SEBI has tightened the noose on listed companies not adhering to norms with regard to minimum public shareholding (MPS). Those that are non-compliant will have to pay a fine of Rs.5,000 a day. In addition, the entire promoter holding, except for compliance to MPS, will be frozen by depositories, and the promoter group and directors of the particular company will not be allowed to hold any position in other companies.
According to MPS norms, any listed company must have at least 25 per cent as public share holders while the remaining 75 per cent can be held by promoters. Government-promoted companies were given time till August 2018 to comply with these norms. Newly listed companies are given a three-year window to comply.
De-listing
Further, if the non-compliance continues for over one year the amount of fine per day will double to Rs.10,000 and such companies may even face compulsory de-listing of their shares from stock exchanges. Stock exchanges have been asked to share all the details of non-compliant companies on their website.
“Mandating penalties for non-compliance of MPS norms will surely act as a deterrent for the violators,” said Anjali Aggarwal, Partner & Head, Capital Market & Stock Exchange Services at Corporate Professionals, a law firm.
“But for any listed company, there may be many corporate actions such as forfeiture of partly paid shares/ buybacks/ takeover offers, etc, wherein promoter holding crossing the threshold of 75 per cent is beyond that company’s control, as it can’t be ascertained as to how many shareholders may tender their holding. A distinction needs to be carved for routine defaulters and for lapses that may happen because of any such corporate actions.”
In the past, SEBI has taken action against non-compliant firms but the penalty was not specified in the rule book.
In 2013, SEBI had first cracked the whip on 105 companies, including Adani Ports, BGR Energy Systems, Tata Teleservices and Videocon, for not complying with the MPS norms by freezing voting rights and corporate benefits of promoters, the promoter group and directors of these companies, until they complied.
GST Council has considered the implementation experience of the last 3 months and gave relief to small traders, says Arun jaitley.
More than three months after the Goods and Services (GST) was introduced, the GST Council made a number of big changes today, to give some relief to small and medium businesses (SMEs) on filing and payment of taxes. The panel also eased rules for exporters and cut tax rates on some items. Those businesses with annual turnover of up to Rs 1.5 crore and which constitute 90 percent of the taxpayer base but pay only 5-6 percent of overall tax, have been permitted to file quarterly income returns. “GST Council has considered the implementation experience of the last 3 months and gave relief to small traders… Compliance burden of medium and small taxpayers in GST has been reduced,” Finance Minister Arun Jaitley said. The SMEs had earlier complained of tedious compliance burden under the new regime. Below is the full text of the recommends made by GST today:
The GST Council, in its 22nd Meeting which was held today in the national capital under Chairmanship of the Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley has recommended the following facilitative changes to ease the burden of compliance on small and medium businesses:
Composition Scheme
1. The composition scheme shall be made available to taxpayers having annual aggregate turnover of up to Rs. 1 crore as compared to the current turnover threshold of Rs. 75 lacs. This threshold of turnover for special category States, except Jammu & Kashmir and Uttarakhand, shall be increased to Rs. 75 lacs from Rs. 50 lacs. The turnover threshold for Jammu & Kashmir and Uttarakhand shall be Rs. 1 crore. The facility of availing composition under the increased threshold shall be available to both migrated and new taxpayers up to 31.03.2018. The option once exercised shall become operational from the first day of the month immediately succeeding the month in which the option to avail the composition scheme is exercised. New entrants to this scheme shall have to file the return in FORM GSTR-4 only for that portion of the quarter from when the scheme becomes operational and shall file returns as a normal taxpayer for the preceding tax period. The increase in the turnover threshold will make it possible for greater number of taxpayers to avail the benefit of easier compliance under the composition scheme and is expected to greatly benefit the MSME sector.
2. Persons who are otherwise eligible for composition scheme but are providing any exempt service (such as extending deposits to banks for which interest is being received) were being considered ineligible for the said scheme. It has been decided that such persons who are otherwise eligible for availing the composition scheme and are providing any exempt service, shall be eligible for the composition scheme.
3. A Group of Ministers (GoM) shall be constituted to examine measures to make the composition scheme more attractive.
Relief for Small and Medium Enterprises
4. Presently, anyone making inter-state taxable supplies, except inter-State job worker, is compulsorily required to register, irrespective of turnover. It has now been decided to exempt those service providers whose annual aggregate turnover is less than Rs. 20 lacs (Rs. 10 lacs in special category states except J & K) from obtaining registration even if they are making inter-State taxable supplies of services. This measure is expected to significantly reduce the compliance cost of small service providers.
5. To facilitate the ease of payment and return filing for small and medium businesses with annual aggregate turnover up to Rs. 1.5 crores, it has been decided that such taxpayers shall be required to file quarterly returns in FORM GSTR-1,2 & 3 and pay taxes only on a quarterly basis, starting from the Third Quarter of this Financial Year i.e. October-December, 2017. The registered buyers from such small taxpayers would be eligible to avail ITC on a monthly basis. The due dates for filing the quarterly returns for such taxpayers shall be announced in due course. Meanwhile, all taxpayers will be required to file FORM GSTR-3B on a monthly basis till December, 2017. All taxpayers are also required to file FORM GSTR-1, 2 & 3 for the months of July, August and September, 2017. Due dates for filing the returns for the month of July, 2017 have already been announced. The due dates for the months of August and September, 2017 will be announced in due course.
6. The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 shall be suspended till 31.03.2018 and will be reviewed by a committee of experts. This will benefit small businesses and substantially reduce compliance costs.
7. The requirement to pay GST on advances received is also proving to be burdensome for small dealers and manufacturers. In order to mitigate their inconvenience on this account, it has been decided that taxpayers having annual aggregate turnover up to Rs. 1.5 crores shall not be required to pay GST at the time of receipt of advances on account of supply of goods. The GST on such supplies shall be payable only when the supply of goods is made.
8. It has come to light that Goods Transport Agencies (GTAs) are not willing to provide services to unregistered persons. In order to remove the hardship being faced by small unregistered businesses on this account, the services provided by a GTA to an unregistered person shall be exempted from GST.
Other Facilitation Measures
9. After assessing the readiness of the trade, industry and Government departments, it has been decided that registration and operationalization of TDS/TCS provisions shall be postponed till 31.03.2018.
10. The e-way bill system shall be introduced in a staggered manner with effect from 01.01.2018 and shall be rolled out nationwide with effect from 01.04.2018. This is in order to give trade and industry more time to acclimatize itself with the GST regime.
11. The last date for filing the return in FORM GSTR-4 by a taxpayer under composition scheme for the quarter July-September, 2017 shall be extended to 15.11.2017. Also, the last date for filing the return in FORM GSTR-6 by an input service distributor for the months of July, August and September, 2017 shall be extended to 15.11.2017.
12. Invoice Rules are being modified to provide relief to certain classes of registered persons.
MCA had taken another bold initiative in Government Process Re-engineering (GPR) and launched Simplified proforma for Incorporating Company Electronically (SPICe) e-Form.
The Ministry of Corporate Affairs plans to simplify the existing processes for setting up a company, according to a public notice.
In this regard, the ministry — which is implementing the Companies Act — has sought views from the stakeholders.
The government has already centralised name reservation and incorporation services. There were more than 11.34 lakh active companies at the end of August.
Now, comments have been sought for “further simplification of processes aimed at further easing the starting of a business,” the ministry said in a public notice.
Registration of new companies is being done by way of the integrated SPICe form.
The procedures for obtaining DIN (Director Identification Number) by the proposed directors, name reservation, incorporation as well as allotment of PAN and TAN have been integrated — a move that brings down the time taken for starting a new business under the companies law.
According to the notice, DIN allotment or name reservation services can also be done independently by stakeholders “who wish to proceed with incorporation in a piecemeal manner.
Stakeholders can submit their comments to the ministry by November 5.
SPICe (Simplified Proforma for Incorporating a Company Electronically) is aimed at providing speedy incorporation related services.
Qualified accounts can be flagged on the ministry’s portal, thereby, helping regulators to keep a check on suspicious entities
The ministry of corporate affairs (MCA) says work has begun for an “early warning system” regarding shell companies.
The term is used to refer to a company without active business operations or much of assets. This by itself isn’t illegitimate but they could be used as a manoeuvre for financial operations of a suspect or illegitimate nature.
Currently, there is no way to check shell companies systemically, an official said. Chartered accountants (CAs) do come out with qualified accounts of such companies but these come in a random way on the ministry’s MCA21 portal. Qualified accounts refer to bits of information about which CAs have doubts or disagreement with the audited entity’s management.
After the hoped-for early warning system comes, qualified accounts would be flagged on the ministry’s portal, helping it and other regulators to check on such entities. “We are yet to work out the nitty gritty of this system but are on the job,” another official said.
He said this would do away with the current system of random inspections to identify such companies. The portal will have filings by CAs in such a way that regulators will be alerted, he said.
Earlier, minister of state for corporate affairs P P Chaudhary had said the government would try to use the information technology tool of artificial intelligence in this regard.
CAs told Business Standard that an early warning system by itself wouldn’t change things by much. There should also be stringent norms to make auditors more independent. One of them said it is a company’s promoters who appoint the auditor, which means the latter does not retain the independence to openly report facts. So, a CA’s appointment would need to move away from promoters.
The ministry had recently issued rules to limit the number of subsidiaries a company may have — no more than two layers. This will apply prospectively but existing companies have to disclose details of their entire list of subsidiaries to the registrar of companies within 150 days. Banks and insurance companies are excluded from this rule.
With no limit on the number of subsidiaries, regulators found it difficult to track illicit transactions.
The goods and services tax (GST) might find use in national accounts beyond the routine application of indirect taxes in converting gross value added (GVA) into gross domestic product (GDP).
“We have started an exercise to look into this. A group comprising officials of the national accounts division is examining this issue,” TC A Anant, the government’s chief statistician, told Business Standard.
The GST, he noted, was more than a tax, since assessees file returns and describe activities on which the tax is levied, besides a whole bunch of other information. “In B2B (business-to-business) transactions, we can track the value chain. The national accounts committee is looking at it. It is at least worth probing,” Anant said. The group will check if there are legal or technical hurdles in the way. In the old taxation system as well, such filings were done in the case of value-added tax, central excise duty and service tax, but those were in separate databases. So, the system’s ability to use the data was somewhat limited.
“We had in the past conducted discussions to see if we could get more mileage from these databases. However, these remained at discussion level and not converted into outcomes,” Anant said.
There were many reasons for this. First, the process of computerisation of tax filings started around 2005-06, the service tax bit earlier and central excise a bit later. It got standardised around 2010-11.
“We started looking at it when we were doing preparatory work for base revision. Partly because of that fragmented nature, we were unable to get any mileage from it. By 2015, it became clearer that these indirect taxes would be taken over by the GST. Now, we have greater advantage as the GST covers both goods and services.”
So far as the usual use of the GST for converting GVA into GDP is concerned, Anant said it was simply a question of getting the data on the GST collection and verify how much of it is attributable to the Centre and how much to state collection. With the latter, there will be an additional bit of information, on how much was collected by specific states and the share they got from the Centre.
“This you may call a routine part of the GST database. For us, numbers are important because we use these — overall tax collections in national accounts and, similarly, specific state figures for its GSDP,” he said. Much of indirect taxes, net of subsidies, are used for converting GVA into GDP, both at current prices and at constant prices. Earlier, a panel headed by former NITI Aayog vice-chairman Arvind Panagariya had suggested using the data on the GST Network (GSTN), the levy’s information technology backbone, to assess the job market. It recommended using registration and enrolment on the GSTN as a sample for enterprise survey, to be conducted annually. So far, a little over nine million assessees have registered on the GSTN. High-frequency data, monthly or quarterly, might be conducted on the subset of the GSTN. The panel also suggested making the GSTN the universal establishment number and the income taxbased permanent account number embedded with the GSTN the universal enterprise number.
“IN B2B TRANSACTIONS, WE CAN TRACK THE VALUE CHAIN. THE NATIONAL ACCOUNTS COMMITTEE IS LOOKING AT IT. IT IS AT LEAST WORTH PROBING” TC A Anant Chief statistician
The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.
India has been ranked as the 40th most competitive economy — slipping one place from last year’s ranking — on the World Economic Forum’s global competitiveness index, which is topped by Switzerland.
On the list of 137 economies, Switzerland is followed by the US and Singapore in second and third places, respectively.
In the latest Global Competitiveness Report released today, India has slipped from the 39th position to 40th while neighbouring China is ranked at 27th.
“India stabilises this year after its big leap forward of the previous two years,” the report said, adding that the score has improved across most pillars of competitiveness. These include infrastructure (66th rank), higher education and training (75) and technological readiness (107), reflecting recent public investments in these areas, it added.
According to the report, India’s performance also improved in ICT (information and communications technologies) indicators, particularly Internet bandwidth per user, mobile phone and broadband subscriptions, and Internet access in schools.
However, the WEF said the private sector still considers corruption to be the most problematic factor for doing business in India.
“A big concern for India is the disconnect between its innovative strength (29) and its technological readiness (up 3 to 107): as long as this gap remains large, India will not be able to fully leverage its technological strengths across the wider economy,” it noted.
Among the BRICS, China and Russia (38) are placed above India.South Africa and Brazil are placed at 61st and 80th spots, respectively.
In South Asia, India has garnered the highest ranking, followed by Bhutan (85th rank), Sri Lanka (85), Nepal (88), Bangladesh (99) and Pakistan (115).
“Improving ICT infrastructure and use remain among the biggest challenges for the region: in the past decade, technological readiness stagnated the most in South Asia,” WEF said.
Other countries in the top 10 are the Netherlands (4th rank), Germany (5), Hong Kong SAR (6), Sweden (7), United Kingdom (8), Japan (9) and Finland (10).
The Global Competitiveness Index (GCI) is prepared on the basis of country-level data covering 12 categories or pillars of competitiveness.
Institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation are the 12 pillars.
According to WEF’s Executive Opinion Survey 2017, corruption is the most problematic factor for doing business in India.
The second biggest bottleneck is ‘access to financing’, followed by ‘tax rates’, ‘inadequate supply of infrastructure’, ‘poor work ethics in national labour force’ and ‘inadequately educated work force’, among others.
The survey findings are mentioned in the report.
“Countries preparing for the Fourth Industrial Revolution and simultaneously strengthening their political, economic and social systems will be the winners in the competitive race of the future,” WEF founder and Executive Chairman Klaus Schwab said.
The govt has struck off more than 200,000 firms that have not complied with the provision of the law from the list maintained by the RoC and frozen their bank accounts to check any siphoning off of funds.
The corporate affairs ministry has disqualified another 200,000 directors for holding posts in defaulting companies that have not filed their financial returns for the last three years or more, taking the total number to over 300,000, while cancelling the registration of another 10,000 companies.
These directors won’t be able to hold board seats in other companies as well and may have to resign soon from them, potentially impacting other firms as well.
While the current law does not provide for any appeal, the government is thinking of exercising “the review power to take any such plea into consideration,” PP Chaudhary, minister of state for corporate affairs, told ET. “By operation of law, these directors are disqualified but we have to see under what provision of law we can examine this. If we need to frame a rule we will do it.”
According to Section 167 of the Companies Act, a director is disqualified automatically from all other posts of director once barred under Section 164, said Chaudhary, a lawyer by profession.
The government has struck off more than 200,000 firms that have not complied with the provision of the law from the list maintained by the Registrar of Companies and frozen their bank accounts to check any siphoning off of funds.
“This exercise is part of demonetisation. No one had the guts to stop all this till now. It will prove a catalyst for the Indian economy,” said the minister of state, who took over this responsibility after the recent reshuffle. He said the money trail will be traced after data mining of these companies.
The government will prioritise those cases where there is evidence of a large movement of cash. He rejected the criticism that the action was retrospective in nature.
“Law has not been retrospective. Companies had two years to file returns… there was healing time,” the minister of state said. So far the shell firm chase has been limited to defaulting firms that have not filed their financial returns for the last three years or more but the government will soon go after compliant firms as well to check their holding companies structures and fund flows.
Chaudhary said the intent is to restore trust in the corporate structure and also improve ease of doing business in the country.
“We do not want to create any terror. Trust in the corporate structure is gone and we want to increase the investor confidence, not interfere in the corporate structure,” Chaudhary said.The government wants to promote ease of doing business to ensure investors that their money is safe in India, he added.
“This exercise has been triggered due to governance. We have shown scale and speed in an unparalleled way in the way we have acted against these companies and directors,” Chaudhary said.
Last week, the government made public the names of 55,000 directors who were disqualified under Section 164 (2) (A) of the Companies Act. The list included the names of prominent politicians including former Jammu and Kashmir chief minister Omar Abdullah and Malayalam filmstar Mohanlal among others.While the government will not impose any penalty on the directors of government-owned companies that figured in the list of defaulters, those in private firms will have to resign from other board seats and won’t be eligible for reappointment for up to five years.
The corporate affairs ministry will also look into these companies to identify shell companies to see if they have been used for money laundering or any other illegal activity. “We need to find who the shell company’s real beneficiary is… It could be in the name of the cook or a driver. We are taking stock of the money in these companies pre and post demonetisation,” Chaudhary said.
While spotting defaulting companies is an ongoing process, Chaudhary said that, using artificial intelligence, the government will sift out the shell companies from among those that are compliant with regulations and also create an early warning system. “The system will trigger alerts every time we see unusual activity taking place in a company. It will also help us find out the beneficial owner of the shell companies,” he said.
SEBI has tightened the noose on listed companies not adhering to norms with regard to minimum public shareholding (MPS). Those that are non-compliant will have to pay a fine of Rs.5,000 a day. In addition, the entire promoter holding, except for compliance to MPS, will be frozen by depositories, and the promoter group and directors of the particular company will not be allowed to hold any position in other companies.
He said this would do away with the current system of random inspections to identify such companies. The portal will have filings by CAs in such a way that regulators will be alerted, he said.
