MSME - interest subvention

RBI circular dated 22nd February, 2019

The Micro, Small and Medium Enterprises [MSME] sector is a significant contributor towards building up of a strong and stable national economy. Hon’ble Prime Minister while launching outreach initiative for MSME sector on November 2nd, 2018 highlighted that access to credit, access to market, technology upgradation, ease of doing business and a sense of security for employees are five key aspects for facilitating MSME sector. Twelve announcements have been made to address each of these five categories. As part of access to credit, Prime Minister announced 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.

Ministry of MSME (MoMSME) has decided that a new scheme viz. “Interest Subvention Scheme for Incremental credit to MSMEs 2018” will be implemented over 2018-19 and 2019-20.

2. Salient Features of the Scheme

2.1 Purpose, Scope and Duration

The Scheme aims at encouraging both manufacturing and service enterprises to increase productivity and provides incentives to MSMEs for onboarding on GST platform which helps in formalization of economy, while reducing the cost of credit. The Scheme will be in operation for a period of two financial years FY 2019 and FY 2020.

2.2 Eligibility for Coverage

(i) All MSMEs who meet the following criteria shall be eligible as beneficiaries under the Scheme:

a. Valid Udyog Aadhar Number [UAN]

b. Valid GSTN Number

(ii) Incremental term loan or fresh term loan or incremental or fresh working capital extended during the current FY viz. from 2nd November 2018 and next FY would be eligible for coverage.

(iii) The term loan or working capital should have been extended by RBI registered systemically important Non-banking financial companies.

(iv) In order to ensure maximum coverage and outreach, all working capital or term loan would be eligible for coverage to the extent of ₹100 lakh only during the period of the Scheme.

(v) Wherever both the facilities working capital and term loan are extended to a MSME by an eligible institution, interest subvention would be made available for a maximum financial assistance of ₹100 lakh.

(vii) MSME exporters availing interest subvention for pre-shipment or post-shipment credit under Department of Commerce will not be eligible for assistance under Interest Subvention Scheme for Incremental credit to MSMEs 2018.

(viii) MSMEs already availing interest subvention under any of the Schemes of the State / Central Govt. will not be eligible under the proposed Scheme.

2.3 Operational formalities

1. The interest relief will be calculated at two percentage points per annum (2% p.a.), on outstanding balance from time to time from the date of disbursal / drawal or the date of notification of this scheme, whichever is later, on the incremental or fresh amount of working capital sanctioned or incremental or new term loan disbursed by eligible institutions.
2. The interest rates charged to MSMEs shall conform to Fair Practices Code as published by respective institutions (as per extant RBI guidelines) and linked to the respective internal / external rating of the MSME as per applicable interest rate guidelines of the institution.
3. The loan accounts on the date of filing claim should not have been declared as NPA as per extant guidelines in force. No interest subvention shall be admissible for any period during which the account remains NPA.

2.4 Claim Submission

1. Nodal office of eligible lending institutions should submit their half yearly claims to SIDBI as per the format given in Annex I. Information with respect to loans disbursed and interest relief claimed (branch-wise) shall be submitted in soft copy in excel in the format given in Annex II.
2. The format for compilation of data by branches of eligible institutions is given in Annex III. The same may be submitted by the branches to their Controlling Offices / Head Offices.
3. All claims have to be duly certified by the statutory auditors of the eligible institutions. The certificate shall include statement on verification of individual accounts with regard to amount, incremental / fresh lending, interest charged and amount claimed. Lending institutions shall ensure that total relief claimed as indicated in Annex I, II and III are matched.
4. The Half Yearly claims shall be submitted to the Chief General Manager, Institutional Finance Vertical, SIDBI, Mumbai.
5. Disbursement against each claim to individual institution shall be only after release of funds from MoMSME.

2.5 Other covenants

1. SIDBI shall act as a Nodal Agency for the purpose of channelizing of interest subvention to the various lending institutions through their Nodal office.
2. All lending institutions shall be responsible for submission of the accurate data and monitoring of the scheme.
3. The interest subvention would be released only on the basis of claim duly certified by the Statutory Auditors of the eligible institutions. SIDBI shall not be liable for any inaccurate submission of data by lending institutions.
4. Interest subvention amount shall be released by SIDBI subject to availability of funds from GOI. Also, MoMSME, GOI will be the final authority for all interest subvention related matters and their decision would be final and binding. Receipt of funds by the eligible institutions would be treated as Utilization Certificate of the Fund.

a copy of the said circular can be found here

NBFCs - reclassification

RBI circular dated 22nd February, 2019

Harmonisation of different categories of NBFCs

Please refer to paragraph 5 of the Statement on Developmental and Regulatory Policies of the Sixth Bi-monthly Monetary Policy Statement for 2018-19 dated February 07, 2019 on Harmonisation of NBFC Categories.

2. Over a period of time, evolution of the NBFC sector has resulted in several categories of NBFCs intended to focus on specific sector/ asset classes. Different sets of regulatory prescriptions were accordingly put in place.

3. On a review, it has been decided that in order to provide NBFCs with greater operational flexibility, harmonisation of different categories of NBFCs into fewer ones shall be carried out based on the principle of regulation by activity rather than regulation by entity. Accordingly, it has been decided to merge the three categories of NBFCs viz. Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs) into a new category called NBFC - Investment and Credit Company (NBFC-ICC).

4. Differential regulations relating to bank’s exposure to the three categories of NBFCs viz., AFCs, LCs and ICs stand harmonised vide Bank’s circular DBR.BP.BC.No.25/21.06.001/2018-19 dated, February 22, 2019. Further, a deposit taking NBFC-ICC shall invest in unquoted shares of another company which is not a subsidiary company or a company in the same group of the NBFC, an amount not exceeding twenty per cent of its owned fund.

5. All related Master Directions (Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016, Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016, Standalone Primary Dealers (Reserve Bank) Directions, 2016 and Residuary Non-Banking Companies (Reserve Bank) Directions, 2016) have been updated accordingly.

GST - Housing sector

PIB press release dated 24th February, 2019

Real estate sector is one of the largest contributors to the national GDP and provides employment opportunity to large numbers of people. “Housing for All by 2022” envisions that every citizen would have a house and the urban areas would be free of slums. There are reports of slowdown in the sector and low off-take of under-construction houses which needs to be addressed. To boost the residential segment of the real estate sector, following recommendations were made by the GST Council in its 33^rd meeting held today:

2. GST rate:
   1. GST shall be levied at effective GST rate of 5% without ITC on residential properties outside affordable segment;
   2. GST shall be levied at effective GST of 1% without ITC on affordable housing properties.

3. Effective date: The new rate shall become applicable from 1^st of April, 2019.

4. Definition of affordable housing shall be:-

A residential house/flat of carpet area of upto 90 sqm in non-metropolitan cities/towns and 60 sqm in metropolitan cities having value upto Rs. 45 lacs (both for metropolitan and non-metropolitan cities).

Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR).

5. GST exemption on TDR/ JDA, long term lease (premium), FSI:

Intermediate tax on development right, such as TDR, JDA, lease (premium), FSI shall be exempted only for such residential property on which GST is payable.

6. Details of the scheme shall be worked out by an officers committee and shall be approved by the GST Council in a meeting to be called specifically for this purpose.

7. Advantages of the recommendations made:

The new tax rate in principle was approved by the Council taking into consideration the following advantages:-

1. The buyer of house gets a fair price and affordable housing gets very attractive with GST @ 1%.
2. Interest of the buyer/consumer gets protected; ITC benefits not being passed to them shall become a non-issue.
3. Cash flow problem for the sector is addressed by exemption of GST on development rights, long term lease (premium), FSI etc.
4. Unutilized ITC, which used to become cost at the end of the project gets removed and should lead to better pricing.
5. Tax structure and tax compliance becomes simpler for builders.

8. GST Council decided that the issue of tax rate on lottery needs further discussion in the GoM constituted in this regard.

The decisions of the GST Council have been presented in this note in simple language for easy understanding.  The same would be given effect to through Gazette notifications/ circulars which alone shall have force of law.

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Indian Stamp Act

PIB press release dated 21st February, 2019

The President of India, today, gave his assent to the Amendments to the Indian Stamp Act, 1899 which were introduced as part of the Finance Act 2019. The was in fulfillment of the commitment made in the last Union Budget 2018-19 to take reform measures with respect to Stamp Duty regime on financial securities transactions in consultation with the States and make necessary amendments to the Indian Stamp Act, 1899. The Finance Bill 2019 was passed by both the Houses of Parliament, Lok Sabha and Rajya Sabha, on 12^thand 13^th February 2019 respectively.

Objective

The amendments propose to create the legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency (through the Stock Exchanges or Clearing Corporations authorised by the stock exchange or by the Depositories) on one Instrument. A mechanism for appropriately sharing the stamp duty with relevant State Governments based on state of domicile of the buying client is also proposed.

Background

The present system of collection of stamp duty on securities market transactions has led to multiple rates for the same instrument, resulting in jurisdictional disputes and multiple incidences of duty, thereby raising the transaction costs in the securities market and hurting capital formation. This has also given scope for rate shopping and evasion of duty.

In order to facilitate ease of doing business and to bring in uniformity and affordability of the stamp duty on securities across States and thereby build a pan-India securities market, the Central Government, after due deliberations, in exercise of powers under Entry 91 of the List I and Entry 44 of List III of the 7th Schedule of Indian Constitution, has decided to amend the Indian Stamp Act, 1899 to create the legal and institutional mechanism to enable states to collect stamp duty on securities market instruments at one place by one agency (through Stock Exchanges or Clearing Corporations authorized by it or by the Depositories) on one Instrument and develop a mechanism for appropriately sharing the stamp duty with relevant State Governments.

Salient Features

To achieve the rationalisation of stamp duty structures, the amendments, inter-alia, provide for the following structural reforms; —

1. Each security is charged with a duty as specified in Schedule I of the Act. Securities are defined to include all those instruments specified in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956; a “derivative” as defined in clause (a) of Section 45U of the Reserve Bank of India Act, 1934; a Certificate of Deposit, Commercial Usance Bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the Reserve Bank of India may specify from time to time; repo on Corporate Bonds; and any other instrument declared by the Central Government, by notification in the Official Gazette, to be securities for the purposes of this Act.
2. All rates are applicable only on one side (either by the buyer or by the seller but not by both), while presently States charge stamp duty on both sides.
3. While fixing the rates, the rates charged by Maharashtra is taken as the benchmark as Maharashtra accounts for around 70% of the total stamp duty collection in the country. However, the rates are chosen in such a manner that it provides a revenue neutral position to the state governments while reducing overall tax burden for investors.
4. While duty is applicable normally on the transaction value, in case of swaps the first leg of the cash flow; in case of options its premium; and in case of repo on corporate bonds the interest paid by the borrower are considered for levy of duty.
5. For all exchange based secondary market transactions in securities, stock exchanges (SEs) shall collect the duty; and for off-market transactions (which are made for a consideration as disclosed by trading parties) and initial issue of securities happening in demat form, depositories shall collect the duty. In the future event of inter-operability of clearing corporations (CCPs), which provides for linking of multiple CCPs while allowing participants to consolidate their clearing and settlement functions at a single CCP, irrespective of the stock exchange on which the trade is executed, stock exchanges can authorize CCPs to collect stamp duty on behalf of state governments. This is because when inter-operability of CCPs is enabled, investors will be able to buy and sell securities at any stock exchange and clear through any CCP of their choice. If so, the categorization of a transaction as delivery vs. non-delivery based trades so as to fix appropriate levies, can only be done by CCPs. The CCPs are substantially owned by stock exchanges (at least 51% shareholding rests with SEs).
6. State of domicile of the buying client or that of the broking house /depository Participant of the buying client (in case the buyer is outside India, as in the case of Foreign Portfolio Investors (FPIs)) would be taken as the basis for remitting duty to the respective States.
7. Issue of securities is also proposed to be brought into the same tax framework as that of trading of securities, that is, authorising depositories to collect duty from companies and redistributing to States based on the domicile State of subscribers /buyers of security.
8. The depositories /repositories and trading platforms under the jurisdiction of the Reserve Bank of India are also brought into this framework. However, Government Securities (G-secs) and instruments based on G-secs (such as repos/reverse repos on G-Secs) have been excluded from the purview of stamp duty. Platforms, which facilitate liquidity adjustments like call money market have also been excluded.
9. In order to prevent multiple incidence of taxation, it is proposed that no stamp duty shall be collected by the State on any secondary record of transaction associated with a transaction on which the depository / stock exchange has been authorised by the State Government to collect the stamp duty.
10. Tax arbitrage is avoided by providing the same rate of stamp duty for issue or re-issue or sale or transfer of securities happening outside stock exchanges and depositories.
11. Further, rule-making powers are granted to the Central Government for implementing the new collection mechanism. Penalty provisions have also been incorporated.
12. For facilitating the collection, stock exchanges/clearing corporations/depositories shall be eligible for some commission which will be decided in consultation with State Governments

Implementation Strategy / Inter-state Council mechanism

Subsequent to the enactment of the Act, it is proposed to create a Coordination Council under Article 263 of the Indian Constitution by a separate order/notification of the President of India. This Council comprising of representatives from Union and States may be tasked with the responsibility of making recommendations regarding review / revision of stamp duty rates. The Government will also notify the required rules.

Impact

The proposed rationalised and harmonised system is expected to lead to zero tax evasion. Further, cost of collection would be minimised while revenue productivity is enhanced. Adoption of the centralised collection mechanism is expected to bring in not only more revenue but greater stability to the revenue collection by the states. Further, this system will help develop equity markets and equity culture across the length and breadth of the country, ushering in balanced regional development.

accreditation of hospitals

PIB press release dated 21st February, 2019

National Accreditation Board for Hospitals and Healthcare Organizations (NABH) has revamped Entry-Level Certification Process to make it simpler, digital, fasterand user-friendly. The revised process is driven through a new portal called HOPE - Healthcare Organizations’ Platform for Entry-Level-Certification with a focus to promote quality at nascent stages by enrolling a wide range of hospitals across the country including Healthcare Organizations (HCOs) and Small Healthcare Organizations (SHCOs). The aim is to create a momentum for HCOs and SHCOs that want to avail benefits associated with Insurance Regulatory and Development Authority of India (IRDAI) and Ayushman Bharat by getting themselves NABH certified along with the primary aim of creating a quality healthcare ecosystem in India. The idea of cashless payment to patients under insurance coverage has been promoted by IRDAI to reduce financial burden on households. The IRDAI has mandated hospitals to ensure a quality healthcare ecosystem through NABH Entry-Level Certification Process.

HOPE is not just confined to certification of HCOs/SHCOs but also enables them to comply with quality protocols, improve patient safety and the overall healthcare facility of the organization. It is an online platform for smooth and secure registration. It provides a self-explanatory questionnaire to be filled by the HCO/SHCOs. A mobile application has also been developed to support HCO/SHCOs for directly uploading geotagged and timestamped evidences required for compliance to the standards. It has also changed the assessment process which is now carried out on a technology based application where the data is captured and validated on a real-time basis.

To ensure an active participation of HCO/SHCOs in the HOPE process, various activities have been initiated:

• Nationwide awareness workshops to sensitize the hospitals on the entire process of assessment.
• Call center support to hospitals through an active helpline for resolving issues while filling the application form.
• Platform to connect hospitals with certified consultants for assistance in the certification processfollowing a cost effective manner.
• Knowledge bank providing a comprehensive guidebook, presentation etc. with detailedinformation of the step-by-step certification procedure.
• Created a larger and stronger network of qualified assessors.

In order to support maximum HCO/SHCOs in the country, QCI and NABH have partnered with several organizations like, Indian Medical Association (IMA), Patient Safety and Access Initiative of India Foundation (PSAIIF), Consortium of Accredited Healthcare Organizations (CAHO) and other stakeholders for spreading awareness about the process.

Established in 1997 Quality Council of India (QCI) is an autonomous organization under the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry. It is the Quality Apex and National Accreditation Body for accreditation and quality promotion in the country. The Council was established to provide a credible, reliable mechanism for third party assessment of products, services and processes which is accepted and recognized globally.

NABH, a constituent body of QCI, has been working to ensure reliability, efficiency and global accreditation in Indian healthcare sector using contemporary methodologies and tools, standards of patient safety and infection control. NABH accreditation provides assurance of quality and care in hospitals at par with international benchmarks. NABH has designed an exhaustive healthcare standard for hospitals and healthcare providers that have been accredited by ISQUA the apex international accreditation body.

Hospitals can contact the call center at 1800-102-3814 or write to hope@qcin.org or refer to the website www.hope.qcin.org

Adjudication of Penalties

MCA has vide its notification dated 19th February, 2019 amended the Rule 3 of Companies (Adjudication of Penalties), Rules, 2014. This rule has emanated from section 454 of the Companies Act, 2013 

Section 454 gives powers to the central government to impose penalties on the companies and officers in default for any non compliance of the Act or Rules. 

The salient feature of the new Rule 3 is as follows:

1) central government can appoint officers not below the rank of Registrar as adjudicating officers to adjudge the penalties under the Act;
2) Before adjudging penalty, notice is required to be given to the company/ officer in default;
3) Time period to be given for reply - not less than 15 days and not more than 30 days;
4) Notice to clearly indicate the nature of non compliance, pointing out the relevant penal provisions and the maximum penalty which can be levied;
5) Reply to the notice to be filed in electronic mode only within the time prescribed;
6) Period for reply can be extended by another 15 days for sufficient reasons given;
7) On receipt of reply, if the adjudicating officer feels that physical presence is required, then he shall issue a notice within 10 days of receiving the reply and fix a date for making physical appearance;
8) Physical appearance can be made personally or through authorised representative;
9) If the person has, in his reply, indicated that he would like to make oral representation, then the adjudicating officer shall given him time accordingly;
 10) On the hearing date, the party shall be given a reasonable opportunity of being heard and thereafter the AO shall pass an order recording the reasons in writing;
11) The order shall also be for adjournment of the hearing to another date;
12) The AO may also require the person concerned to submit his reply to certain matters relevant to ascertain the default;
13) The AO shall pass an order within 30 days of the reply received from the person, where no physical appearance is required. Where physical appearance was done, then the period is 90 days from the date of the notice;
14) Every order shall be duly dated and signed and shall clearly state the reasons why physical appearance was required;
15) Copy of the order shall be sent to the company, officer in default, central government and uploaded on the website of the ministry;
16) The AO shall have powers to summon and enforce attendance of any person acquainted with the facts and circumstance of the case;
17) The AO shall also have the powers to order evidence or produce any document which he feels could be relevant to the case;
18) If any person fails or neglects to reply or refuses to appear before the AO, the AO can pass an order imposing a penalty on the said person after recording his reasons in writing;
19) While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely:-

(a) size of the company;

(b) nature of business carried on by the company;

(c) injury to public interest;

(d) nature of the default;

(e) repetition of the default;

(f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; and

(g) the amount of loss caused to an investor or group of investors or creditors as a result of the default:

20) Penalty can never be less than the minimum penalty imposed under the relevant section of the Act;

21) In case a fixed sum has been prescribed as penalty under the Act, then the AO will impose that fixed sum as a penalty 

22) Penalty has to be paid through the MCA portal;

MCA e-form ACTIVE

MCA has vide notification dated 21st February, 2019 amended the Companies Incorporation Rules by introducing a new e-form ACTIVE (INC-22A). 

Salient features are 

1) this amendment shall come into force from 25th February, 2019;

2) all companies incorporated before 31st December, 2017 are required to file this form;

3) particulars of the company and its registered office is captured in this form;

4) companies which have not filed its financials (AOC-4) or annual return (MGT-7) or both are restricted from filing this form unless it is under management dispute and ROC has recorded the same;

5)  companies which have been struck off or under process of strike off or under liquidation or amalgamation or dissolution are exempt from filing this e-form;

6) last date for filing is 25th April, 2019 - there is no fees upto 25th April after that it will be Rs.10,000 per form;

7) if the filing is not done by the said date, then it shall be marked as "ACTIVE non compliant" in the MCA portal and shall be liable to action u/s 12(9) of the Companies Act, 2013;

8) if the company is ACTIVE non compliant after the said date, then the following event based forms will not be allowed to be filed by the company -

SH-7 change in authorised share capital

PAS-3 - change in paid up share capital

DIR-12 - change in Directors, except cessation 

INC-22 - change in registered office

INC-28 - amalgamation, de-merger etc. 

9) if the company files the form after 26th April, 2019 then it shall be required to pay a fee of Rs.10,000/-. Only then the company will be marked as ACTIVE COMPLIANT;

10) new form INC-22A has been introduced;

11) form requires details of the company name, registered office address, e-mail id, no. of directors, list of directors, details of statutory auditors, cost auditors, if any, details of MD, CEO, WTD, company secretary, CFO & challan nos. of e-forms AOC-4 & MGT-7 for FY 2017-18.
12) geo tagging of the registered office required so latitude and longitude to be given;

13) e-mail id is with OTP, so there will be a validation process 

14) in the attachment, mandatory attachment is a photograph of the registered office, showing the external building, inside office and also showing at least one Director/ KMP who has affixed his DSC to the form. The photograph of the exterior of the office should show the name plate of the company with CIN and GSTIN
15) further, the DSC of at least two Directors is required to be affixed in the form.