Weekly Round-up on Tax and Corporate Laws | 27th June to 2nd July 2022

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 27th June to 2nd July 2022, namely:

(a) Recommendations of 47th Meeting of GST Council

(b) The CBDT excludes gift vouchers, rewards points, and website subscriptions from the definition of VDA

(c) CBDT notifies Form 26QF for filing of a statement of tax deposited under Section 194S by a Crypto Exchange

(d) IBBI floats discussion paper to further reduce timelines under CIRP

(e) High Court directed to file an appeal against assessment order raising demand for the difference in ITC claimed with GSTR-2A; writ dismissed

(f) NFRA issues the AQRR of the Statutory Audit for the F.Y. 2017-18, carried out under NFRA Rules 2018

1. Recommendations of 47th Meeting of GST Council

The 47th Meeting of GST Council held at Chandigarh on 28th & 29th June was chaired by the Union Finance Minister Nirmala Sitharaman. The GST Council has made several recommendations relating to changes in GST rates on the supply of goods and services and changes related to GST law and procedure. The rate changes recommended by the 47th GST Council will be made effective from 18th July, 2022. Several measures for trade facilitation are also recommended, such as waiver of the requirement of mandatory registration for person supplying goods through e-commerce operators, allowing composition dealers to make Intra-State supply through e-commerce operators, etc.

The Council has also directed that the Group of Ministers on Casino, Race Course and Online Gaming would re-examine the issues in its terms of reference based on further inputs from States and submit its report within a short duration. In this regard, a Press Release Dated 29th June 2022 has been issued.

Read the Press Release

Check out Taxmann Advisory's Webinar | 47th GST Council Meeting – Decoding GST Council's Recommendation

📋 Coverage of the Webinar:

✔️ Refund in case of inverted tax structure
✔️ GST rate linked to LMA on specified goods
✔️ GST on low cost hotel accommodation
✔️ GST on specified works contract services
✔️ GST on electric vehicles
✔️ GST on fly ash bricks
✔️ GST rate on treated waters
✔️ GST on health care services – Room rent
✔️ GST on PLC in case of long term lease
✔️ Real Estate – Developed plots
✔️ Real Estate – Renting of Residential Dwelling
✔️ Real Estate – Renting of residential dwelling
✔️ GST Registration for ECOs suppliers
✔️ Composition scheme for ECOs suppliers
✔️ Other changes proposed

📢 Speakers:
•Poonam Harjani – Project Lead | Taxmann Advisory and Research Support Services
•Sunil Kumar – Manager | Taxmann Advisory and Research Support Services

Here is a Link of the Webinar

2. Gift vouchers, rewards points, and website subscription are not VDAs: CBDT

The meaning of virtual digital asset (VDA) has been defined by Section 2(47A). It covers the following three classes of VDA:

(a) Information or code or number or token generated through cryptographic means;

(b) Non-fungible token (NFT); and

(c) Any other digital asset as may be notified by the Board.

The residuary clause mentioned in point (c) also gives power to the Central Govt. to exclude any other digital asset from the definition of a virtual digital asset subject to prescribed conditions.

Exercising such power, the Central Government has notified the following virtual digital assets which shall be excluded from the definition of VDA:

(a) Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;

(b) Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services; and

(c) Subscription to websites or platforms, or applications.

Read the Notification

Check out Taxmann's Master Guide To Income Tax Act | 2022 which covers section-wise commentary on the Finance Act 2022 along with Income Tax Practice Manual. It also covers a section-wise digest of landmark rulings from 1922 – 2022 and the gist of Circulars & Notifications from 1961 – 2022 (Feb.).

Here is a Sample Chapter for your Reference.

3. CBDT notifies Form 26QF for filing of a statement of tax deposited under Section 194S by a Crypto Exchange

The CBDT has amended Rule 31A to notify Form 26QF for filing of TDS statement in respect of tax deducted under Section 194S by a Crypto Exchange.

The Board vide Circular No. 13 of 2022, dated 22-06-2022 has issued guidelines to give clarity on who is required to deduct tax under Section 194S when the transfer of VDA is taking place on or through an Exchange.

Said guidelines cast responsibility on Exchange to deduct tax at source and furnish a quarterly statement in Form No. 26QF in certain specified circumstances. However, the Exchange shall not be required to deduct tax if there is a written agreement between the Exchange and the broker that the broker shall deduct tax from the payment made between Exchange and Seller. Even in this situation, the Exchange will furnish Form No. 26QF to give details of all such transactions wherein the tax has been deducted by the broker.

Read the Notification

Check out Taxmann's Master Guide To Income Tax Rules | 2022 which covers an in-depth Rule-wise commentary on the Income Tax Rule 1962 in a simplified language. It incorporates all amendments up to IT (Second Amdt.) Rules 2022. It also covers a gist of all Circulars & Notifications issued by the Dept. & Income-tax Compliances, which are to be done in each Rule.

Here is a Sample Chapter for your Reference.

4. IBBI floats discussion paper to further reduce timelines under CIRP

The IBBI has floated a discussion paper on 27th June 2022 whereby it proposed various changes in the corporate insolvency resolution process aimed at reducing delays and improving the resolution value. The proposals made by the IBBI are summarized hereunder:

(a) Reduction of timeline for inviting Expression of Interest (EOI)

(b) Increase in the timeline for preparation of Information Memorandum (IM)

(c) Reduction in the timeline for ‘avoidance transaction’ related matters

(d) Casting the duty on the Resolution Professional (RP) to make a Strategy for marketing of assets of the corporate debtor

(e) Allowing submission of different resolution plans for part assets/ businesses

(f) Early liquidation of the corporate debtor on the basis of certain guiding factors

(g) Providing an opportunity to RP to explore the option for compromise or arrangement during the period it awaits the AA’s liquidation approval

(h) Proposal to make the Information Memorandum (IM) more detailed

(i) Inclusion of the asset provided through a personal guarantor as part of the CIRP of the corporate debtor

(j) Mandatory Geo-Tagging of the immovable assets of the Corporate Debtor by the IP

(k) Providing an opportunity to CoC to interact with valuers

(l) Repetition of the valuation exercise in CIRPs where the timeline has been extended beyond the mandatory 330 days due to changes in market conditions

(m) RP must continue to conduct the CoC meetings during the period between approval of the resolution plan by CoC and by AA

(n) Linking of the payment made to dissenting Financial Creditor to the realisable amount at the time of liquidation

(o) IRP must process an email account for the conduct of CIRP & handover credentials to RP after he demits from the office

(p) IRP must provide timely information to creditors w.r.t initiation of CIRP & last date for filing claims

Read the Discussion Paper

Check out Taxmann's Insolvency and Bankruptcy Law Manual which contains a compilation of amended, updated & annotated text of the Insolvency and Bankruptcy Code 2016 (IBC) [as amended by the Insolvency and Bankruptcy Code (Amendment) Act 2021]. What sets this book apart is the unique way of presenting the text of the IBC along with 28+ Relevant Rules/Regulations, 7+ Guidelines, Notifications, Circulars, RBI Directions, etc.

Here is a Sample Chapter for your Reference.

5. HC directed to file an appeal against assessment order raising demand for the difference in ITC claimed with GSTR-2A

The Madras High Court has held that if the demand of ITC is raised on account of the difference between ITC claimed by the assessee as compared to that shown by the supplier in its GST returns, then remedy by way of appeal has to be availed, and the writ petition was dismissed.

Facts

The assessment order was passed against the petitioner as there was a difference in ITC claimed by the petitioner in GSTR-3B and information captured in GSTR-2A. The demand was raised against the petitioner, and it filed a writ petition against the assessment order. It submitted that credit availed on the strength of invoices issued by the supplier couldn’t be denied.

High Court

The High Court observed that in the instant case, the order was passed, and the demand for ITC was raised on account of the difference between the ITC claimed by the petitioner as compared to that shown by the supplier. The petitioner was expected to compare to input tax credit availed with the information contained in Form GSTR-2A, Form GSTR-4A or Form GSTR-6A, as the case may be. Moreover, the petitioner had an alternate remedy by way of an appeal before the Appellate Commissioner under Section 107 of the CGST Act, 2017. The Court opined that these matters are best left to be resolved before the hierarchy of the Appellate Authority prescribed under the GST Act and the writ petition would not be maintainable.

Read the Ruling

Check out Taxmann's GST Issues | Decoding GST Issues & Litigation Trends which is an attempt to explore the various controversies (existing legal/future controversies) and enforcement of provisions of GST. This has been done by exploring various statutory provisions & reported judgements on GST issues. The book aims to provide information and analysis on various GST related constitutional and legal issues.

Here is a Sample Chapter for your Reference.

6. NFRA issues the AQRR of the Statutory Audit for the F.Y. 2017-18, carried out under NFRA Rules 2018

As per the Companies Act, 2013, NFRA is required, inter-alia, to monitor and enforce compliance with auditing standards in such a manner as may be prescribed. Also, Rule 8 of the NFRA Rules 2018 requires monitoring and compliance with auditing standards under the Act.

Accordingly, NFRA has exercised its powers and made the Audit Quality Review of the statutory audit of IL&FS for the F.Y. 2017-2018. This report examined the overall audit quality in terms of compliance with standards and the effectiveness of the quality control procedures of the audit firm.

This report is designed to identify and highlight non-compliance with the requirements of the auditing standards and to bring out insufficiencies in the quality control system and the shortcomings in the documentation of the audit process and reporting. It also evaluated the quality and adequacy of the audit supervisory procedures of the audit firm.

Based on the subject matter, the observations in this AQRR are divided into 11 chapters. Each chapter has been further divided into three divisions, which cover the observations, evidence and conclusions made at each stage of the AQR process.

Violations by the Audit Firm

NFRA found the following violations while examining the overall audit quality in terms of compliance with standards and the effectiveness of the quality control procedures of the audit firm.

(a) Violation of the norms on Auditor’s Independence

(b) Failures in the Audit of Investments

(c) Failures in the Audit of Loans and Advances

(d) Failures in the Audit of Revenue from Operations

(e) Lapses to Comply with the Quality Control Norms

Conclusion

Based on AQRR observations, NFRA concludes that there are lapses in almost all stages of the audit, such as at the planning stage, substantive testing, reporting to TCWG, adherence to independence norms and involvement of EQCR in the audit. Also, the exercise of professional scepticism and adequate challenge of the management assumptions are key to any audit.

Therefore, in NFRA’s view, the auditor did not have adequate justification for issuing the audit report asserting that the audit was conducted in accordance with the auditing standards and the financials give a true and fair view. The audit quality is seriously compromised due to the large-scale non-compliance with professional standards and regulatory and legal requirements.

If the auditor had done his job adequately, these lapses by IL&FS could have been detected much earlier, and the tens of thousands of crores of losses and haircuts that the banks, creditors, and investors were ultimately saddled with would have been averted.

Read the Story

Check out Taxmann's Webinar | Key NFRA Observations in its Audit Quality Review (AQR) Reports

📋 Coverage of the Webinar:

✔️ Introduction
• Section 139(2)(b) of the Companies Act
• Rule 8 of the NFRA Rules, 2018
• Process
• Audit Quality Review Report (AQRR) Flow

✔️ Key Observations from NFRA
• Non-Compliance with Independence Requirements as per NFRA
• Compliance with Independence Requirements
• Compliance with Independence Requirements – Provision of management services leading to self-review threat
• Threat to Independence Requirements – Provisions of review of Ind AS services
• Going Concern – Key Points to Consider;
• Evaluation of Risk of Material Misstatements (ROMM)
• Investments
• Reversal of Excepted Credit Loss
• Other Observations
• Provision of Interest-Free Loans to Joint Ventures and Subsidiaries
• Financial Guarantees
• De-Recognition of Borrowings
• Evaluation of Engagement Quality Control (EQC) Review
• Evaluation of Communication with those charged with Governance (TCWG)
• CARO Related Matters
• Litigation Related
• Evaluation of Internal Control over Financial Reporting (ICFR)
• Revenue Recognition
• Regulatory Related

✔️ The Mandated Do’s (Indicative List)
• Definitions to be Monitored Carefully

📢 Speaker:
• D Ramprasad

Here is a Link of the Webinar