Summary: For the week ending August 11, 2024, notable notifications and circulars include updates across various sectors. The Income Tax department granted exemptions to the Kalyan Karnataka Region Development Board and the Karnataka State Natural Disaster Monitoring Centre. New GST provisions were announced, effective from October 2024 and April 2025, including revisions to the Input Service Distributor definition and a penalty for non-registration of machines. The AAR provided rulings on GST for ready-to-eat food items, solar power plant procurement costs, and exemptions for flying training services and goods stored in Free Trade Warehousing Zones. SEBI issued guidelines on market abuse prevention, updated bond valuation practices, and amendments to regulations for Asset and Real Estate Investment Trusts. The Ministry of Corporate Affairs introduced e-adjudication for penalties and an accelerated exit process for LLPs. IBBI issued suspensions and penalties against insolvency professionals for regulatory breaches. The RBI maintained the repo rate at 6.50% and projected a 7.2% GDP growth for 2024-25 while updating monetary policy rates.
Summary of Notifications & Circulars issued during week (5th– 11th Aug 2024)
A. Income Tax
Exemptions to Kalyan Karnataka Region Development Board: Kalyan Karnataka Region Development Board, a board constituted by the Government of Karnataka, has been notified under section 10(46) for exemption on income arising from grants received from state government and Interest on bank deposits. (Income Tax Notification 97/2024 Dated 07/08/2024)
Exemptions to Karnataka State Natural Disaster Monitoring Centre: Karnataka State Natural Disaster Monitoring Centre, a body constituted by the Government of Karnataka, has been notified under section 10(46) for exemption on income arising from grants received from central and state government, income received from data sharing activities and Interest on bank deposits. (Income Tax Notification 98/2024 Dated 07/08/2024)
Non-applicability of higher rate of TDSITCS in the event of death of deductee/ collectee before linkage of PAN and Aadhaar: The Board had provided a window of opportunity to the taxpayers up to 31.05.2024 for linkage of PAN and Aadhaar so as to avoid higher deduction/collection of tax under section. The CBDT specifies that in case of demise of the deductee/collectee on or before 31.05.2024 i.e. before the linkage of PAN and Aadhaar could have been done, there shall be no liability on the deductor/collector to deduct/collect the tax at higher rates under section 206AA/206CC. (Income Tax Circular 08/2024 Dated 05/08/2024)
B. GST
GST, Govt notifies section 11 to 13 of Finance Act 2024: The sections 11 to 13 of the Finance Act have been notified to be effective from 1st October 2024 (section 13) and 1st April 2025 (section 11 &12). Section 11 revises the definition of “Input Service Distributor” (ISD), specifying the officer responsible for receiving and distributing input tax credits. Section 12 replaces the existing Section 20 of the CGST Act, detailing the manner of credit distribution by ISDs, including requirements for registration and the distribution method of central and integrated taxes. Section 13 introduces a new Section 122A, which imposes a penalty of ₹1 lakh per machine on manufacturers who fail to register certain machines under a special procedure outlined in Section 148 of the Act. (CGST Notification 16/2024 Dated 06/08/2024)
AAR, GST on Ready-to-Eat Food Items Sold Without Brand Name: Case of Devalokam Bakery, AAR Tamil Nadu (TN) Ruling Dated 15th July 2024. AAR examined whether ready-to-eat food items such as Pani Puri, Masala Chat, Punjabi Lassi, Sev Puri, Samosa Chat, Vada Pav, and Pav Bhaji, cooked and sold without a brand name, qualify for the 5% GST rate under restaurant services. The applicant sells these items through a separate counter at their bakery, and customers consume them on-site. The AAR concluded that these food items are classified as services provided by restaurants, cafes, and similar establishments, falling under HSN code 996331. According to Notification No. 11/2017 and its amendments, these services are taxable at 5% GST, provided no input tax credit (ITC) is claimed on the goods and services used in supplying the service. However, if these services are offered from the premises of hotels, inns, guest houses, or other commercial places with a declared tariff of ₹7,500 or more per unit per day, the applicable GST rate is 18%. (AAR Tamil Nadu Ruling Dated 15/07/2024)
AAR, No ITC on the solar power plant’s procurement costs due to the exempt nature of output supplies: Case of AES Engineering Solar, AAR Maharashtra (MH) Ruling Dated 31st July 2024. The AAR determined that since the applicant only invoiced for the supply of electricity without including delivery (transmission) charges, the supply of electrical energy is exempt from GST under Entry No. 104 of both Notification No. 2/2017 dated 28th June 2017. Additionally, the applicant asked if they could claim and utilize input tax credit (ITC) for the CGST and SGST paid on the procurement of the solar power plant used for generating electricity. The AAR ruled that since the supply of electricity is exempt from GST, the applicant is not entitled to claim ITC on their inward supplies of goods, services, or capital goods used in generating electricity as per provisions of Section 17 and Rules 42 and 43, which prescribe for calculation of ITC. (AAR Maharashtra Ruling Dated 31/07/2024)
AAR, GST Exemption on Flying Training Services by NFTI: Case of National Flying Training Institute (NFTI), AAR Maharashtra (MH) Ruling Dated 31st July 2024. The AAR concluded that the supply of flying training services for completing an approved course for a Commercial Pilot License (Aeroplanes) is exempt from GST. This exemption is provided under Entry No. 66 of Notification No. 12/2017 dated 28th June 2017. (AAR Maharashtra Ruling Dated 31/07/2024)
AAR, GST on Goods Stored in Free Trading Warehousing Zone (FTWZ): Case of Panasonic Life Solutions India private Limited, AAR Tamil Nadu Ruling Dated 25th July 2024. AAR analysed that the transfer of goods stored in FTWZ to customers in the DTA or multiple transfers within the FTWZ does not fall under para 8(a) of Schedule III) of the CGST Act, (not considered a supply) as these transactions occur outside India’s taxable territory until the goods are cleared for home consumption. IGST is applicable at the time of final clearance of the goods for home consumption from the FTWZ. The AAR’s ruled that transactions involving goods stored in an FTWZ do not attract GST until the goods are cleared for home consumption. This includes multiple transfers within the FTWZ or transfers to DTA. Consequently, no reversal of input tax credit is required for such transactions under Section 17(3) of the CGST Act. (AAR Tamil Nadu Ruling Dated 25/07/2024)
C. Central Excise
No Notification/ Circular during the week.
D. Custom Duty
No Notification/ Circular during the week.
E. Directorate General of Foreign Trade (DGFT)
No Notification/ Circular during the week.
F. Securities and Exchange Board of India (SEBI)
Institutional mechanism by Asset Management Companies for identification and deterrence of potential market abuse: AMCs shall put in place an institutional mechanism for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities. This mechanism shall consist of enhanced surveillance systems, internal control procedures, and escalation processes such that the overall mechanism is able to identify, monitor and address specific types of misconduct, including front running, insider trading, misuse of sensitive information etc. (SEBI Circular Dated 05/08/2024)
Valuation of Additional Tier 1 Bonds (AT-1 Bonds): National Financial Reporting Authority (NFRA), has recommended that since the market practice for AT-1 bonds has been observed to trade at or quote prices closer to Yield to Call (YTC) basis, valuation of AT-1 Bonds on Yield to Call basis (adjusted with appropriate risk spreads) will be consistent with the principles of market-based measurement under Ind AS 113. In order to align the valuation methodology with the recommendation of NFRA, it has been decided that the valuation of AT-1 Bonds by Mutual Funds shall be based on Yield to Call. (SEBI Circular Dated 05/08/2024)
Amendment to Master Circular for Infrastructure Investment Trusts (InvITs), Board nomination rights to unitholders: Master Circular stipulate that eligible unitholders could nominate only one Unitholder Nominee Director, provided their unitholding exceeded a specified threshold. However, if an entity already had the right to nominate a director as a shareholder or lender to the Investment Manager or InvIT, it could not nominate a director as a unitholder. To address this, a proviso has been added stating that the restriction does not apply if the nomination right is available under Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations. (SEBI Circular Dated 06/08/2024)
Amendment to Master Circular for Real Estate Investment Trusts (REITs), Board nomination rights to unitholders: Master Circular stipulate that eligible unitholders could nominate only one Unitholder Nominee Director, provided their unitholding exceeded a specified threshold. However, if an entity already had the right to nominate a director as a shareholder or lender to the Investment Manager or REIT, it could not nominate a director as a unitholder. To address this, a proviso has been added stating that the restriction does not apply if the nomination right is available under Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations. (SEBI Circular Dated 06/08/2024)
Master Circular for Stock Brokers: SEBI had earlier issued Master Circular dated 22nd May, 2024 in respect of Stock Brokers. Subsequently, various guidelines/directions were issued to Stock Brokers by way of circulars/advisory. In view of the same, it has been updated to include all relevant circulars that were issued till date. (SEBI Master Circular Dated 09/08/2024)
Amendment to SEBI Alternative Investment Funds (AIF) Regulations: The amendments removes the requirement for funds to meet day-to-day operational needs (regulation 3), allows large value funds for accredited investors to extend their tenure up to five years with approval from two-thirds of unit holders (regulation 13), limits Category I AIFs’ borrowing to temporary funding for up to 30 days, not exceeding 10% of investable funds, and allows encumbrance on equity for infrastructure projects (regulation 16) and similarly restricts borrowing for Category II AIFs (regulation 17). (SEBI Notification Dated 05/08/2024)
Draft Circular on Streamlining the process and reduction in timelines of Bonus Issue (enabling T+2 trading of shares where T being record date): At present, there are no specific timelines regarding credit of bonus shares and trading of such shares, from the record date of the issue. As per market practice, existing shares continues to remain available for trading under existing ISIN and shares issued pursuant bonus issue are credited in existing ISIN and same are made available for trading in 2-7 working days post record date. To have uniformity and to reduce investors’ risk of market volatility, it is proposed to streamline and reduce timelines of bonus issue enabling T+2 trading of shares post record date (T day). The comments are invited from stakeholders. (SEBI Draft Circular Dated 05/08/2024)
Consultation Paper on Review of Regulatory Framework for Investment Advisers (IAs) and Research Analysts (RAs): The aim is to simplify and reduce the registration and compliance costs for IAs and RAs, aligning with the evolving market land-scape. The main proposals include relaxing minimum qualification requirements, eliminating experience prerequisites, and removing net worth requirements in favour of a deposit system. The paper also suggests allowing dual registration as both IA and RA and proposes a new category for part-time IAs/RAs. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 06/08/2024)
Consultation Paper on investment by Foreign Portfolio Investors (FPIs) through Segregated Portfolios/ P-notes/ Offshore Derivative Instruments: The paper aims to address regulatory gaps and arbitrage opportunities under the current FPI Regulations. It proposes applying additional disclosure requirements directly to ODI subscribers and FPIs with segregated portfolios to enhance transparency and compliance. SEBI has highlighted the evolution of the ODI framework, and the decline in ODI usage as a percentage of total FPI assets under custody. The objective is to mitigate potential misuse of the FPI route for avoiding regulatory obligations such as substantial acquisition, disclosures and maintaining minimum public shareholding in listed companies. The comments are invited from stakeholders (SEBI Consultation Paper Dated 06/08/2024)
Consultation Paper on Draft Circular for Reporting by Foreign Venture Capital Investors (FVCI): The current reporting format for FVCI, is being revised in light of recent amendments to the FVCI Regulations. The key changes include a revised reporting format, mandatory online submission via the SEBI intermediary portal (SI Portal), and an emphasis on timely and accurate reporting. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 08/08/2024)
Draft Circular on Periodic reporting format for Research Analysts and Proxy Advisers: SEBI has recognized Research Analyst Administration and Supervisory Body (RAASB) for the purpose of administration and supervision of RAs under regulation 14 of the RA Regulations. As the Proxy Advisers (PAs) are registered under the RA Regulations, they shall also come under the purview of RAASB. It is proposed to specify a standardized reporting format in which RAs and PAs shall submit information to RAASB on periodic basis. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 09/08/2024)
G. Ministry of Corporate Affairs (MCA)
Amendment to Companies (Adjudication of Penalties) Rules 2014: It introduces mandatory e-adjudication for penalty proceedings effective 16th September 2024.
Notably, Rule 3A mandates that all adjudication proceedings, including notices, filing of documents, hearings, and payment of penalties, be conducted electronically via a new e-adjudication platform developed by the Central Government. (MCA Notification Dated 05/08/2024)
Amendment to Limited Liability Partnership Rules 2009: The amendments introduces the Centre for Processing Accelerated Corporate Exit, effective from 27th August 2024. This Centre is now mentioned alongside the Registrar in various sub-rules, specifically in clauses and provisions related to the accelerated exit process of LLPs. (MCA Notification Dated 05/08/2024)
H. Insolvency and Bankruptcy Board of India (IBBI)
IBBI Guidelines for Committee of Creditors: The guidelines emphasize the CoC’s commercial wisdom in maximizing the value of distressed assets while ensuring transparency and reducing procedural delays. They highlight the need for objectivity, integrity, and informed decision-making among CoC members. CoC members are encouraged to cooperate with insolvency professionals, facilitate timely appointments, and resolve disputes amicably to avoid litigation. Confidentiality is paramount, and members must ensure that insolvency resolution costs remain reasonable. Regular monitoring of the insolvency professional’s activities, prudent management of expenses, and active involvement in valuation presentations are required. (IBBI Guidelines Dated 06/08/2024)
NCLT, Corporate Debtor not liable for offences prior to commencement of CIRP: Case of Praful Nanji Satra vs Vaishali Arun Patrikar, NCLT Mumbai, Judgement Dated 26th July 2024. NCLT held that as per section 32A of IBC, the Corporate Debtor shall not be held liable for offences prior to the commencement of Corporate Insolvency Resolution Process (CIRP). It held that after the approval of the Resolution Plan no action can be taken against the assets of the Corporate Debtor in relation to an offence committed prior to the commencement of Corporate Insolvency Resolution Process. Accordingly, the Respondent herein is directed to lift the attachment on the bank accounts of the Corporate Debtor. (NCLT Mumbai Judgement Dated 26/07/2024)
IBBI suspends registration of IP Krishna Mohan Gollamudi for misuse of Corporate Debtor (CD) property for son wedding: It was found that Mr. Krishna Mohan Gollamudi booked rooms and a hall at M/s. Leo Meridian Infra Projects, for the event without proper billing. The investigation revealed that although rooms were allegedly booked independently by the bride’s father, the hall was provided free of charge and some rooms were billed incorrectly. IBBI noted that leaving such mistake with word of caution alone will not act as deterrent, therefore, it imposed a penalty of Rupees one lakh. (IBBI Order Dated 05/08/2024)
IBBI suspends registration of IP Srigopal Choudhary for violation of CIRP regulations and code of conduct: The findings reveal significant delays in conducting Committee of Creditors (CoC) meetings, with a total delay of 178 days in the CIRP. His failure to address claims effectively and conduct timely meetings led to inefficiencies. He did not convene CoC meetings as required, delayed the reconstitution of the CoC, and failed to act on requests for his replacement. He did not publish essential documents and processes, exacerbating the delay in the CIRP. IBBI suspended the registration of Mr. Srigopal Choudhary having for a period of three years. (IBBI Order Dated 06/08/2024)
I. Reserve Bank of India (RBI)
RBI Monetary Policy – Resolution of Monetary Policy Committee: The various decisions are as follows. (RBI Monetary Policy Resolution Dated 08/08/2024)
– To keep the Repo rate under Liquidity Adjustment Facility (LAF) unchanged at 6.50%. The standing deposit facility (SDF) rate at 6.25% and marginal standing facility (MSF) rate and bank Rate at 6.75%.
– To remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to target while supporting growth. CPI inflation target of 4% with in a band of +/- 2%.
– The real GDP growth projected for 2024-25 at 7.2%.
– The CPI Inflation projected for 2024-25 at 4.5%.
– The updated policy rates are Repo- 6.5%, SDF- 6.25%, MSF and Bank Rate- 6.75%, CRR- 4.5%, SLR- 18.0%, Fixed Reverse Repo- 3.35%.
RBI Monetary Policy – Statement on Development and Regulatory Policies: The various measures set out are as follows. (RBI Monetary Policy- Dvpt. and Regulatory Policies Dated 08/08/2024)
– Public Depository of Digital Lending Apps: The reports have highlighted presence of unscrupulous players in digital lending who falsely claim their association with RBI regulated entities (REs). Accordingly, to aid the customers in verifying the claim of Digital Lending App’s (DLAs) association with REs, Reserve Bank is creating a public repository of DLAs which will be available on RBI’s website. Detailed instructions in this regard shall be issued shortly.
– Frequency of Reporting of Credit Information to Credit Information companies: At present credit institutions (CIs) are required to report the credit information of their borrowers to credit information companies (CICs) at monthly or such shorter intervals as mutually agreed between the CI and CIC. With a view to provide a more up-to-date picture of a borrower’s indebtedness, it has been decided to increase the frequency of reporting from monthly intervals to fortnightly basis or at such shorter intervals as mutually agreed. Lenders will be able to make better risk assessment of borrowers. Necessary instructions will be issued shortly.
– Enhancing Transaction Limits for Tax Payments through UPI: Currently, the transaction limit for UPI is capped at ₹1 lakh. As direct and indirect tax payments are common, regular and high value, it has been decided to enhance the limit for tax payments through UPI from ₹1 lakh to ₹5 lakh per transaction. Necessary instructions will be issued separately.
– Introduction of Delegated Payments through UPI: It is proposed to introduce “Delegated Payments” in UPI. “Delegated Payments” would allow an individual (primary user) to set a UPI transaction limit for another individual (secondary user) on the primary user’s bank account. This product is expected to add to the reach and usage of digital payments across the country. Detailed instructions will be issued shortly.
– Continuous Clearing of Cheques under Cheque Truncation System (CTS): Cheque Truncation System (CTS) currently processes cheques with a clearing cycle of up to two working days. It is proposed to transition CTS from the current approach of batch processing to continuous clearing with ‘on-realisation-settlement’. Cheques will be scanned, presented, and passed in a few hours and on a continuous basis during business hours. The clearing cycle will reduce from the present T+1 days to a few hours. Detailed guidelines in this regard shall be issued shortly.
Modified Interest Subvention Scheme(MISS) for Short Term Loans for Agriculture and Allied Activities: Government of India has approved the continuation of the MISS for Short Term Loans for Agriculture and Allied Activities availed through Kisan Credit Card (KCC) during the financial year 2024-25. The loans up to an overall limit of ₹3 lakh to farmers at lending rate of 7%, with interest subvention of 1.5%. The interest subvention of 3% per annum will be provided to such of those farmers repaying in time. (RBI Notification 59/2024 Dated 06/08/2024)
Frequency of reporting of credit information by Credit Institutions to Credit Information Companies: At present credit institutions (CIs) are required to report the credit information of their borrowers to credit information companies (CICs) at monthly or such shorter intervals as mutually agreed between the CI and CIC. With a view to provide a more up-to-date picture of a borrower’s indebtedness, it has been decided to increase the frequency of reporting from monthly intervals to fortnightly basis (i.e., as on 15th and last day of the respective month) or at such shorter intervals as mutually agreed. (RBI Notification 60/2024 Dated 08/08/2024)
Draft circular on Regulatory Principles for Management of Model Risks in Credit: This draft aims to address potential risks and ensure robustness in credit management models used by regulated entities (REs) for tasks like credit appraisal, borrower scoring, and risk management. It emphasizes the need for comprehensive governance, oversight, and validation processes for these models. It mandates that REs must adopt a Board-approved policy covering model development, deployment, and ongoing validation. The comments from stakeholders are invited. (RBI Press Release Dated 05/08/2024)
SC, Banks and NBFCs obliged to adopt restructuring process before classification of MSME account as NPA: Case of PRO Knits vs Board of Directors Canara Bank, SC Judgement Dated 1st August 2024. Supreme Court held that Banks/ Non-Banking Financial Companies (NBFCs) are obliged to adopt restructuring process of MSME as contemplated in Notification dated 29th May 2015 prior to classification of account as Non-Performing Assets (NPA). The Instructions/Directions issued by the Central Government under Section 9 of the MSMED Act and by the RBI under Section 21 and Section 35A have statutory force and are binding to all the Banking. (SC Judgement Dated 01/08/2024)
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