JUNE 2020

GST Updates:

• Extension of validity of e-way bill generated on or before 24.03.2020 (whose validity has expired on or after 20th day of March 2020) till the 30th day of June
  Provided that where an e-way bill has been generated under rule 138 of the Central Goods and Services Tax Rules, 2017 on or before the 24th day of March, 2020 and whose validity has expired on or after the 20th March, 2020, the validity period of such e-way bill shall be deemed to have been extended till the 30th day of June, 2020. This notification shall come into force with effect from the 30th day of May, 2020. Notification No. 35/2020- Central Tax
• Step wise process to file NIL GSTR3B returns through SMS
  Government rolls out facility of filing of NIL GST return through SMS. Know the process to file step wise from June 2020. Taxpayers can file NIL return of any period which are due from February 2020 whose due date to file is 30 June.
• Facility for registration of IRP/RPs made available on the GST Portal
• Insolvency Resolution Professionals/ Resolution Professionals (IRPs/RPs), appointed to undertake corporate insolvency resolution proceedings for Corporate Debtors, in terms of Notification. No 11/2020-CT, dated 21st March, 2020 can apply for new registration on GST Portal, on behalf of the Corporate Debtors, in each of the States or Union Territories, on the PAN and CIN of the Corporate Debtor, where the corporate debtor was registered earlier, within thirty days of their appointment as IRP/RP.
• They should select the Reason for Registration as “Corporate Debtor undergoing the Corporate Insolvency Resolution Process with IRP/RP” from the drop down menu.
• The date of commencement of business for IRP/RPs will be the date of their appointment. Their compliance liabilities will also come into effect from the date of their appointment.
• The person appointed as IRP/RP shall be the Primary Authorized Signatory for the newly registered Company.
• In the Principal Place of business/ Additional place of business, the details as specified in original registration of the Corporate Debtors, is required to be entered.
• The new registration application shall be submitted electronically on GST Portal under DSC of the IRP/RP
• The new registration by IRP/RP will be required only once. In case of a change in IRP/RP, after initial appointment, it would be deemed to be change of authorized signatory and not an appointment of a distinct person requiring a fresh registration.
• In cases where the RP is not the same as IRP, or in cases where a different IRP/RP is appointed midway during the insolvency process, the change in the GST system may be carried out by a non- core amendment in the registration form.
• The change in Primary Authorized Signatory details on the portal can be done either by the authorised signatory of the Company or by the concerned jurisdictional officer (if the previous authorized signatory does not share the credentials with his successor) on request of IRP/RP.
• Can Business claim Input Tax credit of GST on Health Insurance, Masks, Sanitizers, Transport for Covid19 Expenses?

Let us refer to the below table to understand what expenses will be allowed for ITC taking into view the MHA guidelines:-

Nature of Expenses	Before Pandemic (Normal Case)	During Pandemic (Re: Government order)
Masks, Sanitizers, temperature screening and similar equipment’s	Not Eligible	Eligible
Rent or Hire of Vehicles for Workers transportation	Not Eligible	Eligible
Health Insurance for workers	Not Eligible	Eligible
Food and Beverages	Not Eligible	Not Eligible Since not mandated by law
Transport facilities for employees wherever public/private transport is not feasible	Not Eligible	Eligible

Important: GST Claim possible only if the above expenses is made against GST Invoice which must also have the GST details of the entity purchasing/ availing such goods or services.

As per CGST Act, 2017, ITC of health insurance, staff welfare expenses (masks, sanitizers, thermal screening etc) is not available except where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

Thus, with effect from April 15, 2020, it has become mandatory via the Order issued by MHA, for every employer to obtain medical insurance for the workers and thus, the Input Tax Credit on such medical insurance shall be available.

In order to ensure that the insurance obtained by them falls within the ambit of instructions issued by MHA, a letter may be obtained from the insurance company that the medical insurance policy obtained by the assessee falls within the ambit of the MHA guidelines.

Income tax updates :

1.Income Tax Appellate Tribunal (ITAT) is set to launch an e-filing portal

It was also announced that the Standard Operating Procedures (SOPs) and detailed guidelines for use of facility of E-Filing Portal are under consideration and shall be announced once the E-filing Portal is hosted on the NIC server after completion of ITAT hopes that this initiative of development of e-filing portal shall be of immense use to the taxpayers, tax consultants and other stakeholders as it is yet another milestone in the their transition to digitization.

Format of Declaration to be taken from Salaried Employee by Employer to deduct TDS in Old or New IT Slab Rates

The Finance Act 2020, has introduced new section 115BAC, as per this provision the assessee has an option whether to pay tax as per new slab rates or the old slab rates including employees for Financial Year 2020-21 Assessment Year 2021-22. Where the employee opts for new tax regime then the employee has to forgo some of the tax concessions under the existing income tax act, whereas if the employee opts for old tax regime then he will get the benefits of deduction under the income tax act.

The provision is made applicable for the Individual/ HUF and the individual can exercise the option at the time of filing the return of income. If the individual assessee is a salaried employee then he opt the scheme on a yearly basis. It means the individual can switch to the tax regime of his choice in the next year.

For opting the scheme, the employee has to give declaration to the deductor of his intention to opt for old or new tax scheme as per his choice. Upon such intimation, the employer shall compute his total income and make TDS thereon in accordance with the provision of section 115BAC of the Act. The declaration made by the employee cannot be changed. However at the time of filing Returns he can again chose one more time. Also Next year he can chose again if employee wish to switch method.

What all New Information shall be Captured in Form 26AS from 1 June 2020?

Section 285BB read with section 295 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:— Annual Information Statement Rule 114-I.

The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or any person authorised by him shall, under section 285BB of the Income-tax Act, 1961, upload in the registered account of the assessee an annual information statement in Form No. 26AS containing the information specified within three months from the end of the month in which the information is received by him

Sr No	Nature of information in Form 26AS
1	Tax deducted at Source or collected at source
2	Specified financial transaction like dealing in Shares and Mutual Funds
3	Payment of Advance Tax, Self Assessment taxes paid
4	Demand and refund pending for past years
5	Pending proceedings in CIT& ITAT. HC and SC
6	Completed proceedings and related Order
7	Information received under an agreement referred to in section 90 or section 90A of the Income-tax Act,1961 – Income Tax Paid in Other Country (other than India)
8	Relief Taken by Assessee under Double Taxation Avoidance Agreement (DTTA) with other Country

The Board may also authorise the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) or any person authorised by him to upload the information received from any officer, authority or body performing any function under any law or the information received under an agreement referred to in section 90 or section 90A of the Income-tax Act,1961 or the information received from any other person to the extent as it may deem fit in the interest of the revenue in the annual information statement referred to in sub-rule (1).

Miscellaneous updates:

No Coercive action against Employers on Govt order for full payment of Wages during Covid19 Lockdown: SC The Supreme Court on 4th June 2020 ordered that no coercive action could be taken against employers with respect to the Ministry of Home Affairs (MHA) notification compelling payment of wages to employees amid the COVID-19 lockdown. The Court also reserved its order on the validity of the MHA notification for June 12. The Centre has justified its direction asking private establishments to pay full wages to workers during the COVID-19 lockdown and said that employers claiming incapacity in paying salaries must be directed to furnish their audited balance sheets and accounts in the court. The affidavit filed by the Ministry of Home Affairs (MHA) said the direction was fully in conformity with the provisions, scheme and objects of the Disaster Management Act and it is not ultra vires. It further said that these measures were proactively taken by the government to prevent “perpetration of financial crisis within the lower strata of the society, labours and salaried employees”. The Centre maintains that the Government’s directions were a temporary measure to “mitigate the financial hardship of the employees and workers specially contractual and casual during the lockdown period.” When the Court asked Mr Gupta whether he agreed that negotiations have to take place between employees and employers, he said, “Interim order of no coervice action should be extended to us, as labour officers are harassing us. The Court reserved its order for June 12. It also ordered that no coercive action be taken against employers with respect to the MHA notification dated March 29, 2020.

Foreign Liabilities and Assets Returns (FLA Returns)

In this Article, we will be understanding about the FLA Return which is an Annual Return that needs to be filed as per the Provisions of Foreign Exchange Management Act 1999.

This Annual Return has to be submitted by all Indian Resident Entities which have received Foreign Direct Investment and or made overseas Investment in any of the previous years including the current year. The Due date for filing the Annual Return is July 15 of every year. Non-filing may lead to penalty being invoked as per the provisions of FEMA.

FILING PERIOD:

The annual period specified under FEMA for filing of annual returns is from April to March every year. In case the accounting period of an entity is different from that of the reference period, the entity still has to file the returns with data represented for the reference period as per FEMA only.

BASE DATA:

The Annual return has to be filed based on the Audited Balance Sheet figures of the entity for the respective period. In case the entity’s balance sheet is not yet audited before the due date of filing of FLA Returns, then the unaudited figures can be used for filing the return. In case there are any revisions in the data post audit, then the entity is supposed to submit a revised return based on audited accounts before end of September every year.

OUTSTANDING INVESTMENT:

Annual Return needs to be filed by an entity which has outstanding investments in respect of Inward or Outward FDI only. In case of NIL outstanding, the entity need not file FLA. It is also pertinent to note that If a company has received only share application money and hasn’t allotted shares yet, its not considered and FDI and hence need not file FLA Return.

It is also important to note that if a Company has received FDI or made outward investments in earlier years which is still outstanding, and does not have any fresh inward receipts or outward investments, still the Company has to file FLA as there are outstanding investments as at the end of the reference period.

If all non-resident shareholders of an entity have transferred their shares to the residents during the reporting period, and there are no outstanding investments at the end of the reporting period, then such entities are not required to file FLA Returns.

When shares are issued by a Company to Non-residents on a Non-Repatriable basis (cannot be repatriated back out of India), then such kind of investments are not considered as Foreign Investments at all. Companies having only such kind of non-resident investments will not be required to file FLA Returns.

APPLICABILITY FOR ENTITIES OTHER THAN COMPANIES:

FLA is also applicable for Partnership Firms, branches or Trust have any Outward FDI outstanding as on end of March, they have to mandatorily file the FLA Returns. Such entities have to send a request to RBI to get a dummy CIN Number which will help them to file the FLA Return.

FORMAT OF FLA RETURN:

FLA Return is an excel based return. The latest excel has to be downloaded every year from RBI’s website http://rbi.org.in/scripts/BS_ViewFemaForms.aspx. Filled in forms have to be emailed before July 15th to fla@rbi.org.in

The email has to be sent through the official email id of any authorised person like CFO, Director, Company Secretary etc of the Company. An acknowledgment will be sent back to such email id as well as the email id mentioned as contact id in the excel filled in. No attachments are required to be submitted along with the return, just the excel would suffice.

OWN FUND BOOK VALUE METHOD:

This is a method prescribed by FEMA for valuation of equity capital of unlisted companies for the purpose of FLA Returns. The following is the formula specified:

Market Value of equity capital held by Non- Resident at OFBV:

Net worth of the Company* % of Non-resident equity holding

Net Worth of the Company = Paid up equity and Participating Preference Capital + Reserves and Surplus- Accumulated Losses. In the excel return once the balance sheet figures are filled in, the above calculation automatically happens.

CONCLUSION:

It is very essential for Companies or Entities with FDI or Overseas Investment to be aware of the requirements under FEMA, as non- compliance would lead to un-necessary penal prov30ision being invoked.

COVID-19 and MCA Compliances

This article is a summary of all the relaxations brought in by the Ministry of Corporate Affairs (MCA) due to the COVID-19 situation for the benefit of the Companies/LLPs to provide them with relief from the burden of much statutory compliance.

• CARO 2020 introduced at the beginning of the year has been made applicable to companies only from the FY 2020-21 instead of FY 2019-20 as originally notified, which will ease the burden on the Companies and auditors from additional reporting requirements. 
• Meetings can happen without physical presence through video conferencing or other audiovisual means.
• Additional 60 days has been provided to the original 120 days time gap between two consecutive board meetings. This is a one-time relaxation available for conducting board meetings for two quarters up to 30th September 2020. 
• Companies, whose financial year ended on 31st of December 2019, are allowed nine months from the end of their fiscal year to hold the AGM for that year i.e., on or before 30th September 2020.
• Every company must have at least one resident director who has been residing in India for a period of a minimum of 182 days during a financial year. During FY 2019-20, if no director of the Company has resided in India for a minimum of 182 days, it will not be considered as violation. 
• The Act mandates Independent directors of the Company (wherever applicable) to hold at least one meeting in a financial year without the attendance of non-independent directors and members of management. For the FY 2019-20, if the Independent directors have not held such meetings, it will not be considered as violation.
• Companies Fresh Start Scheme,2020 (CFSS 2020), and modified LLP settlement scheme 2020 has been introduced to give a fresh start to Companies and LLPs who have been non-compliant with various filing requirements under the Act. Utilizing the scheme, the Companies and LLPs can rectify their non-compliance by filing all the forms required to have been filed under the Act without paying any additional fees. It would provide huge relief to those companies which have been non-compliant with non-filing of annual forms for many years and also gives a fresh start to those companies. It must be noted that this scheme will not apply to (SH-7) for increasing the capital of the Company and other Charge related forms.
• MCA website releases extension of the time allowed for names reserved already and forms which were submitted earlier and sent for resubmission. Those who could not file the incorporation forms after getting the Name approval and those could not resubmit the forms due to COVID-19 situation, can now utilize the extended timeline allowed and file the necessary forms with the MCA portal.
• Newly incorporated companies are required for file INC 20A for the commencement of business within 180 days of incorporation of the Company. The timeline is extended for another 180 days. Thus newly incorporated companies can file INC 20A within 360 days from the date of Incorporation of the Company. 
• A company, having outstanding deposits, is required to deposit at least 20% of the amount of its deposits maturing during the following financial year, into a separate deposit repayment reserve on or before 30th April of each year. For the deposits maturing in the financial year 2020-21, the MCA has extended the due date for deposit into the deposit repayment reserve to 30th June 2020.

The Companies and LLPs can utilize this time to clear their old dues of pending non-compliances and avail the best use of these MCA notifications which removes many burden from all the statutory requirements.  

Meaning of Delivery Challan Under GST

Delivery challan is also known as a delivery slip or a dispatch challan. It is an important document created for the transportation of goods from one place to another which may or may not result in sales. Delivery challan under GST is sent along with the goods and it contains important details of the transported goods i.e. the quantity, buyer, and delivery address. This document is issued by the supplier in cases where the sale of goods or services does not happen immediately or when paying for the transported goods is not received on supply.

Section 31 of CGST Act 2017 stats that a registered person supplying goods which are taxable, need to issue a tax invoice indicating the quantity, details, value of goods, tax charged on good etc. along with other details which are stated in Sec 31(1) of CGST Act 2017. Similarly, for the transportation of goods, the Delivery challan needs to be issued instead of a tax invoice.

Examples: When delivery challan under GST can be issued for the transportation of goods without a tax invoice

Rule 55 (1) of CGST Rules contains some instances when delivery challan can be issued for transportation of goods even without an invoice:

• Supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known.
• Transportation of goods for job work: Delivery challan is required for supplying goods by:
  1. Principal to a job worker
  2. One job worker to another job worker
  3. Return of goods after job work to Principal
• Transportation of goods for reasons other than by way of supply: There are some instances when the transportation of goods are needed even before the supply takes place. Example: Transportation of goods from one warehouse to another warehouse of the supplier.
• Transportation of goods in a semi-assembled state.

Cases Where GST Delivery Challan is Must for the Transportation of Goods
Goods Sent on Approval Basis: If the goods are being sent or taken within or outside the State on approval for sale or return basis and are removed before the supply takes place, Delivery Challan needs to be issued at the time of departure of the goods.

Transporting Art Work to Various Galleries: Artists transports their artworks to various galleries for exhibition and sell purposes from such galleries. if the artwork gets a buyer then, in this case, the artworks from one gallery to another within or outside the state will be transported with delivery challan.

Sending Goods Outside India for Exhibition or for Export Promotion: Circular No. 108/27/2019-GST by CBIC dated 18.07.2019 stats that if the goods are being transported out of India for an exhibition or on a consignment basis. Then these types of exports are neither ‘supply’ nor ‘export’ basis. Thus LUT or bond is not required instead of that these types of exports will come under Delivery Challan. Transfer of Goods in Multiple Shipments: Where goods are being transported in multiple shipments. In these cases, the supplier should issue the complete invoice before dispatch of the first consignment and along with a delivery challan for each of the subsequent consignments, reference of the invoice need to be mentioned in each of them. Transfer of Goods in Multiple Shipments: Where goods are being transported in multiple shipments. In these cases, the supplier should issue the complete invoice before dispatch of the first consignment and along with a delivery challan for each of the subsequent consignments, reference of the invoice need to be mentioned in each of them.

Tax Invoice Could Not be Issued at the Time of Removal: In cases where goods are being transported to the recipient but the tax invoice could not be issued at the time of departure of the goods. Rule 55(4) of CGST and SGST Rules, 2017 states that the supplier can issue a tax invoice after delivery of goods.   Tax Invoice Could Not be Issued at the Time of Removal: In cases where goods are being transported to the recipient but the tax invoice could not be issued at the time of departure of the goods. Rule 55(4) of CGST and SGST Rules, 2017 states that the supplier can issue a tax invoice after delivery of goods.

GST E- Way Bill: In cases where carrying an e-way bill under GST is not necessary under Rule 55A of CGST Rules included w.e.f. 23-1-2018 as well as when tax invoice of Supply is not required, Delivery Challan is required.

Format of Delivery Challan Under GST The document needs to be serially numbered. However, the number of digits must be under sixteen characters, in one or multiple series. All the delivery Challan must have all the following information:

Date (of challan and transportation) and the number of delivery challan Name, address and GSTIN of the consigner, if registered. If registered: Name, address and GSTIN or Unique Identity Number of the consignee. If unregistered then name, address, and place of supply. 1.HSN code for the goods

2.Description of goods

3.Quantity of goods supplied (Optional, If the exact quantity being supplied is not known)

4.The taxable value of supply

5.GST tax rate and tax amount divided for CGST, SGST, IGST, and GST Cess – where the transportation is for supply to the consignee

6.Place of supply, in case of inter-state movement of goods

7.Signature

8.Multiple delivery challans for multiple deliveries

9.Generally, goods are transported at once to the receiver. There may be cases where goods are delivered in parts. This may be because of the size of goods like heavy machines, the weight of goods etc.

10.In such cases the following method should be followed:

Original Invoice must be issued before the first delivery of goods.

For every subsequent delivery, separate delivery challan must be issued mentioning the details of original invoice and a copy of invoice attached.

11.With the last delivery, original invoice must be sent along with the challan to the receiver.

Method to Issue Delivery Challan Under GST

According to Rule 55 (2) of CGST Rules, Delivery challans under GST will need to be in triplicate as below:

13.The original copy for the buyer needs to be marked as ORIGINAL FOR CONSIGNEE.

14.The duplicate copy for transporter should be marked as DUPLICATE FOR TRANSPORTER.

15.The triplicate copy for the seller should be marked as TRIPLICATE FOR CONSIGNER.

RBI MORATORIUM EXTENSION AND ITS IMPACT ON EMIs

Reserve Bank of India has recently extended the loan EMI Moratorium for another 3 months till 31st August 2020. The First Moratorium was given till 31st May as part of the relief measures announced on account of the pandemic. This article will focus on the impact of choosing to opt for a moratorium and the cost involved in doing the same.

It is important to note that RBI announced only a Moratorium which means given additional time for the borrowers to repay their money back to the lenders, and not a waive off. This means the interest on loans would still keep accumulating on the outstanding loan amount (including interest accrued and not paid) during the moratorium period too.

The move by the RBI was to help borrowers facing a cash crunch during the pandemic times to get more time to arrange for the funds and start repaying their loans. Various banks adopted different approaches to giving effect to such Moratorium. Some banks automatically gave effect to the Moratorium on all loan accounts automatically, and only when a customer opted out of the same by way of a specific request, the lender would make it a normal loan account. Some banks continued to have the loan account as usual and convert it into a Moratorium Account only when there was a specific request from the Borrower for the same.

Hence its very essential for any Borrower to understand the implications of opting out for a Moratorium, as well know what approach their bank is taking, in order to be really careful on servicing their outstanding Loans. Since the period has been extended by another three months again now, borrowers have to calculate the impact of opting the extension again on their overall interest cost.

Let us understand how the moratorium period has an impact on the Interest cost and how it differs on New Loans having a longer tenure for completion vs Older Loans which has considerably less remaining tenure for completion.

Many Banks have moratorium interest calculators available on their website which can be used by borrowers to understand the impact and take an informed decision. Assuming a borrower took a loan for Rs 50 lacs at 12% Interest Rate for a tenure of 10 years (120 months) and he has already paid his EMIs for one year. Following table shows the impact on his Interest Cost if he opts for a 3month Moratorium.

OPTION	LOAN AMOUNT	INTEREST RATE	TENURE (in months)	EMI (Rs)	REMAINING TENURE	TOTAL AMOUNT TO BE SERVICED FOR LOAN (Tenure * EMI)	TOTAL INTEREST COST
A. ORIGINAL LOAN	50,00,000	12%	120	71,735	108	86,08,200	36,08,200
B. OPTING FOR 3 MONTH MORATORIUM (WITH SAME EMI)	50,00,000	12%	127	71,735	115	91,10,345	41,10,345
C. OPTING FOR 3 MONTH MORATORIUM (WITH SAME TENURE)	50,00,000	12%	120	73,909	108	88,69,080	38,69,080

From the above table if we drill down on the interest cost impact alone, it’s like this:

Particulars	ORIGINAL LOAN	MORATORIUM of 3 months with Same EMI	Moratorium of 3 months with Same Tenure
Interest Cost	36,08,200	41,10,345	38,69,080
Increase in Interest Cost	NA	5,02,145	2,60,880
EMI	71,735	71,735	73,909