Govt approval must for all FDIs from neighboring countries including China, in same lines as made by several countries

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ASSOCHAM Secretary said that by amending the FDI rules through the Press Note No 3 , the Department for Promotion of Industry and Internal Trade, has not only brought the FDI proposals for greenfield investments but also infusion into the existing projects, under the ‘government route’

The government has amended the Foreign Direct Investment (FDI) policy to discourage opportunistic investment in Indian companies by neighbouring countries in the midst of the Coronavirus pandemic.

This comes after China’s central bank recently raised stake in Housing Development Finance Corporation (HDFC) to a little over 1 percent.

As per the new amendment, FDI investments into Indian companies from the neighbouring countries will now require a nod from the government. This will be applicable to all countries that share a land border with India – such as China among others.

The amendment specifies that transfer of ownership of Indian companies arising out of FDI investments from neighbouring countries will now also be subject to government approval.

Similar FDI restrictions were earlier placed on Pakistan and Bangladesh.

These changes were notified via a Press Note by the Department for Promotion of Industry and Internal Trade (DPIIT).

As per the note, “Government has reviewed the FDI policy for curbing opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic.”

The note states: “A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”

“Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment,” it said.

“In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the mentioned sectors, such subsequent change in beneficial ownership will also require Government approval,” it added.

The decision will take effect from the date of Foreign Exchange Management Act (FEMA) notification.

Earlier, reports said that market regulator Securities and Exchange Board of India (SEBI) was monitoring equity transactions in India by Chinese companies and banks. Such transactions have come under the scanner at a time when the share prices of companies have dropped due to the economic impact of the coronavirus pandemic.

Globally, transactions by Chinese firms and institutions have come under scrutiny recently since the assets are being purchased at low valuations. Nations such as the US, Japan and Australia have already placed restrictions on Chinese companies buying assets.

Source:Amendment of FDI Policy

Government releases compliance schedule to ensure MSME payments

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With a spate of corporate irregularities coming to the fore, the Centre has decided to make disclosure norms more stringent. Specified Companies (Furnishing of information about the payment to micro and small enterprise suppliers)
Every specified company shall file in MSME Form I details of all outstanding dues to Micro or small enterprises suppliers (whose payment is due or not paid within 46 days) dealing with MSME shall mandatorily file a return with MCA in e-form MSME-1.

Directors of companies delaying payments for supplies made by small businesses will face imprisonment up to six months or pay fines between Rs 25,000 and Rs 3,00,000.

The Ministry of Corporate Affairs has notified new guidelines to address the concerns of small businesses over delayed payments that not only makes it mandatory for all companies to file half yearly returns detailing outstanding dues to MSME suppliers but also assign reasons if such delays are for more than 45 days.

The new rules have been implemented to put pressure on companies to pay up.

Under the proposed changes, every private and public company will mandatorily file “MSME FORM I” with the the Registrar of Companies (RoC) by February 22 with details of all outstanding dues to MSME suppliers existing on the date of notification of rules on January 22.

In addition, all entities will also have to file a return as per MSME Form I by October 31 for the period from April to September and by April 30 for the period from October to March.

If there are any delays in payments, it has to be mentioned in the returns with the MCA reserving the right to penalise defaulting entities.

In order to ensure adherence to the new rules, MCA has also proposed a fine of up to Rs 25,000 on companies defaulting in filing the information or delaying payments.

The fines for directors, chief financial officer and company secretary of a defaulting company has been specified at not less than Rs 25,000 up to Rs 3,00,000 per person with provision also for imprisonment up to six months.

The new rules will be applicable for every company that received goods or services ‘from’ MSME segment for which payment is due for 45 days or more.

The companies that have no outstanding payments to MSMEs or such outstanding payments are not for more than 45 days are not required to file details in the specified form.

For the purpose of new rules, MSMEs are defined on the basis of capital investment made in plant and machinery, excluding investments in land and building.

Manufacturing units having investment below Rs 25 lakh were termed Micro, those between Rs 25 lakh and Rs 5 crore termed as Small and from Rs 5 crore to Rs 10 crore as Medium.

Similarly, for Service units, corresponding investment thresholds were upto Rs 10 lakh Micro, between Rs 10 lakh to Rs 2 crore Small and between Rs 2 crore to Rs 5 crore Medium.

Source: Business Standard

President promulgates Unregulated Deposit Scheme Ordinance

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The law provides for attachment of properties or assets and subsequent realisation of assets for repayment to depositors.

The President on Thursday promulgated the Banning of Unregulated Deposit Scheme Ordinance which seek to curb the menace of ponzi schemes and make such unregulated deposit scheme punishable.

The Ordinance will help put a check on illicit deposit taking activities like Saradha scam and Rose Valley chit fund scam in the country that dupe poor and the financially illiterate of their hard earned savings.

The legislation contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme.

“No deposit taker shall directly or indirectly promote, operate issue any advertisement soliciting participation or enrolment in or accept deposits in pursuance of an unregulated deposit scheme,” the Ordinance said.

The law also proposes to create three different types of offences — running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement in relation to unregulated deposit schemes.

The Ordinance also provides for severe punishment ranging from 1 year to 10 years and pecuniary fines ranging from Rs 2 lakh to Rs 50 crore to act as deterrent. It too has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.

The law provides for attachment of properties or assets and subsequent realisation of assets for repayment to depositors. Clear-cut timelines have been provided for attachment of property and restitution to depositors.

It also enables creation of an online central database for collection and sharing of information on deposit-taking activities in the country.

Being a comprehensive union law, it adopts best practices from state laws, while entrusting the primary responsibility of implementing the provisions of the legislation to the state governments.

HIGHLIGHTS OF BUDGET 2019

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HIGHLIGHTS OF BUDGET 2019

1. Within 2 years, Tax assessment will be done electronically
2. IT returns processing in just 24 hours
3. Minimum 14% revenue of GST to states by Central Govt.
4. Custom duty has been abolished from 36 Capital Goods
5. Recommendations to GST council for reducing GST rates for home buyers
6. Full Tax rebate upto 5 lakh annual income after all deductions.
7. Standard deduction has been increased from Rs. 40,000 to Rs. 50,000
8. Exemption of tax on second self-occupied house
9. Ceiling Limit of TDS u/s 194A has increased from Rs.10,000 to Rs. 40,000
10. Ceiling Limit of TDS u/s 194I has increased from Rs. 1,80,000 to Rs. 2,40,000
11. Capital Gains Tax Benefit u/s 54 has increased from investment in one residential house to two residential houses.
12. Benefit u/s 80IB has increased to one more year i.e. 2020
13. Benefit has been given to unsold inventory has increased to one year to two years.

Other Areas

14. State share has increased to 42%
15. PCA restriction has abolished from 3 major banks
16. 2 lakhs seats will increase for the reservation of 10%
17. 60000 crores for MANREGA
18. 1.7 Lakh crore to ensure food for all
19. 22nd AIIMS has to be opened in Haryana
20. Approval has to be given to PM Kisan Yojana
21. Rs. 6,000 per annum to be given to every farmer having upto 2 hectare land. Applicable from Sept 2018. Amount will be transferred in 3 installments
22. National Kamdhenu Ayog for cows. Rs. 750 crores for National Gokul Mission
23. 2% interest subvention for farmers pursuing animal husbandry and also create separate department for fisheries.
24. 2% interest subvention for farmers affected by natural calamities and additional 3% interest subvention for timely payment.
25. Tax free Gratuity limit increase to Rs. 20 Lakhs from Rs. 10 Lakhs
26. Bonus will be applicable for workers earning Rs. 21,000 monthly
27. The scheme, called Pradhan Mantri Shram Yogi Mandhan, will provide assured monthly pension of Rs. 3,000 with contribution of Rs. 100 per month for workers in unorganized sector after 60 years of age.
28. Government delivered 6 crores free LPG connections under Ujjawala scheme
29. 2% interest relief for MSME GST registered person
30. 26 weeks of Maternity Leaves to empower the women
31. More than 3 Lakhs crores for defence
32. One lakh digital villages in next 5 years
33. Single window for approval of India film maker.

Auditors barred from putting a value on companies they are auditing

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An income tax tribunal has barred auditors from issuing valuation certificates to the companies they are auditing. This is set to impact several tax disputes around valuations in companies including angel tax disputes involving start-ups.

The Bangalore Income Tax Appellate Tribunal (ITAT) said that auditors of a company cannot double up as accountants especially in situations while dealing with “share valuation for the purpose of excess share-premium taxability.”

In several cases the income tax department has disputed valuations of companies around the time of investments.

The ITAT ruling came in a case where the tax department had challenged valuation of a company by its auditor.

In most cases, valuations of startups were challenged by the tax department, leading to “angel tax.” The angel tax controversy surrounds the valuations during various rounds of startup funding. In several cases, the revenues at startups kept reducing or remained stagnant, but their valuations increased. The taxman is questioning the premiums paid by the investors and wants to categorise them as income that would be taxable at 30%. In most cases, the investments made by angel investors, venture capital funds or any other investor have been challenged by the taxman.

Many accountants and valuers are already facing heat from the tax department. ET had, on December 25, reported that the tax department has started issuing show-cause notices to valuation experts, questioning the premiums several startups fetched during their investments rounds.

Valuation experts, however, say that they merely projected and calculated future growth, using the facts and figures provided by the startups. Many tax experts point out that the tax department’s approach to the fair value as a benchmark for calculating premiums may not be accurate in the context of startups.

Income tax officers claim that the scrutiny on startups is mainly due to concerns that black money may have changed hands.

ITAT Ruling

SEBI puts in place new framework to check non-compliance of listing rules

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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.

Source: Times of India

World Bank projects India’s FY19 GDP growth at 7.3%

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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.

 

Source: MoneyControl.com