Lawyer Monthly Magazine - March 2020 Edition

Regulatory Update of the Month By Clasis Law 23 MAR 2020 | WWW.LAWYER-MONTHLY.COM • The turnover threshold for an audit of a MSMEs to be increased from INR 1 crore to INR 5 crore, for those businesses which carry out less than 5% of their business in cash; • App-based invoice financing loans product to be launched, to obviate the problem of delayed payments and cash flow mismatches for MSMEs; and • Amendments to be made to the Factor Regulation Act, 2011 to enable non-banking financial companies (NBFCs) to extend invoice financing to the MSMEs through Trade Receivables Discounting System (TReDS). Banking and Finance: • Encourage public sector banks to approach capital markets for fundraising; • In order to protect interest of depositors, amendments to the Banking Regulation Act, 1949 to strengthen cooperative banks and avoid bank loan frauds; • Proposal to formulate a partial credit guarantee scheme for NBFCs to address their liquidity constraints; • Foreign portfolio investment (FPI) limit in corporate bonds to be increased from 9% of its outstanding stock to 15% of its outstanding stock; • Proposal to formulate a new legislation for laying down a mechanism for netting of financial contracts; • Capital requirements for NBFCs eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to be reduced from INR 500 crores to INR 100 crores; or loan size from INR 1 crore to INR 50 lakhs; • New scheme NIRVIK (Niryat Rin Vikas Yojana) to be launched to achieve higher export credit disbursement, which provides for higher insurance coverage, reduction in premium for small exporters and simplified procedure for claim settlements; • Scope of credit default swaps to expand; and • Debt Based Exchange Traded Fund expanded by on payments by e-commerce operators to resident sellers of goods or services on digital/ electronic platform; • Dispute resolution scheme (Vivad se Vishwas) to be announced with a deadline of 30 June 2020, to reduce litigations in direct taxes. The scheme inter-alia proposes to include (i) waiver of interest and penalty and only disputed taxes to be paid for payments till 31 March 2020, (ii) additional amount to be paid if waiver of interest and penalty availed after 31 March 2020, (iii) benefits to taxpayers in whose cases appeals are pending at any level; and • New companies engaged in the business of generation of electricity would be eligible for tax rate of 15%. Tax concession for foreign investments made by foreign governments: • 100% tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31 March 2024 with a minimum lock-in period of three years by the Sovereign Wealth Fund of foreign governments. Start-ups & Micro, Small and Medium Enterprises (MSME): • Start-ups with an annual turnover of up to INR 100 crore will be allowed a 100% deduction of its profits for three consecutive assessment years out of 10 years; • Window for MSME’s debt restructuring by RBI to be extended by one year till 31 March 2021; • National Logistics Policy will be launched soon to inter-alia make MSMEs more competitive; • Scheme announced to provide subordinated debt to entrepreneurs of MSMEs; the debt will be provided by banks as quasi-equity and would be fully guaranteed through credit guarantee trust for medium and small entrepreneurs; • Tax burden on employees due to tax on employee stock option plan (ESOP) to be deferred by 5 years or till they leave the company or when they sell the ESOP, whichever is earlier;