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NEWS & VIEWSFOR MEMBERS / SUBSCRIBERS / VOL. 23 - NO. 12- JUNE 2020

From President's Desk...Dear Professional Colleagues and Readers,

CA Sanjay Visanji Chheda

Thank you all..... Always in Gratitude

C.V.O. CA'S

Follow us on , , LinkedIn@cvocain Join Yahoo group : [email protected]

May 31, 2020.

As we had thought and wrote in last President's Communication, that it seems that even Fourth Communication will be in Lock Down and that thought has become hard reality. Let's hope, desire, wish and pray, that when we sit down for next President's Communication in June end, same is freed from Lock Down.

While we are reading this, it is 67 days long Lock Down which has taught us many new words like “Lock Down”, “Social Distancing”, “self-isolating”, “pandemic”, “quarantine” and what not. It has taught us all many new things including some stuff of kitchen, laundry and it also gave us all time to pursue few lost hobbies, forgotten passions.

Coming to our Professional Work side, so far, we all were weak in delegating work in the way that we were not able to measure work done, time required, etc. For centuries, we all were used to measure work in Hours Spent between IN and OUT at Time Machine installed at Office Entrance.

This Lock Down has taught us and now this Work from Home is going to be Concept, which will remain in our life forever. If we are at Top, we need to learn, how to delegate, monitor, review, measure and control Work. If we are at Middle or Bottom, we need to learn how to Receive Work, Do It and then most crucial, how to report back, giving sense of Required Comfort to Seniors (that what they have delegated has been finally delivered) and same is BILLABLE too.

thWe all are living in a City which is on 8 Rank in list of most populated cities across Globe. And as whole world's experts are saying, we will have to learn to live with such pandemic virus, etc. Hence, we all have to learn from history as well as present scenario and have to equip ourselves, our home, our offices, our societies to enable Work from Home.

One more thing which is good about this Lock Down is Distance Learning. So far, people never used this Distance Learning to its best, but compulsion of this Lock Down has shown and proved to us benefits of Distance Learning. Few weeks back, CVOCA organised a Webinar where Panellists were from different corners of Globe including Dubai, Canada, UK and Switzerland. Same way, even our audience can be in any corner of World. One thing which we all never imagined or realised is Scalability Potential of this Distance Learning, which is going to be most important part of our life from now onwards.

Events in Retrospect

CVOCA endeavoured its best to give value for time spent on each Program, be it Topic, be it Content. We, at CVOCA also endeavoured and are constantly improving our Social Media Presence. CVOCA's latest program on “ABCD of Cyber Security” took CVOCA's YouTube subscriber base to 1.35K and said program got more than 3.6K view in less than a week.

Upcoming Events:

As various sources are claiming, Lock Down 5.0 is on the horizon and we at CVOCA, during this Lock Down 5.0, wish to give you Worth for each Minute that you spent with CVOCA. We are planning series of small Videos on various social media platforms on various day to day issues in Companies Act, Income Tax Act, GST and various other practical difficulties faced by all of us. Stay connected with CVOCA on various Social Media including WhatsApp, Twitter, LinkedIn, YouTube, Telegram

Latest issue of CVOCA News & Views

Latest issue of CVOCA News & Views comprises of Impact of COVID-19 on Tax Treaty Related Issues & Transfer Pricing, How to Handle Transitional Credit Under GST, GST Applicability on Directors Remuneration, Lower Taxation on Companies u/s 115BAA & 115BAB; which has remained in news for one or the other reason. Our writers, our own members, have tried their best to give words to their perspective of given problem, given situation. CVOCA News & Views as well as its various contributors would love to hear from you, your suggestions, feedback and constructive criticism.

Do write to us on [email protected].

Hope, wish and pray that you all Stay Home, Stay Safe, Stay Studying

FROM THE DESK OF CHAIRMAN

NEWS BULLETINNEWS BULLETINCOMMITEECOMMITEE

PresidentCA Sanjay Visanji Chheda

Chairman CA Hasmukh Bhavanji Dedhia Convenor CA Parin Dinesh Gala Jt. Convenor CA Umang Lalit Soni Sp. Invitees CA Rakesh Maganlal Vora

Members CA Dharmi Mulchand Kenia CA Hitesh Keshavji Pasad CA Kunjesh Raju Shah CA Nihar Suresh Dharod CA Nisha Ninad Gala CA Priten Bhupendra Shah CA Ankur Kishor Sangoi CA Nainit Digesh Savla

CONTENTSCONTENTS

CA Hasmukh Bhavanji Dedhia

ASSOCIATIONASSOCIATIONEvents in Retrospect .....................3

Impact of COVID‐19 .....................4Crisis on Tax Treaty Related Issues ‐ An Indian Perspective

Covid‐19: .................................10Impact on Transfer Pricing

Transitional Credit Under............14GST ‐ Whether still Can be Claimed ?

Analysis of GST Applicability.......17on Directors Remuneration

Analysis of New Section .............24 Inserted – 115BAA & 115BAB

The Conquest..............................27

Work from Home(WFH) ‐ ..........31Need for a Policy in Place !

Capitalytic ...................................36Rising & Falling Wedge Pattern

Industry Ninja .............................39Move Your Bus – Ron Clark Brief Update On

SEBI & Corporate Law.................41

FEMA Updates............................45

RERA Updates.............................47

Direct Taxes Law Updates ...........48

GST Updates ...............................53

C.V.O. CA'S NEWS & VIEWS

VOL. 23 - NO. 12 - JUNE 2020

2

A report read recently, quoting an appropriate source, reveals that number of

deaths in last three months in the world occurred for the reportable causes as

under: (i) Cancer: 11,67,714 (ii) excessive alcohol, smoking leading to

organ failures: 13,64,969 (iii) HIV: 2,40,950 (iv) Accidents: 3,93,479 (iv)

Suicides: 3,53,696 (v) malaria & such other ailments: 3,40,584 (vi)

common cold etc: 3,69,602 (vii) Corona: 3,71,286. Even if one doubts the

source, numbers are no likely to be significantly different in terms of

proportions. The number of deaths in India due to COVID19 are yet less than

10,000 (worldometer).

Then do we seriously think carona to be lethal and dangerous?

Have the research conducted so far revealed and confirmed source,

origin, of causes of virus? Nothing seems decisively finalized

Why most leading body on health matters, 'WHO' is itself under cloud of

doubt for matters concerning this virus?

Is the analysis of virus finally revealing any composition and possible life

of it?

Perhaps contagious nature is not doubted but whether it occurs air to air

or even through other modes like metals, clothes etc, all is still to be

confirmed?

Is the treatment or protocol for so-called positive cases not still on

experimental basis?

In that case, was so much fear psychosis for the suspect cases justifiable

to result in social boycott of not only the patient but entire family and

leading to put all building, lane, or in some cases the area under doubt.

Was it not time to think to drastically improve India's medical

infrastructure, more particularly, of the government run facilities?

In the hindsight, serious debate should take place whether such drastic steps

of more than 9 weeks of nation-wide lockdown were necessary instead of

focusing on proper medical treatment of the suspects with appropriate

protocol. Could this not have avoided turbulent times that the businesses,

commercial establishments, consumers, travelers and above all the migrant,

daily wage earners went through.

The unanswered Questions…may never be asked!

3


VOL. 23 - NO. 12 - JUNE 2020

Further, important questions about the upliftment of overall environment of economy/ business and thereby

maintaining the GDP, are yet to be addressed. The several announcements of relief and relaxations appear to

widely fall short for the desired results.

We may perhaps never ask or ponder over these questions; even if we do there are no logical answers. Hope

that India's traditionally strong resilience power would help see us sail through.

- Hasmukh B. Dedhia

EVENTS IN RETROSPECT Date Committee Topic Speaker

Attendance (Zoom, FB &

Youtube)

Sat., May 2,

2020

Capital Market

Committee

Study Circle

Committee

Investment

Opportunities in

Capital Market during

COVID-19 Crisis

CA Deepesh Talakshi Chheda 556

(1200+

views)

100+ (906

views)

600+ (3,400+ views)

Mon. May 18,

2020

Reinventing Your

Practice - How to

Develop Your Practice

& Opportunities

Prakash Diwan

CA Jayant Gangji Mamania

CA Bhavin Ramesh Chheda

Harini Dedhia Saxena

Yatin Mulchand Mota

Sat., May 23,

2020

Program

Committee

ABCD of Cyber

Security

Sachin Mahendra Dedhia, CISA,

CEI, Certified Ethical Hacker

Compiled by:


CA Jayna Divesh Shah

VOL. 23 - NO. 12 - JUNE 2020

4

1. The COVID-19 crisis has forced governments worldwide to take stringent containment measures such as

strict quarantine requirements and travel restrictions to slow down the spread of the virus. A nation-wide

lockdown & suspension of international air travel has been in force in India since March 22, 2020

resulting in many cross-border workers or individuals being stranded in India and compelled to perform

work duties from India for a prolonged period. This has raised various unforeseen tax issues in cases

where there are cross-border elements involved which have an impact on the right to tax between

countries, currently governed by international tax treaty rules that define taxing rights.

rd2. On 3 April 2020, the Organisation for Economic Co-operation and Development (“OECD”) Secretariat

issued 'OECD Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 Crisis' providing

useful guidance on the international tax treaty rule issues that may arise as a result of the COVID-19

pandemic (hereinafter referred to as “OECD guidance”). Various governments and tax administrations

around the world are also proactively issuing guidance on the application of the domestic law threshold

requirements, domestic filing and other guidance to minimise or eliminate unduly burdensome

compliance requirements for taxpayers in the context of the COVID-19 crisis.

3. This article deals with the following tax issues arising on account of the COVID-19 crisis which may

prompt new compliance requirements and tax obligations in India:

(i) Triggering of tax residency rules for individuals stranded in India

(ii) Creation of Permanent Establishment (“PE”) for foreign enterprises in India

(iii) Impact on residential status of foreign companies in India based on Place of Effective Management

(POEM)

4. TRIGGERING OF TAX RESIDENCY RULES FOR INDIVIDUALS STRANDED IN INDIA:

4.1. The OECD guidance presents two possible scenarios where the tax residence status of individuals may be

in question:

(i) a person may be temporarily away from his/her home and gets stranded in the host country due to

the COVID-19 crisis and attains domestic law residence there, and

(ii) a person may be working in his/her current home country and have acquired residence status there

but temporarily return to his/her previous home country due to the COVID-19 situation.

As per OECD guidance, despite the complexity of the rules, and their application to a wide range of potentially

affected individuals, it is unlikely that the COVID-19 situation will affect the treaty residence position.

4.2. An individual can generally be a tax resident only in one country at a time. In cases where an individual is a

tax resident of two countries at the same time under the domestic tax laws of two or more different

countries (i.e., a dual resident), then the tax residency is determined under the tie-breaker rules in the

applicable tax treaty. The tie-breaker rules in the tax treaty would award tax residence in favour of the

country where such individual has a permanent home or habitual abode available to him/her. Thus, any

temporary dislocation on account of exceptional circumstances arising out of COVID-19 crisis should not

trigger undue tax implications.

Impact of COVID-19 Crisis on Tax Treaty Related Issues -An Indian Perspective


5

4.3. The OECD guidance concludes that, because the COVID-19 crisis is a period of major disruption and

exceptional circumstances, tax administrations will have to consider a more normal period of time

when determining an individual's residential status.

4.4. Indian Perspective:

4.4.1. Section 6 of the Income Tax Act, 1961 (“ITA”) determines the residential status of a person. In case of an

individual, the residential status, whether resident, not ordinarily resident or non-resident, is

dependent on the period for which such individual stays in India during the relevant year or years

preceding the relevant year.

4.4.2. Usually, Non Resident Indians (NRIs) and other foreign visitors manage their stay and business affairs

in India in a manner that they do not trigger residency rules in India. Various individuals who came for

a visit to India during Financial Year (“FY”) 2019-20 and intended to leave India before the end of the

year in order to sustain their non-residential status for tax purposes in India were forced to prolong

their stay due to a nation-wide lockdown and ban on international air travel on account of outbreak of

Covid-19 in India. This raised a concern that such individuals may become residents in India u/s. 6 of

ITA and thereby, be subject to tax on their global income and increased compliance requirements.

4.4.3. To mitigate this situation, the CBDT has issued Circular no. 11/2020 dated 8-May-2020 relaxing

residency norms for individuals who are unable to leave India owing to COVID-19 lockdown. For

determining the residential status u/s. 6 of ITA for Financial Year 2019-20 in respect of an individual

who has come to India on visit before 22-March-2020 and is:

RELAXATION IN DETERMINING NUMBER OF DAYS OF STAY IN

INDIA DURING FY 2019-20

1Unable to leave India on/before 31-March-2020

Ignore period of stay from 22-March-2020 to 31-March-2020

2

Quarantined in India on account of COVID-19 on/after 1-March-2020; and

Either departed on evacuation flights on/before 31-March-2020 or unable to leave India on/before 31-March-2020

Ignore period of stay from the beginning of quarantine to the date of departure or 31-March-2020, as the case may be

3Departed on an evacuation flight on/before 31-March-2020

Ignore period of stay from 22-March-2020 up to date of departure

4.4.4. Further, in a Press Release dated 9-May-2020, the Ministry of Finance clarified that as the lockdown

continues during Financial Year 2020-21 and it is not yet clear as to when international flight

operations would resume, a circular excluding the period of stay of these individuals up to the date of

normalisation of international flight operations, for determination of the residential status for the

Financial Year 2020-21 shall be issued after the said normalisation.

4.4.5. The above circular would greatly help in assuaging concerns of triggering tax residency u/s. 6 of ITA in

India for individuals stranded in India owing to the extended COVID-19 lockdown, especially in cases

where there is no applicable tax treaty with the normal country of residence. However, the above

circular is only relevant in respect of determining residency status of individuals u/s. 6 of the ITA and

does not address concerns of crossing thresholds related to creation of a PE in India for foreign

enterprises on account of employees who are stranded in India and continuing to perform work duties

from India. These issues are discussed in detail below.

VOL. 23 - NO. 12 - JUNE 2020

SN SITUATION


6

5. CREATION OF PERMANENT ESTABLISHMENT (“PE”) FOR FOREIGN ENTERPRISES IN INDIA

5.1. The restrictions imposed by governments owing to the COVID-19 crisis has significantly changed how

enterprises continue normal business activities. The employees of foreign enterprises stranded in

India owing to the COVID-19 lockdown are compelled to perform their official duties from India for a

prolonged period resulting in unforeseen PE exposure in India for such foreign enterprises and

thereby, resulting in unintended domestic tax compliance obligations.

5.2. Fixed Place PE – in the context of Work from Home situation:

5.2.1. Article 5(1) of most Indian tax treaties provides that a PE is “a fixed place of business through which the

business of an enterprise is wholly or partly carried on". In the case of employees of a foreign enterprise

stranded in India owing to the COVID-19 lockdown and working remotely from home in India, a

concern has arisen that such home office of the employee could be categorised as a Fixed Place PE of

the foreign enterprise in India.

5.2.2. Generally, a fixed place PE must have a certain degree of permanency and be at the disposal of an

enterprise. The OECD Model Commentary on Article 5 explains that even though part of the business

of an enterprise may be carried on at a location such as an individual's home office, that should not lead

to the conclusion that that location is at the disposal of that enterprise simply because that location is

used by an individual (e.g. an employee) who works for the enterprise. The carrying on of intermittent

business activities at the home of an employee does not make that home a place at the disposal of the

enterprise. Also, for a home office to be a PE for an enterprise, it must be used on a continuous basis for

carrying on business of an enterprise and the enterprise generally has to require the individual to use

that location to carry on the enterprise's business. Indian jurisprudence also mandates the satisfaction

of “disposal test” for a premise to become a fixed place PE of the foreign enterprise.

5.2.3. As per OECD guidance, during the COVID-19 crisis, individuals who stay at home to work remotely are

typically doing so as a result of government directives: it is force majeure, not an enterprise's

requirement. It is, therefore, unlikely that a fixed place PE will be created for the foreign enterprise in

India in cases where its employees are temporarily stranded in India and working from home owing to

the exceptional COVID-19 situation. The OECD guidance, however, cautions that such position may

change in the future in case “Work From Home” becomes the new normal over time and develops into a

permanent arrangement instead of a temporary circumstance arising out of the COVID-19 crisis.

5.3. Agency PE:

5.3.1. In order to bring domestic tax law in line with BEPS Action Plan 7 relating to artificial avoidance of PE,

the meaning of “Business Connection” contained in Explanation 2 to Section 9(1)(i) of the ITA was

amended vide Finance Act 2018, to provide that “business connection” shall include, inter alia, any

business activity carried out through a person who, acting on behalf of the non-resident, habitually

exercises in India, an authority to conclude contracts on behalf of the non-resident or habitually

concludes contracts or habitually plays the principal role leading to conclusion of contracts by that

non-resident. The wordings for Agency PE under Article 5 of the Indian tax treaties read with Article 12

of the Multilateral Convention (“MLI”), wherever applicable, are similar to that provided under Indian

domestic tax law.

5.3.2. In view of the above provisions, a concern may arise whether the activities of an individual stranded in

India and temporarily working from home for a foreign enterprise could give rise to a dependent agent

PE. The stranded individual may either:

(i) exercise authority to conclude contracts in India or actually conclude contracts in India on behalf

of the foreign enterprise or

VOL. 23 - NO. 12 - JUNE 2020


7

(ii) play the principal role leading to conclusion of contracts by the foreign enterprise during his/her

prolonged stay in India

even though such activities are usually carried out in the normal country of residence of that employee.

For this purpose, it is important to examine whether the said employee performs these activities in a

“habitual” way.

5.3.3. The OECD Model Commentary on Article 5 explains that a PE should be considered to exist only where

the relevant activities have a certain degree of permanency and are not purely temporary or transitory.

The requirement that an agent must “habitually” exercise an authority to conclude contracts means

that the presence which an enterprise maintains in a country should be more than merely transitory if

the enterprise is to be regarded as maintaining a PE, and thus a taxable presence, in that State.

“Habitual” would refer to systematic, continuous and regular course of conduct.

5.3.4. As per OECD guidance, an employee's activity in India is unlikely to be regarded as “habitual” if he/she

is only working at home in India for a short period because of force majeure and/or government

directives extraordinarily impacting his/her normal routine. The temporary conclusion of contracts in

India by the employees resulting directly on account of the COVID-19 crisis should, therefore, generally

not create an Agency PE for the foreign enterprise in India. However, this is a fact-specific issue and a

general view cannot be taken in all cases. It is important to evaluate whether or not such employees

were habitually concluding contracts on behalf of the foreign enterprise in their normal country of

residence prior to the COVID-19 crisis.

5.4. Construction PE / Service PE:

5.4.1. In general, a construction site will constitute a PE if it lasts more than 6 months to 12 months

depending on the tax treaty. The OECD Model Commentary on Article 5 explains that a site should not

be regarded as ceasing to exist when work is temporarily discontinued (temporary interruptions

should be included in determining the duration of a site). Examples of temporary interruptions given

in the Commentary are a shortage of material or labour difficulties. As per OECD guidance, the

duration of such an interruption of activities owing to COVID-19 lockdown should be included in

determining the life of a site and therefore, will affect the determination whether a construction site

constitutes a PE.

5.4.2. The concept of a “Service PE” is usually found in tax treaties drafted based on UN Model Convention. In

general, a Service PE is said to constitute if a foreign enterprise furnishes services in the source

country, through employees or other personnel, if such activities continue for more than 90 days or

183 days depending on the tax treaty. The threshold period is computed qua the enterprise and not the

individual employees or personnel engaged in provided the concerned services. The standby time of

the individuals is also considered while computing the threshold period for determining the existence

of a Service PE, similar to that discussed above for determining the existence of a Construction PE.

5.4.3. The nation-wide lockdown in India on account of COVID-19 pandemic has caused a temporary

interruption of construction/service activities carried on by foreign enterprises in India. Indian tax

treaties have varying thresholds for constitution of a Construction PE and a Service PE, some of which

are highlighted below:

VOL. 23 - NO. 12 - JUNE 2020


8

1 Australia, Hong Kong more than 6 monthsmore than 183 days in any 12 month period

2Germany, Japan, Netherlands

more than 6 monthsNot Applicable

3 Luxembourg more than 9 monthsmore than 183 days in any 12 month period

4 Mauritius more than 9 monthsmore than 90 days in any 12 month period

5 Singaporemore than 183 days in

any fiscal yearmore than 90 days in

any fiscal year

6United Arab Emirates (UAE)

more than 9 months more than 9 months in

any twelve-month period

7 United Kingdom (UK) more than 6 monthsmore than 90 days in

any twelve-month period

8United States of America (USA)

more than 120 days in any twelve-month period

more than 90 days within any twelve-

month period

5.4.5. It is important to carefully evaluate the overall duration of ongoing construction / service activities of a

foreign enterprise in India through its employees or other personnel residing in India, including any

interruption or standby time on account of the COVID-19 lockdown. In case the duration exceeds the

threshold for constitution of a Construction PE or Service PE as per the applicable tax treaty, then the

foreign enterprise would have a PE exposure in India. Accordingly, foreign enterprises must proactively

evaluate possible Construction PE or Service PE exposure in India and resultant tax obligations &

compliance requirements in respect of such PE's in India.

6. IMPACT ON RESIDENTIAL STATUS OF FOREIGN COMPANIES IN INDIA BASED ON PLACE OF

EFFECTIVE MANAGEMENT (“POEM”):

6.1. A foreign company is generally a tax resident of the country where it is incorporated. In certain cases, it

may also become a tax resident of India if its POEM is located in India as per Section 6(3) of the ITA. For

this purpose, POEM” means a place where key management and commercial decisions that are

necessary for the conduct of business of an entity as a whole are, in substance made.

6.2. The COVID-19 crisis has raised concerns about a potential change in the “POEM” of a company as a

result of a relocation, or inability to travel, of chief executive officers or other senior executives

consequently affecting the residential status of the company for tax purposes. This could possibly

result in a dual residency status for the said company. Additionally, this issue may also impact the

application of anti-abuse rules (such as Limitation of Benefits) and beneficial ownership under various

articles of the tax treaty.

SN COUNTRYTHRESHOLD FOR

CONSTRUCTION PE THRESHOLD FOR

SERVICE PE

VOL. 23 - NO. 12 - JUNE 2020


9

6.3. The OECD guidance states that it is unlikely that the COVID-19 situation will create any changes to a

company's residence status under a tax treaty. The extended lockdown and suspension of air travel may

temporarily change the location of the chief executive officer and other senior executives of companies,

but such changes associated to the COVID-19 crisis, constitute extraordinary and temporary

circumstances that should not trigger a change of a company's residence for tax purposes.

6.4. Indian tax treaty tie-breaker rules generally provide that the country of residence would be where the

POEM is located or in cases where Article 4 of the MLI on “Dual Resident Entities” is applicable,

competent authorities of both countries would decide the residency on a case-to-case basis by mutual

agreement. All relevant facts and circumstances must be examined to determine the POEM.

6.5. The OECD Model Commentary illustrates a range of factors that the competent authorities are expected

to take into consideration to make their determination of “place of effective management”, which

includes: where the meetings of the company's board of directors or equivalent body are usually held;

where the chief executive officer and other senior executives usually carry on their activities; where the

senior day-to-day management of the company is carried on; where the person's headquarters are

located; etc. However, the rules notified by India for determination of POEM prescribe an active and

passive income test, which is quite different from the tax treaty interpretation. The OECD guidance

concludes that all relevant facts and circumstances should be examined to determine the “usual” and

“ordinary” POEM, and not only those that pertain to an exceptional and temporary period such as the

COVID-19 crisis.

6.6. Therefore, in cases where dual residency status is triggered for a foreign company on account of its

POEM being in India temporarily due to the COVID-19 situation, it is pertinent that the foreign

company categorically documents the facts and circumstances involved in respect of whereabouts of its

key management personnel during the COVID-19 crisis and nature of decisions taken during the

intervening period in order to defend its tax residency status to the tax authorities.

7. CONCLUSION:

Though the OECD Guidance has persuasive value, it is not binding on India as India is not a member

country of OECD. Indian Courts have, however, applied the OECD Model Commentary in selective

cases while interpreting tax treaty rules. In a manner similar to relaxations in residency norms

announced for individuals stranded in India, it is imperative that the Indian Government take

cognizance of the above tax issues in respect of foreign enterprises operating in India and accordingly,

issue practical guidance and provide relaxations in compliance requirements. This would help in

avoiding unnecessary litigation in the future.

In the meantime, foreign enterprises operating in India must carefully monitor possible PE exposure in

India or triggering of residency in India based on POEM during the continuance of the COVID-19 crisis.

Adequate supporting documentation should be maintained to illustrate the facts and circumstances

demonstrating that the prolonged stay in India was involuntary and arising directly as a result of the

COVID-19 crisis.

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CA Rushabh Kishor Vora

10

Background

As the world is down amidst the outbreak of global pandemic i.e. Covid 19, economic situation of most of the

countries have taken a downward trend. Whilst many countries are implementing nation-wide lockdown as a

precautionary measure, financial experts feared present situation as one of the worst recessions since 1930.

In this challenging time, businesses, especially Multinational Enterprises (“MNEs”) are facing considerable

burden on sustaining and continuing business. At the same time, they are likely to face numerous tax

(including Transfer Pricing) challenges. Whilst Government of many countries are issuing relief (including tax)

packages at this moment, it would be interesting to witness approach of tax authorities while scrutinizing the

case (2-3 years later) of taxpayers for the present period.

In this article, we have analysed the impact of Covid-19 on Transfer Pricing policies and some of the immediate

issues before MNEs as under:

1. Operating losses/ low profitability

Amid this lockdown, most of the industries would get negatively impacted and will incur significant losses.

Reduction in demand, either directly or indirectly, or discontinuity of supply has led to no profit scenario

for most of the companies. In such circumstances, MNEs are worried as to how would they justify

operating losses or low profitability before tax authorities. Whilst one may argue that most of other players

in industry may also face similar issue, magnitude of different factors may lead to abnormal variation in

profitability of different players.

2. Need for comparability/ economic adjustments

We have heard the popular idiom “Apple to Apple comparison” which signifies that the concept of Transfer

Pricing is entirely based on the comparability. We have analysed below the need for suitable comparability/

economic adjustment amid global economic slowdown that may be undertaken:

a) Under-utilisation of capacity/ idle capacity adjustment

In this economic slowdown, many of the industries could not undertake routine operations leading to

under-utilisation of capacity. While most of the employees were not allowed to travel for their work, few

companies managed to introduce work from home system which has definitely reduced the impact of

lockdown. In service sector, especially IT-ITeS, wherein employees are required to travel abroad for

onsite work, were impacted heavily on account of termination of international travel. On other hand,

manufacturing industry could not operate at its optimum installed capacity.

In this scenario, it is imperative to analyse impact of under-utilisation of capacity or idle capacity of

employees on operations as well as profitability of the company. Various Courts/ Tribunals have

allowed such adjustment in following judicial precedents as under:

Covid-19: Impact on Transfer Pricing

VOL. 23 - NO. 12 - JUNE 2020


11

Innodata Isogen India Pvt Ltd (ITA No 5390/Del/2010)

SI Group India Ltd (ITA No. 1745/Mum/2014)

GE Intelligent Platform Pvt Ltd (ITA No. 148/Bang/2015)

Visteon Engineering Centre (India) Pvt Ltd (ITA No. 316/Pun/2015)

While under-utilisation of capacity warrants an adjustment, it is interesting to witness different

mechanisms that may be adopted to undertake such adjustment. We have listed down below few

interesting rulings which have provided guidance on manner of computing the adjustment:

Class India Pvt Ltd (ITA No 1783/Del/2011) – Held that adjustment should be made in operating

margin of the comparable.

IKA India Pvt Ltd (ITA No. 2192/Bang/2017) – Held that if adjustment cannot be made to

comparable (due to lack of data), adjustment can be undertaken in profitability of tested party.

Terex India Pvt Ltd (ITA No 6775/Del/2015) – Held that adjustment should be made in profit of

comparable and if relevant data is not available in public domain, TPO should use power u/s

133(6) to obtain such relevant data.

b) Forex adjustment

Effects of abnormal foreign exchange fluctuation cannot be ignored in this extra-ordinary

situation. We have analysed and depicted below abnormal USD-INR exchange fluctuation rate is

under:

As can be seen above, USD-INR exchange rate has been fluctuated apprx 10% in whole FY 2019-20 stand apprx 8% in 1 quarter of 2020 (impacted period). This extra-ordinary fluctuation in exchange

rate may lead to abnormal forex loss or profit to Indian companies. In order to eliminate this

difference, suitable adjustment may be made to transfer price while determining the arm's length

price and this factor cannot be ignored at all.

c) Working capital adjustment

Working capital adjustment is necessary to eliminate the difference in working capital employed

by tested party vis-à-vis comparable companies. In this lockdown situation, working capital

elements (such as trade receivable, trade payables, inventory, etc) is significantly impacted for

most of the players in industry. Impact could be higher in travel/ tourism industry, manufacturing

industry, etc considering no operations at all. While magnitude of working capital cycle may vary

substantially, it would be imperative to eliminate the difference.

d) Risk adjustment

Risk adjustment is undertaken in order to eliminate different risk profile of companies owing to

business complexities and contractual obligations. Pandemic effects may pose significant

¹Source: https://in.investing.com/currencies/usd-inr-historical-data?end_date=1588962600&st_date=1483295400

st1 April 2020 76.404

th15 January 2020 70.720

st1 April 2019 69.205

Different dates USD to INR

Rate

VOL. 23 - NO. 12 - JUNE 2020


12

challenges to continue with existing risk profile (as per contractual arrangement) and risks may

vary depending on appetite as well as mutual discussion with their related parties. Thus,

difference of risks borne by taxpayers vis-à-vis comparable companies need to be adjusted in

order to make fair comparison. Having said this, quantification of risk adjustment is a complex

exercise and may be challenged by tax authorities.�3. Cash flow and intra-group financial transactions

As we are aware, economic slowdown has impacted cash flow of MNEs tremendously. Cash and liquidity

crunch have disrupted business houses and maintaining cashflow would be crucial to survive in coming

days. With this reason, it is expected that intra-group financing/ loans may significantly increase. At the

same time, MNEs may avail more and more guarantee from group headquarter while availing loan from

third party. Incidentally, Organisation of Economic Co-Operation and Development (“OECD”) has

released comprehensive Transfer Pricing Guidance on Financial Transaction in February 2020 which

dealt with application of Transfer Pricing principles on different financial transactions such loans,

guarantees, cash pooling, insurance, etc. It would be interesting to witness as to how MNEs would react in

terms of changing their existing capital structure (debt equity ratio) and following new guidelines on

financial transactions.

4. Re-visit Transfer Pricing policy/ arm's length mark-up

Practically, it is impossible for any MNEs, whether large or medium or small, to survive this global

slowdown without making any changes to its business/ operational model and transfer pricing

mechanism. Functions performed, Assets employed and Risks assumed (“FAR analysis”) may have

undergone 360-degree change for few of the industry player. Therefore, existing remuneration policy may

need to be amended to reflect the present scenario. Especially, entities following cost plus model may

reduce their profit mark-up % to support position of it's headquarter/ parent. Ex – Earlier, many of the

Indian software developer, Information Technology enabled Service provider used to follow cost plus 17%

mark-up model (in line with existing Indian Safe Harbour Regulation). During lockdown period and till the

time situation normalise, these players may reduce mark-up to 10-12% which will also reduce burden of

headquarter/ parent entity. It is important for MNEs to re-assess actual FAR profile of their intra-group

transactions and should make necessary amendments in agreement/ transfer pricing policy. At the same

time, in case contract/ agreement provides for “Force Majeur” clause, MNEs, may implement the same

while documenting the relevant reasons. Any such change would be required to document along with

detailed reasons/ analysis to support their decision in future scrutiny.

5. Impact on Advance Pricing Agreement (“APA”)

APA is a pre-agreed agreement entered into by taxpayer with tax authority on appropriateness of transfer

pricing methodology and remuneration for certain transactions for certain years. Importantly, taxpayers

are required to follow all the terms and conditions of APA, including but not limited to, profitability,

function/ risk aspects, critical assumptions, credit period, etc, failing of which may lead to revocation of

APA. In this economically critical situation, where many of the MNEs are struggling to survive, it would be

difficult to follow all these aspects especially achieving the desired profit margin in India. Over the years, it

is experienced that APA authorities behave more rational as compared to routine tax officers. However, it

would be interesting to witness how APA authorities shall tackle this situation and if they grant to

undertake any relaxation or modification in agreed APA.

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13

6. Collection period/ Outstanding receivable

Outstanding receivable is one of the most contentious issue in Transfer Pricing wherein tax authorities

generally alleged that if taxpayer has not received outstanding dues from its overseas related party, it

should be considered as separate international transaction. At the same time, if collection period exceeds

average collection period in same industry, taxpayers may need to recover interest component at

appropriate arm's length rate. While, business conditions have been significantly impacted and thus,

MNEs are facing issue to recover outstanding dues. Despite of contractual arrangement to recover dues

within pre-agreed period (such as 60 or 90 days), MNEs are forced to provide additional credit period to

support their customers at this moment. Further, in order to maintain long-term relationship as well as to

continue business with customers, they would not be in a position to demand interest from overseas

related party. Therefore, in my view, tax authorities should take liberal view for this period while taking

any adverse view.

7. Multiple year data

As per Indian Transfer Pricing Regulation, financial result/ profitability of taxpayer is mandatorily

required to compared with multiple year weighted average data of third-party comparable companies.

Generally, use of multiple year data eliminates the difference of various factors such as different

businesses, product life cycles, pricing conditions, etc which may have influenced the transfer prices in

comparable circumstances. However, single year comparison of taxpayer's profitability with multiple year

data of comparable companies will surely give distorted picture in this extra-ordinary global condition.

Owing to this genuine hardship, tax authority should bring necessary amendments in law or provide

temporary relief to taxpayers.

VOL. 23 - NO. 12 - JUNE 2020

Way Forward:

Undoubtedly, this is a challenging time for MNEs and they are

coping-up with a situation while bearing the survival risk.

Therefore, it is imperative to assess the impact of Covid-19 on

business and need to re-visit existing TP policy/ model. Robust

documentation would be a key to justify this abnormal

economic situation and prudent action taken by taxpayer in

realistic manner.

Additionally, it is learnt that OECD is also planning to release

guidance on transfer pricing issue arising from Covid-19

pandemic and it is likely to be published after year-end. This

would be binding on countries (especially member nations)

and non-member countries will be able to take guidance from

it to tackle transfer pricing issues in better way.

Overall, it would be interesting to witness as to how MNEs and

tax authorities will react to this situation in coming days.

Assess the impact of Covid-19

Re-analyse contractual obligation

Prepare robust TP documentation

Determine if need to change TP policy

Keep monitoring situation


Compiled by:

CA Mihir Dilip Shah

14

From its very inception, GST Law (as drafted and legislated) is not free from interpretational and technical

issues. One such issue is about the due date to file claim for Transitional credits to be carried forward to GST ston 1 July 2017 i.e., the appointed date.

Update on Recent Judgement for Claiming TRAN-1 credit

Introduction:

Recently in the cases of M/s Brand Equity Treaties Limited, M/s Micromax Informatics Ltd, M/s Developer

Group India Private Ltd and M/s Reliance elektrik works VS the Union of India and others, the Hon'ble Delhi

High Court considered the said issue, whether the taxpayers are still permitted to file TRAN – 1 to claim thcarried forward of accumulated CENVAT credit available to them as on 30 June 2017. Brief discussion on the

said case is given below:

Facts of the Case:

The aforesaid petitioners had filed the case against the department to allow them to file the TRAN -1 for to

claim accumulated CENVAT Credit even after the stipulated due date to file said form is over as per Rule

117 of Central Goods and Service Tax Rules 2017. They had stated in their petition that such accumulated

CENVAT credit represents their property and the same is a vested right in their favour. They have argued

that such vested right cannot be taken by away by framing rules without there being any substantive

provision under the Central Goods and Service Tax Act.

On the other hand the learned counsels for the revenue have strongly opposed the petitions. They have

argued that the petitioners shall not be allowed to file the form TRAN -1, since their non-filling of the said

form was not due to the technical difficulties faced on GST system. Therefore the benefit of the rationale of

earlier case laws which were decided in the favour of taxpayers, where the tax payers had faced technical

difficulties should not be given to the taxpayers in these cases.

Some important points considered by the Hon'ble Delhi High Court while analysing the said cases:

The Hon'ble Delhi High Court analysed the specified provisions of Transitional Credits from its initiation.

They have started their analysis from Sec 140 of the Central Goods and Service Tax Act, 2017 (GST Act) ,

which allows carry forward of accumulated CENVAT Credit from earlier laws to GST in a manner as may

be prescribed.

As per Section 2(87) of the GST Act states prescribed means prescribed by rules made under GST Act.

Rule 117 under the Central Goods and Service Tax Rules, 2017 (GST Rules) read with Section 140 of GST

Act, states that accumulated Cenvat Credit can be carried forward to GST by filing an declaration

electronically in Form GST TRAN - 1 within 90 days from the appointed date.

Further extension of such time imposed by more 90 days was possible with the recommendations from

the GST Council.

Transitional Credit Under GST -Whether still Can be Claimed ?

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15

The said prescribed time limit for filing form GST TRAN – 1, was extended by CBIC various times as threcommended by the GST Council. The last date for filing form Tran – 1 was 27 December 2017.

However even after so many extensions several taxpayers could not meet the said deadline, due to low

bandwidth on GST portal and various technical glitches faced by them.

Such issue was brought to the notice of the council by various complaints on the GST portal and some of the

cases were being filed in various courts across the countries. Responding to such set of complains and the

judicial decisions various taxpayers were provided extensions for filing of said form GST TRAN - 1.

With the aforesaid background and knowing that the reason of non-filing of GST TRAN – 1 for aforesaid

petitioners was not due to any such issues faced on GST Portal, the Hon'ble Delhi High Court has

considered the term 'Technical glitches' as wider term and not restricted to the issues on the GST portal.

The Hon'ble Delhi High Court had considered technical glitches should not only means technical issues

faced by the taxpayers, but also should include challenges faced by the tax payers in form of low band

width, lack of computer knowledge and skills required to understand new system of tax.

The Hon'ble Delhi High Court has further contented that the revenue should not disallow the rights of

such aforesaid taxpayers, merely on the grounds that there are no logs on the GST portal for technical

issues faced by them. There can be many other such technical glitches faced by taxpayers, which may not

have entered in the GST Logs.

The Hon'ble Delhi High Court further stated that claim of such accumulated CENVAT credit is a property

of the taxpayer and is a constitutional right under Article 300A of the constitution. The same cannot be

taken away merely by framing rules, without being any specific provision in the GST Act.

In absence of any specific provision under GST, the Hon'ble Delhi High Court considered the residuary

clause of the Limitation Act and stated that period of three years will be the time frame to be allowed to file

such claim for accumulated CENVAT credit.

thOn the basis of the said arguments and analysis The Hon'ble Delhi High Court has decided on 5 May

2020 that the petitioners shall be allowed to file the TRAN – 1 form till 3 years from the appointed date thi.e., till 30 June 2020.

It is to be noted that there are several judgements of various other Hon'ble High Courts including Bombay

High Court judgement of Nelco Limited VS The Union of India and others wherein they have upheld that the

due date to file TRAN – 1 form was 27 December 2017 and not any other due date.

Recent Notification for retrospective amendment

thCBIC has issued notification no. 43 of 2020 Central Tax dtd 16 May 2020, which has retrospectively stamended section 140 with effect from 1 July 2017. The said retrospective amendment has now prescribed

the time limit under the Rule 117 of the Central Goods and Service Tax Act to be a part of legislation of GST

Act. The said notification appears to have nullified the aforesaid judicial pronouncement of the Hon'ble Delhi

High Court.

VOL. 23 - NO. 12 - JUNE 2020


16

Way forward

1. After issuance of such retrospective notification, should the taxpayer consider to claim TRAN – 1

credit?

Ans: Accumulated CENVAT Credit is a vested right of the taxpayer covered under Article 300A of the

constitution. Such vested right of the taxpayer cannot be quashed by issuing such retrospective

amendment.

One needs to decide on case to case basis whether to still avail such transitional credits, considering the

litigation in the future. thThe benefit of the said judgement can be availed only if the said claim is filed by taxpayers before 30

June 2020.

2. If any of the taxpayer still decides to claim the transitional credit, how can one claim such credit in the

current situation?

Ans: Since the notification for retrospective amendment is issued by the department it seems, the

department will not provide functionality to file TRAN – 1 form on the GST Portal. Also it is likely that

the department will not accept any manual applications made by the taxpayer. Therefore the tax payer

can take the said credit in GSTR 3B and inform the jurisdictional officer about the same.

Further the taxpayer should keep the credits availed as unutilised, to safeguard themselves against any

demand for Interest.

The views expressed in the article are author's personal view. Therefore one should consider claiming such

credit on case to case basis by analysing pros and cons of each case.

VOL. 23 - NO. 12 - JUNE 2020


Analysis of GST Applicabilityon Directors Remuneration

Compiled by:

CA Jinesh Premji Gada

17

Intention of the Government is not to charge GST on services rendered by employees to employer. On the same

lines as per Schedule III , clause no 1 , of Central Goods and Service tax Act, 2017 Services by an employee to

the employer in the course of or in relation to his employment is covered in activities or transactions which

shall be treated neither as a supply of Goods nor a supply of services.

So any services provided by an employee to the employer in the course of or in relation to his employment are

outside the ambit of GST Act.

In the press release dated 10-07-2017 position of taxation of perquisites is also clarified. It is mentioned in the

said press release that services by an employee to the employer in the course of or in relation to his

employment is outside the scope of GST (neither supply of goods nor supply of services). It follows therefrom

that supply by the employer to the employee in the terms of contractual agreement entered into between the

employer and the employee, will not be subject to GST. Further, the input tax credit (ITC) scheme under GST

does not allow ITC of membership of a club, health and fitness center (section 17(5) (b) (ii)). It follows,

therefore, that if such services are provided free of charge to all the employees by the employer than the same

will not be subject to GST, provided applicable GST was paid when procured by the employer. The same would

hold true for the rent free housing facility given to the employees when in terms of the contract between the

employer and employee and is part and parcel of the cost-to-company (CTC).

Therefore it is utmost importance that employment contracts with employees should be drafted carefully to

avoid litigations later i.e. scope of services should be defined properly and break up of cost-to-company (CTC)

should also be given.

Now we will examine whether Director is considered as employee of the company or not. To find out the

answer we will have to refer Companies Act 2013. Broadly speaking there are two types of Director in the

Companies Act 2013 namely

1) Executive Director and

2) Non – Executive Director

1. Executive Director

As per Rule 2 (1) (k) of the Companies (Specification of definitions details) Rules 2014

“Executive Director” means a whole time director as defined in clause (94) of section 2 of the Companies Act

2013.

As per Section 2(94) of the Companies Act 2013

“whole-time director” includes a director in the→ whole-time employment of the company.

Director→ Whole-time employment of the company → whole-time Director → Executive Director

Therefore, from the above mentioned provision a person can conclude that “whole-time Directors” shall be

considered as “Executive Directors”.

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18

Non- executive Director is not defined in the Company's Act 2013. Therefore a Director who is not full filling

conditions mentioned in definition of Executive Director shall be considered as Non- Executive Director.

A non-executive director typically does not engage in the day-to-day management of the organization but

is involved in policymaking and planning exercises.

thAs per Notification No. 13/2017- Central Tax (Rate) dated 28 June, 2017

In exercise of the powers conferred by sub-section (3) of section 9 of the Central Goods and Services Tax Act,

2017 (12 of 2017), the Central Government on the recommendations of the Council hereby notifies that on

categories of supply of services mentioned in column (2) of the Table below, supplied by a person as specified

in column (3) of the said Table, the whole of central tax leviable under section 9 of the said Central Goods and

Services Tax Act, shall be paid on reverse charge basis by the recipient of the such services as specified in

column (4) of the said Table:-

SI. NO. Category of Supply of Services Supplier of Service Recipient of Service

(1) (2) (3) (4)

6. Services supplied by a director of a company or a body corporate to the said company or the body corporate.

A director of a company or a body corporate

The company or a body corporate located in the taxable territory.

As per above notification services supplied by a director of a company is covered under reverse charge

mechanism. But as discussed above as per Schedule III , clause no 1 , of Central Goods and Service tax Act,

2017 any services provided by an employee to the employer in the course of or in relation to his employment

are outside the ambit of GST Act.

Therefore based on above discussion as per my view as per Schedule III, clause no 1, of Central Goods and

Service tax Act, 2017 services supplied by an executive director who is in whole –time employment of the

company and against the said service remuneration paid by the company in the course of or in relation to his

employment as per the terms of contractual agreement entered into between the employer and the employee is

outside the ambit of GST Act. The same is also because against such payment of Directors remuneration the

company or the body corporate is also deducting TDS under section 192 under the head TDS on salary and

also in the income tax return of Director the said remuneration received by the executive director is also

shown under the head income from salary only.

GST will be payable by the company or by the body corporate on reverse charge basis against services received

by the company or body corporate from non –executive director as they are not in whole –time employment of ththe company as per entry no 6 of Notification No. 13/2017- Central Tax (Rate) dated 28 June, 2017. The

company or body corporates are paying directors sitting fees to non-executive directors who are independent

director for attending board meeting or they pay against services rendered by non- executive director relating

to policymaking and planning exercises.

But my above view is though appears to be correct but will not be free from litigation because under GST Act or

Rules or notifications or circulars are not talking about the said difference as I have made above. Employee

Definition is also not given under GST Act. There are 2 advance authority ruling on the said director's

remuneration which we will discuss below who are also not making such difference so litigation will be bound rdto happen. However 3 recent decision is in favor of the assessee and we will also discuss the same.

VOL. 23 - NO. 12 - JUNE 2020


19

1) Karnataka Authority of Advance Ruling in the case of M/S Alcon Consulting Engineering (India) Pvt thLtd (KAR ADRG 83/2019 dated 25 Sept 2019)

Facts of the case

The applicant states that they are in the business of providing consultancy services like surface survey

and map making, project management consultancy services for construction projects, engineering

advisory services and technical testing analysis services to the General Public, State Government

agencies and Central Government throughout the country.

Findings, Discussions and Ruling

Regarding the remuneration to the Directors paid by the applicant, the services provided by the Directors

to the company are not covered under clause (1) of the Schedule III to the Central Goods and Service Tax

Act 2017 as the Director is not the employee of the company. The considerations paid to the Director is in

relation to the services provided by the Director to the company and the recipient of such service is the

company as per clause (93) of section 2 of the CGST Act and the supplier of such service is the Director.

It is held that in the present case the applicant is the company and is located in the taxable territory and

the Directors remuneration is paid for the services supplied by the Director to that applicant company

and hence the same is liable to tax under reverse charge basis under section 9 (3) of the Central Goods

and Service tax Act 1957 as it is covered under entry no 6 of Notification No 13/2017 Central Tax (Rate)

dated 28-06-2017.

One of the important remarks made by Advance Authority is mentioned below:

“The question before us is not whether this service is taxable or not but whether this supply of service is

liable to tax under reverse charge mechanism.”

My Comments on above remark made by Advance Authority & on ruling

Above remark is very interesting i.e. if question before them was to tell whether this service is taxable

or not in view of clause (1) of the Schedule III to the CGST Act 2017, then answer might have been

different. Because in that event members of the Advance Authority might have focused to find out

whether Director who is in whole time employment is also called as employee or not and if considered

as employee then whether remuneration paid to such Directors will be classified as activities or

transactions which shall be treated neither as a supply of Goods nor a supply of services.

In the above judgment Advance Authority bench has simply said in plain vanilla language that

Director is not the employee of the company. They have not analyzed provisions of Companies Act

2013 wherein it mentioned that executive director is one who is in whole time employment of the

company so one can take the stand that they can be covered under category of employees. The same is

because such distinction is not given under GST Act so when GST Act is silent it is advisable to refer

relevant law which is companies act 2013 for definition of Director, employee definition to be referred

from dictionary which is mentioned below and employee related law which is also mentioned below

because government is talking about integration of various laws and when law to be examined is silent

then other laws can be referred.

VOL. 23 - NO. 12 - JUNE 2020


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2) Rajasthan Authority of Advance Ruling in case of Clay Craft India Pvt Ltd (RAJ /AAR/2019-20/33

dated 20th Feb 2020)

Facts of the case & Companies Few Key Points

The applicant is engaged in the manufacture of bona china crockery, Transfer sheet decalcomania, other

utensils items and moulds and die. Directors are working in the company at different level of

management in the company and each one of them is holding charge of procurement of raw material,

production, quality checks, dispatch, accounting etc.

Directors are also working as an employee of the company for which they are being compensated by the

company by way of regular salary and other allowances as per the company policy and as per their

employment contract.

The company is deducting TDS on their salary and PF laws are also applicable to their service. Therefore

in all practical purposes directors are the employees of the company.

M/S Clay Craft Pvt Ltd are already paying GST under reverse charge mechanism on the commission paid

to their Directors as such amount pertain to the services provided by them in the capacity of a Director.

My comments on commission payable to Director

If in the Executive Directors employment contract it is mentioned that apart from salary CTC, they are

also entitled to commission calculated on the basis of sales done by them or profit earned by the

company because of their service, then the said can also be considered as outside the ambit of GST.

The company has submitted that services provided by an employee to his employer are under clause I of

the schedule III which related to the activities which are not treated either as supply of Services or Goods.

As per Cambridge Dictionary an employee is “someone who is paid to work for someone else”.

The employees' state insurance corporation (General Provident fund) Rules 1995 also defines the

employee as per clause 2 (e) “Employee” means a person appointed to or borne on the cadre of the staff of

the corporation, other than persons on deputation.

We have already seen definition of Director as per companies act above.

These definitions mentioned above makes it clear that directors of our company is in the employment of

the company and his services would be excluded from the provisions of CGST Act 2017 by way of

exclusion provided in clause 1 of the schedule III.

Findings, Discussions and Ruling

It is held that consideration paid to the Directors is against the supply of services provided by them to the

applicant company and are not covered under clause (I) of the schedule III to the CGST Act 2017 as the

Directors are not the employee of the company. In the instant case Director is the supplier of services and

the applicant company is the recipient of the services. So it is very clear that the services rendered by the

Director to the company for which consideration is paid to them in any head is liable to pay GST under

RCM as per entry no. 6 of Notification No. 13/2017- Central Tax (Rate) dated 28-06-2017 issued under

section 9(3) of the Central Goods and Services Tax Act 207. Notification No. 13/2017- Central Tax (Rate)

dated 28-06-2017 has given the distinct identity to the services provided by the Director and specifically

included in the category of service on which GST will be payable under RCM.

VOL. 23 - NO. 12 - JUNE 2020


21

My comments on above Ruling

Here also why Directors are not considered as employees is not dealt with and on the contrary it was

told that Notification No. 13/2017- Central Tax (Rate) dated 28-06-2017 has given the distinct

identity to the services provided by the Director and specifically included in the category of service

on which GST will be payable under RCM.

Applicability of Advance Authority Ruling

As per Section 103 (1) The Advance Ruling pronounced by the Authority or the Appellate Authority under

this chapter shall be binding only on the applicant who has sought it in respect of any matter referred to

in Section 97 (2) for Advance Ruling & on the concerned officer or the jurisdictional officer in respect of

the applicant.

3) Karnataka Authority of Advance Ruling in the case of M/S Anil Kumar Agrawal (KAR ADRG 30/2020 thdated 4 May 2020)

Facts of the case

The Applicant is an unregistered person and is in receipt of various types of income/revenue mentioned

as under:

b) Salary as a director from Private Limited Company.

Out of a) to u) we are discussing only salary as a director from Private Limited Company so only b) is

reproduced above & we will discuss only the same.

Applicant's interpretation of Law

The income received towards salary as Director from a Private Limited Company are not included in the

purview of GST as the same needs to be treated neither as supply of goods nor as supply of services.

Discussion, Finding & Ruling

The applicant an unregistered person is in receipt of various types of income and intend to know whether

the income so received in each type is included in the Aggregate Turnover, for the purpose of registration

under the provisions of GST Act.

“Aggregate Turnover” in terms of section 2 (6) of the CGST Act, 2017 which reads as under:

“Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward

supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods

or services or both and inter-State supplies of persons having the same Permanent Account Number to be

computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and

cess.

It could be seen from above that the aggregate turnover is the sum of different supplies. Therefore any

income to be included in aggregate turnover nerds to be related to any transaction that amounts to supply

in terms of section 7 (1) (a) of the CGST Act 2017.

Section 7 (1) (a) of the CGST Act 2017 stipulates that any transaction must consist of the following three

components to get qualify as Supply:

VOL. 23 - NO. 12 - JUNE 2020


22

i) The Transaction must involve a supply, of goods or service or both, such as sale, transfer, barter,

exchange, license, rental, lease or disposal made or agreed to be made.

ii) The Transaction must be for a consideration by a person.

iii) The Transaction must be in the course or furtherance of business.

Salary received as Director from a Private Limited Company

The applicant is in receipt of certain amount termed as salary as Director of a private limited company.

Two possibilities may arise with regard to the instant issue of amount received by the applicant. The first

possibility that the applicant is the employee of the said company (Executive Director), in which case the

services of the applicant as an employee to the employer are neither treated as supply of goods nor as

supply of services, in terms of Schedule III of CGST Act, 2017. The remuneration received by the

applicant as Executive Director is not included in the aggregate turnover, as it is the value of services

supplied by the applicant being an employee.

The second possibility that the applicant is the nominated director (non-Executive Director) of the

company and provides the services to the said company. In this case the remuneration paid by the

company is levied to GST in the hands of the company under reverse charge mechanism under section

9(3) of the CGST Act 2017, under entry no. 6 of Notification No. 13/2017, Central Tax (Rate) dated 28-06-

2017. Thus the value of the said services of the applicant being a Non- Executive Director are included in

the aggregate turnover, as it is the value of the taxable services supplied by the applicant, though the tax is

discharged by the private limited company under reverse charge mechanism.

Conclusion:

1) Directors Remuneration payable to Executive Director/ whole-time Director / Managing Director is

exempt from GST as per Schedule III, clause 1, of Central Goods and Service tax Act 2017, services by an

employee to the employer is covered in activities or transactions which shall be treated neither as a

supply of goods nor a supply of services. Therefore it is utmost important that employment contract with

employees including executive director/whole-time director/managing director should be drafted

carefully clearly mentioning scope of services and break up of cost-to-company shall be also given.

2) In my opinion commission payable to executive director/whole time director/managing director is also

treated as part of salary so the same is also outside the ambit of GST, however it is advisable that terms of

employment contract should mention when the same is payable and how to determine quantum of

commission payable to avoid litigation.

3) GST will be payable by the company or by the body corporate on reverse charge basis against services

received by them from non-executive director/nominee director/independent director like directors

sitting fees for attending board meeting, amount payable towards services provided by them relating to

policy making and planning services etc. as per entry no 6, Notification No 13/2017- Central Tax (Rate)

dated 28-06-2017 issued under section 9(3) of the Central Goods and Services Tax Act 207 because

employer and employee relationship is not present here.

4) Karnataka Authority for Advance Ruling in the case of M/S Alcon Consulting Engineering (India) Pvt Ltd

and Rajasthan Authority of Advance Ruling in the case of Clay Craft India Pvt Ltd has held that

Directors Remuneration is taxable on reverse charge basis as per entry no 6, Notification No

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13/2017- Central Tax (Rate) dated 28-06-2017 issued under section 9(3) of the Central Goods and

Services Tax Act 2017. They have simply stated that Directors are not employees of the company so

Directors Remuneration is taxable under GST on Reverse charge basis without giving reasons why they

are not considered as employee of the company. Therefore Government should clarify this burning

issue to avoid unnecessary litigation as Governments intention is not to levy tax on services provided by

an employee to employer under GST. So Directors remuneration is also outside the ambit of GST when

employer and employee relationship is existing.

5) Recently Karnataka Authority of Advance Ruling in the case of M/S Anil Kumar Agrawal (KAR ADRG

30/2020 dated 4th May 2020) has given favorable decision though question was relating to whether

salary received as Director from Private Limited Company is to be included in Aggregate Turnover or not

for the purpose of registration but in the said ruling it is also held that that Salary received as Director

from a Private Limited Company in a case where the applicant is the employee of the said company

(Executive Director), in which case the services of the applicant as an employee to the employer are

neither treated as supply of goods nor as supply of services, in terms of Schedule III of CGST Act, 2017.

And in a case where the applicant is the nominated director (non-Executive Director) of the company and

provides the services to the said company, in that case the remuneration paid by the company is levied to

GST in the hands of the company under reverse charge mechanism under section 9(3) of the CGST Act

2017, under entry no. 6 of Notification No. 13/2017, Central Tax (Rate) dated 28-06-2017.

6) As per Section 103 (1) The Advance Ruling pronounced by the Authority or the Appellate Authority

under this chapter shall be binding only on the applicant who has sought it in respect of any matter

referred to in Section 97 (2) for Advance Ruling & on the concerned officer or the jurisdictional officer in

respect of the applicant. Therefore both adverse judgment mentioned above will not be binding on other

assessee's. However because of two adverse judgments litigations are bound to happen. Further, the

third recent favorable Karnataka AAR ruling mentioned above will be beneficial to assessee.

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CA Harsh Lalit Soni

24

Section 115BAA – Lower tax rates introduced for domestic companies

A new section 115BAA has been inserted w.e.f. Assessment Year 2020-21 which provides option to a domestic

company to pay tax at lower rate of 22% (plus applicable surcharge and cess) as opposed to normal tax rate of

30%/ 25% (plus applicable surcharge and cess), provided the income is computed-

without claiming exemption/ deduction

u/s 10AA [SEZ units],

u/s 32(1)(iia) [additional depreciation qua new plant and machinery @ 20%/ 30%],

u/s 32AD [15% on new assets in undertaking set up in specified backward areas in Andhra Pradesh,

Bihar, Telangana, and West Bengal]

u/s 33AB [specified percentage of amounts deposited with Tea/ Coffee/ Rubber Board]

u/s 33ABA [specified percentage of amounts deposited in Site Restoration Account]

u/s 35(1)(ii)/(iia), 35(2AA) [specified deduction for scientific research]

u/s 35AD [expenditure on specified business]

u/s 35CCC [expenditure on agricultural extension project]

u/s 35CCD [expenditure on skill development project]

Under Part C of Chapter VIA except section 80JJAA of the Act (such as 80IA/ IB/ IC/ ID/ IE etc.)

Without set-off of any brought forward losses to the extent such loss relates to deductions mentioned

above. Such losses would also not be allowed to be carried forward to subsequent years.

After claiming depreciation other than additional depreciation u/s 32(1)(iia).

Benefit of lower rate under the aforesaid section can be exercised by the company from any year commencing

from AY 2020-21 or onwards. Such option is to be exercised in prescribed manner, before due date of return

u/s 139(1) for the year in which option is exercised. Option once exercised would be binding for subsequent

years and cannot be withdrawn.

Observations/ Comments:

Effective tax rate u/s 115BAA would be 25.168% (including 10% surcharge and 4% cess). Surcharge in

respect of income chargeable to tax under section 115BAA is prescribed @ 10%.

Benefit is available only to domestic companies and not to other categories of assessee like partnership

firm, LLP, foreign company etc.

Domestic company will have to weigh the benefit of lower rate under this provision with effective tax rate

under existing scheme arrived after taking specified deduction(s)/ exemption(s). If the benefits on account

of deduction u/s 10AA or additional depreciation or under Chapter VIA (Part C) etc. are expected to be

Analysis of New Section Inserted – 115BAA & 115BAB

VOL. 23 - NO. 12 - JUNE 2020


25

substantial over the years, the domestic company may choose not to exercise such option. Option u/s

115BAA in such cases may be exercised later when benefit of such deductions/ exemption recedes.

Only brought forward losses attributable to specified deductions/ exemptions are not allowable. Other

brought forward losses and unabsorbed depreciation u/s 32(2) are allowed to be set off.

Section 115BAB – Lower tax rates introduced for domestic manufacturing companies

New section 115BAB has been inserted w.e.f. assessment year 2020-21 which provides option to a domestic

manufacturing company to pay tax at a lower rate of 15% (plus applicable surcharge and cess) if such

company is set-up and registered on or after 1st October, 2019 and commences manufacturing activity upto

31st March, 2023.

Surcharge in respect of income chargeable to tax under section 115BAA is prescribed @ 10%.

Akin to the provisions of section 115BAA, income for the purposes of the aforesaid preferential rate has to

be computed without claiming exemptions / deductions, set-off of brought forward losses, as prescribed

in that section and discussed above.

Additionally, following conditions must be fulfilled by the company to avail benefit of lower tax rate:

company must not be formed by splitting up, or the reconstruction of a business already in

existence;

Company must not use machinery or plant previously used for any purpose. Used plant and

machinery to the extent of 20% of total value of plant and machinery is permissible;

Company must not use building previously used as a hotel or a convention centre.

Similar to provisions of section 80IA(10), sub-section (4) of section 115BAB empowers the assessing

officer to determine/ deem reasonable profits of such domestic company, if such company has business

arrangements or enters transaction with connected parties in a manner that it produces more than

ordinary profits. Domestic transfer pricing provisions contained in section 92BA have been made

applicable to transactions of eligible companies with connected parties.

Akin to provisions of section 115BAA, if company opts for lower rate of tax given under this section, it

shall not be able to subsequently withdraw the option.

Comparative tax rates for assessment year 2020-21 pre and post the Ordinance for domestic companies are

as under:

VOL. 23 - NO. 12 - JUNE 2020


26

IncomeTax

Rate

Surcharge /

Cess

Effective

Rate

Pre -Ordinance Rates

Where total

turnover in PY

2017 -18 does not

exceed Rs. 400

crores

Upto 1 Crore. 25% Nil/4% 26%

Above Rs. 1 crore but less

than Rs. 10 Crore. 25% 7%/4% 27.82%

Above Rs. 10 Crore. 25% 12%/4% 29.12%

Where total

turnover in PY

2017 -18 exceed

Rs. 400 crores

Upto 1 Crore. 30% Nil/4% 31.2%

Above Rs. 1 crore but less

than Rs. 10 Crore. 30% 7%/4% 33.384%

Above Rs. 10 Crore. 30% 12%/4% 34.944%

Post -Ordinance Rates

Where option u/s

115BAA is

exercised

No Limit 22% 10%/4% 25.168%

Where option u/s

115BAB is

exercised (Eligible

Manufacturing

Companies)

No Limit 15% 10%/4% 17.16%

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CA Henik Dilip Shah

27

Whenever anyone hears the word “conquer”, the thoughts which develop in the mind are “winning over

something”, or “achieving something”. A simple Google search will show the meaning as “overcome and take

control of (a place or people) by military force.” The present governance system of our country is republic-

democracy. Let's deep-dive into our history and understand who have been the conquerors and what have they

conquered.

1. The British

Independent India has always had a love-hate relationship with the British Raj. The British conquest of

India had cost us millions of lives, by battles for independence, by government-made famines (for the

World wars) and by participating in those wars- for as well as against the British. It humiliated and

exploited further hundreds of millions more, looted immense wealth and divided the land into two

countries.

Yet, with all zest typically possessed by fresh converts, almost all of India adopted the western values and

culture as propagated by the British. No doubt they persecuted us, however they also united the

bewildering land of warring kingdoms creating a national consciousness. They laid the foundations of the

Indian Judiciary, its current administrative structure, and connected the country, especially with

railways. Indians are passionate cricket players and tea lovers, both being British legacies. English is that

neutral language which is being used to communicate with varied natives of this country (Even this article

is being written in English). Aptly, modern India is a brain child of the British Raj.

The Conquest

A classic example of Indians accepting western culture is this UNESCO World Heritage Building- a railway

terminal. Built in Neo-Gothlic style of architecture, it is actually a symbol of British oppressive rule.

However, ever after independence, no one has ever thought of razing this building and constructing an

Indian structure. Just that one democratically elected government changed its name from “Victoria

Terminus” to “Chhatrapati Shivaji Maharaj Terminus”, paying their respect to a Maratha king.

But then, even for a second we think, to completely disavow the British Raj's legacy, since they being foreign

oppressors, we have to look at multiple authentic Indian rulers of major parts of the subcontinent. With a

hope of finding such rulers, during whose times India was apparently “the land of the golden sparrow”, we

land to a period where almost entire India (though for a brief time) was ruled by the Marathas.

VOL. 23 - NO. 12 - JUNE 2020


28

2. The Marathas

thThe Marathas started claiming power with the rise of Chhatrapati Shivaji Maharaj in the 17 Century. This

was under a common desire for “Swaraj” (rule by native men) as the Islamic rulers at that time were being

viewed as foreigners. He and later his successors started acquiring land and increase their territory to

such an extent that before the Third Anglo-Maratha war (1817-1818), the Marathas held almost the entire

of north, west and central India.

While the modern day history textbooks almost always show the Maratha rule in good light, not all has [1]actually been good. Reference can be given to the plunder of Surat by Shivaji himself, in 1664. Surat was

under attack for nearly three days, in which the Maratha army looted all possible wealth from Mughal and

Portuguese trading centers. The Maratha soldiers took away cash, gold, silver, pearls, rubies, diamonds

and emeralds from the houses of rich merchants such as Virji Vora (apparently the richest merchant in the

world at that time), Haji Zahid Beg, Haji Kasim and others.

Interestingly, the business of Mohandas Parekh, a broker of the Dutch East India Company, was spared as

he was reputed as a charitable man. Shivaji Maharaj also did not plunder the houses of the foreign

missionaries.

The traditional Gujarati lullaby, highlighting the stature of Shivaji Maharaj, is below. In current times,

Surat residents may not shy away from singing this lullaby.

“Aabh ma uge ne chandlo ne jijabai ne aviya bal re,

Aej baluda ne mat hichode dhanana na dungra bole,

Shivaji ne nidaru na ave, mata jijabai jhulave.”

Swaraj still holds high in Indians. With “Aatma-nirbharta” (self-reliance) being the new economic mantra,

we are on a continuous journey of nurturing this swaraj.

However, when we consider the plight of the merchants of Surat, we have to look further into history to find

the ideal rule. We land to the period of the alleged foreigners- the Islamic rule.

3. The Islamic rulers

thThe Islamic conquest of India began from as early as the 8 century AD (The religion itself being found in th [2]the 7 century). Plundering multiple temples and cities in Punjab and Gujarat, especially the Somnath

temple by Mahmud of Ghazni. Later, another ruler, Bakhtiyar Khalji destroyed the Nalanda and other such

universities. Timur was another such tyrant ruler and mass murderer. The Mughals have their own share

of oppressive rulers like Aurangzeb.

But again, even all of such “foreign Islamic” rulers have their share of contribution in pushing the

civilisation forward. It is pertinent to mention that one ruler- Sher Shah Suri, introduced his currency

“Rupiya” which now is the source of Indian currency's name “Rupee”. Trade flourished within and outside

the sub-continent.

VOL. 23 - NO. 12 - JUNE 2020


29

The Taj Mahal, a Wonder of the world, was built by Mughal Emperor Shah Jahan. When the Hindus,

especially of north and central India, view Islamic rulers as oppressors, even this monument becomes a

symbol of that oppressive rule.

Can any rule be called ideal? Let's look further into history, to pre-Islamic rule, where multiple native

kings, divided on the basis of region and religion, ruled small parts of the country.

4. Pre-Islamic times

Pre-Islamic times are actually the founding stones of the Indian culture as we see it today, especially for

native religions like Hinduism, Buddhism and Jainism. Many might be tempted to think this phase to be

the idealistic times, where there was swaraj, the region self-reliant and no foreign rule, thus made India the

land of the golden sparrow.

However, even those times were riddled with wars and annexations. Notable is the war of Kalinga, fought

between the Mauryan king Ashoka and an independent feudal state of Kalinga (It did not have a king). [3]Around 3 lakh people died in that war, as per Ashoka's accounts.

Monuments built by Ashoka- one is our National Emblem, another finds its place on one of our currency

notes. The Chakra on the emblem adorns our national flag. Shouldn't the descendants of the Kalingas, the

Oriya people, denounce all that which contains any reference of Ashoka?

Obviously, be it the Oriyas, or the Hindus of north and central India, or people from Surat, or any average

Indian, will never denounce or disavow anything of its history. This is simply because all the history

becomes a part of the very culture that any conquest intends to claim supremacy upon, and thus, all of it is

now an indispensable part of the daily life in current times.

About current times ;

Post-Independence, India is a republican democracy. We opened our economy to outside world effectively stfrom 1991. The 21 century began with the NDA rule under Late Shri Atal Bihari Vajpayee, to UPA-I and

UPA-II under Dr. Manmohan Singh, and then back to NDA under current honourable PM Shri Narendra

Modi.

History is written by victors. And who are victors? The most brutal in a war, from mind and might (This is

the very reason why they are victorious over their enemies). Every rule mentioned above has its fair share

of brutality, and the more a ruler has been brutal, the more it has conquered, and the more it is a part of

our daily life today. This phenomenon was very appropriately worded by Arvind Adiga in his book “The

White Tiger”. It reads: “Kill enough people and they will put up bronze statues to you near Parliament

House in Delhi”

In the current times, conquest is not only restricted to brutality by killing. It can also mean reducing a

person's self-respect to zero, public-shaming and curtailment of rights. In 2014, India replaced the then

UPA-II for its own shortcomings. The UPA was brutal, especially for failure to protect the people of the

country. The 26-11-2008 and 11-07-2006 terrorist attacks on Mumbai are still a nightmare for many

people. Now we have to focus on the elected government.

VOL. 23 - NO. 12 - JUNE 2020


30

The elected government has been brutal in its own ways, from poor framing of laws such as GST and IBC to

ill-planned decisions like demonetisation to even recent handling of migrant crisis amid this lockdown. India

had been experiencing an economic slowdown before the Covid-19 pandemic. People are actually dying by

walking extensively from state to state, sleeping on the tracks or over-crowding such as to making the vehicle

uncontrollable. People even died standing in queues, waiting for their currency notes to be exchanged.

(A migrant worker writing an apology letter to some cycle owner for stealing his cycle so as to reach Bareily [4]

with a differently-abled child.)

Again, the more brutal this government has been, the more it has conquered. Not just in the 2019 general

th [5] elections, but beyond. This is very well articulated in a New York times article dated 16 May 2020. It states

that PM Modi's approval ratings being at 80-90%. Even though the handling of the pandemic by his

government has had a mixed response, and before this, anti-government protests roiled the country, Hindu-

Muslim riots exploded in the capital just as US President Donald Trump was visiting. And India's once-hot

economy was slumping, shedding millions of jobs and casting a pall over the entire country. Still, PM Modi's

popularity is soaring.

Why? He's widely seen as a mobilizer, not a despot, which may explain why his nationwide stay-at-home

lockdown, which he dropped on the country with four hours' notice, has been largely obeyed. Even the softer,

feel-good exercises he has insisted on, like asking Indians to stand in their doorways and clap at a certain time,

or to light candles at another, have been followed by millions. Further, his phrase “Jaan Hain to Jahaan Hain”

which means the world exists only if you are alive, has struck a chord with the masses. It cannot be denied that

for a nation of 1.3 billion, the 1,00,000+ reported coronavirus infections is much lower per capita than many

other countries, especially richer ones like the United States, Britain, Italy and Russia.

Point to ponder:

This same concept of conquest applies to us as well. We have our own good aspect, and this is the reason

why we are who and where we are. Post the lockdown, it will be imperative to be brutal, to conquer own lost

clients/customers and markets, probably conquer even new. We have to be such men and women, that we

create a legacy, that people remember us. And at the same time, we have to thwart off any external

conquest, be it on business or political front. Are we ready?

Think over it. Think different!

References:

1. https://en.wikipedia.org/wiki/Battle_of_Surat

2. https://en.wikipedia.org/wiki/Muslim_conquests_in_the_Indian_subcontinent

3. https://en.wikipedia.org/wiki/Kalinga_War

4. https://www.timesnownews.com/india/article/migrant-labourer-steals-bicycle-en-route-to-bareilly-leaves-poignant-

letter-for-owner/592874

5. https://www.nytimes.com/2020/05/16/world/asia/coronavirus-modi-india.html

VOL. 23 - NO. 12 - JUNE 2020


31

Compiled by:

CA Nisha Ninad Gala

The concept of Flexihours, Work from home etc. which were once privileges offered in selected few

organisations, have today become a compulsion for almost all offices, wherever practically possible.

Organisations that were already offering these options to their employees, must have had a comparatively

smooth transition or much more control, with less changes to be made on the operations front. However, those

new to this concept may have or are still undergoing a bit of a struggle.

Work From Home, has its own set of advantages and disadvantages. It does provide employees flexibility and

comfort, reduces considerable commute time, allows the employee to manage multiple responsibilities,

reduces absenteeism and ensures good health and employee well being altogether. The flip side, however

could be lower productivity, distractions, lesser team connectivity, lack of coordination and a devoid of all

other positive energies that work best while working under an office roof.

The fact that today WFH has become mandatory, leaves no option, but to minimize the disadvantages as far as

possible so that business is not hampered. For all that the future may have instore, this could be the most

practical way forward.

Every organization, big or small, has its own set of office rules, procedures, processes. Most organizations

(read larger organizations) have them clearly defined, documented and implemented for obvious reasons

though, considering the number of people that need to be managed or different locations or verticals etc. On

the hand, in smaller organisations, most office policies are just implied and not really defined. If defined and

documented, they may not be 100% implemented. This has its own side effects.

However, today when the team is operating remotely and scattered across, it becomes advisable and necessary

to have clear, defined, discussed and adopted standard rules of operation for every organisation. Having gone

with the flow, not many organisations have yet completed their work from home policies, considering the

complexity and the adversity that may be involved.

Most of the points or areas might have been communicated to employees, one way or the other, through emails

and correspondences. However, consolidating these communications into one document, gives it affirmation

and a stop reference point.

So, here are a few important pointers which could be useful while drafting your Work from Home policy.

1. The Need of the Policy : While Instilling trust that the organisation has on the employee and vice versa, it

is important to bring out the need for having the policy in place. The purpose to eliminate ambiguity,

encourage uniformity, bring about clarity and ensure smooth business operations should be clearly

mentioned. WFH is empowering employees to work independently, maintain self-discipline, take

responsibility and deliver.

Work from Home(WFH) -Need for a Policy in Place !

VOL. 23 - NO. 12 - JUNE 2020


32

2. Relevance of the Policy : It should be mentioned in the policy whether it is a stop gap arrangement

considering the Covid-19 scenario, or would be applicable on a case to case basis or would be generally

applicable as a part of employee policy. In either case, if there is a need to have a formal permission to

Work from Home by the employee, then the procedure for application and the approval needs to be

drafted, documented and communicated.

3. Scope/Applicability of the Policy : Having brought out the relevance, it would then be necessary to

mention for whom the policy will be applicable:- all employees, a certain category of employees,

voluntarily or “compulsorily.” etc. Some functions cannot be carried out remotely, while other's can be.

In line with the government norms, if there is a requirement for only a certain percentage of employees to

be at office, then the fact that the respective managers or heads would communicate who shall be present

at office and when, shall be clearly stated. The Authority -responsibility should be clearly defined.

4. Office Protocol : Each office shall have its own protocol of operating (especially post lockdown and post

covid-19 scenario). It could be Operating daily with few employees, or calling employees on alternate days

and so on. It should be clearly communicated. Also, in cases where there is constant interaction with

members of other teams, it is necessary that all are aware about who is at office or who is working from

home and so on.

5. Mutual consent : Although, this is a policy drafted by the organisation, its sole aim is to ensure employee

engagement and productivity. There should be an open discussion on the policy and if any employee has

any reservations or limitations, it should be resolved. While accommodating everyone's requests may not

be practical, there surely can be some relaxations provided on a case to case basis, with a pre-condition

that the work should not suffer. Such relaxation provided, should be known to concerned team

members. With the right preparation and communication, the team can be just as happy, connected, and

productive at home as they are in the office.

6. Rules for Working at Home

a. Work environment – Some obvious requirements such as internet connectively, laptop/desktop,

designated desk or workspace, no noise or disturbance etc. may be mentioned. Security measures

with related to the various devices, software, apps etc. should be clearly brought out.

b. Working hours – An organisation would neither want overworked employees, neither underworked.

The fact that the employee is always available should not be pre-assumed and neither be a reason for

exploitation. Define fixed office working hours, during which all employees are expected to be

available. Whether online or offline, that may be decided by the team, depending on the nature of

work. The need to exceed the working hours may also be considered on a case to case basis.

Do inculcate the habit of fixed Lunch hours and tea break times. While it may appear like a school

discipline, but one wouldn't want to be disturbed during breaks, nor disturb the other and also often get

bogged down because of non availability of a particular employee, trying to trace him/her down.

VOL. 23 - NO. 12 - JUNE 2020


33

An organisation needs to be empathetic that the employee may be having other

responsibilities to be discharged and needs personal space and time.

At the same time employees need to understand the privileges being availed and ensure

they follow discipline and do not get distracted during office hours.

It is a mutual give and take and both ends need to respect the fact.

c. Attendence, Log In -Log Out, Leaves etc. – As far as possible, have a mechanism to mark attendance,

log in, log out for all employees. The same procedure for applying for leave ( e.g. a day off) , if required

could continue. Certain practices as these, ensure that the decorum of organisation is maintained

irrespective of the location.

d. Work attire – It may be prudent to have a rule for the acceptable clothing and appearance that one

should have during office hours. Even in the comforts of homes, one may have to enter into video

conferences of face to face meetings with colleagues, clients etc. Moreover, a work attire entails

focussed approach as against a laid back attitude which may creep in knowingly and unknowingly.

e. Safety Measures – An elaborate mention about the safety measures that an employee needs to take

while working from home should be incorporated in the policy. The government has, time and again,

come out with various circulars regarding the same. A reiteration of the do's and donts should

become a part of the document. What are the important steps an employee should take , when he/she

is commuting to office in between Work From Home should be clearly slated. There should be an

internal office contact person appointed for seeking help in case of any kind of emergencies.

7. File and Data Management : One of the most crucial aspects of work is saving and sharing of data . Many

tools , softwares are available , which enable to manage and retrieve data that is stored remotely . It is

advisable to opt for paid secured softwares as against free software to ensure data security. Having clear

guidelines with reference to the data and files to include how to name or number the file and where and

how to store it . A situation where numerous files are moving around , worked upon and saved could cause

confusions, duplication of work , and unwarranted task of matching the correct the file. Creating names

with versions and so on could be one of the options. One could appoint a coordinator for every assignment

or team whose core responsibility would be to coordinate amongst teams.

8. Regular Communication : Communication , has always been the key to an organisation and more so,

now. There could be a laid protocol of having joint video meetings, or conference calls on fixed days, or

fixed times even if offline communications happen. Co-ordination is especially needed, when there is

dependency of one's work on another. Timely communication and coordination is needed to ensure no

one's work is hampered. Reporting is again one of the key essentials to avoid chaos and to stay

informed. A reporting format or structure should not only be defined, but strictly implemented to ensure

control.

Apart from professional, work related talks ,

personal talks enquiring about the well-being of employees/colleagues

and their family members and having regular dialogues is a MUST.

VOL. 23 - NO. 12 - JUNE 2020


34

9. Secondary Responsibility & Contacts : In these testing times , an organisation may go unaware if any of

its employee suddenly gets into an emergency situation. Having alternative contact numbers of spouses,

landline numbers is important. At the same time, certain routine yet crucial work should be assigned to

two people , one whose primary responsibility is to carry out the work and another who does the work in

absence of the first . This is important so that , if any untoward incidents do happen , the designated

person can pick up from where it was left , till the primary person resumes . This will safeguard any loss of

work or delays.

10. The Do's and Don't's while in Office during WFH :

If the employees are required to come to office, occasionally, alternatively or otherwise , then detailed

guidelines should be mentioned of the safety measures that need to be taken .

Screening at the entry point,

Log in of attendences,

sanitization of self and belongings,

compulsory wearing of masks,

Maintaining of personal hygiene

desk space management,

safe use of office equipment and accessories,

pantry restrictions,

lunch & break time management etc.

are the areas which need a special mention in the document.

The precautions an employee should take during commute and once home from work ,should also get a

mention , to ensure the safety of the employee as well as the family members.

11. Incidental Costs : It would be advisable to communicate clearly and well in advance about expenses

which are permissible, allowable, reimbursable. This may include some infrastructure costs, set up costs,

travel costs and so on . This again, is to avoid any ambiguity, disparity and reluctance across teams.

In the current scenario, cash is the king and everyone in the hierarchy of an organisation is out there to save

costs as far as possible. Many managers and heads opine that silence on certain matters is best and issues

can be tackled on a case on case basis. This could be true for some, but in the long run, in order to avoid all

sorts of employee disputes and dis-satisfactions , some matters are better detailed.

12. Performance parameters : Although this may be somewhat tricky, at the moment. However,

communicating to employees, the expectations that the organisation has from the employees and the

parameters for ensuring the productivity and performance, will secure the employee of his place in the

organisation and motivate him/her to perform.

As much as the employee needs the organisation for his/her survival,

the organisation needs to retain talent. The situation will not remain dark forever and

there is surely light at the other side of the tunnel.

The employees and the organisation need to sail through this with each other's support and conviction.

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35

13. Default and its consequences : The policy should also mention, the consequences for not following the

rules laid down , in its true spirit . It is the task of the management , that deliberate rule breakers are taken

to task . This is important in order to convey that the policies of the office are not just a rule on paper and

should be strictly adhered by one and all .

14. Disclaimers etc. : The policy should be concluded with certain disclaimers, such as the management

shall review the policy on a time to time basis and make necessary changes if required. It should also

invite employees for feedbacks and scope for bringing up their issues. There could be a designated

person, or email contact, wherein they could register the same. A timeframe should be mentioned (and

adhered) by when all queries raised will be answered.

While there are strict rules to be followed, there is always room for some fun, team bonding and re-

assurance that the organisation and its members are together.

Fun breaks, Game-times, occasional celebrations, informal conversations, contests, talent displays,

connecting with employee families could all act as morale boosters for a team to connect and bond. The

mental health of the employee is equally important for the organisation.

The above is an illustrative list, and may vary within organisations.

If one thinks and wants to believe that drafting such policies is a waste and too much of a hastle, it is time to

question such belief.

Circumstances have changed and will further change.

However, it does not discharge employees from their responsibility to deliver. Work cannot be

and should not be compromised.

The key is to create a Work From Home Policy that sets the right expectations and creates channels

and infrastructure that not only supports working from home, but that mitigate the many pitfalls

that spring up when employees are operating out of office.

Having a thoughtful and complete Work From Home Policy

is the single biggest factor in setting your team up for success !

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CS Keyur Jitendra Furia

capitalytic

36

The wedge trading strategy is a reversal trading strategy that has the potential to generate big profits. No

technical indicators are required to trade the wedge trading strategy. It is a pure price action trading strategy.

Falling wedge Pattern :

It's important to recognize that the falling wedge pattern, it has two parts in its price pattern structure:

The primary characteristic of a falling wedge pattern is that we need to have a bearish trend before the

pattern develops. This is because it's a reversal pattern.

Part two is the actual falling wedge pattern which looks like a triangle that is pointing down.

Rising & Falling Wedge Pattern

You need to have a series of lower highs followed by a series of lower lows, the more the better. Each lower point

should be lower than the previous lows and each higher point should be lower than the previous high.

However, as we approach the end of the falling wedge pattern the price will fail to make lower lows.

While the falling wedge pattern develops, you'll notice the length of the swing waves become tighter and tighter.

Especially as we move to the downside. And at some point in the future, the two trend lines that connect the

highs and the lows will converge. The falling wedge pattern is not confirmed until it's breaking to the upside

resistance.

Wait until you can Spot on the Price Chart the Structure of a Falling Wedge Pattern and Draw the two trend line

that connects the highs and the lows. The more compressed the pattern is the better. Eventually, we'll break to

the upside. The volatility behind the breakout will push the price higher very fast. Buy when we break and

Close above the Downward Resistance Trend line

It's important before the breakout to see the price contracting within the two trend lines. So when the price hit

the resistance trend line the sellers will step in and when the price hit the support trend line the buyers will

step in. Ultimately, we're getting the price squeezed inside this range bound action. As we get tighter and tighter

that's what we're focused on as the build-up in pressure will eventually lead to a breakout.

VOL. 23 - NO. 12 - JUNE 2020


37

Breakout is confirmed on close above the resistance lines & also one can buy on retest of former resistance

acting as importance support as seen in image below. Retest level entry gives a favourable risk rewards

Rising wedge Pattern :

It's important to recognize that the Rising wedge pattern, it has two parts in its price pattern structure:

The primary characteristic of a rising wedge pattern is that we need to have a bullish up trend before the

pattern develops. This is because it's a reversal pattern.

Part two is the actual rising wedge pattern which looks like a triangle that is pointing upside direction.

A rising wedge in an uptrend is considered a reversal pattern that occurs when the price is making higher

highs and higher lows. As the chart below shows, this is identified by a contracting range in prices. The price is

confined within two lines which get closer together to create a pattern. This indicates a slowing of momentum

and it usually precedes a reversal to the downside. This means that you can look for potential selling

opportunities.

A rising wedge in a downtrend is a temporary price movement in the opposite direction (market retracement).

VOL. 23 - NO. 12 - JUNE 2020


38

As in the case of a rising wedge in a uptrend, it is characterised by shrinking prices that are confined within

two lines coming together to form a pattern. It indicates the continuation of the downtrend.

Once you have identified the rising wedge (whether in a uptrend or downtrend), one method you can use to

enter the market with is to place a sell order (short entry) on the break of the bottom side of the wedge. In order

to avoid false breakouts, you should wait for a candle to close below the bottom trend line before entering.

In a rising wedge, both boundary lines slant up from left to right. Although both lines point in the same

direction, the lower line rises at a steeper angle than the upper one. Prices usually decline after breaking

through the lower boundary line. As far as volumes are concerned, they keep on declining with each new price

advance or wave up, indicating that the demand is weakening at the higher price level. A rising wedge is more

reliable when found in a bearish market. The chart below demonstrates the area where price breaks the lower

support trend line and where you should short.

Head & Shoulders Pattern in Falling wedge :

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CA Meet Rameshchandra Gada

39

Move Your Bus – Ron ClarkIf you want to learn how to motivate those around you to run just

a bit faster every day – or if you want to learn how to pick up the

pace yourself – you must read ahead!!

Let's understand what does a bus have to do with my

business/profession? More specifically it represents the goals

and achievements you hope to reach as an organization.

Depending on your personal circumstances, the bus could be a

corporation, a small business, a project, a sports team, your

family or even a school.

Now, the bus has no fuel tank and no petrol/diesel, because your organization is going nowhere without the

people on your team to act as petrol/diesel. So, imagine that we are going to cut holes from the floor and moving

the bus ourselves and own efforts. The movement of the bus depends entirely on the people who are on the

team, and that includes YOU. If everyone is performing at the top of his game, success in imminent.

In every organization, there are different styles of workers, which the author mentally categorizes by the

amount of energy they expend. An Extraordinary New Approach to Accelerating Success in Work and Life

defines five types of people on this planet: -

Runners – who consistently go above and beyond what is required. They are the top performers, the people

who really lend their muscle to moving the bus. They need support and direction. These individuals are

working as hard as possible and essentially carry the load of the bus. They never complain, and provide

positive spirit. They have strong work ethic and pay attention to detail. They are driven by goal of professional

excellence. They tend to neglect their personal lives. It is important for Leaders to keep in mind that if they are

putting job first, someone is being kept second. Treat them with reverence i.e. tempering your criticism and

allowing things to slide, because you don't want to break spirit of a Runner. They are indeed backbone of an

organization.

Joggers – do their jobs without pushing themselves, they are conscientious workers who do a good job but are

not at the same level as runners. They are steady and dependable and want validation. They do their jobs and

have some amount of success. Joggers really do try to keep up, and while they will occasionally break into a

sprint, they simply don't maintain that high level of effort over the long haul. They don't slow the bus down, but

they don't make it fly either. They meet basic expectations. They honestly feel they are doing their best that

could ever be expected from anyone, because they are fairly meticulous about performing the tasks they were

hired to do. They are not inherently lazy, they lack bit of confidence about their abilities or perhaps tend to

pour most energy in tasks they're already skilled at. They want recognition for extra efforts. They play

supporting role to Runners.

Walkers – are just getting pulled along. They contribute less forward momentum than the others. They lack

motivation. As per author nearly 60% workforce is of walkers. They do not contribute for forward momentum.

VOL. 23 - NO. 12 - JUNE 2020


40

They plod and stumble and don't keep up with Joggers. They are practically being puled along the bus, with

their legs draggin' as they trip over their feet. They love to point out wrong, to deflect any blame that could be

placed on them. Sometimes they will complain that the Runners are “making them look bad” or things aren't in

their job description. They talk negatively and are a toxic crisis. They would latch on to new hires quickly. They

want to bond with and form alliances. Treat Runners differently from Walkers.

Riders – pick up their feet and slow down the whole enterprise. They are essentially the deadweights, because

they have picked up their feet and sitting there cross-legged! Regardless of what is happening, they choose to

do nothing. If they see flat tire, they are going to watch others change it. If the bus needs diesel, they will watch

others pump it. They do not care for overall success of the organization. They don't care of their personal

success. They can make Runners and Joggers extremely frustrated, and they sometimes receive the most

attention from leaders who are desperately trying to motivate them and fix the situation. Riders will document

how others are treated so they will have evidence to support their case in the event that they are fired.

Drivers – are trying to steer the entire organization. He supports the Runners first and then while they are off

and running, he will turn his attention to other three, either to help, improve or kick them off the bus.

Who are you?

You may be a former Runner who has burned out and is just coasting on memories of how great you used to be.

You may be a Walker who wants to run but can't because you are so darn exhausted. The energy to do more

just isn't there anymore.

You may be a potential Runner who is stuck in a situation with a boss who walks and doesn't value your

worth to the organization.

You may be a Rider who wants to be better but has no idea how to begin to walk, much less run.

You may be a Runner who has looked around and realized that there is a new younger crop of Runners who

seem to be accelerating with turbo boosters that make your run look like a trot.

Quick Tips: How to Accelerate Quick Tips: How to Map the Route

1. Get there early 1. Allow the Runners to shine

2. Wear good clothes 2. Help Joggers to be their best selves

3. Say hello 3. Show Walkers how to improve

4. Sit with Runners 4. Equip people to meet your expectations

5. Ask for help 5. Go right to the source where there is a problem

6. Accept criticism 6. Show appreciation

7. Clean the windshield 7. Enjoy the ride

8. Take the hint

9. Listen more than you talk

10. Stay in your lane

11. Change the conversation to change the culture

12. Allow the Runners to reap the rewards

13. Exude a sense of urgency

14. Find solutions

15. Realise you are not entitled to this job

16. Be credible

17. Pay attention to details

VOL. 23 - NO. 12 - JUNE 2020


BRIEF UPDATE ON SEBI AND CORPORATE LAW

by CA IP Neha Rajen Gada and CA IP Rajen Hemchand Gada

41

SEBIA. NOTIFICATIONS

1. Securities and Exchange Board of India

(Payment of Fees) (Amendment) Regula-

tions, 2020

[Issued by the Securities and Exchange

Board of India vide Notification No. SEBI/

LAD-NRO/GN/2020/011 dated May 08,

2020]

SEBI has reduced turnover fees payable by

brokers for the period commencing from June

01, 2020 till March 31, 2020. It has further

reduced the filing fees in case of Public Issues,

Rights Issues and Buy Back offers.

B. CIRCULARS

1. One-time relaxation with respect to validity

of SEBI Observations


Board of India vide Circular No. SEBI/HO/

CFD/CIR/DIL/CIR/P/2020/66 dated April 21,

2020]

SEBI has extended the validity period of expiry

of its observations on draft offer documents

filed for IPOs, Rights Issue, FPOs and IPOs of

Indian Depository Receipts. Further, in case of

offers (IPO/Rights use / FPO) opening before

December 31, 2020, SEBI has also permitted

increase or decrease of offer size of upto 50%

without the requirement of filing a fresh offer

document.

2. Encumbrance on units of Infrastructure

Investment Trusts / Real Estate Investment

Trusts


Board of India vide Circulars No. SEBI/HO/

CFD/CIR/CFD/DIL/67/2020 dated April 21,

2020]

SEBI has granted various relaxations in case of

Rights Issues that open before March 31, 2020.

The relaxations granted are for:

1. The eligibility conditions related to Fast

Track Rights Issues;

2. Minimum Subscription; and

3. The minimum threshold required for not

filing draft letter of offer with SEBI.

However, these relaxations are not applicable

to issuance of warrants.

3. Relaxation in timelines for compliance with

regulatory requirements by trading

members / clearing members


Board of India vide Circular No. SEBI/HO/

MIRSD/ DOP/CIR/P/2020/68 dated April 21,

2020]

In view of the situation arising due to COVID-19

pandemic and extended lockdown period,

based on representation received from Stock

Exchanges, it has been decided to extend the

timelines for the following compliance

requirements by their trading members /

clearing members

1. Submission towards weekly monitoring of

client funds under the provisions of

Enhanced Supervision.

VOL. 23 - NO. 12 - JUNE 2020


42

2. Submission of data on monthly basis towards

clients' and fund balance under the provisions

of Enhanced Supervision.

3. Daily margin trading reporting

4. Update in Income Tax Permanent Account

Number of Key Management Personnel /

Directors

5. Issue of Annual Global Statement to clients

The due date for compliance for items 1 to 3 was

March 17, 2020 and extension has been for

compliances at items 4 and 5 by a month.

4. Relaxation in Regulation 24(i)(f) of the SEBI

(Buy-back of Securities) Regulations, 2018

due to the COVID 19 pandemic

[Issued by the Securities and Exchange Board

of India vide Circular No. SEBI/HO/CFD/ DCR2

/CIR/P/2020/69 dated April 23, 2020]

Companies undertaking Buy Back of shares are

not allowed to access the capital markets for

raising further capital for a period of one year

from the expiry of buyback period, except in

discharge of their subsisting obligations. SEBI

has relaxed the period of one year to six months.

This relaxation will be applicable till December

31, 2020.

5. Relaxation in relation to Regulation 44(5) of

the SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015 ('LODR') on

holding of Annual General Meeting (AGM) by

top 100 listed entities by market capitaliza-

tion, due to the COVID –19 pandemic


of India vide Circular No. SEBI/HO/CFD/

CMD1/ CIR/P/2020/71 dated April 23, 2020]

SEBI has relaxed the provisions of Regulation

44(5) of the LODR whereby the top 100 listed

entities by market capitalization whose financial

year ended on December 31, 2019 may hold their

AGM within a period of nine months from the

closure of the financial year (i.e., by September

30, 2020).


regulatory requirements by Depository and

depository participants


of India vide Circular No. SEBI/HO/MIRSD

/DOP/CIR/P/2020/72 dated April 24, 2020]

SEBI has granted relaxation in the time required

to submit varios compliances by Depository /

Depository Participants.

7. Clarification on Know Your Client (KYC)

Process and Use of Technology for KYC


of India vide Circular No. SEBI/HO/MIRSD

/DOP/ CIR/P/2020/73 dated April 24, 2020]

SEBI has propagated the use of eSign technology

for undertaking KYC under AML / PMLA

provisions. It has elaborated the method in which

the technology has to be used and related do and

dont's.

8. Extension of implementation date of Circular

on 'Review of Margin Framework for Cash and

Derivatives segments (except for Commodity

Derivatives Segment)'


of India vide Circulars No. SEBI/HO/MRD2

/DCAP/CIR/P/2020/74 dated April 27, 2020]

SEBI has extended the implementation date of

the aforesaid circular to June 01, 2020 instead of

May 01, 2020.

9. Relaxations relating to procedural matters –

Issues and Listing


of India vide Circular No. SEBI/HO/CFD

/DIL2/CIR/P/2020/78 dated May 06, 2020]

SEBI has, in respect of Rights Issues opening till

July 31, 2020, allowed Service of the abridged

letter of offer, application form and other issue

material to shareholders may be undertaken by

VOL. 23 - NO. 12 - JUNE 2020


43

electronic transmission and other related

matters for ease for Company as well as its

investors.

10. Additional relaxation in relation to compli-

ance with certain provisions of SEBI (Listing

Obligations and Disclosure Requirements)

Regulations 2015 – Covid-19 pandemic



CMD1/CIR/P/2020/79 dated May 12, 2020]

SEBI has relaxed various regulations relating

conducting of AGM such as sending physical

copies of Annual Reports, requirement of proxy

for general meetings, requirements of dividend

warrants / cheques and publication of

advertisement in newspaper.

11. Entities permitted to undertake e-KYC

Aadhaar Authentication service of UIDAI in

Securities Market


of India vide Circular No. S EBI/HO/MIRSD/

DOP/CIR/P/2020/80 dated May 12, 2020]

The following entities are permitted to under e-

KYC Aadhaar:

a) Bombay Stock Exchange Limited

b) National Securities Depository Limited

c) Central Depository Services (India) Limited

d) CDSL Ventures Limited

e) NSDL Database Management Limited

f) NSE Data and Analytics Limited

g) CAMS Investor Services Private Limited

h) Computer Age Management Services Private

Limited.

12. Relaxation from the applicability of SEBI

Circular dated October 10, 2017 on non-

compliance with the Minimum Public Share-

holding (MPS) requirements




SEBI has directed Stock Exchanges to withdraw

any penal action initiated against companies for

non-compliance under minimum public

shareholding provision after March 01, 2020.

Further, SEBI has directed SEs not to take any

action against such companies till August 31,

2020.

13. Relaxations relating to procedural matters –

Takeovers and Buy-back




SEBI has laid down the steps to be undertaken

with regard to services of offer documents,

publishing of advertisements, etc. in case of open

offers and buy-back tender offers opening upto

July 31, 2020.


regulatory requirements


of India vide Circular No. SEBI/HO/MIRSD/

DOP/CIR/P/2020/82 dated May 15, 2020]

SEBI has granted further relaxation in

compliance of various provision by Trading /

Clearing members and Depository / Depository

Participants.

VOL. 23 - NO. 12 - JUNE 2020


44

15. Advisory on disclosure of material impact of

COVID-19 pandemic on listed entities under

SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015




SEBI has reiterated the need for listed entities to

give disclosure listed entities to disclose material

events which have a bearing on its performance /

operations with special focus on COVID-19

pandemic in current times.. It also provided an

illustrative list of items that may be considered

for reporting. However, it is not an exhaustive list.

CORPORATE LAW

A. RULES

1. Companies (Appointment and Qualifica-tion

of Directors) 2nd Amdt Rules 2020.

[Issued by Ministry of Corporate Affairs vide

Notification No. G.S.R. 268(E) dated April 29,

2020]

MCA has extended the date for enrolling persons

as independent directors with the data bank till

June 30, 2020.

B. CIRCULARS

1. Holding of AGMs by companies whose

financial year ended on 31st December, 2019


General Circular No. 18/2020 dated April 21,

2020]

MCA has clarified that if the companies whose

financial year (other than first financial year) has stended on 31 December, 2019, hold their AGM

for such financial year within a period of nine

months from the closure of the financial year (i.e.

by 30th September, 2020).

2. Extension of the last date of filing of Form

NFRA-2


General Circular No. 19/2020 dated April 30,

2020]

The time limit for filing of form NFRA-2, for the

reporting period FY 2018-19, will be 210 days

from the date of deployment of the said form on

the website of NFRA.

3. Clarification on holding of annual general

meeting (AGM) through video conferencing

(VC) or other audio visual means (OAVM)


General Circular No. 20/2020 dated May 05,

2020]

MCA has allowed companies to conduct AGMs

during calendar year 2020 to be conducted

through video conferencing (VC) and other audio

visual means (OAVM). It has laid down the

manner in which the AGMs have to be conducted.

4. Clarification on dispatch of notice under

section 62(2) of Companies Act, 2013 by listed

companies for rights issue opening upto 31st

July, 2020


General Circular No. 21/2020 dated May 11,

2020]

In case listed companies comply with SEBI

Circular dated May 06, 2020 in respect of the

Rights Issues opening upto July 31, 2020 then

such companies will not be viewed as violating

section 62(2) of the Act pertaining to dispatch of

notice to shareholders through registered post or

speed post or courier.

VOL. 23 - NO. 12 - JUNE 2020

CA Manoj Chunilal Shah CA Viral Vinod Satra

Compiled by:FEMAUPDATES


45

Amendments to Non Debt Instrument Rules 2019

for curbing opportunistic takeovers/acquisitions

of Indian Companies due to current COVID 19

pandemic

ndNotification Dated 22 April 2020 issued by

Ministry of Finance

In order to curb opportunistic takeovers and

acquisitions of Indian companies due to COVID 19

pandemic, government has amended provisos to

Rule 6(a) of Non Debt Instruments Rules, 2019 as

under:

Provided that an entity of a country, which shares

land border with India or the beneficial owner of an

investment into India is situated in or is a citizen of

any such country, shall invest only under

Government Approval Route.

Provided further a citizen of Pakistan or an entity

incorporated in Pakistan shall invest only under the

Government route in sectors/activities other than

defence, space, atomic energy and sectors/activities

prohibited for foreign investment.

Provided also that in the event of 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

above provisos such subsequent change in beneficial

ownership will also require Government approval.

Comments : Previously foreign investment by an

entity of Bangladesh and Pakistan or citizen of

Bangladesh and Pakistan was under government

approval route. However, with outbreak of COVID 19

pandemic to protect opportunistic takeovers/

acquisitions of Indian Companies government has

brought this change in FDI Policy. Accordingly, it has

been decided that any foreign investment by an entity

or citizen of any country connected through land

border with India or beneficial owner of investment is

situated in any country connected with land border to

India will require prior government approval.

Amendments to Non Debt Instrument Rules 2019

– Acquisition after renunciation of rights

thNotification Dated 27 April 2020 issued by

Ministry of Finance

As per existing provisions [Rule 7 of Non Debt

Instrument Rules 2019 (NDI Rules)] existing foreign

investors are allowed to acquire shares through

rights issue subject to conditions prescribed therein

the rule. Further, explanation to the rule clarified that

conditions of Rule 7 would even apply to foreign

investor who acquires securities pursuant to

renunciation of rights. Therefore, in case when

foreign investor, not even being an existing

shareholder, could acquire securities of Indian

Company on account of renunciation of rights at the

applicable rights price.

thThe Ministry of Finance vide Notification dated 27

April 2020, amended the Rule 7 and omitted the

explanation to Rule 7 of NDI Rules and added new

Rule 7A. Rule 7A states that –

'a person resident outside India who has acquired a

right from a person resident in India who has

renounced it may acquire equity instruments (other

than share warrants) against the said rights as per

pricing guidelines specified under rule 21 of these

rules'

Accordingly, all transactions where shares are

VOL. 23 - NO. 12 - JUNE 2020


46

acquired by foreign investor due to renunciation of

rights will have to comply with pricing guidelines

prescribed in Rule 21 of NDI Rules.

Comments : The amendment to Rule thus prohibits

acquisition of shares by non existing foreign investor

based on existing rights price which was allowed

earlier. Now in wake of Rule 7A if shares are acquired

on account of renunciation of rights pricing

guidelines would be required to be complied.

Amendments to foreign investment in Insurance

Sector – NDI Rules 2019

thNotification Dated 27 April 2020

Government also made amendment to foreign

investment in Insurance Sector and sector specific

conditions there to. It has added few areas in

Insurance Sector where 100% investment can be

made under automatic route.

As per amendment, 100% foreign investment in

Intermediaries or Insurance Intermediaries

including Insurance Brokers, re-insurance brokers,

insurance consultants, corporate agents, third party

administrator, surveyors and Loss Assessors and

such other entities, as may be notified by the

Insurance Regulatory and Development Authority of

Indian from time to time is allowed under automatic

route.

For updated sector specific conditions refer

notification at –

http://egazette.nic.in/WriteReadData/2020/219200.p

df

Voluntary Retention Route (VRR) for Foreign

Portfolio Investors (FPIs) investment in debt-

relaxations

A.P. (DIR Series) Circular No. 32 dated May 22,

2020

As per para 6(a) of directions, Foreign Portfolio

Investors (FPIs) shall invest at least 75% of their

Committed Portfolio Size (CPS) within 3 months

from date of allotment. In view of COVID 19

disruptions it has been decided to allow FPIs that

have been allotted investment limits, between

January 24, 2020 (the date of reopening of allotment

of investment limits) and April 30, 2020, an

additional time of three months to invest 75% of their

CPS.

Import of Goods and Services – Extension of time

limits for settlement of import payments

A.P. (DIR Series) Circular No. 33 dated May 22,

2020

In view of the disruptions due to outbreak of COVID-

19 pandemic, it has been decided to extend the time

period for completion of remittances against such

normal imports (except in cases where amounts are

withheld towards guarantee of performance etc.)

from six months to twelve months from the date of

shipment for such imports made on or before July

31, 2020.

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CA Ashwin Bhawanji Shah

RERA

UPDATESUPDATE ON REAL ESTATE (REGULATION & DEVELOPMENT ) ACT , 2016

EXTENSION OF TIMELINE OF COMPLETION OF

PROJECT :-

Hon'ble Finance Minister during the Press thConference dt 13 May 2020 have suggested

certain relief measures for Real Estate Sector :-

Ministry of Housing and Urban Affairs will make recommendation to State Government and UTs to further instruct various Real Estate Regulatory Authority to announce relief measures.

The outbreak of COVID 19 shall be treated as Force Majeure for the purpose of extension of timeline of the completion of the project.

Regulatory Authorities may on Suo Moto basis without inviting any application , automatically revise the timeline of completion of the project by six month

However, benefit of automatic extension of timeline of completion of the project will be available to those project whose project

thcompletion date expires on or after 25 March , 2020.

Revised Certificate of Project Registration shall be generated and uploaded by Regulatory Authorities mentioning revised date of project completion by adding six month period therein.

Regulatory Authorities may further grant extension of three month as per merit of the case on application therefor.

It is also recommended to extend the timeline of various statutory compliances by Promoter on con current basis.

Maharashtra , Rajasthan and Gujarat Regulatory Authorities have already adhered to the instruction of State Government and issued necessary orders in this regard for extension project completion timeline by six month. However, MahaRera has further granted relief of force majeure period for interest and compensa-

tion payable u/s 12,14,18, and 19 of the Act. thFurther, order dated 18 May 2020 of MahaRera

does not specify that automatic extension of timeline for completion of project by six month shall only be available to those project whose

thtimeline were expiring on or after 25 March , 2020.

Representations are made by the group of Developers before Central Government to keep on hold all proceedings of dispute mechanism for certain period and the same is not yet disposed of by the Central Government.

The relief measures suggested by Central Government for extension of timeline of project completion by six month may not be sufficient as Developer community perceives that impact of halt of economic activities due to lockdown and reduction in purchasing power of the people will impact cash flow of the Real Estate Sector for longer period.

It is further represented by the Developers Association that all the section namely Section 12,14,18,19 , which entitles allottees to claim either refund of monies with interest and compensation or interest for delayed period of possession , shall be removed from Real Estate (Regulation & Development) Act, 2016 looking at the cash crunch and other impacts originating from COVID 19.

However, allottees who have availed Housing loans are though allowed certain moratorium period for deferring EMI but no relief has been granted for waiver of interest component for the period which are covered by COVID 19.

The litigation on this front is likely to increase as the allottees would be aggrieved for the reason of non waiver of interest on Housing loan and grant of relief to developer for extension of timeline for the purpose of interest and compensation payable u/s 12,14,18, and 19 of the Act.

47

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:

CA Haresh Padamshi Kenia

DIRECT TAXES

LAW UPDATE

48

1 CBDT Press note on reduction in withholding

tax rates for residents

Due to of unprecedented and difficult times

global pandemic COVID-19, the Hon'ble Prime

Minister announced, on 12 May 2020, that the

Government of India is rolling out an INR 20

trillion economic stimulus package under the

theme of ”Self-Reliant India Movement” to

provide relief to various sectors and drive the

country towards self-reliance.

On 13 May 2020 the first tranche of various

measures were announced by the FM. The FM

announced direct tax relief measure by way of

reduction in withholding tax rates for residents.

FM also announced other relief measures of

expeditious release of refunds for non-

corporates and deferment of dates for certain

compliances. The CBDT announced reduction in

withholding taxes rates for residents through

press release dated 13.05.2020.

The features of relief measure are as under;-

The Press Release clarifies that in order to

provide more funds at the disposal of taxpayers

for dealing with the economic situation arising

out of the COVID-19 pandemic, the rates for

withholding/deduction of tax at source (TDS) for

the specified non-salaried payments made to

residents and collection of tax at source (TCS)

for specified receipts have been reduced by 25%

for the period from 14 May 2020 to 31 March

2021.

The Press Release clarifies that legislative

amendments with regard to the announcements

on TDS/TCS rate reduction shall be proposed in

due course. Considering the extraordinary

unprecedented circumstances, as also the object

to provide l iquidity to taxpayers, the

payers/payees may apply the reduced rates as

per the Press Release without waiting for the

legislative amendments which, most likely, will

be retroactive covering the period from 14 May

2020 onwards.

TDS on the amount paid or credited during the

period from 14th May, 2020 to 31st March, 2021

shall be deducted at the reduced rates specified

in the Press note. Similarly, the tax on the

amount received or debited during the period

from 14th May, 2020 to 31st March, 2021 shall

be collected at the reduced rates specified in the

Press Note.

The Table to press note provides details of non-

salaried payments to residents qualifying for

reduced TDS rates till 31 March 2021. The rate

of withholding of taxes for non-salaried specified

payments (such as payment for contract,

professional fees, interest, rent, dividend,

commission, brokerage, etc.) made to residents

shall be reduced by 25% of their existing rates.

There is no reduction in TDS rates on payments

to non-residents. Like Section 195, 194E etc.

There are certain payments to which reduced rates of TDS does not apply Like –

Payment of accumulated balance due to an employee from Employees' Provident Fund Scheme, 1952 (statutory PF) - Section 192A.

Winnings from lotteries, games, horse races etc., - Section 194B & 194BB.

VOL. 23 - NO. 12 - JUNE 2020


49

Cash withdrawals in excess of Rs1cr.from banks

or post offices – Section 194 N

The Table to press note also provides details of

receipts qualifying for reduced TCS rates till 31

March 2021.

There is no reduction in TCS rate @ 5% for

payment to Authorised Dealers in excess of Rs 7

lakh towards Liberalised Remittance Scheme of

Reserve Bank of India and payment to seller for

overseas tour program package which shall come

into effect from 1 October 2020.

The Press Release clarifies that there shall be no

reduction in TDS/TCS rate where tax is required

to be deducted/collected at a higher rate due to

non-furnishing of PAN/Aadhar

The Income Tax Act permits payee/payers to

obtain lower TDS/TCS certificates (LDC) from

the Tax Authority, in which case the payer/payee

can apply such lower rates. The Press Release is

silent on the impact of reduction of TDS/TCS

rates wherever such LDCs are available. The

payers/payees can consider the reduced rates as

announced by the Press Release or the rate as per

LDC, whichever is lower. In the absence of any

clarity in the Press Release, it may not be

appropriate to consider LDC rate to have reduced

by 25%.

The Following further compliance reliefs were

announced to provide the much-needed liquidity

to taxpayers in current difficult times and also

facilitate tax compliances, post the lifting of

lockdown in the country.

Extension for benefit of settlement under the

Direct Tax Vivad se Vishwas Act 2020 (VSV

Act) without payment of additional tax:

The benefit of settlement under VSV Act without

payment of additional amount shall be extended

from 30 June 2020 to 31 December 2020.

Therefore, any settlement under VSV Act made

on or before 31 December 2020 shall not require

payment of additional 10% of the tax amount.

Grant of immediate refunds

All pending refunds to charitable trusts and non-

corporate businesses/professions including

proprietorship, partnership, Limited Liability

Partnerships and co-operatives societies shall be

issued immediately

Extension for furnishing tax audit report for

financial year 2019-20

Due date of furnishing tax audit report for

financial year 2019-20 for all taxpayers shall be

extended from 30 September 2020 to 31 October

2020.

Extension for furnishing tax returns for

financial year 2019-20

Due date of furnishing tax returns for Financial

year 2019-20 for all taxpayers (whether

corporate or non-corporate) shall be extended

from 31 July 2020/31 October 2020, as the case

may be, to 30 November 2020.

Extension for period of limitation for

completion of assessments

The period of limitation in relation to

assessments which are getting time barred on 30

September 2020 (i.e., for Assessment year 2017-

18) shall be extended to 31 December 2020.

Further, the period of limitation in relation to

assessments which are getting time barred on 31

March 2021 shall be extended to 30 September

2021.

All the above measures will be implemented

either through legislative amendments or

through circulars/notifications by the Central

Board of Direct Taxes.

VOL. 23 - NO. 12 - JUNE 2020


50

2 Deferment of applicability of revamped

registration procedure for charitable and

research institutions

The Finance Act 2020, has introduced a

completely revamped registration procedure for

all the existing registered charitable institutions

and for taxpayers seeking new registration. It

rationalized the procedure relating to approval/

registration/ notification of certain entities

referred to in sections 10(23C), 12AA, 35 and

80G of the Act, with effect from 1st June, 2020.

Under the procedure, in order to enjoy continuity

of the tax exemption for financial year 2020-21

and onwards, the existing registered charitable

institutions are required to make an intimation to

the Tax Authority within a period of three months

from the date of applicability of revamped

registration procedure i.e. on or before 31 August

2020.. Similarly, for all fresh registration

applications made on or after 1 June 2020,

registrations are to be granted only if such

applications are made as per the revamped

registration procedure. Similar provisions were

also introduced in relation to registered research

institutions and funds and institution for

continuing/grant of registration for receiving

donations which qualify for deduction in the

hands of donors.

The Various representations were received in the

finance ministry expressing concerns over the

implementation of the new procedure from 1st

June, 2020 due to the outbreak of novel corona

virus (COVID-19) and consequent lockdown.

There have been a number of requests to defer the

applicability of the new procedure.

The CBDT vide press release dated 9 may 2020,

in view of the unprecedented humanitarian and

economic cr is is , has decided that the

implementation of new procedure for approval/

registration/notification of certain entities shall

be deferred to 1st October, 2020. Accordingly, the

entities approved/ registered/ notified under

section 10(23C), 12AA, 35 and 80G of the

Income-tax Act, 1961 would be required to file

intimation within three months from 1st October,

2020, i.e, by 31st December, 2020. Further, the

amended procedure for approval/ registration/

notification of new entities shall also apply from

1st October, 2020. The necessary legislative

amendments in this regard shall be proposed in

due course.

3 Deferment of reporting of GAAR and GST

particulars in the tax audit report till 31 March

2021.

Section 44AB of the Income-tax Act, 1961 read

with rule 6G of the Income-tax Rules, 1962

requires specified persons to furnish the Tax

Audit Report (TAR) along with the prescribed

particulars in Form No. 3CD. The existing Form

No. 3CD was amended vide notification no. GSR

666(E) dated 20 th July, 2018 with effect from 20

th August, 2018. Amongst others, it introduced

following two additional reporting requirements

in TAR:

1. Clause 30C of TAR: General Anti Avoidance

Rule (GAAR)

TAR requires to report whether a taxpayer has

entered into an impermissible avoidance

arrangement and if yes, it further requires to

report the nature of such impermissible

avoidance arrangement and the amount of tax

benefit in the tax year arising, in aggregate, to all

the parties to the arrangement.

2. Clause 44 of TAR: Details relating to Goods

and Service Tax (GST)

TAR requires reporting of details of GST viz.

break-up of total expenditure with GST

registered and non-registered entities and for the

former, it further requires the break-up of

expenditure relating to exempt supply covered

VOL. 23 - NO. 12 - JUNE 2020


51

under the composition scheme and other

registered entities.

However, the reporting under above clause 30C

and clause 44 of the Tax Audit Report was kept in

abeyance till 31 st March, 2019 vide Circular No.

6 /2018 dated 17.08.2018, which was

subsequently extended to 31 .03.2020 vide

Circular No. 9/2019. Several representations

were received by the Board with regards to

difficulty in implementation of reporting

requirements under clause 30C and clause 44 of

the Form No. 3CD of the Income-tax Rules, 1962

in view of the Global Pandemic due to COVID-19

virus and requested for deferring the

applicability of the above provisions.

The CBDT vide Circular No. 10-2020 [F. No.

37014219/20 18-TPL] dated 24th April, 2020, in

view of the prevailing situation due to COVID- 19

pandemic across the country, decided that the

reporting under clause 30C and clause 44 of the

Tax Audit Report shall be kept in abeyance till 31

st March, 2021.

Thus, TAR issued till 31 March 2021 for any

financial year (including financial year 2019-20)

need not contain GAAR and GST particulars,

reducing compliance burden on taxpayers and

tax auditors

4 Revised Frequently Asked Questions in

relation to Vivad Se Vishwas Act, 2020

The Direct Tax Vivad Se Vishwas Bill, 2020 (VSV

Bill) was introduced in the Lok Sabha on 5

February 2020. VSV Bill , as introduced, resulted

in various concerns among stakeholders. Some

of these concerns were addressed by way of an

amendment to VSV, which was passed by the Lok Sabhaon 4 March 2020. However, there were also

certain other concerns which required redressal

by way of clarifications from the Government of

India. In this regard, pending enactment of Bill

into Act, the CBDT issued Circular No. 7/2020

on 4 March 2020 to clarify certain issues raised

by stakeholders relating to the operation of the

VSV Bill. Circular clarified that FAQs are subject

to final approval and passing of the Bill and

receiving presidential assent. In order to dealt

with such various concerns, CBDT issued

circular in the form of 55 questions and answers

explaining the scope of VSV. Subsequently, the

VSV Bill was passed by the parliament and

received presidential assent and was enacted into

The Direct Tax Vivad Se Vishwas Act, 2020.

Thereafter, CBDT also issued Notification No. 18

of 2020, F. No. IT(A)/1/2020-TPL notifying the

Direct Tax Vivad Se Vishwas Rules, 2020 as well

as Forms prescribed under such Rules.

There could have been a scope to challenge

validity of the Circular issued prior to enactment

of law and its binding effect. In view of the

subsequent enactment and notification of the

Rules/forms, and with a view to give legal effect to

clarifications issued earlier, the CBDT has now

reissued the Circular( Circular no -9) (revised

Circular) reiterating 55 FAQs with following

modifications to old Circular (Circular no-7).

(i) Vivad se Vishwas referred to Direct Tax Vivad se

Vishwas Act, 2020 in circular no 7. However, in

this circular it refers to The Direct Tax Vivad Se

Vishwas Act, 2020;

(ii) Since clauses of the Act have now become

sections in the Vivad Se Vishwas, the reference to

“clause” in circular no 7 has been replaced with

“section”;

(iii) Reference to declaration form in circular no 7 has

been replaced with referencing of relevant form,

since rules and forms have now been notified;

and

(iv) Answer to question no 22 has been modified to

reflect the correct intent of the law Question 22 of

the Circular no-7 suggested that cases where

notice for initiation of prosecution has been

issued with reference to tax arrears, such

VOL. 23 - NO. 12 - JUNE 2020


52

taxpayer has a choice to compound the offence

under the Income Tax Act and opt for VSV.

However, a case where prosecution has been

instituted and is pending in court, is not eligible

for being settled under VSV. The revised circular

now clarifies that the disqualification from VSV

applies only in case where prosecution has been

instituted and not in case where mere notice of

prosecution has been issued. In cases where

prosecution has been instituted with respect to an

assessment year, Taxpayer is not eligible to file

declaration for such assessment year unless the

prosecution is compounded before filing the

declaration.

The Revised Circular has been issued under

Section. 10 and Section. 11 of the VSV Act.

Section. 10 of the VSV Act authorises the CBDT

to issue such directions as it deems fit in relation

to the operation of VSV. Section. 11 of the VSV

Act, authorizes the Central Government to

remove any difficulties in the operation of the

VSV by way of an order which is not inconsistent

with the provisions of the VSV Act

5 Section 6 of Income Tax Act - RESIDENTIAL

STATUS – Clarification of Residency under

said section

CIRCULAR NO. 11 OF 2020

[F.NO.370142/18/2020-TPL], DATED 8-5-2020

Due to declaration of the lockdown and suspension

of international flights owing to outbreak of Novel

Corona Virus (COVID-19), the CBDT has decided

that for the purposes of determining the residential

status under section 6 of the Act during the previous

year 2019-20 in respect of an individual who has

come to India on a visit before 22nd March, 2020

and:

(a) has been unable to leave India on or before 31st ndMarch 2020, his period of stay in India from 22

March, 2020 to 31st March, 2020 shall not be

taken into account; or

(b) has been quarantined in India on account of Novel

Corona Virus (Covid-19) on or after 1st

March,2020 and has departed on an evacuation

flight on or before 31st March, 2020 or has been

unable to leave India on or before 31st March,

2020, his period of stay from the beginning of his

quarantine to his date of departure or 31st March,

2020, as the case may be, shall not be taken into

account; or

(c) has departed on an evacuation flight on or before

31st March, 2020, his period of stay in India from

22nd March, 2020 to his date of departure shall

not be taken into account.

Further as the lockdown continues during the

Financial Year 2020-21 and it is not yet clear as to

when international flight operations would

resume, a circular excluding the period of stay of

these individuals up to the date of normalisation

of international flight operations, for determina-

tion of the residential status for the previous year

2020-21 shall be issued after the said

normalisation.

VOL. 23 - NO. 12 - JUNE 2020


Compiled by:GST UPDATESGST UPDATES

CA Nitin Dhanji Kenia CA Bharat Kalyanji Gosar

53

NOTIFICATIONS - CENTRAL TAX:

Notification No. 37/2020 - Central Tax dated th28 April, 2020

Vide Notification No. 31/2019 dated 28/06/2019,

Rule 87(13) was inserted to The Central Goods

and Service Tax Rules, 2019. The Sub rule

provides that a registered person may transfer

any amount of tax, interest, penalty, fee or any

other amount available in the electronic cash

ledger under the Act to the electronic cash ledger

for Integrated tax, Central tax, State tax or Union

territory tax or Cess via FORM GST PMT-09. This

sub rule along with Form GST PMT-09 is made

operational with effect from 21/04/2020.

th Notification No. 38/2020 - Central Tax dated 5

May, 2020

Following Rules are amended in The Central

Goods and Service Tax Rules, 2017 effective from

21/04/2020.

nd2 proviso to Rule 26(1) : By adding this

proviso, a registered person registered under the

provisions of the Companies Act, 2013 is allowed

to furnish the return under Section 39 in FORM

GSTR3B verified through electronic verification

code (EVC) during the period from the 21st day of

April, 2020 to the 30th day of June, 2020. This

proviso is effective from 21/04/2020.

Rule 67A : Newly inserted Rule gives facility of

furnishing a Nil return under Section 39 in FORM

GSTR-3B for a tax period by short messaging

service (SMS) facility using the registered mobile

number and the said return shall be verified by a

registered mobile number based One Time

Password (OTP) facility. Nil return shall mean a

return that has nil or no entry in all the Tables in

FORM GSTR-3B. The Rule will be effective from

date to be notified.

th

Notification No. 39/2020 - Central Tax dated 5

May, 2020

The Notification seek to make amendments to

special procedure for corporate debtors

undergoing the corporate insolvency resolution

process under the Insolvency and Bankruptcy

Code, 2016.

Notification No. 40/2020 - Central Tax dated th5 May, 2020

The Notification seek to extend the validity of e-

way bills till 31.05.2020 for those e-way bills

which expire during the period from 20.03.2020

to 15.04.2020 and generated till 24.03.2020.


The Notification extends the time limit for

furnishing of the annual return specified under

Section 44 of the CGST Act read with Rule 80 of

the CGST rules for the financial year 2018-2019

till the 30th September, 2020.

th Notification No. 42/2020 - Central Tax dated 5

May, 2020

The due date for return in FORM GSTR-3B for the

months of November, 2019 to February, 2020 for

registered persons whose principal place of

business is in the Union territory of Jammu and

VOL. 23 - NO. 12 - JUNE 2020


Disclaimer: The views / opinions expressed in the articles are purely of the writers. The readers are requested to take proper professional guidance before abiding the views expressed in the articles. The publisher, the editor and the association disclaim any liability in connection with the use of the information mentioned in the articles.

PRINTED AND PUBLISHED BY MANOJ SHAH ON BEHALF OF C.V.O. CHARTERED AND COST ACCOUNTANTS' ASSOCIATION - 304, JASMINE APARTMENT, DADA SAHEB PHALKE ROAD, DADAR (EAST), MUMBAI - 400014.TEL: 022-24105987. EDITOR: RAMESH CHHEDA

54

Kashmir and Union territory of Ladakh is

extended to 24/03/2020 and for the months of

January, 2020 to March, 2020 for registered

persons whose principal place of business is in

the Union territory of Ladakh is extended till

20/05/2020.


Vide Section 128 of the Finance Act, 2020,

amendments are made to Section 140 of CGST

Act. Section 140 of the Central Goods and

Services Tax Act relating to transitional

arrangements for input tax credit, is amended so

as to prescribe the time limit and the manner for

availing input tax credit against certain unavailed

credit under the existing law. This is amended

retrospectively from the 1st day of July, 2017.

Vide this Notification, Section 128 of the Finance

Act, 2020 is made effective from 18/05/2020.

CIRCULARS - CGST:

th Circular No. 138/08/2020 - GST- dated 06

May, 2020.

The Circular clarifies in detail about issues in

Insolvency and Bankruptcy Code, 2016. It is also

clarified that the requirement of exporting the

goods by the merchant exporter within 90 days

from the date of issue of tax invoice by the

registered supplier gets extended to 30th June,

2020, provided the completion of such 90 days

period falls within 20.03.2020 to 29.06.2020. It

is further clarified that the due date of furnishing

of FORM GST ITC-04 for the quarter ending

March, 2020 stands extended upto 30.06.2020.

VOL. 23 - NO. 12 - JUNE 2020

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