The year of covid – we look back to the future- A year since the start of the COVID-19 pandemic, India with its structural inadequacies and population was one of the hardest hit since its greatest crisis on 1991. We look back at year gone by and take stock of the situation.
Global economy is in recession but shares are at record high. What seems to be driving the dichotomy? Global lockdown dragged the world economy into recession with many countries experiencing massive GDP contraction.
RBI released the Internal Working Group (IWG) report that reviewed the existing licensing and regulatory guidelines relating to ownership, control, and corporate structure of private sector banks in India. At a time when our economy is in doldrum and the financial institutions are facing serious capital crunch, these recommendations of the IWG raises several questions.
The festival season may have masked underlying fears for our economy, and our equity markets may have rebounded amidst pandemic woes, but a looming worry is that Covid-19 will distort India’s Debt : GDP ratio to record high levels.
A drastic contraction of 23.9% in quarterly GDP has taken our economy to FY 2014 quarterly levels. With COVID - 19 cases continuing to soar, and no new fiscal stimulus announced by the Government, our economy’s short-term decline is set to continue in the foreseeable future.
In an unprecedented move, in the face of COVID – 19, India locked itself down for 3 weeks. The economic repercussions of lock down are expected to be felt for months. With a large population, and already faltering growth rate, India will need to choose between fiscal prudence and keeping our economy afloat.
On August 30, 2019, Government of India announced a major reform in the banking sector by merging large PSU banks. The plan is to merge 10 state-owned banks into four larger ones Banking mergers have been happening frequently in the last few years, but this time, the consolidation will leave only 12 PSU banks instead of 27 (as in 2017).
" The seven phased General elections concluded on 19th May, 2019. 23rd May, 2019 witnessed the return of the incumbent government with a larger majority.
Based on the work done in its previous tenure, we expect renewed focus on certain major policy areas in the next five years.
Few of the main areas have been Digitization, ease – of doing business, strengthening of the MSME sector, encouraging the start-ups, and streamlining of the Taxation regime. The expected impact on each of these sectors have been discussed further in this Article. "
Bond exchange traded funds (ETF), similar in structure and intent to the stock ETF, could debut soon in India, where the government is seeking to enhance liquidity in debt investments and expand the scope for retail savings.
Bond ETFs permit both retail and institutional investors to take exposure in a larger pool of fixed income securities than they normally could have access to. Multiple bonds are clubbed in smaller chunks defined by the ETF price and size, catering to all appetites. Bond ETFs, perceived to be helping enhance debt-market liquidity, have gained currency in G-7 countries.
The Cabinet has approved a promulgation of an ordinance to amend the 16-month-old Insolvency and Bankruptcy Code (IBC).
The present amendment is based on recommendations of a 14-member government appointed committee that had last month suggested a slew of measures, including addressing difficulties of home buyers and making recoveries easier for lenders plus disqualifying certain classes of promoters from back door entry into the resolution process.
“Fugitive Economic Offenders Ordinance preamble states - A Bill to provide for measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. ”
“ Department of Industrial Policy and Promotion has announced “waiver conditions” for “Angel tax”. Start-ups from now on may avail of the tax concession only if total investment, including funding from angel investors (those who make the initial equity investment) does not exceed Rs.10 crores. ”
“This notification could boost foreign direct investment into the country. The notification of FEMA (Cross Border Merger) Regulations, 2018, is the last leg of legal provisions which allows both inbound and outbound mergers of companies in India. The real beneficiaries of these regulations would be MNCs which in many cases want to consolidate the business of a region and require mergers involving an Indian company with other companies in foreign jurisdictions ”
“Union Cabinet has now approved the proposal for establishing the National Financial Reporting Authority (NFRA), intended to serve as an independent regulator for the auditing profession.
We believe establishment of NFRA as an independent regulator for the auditing profession will improve the transparency and reliability of financial information presented by listed and unlisted companies in India. ”
" India will have a new revenue recognition standard outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This supersedes most current revenue recognition standard.
In brief, the new standard seeks to streamline, and remove inconsistencies from, revenue recognition requirements; provide a more robust framework for addressing revenue issues; make revenue recognition practices more comparable; and increase the usefulness of disclosures. "
" Recently, the Union cabinet has given its nod to table The Banning of Unregulated Deposit Schemes and Chit Funds (Amendment) Bill, 2018 in the Parliament, in order to curb, fraudulent deposit/ Ponzi schemes which had collected and laundered huge amounts of money from large section of people, exploiting their finances and greed for quick and high return. "
" An e-way bill is a document that a person in charge of a conveyance carrying any consignment of goods of value exceeding Rs 50,000 is required to carry. It is a mandatory document that is generated from the GST Common Portal by registered persons or transporters who undertake movement of goods. A transporter needs to generate the e-way bill before the movement of goods commences. "
" The Budget 2018-19 has primarily focused agriculture, rural development, health, education, employment, MSME and infrastructure sectors. It came against the backdrop of a raft of reforms, economic slowdown and fiscal stress.
These series of structural reforms will propel India among the fastest growing economies of the world. the Budget seems rather lacklustre for the investor community, especially global investors as their long standing demands such as clarity over indirect transfer tax, General Anti-Avoidance Rules (“GAAR”) and reforms for start-up investments have remained unfulfilled.
“The Parliament approved amendments to the Insolvency and Bankruptcy Code Bill to bar owners of defaulting firms from bidding to buy back assets when they are auctioned as part of bankruptcy proceedings.
The code proves to be a learning experience as it is the first time that such jurisprudence has been introduced in India. Overall, the Bill broadly appears to be clarificatory in nature. Although the intentions are laudable, it remains debatable if the imposition of a blanket ban on the existing promoters, without taking into account the causes of failure of an enterprise, is effective. It ca
“The Financial Resolution and Deposit Insurance (FRDI) Bill proposes to create a framework for overseeing financial institutions. The 'Resolution Corporation', proposed in the draft bill, would look after the process and prevent the banks/ financial institutions from going bankrupt. The draft bill empowers Resolution Corporation to cancel the liability of a failing bank or convert the nature of the liability which has become a controversial issue.”
“India ranked 100th out of 190 countries after it implemented reforms in most macro indicators viz, starting a business, obtaining credit, paying taxes and resolving insolvency. For the first time, India jumped 30 positions to be counted the top 100th in terms of ease of doing business ranking.
The World Bank's Ease of Doing Business index ranks the nation based on the 10 indicators. These indicators are: Starting a business, Dealing with construction permits, Getting electricity, Registering property, Getting credit, Protecting minority investors, Paying taxes, Trading across borders, Enforc
“MCA has notified the provisions governing valuation by registered valuers [section 247 of the Companies Act, 2013 (the Act)] and the Companies (Registered Valuers and Valuation) Rules, 2017 (the Rules), both to come into effect from 18 October, 2017. In addition, the MCA has specified the Insolvency and Bankruptcy Board of India (IBBI) as the responsible authority.
The notified Rules lays down the criteria for individuals, partnership entities and companies to be eligible to be registered as valuers under the Act. Apart from this, the Rules contain other aspects pertaining to registered valu
The Government from quite a time is considering to bring the real estate sector under GST.
The sector is unique because it is an immovable property and is also bound by State laws.
If GST is applied on land and immovable property, the buyer has to pay one tax at uniform rate across states (eg stamp duty varies state wise). Implemented efficiently and effectively, one GST for real estate across the country will streamline the transaction and, increase income transparency, lower the cascading effect of taxtaion. How the states will agree to this and what changes have to be made to compensate
Crowdfunding — is finally gaining traction in India. It’s a big opportunity for individuals for new company trying to raise small amounts of money who can’t get funded by traditional means, either because of their credit score or the high interest rates. The amounts they are interested in may be too small for traditional lenders. Crowdfunding is a great way to get a small project through.
Crowdfunding can be divided into donation-based (charity/personal causes), debt-based (peer to peer) and equity-based. Crowdfunding is still in a nascent stage in India. However, its market potential is huge
“Bitcoins are intended to be digital currency, where buyers and sellers use them and eliminate all the other mediums such as credit cards, ATM Machines etc. Bitcoins will prove to be safer than carrying plastic cards and which shall be an international currency with no exchange transaction fees.”
“The IBC has been a real game changer in the Indian economy’s business reform initiatives in the last twenty five years. Ease of doing business is ironically the base premise for enacting the comprehensive Code to exit from the business.”
The Government has taken several steps for discouraging cash transaction and promoting digital payments. Proposed Initiatives: -
Restriction on receiving Cash above Rs. 2 Lakhs [Section 269ST & 271DA of the Income Tax Act, 1961], Restriction on Capital Expenditure for Business in Cash above Rs. 10000/- [Section 32 of the Income Tax Act, 1961], Reduction in the limit of Cash Payment to Rs. 10000/- in a Day [Section 40A(3) & 40A(3A) of the Income Tax Act, 1961], Lower Presumptive Profit of 6% for Cheque/ Digital Receipts by small businesses [Section 44AD of the Income Tax Act, 1961] and est
The Companies (Amendment) Bill, 2017 first introduced in March 2016 in the Lok Sabha, the Bill seeks to make important changes to the Companies Act of 2013 in relation to the structuring, disclosure, and compliance requirements for companies. The Bill has now been approved by Lok Sabha in July 2017 and is awaited to be passed in Rajya Sabha.
Major amendments proposed in the Companies (Amendment) Bill, 2017- simplification of the private placement process, rationalization of provisions related to loan to directors, omission of provisions relating to forward dealing and insider trading, doing
“The much-awaited Real Estate Act has come into force from May 1st, 2017 but only 13 states and Union Territories have so far notified rules under the Act. The Real Estate (Regulation and Development) Bill, 2016 was passed by Parliament in March last year and all the 92 sections of the Act come into effect from May 1. ”
"Ministry of Corporate Affairs (MCA) has recently vide notification dated 13th April, 2017 has notified Section 234 of the Companies Act, 2013 (‘Act’) which deals with Merger or amalgamation of company with foreign company now allowing the merger or amalgamation of Company with foreign company. The corresponding rules have also been notified in consultation with Reserve Bank of India (RBI) for implementation of the said section. MCA has issued the Companies (Compromise, Arrangements and Amalgamation) Amendment Rules, 2017 inserting Rule 25A and Annexure B in prescribing rules in the Companies
"Telecom Regulatory of India (TRAI) had rolled out a draft telecom tariff order (TTO) in October 2016. Post final approval from supreme court of India TRAI rolled out Tariff Order and New Interconnection regulation on 03 March 2017. This time TRAI have attempted to ensure transparency, non-discrimination, consumer protection and create an enabling environment for orderly growth of the sector. "
“Green Bonds are the one of the kinds of debt instruments, wherein the issuer gets capital from the investors only if the investment (capital) is being raised to fund green projects relating to renewable energy or emission reductions etc. In order to regulate the Green Bonds market in India the Securities Exchange Board of India (SEBI) in May, 2017 came out with a circular stating the disclosure requirements for issuance and listing of Green Debt Securities in India. Such guidelines demonstrates SEBI’s recognition of the increasing need of dedicated funds for clean energy projects”
“CBDT has notified the final rules prescribing ‘fair market value’ method for valuation of unquoted shares. The amended rules are called the Income-tax (20th Amendment), Rules, 2017 for Sections 56(2)(x) and 50CA, are broadly in line with the draft rules released by the CBDT in May. The amended rules shall come into force from April 1, 2018 and shall apply in relation to assessment year 2018-19 and subsequent years.”
“Digital economy is about transforming the many facets of business interactions and transactions and also enabling economic innovations. For example, the digital
economy both is enabled by and has given rise to the advent of new digital currencies and payment processes, for example Bitcoin and the digital wallets.”
“GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. ”
Post introduction of RERA, the government has published the draft Income Computation and Disclosure Standards (ICDS) on Real Estate Transactions to streamline accounting standards in Real Estate. ICDS are a set of accounting policies and standards used for computing taxable income and not for maintaining books of accounts The main highlights of the draft ICDS –
• Defining how revenue and costs are to be recognized;
• Defining components of project costs for computation of taxes;
• Defining valuations of inventories;
• Treatment of Transferable Development Rights; and
• Other items crit
"Socially Responsible Investing (SRI) is a concept where investors invest in companies working in socially and environmental responsible ways. The focus is on sustainable, socially conscious, green and ethical investing. SRI seeks to balance financial return and social good at the same time. SRI investors apply various environmental, social and governance (ESG) criteria in their investment analysis and selection. It is observed that, while globally SRI has emerged as one of most powerful trends among the investment community of the developed world, the concept is still in a nascent stage in In
“The Insolvency and Bankruptcy Code 2016 seeks to address the issues faced currently in the context of insolvency and winding up. The code simply aims to revamp the prevailing bankruptcy laws and replace them with more simpler and time bound closure of business.
This area of law has given an opportunity to the professionals like CA/CS/LLB/CWA to act as Insolvency Professionals / Insolvency Professional Agencies.”
“The Finance Act has come into force w.e.f. 1 st April, 2017 while providing some relief to lower income groups by way of lower tax slabs. The Act has introduced stringent amendments in taxation laws. Continuing on its endeavour for a transparent system the government has also made AADHAR mandatory for tax filing from 1 st July, 2017 and mandatory disclosure of cash transactions for the demonetization period. Various other amendments has been taken up in the Finance Act, 2017 which shall keep an overall track of the taxation provisioning for all types of assessees.”
In the recent Budget of 2017, the Government has accorded infrastructure status to affordable housing and taken other steps, including a pledge to build one crore rural homes in two years to help provide housing for all by 2022.
Accordance of infrastructure sector status to this segment of real estate will help increase the much needed supply of affordable homes. Developers are expected to have access to cheaper institutional funds (including ECBs, insurance and pension funds) and tax exemptions to improve margins, which may induce developers to provide such housing.
Buyers, especially for
FinTech describes a business that aims at utilizing modern technology and software to provide efficient and superior financial services platform to institutions and end users. FinTech companies are accelerating the pace of change and are reshaping the financial services industry radically. Financial service providers like banks are recognizing the potentials of the FinTech. It is clear, however, that the disruptive innovations of FinTech cannot wholly eliminate or completely decimate the traditional banking or finance, but is expected to go a long way in establishing a clear footprint towards
"The Reserve Bank of India (RBI) vide Notification dated 10th January, 2017 introduced a new instrument for Start up companies named as ‘Convertible Notes’ by amending the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (Regulations) through issue of Foreign Exchange Management (Transfer of Issue of Security by a Person Resident Outside India) (Fifteenth Amendment) Regulations, 2016 (Amendment)."
“GST shall strive to make India a One Tax Nation proving to be biggest reform to check misreporting or non reporting of the transactions in the books of account.
GST would be critical step to redefine the policy mechanism. Basic exemption threshold would be reduced to an annual turnover of INR 20 Lakhs.”
"It is seen that the last two years have seen a swing of initiatives and agendas announced by the government – starting with National Digital Literacy Mission with its worthwhile agenda of enabling one person in each Indian family to have digital skills, we have seen Swach Bharat Abhiyan, Make in India, Start up India and the more recent demonetization drive and the ‘Cashless India’ opportunity capturing the imagination of the country. "
"In the repercussion of the cancellation of the legal tender character of old INR 500 and INR 1000 notes, there has been a surge in the digital transactions through use of credit/debit cards and mobile phone applications/e-wallets etc. To further accelerate this process, the Central Government has come out with various incentive packages and measures for promotion of digital and cashless economy in the country. Digital India is a programme initiated to prepare India for a knowledge future. "
"In order to bring more clarity and to capture the possible concealing black money, the Taxation Laws (Second Amendment) Bill, 2016 (“the Bill”) was introduced in Parliament to amend the provisions of the Income Tax Act, 1961 (Act) to ensure that defaulting assesses are subjected to tax at a higher rate and with stringent penalty provision."
“A recent move of the Central Government exercising its powers u/s 26(2) of the Reserve Bank of India Act, 1934, to withdraw the legal tender character of existing bank notes in denominations of ₹ 500 and ₹ 1000 issued by Reserve Bank of India (RBI) is unprecedented. The demonetization of ₹ 500 and ₹ 1000 banknotes was a policy enacted by the Government of India on 8th November, 2016. All ₹ 500 and ₹ 1000 banknotes of the Mahatma Gandhi Series ceased to be legal tender in India from 9th November, 2016”
“Real Estate Rules Notified - 70% Of Unused Amounts Collected For Ongoing Projects To Be Kept In A Separate Bank Account, Promoters To Declare Original Sanctioned Plans, Changes Made Later, Fresh Timeline For Completion of Ongoing Projects Registration of Projects With Regulatory Authorities Incentivized By Reducing Fee Substantially, Interest To Be Paid Both By Promoters and Allottees Is SBI Marginal Cost Lending Rate Plus 2%, Promoters to Make Public A Host of Information And Report Quarterly Progress To Enable Informed Decisions By Buyers”
India was a top investment destination in the mid to late 2000’s. Even after the Global meltdown of 2008 India has remained one of the top investment destination and it continues to show a vast potential for foreign investment and foreign players.
Cyber Security Due Diligence is defined as the review of governance, processes and controls that are used to secure information assets.
The much awaited transformation in the Labour Law empowering women employment, the Maternity Benefit (Amendment) Bill was passed by Rajya Sabha on 11th August, 2016. While the bill is yet to be passed in Lok Sabha. The bill highlights the increasing the period of maternity leave from 12 to 26 weeks for Organized Formal Sectors.
"The GST Act 2016 has been for the first time made public in June 2016 by the Indian Government. The government is planning to introduce the Act w.e.f. 1st April, 2017 and proposes to pass the 122nd Constitutional Amendment bill, 2014 in the upcoming monsoon session of the parliament”
“Masala Bond is a kind of financial instrument through which Indian entities can raise money from overseas Markets in rupee and not in foreign currency. Indian rupee denominated bonds issued in offshore Capital markets.”
“Withdrawal of United Kingdom (UK) (Britain) from the European Union (EU) is termed as Brexit, it is term that refers to the June 23, 2016 referendum where the British voters agreed to exit the EU. The referendum shook the global markets leading to downfall in the currency British pound to its lowest level in decades”
“National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) under the Companies Act, 2013 was notified by the Ministry of Corporate Affairs (MCA) on 1st June, 2016. For the working of the provisions of the sections for establishment of NCLT and NCLAT, the Government has now provided with the rules governing the functioning of the tribunals.”
"A transformation in the Indian Economic reform with the passing of the Insolvency and Bankruptcy Code 2016 (hereinafter referred as ‘Code’) with regard to the functioning of the credit market in India. This shall provide a big boost to Ease of doing business in India. The law has been enacted with a vision to encourage entrepreneurship and innovation which will further boost the startups in India. "
“Real Estate (Regulation and Development) Act, 2016 established to regulate and keep an eye on all the norms applicable on real estate industry – setting up of RERA and real estate appellate tribunals.”
“Startup entity means an entity incorporated or registered in India not prior to five years with an annual turnover not exceeding 25Cr and can be in the following forms- Partnership firm, LLP or a Private Limited Company”