The income tax (I-T) has barred all Chartered Accountants (CAs) from valuing shares of closely-held companies.
Earlier, the fair market value of unlisted equity shares was calculated at the option of the company on either the book value on the valuation date or by the discounted cash flow method. Calculated by a merchant banker or a CA.
However, the Central Board of Direct Taxes has removed the CAs from the list of authorised professionals in this regard. From Thursday, only a merchant banker may do this. This change brings this provision at par with Rule 3 of the I-T Act, which says only a merchant banker may calculate the value of unlisted shares issued under Employee Stock Ownership schemes.
Interestingly valuation of shares may still be done by CAs under the Companies Act.
So, unlisted shares or unlisted companies may be sold or valued by a CA’s valuation but, for I-T purposes, it will require a merchant banker’s valuation report.
It is expected that the government is considering a qualifying course for valuation; only those who clear it may do valuation.
The GST Council on Friday finally approved single monthly return with an aim to boost collections and compliance. The new system is scheduled to be implemented in next six months.
The Goods and Services Tax (GST) Council on Friday finally approved single monthly return with an aim to boost collections and compliance. The new system is scheduled to be implemented in next six months — but could take more time. “The Council has approved the new system of GST return but the software will take six months to get fully operationalised,” Finance Minister Arun Jaitley said.
However, from the preliminary information provided by the GST Council, the new system will be implemented in three phases. “While the initiative of GST return simplification appears to have crossed another milestone – the 3 Phase implementation plan of the revised returns format or procedures do not bring out the exact comfort that industry has sought so far,” Indirect tax expert Jigar Doshi of SKP Business Consulting told FE Online. He explained how the new single return filing system is planned for implementation.
The new return filing process would be introduced in three phases:
Phase 1: First six months
The current process of filing GSTR-3B and GSTR-1 will continue for the first six months.
Software for the new system will be developed during this phase.
Phase 2: Next six months
A single-monthly system of filing returns will be introduced for all taxpayers, except persons with nil liability and composition dealers. They will be filing quarterly returns.
A uni-directional system of uploading details of invoices by the supplier will be implemented. Recipients will get credit on the basis of these invoices.
For the first six months of the new system, a facility to avail provisional credit by the recipient will be available.
Suppliers will be uploading details of invoices and recipients will follow up with the supplier in case of any gap in the uploaded details.
Recipients will try and reduce mismatch through follow up only. No mechanism will be in place for the recipients to upload any invoice.
Phase 3: After 1 year
The new system of return filing will be fully implemented with no facility of provisional credit. Credit will be available on the basis of details of invoices uploaded by the supplier only.
If tax liability on uploaded invoices is not discharged by the supplier but the credit is availed by the recipient, the government would first recover the same from the supplier. However, the government would retain the power to recover the tax from the recipient also.
SEBI proposed that the board of RTA should have public interest directors when it becomes a QRTA.
A Securities and Exchange Board of India (Sebi) panel on Friday proposed tighter ownership and governance norms for registrar and transfer agents (RTAs).
According to a discussion paper released by Sebi, the panel, headed by former Reserve Bank of India (RBI) deputy governor R. Gandhi, felt that since RTAs manage sensitive investor-related data, there need to be stricter governance rules for them.
RTAs maintain detailed records of all investor transactions in mutual funds and shares. They also help investors complete their transactions and receive a record of their account statements.
This is the second discussion paper by the panel after some market participants suggested it should add credit rating agencies (CRAs), RTAs and debenture trustees (DTs) in the list of market infrastructure institutions (MIIs) and frame stricter norms for them, similar to those followed by MIIs such as exchanges, depositories and clearing corporations.
The panel, however, felt RTAs, CRAs and debenture trustees need not be categorized as MIIs but suggested that RTAs should have tighter norms.
In September 2017, Sebi had defined qualified RTAs (QRTAs) as “RTAs servicing more than 20 million folios”. The Sebi panel felt that once an RTA becomes a QRTA, enhanced ownership norms should be applied to them.
In India, there are only two RTAs (Karvy Computershare Pvt. Ltd. and Computer Age Management Services Pvt. Ltd.) which service 90% of the mutual fund folios. Karvy has around 40% market share in corporate folios.
The Sebi panel said QRTAs should either have a dispersed ownership or be owned by regulated entities or entities in the business of RTA.
While regulated entities can be allowed to hold 100% in RTAs, unregulated entities should not be allowed to hold more than 49% collectively and 15% individually in RTAs, the panel said. If the QRTA is an in-house entity or one that performs the function exclusively for one entity only, such ownership norms may not be required, the paper said. However, when an RTA becomes a QRTA, it may be given five years to achieve the proposed ownership structure, said the Sebi panel.
Sebi proposed that the board of RTA should have public interest directors (PIDs) when it becomes a QRTA.
“If the chairperson is a non-executive director, the QRTA shall have at least one-third of the board of directors as PIDs; and where the QRTA does not have a regular non-executive chairperson, it shall have at least half of the board of directors as PIDs,” according to the Sebi panel.
With regard to CRAs, the panel said since Sebi has already put in place tighter norms for CRAs, they need not be categorized as MIIs and be subjected to further stringency.
However, the panel proposed that the so-called “Appeal Committee” in CRAs should be renamed as ‘Review Committee’, as the word appeal has a legal connotation to it. Further, the review committee of CRAs should have independent members, the Sebi panel said.
On DTs, which act as intermediaries between the issuer of debentures and the holders of debentures, the Sebi panel said there are already quite a few challenges before them in performing their obligations and that the function of DTs is still evolving. “Therefore, the committee is of the view that the review of ownership and governance of DTs is not the immediate priority.”
Sebi has put in place a stronger mechanism to check non-compliance of listing conditions, wherein exchanges will have powers to freeze promoter shareholding and even delist the shares of such defaulting companies.
The move is aimed at maintaining consistency and adopting a uniform approach in the matter of levy of fines for non-compliance with certain provisions of the listing regulations.
Under the new framework, exchanges would have the power to freeze the entire shareholding of the promoter and promoter group in non-compliant listed entity also holding in other securities, the Securities and Exchange Board of India (Sebi) said in a circular.
Besides, exchanges can levy fines on non-compliant company, move the stocks of such firms to restricted trading category and suspend trading in the shares of such entities.
Further, in case an entity fails to comply with the requirements or pay the applicable fine within six months from the date of suspension, the exchange will need to initiate the process of compulsory delisting.
The new rules would come into force with effect from compliance periods ending on or after September 30, 2018.
Grounds for suspension from listing include failure to comply with the board composition including appointment of women director and failure to constitute audit committee for two consecutive quarters; failure to submit information on the reconciliation of shares and capital audit report for two consecutive quarters.
According to new rules, Sebi has asked stock exchanges to impose penalties ranging from Rs 1,000-5,000 per day on violation of certain clauses of the listing agreement like non-submission or delay in submission of document related to the company’s financial and shareholding details, failure to appoint women director on the board.
Besides, the exchanges can levy a fine of Rs 10,000 per instance for delay in furnishing prior intimation about the company’s board meeting and delay in non-disclosure of record date or dividend declaration.
Such fines will continue to accrue till the time of rectification of the non-compliance to the satisfaction of the concerned recognized stock exchange or till the scrip of the listed entity is suspended from trading for non-compliance with the provisions of Listing Regulations.
Such accrual will be irrespective of any other disciplinary or enforcement action initiated by stock exchanges or Sebi.
Further, if a non-complaint entity is listed on more than one exchanges, the concerned bourses need to take uniform action in consultation with each other.
The board of directors need to be informed about the non-compliance and their comments need be made public so that investors can make informed decisions.
The exchanges would have to disclose on their websites the action taken against the listed entities for non-compliance of the listing conditions, including the details of respective including the details of respective requirement, amount of fine, period of suspension, freezing of shares, among others.
Every bourse is required to review the compliance status of the listed entities within 15 days from the date of receipt of information. Also, exchanges need to issue notices to the non-compliant listed entities to ensure compliance and pay fine within 15 days from the date of the notice.
If any non-compliant listed entity fails to pay the fine despite receipt of the notice, the exchange will initiate appropriate enforcement action including prosecution.
If the non-compliant listed entity complies with the Sebi’s requirement and pays applicable fine within three months from the date of suspension, the exchange will have to revoke the suspension of trading of its shares after seven days of such compliance and trading would be permitted only in ‘trade to trade’ basis for a week from revocation.
The credit to micro, small and medium enterprises (MSMEs) is expected to grow at 12-14 per cent over the next five years, helped by higher lending by non banking finance companies (NBFC) to the segment, says a report.
As on March 2017, credit to MSMEs stood at Rs 16 trillion.
NBFC and housing finance companies are expected to expand at about 20-21 per cent compounded annual growth rate (CAGR) in this space during the period, while bank credit to this segment, which accounted for about 84 per cent of total MSME credit, is estimated to grow at a lower CAGR of 9-11 per cent, according to a report by Icra.
“Non-banks share in the MSME credit pie should expand to 22-23 per cent by March 2022 compared to 16 per cent in March 2017. Non-banks, with their niche positioning, differentiated product offering, good market knowledge and large unmet demand, would be able grow at a healthy rate vis-a-vis banks,” the rating agency’s assistant vice president and sector head, A M Karthik said.
He added there is large unmet credit demand in the MSME segment, which was estimate to be about Rs 25 trillion in FY2017.
“Notwithstanding the estimated growth, the unmet credit demand quantum is likely to increase further, going forward,” he said.
With large corporate credit expected to remain sluggish, at least over the next one-two years, the bank credit to the MSME segment is expected to be around 9-11 per cent with public sector banks growing at 7-9 per cent and private banks at 16-18 per cent, the report said.
Banking NPAs in the MSMEs segment stood high at about 8.4 per cent in March 2017 while that of non-banks stood at about 3 per cent as on that date.
The report said notwithstanding the moderate seasoning of the portfolio, non-banks have a more flexible and customised credit assessment for this segment and have steadily been moving to lower ticket loans, in view of the asset quality pressure in the large ticket loans and better yields in the smaller ticket loan categories.
“While non-bank asset quality is expected to worsen from current levels, the extent of deterioration may be lower than that witnessed in banks,” the report said.
The World Bank’s biannual publication, India Development Update: India’s Growth Story, expects the economy to clock a growth rate of 6.7 per cent in the current fiscal ending March 31.
The World Bank today projected India’s GDP growth at 7.3 per cent for the next financial year and accelerate further to 7.5 per cent in 2019-20.
The World Bank’s biannual publication, India Development Update: India’s Growth Story, expects the economy to clock a growth rate of 6.7 per cent in the current fiscal ending March 31.
The report, however, observed that a growth of over 8 per cent will require “continued reform and a widening of their scope” aimed at resolving issues related to credit and investment, and enhancing competitiveness of exports.
“The Indian economy is likely to recover from the impact of demonetisation and the GST, and growth should revert slowly to a level consistent with its proximate factors — that is, to about 7.5 per cent a year,” the report said.
In November 2016, the government had scrapped high value currency notes of Rs 500 and Rs 1,000 in a bid to check black money, among others.
Later, India implemented its biggest indirect tax reform — Goods and Services Tax (GST).
Both of these initiatives had impacted the economic activities in the country in short run.
India’s economic growth had slipped to a three year low of 5.7 per cent in April-June quarter of the current fiscal, though it recovered in the subsequent quarters.
The economy is expected to grow at 6.6 per cent in the current fiscal ending March 31, as per the second advanced estimates of the Central Statistics Office (CSO), compared to 7.1 per cent in 2016-17. The earlier estimate was 6.5 per cent.
The Economic Survey tabled in Parliament has projected a growth rate of 7 to 7.5 per cent in the 2018-19 financial year.
The World Bank report further said that accelerating the growth rate will also require continued integration into global economy.
It pitches for making growth more inclusive and enhancing the effectiveness of the Indian public sector.
The country’s foreign exchange reserves rose by USD 167.8 million to USD 420.758 billion in the week to March 2 on an increase in core currency assets, the Reserve Bank of India said today.
In the previous reporting week, the reserves had declined by USD 1.13 billion to USD 420.591 billion. The reserves had touched a life-time high of USD 421.914 billion on February 9.
It had crossed the USD 400-billion mark for the first time in the week to September 8 last year, but has been fluctuating since then. In the week to March 2, the foreign currency assets, a major component of the overall reserves, rose by USD 177.2 million to USD 395.642 billion, the apex bank said.
Expressed in the US dollar terms, the foreign currency assets include the effect of appreciation or depreciation of the non-US currencies such as the euro, the pound and the yen held in the reserves.
The value of gold reserves increased by USD 8.1 million to USD 21.522 billion, the central bank said.
The special drawing rights with the International Monetary Fund declined by USD 7.4 million to USD 1.529 billion. The country’s reserve position with IMF also declined by USD 10.1 million to USD 2.064 billion, the RBI said.
The income tax (I-T) has barred all Chartered Accountants (CAs) from valuing shares of closely-held companies.
