. The EPFO and the Pension Fund under the EPS is only strengthened with the membership continuously increasing year on year. Hence there should not be any cash flow issues to the EPFO as the contributions keep coming continuously and is only increasing year on year.
From the above, it is evident and very clear that the EPFO will not suffer any depletion of funds as projected and as contended with a view to deny higher pension to the subscribers/retired employees, based on their last drawn actual salaries. The EPFO has to become more efficient in fund management and in generating better returns for the huge corpus they have in their custody and control. They cannot blame others or make the subscribers/retired pensioners suffer for their inefficiency to manage the funds professionally. Central Government should make suitable amendments to the law and entrust such funds to be managed by professionals rather than leave it to the Government Officials, who do not have any expertise or experience in financial matters and in managing such huge funds.
Way forward to Employees to claim higher Pension on last drawn actual salary
The pension currently received by the Employees who are members of the Pension Scheme is very meagre. They are entitled to receive a much higher pension, based on their last drawn salaries. Such employees are therefore required to execute Joint Option Forms along with their Employers, providing details of the employment of the Employees and opting for a higher pension based on their actual last drawn salaries. The Employer has to confirm in the Option Form that they do not have any objection to the Employees opting for contributions to the Pension Fund based on their actual salaries and claiming higher pensions based on the last drawn salaries, as there is no additional financial liability upon the Employer. EPFO is declining to entertain claims of Employees to avail higher Pension based on actual last drawn salaries on the ground that Review Petitions are filed in the Supreme Court and they are pending. Review Petitions are usually entertained by the Courts only to correct apparent errors in the judgements, if any, and not to otherwise alter, amend or modify the judgements already passed and have become final.
The Option Forms jointly executed by the Employer and Employee need to be forwarded to the RPFC with a covering letter with a request to recompute the pension based on the respective last drawn salary of the Employee and to pay the pension that the Employee is actually entitled to receive. The RPFC should also be requested to pay the arrears of pension that the Employees are entitled to receive from their respective dates of exit/retirement from the Pension Scheme till the date of recomputation, being the difference between the actual monthly pension payable on recomputation and the monthly pension that the Employees have been receiving till date. The Employees should confirm that they are ready and willing to make good the arrears in respect of the pension contribution and that they have no objection in remitting the required amount with applicable interest to their respective Pension Funds. The RPFC should be requested to calculate and inform the amount so payable. After waiting for a reasonable period and if the RPFC is not acting of the Employee’s request, the Employee will have to seek legal remedies by filing a Writ Petition in the High Court for suitable directions to get the monthly pension revised and recomputed in proportion to their last drawn salaries as per the provisions of the Pension Scheme and also to pay the arrears of pension with applicable interest. Since the Employees will be paying the short remittances based on actual salaries with corresponding interest applicable to the relevant years, they are entitled to receive the arrears of pension also with interest at the rates applicable to the respective years.
Certain relevant facts of Pension Scheme
- Monthly pension = Number of years multiplied by last drawn salary divided by 70 [EPS = (Service Period x Pensionable Salary)/].
- Currently, EPFO is providing pension calculated on the salary of the employee with a maximum cap at Rs.5000/-, Rs.6500/- & Rs.15,000/-. Now that the cap has been removed, the EPS contributions have to be based at 8.33% of the actual salary of the employee. Current employees should also execute joint Option Forms along with HML and file it with RPFC for contribution to the Pension Scheme based on actual salaries.
- Pension amount is payable to the eligible employee. On the death of the employee, members of the family, whom he/she has nominated, are entitled for pension.
- Lump-sum withdrawal of amount is allowed if the service period of the employee in the Pension Scheme is less than 10 years. If the total years of service period exceed 10 years, then he/she will be given certificate of pension (Pension Pay Order).
On July 22, 2020, the Committee of Experts (“Committee”) constituted by the Ministry of Electronics and Information Technology (“MEITY”) and chaired by Mr. Kris Gopalakrishnan, released the draft Report on Non-Personal Data Framework (“NPD Report”) with its recommendations on the potential governance of non-personal data.
With a population of 1.3 Billion and nearly 500 million mobile phone users generating volumes of data, India has an enormous opportunity. The Committee has investigated how data that is generated in India can be utilized to benefit the citizens of India. This data analyzes is only for Non – Personal Data (“NPD”).
The article therefore intends to cover some of the key recommendations and the concerns and issues arising out of such recommendations.
Definition and classification of NPD
NPD, in contrast to personal data, is defined as data that is not ‘Personal Data’ (as defined under the Personal Data Protection Bill), or data that is without any Personally Identifiable Information (‘PII’). It may also include personal data or aggregated data that are later anonymized.
The Committee proposes classification of NPD into three categories, which are public, community and private NPD.
- Public NPD is defined as NPD collected or generated by the governments, or collected or generated in the course of execution of all publicly funded works but does not include NPD that is explicitly afforded confidential treatment under a law. Anonymized data of land records, public health information, vehicle registration data, pollution levels collected for a publicly funded project etc. are examples of Public NPD.
- Private NPD is defined as NPD collected or produced by persons or entities other than the governments, the source or subject of which relates to assets and processes that are privately-owned by such person or entity, and includes those aspects of derived and observed data that result from private effort. It includes insights involving application of algorithms, proprietary knowledge and may also include such data in a global dataset that pertains to non-Indians and which is collected in a foreign jurisdiction.
- Community NPD is defined as any NPD collected or produced by anonymized personal data, and non-personal data about inanimate and animate things or phenomena – whether natural, social or artefactual, whose source or subject pertains to a community of natural persons which shall not include Private Non-Personal Data. It includes datasets collected by municipal corporations, public electric utilities; user information collected by private players and raw / factual data’, without any processing / derived insights.
- The Committee has also defined a new concept of ‘sensitivity of Non-Personal Data’, as even Non-Personal Data could be sensitive from the following perspectives – 1) It relates to national security or strategic interests; 2) It is business sensitive or confidential information; 3) It is anonymised data, that bears a risk of re-identification. The Committee recommends that the data principal should also provide consent for anonymisation and usage of this anonymized data while providing consent for collection and usage of his/her personal data.
Key stakeholders within the NPD Framework
The Committee has identified and defined the roles of Data Principals, Data Custodians, Data Trustee and Data Trusts in the NPD ecosystem:
1. Data Principal: in case of a Public NPD and Private NPD, Data Principal is a government entity, an individual, a community, or a company and in respect of Community NPD, the community to whom such NPD relates to. The Data Principal maybe be equated to the data principal under the PDPB with respect to personal data.
2. A Data custodian: Just like data fiduciary under the PDPB, data custodian is a public entity or a private sector entity that collects, stores and processes data in a manner that is in the best interest of Data Principal. Data Custodians have a duty of care towards individuals/community and they are required to comply with the principles and guidelines that maybe prescribed in NPD Law when enacted.
3. Data trustee: The Data principal may exercise rights over their data through this representative entity for a community and the Report suggests that it may also include a government body. While the Report lacks clarity as to who can become a trustee, it also indicates that an eligibility criterion will be laid out in the NPD legislation.
4. Data Trusts are the institutional structures, comprising specific rules and protocols for containing and sharing a given set of data and can contain data from multiple sources, custodians, etc.
Rights over NPD
The Committee has developed guidelines suggesting defining ownership of data collected in/from India in absolute terms.
In case of Community NPD, the concept of “Beneficiary ownership/interest to protect Community interest (data accruing from a community/data about a group or community) – rights over such data collected in India should vest with the trustee of that community, with the community being the beneficial owner. In case of Public NPD, since this data is derived from public efforts, the datasets created partake the characteristics of a national resource and in case of Private NPD, only raw, factual data about community collected by a private body needs to be shared subject to the well-defined grounds. Any proprietary information need not be shared.
The Committee has acknowledged that there may be an overlap in rights of data with respect to Private NPD and Community NPD and hence introduced the principles of “best interest” and “beneficial interest”. It is uncertain as to what would amount to “best interests” and “beneficial interest”, but we may expect that the NPD legislation when enacted will detail this out.
The Committee has recommended creating data business as a new category of business which would also include government agencies that collect, process or store data beyond a threshold that maybe specified by the regulator to be categorized as data businesses.
A data business is a horizontal classification and not a different industry, the Committee suggests every data business, especially after reaching a threshold of data collection, should declare what data they collect and their procedure. Indian citizens and India-based organizations will have open access to the metadata of the data collected by different data business and government. The Committee observed that by looking at the meta-data, potential users may identify opportunities for combining data from multiple data businesses and/or government to develop innovative solutions.
Data Sharing, mechanisms and checks and balances
The Report refers to various provisions of controlled access to private, public and community data to individuals and organisations for defined purposes viz., sovereignty purpose, public interest purpose and economic purpose:
- Sovereign purpose: Data maybe requested for purposes of national security, legal purposes, etc.
- Core Public Interest Purpose: Data may be requested for community benefits or public goods, research and innovation, policy making for better delivery of public services etc.
- Economic Purpose: Data maybe requested to encourage competition and provide a level playing field or encourage innovation through start up activities or for a fair monetary consideration as part of a well-regulated data market.
The Report recommends data sharing mechanisms for sharing public, community and private data and various checks and balances to ensure appropriate implementation of the rules and regulations w.r.t data sharing. Besides improving on existing Open Government Data Initiatives, government should ensure availability of high-quality Public NPD sets are available. Only the raw / factual data collected by a private organization may need to be shared subject to level of value-added to the NPD. In case of lesser value add, data sharing may be mandated, but on FRAND (fair, reasonable and non-discriminatory) based remuneration. In case of high value add, private organisations are at liberty to determine usage of NPD. Further, the Committee has recommended factors including location of NPD, testing and probing tools to secure clouds and reports generated, compliance with the terms of storage, processing and usage of data as agreed between the cloud provider and data businesses which are required to be maintained in order to ensure appropriate implementation of the rules and regulations of data-sharing.
Non-Personal Data Authority
Considering that this is the newest evolving regulatory space, the Committee suggest creation of an independent and separate Non-Personal Data Authority (“Authority”) that would work in consultation with the Data Protection Authority proposed under the PDP Bill, Competition Commission of India and other sectoral regulators.
The Authority will be empowered to monitor the use and mining of NPD and additionally bare an enforcing role (“ensure that data is shared for sovereign, social, economic welfare and regulatory and competition purposes”) and an enabling role (ensure the rules and regulations are followed and provide data appropriately when data requests are made).
The Authority will have the ability to address market failures in case of absence of data and guarantee a ‘level playing field’ with reasonable and viable competition in digital and data markets.
While formulation and publication of the 72-page Report is an extremely timely initiative, the Report however, has come under sustained criticism since its publication. The findings and recommendations of the Committee need to be analyzed objectively and the impacts on different stakeholders requires a deeper examination.
Issues include the regulatory overlap between the PDPB, Competition Law, Draft Ecommerce Policy and Consumer Protection Laws in India. The outlook in the Report that has been given is too broad. There is a need to narrow down on the specifics in the Report and it should aim to create regulatory harmonization. Apart from this, to realize the potential of data in the economy and to also check abuse of dominance in the data markets, it proposes data sharing mechanisms however, it remains to be seen what impact it’ll have on intellectual property regime, innovation and competition in the digital economy space.
Further, the question as to why a need for separate regulator for NPD arises. Can the data protection authority under PDPB be more suited to address issues surrounding both personal data and NPD? The Report lacks clarity as to what makes data protection authority ineffective that warrants a separate regulator for NPD.
The Report also mandates data sharing with the government for sovereign purpose but fails to provide clarity on the applicability of the three principles laid down the celebrated judgment of Puttuswamy i.e., legality, need and proportionality. Similarly, the Report does not present evidence as to why a certain approach is most effective. In this regard, why mandatory data sharing by private companies is a better policy than self-regulation or incentive driven voluntary sharing or is it better to leave data sharing to the market forces and contracts to decide what incentives are more effective for companies to voluntarily share data. Similarly, companies maybe investing substantial resources to collect raw and factual data, however, why such data collection activity should not have a remuneration value. There is also a lack of clarity on adjudging the value that should be appropriated on a value added data set.
Furthermore, there is a need to clarify the role of NPD Regulatory Authority on competition issues and further strengthen CCI’s approach in dealing with competition issues of digital economy. While among other things data sharing is aimed at helping startups, understanding how it will impact or incentivize the startups is very much necessary. The policy should not cause adverse impact for mere grains.
While the Report recognises the importance of consent by individual data principles or anonymisation and its usage, however, a general study would reveal that consumers do not read privacy policies on account of length, legalese and language. So how appropriate and effective consent could be is questionable. Similarly, sensitivity of information should be adjudged following the deliberations with the consumers.
Another issue here is when data is inferred, an individual would not know if he or she belongs to a classification or categorisation of a community. In such a scenario, how would individuals exercise their rights within community about which they often do not know. Most importantly, there is also a challenge of multiplicity and conflicting interest within community and the report does not clarify on this as well. Similarly, while the report talks about collective harm, it does not illustrate appropriate redressal mechanisms.
The Report also has a number of issues regarding data generated through open source software (raw / factual data) which can be potentially used for creation of intellectual property or trade secrets for Companies. These for instance include simulations, behavioral studies etc. The Report now recommends that such data must be shared with Government agencies at no remuneration. Furthermore, the ownership of the aforesaid data is with the Data Principal and therefore, every time such data is processed or shared, a Company will have to obtain permission from the Data Principal. This will definitely impact the intellectual property of a Company.
The Report is a culmination of over two years of discussion and yet, the language appears ambiguous and does not represent many the concerns raised. The recommendations appear rhetoric and unimaginably testing to actualize some of the recommendations made in the Report.
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Consolidation & Codification of Labour Laws: A step towards a brighter future?
Chamber Vlog - 19
Evolution of Title Deeds: Bamboo to Digital
3 years of GST
Tax and Regulatory Updates from PricewaterhouseCoopers
Parliament passes the Code on Social Security, 2020
The Parliament passed the Code on Social Security, 2020 (Code) on 23 September 2020. However, it awaits the assent of the President of India and shall come into effect as the Central Government may, by notification in the official gazette appoint.
The Code amalgamates the following labour laws:
1. The Employees’ Compensation Act, 1923;
2. The Employees’ State Insurance Act, 1948;
3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
4. The Maternity Benefit Act, 1961;
5. The Payment of Gratuity Act, 1972;
6. The Unorganised Workers’ Social Security Act, 2008;
7. The Cine Workers Welfare Fund Act, 1981;
8. The Building and Other Construction Workers Cess Act, 1996; and
9. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959.
Key highlights of the Code
- Uniform definitions: Uniform definitions have been provided to avoid any conflict. No separate definition of basic wages has been provided, to remove the ambiguity regarding contributions for provident fund (PF) and Employees’ State Insurance.
- Wider coverage: Workers from both the organised and unorganised sectors of employment have been covered. The unorganised sector has felt left out under previous regulations. Now, the unorganised sector will be securely covered. The Government is also proposing to formulate a social security fund for the unorganised sector.
- Single registration and single return: Filing of single return and single registration has been introduced for ease of doing business and compliances.
- Common registers and records: Provision of common registers and records has been introduced for ease of compliances.
- Provision for maintaining own PF account: An establishment employing 100 or more persons is permitted to make an application to the Central Government to maintain a PF account. Earlier, there was no threshold limit for an organisation to apply for maintaining its own trust.
- Opting out of voluntary coverage: The option for opting out from the voluntary coverage is provided for the first time, subject to such conditions as may be prescribed by the Central Government.
- Contribution rates: Enabling provision has been introduced to enable the Central Government to specify rates of employees’ contributions and the period for which such rates shall apply for any class of employee, by a notification.
- Constitution of National Security Board: The National Security Board is required to be constituted by the Central Government for unorganised workers. The Code requires the State Government to constitute a State Board known as the (name of the State) Unorganised Workers Social Security Board.
- Fixed-term employees to be eligible for gratuity: The Code introduces a provision for fixed-term employees to be eligible for gratuity, upon rendering service for a period of one year.
- Introduction of web-based inspection: Web-based inspection scheme for random inspections by a centralised computer system has been introduced. This would bring accountability and transparency for each of the inspections carried out.
- Self-employed and other class of workers to be covered under social security: Concept of ‘self-employed worker’, ‘home-based worker’, ‘unorganised worker’, ‘gig workers’, ‘aggregator’ has been introduced, enabling wider coverage. The Code also provides enabling provisions for self-employed and other class of persons into the ambit of social security.
- Limitation of five years provided for assessments: The most important aspect dealt with is with respect to the limitation period. The limitation period for initiation of inquiry by the authorities for assessment and determination of money dues from employers has been provided as five years. This has been a long-awaited reform by stakeholders. The Code envisages a transparent and predictable system of assessment by the officers.
- Accidents while commuting from residence to place of work eligible for compensation: Compensation to employees in case of accidents while commuting from residence to place of work and vice versa has been included in the Code.
- Provision of common crèche facility for establishments: The Code allows the establishment to avail common crèche facility of the Central Government, State Government, municipality or private entity or provided by Non-Governmental organisation or by any other organisation or group of establishments that may pool their resources to set up a common crèche in the manner as they may agree for such purpose.
- Transformation of enforcement officer into inspector-cum-facilitator: The role of an enforcement officer has been transformed into inspector-cum-facilitator with responsibilities of imparting advice to the workers and for effective compliance with the Code.
- Appeals: The Code also provides that the Industrial Tribunal shall not entertain any appeal under determination and assessment of dues by the employer, unless he has deposited 25% of the amount due from him with the Social Security Organisation, as determined by an officer.
Penalties and compounding of offenses: Stringent fines and penalties have been prescribed. Provision for compounding of offences for a sum of 50% of the maximum fine stipulated for an offence punishable with fine only and for 75% of the maximum fine stipulated for an offence punishable with imprisonment up to one year or with fine, except wherein any offences are repeated within three years from the first violation.
Parliament passes the Industrial Relations Code, 2020
The Parliament passed the Industrial Relations Code, 2020 (IRC 2020) on 23 September 2020. However, it awaits the assent of the President of India and shall come into effect as the Central Government may, by notification in the official gazette appoint.
The IRC 2020 amalgamates the following labour laws:
- The Trade Unions Act, 1926;
- The Industrial Employment (Standing Orders) Act, 1946; and
- The Industrial Disputes Act, 1947.
Key highlights of the IRC 2020
- Applicability: The provisions of the IRC 2020 would not be applicable to an establishment if the threshold limits of employees’ fall below the threshold limits provided under various labour laws.
- Uniform definitions: The IRC 2020 prescribes a comprehensive definition of wages. In addition, a person employed in a supervisory capacity drawing wages more than INR 18,000 per month would be excluded from the definition of ‘worker’. The Central Government may also amend this threshold through notifications, from time to time.
Uniform definitions have been provided, which aim to remove ambiguity and provide for ease and transparency.
- Threshold limit of layoff and retrenchment increased: The threshold limit for layoff and retrenchment of the workers or shut down of the establishment has been increased to 300 or more. The earlier limit varied from 100 or more, in various States. This has been introduced for the purposes of employers obtaining prior permission of the appropriate Government for such lay-off and retrenchment. Accordingly, the requirement for obtaining prior permission from the appropriate Government has been removed for establishments having less than 300 workers.
- Introduction of negotiating union and negotiating counsel: In case of an establishment, having a trade union, there shall be a negotiating union for negotiating with the employer of the industrial establishment on such matters as may be prescribed. The threshold limit for such negotiations is said to be 51% i.e., at least 51% of the workers should support such negotiations to be recognised as sole negotiations under the IRC 2020.
In case the threshold limit is not met, the establishment is entitled to create a Negotiation Council consisting of the representatives of those trade unions that have the support of at least 20% of the total workers.
- Introduction of Grievance Redressal Committees: Every industrial establishment employing 20 or more workers will have one or more Grievance Redressal Committees for the resolution of disputes arising from individual grievances.
- Threshold for applicability of standing orders increased: Any industrial establishment in which 300 or more workers are employed, or were employed, on any day of the preceding 12 months, is required to have standing orders certified from the labour authorities. Earlier, the threshold limit was 100 or more workers. Such certification procedure is required to be completed within 60 days from the receipt, failing which the draft standing orders/ modifications are deemed to have been certified. The Central Government has been casted upon with the responsibility of preparing model standing orders.
- Mapping of standing orders: The existing standing orders of an industrial establishment are required to be mapped in accordance with the provisions provided in the IRC 2020.
- Fixed-term employees to be eligible for gratuity: IRC 2020 brings in a provision for fixed-term employees that would be eligible for gratuity, upon rendering service for a period of one year.
- Investigation or inquiry into complaints to be completed in 90-days: In case an employer suspends a worker, pending investigation or inquiry into complaints or charges of misconduct, such investigation or inquiry shall be completed within a period of 90-days from the date of suspension.
- Provisions for strikes: A 60-day notice to be provided by a person employed in an industrial establishment before going on a strike is mandated.
- Introduction of worker re-skilling fund: The Government will set up a worker re-skilling fund, wherein, the employer is required to contribute 15-days of wages last drawn by the worker before retrenchment. This fund is required to be credited within 45-days of retrenchment of the worker by crediting into the worker’s account. This provides for an additional compensation apart from retrenchment compensation.
- Penalties and compounding of offenses: Stringent fines and penalties have been prescribed. IRC 2020 provides for compounding of offences for a sum of 50% of the maximum fine stipulated for an offence punishable with fine only and for 75% of the maximum fine stipulated for an offence that is punishable with imprisonment up to one year or with fine, except in case of offences repeated within three years from the first violation.
Parliament passes the Occupational Safety, Health and Working Conditions Code, 2020
The Parliament passed the Occupational Safety, Health and Working Conditions Code, 2020 (OSHWCC 2020) on 23 September 2020. However, it awaits the assent of the President of India and shall come into effect as the Central Government may, by notification in the official gazette appoint.
The OSHWCC 2020 amalgamates the following labour laws:
- The Factories Act, 1948;
- The Mines Act, 1952;
- The Dock Workers (Safety, Health and Welfare) Act, 1986;
- The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996;
- The Plantations Labour Act, 1951;
- The Contract Labour (Regulation and Abolition) Act, 1970;
- The Inter-State Migrant workmen (Regulation of Employment and Conditions of Service) Act, 1979;
- The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955;
- The Working Journalist (Fixation of Rates of Wages) Act, 1958;
- The Motor Transport Workers Act, 1961;
- Sales Promotion Employees (Condition of Service) Act, 1976;
- The Beedi and Cigar Workers (Conditions of Employment) Act, 1966; and
- The Cine Workers and Cinema Theatre Workers Act, 1981.
Key highlights of the OSHWCC 2020
- Uniform electronic registration: Centralised/ uniform electronic registration for the establishments has been introduced to promote the ease of doing compliance.
- Common licence: Provision for common licence with respect to a factory, industrial premises for beedi and cigar work, and for engaging contract workers or any combination thereof has been introduced.
- Validity of contractor’s licence increased: The validity of licence to be undertaken by a contractor increased to five years.
- Uniform definitions: Uniform definitions have been provided to avoid any conflict.
- Common registers and records: Provision of common registers and records has been introduced for ease of compliance.
- Threshold limit for coverage of premises as factory enhanced: Definition of a factory has been provided to mean whereon 20 or more workers are working, or were working on any day of the preceding 12 months in any part of which a manufacturing process is being carried on with the aid of power and whereon 40 or more workers are working, or were working, on any day of the preceding 12 months in any part of which a manufacturing process is being carried on without the aid of power. The earlier definition included 10 workers with the aid of power and 20 workers without the aid of power.
- Threshold for applicability of contract labour provisions increased: The applicability of the OSHWCC 2020 to engage contractual labour has been increased to 50 contractual workers. Earlier many State jurisdictions had increased the threshold limit to 50 contract workers, but there is now uniformity across State jurisdictions.
- Obligation of principal employer for the contractor: Liability imposed on the principal employer of an establishment who has employed contract labour through a contractor who has not himself obtained a licence. With the imposition of this obligation, the compliance regime will further strengthen.
- Experience certificate to contract workers: The contractor is required to issue experience certificate to every contract worker, detailing the work performed by such contract labour.
- Employer mandated to require annual health examination: The employer has been mandated to provide such annual health examination to such employees of such age or class of employees or such class of establishments as the Government may prescribe.
- Issuance of employment letters to the employees: Employers have been mandated to issue employment letters to the employees. In addition, if an employee has not been issued such appointment letter on or before the commencement of the OSHWCC 2020, he/ she shall be issued such appointment letter within three months. This would promote formulisation of employment.
- Night shift for women employee: Women employees are entitled to be employed in all establishments for all types of work and may be employed for night shifts with their consent, subject to conditions relating to safety, holidays, working hours or any other conditions prescribed by the Government.
- Duties of the employees: Certain duties have been mandated on employees, such as taking reasonable care for their own health and safety and that of other persons, comply with the safety and health requirements specified in the standards, cooperate with the employer in meeting the statutory obligations, etc.
- Constitution of National Occupational Safety and Health Advisory Board and State Occupational Safety and Health Advisory Board: Provision prescribed for the Constitution of National Occupational Safety and Health Advisory Board by the Central Government and constitution of State Occupational Safety and Health Advisory Board by the State Government.
- Provision of common crèche facility for establishments: The OSHWCC 2020 allows the establishment to avail common crèche facility of the Central Government, State Government, municipality or private entity or provided by Non-Governmental organisation or by any other organisation or group of establishments that may pool their resources to set up a common crèche in the manner they may agree for such purpose.
- Definition of ‘inter-State migrant worker’ widened: The definition of ‘inter-State migrant worker’ has been widened to include a person who has come on his own from one State and obtained employment in an establishment of another State or has subsequently changed the establishment within the destination State. The earlier definition was quite restrictive and provided that a person who is recruited through a contractor in one State for employment in another State, to be an ‘inter-state migrant worker’.
- Toll-free helpline to the inter-State migrant workers: Government is required to provide facility of toll-free helpline to inter-State migrant workers in the manner prescribed. This would be a welcome step considering the problems faced by inter-State migrant workers during COVID-2019.
- Limitation of filing compliant by the inspector: It prescribes that the Courts are not to take cognisance of any offence, unless the complaint is made within six months of the date on which the alleged commission of the offence came to the knowledge of the Inspector-cum-Facilitator.
Penalties and compounding of offenses: Stringent fines and penalties have been prescribed. Provision for compounding of offences for a sum of 50% of the maximum fine stipulated for an offence punishable with fine only and for 75% of the maximum fine stipulated for an offence that is punishable with imprisonment up to one year or with fine, except wherein any offences are repeated within three years from the first violation.
Parliament passes the Foreign Contribution (Regulation) Amendment Bill, 2020
Both the houses of parliament have passed the Foreign Contribution (Regulation) Amendment Bill, 2020 (Bill). The Bill amends the Foreign Contribution (Regulation) Act, 2010 (Act), which regulates the use and acceptance of foreign contribution by individuals and organisations. The amendments in the Bill shall come into effect on such date as the Central Government may specify by a notification in the official gazette. The key amendments in the Bill are summarised below.
- Prohibition on acceptance of foreign contribution by certain categories of persons: The Act prohibits certain categories of persons such as candidates for election, judges and government servants from accepting foreign contributions. The Bill proposes to add ‘public servant’ as defined under the Indian Penal Code, 1860 to this list of prohibited categories of persons.
- Prohibition on transfer of foreign contribution to other person: The Act prohibits the transfer of foreign contribution to any other person, unless such other person is also registered, or had obtained prior permission under the Act. The Bill proposes to completely prohibit the transfer of foreign contribution to any other person.
- Reduction in use of foreign contribution for administrative purposes: The Act provides that without prior approval of the Central Government, a person who receives foreign contribution shall not defray more than 50% of the contribution received in a financial year, towards administrative expenses. The Bill proposes to reduce it to 20%.
- Restriction on utilisation of foreign contribution: The Bill proposes that where the Central Government on the basis of any information or report, and after holding a summary inquiry, has reason to believe that a person who has been granted prior permission has contravened any provisions of the Act, the Central Government may, pending any further inquiry, direct that such person shall not utilise the unutilised foreign contribution or receive the remaining portion of foreign contribution without its prior approval.
- Aadhaar number for registration: The Bill proposes that the Central Government may require that any person who seeks prior approval or makes an application for renewal of certificate, shall provide the Aadhaar number of all its office bearers or directors or other key functionaries as the identification document. In case of a foreigner, they shall provide a copy of the passport or Overseas Citizen of India card.
- Suspension of registration: The Act provides that the Government may suspend the registration of a person for a period not exceeding 180 days. The Bill proposes that the registration may be suspended for a period of 180 days or such further period, not exceeding 180 days, as may be specified.
- Surrender of certificate: The Bill proposes to add a new provision, wherein the Central Government may permit the surrender of the certificate granted on receiving a request from a person. Provided that the Central Government after making an inquiry is satisfied that such person has not contravened any of the provisions of the Act, and the management of foreign contribution and assets (if any) created out of such contribution has been vested in the authority.
- Renewal of certificate: The Bill proposes that before renewing the certificate, the Central Government may make such inquiry, as it deems fit, to satisfy itself that such person has fulfilled all conditions specified in sub-section (4) of section 12 of the Act, such as the person is not fictitious or benami, etc.
- Foreign contribution through scheduled bank: The Act provides that a registered person must accept foreign contribution only in a single branch of a scheduled bank specified by such person. Such person may open more accounts in other banks to utilise the contribution. The Bill proposes to amend it to state that the foreign contribution must be received only in an account designated as the ‘FCRA Account’ by the bank, which shall be opened for the purpose of remittances of foreign contribution in such branch of the State Bank of India at New Delhi, as the Central Government may specify by notification. Such person may also open another FCRA Account in any scheduled bank for keeping or utilising the foreign contribution received. Every person who makes an application for grant of certificate of registration shall be required to mention the details of the FCRA Account in the application.
PwC comments: The proposed amendments will tighten the framework for the acceptance and utilisation of foreign contribution.
Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 notified
The Government of India notified the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) on 29 September 2020 after receiving the President of India’s assent. The TOLA seeks to enact legislative amendments in direct and indirect tax laws, which were introduced by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ordinance) as a COVID-19 pandemic relief measure. The TOLA also legislates subsequent relaxations/ notifications/ amendments announced by the Government and the Faceless Assessment Scheme introduced by the Government, as part of its vision for a ‘Transparent Taxation – Honouring the Honest’.
In line with the introduction of the Faceless Assessment Scheme in the TOLA, the Central Board of Direct Taxes (CBDT) has also launched the Faceless Appeal Scheme (Scheme) on 25 September 2020 by issuing appropriate notifications in this regard.
Extended due dates for tax compliances
The TOLA gives legislative effect to the relaxation in due dates for various tax compliances announced by the Government. The following is a snapshot of the extended due dates:
Relaxation in computation of interest
In case of small taxpayers whose self-assessment tax liability does not exceed INR 100,000, the benefit of the extended due date shall be available for computation of interest (if any) under section 234A of the Act. Depending on the outstanding tax liability, post advance tax payment, even large taxpayers could avail this benefit.
In case of an individual being resident in India who is a senior citizen and has no income under the head ‘profit and gains of business & profession’, any self-assessment tax paid by such individual for FY 2019-20, would be treated as advance tax discharged within the original due date of filing of return, i.e., 31 July 2020.
For delayed payments of advance tax, self-assessment tax, regular tax, TDS, TCS, equalisation levy, securities transaction tax (STT), commodity transaction tax due between 20 March 2020 and 29 June 2020 and paid on or before 30 June 2020, reduced interest rate at 9% per annum shall apply. Further, immunity from penalty and prosecution has been granted for the delay relating to this period.
Amendment to deemed residency provisions
An individual is regarded as resident in India in any FY, if he stays in India for 182 days or more during the FY; or his stay in India is 60 days or more during the previous year and 365 days or more in the preceding four FYs. However, relaxation is provided to an Indian citizen or a person of Indian origin, who being outside India, comes to India for the purpose of visit, wherein the 60 days threshold as mentioned above is replaced by 182 days.
The Finance Act, 2020 amended the provisions of section 6 of the Act –
- to reduce 182 days to 120 days for an Indian citizen or a person of Indian origin, having total income, other than the income from foreign sources, exceeding ₹1.5m during the FY.
- inserted clause (1A) to provide that a citizen of India having total income, other than the income from foreign sources, exceeding ₹1.5m during the FY will be deemed to be a resident of India if he is not liable to pay tax in any country outside India on account of his domicile, residence, or any other criteria of a similar nature.
- defined term “income from foreign sources” as income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).
However, there were certain ambiguities in the amended provisions. In order to provide clarity to the individual taxpayers, TOLA has made the following amendments to the provisions of section 6 of the Act with effect from FY 2020-21 –
- The reduced number of days to determine residency will apply only to a citizen of India, or a person of Indian origin who, being outside India, comes on a visit to India.
- The above-mentioned deeming fiction to determine the residency of an individual will not apply to an individual who is resident in India otherwise.
- For computation of total income, in case of deemed residency provisions, income that is deemed to accrue or arise in India should be factored for determining the ₹1.5m threshold.
Faceless Assessment Scheme
On 13 August 2020, the Prime Minister launched the platform for ‘Transparent Taxation – Honouring the Honest’ to make the tax system ‘Seamless, Painless and Faceless’. Subsequently, the Government issued a series of notifications to implement the faceless assessment scheme. TOLA has legislated these provisions vide a new section 144B, which has been inserted with effect from 1 April 2021. The provisions of section 144B of the Act are mostly in line with the procedure notified earlier. However, some additions have made to these provisions, as follows –
- Additional procedures have been laid down in the context of faceless assessment when a taxpayer has opted for dispute resolution panel (DRP) proceedings.
- The authorities to be assigned for assessment unit, verification unit, technical unit and the review unit have been specified.
- Every notice, or any order, or any other communication shall be delivered to the taxpayer by way of –
- Placing an authenticated copy in the taxpayer’s registered account; or
- Sending an authenticated copy to the registered email address of the taxpayer or his authorised representative; or
- Uploading an authenticated copy on the taxpayer’s mobile app (taxpayer downloads and installs an application software of the Income-tax Department developed for mobile devices, on its registered mobile number).
In addition, new provisions have been inserted under the Act to widen the scope of the faceless mechanism to conduct other income-tax proceedings, which inter alia covers transfer pricing proceedings, DRP, rectifications, giving effect to an appeal order, TDS proceedings, etc. In this regard, the following sub-sections/ sections have been inserted in the Act, which would be effective from 1 November 2020 –
- Transfer pricing [section 92CA(8)]
- Jurisdiction of income-tax authorities [section 130]
- Collection of information [section 135A]
- Inquiry or valuation [section 142B]
- DRP [section 144C(14B)]
- Reassessment [section 151A]
- Rectification of mistakes, amendments and issuance of notice of demand or intimation of loss [section 157A]
- Issuance of lower/ nil withholding certificate, proceedings under section 201 of the Act, recovery of taxes [section 231]
- Appeal to the Tribunal [section 253(8)]
- Revision of orders [section 264A]
- Giving effect to an order of Commissioner of Income-tax (Appeals) [CIT(A)], Tribunal, High Court, Supreme Court, any other order [section 264B]
- Prosecution and compounding [section 279(4)]
- Granting approval or registration [section 293D]
The Central Government has been empowered to make a scheme, by notification in the official gazette, for these proceedings to impart greater efficiency, transparency and accountability.
However, the penalty proceedings remain out of this scheme. The amendments in this regard are expected in due course.
Faceless Appeal Scheme
The Finance Act, 2020 introduced provisions under section 250 of the Act empowering the Central Government to introduce a scheme for the purposes of disposal of appeal by the CIT(A) so as to impart greater efficiency, transparency and accountability. Thereafter, the Prime Minister while launching the platform for ‘Transparent Taxation – Honouring the Honest’ had announced launching of faceless appeal on 25 September 2020.
In line with the above, the CBDT has launched5 the Scheme, which provides for disposal of all appeals by the CIT(A) in a faceless manner, subject to certain exceptions.
For the purpose of this Scheme, Faceless Appeal Centres would be set up. The centre would comprise of a National Faceless Appeal Centre (NFAC), Regional Faceless Appeal Centres (RFAC) and Appeal units, to conduct the e-appeal proceedings.
As per the Scheme, there will be no physical interface between the taxpayers or authorised representative and the tax authorities. However, if need be, a request for personal hearing exclusively via electronic mode can be made to present the case. The request would be accepted only if it is approved by the Chief Commissioner or the Director General, in charge of the RFAC.
The Scheme also prescribes the procedure for automated allocation of appeal; admission of appeal; filing of additional grounds, admitting additional evidence; e-communication of the appellate order, etc. It also provides the procedure for penalty proceedings for non-compliance of any notice, direction or order as well rectification proceedings. An independent review of the draft appeal order is mandated before such order is finalised and communicated to the appellant.
The Principal Chief Commissioner or the Principal Director General, in charge of the NFAC has been empowered, subject to CBDT approval, to specify the format, mode, procedure and processes for effective functioning of the Faceless Appeal Centres set-up under this Scheme.
Centralisation of powers for conducting survey proceedings
On 13 August 2020, the CBDT issued an order under section 119 of the Act to ensure that survey proceedings under section 133A of the Act, being an intrusive action, be conducted with utmost responsibility and accountability.
The CBDT entrusted Directorates of Investigation (Investigation Wing) for the investigation wing and Principal Chief Commissioner of Income-tax (TDS)/ the Chief Commissioner of Income-tax (TDS) for TDS charges with an “only and exclusively” right to act as an income-tax authority, and take over these powers from the present jurisdictional income-tax authority.
New procedure for registration/ re-registration of charitable trusts and institutions extended
The Finance Act, 2020, introduced a new procedure for registration of all existing and new charitable trusts and institutions (under section 12AB of the Act).
To continue claiming exemption, existing registered trusts and institutions were required to apply for fresh registration within three months from the date this section is made effective. Initially, the section was effective from 1 June 2020, which was later deferred to 1 October 2020.
To provide further relief to taxpayers given the continuing pandemic, the applicability of new provisions for registration/ re-registration under section 12AB have been deferred to 1 April 2021. Related sections [viz. 10(23C), 11, 12A, 12AA, 56(2), 115BBDA, 115TD and 253)] under the Act have been re-modified such that pre-amended provisions (i.e. provisions prior to amendments made vide the Finance Act, 2020) will continue.
Charitable trusts and institutions seeking fresh registrations until 31 March 2021 can make an application under the existing provisions of section 12AA of the Act. From 1 April 2020, the application for registrations will have to be made under section 12AB of the Act. Registered trusts and institutions would be required to apply for re-registration under section 12AB of the Act in FY 2021-22 on or before 30 June 2021.
Similarly, amendments made vide the Finance Act, 2020, in sections 35 and 80G of the Act for intimation, filing statement before the income-tax authorities and furnishing certificates to donors, etc., with effect from 1 June 2020 are deferred to 1 April 2021.
Reduction in rates of TDS and TCS
The CBDT, in May 2020, provided relaxation by reducing the TDS and TCS rate by 25% for payments made to residents for the period 14 May 2020 to 31 March 2021. To give the necessary effect to this in the legislation, sections 197B (for TDS) and sub-section (10A) to section 206 (for TCS) of the Act have now been inserted and made effective from 14 May 2020.
The CBDT has clarified that there shall be no reduction in rates where the tax is required to be deducted or collected at higher rates due to non-furnishing of PAN/ Aadhaar. However, as per the amendment in the TCS provisions, the higher rate of 1% under section 206C(1H) of the Act in case of non-furnishing of PAN/ Aadhaar would reduce to 0.75%.
Extension of the Vivad se Vishwas Amnesty Scheme
The Finance Minister announced the extension of time-limit for payment under the Vivad se Vishwas Amnesty Scheme (VsV Scheme) until 31 December 2020 (from 30 June 2020) without paying any additional amount of 10%, on 13 May 2020. In addition, the compliances falling due under the VsV Scheme during the period 20 March 2020 to 30 December 2020 was extended to 31 December 2020. The necessary legislative amendment has now been notified under the VsV Scheme to give effect to the above-mentioned amendments.
Power to remove difficulties
The Central Government has been empowered to remove difficulties, if any, that arise in giving effect to the provisions of TOLA, within two years from the end of the month in which TOLA has received the assent of the President.
PwC comments: The TOLA has provided certainty to taxpayers on various relaxations announced by the Government, especially those announced in the press conference that did not form part of the Ordinance. The TOLA and the Faceless Appeal Scheme has also expanded the scope of a ‘technology-enabled administration’ of tax proceedings. This move is a bold step towards digitisation and an insight into the Government’s vision and road map for tax administration in the future.
CBDT issues guidelines on applicability of TDS on e-commerce operators and TCS on sale of goods
Section 206C of the Income-tax Act, 1961 (Act) provides for collection of tax at source (TCS) on the business of trading in alcohol, liquor, forest produce, scrap, etc. The Finance Act, 2020, had widened the scope of section 206C of the Act to, inter alia, provide for TCS on sale of goods at the rate of 0.1% on the value exceeding ₹5m in any previous year, subject to specified conditions being met.
Section 194-O of the Act was also introduced vide Finance Act, 2020. This section provides that where the sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform, such e-commerce operator is required to deduct tax at source (TDS). Such deduction shall be done at the rate of 1% on the amount of sale or services, at the time of credit or payment to the e-commerce participant, whichever is earlier.
Both the above provisions will be effective from 1 October 2020.
Based on representations received, the Central Board of Direct Taxes (CBDT) has issued guidelines exercising the powers given in the respective sections.
- Issues addressed in the Circular
- Guidelines applicable for both sections 206C(1H) and 194-O of the Act
- Guidelines applicable to section 194-O of the Act
- Guidelines applicable to section 206(1H) of the Act
GST Council extends compensation cess indefinitely beyond June 2022; existing return filing system to continue till 31 March 2021; and proposes enabling of auto-population of Form GSTR-3B from Form GSTR-1
The forty-second meeting of the Goods and Service Tax Council (GST Council) was held on 5 October 2020 via video conferencing and was chaired by the Union Finance and Corporate Affairs Minister, Ms. Nirmala Sitharaman. The GST Council discussed various aspects pertaining to compensation cess, the future roadmap for GST compliance and incremental introduction of the proposed new GST return system into the current system of filing returns.
The key discussions by the GST Council as per Press Release are summarised below.
Compensation to States
- Levy of compensation cess to be extended beyond June 2022 for such period as may be required.
- Compensation of ₹200bn to be released to the States as on 5 October 2020 towards loss of revenue during financial year (FY) 2020-21. An amount of about ₹250bn towards Integrated GST of FY 2017-18 to be released.
Auto-filled Form GSTR-3B
- The GST Council has approved the roadmap for GST return filing, incorporating features of the new GST return system (in furtherance to the recommendations stipulated in the thirty ninth GST Council meeting). This is expected to reduce the compliance burden significantly.
- Under the new framework, filing of Form GSTR-1 by the taxpayer and his/ her suppliers within the due date would enable the following:
- View the input tax credit (ITC) available in his/ her electronic credit ledger from all sources prior to the due date for payment of tax; and
- Enable the system to auto-populate Form GSTR-3B.
In order to achieve this, Form GSTR-1 would have to be mandatorily filed before Form GSTR-3B with effect from 1 April 2021.
- Auto-population of the taxpayer’s liability from his/ her Form GSTR 1 would be effective from 1 January 2021.
- Auto-population of ITC based on the suppliers’ Form GSTR-1 through the newly developed facility in Form GSTR-2B according to the following timelines for:
- Monthly filers from 1 January 2021.
- Quarterly filers from 1 April 2021.
- Due date for furnishing quarterly Form GSTR-1 for taxpayers required to file returns on a quarterly basis would be the thirteenth of the month succeeding the quarter effective from 1 January 2021.
- The present system of filing monthly return in Forms GSTR-1 and GSTR-3B to be extended till 31 March 2021.
Relaxation for small taxpayers
- The earlier recommendation by the GST Council for small taxpayers having aggregate turnover less than ₹0.05bn to file returns on a quarterly basis (however, payments are to be made on monthly basis) would be implemented from 1 January 2021.
- For the first two months of the quarter, small taxpayers would have the option to pay 35% of the net cash liability of the last quarter using an auto-generated challan.
Harmonised System of Nomenclature requirements
With effect from 1 April 2021, the requirements for Harmonised System of Nomenclature (HSN) in Form GSTR-1 would be revised as follows:
- Six-digit HSN code for suppliers having aggregate turnover above ₹0.05bn;
- Four-digit HSN code for business-to-business suppliers having aggregate annual turnover upto ₹0.05bn; and
- Government empowered to notify eight-digit HSN for notified class of supplies by all taxpayers.
- Provision for furnishing of Nil Form CMP-08 through SMS.
- Refund to be paid/ disbursed in a validated bank account linked with the Permanent Account Number (PAN) and Aadhaar of the registrant with effect from 1 January 2021.
- Satellite launch services supplied by Indian Space Research Organisation, Antrix Corporation Limited and New Space India Limited would be exempted to encourage domestic launching of satellites.
Ready reckoner for effective dates
PwC comments: While auto-population of Form GSTR-3B is a welcome change aimed at increasing the ease of doing business and reducing the compliance burden of taxpayers, its seamless implementation would vastly increase the trust and confidence in the system. The changes in HSN requirement would add to the existing obligation (along with e-invoicing), requiring changes in the Enterprise Resources Planning systems for companies to work upon.
Government relaxes deadlines for e-invoicing; prescribes 100% security for imports under Foreign Trade Agreement where inquiry or verification is initiated
Considering that 30 September 2020 was a statutorily significant deadline for various goods and services tax (GST) and pre-GST compliances, and the introduction of the e-invoicing mechanism from 1 October 2020, the Government has provided certain relaxations.
The relaxations provided by the Government have been summarised below.
Relaxation and amendments relating to e- invoicing
Extension of exemption for export freight
Exemption for service provided by the transportation of goods by an aircraft or vessel from a customs station of clearance in India to a place outside India is extended from 30 September 2020 to 30 September 2021.
Time limit for compliances under pre-GST regime extended
The time limit for completion of certain compliances such as the issuance of Show Cause Notice (SCN), filing responses to SCN and appeals, etc., under the following statutes is extended to 31 December 2020:
- The Central Excise Act, 1994;
- The Customs Act, 1962;
- The Customs Tariff Act, 1975; and
- Chapter V of the Finance Act, 1994.
Guidelines for provisional assessment amended to align with with Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (‘CAROTAR, 2020’)
In cases where the importer requests provisional assessment when an inquiry or verification is initiated under CAROTAR 2020, 100% of the differential duty has to be furnished as security. This applies to all class of importers, including Authorised Economic Operators.
PwC comments: The extension of deadlines for filing the annual return and audit report was much awaited and a great relief, considering that many companies were also gearing up for the e-invoicing deadline of 1 October. While the industry was also hoping for the deferral of the e-invoicing mechanism’s implementation, the Government has only provided relaxation for a month. Nonetheless, this is a welcome move by the Government, as it provides a breather for the industry to manage its statutory compliances.
Recommendations of the 42nd GST Council Meeting
Union Finance Minister announces stimulus to boost demand in the Economy
Chamber's Repository for all the Notifications and Guidelines pertaining to the COVID-19 outbreak, the resulting lockdown & unlock S.O.P.
Representations sent by the Chamber
REPRESENTATION on AIR CARGO RESTRICTIONS – NEGATIVE IMPACT ON KERALA
REPRESENTATION on Challenges faced by Companies in the filing of Income Tax Returns
REPRESENTATION on Concerns regarding the proposed amendments to the Kerala Police Act
From the Research Wing....
- The Chamber submitted a representation to the Sixth Kerala State Finance Commission highlighting the need for reforms in Local Governance.
- The Chamber submitted a representation to Shri Hardeep Singh Puri, Hon’ble Minister of State for Civil Aviation (Independent Charge) on Air Cargo Restrictions imposed by the Union Government and the need to restore status quo ante as far as the airports in Kerala are concerned.
- The Chamber’s Research Wing is preparing the a submission on the ‘Remission of Duties and Taxes on Export Product (RODTEP).’ Members are requested to communicate their suggestions to the Chamber at the earliest.
- The Chamber’s Research Wing is preparing a representation on the ‘Ease of Doing Business in Kerala.’ Members are requested to fill in this questionnaire before 7th November.
POLICY DEVELOPMENTS CORNER
- The Central Government has extended the due date for furnishing of Income Tax Returns and Audit Reports to 31st January, 2021. Click here for more details.
- The Industrial Relations, Social Security & Occupational Safety & Health Codes 2020 received Presidential Assent. The Codes will come into force from a date to be notified by the Central Government.
Exclusive EXIM Statistics
Statistical Reports on Exports and Imports through the Cochin Port.
The Cochin Chamber of Commerce and Industry publishes statistical reports on Exports and Imports through the Cochin Port on a monthly basis followed by a Consolidated Annual Report at the end of each calendar year. The reports on exports are classified as commodity wise and pertain to the following commodities:
- Cotton Goods
- Seafood and
- Coir and coir products
Details on all other commodities that do not fall under the above-mentioned heads are carried as the ‘Miscellaneous Report’. Customized reports will also be available according to customers requirement.
We have several members in the export/import fraternity subscribing to these reports on a monthly basis and from the feedback received they are immensely benefited by the same.
We are confident that our reports will be of help to your Company in staying one step ahead of your competitors in business. A sample of the report is attached herewith for your reference. Also attached is the ‘Subscription Form’ to enable you to subscribe to the report should you want to do so.
Should you have any queries please feel free to contact Mr. T.M. Padbhanabhan (8921695456).
For more details, visit Export-Import Statistics