The Taxation Laws (Amendment) Bill, 2017

Amongst the significant errors made by government for roll out of Goods and Service Tax (GST), The Taxation Laws (Amendment) Bill, 2017 was introduced in Lok Sabha on March 31, 2017. The main purpose for the Bill was to introduce suitable amendments in the Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944, the Finance Act, 2001, the Finance Act, 2005, and repeal provisions of few Acts to ensure smoother GST roll out. Below are some key features mentioned in The Taxation Laws (Amendment) Bill, 2017:
Amendments to the Central Excise Act, 1944
Currently, Central Excise Duty is levied on various excisable goods such as tobacco, petroleum products, rubber, oils, vehicles, etc.  This is proposed to be changed to levy duty only on certain kind of petroleum products such as motor spirit, high speed diesel, aviation turbine fuel and tobacco products. These goods on which the excise duty was levied were mentioned in the Central Excise Tariff Act, 1985.  These will be moved to the Fourth Schedule of the 1944 Act.  Note that the 1985 Act is proposed to be repealed under the Central Goods and Services Tax Bill, 2017.Currently, under the Central Excise Tariff Act, 1985, the central government has powers to change excise rates through notification in emergency circumstances.  The Bill inserts a similar provision in the 1944 Act.  Further, it also inserts a provision to allow the central government to amend the newly inserted Fourth Schedule through notification.
Amendments to Finance Act, 2001
The Finance Act, 2001 levies the National Calamity Contingent Duty on a variety of goods such as pan masala, tobacco products, telephones, motor vehicles, crude oil, and petroleum products. The Bill seeks to limit the levy only to tobacco products and crude oil.
Amendments to Customs Act, 1962
Below mentioned are the key amendments proposed in the Bill:

• Currently, under the Customs Act, 1962 imported goods remain in the customs area until they are cleared by customs authorities. Customs area includes ports, airports, etc.  The Bill extends the customs area to include warehouses.

• The Bill adds to a provision to the Act which requires several persons to furnish information to a proper officer under the Act (customs officer). Such persons and entities include: (i) income tax and state GST authorities, (ii) Reserve Bank of India, (iii) banks and financial institutions, (iv) stock exchanges and depositories (v) state electricity boards, (vi) Registrar of Companies, (vii) Registrar and Sub-registrar under the Registrar Act, 1908,(viii) registration authority under the Motor Vehicles Act, 1988, and (ix) Post Master General. The manner in which the information will have to be furnished will be notified by the government. The proper officer may serve a notice if the information is not furnished within the specified time.  Further, the officer may impose a fine after 30 days of serving the notice.  The fine will be of INR 100/day, until the information is furnished.

Amendments to Customs Tariff Act, 1975
Below mentioned are the key amendments proposed in the Bill:

• Goods imported will be liable to pay the Integrated Good and Service Tax (IGST). IGST will be levied on the aggregate of value of the imported goods, Customs Duty levied under the Act, and any other amount chargeable under any law.
  

• Goods imported will be liable to the GST Compensation Cess. The Cess will be levied on the aggregate of value of the imported goods, Customs Duty levied under the Act, and any other amount chargeable under any law.
  

Amendments to Finance Act, 2005
The Finance Act, 2005 levies an Additional Excise Duty on several items such as pan masala and tobacco products.  The Bill removes petroleum oils, crude and other related products from this list.
Repeal of several laws
The Bill seeks to repeal four laws which include the Sugar Cess Act, 1982 and the Jute Manufacturers Cess Act, 1983.  It also repeals certain provisions of 10 laws which include the Rubber Act, 1947, the Industries (Development and Regulation) Act, 1951, and the Coal Mines (Conservation and Development) Act, 1953.  Any un-collected duties (arrears) under the above Acts shall be collected by the respective collecting agencies and remitted to the Consolidate Fund of India.
If you have any questions or would like to discuss more about the taxation laws, our experts can ensure right business insights and best practices for you.
We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017

On Nov 23, 2017, the President of India promulgated the Insolvency and Bankruptcy Code (Amendment) Code, 2016 (IBC) to strengthen the insolvency resolution process. The Ordinance amends the Insolvency and Bankruptcy Code, 2016 to prohibit certain people from submitting a resolution plan (specifying details of restructuring a defaulter’s debt). These persons include: (i) willful defaulters, (ii) disqualified directors, (iii) promoters or management of the defaulting company, and (iv) any person who has committed these activities abroad. Below mentioned are some key amendments as per the Ordinance:

1. Responsibilities of resolution professional
   While inviting prospective resolution applicants to submit a resolution plan, the insolvency professional is required to ensure that such applicant fulfills the requisite criteria laid by committee of creditors about the complexity and business operational scale of the corporate debtor.
2. Non- eligible resolution applicants
   In order to eliminate possibility of default promoters of ailing entities from submitting resolution plans that leads to acquire the concerned entities assets at low valuations, henceforth any person whether acting alone or jointly with any person, who is a promoter or in the management or control of such person will not be eligible to submit a resolution plan.
3. Position of personal guarantor
   The Ordinance clarifies the position of personal guarantor of the corporate debtor also. The Ordinance amends section 2 of the Code which deals with the applicability of the Code. The Ordinance inserted “personal guarantors to corporate debtor” in section 2 clause (e), meaning by the Code is now applicable to the personal guarantor of the corporate debtor. In consequence, it can be interpreted that now during the insolvency process, the moratorium under section14 of the Code will be applicable to the properties of the personal guarantor of the corporate guarantor also.
4. Submission of resolution plan
   While considering an approval of a resolution plan, the Ordinance mandates the committee of creditors in order to consider the feasibility and validity of the plan. Moreover, a resolution plan submitted before the commencement of the present Ordinance by a resolution applicant who is otherwise ineligible under the IBC, unapproved by the committee of creditors, therefore requiring invitation of fresh resolution plans.

It would be important to mention that prior to the Ordinance, the Insolvency and Bankruptcy Board of India had vide its notification dated 7th November 2017 inserted new regulation after sub-regulation (2) under Regulation 38 in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate persons) Regulation, 2017. Under the New Regulation, the Board has made mandatory that the resolution plan should contain details of the resolution applicant and other connected persons. The ‘details’ includes identity, conviction of any offence, if any, during the preceding five years, identification as willful defaulter, if any, by any bank or financial institution or consortium, etc. Now, after the present amendment in the Code by way of the Ordinance both the Code and Regulations are harmonious. The outcome of this will be that the probability of successful resolution of the corporate debtor will be on higher side as the corporate debtor will be handed to person/entity with clean background. The Ordinance prohibits certain persons from submitting resolution plans as it may be considered undesirable to let them take charge of the company. However, this may reduce competition among applicants seeking to resolve the company and result in lower recoveries for creditors.
If you have any questions or would like to discuss more about the Code, our experts can ensure right business insights and best practices for you.
We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here
Company formation in India | Company registration in India

The Insolvency and Bankruptcy Code (Amendment Bill), 2017

Insolvency is a situation where a company is unable to repay its outstanding debt.  The Insolvency and Bankruptcy Code (Amendment Bill) (“Bill”), 2017 was introduced on December 28, 2017 amending the Insolvency and Bankruptcy Code, 2016 (“Code”) which replaces an ordinance promulgated in November 2017.

Resolution Applicant
A resolution plan explains the details that how the debt of a defaulting debtor can be restructured. This code defines a resolution in which applicant as a person submitting a resolution plan to insolvency professional. The bill amends to define a resolution applicant as a person submitting a resolution plan after receiving an invite by the insolvency professional to do so.

Eligibility for resolution applicants
The Code specifically defines that an insolvency professional will take control of the defaulting company inviting applicants to submit resolution plans. The Bill states that insolvency professional will only invite those resolution applicants to submit a plan, who fulfill certain criteria laid down by him (with the approval of the committee of creditors), and other conditions which may be specified by the Insolvency and Bankruptcy Board.

Ineligibility to be a resolution applicant
The Bill includes a provision prohibiting certain persons from submitting a resolution plan.  A person will be ineligible to submit a plan if:

• he is a not discharged insolvent;
• he is a willful defaulter;
• his account has been identified as a non-performing asset for more than a year and he has not repaid the amount before submitting a plan;
• he has been convicted of an offence punishable with two or more years of imprisonment;
• he has been disqualified as a director under the Companies Act, 2013;
• he has been prohibited from trading in securities by SEBI;
• he is the promoter or in the management of a company which has indulged in undervalued, preferential, or fraudulent transactions;
• he has given guarantee on a liability of the defaulting company undergoing resolution or liquidation and has not honored the guarantee;
• he has indulged in these specified activities abroad ; or
• he is connected to any person mentioned above.

Approving the resolution plan
This Code specifies that the committee of creditors shall approve a resolution plan with 75% majority.  The Bill amends this provision to state that the committee will approve this plan by a 75% majority subject to any conditions specified by the Insolvency and Bankruptcy Board. The Bill prohibits the committee of creditors from approving a resolution plan submitted before the promulgation of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the plan has been submitted by a person ineligible to be a resolution applicant.

Liquidation
The Code allows the insolvency professional to sell the movable or immovable property of the debtor in case of liquidation.  The Bill prohibits the insolvency professional to sell this property to any person who is ineligible to be a resolution applicant.

Penalties
The Bill includes a provision to specify that a person contravening any provisions of the Code, for which no penalty has been specified, will be punishable with a fine ranging between one lakh rupees to two crore rupees.

Code provides a time-bound process to resolve insolvency of companies and individuals. In conclusion, the Insolvency and Bankruptcy Code, 2016, is a progressive legislation that is intended to improve the efficiency of insolvency and bankruptcy proceedings in India. The new legislation provides for the early detection of financial distress and a time bound process for resolution. However, many details on the IBC’s implementation need to be worked out in the regulations, and its success will depend to a large extent on how quickly a high quality cadre of insolvency resolution professionals will emerge and on whether the time bound process for insolvency resolution will be adhered to in practice.

If you have any questions or would like to discuss more about the Code, our experts can ensure right business insights and best practices for you.

We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click her

COMPANY FORMATION IN INDIA