Insolvency board enforces stringent tests for reviving defaulting companies
The Insolvency and Bankruptcy Board of India (IBBI) has amended its rules governing lenders who invest in bankrupt companies. Promoters or any party proposing a rescue plan for a sinking company will be subject to strict tests of creditworthiness and credibility. The rescue plan must provide details explaining the background of the promoter, including any convictions, disqualifications, criminal proceedings, and the categorization of wilful defaulters.
This move puts greater responsibility on the professionals working out the resolution and the committee of creditors, to ensure that defaulting companies do not fall back into the hands of their original promoters. Lenders have long feared that promoters regaining control of defaulting entities cast a doubt on the credibility of the lending process.
RBI clarifies linking Aadhaar to bank accounts mandatory
Putting an end to any legal confusion, the Reserve Bank of India (RBI) recently issued a clarification on the linking of Aadhaar to bank accounts.
In its statement, the RBI announced that the linkage of Aadhaar with bank accounts is mandatory under the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017 – published in the government Gazette on June 1.
Accordingly, existing bank account holders must furnish their Aadhaar number by December 31, 2017; failure to do so will invalidate the bank account. It is also mandatory to link one’s Permanent Account Number (PAN) with Aadhaar.
Only small accounts – where the aggregate of all credit in a financial year does not exceed US$1,538 (Rs 100,000), withdrawal and transfers in a month do not exceed US$154 (Rs 10,000), and the account balance at any point of time does not exceed US$769 (Rs 50,000) – fall outside the purview of this linkage requirement.
GST relief for exporters, SMEs among key GST Council decisions from October 2017
A host of concerns raised by exporters and small businesses over the Goods and Services Tax (GST) refund mechanism and increased compliance burden were addressed by the GST Council meeting on Friday.
For exporters, the finance minister, Arun Jaitely, confirmed that refund of GST for July will be secured by October 10, and for August by October 18. Further, exporters will have access to a digital wallet by April next year, in which a nominal amount will be deposited for tax credit purposes. Until then, exporters will be subject to a nominal GST of 0.1 percent.
For small businesses, the option to file returns and pay taxes by quarter will ensure ease of compliance – instead of the monthly requirement. Nonetheless, the GST-3B form will have to be filed monthly till December this year.
Further, the composition scheme will be extended to businesses with a turnover of up to US$150,000 (Rs 1 crore), instead of the previous US$110,000 (Rs 70 lakh) limit.
In other decisions, the GST rates were revised for selected goods and services.
CBEC announces new Drawback Duty rates
Recently, the Central Board of Excise and Customs (CBEC) announced new drawback duty rates. Drawback duty is a provision that allows for the refund of customs and excise duties paid on the imported raw material used in the manufacturing of export goods.
Post July 1, 2017, exporters in India were briefly allowed to claim a higher rate of drawback duty on exported items. This was to facilitate an easy transition to the Goods and Services Tax (GST) system.
However, this relaxation will be available only until September 30, 2017, and subject to the condition that exporters submit a certificate declaring that no Input Tax Credit (ITC) of CGST/IGST has been claimed on imports.
After September 30, 2017, the GST paid on inputs of exported goods will not be covered under the drawback duty provision under the Customs Act of 1962. Instead, it will have to be claimed as refund under provisions in GST law.
GST cess hike for cars, rate reduction for common items, extension of return filing
The 21st GST Council’s meeting on September 9 resulted in the increase in cess for mid-size, large, and sports utility vehicles (SUVs) by 2 percent, 5 percent, and 7 percent, respectively. The Council opted for this segregated policy instead of the 10 percent increase effected by the GST regime. Overall tax incidence for mid-size cars will now be 45 percent, large cars – 48 percent, and SUVS – 50 percent.
On the other hand, the Council slashed GST rates for around 30 items of common use. These include: walnuts, cleaning broom, custard powder, idli and dosa batter, rubber bands, raincoat, corduroy fabric, computer monitors, and table and kitchenware, among others. Khadi fabrics sold through Khadi and Village Industries Commission (KVIC) will be exempt from GST.
The GST Council also extended the return filing deadline: the GSTR1, which was to be filed by September 10, can be filed till October 10 by smaller businesses and large ones by October 3. This is because of technical glitches in the GSTN portal.
Supreme Court rules individual privacy as fundamental right
On August 24, the nine-judge bench of the Supreme Court (SC) of India upheld the right to individual privacy as a fundamental right under the Constitution.
The landmark verdict came on an array of petitions challenging the federal government’s move to make Aadhaar mandatory for availing benefits of various government schemes, and extending its provisions for several other essential activities, such as opening bank accounts, making financial transactions above US$780 (RS 50,000), securing loans, and filing tax returns.
Though the SC ruling does not overturn the constitutional validity of Aadhaar Act, it will play an important role in a separate court hearing that will examine the validity of Aadhaar on the principles of the right to privacy. Separately, the judgment does not have a direct or immediate effect on data sharing as India does not have a data privacy law. However, the decision does provide solid grounding for any future data privacy policies in India.
The impact of the SC ruling is evolving. Businesses should monitor the issue closely to understand how it impacts Aadhaar-related transactions, as well as data privacy rules.
GST Council finalizes e-way bill
At its 20th meeting held on August 5, the Goods and Services Tax (GST) Council approved the electronic way (e-way) bill, which mandates pre-registration of goods before transportation.
The e-way bill, which is likely to come into force by October 1, 2017, would be applicable for consignments worth more than US$780 (Rs 50,000) only. The Council has decided that the e-way bill will not apply to the inter-city movement of goods within 10 kilometers distance, as well as on items exempted from the GST.
The introduction of the e-way bill is expected to significantly reduce wait times at checkpoints, and will streamline the transportation process. The bill would be valid for a period between one day and 20 days, depending on the distance to be traveled.