Wednesday, 15 November, 2017

Vistra India Update 339

November 1 - November 15, 2017

INCOME TAX

Clarification on Indirect Transfer provisions in case of redemption of share or interest outside India under the Income-tax Act, 1961

Section 9(1)(i) of the Income-tax Act, 1961 ('Act'), provides that all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India or through the transfer of a capital asset situate in India, shall be deemed to accrue or arise in India. Explanations 5, 6 and 7 of section 9(1)(i) further define the scope of said provision.  The finance minister in his budget speech on 1st February, 2017 had stated that Category I and Category II Foreign Portfolio Investors (FPI) will be exempted from indirect transfer provisions. It was also stated that a clarification will be issued that indirect transfer provisions shall not apply in case of redemption of shares or interests outside India as a result of or arising out of redemption or sale of investment in India which is chargeable to tax in India.

The matter has been examined by CBDT and it has been decided that the provisions of section 9(1)(i) of the Act read with Explanation 5 thereof shall not apply in respect of income accruing or arising to a non-resident on account of redemption or buyback of its share or interest held indirectly (i.e. through upstream entities registered or incorporated outside India) in the specified funds if such income accrues or arises from or in consequence of transfer of shares or securities held in India by the specified funds and such income is chargeable to tax in India. However, the above benefit shall be applicable only in those cases where the proceeds of redemption or buyback arising to the nonresident do not exceed the pro-rata share of the non-resident in the total consideration realized by the specified funds from the said transfer of shares or securities in India. It is further clarified that a non-resident investing directly in the specified funds shall continue to be taxed as per the extant provisions of the Act.

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Double Taxation avoidance agreement (DTAA) between the Government of the Republic of India and the Government of New Zealand – amendment notified

The Third Protocol for amendment of the Convention between the Government of the Republic of India and the Government of New Zealand for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was signed by both countries on 26th October 2016. The Protocol entered into force in India on 7th September 2017 and has been notified in the Official Gazette on 2nd November 2017. The Protocol updates the existing framework of exchange of tax related information to latest international standard which will help curb tax evasion and tax avoidance between the two countries and will also enable mutual assistance in collection of taxes

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COMPANY LAW

Companies (Accounts) Amendment Rules, 2017

The Ministry of Corporate Affairs (MCA) has amended Form AOC – 4. The amended form will come in to effect from 7th November, 2017.

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Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Amendment, Rules, 2017

The Ministry of Corporate Affairs (MCA) has amended Form AOC – 4 XBRL. The amended form will come in to effect from 6th November, 2017.

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RBI AND FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017

Reserve Bank of India issued the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 (“2017 Regulations”). The 2017 Regulations consolidate the regulations, compliances and restrictions applicable to foreign investment in India and supersede previous regulations issued by the RBI under Notification No. FEMA 20/2000-RB and Notification No. FEMA 24/2000-RB both dated May 3, 2000, Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000 and The Foreign Exchange Management Act,1999 (“FEMA”). Key changes in the new regulations are:

  • Definition of FDI and FPI investment: 'Foreign Direct Investment' (FDI) means investment through capital instruments by a person resident outside India in an unlisted Indian company or in 10 per cent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.  In case an existing investment by a person resident outside India in capital instruments of a listed Indian company falls to a level below 10 per cent of the post issue paid-up equity capital on a fully diluted basis, the investment shall continue to be treated as FDI. 'Foreign Portfolio Investment' means any investment made by a person resident outside India through capital instruments where such investment is less than 10 per cent of the post issue paid-up share capital on a fully diluted basis of a listed Indian company or less than 10 per cent of the paid up value of each series of capital instruments of a listed Indian company. The 10 per cent limit for foreign portfolio investors shall be applicable to each foreign portfolio investor or an investor group as referred in Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014
  • Equity instruments, i.e., equity shares (including partly paid up shares), debentures, preference shares and share warrants have now been clubbed under one definition of “Capital Instruments”
  • Separate schedules are provided in the Regulations with respect to conditions applicable for different classes of person’s resident outside India making investments into India.  These are:
      1. For a person resident outside India - Schedule 1.
      2. A Foreign Portfolio Investor (FPI) - Schedule 2.
      3. A Non-Resident Indian or an Overseas Citizen of India on repatriation basis -Schedule 3.
      4. A Non-Resident Indian or an Overseas Citizen of India on non-repatriation basis-  Schedule 4
      5. A person resident outside India dealing in capital instruments - Schedule 5.
      6. A person resident outside India, other than a citizen of Bangladesh or Pakistan or an entity incorporated in Bangladesh or Pakistan, investing in an LLP- Schedule 6.
      7. A Foreign Venture Capital - Schedule 7.
      8. A person resident outside India dealing in units of an Investment Vehicle-Schedule 8.
      9. A person resident outside India investing in the Depository Receipts (DRs) issued by foreign depositories - Schedule 9.
      10. A Foreign Portfolio Investor or Non- Resident Indian or an Overseas Citizen of India dealing in Indian Depository Receipts (IDRs) of companies’ resident outside India and issued in the Indian capital market - Schedule 10.
  • Procedure for issue of convertible note by a start-up company to a person resident outside India is now issued.
  • Issue of capital instruments to person resident outside India is now reduced from 180 days to 60 days to align it with Companies Act 2013. In case of non-issue of shares within in the timeline funds will be required to be returned within 15 days.
  • Transfer of shares by NRI or OCI to person resident outside India by way of sale or gift is now permitted under automatic route subject to certain conditions. Similarly during liquidation, merger, demerger, amalgamation of foreign companies transfer from person resident outside India to another person resident outside India is now under automatic route.
  • The definition of “Downstream Investment” has been amended to include investment by Limited Liability Partnership (LLP)/ Investment Vehicle in downstream Indian company or LLP. Additional downstream investments should have the approval of Board of Directors and Shareholders approval
  • For delayed reporting in place of condonation, RBI has now prescribed fee for delayed reporting.
  • Valuation of shares can now be done by a cost accountant
  • The new Regulations placed restriction in relation to repatriation in case where (a) original investment was made on non-repatriation basis or (b) the person was a resident in India when the rights was issued shall be applicable even in case of person resident outside India makes investment on account of shares renounced in its favor by the person to whom it was offered. Similarly an employee who was a person resident in India when the options were granted cannot repatriate the sale proceeds after selling the shares so acquired pursuant to exercise of options.
  • In case of transfer of capital instruments between a person resident in India and a person resident outside India, an amount not exceeding twenty five percent of the total consideration
      1. can be paid by the buyer on a deferred basis within a period not exceeding eighteen months from the date of the transfer agreement; or
      2. can be settled through an escrow arrangement between the buyer and the seller for a period not exceeding eighteen months from the date of the transfer agreement; or
      3. can be indemnified by the seller for a period not exceeding eighteen months from the date of the payment of the full consideration, if the total consideration has been paid by the buyer to the seller. Provided the total consideration finally paid for the shares shall be compliant with the applicable pricing guidelines.
  • A foreign investor is now permitted to pledge units held by it in an Investment Vehicle such as Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InVIts) and Alternative Investment Funds (AIFs), to secure credit facilities being extended by an Indian bank to such entity.

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GOODS AND SERVICES TAX

Due date for filing Form GSTR 3B for the period Jan 2018 to March 2018 notified

Filing of return in FORM GSTR-3B till March, 2018 is made mandatory with the following due dates.

Sl. No.

Month

Due Date

1

Jan 2018

20th February 2018

2

Feb 2018

20th March 2018

3

Mar 2018

20th April 2018


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Clarification on filing Form GSTR 1, Form GSTR 2 and Form GSTR 3

Taxpayers with annual aggregate turnover upto Rs. 1.5 crore need to file Form GSTR – 1 on quarterly basis as per following due dates.

Sl. No.

Period

Due Date

1

Jul 17 to Sept 17

31st Dec 2017

2

Oct 17 to Dec 17

15th Feb 2018

3

Jan 18 to Mar 18

30th April 2018


Taxpayers with annual aggregate turnover of more than Rs. 1.5 crore need to file Form GSTR – 1 on monthly basis as per following due dates.

Sl. No.

Period

Due Date

1

Jul 17 to Oct 17

31st Dec 2017

2

Nov 2017

10th Jan 2018

3

Dec 2017

10th Feb 2018

4

Jan 2018

10th Mar 2018

5

Feb 2018

10th Apr 2018

6

Mar 2018

10th May 2018


The due date for filing Form GSTR - 2 and form GSTR - 3 for the months of July 2017 to March 2018 would be notified at a later date.

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Due date for filing Form GSTR -6 extended

Filing of return in FORM GSTR-6 (return to be filed by Input Service Distributor) for the month of July 2017 is extended upto 31st December 2017.  The due dates for furnishing the return for the month of August, 2017, September, 2017 and October, 2017 would be notified later.

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Reduction in late filing fee for delay in filing of Form GSTR 3B notified

Late filing fee for delay in filing Form GSTR 3B for the month of October 2017 and onwards is reduced from Rs. 200 per day (Rs. 100 each under CGST and SGST Act) to Rs. 50 per day (Rs. 25 each under CGST and SGST Act).  Further, where the total amount of central tax payable in the said return is nil, the amount of late fee payable is reduced to Rs. 20 per day (Rs. 10 each under CGST and SGST Act).

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Due date for filing Form GSTR TRN – 1 extended

Due date for filing of return in FORM GSTR TRN - 1 is extended upto 27th December 2017.

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CUSTOMS

Publishing of rate of exchange for conversion of the foreign currency

The Central Board of Excise and Customs (CBEC) vide Notification No. 103 /2017 - Customs (N.T.) notified the rate of exchange for conversion of the foreign currency into Indian currency or vice versa for Export and Import of goods, with effect from 3td of November 2017 respectively. 

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Events

26 Sep
Monaco | 26 Sep - 29 Sep
Singapore | 27 Sep
Mauritius | 30 Sep
Mexico City | 4 Oct - 5 Oct
Luxembourg | 4 Oct - 5 Oct
Munich | 8 Oct - 10 Oct
Munich | 9 Oct
9 Oct - 10 Oct
Warsaw | 18 Oct
Dublin | 18 Oct
London | 25 Oct - 26 Oct

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