The weekly messenger | Edition 27.17

Accounting News

AICPA issues proposed financial instruments disclosure framework-12 July 2017

The American Institute Certified Public Accountants (AICPA) has issued a proposed disclosure framework for the valuation of financial instruments. The purpose of this document is to provide a framework for the valuation professional, regarding performance requirements when engaged (in the case of independent third-party professionals) or assigned (in the case of internal professionals employed by a reporting entity) to provide fair value and other measurements of financial instruments and components thereof.

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Regulatory News

Amendment in schedule IV of the Companies Act 2013-5 July 2017

The Central Government (CG) has amended Schedule IV “Code for Independent Directors” of the Companies Act 2013, wherein it has made the following changes:

• In sub-para (12) of paragraph III which  relates to the duties of independent directors, the words “acting within his authority” have been substituted by the words “act within their authority “;
• In sub-para (2) of paragraph VI , which relates to the resignation or removal of independent directors, the words " a period of not more than one hundred and eighty days", have been substituted by the words "three months" ;
• In sub-para (1) of paragraph VII ,which relates to separate meetings of independent directors, the words "in a year", have been substituted by the words "in a financial year" ;
• After paragraph VIII, a note has been inserted wherein it has been notified that some provisions of schedule IV will note be applicable to government companies, if they fulfil certain requirements.

This notification will become effective from the date of its publication in the Official Gazette i.e. 6 July 2017.

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Companies (Appointment and Qualification of Directors) Amendment Rules, 2017-5 July 2017

CG has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 with the Companies (Appointment and Qualification of Directors) Amendment Rules 2017 wherein it has made the following modifications:

• Rule 4 which relates to the number of independent directors have been bifurcated into two sub rules i.e. original rule 4 has been renumbered as sub-rule 1 of rule 4 and a new sub-rule i.e. sub-rule 2 has been inserted which is as follows:
  "The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-
  (a) a joint venture;
  (b) a wholly owned subsidiary; and
  (c) a dormant company as defined under section 455 of the Act.".

• Form DIR-5 has been substituted by new Form-DIR - 5.

These rules will become effective from the date of its publication in the Official Gazette i.e. 6 July 2017.

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Companies (Meeting of Board & its Powers) Second Amendment Rules 2017 – 13 July 2017

CG has amended the Companies (Meetings of Board and its Power) Rules, 2014 with the Companies (Meetings of Board and its Power) Second Amendment Rules, 2017 wherein it has made the following modifications:

• In clause (e) of sub-rule 3 of the Rule 3 which relates to “Meetings of Board through video conferencing or other audio visual”, earlier there was a requirement that a director who intends to participate in the meeting through electronic mode may intimate about such participation at the beginning of the calendar year and such declaration shall be valid for one year. Now, a provision has been added to this clause which says that the declaration given by the director for his participation through electronic mode will not debar him from participating in the meeting in person, provided in such cases he shall intimate the company sufficiently in advance of his intention to participate in person.
• In sub-rule 11 of rule 3 in clause (a), after the words "decision taken by maiority" , the words "and the draft minutes so recorded shall be preserved by the company till the confirmation of the draft minutes in accordance with sub-rule (12)" shall be inserted.
• Earlier as per Rule 6 which relates to the “Committees of the Board”, listed companies and public companies having paid-up capital of ten crore rupees or more or having turnover of one hundred crore rupees or more or having in aggregate, outstanding loans, or borrowings or debentures or deposits exceeding fifty crore rupees or more were required to constitute an Audit Committee and a Nomination and Remuneration Committee of the Board. Now, as per the amended rule 6, it has been notified that listed companies and companies covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an 'Audit Committee' and a 'Nomination and Remuneration Committee of the Board.

These rules will become effective from the date of its publication in the Official Gazette.

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Exemption to Private Company (corrigendum) – 13 July 2017

CG has amended the notification no. G.S.R.583 (E) dated 13 June 2017 whereby it has made the following change:

Earlier it was notified that the auditor is not required to report on the adequacy and operating effectiveness of the internal financial controls system as per clause (i) of sub-section (3) of section 143 of the Companies Act, 2013 of those private companies whose either turnover is less than rupees fifty crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less than rupees twenty five crore. Now the word “or” has been replaced with the word “and”.
Accordingly, reporting under  clause (i) of sub-section (3) of section 143 would be not be applicable in case of those private companies which meets both the criterias i.e. with respect to turnover and borrowings as mentioned in para 5 of the above mentioned notification.

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Issue of Listing of Debt Securities (Amendment) Regulations, 2017 – 13 June 2017

The Securities and Exchange Board of India (SEBI) has amended the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 with SEBI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2017 wherein the following changes have been made:

• In Regulation 20A which relates to “Consolidation and re-issuance”, after  the  words, "debt  securities," and before the words "subject to" the following words shall be inserted - "in the manner as may be specified by the Board from time to time,"
• Clause (a) of Regulation 20A has been substituted with the following clause, “the articles of association of the issuer shall not have any provision, whether express or implied, contrary to such consolidation or re-issuance.”
• After Regulation 20A and before Regulation 21, the following regulation shall be added:
  “International Securities Identification Number”
   20B. Any issuer issuing debt securities on private placement basis, shall comply with the  conditions relating to the issue of International Securities Identification Number, as may be  specified by the Board from time to time.”  

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CGST Rules, 2017-2 July 2017

The Central Board of Excise and Custom (CBEC) vide Notification No. 3 /2017-Central Tax (Dated 19th June 2017) and further as amended by Notification No. 7/2017-Central Tax (Dated 27th June 2017), Notification No. 10/2017-Central Tax (Dated 28th June 2017) and Notification No. 15/2017-Central Tax (Dated 1st July 2017), has issued The Central Goods and Services Tax (CGST) Rules, 2017.

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Gifts upto a value of 50000 per year by an employer to his employee are outside the ambit of GST-11 July 2017

CBEC has issued a press release whereby it has provided clarification that the gifts and perquisites of value of more than 50000 rupees, made without consideration by companies to employees will be subject to the Goods and Services Tax (GST), when made in the course and furtherance of business.

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Further clarification on tax in reverse charge on gold ornaments- 13 July 2017

CBEC has released a press release under which it has given clarification on whether GST would be applicable on purchase of old jewellery by a jeweller from a consumer under reverse charge mechanism. On the basis of  examination of section 9(4) of the CGST Act, 2017 which  mandates tax on supply of taxable goods (gold in this case) by an unregistered supplier (an individual in this case) to a registered person (the jeweller in this case), CBEC informed that such transaction would attract GST @ 3%. However, later on, CBEC clarified that this provision is to be read in conjunction with section 2(105) read with section 7 of the said Act. Section 2 (105) defines supplier as a person supplying the goods or services. Section 7 provides that a supply is a transaction, for a consideration by a person in the course or furtherance of business.

Now, on the basis of reading of section 2(105) along with section 7 of the aforementioned act, CBEC felt that though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or furtherance of his business. Accordingly the sale of old jewellery by an individual to a jeweller will not attract the provisions of section 9(4) and jeweller will not be liable to pay tax under reverse charge mechanism on such purchases. However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax under reverse charge mechanism will apply.  

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Clarification of tax on lodging in hostels- 13 July 2017

CBEC has released a press release wherein it has clarified that, services provided by an educational institution to its students, faculty and staff are fully exempt from GST and also annual subscription/fees which are charged as lodging/boarding charges by such educational institutions from its students for hostel accommodation shall also not attract GST.

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Services provided by RWA / Housing Society- 13 July 2017

CBEC has released a press release under which it clarified that, that supply of service by the Resident Welfare Association (RWA) to its own members by way of reimbursement of charges or share of contribution up to an amount of five thousand rupees per month per member for providing services and goods for the common use of its members in a housing society or a residential complex are exempt from GST.

Further, if the aggregate turnover of such RWA is upto Rs.20 Lakh in a financial year, then such supplies would be exempted from GST even if charges per member are more than Rs. five thousand.

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Provisions related to registration in GST regime – 15 July 2017

CBEC has issued timelines for the purpose of applying for registration in case a person is carrying out business and have an annual aggregate turnover in the preceding financial year exceeding Rs. 20 lakhs (Rs. 10 lakhs in Special Category States) under various scenarios which are as follows:
 

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GST on legal services by advocates including senior advocates- 15 July 2017

CBEC has clarified that legal services which includes representational services provided by individual advocate, senior advocate and a firm of advocates are liable for payment of GST under reverse charge by the business entity.

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Further GST Updates

CBEC has issued certain notifications w.r.t. GST whose links are as follows:

• For GST Goods Rate Booklet, click here;
• For GST Service Rates Booklet, click here;
• For applicability of margin scheme under GST on old and used bottles, click here

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