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The Central Board of Indirect Taxes and Customs (CBIC) investigation wing has detected tax evasion of over Rs 50,000 crore during the last one-and-a-half years.

While Goods &amp; Services Tax (GST), which was implemented in July 2017, accounted for less than 10% of the total evasion detected, the rest of the cases booked during April 2017-September 2018 comprised central excise and service tax evaded during the old tax regime.

The tax sleuths can register cases of tax evasion of the last five years.

GST evasion of Rs 4,441 crore has been found in 604 cases registered during July 2017-September 2018, as per the data available with the Director General of Goods &amp; Services Tax Intelligence (DGGI), which functions under CBIC.

Of the total number of tax evasion cases of Rs 50,109 crore, as many as 3,142 cases of evasion of service tax and central excise totalling Rs 45,668 crore were detected by the investigators during April 2017 and September 2018.

As many as 2,787 are related to service tax and involve Rs 39,047 crore while 355 cases of Rs 6,621 crore pertain to central excise.

Explaining the high incidence of tax evasion during earlier regime, tax expert Pratik Jain of PwC said any single point of tax is always prone to evasion.

The data shows a slow recovery during the past one-and-a-half years. So far, CBIC has collected Rs 4,894 crore in 2,104 cases of recovery of excise and service tax registered during this period. The tax recovery rate is, however, better in the GST regime.

As much as 57% of the tax evasion detected has been recovered so far, as compared to 9% recovery seen in old cases registered this year.

Experts say that the GST tax evasion could be much higher than what has been detected so far.

“Tax evasion measures started in the last few months. Earlier, the emphasis was more on the acceptance of the new tax regime by taxpayers,” said Shashi Bhushan Singh, former member of Central Board of Excise and Customs, now renamed CBIC.

GAs far as recovery is concerned, “there is a long process. First, the cases have to stand the scrutiny during adjudication. Once they are confirmed, many a times the firm is not traceable or doesn’t pay. A lot of revenue is also held up as the cases go on in the court for very long while only a part sum is paid to the government during the process,” said Singh.

This story first appeared in DNA Money: <a href="https://www.dnaindia.com/business/report-tax-evasion-of-rs-50000-cr-detected-in-last-15-years-2687053">Tax evasion of Rs.50,000 cr detected in last 1.5 years</a> 
&nbsp;

GST evasion of Rs 4,441 crore has been found in 604 cases registered during July 2017-September 2018, as per the data available with the Director General of Goods &amp; Services Tax Intelligence (DGGI), which functions under CBIC.


Goods and Services Tax: CBIC detects over Rs 50,000 cr tax  evasion in last 1.5 years

The 15th Finance Commission will be examining the appropriateness of the expenditures projected by the state governments before deciding on the&nbsp; devolution of central taxes, said chairman N K Singh in an interview with Anjul Tomar.

How do you see breach of fiscal deficit by governments ahead of elections?

What constitutes populist expenditure is debatable. What you may consider populist, some other states may consider essential. Mid-day meal is one example. Tamil Nadu government told us that mid-day meal, viewed as populist, helped in school attendance and improving nutritional standards, and later became a national scheme. The other version, of course, is the distinction between what are capital-creating assets and those which are purely for consumption. The whole issue of what constitutes populist expenditure is something on which more thinking needs to be done because let’s not forget that each of these state governments are elected and have legislatures which are accountable to the people. Therefore, we can’t circumscribe the functions constitutionally assigned to the state assemblies and the state governments. But within the framework of that, while examining the appropriateness of some expenditures projected by the state governments, we are certainly entitled to look into the merit of various state governments’ proposals and various expenditures on areas, particularly those that contribute to long-term growth and long-term social objectives.

South Indian states say they are being penalised for the decline in population growth during the allocation of resources?

There is no objective of Finance Commission to punish any state for good performance. Some states have said this goes against them because their population has come down. Therefore, their plea is that instead of using the 2011 census, the earlier census (1971) should be used. We are bound by the terms of reference which specify that we should use the population figures of the 2011 census. But there is a separate item which says that we can consider incentivising states which have achieved better demographic management. We haven’t decided on whether to use population, and if so, what weightage we should assign to population.

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Is there any other way you would like to compensate the states?

Successive finance commissions have assigned weightage to what may be called backwardness to address this issue of the states which may have not made so much of progress and may have been left out of the mainstream. This is certainly one of the issues that the commission will be addressing. We haven’t decided on what would be the methodology we will deploy and what is the weightage we will assign to the equalisation or the backwardness or the convergence formula on that. But certainly, we will need to address that particular reference that talks about need for convergence.

What will be the road map for devolution of funds to the urban local bodies?

Urban local bodies are currently dependent on the states. The last Finance Commission only gave money to the panchayats, therefore leaving the first and the second tier entirely to the state government. It was, however, assumed that out of the increased 42% devolution of funds to the states, the commission would be in a position to give the money to the urban local bodies. In many of the states we visited, the urban local bodies have asked us to reconsider the decision of the 14th Finance Commission and also have a look at other two tiers - urban local bodies and municipalities - while giving money to the panchayats. We will certainly examine this.

When is the report of Finance Commission likely to be final?

According to the terms of reference, we have been asked to submit the report by the end of October 2019. It is our intention to adhere to the timeline prescribed. We recognise that without this report there would be difficulties in the presentation of the Budget 2020, both at the central and the state levels. State governments will also be left with a degree of uncertainty on the kind of resources which are available. The commission would like to adhere to the timeframe prescribed in the reference.

You have been a part of the government for so long. Has such a face-off between the Reserve Bank of India (RBI) and the government ever happened?

Earlier also there have been differences in perceptions and perspectives. They have invariably been settled through mutual process and consultations, which I think is the appropriate course forward. I don’t think there are two parties. I think there is only one party. I think these issues are best resolved by discussions between the RBI and the central government.

This Article was first Published by DNA:&nbsp;<a href="https://www.dnaindia.com/business/interview-we-will-look-at-urban-local-bodies-suggestion-for-devolution-of-funds-n-k-singh-2685064" target="_blank">We will look at urban local bodies' suggestion for devolution of funds: N K Singh​</a>

South Indian states say they are being penalised for the decline in population growth during the allocation of resources?


What 15th Finance Commission will do, chairman N K Singh explains 

New Delhi: The small businesses have welcomed the 12 announcements made by Prime Minister Narendra Modi for the micro, small and medium enterprises (MSME) sector on Friday, but the implementation remains a key concern for them.

“All the announcements, more particularly related to the availability of credit and government’s procurement policy, are highly relevant for MSMEs. We have to now see how these are implemented on ground.

The government must monitor all the initiatives,” said D S Verma, executive director of Indian Industries Association (IIA), the pan India association of SMEs which has over 8,000 direct members.

Reacting to the newly announced 59-minute loan facility, Verma said that the PM has talked about giving in-principal approval for loans in less than an hour whereas actual disbursement by banks may take much more time.

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“It is a good move. Otherwise, the reality is that no bank wants to give us loans as they prefer big-ticket loans. We only hope that the loans are not caught up in the usual procedure,” he added.

Wary of the implementation of the new quick loan scheme, Basavaraj Javali, president of Karnataka Small Scale Industries Association (KASSIA), said the government’s Mudra scheme has not been extended to more than 10% of the MSMEs. 
&nbsp;

The small businesses have welcomed the 12 announcements made by Prime Minister Narendra Modi for the micro, small and medium enterprises (MSME) sector on Friday, but the implementation remains a key concern for them.


Get loan in 59 minutes! Good move. Reality is, no bank wants to give loans as they prefer big-ticket loans

The Union Cabinet on Thursday approved an ordinance to decriminalise 16 corporate offences under the Companies Act, 2013. The ordinance to amend the Act will be promulgated after receiving President’s assent. These offences have been a source of harassment to entrepreneurs and businesses.

The decision comes a day after India improved its position to 77th in the Ease of Doing Business rankings. The offences which will be brought out of the purview of criminal offences include non-filing of annual returns and financial statements within specified time, accepting directorships beyond specified limits, failure to file statement after resigning as auditor of a firm, managerial remunerations in case of inadequate profits, failure to inform about the change in share capital and issuance of shares on discount, sources said.

The maximum number of defaults (around 6,000) under the Companies Act have been on account of non-filing of financial statement and annual report. The law provides for a fine of Rs 50,000 with a maximum of Rs 5 lakh or an imprisonment of up to six months or both.

In a big relief to the corporate sector, the offences will now be brought under the category of ‘civil defaults’ with the provision of a penalty, thus reducing the number of prosecutions filed in the courts.

The cases of default will be decided by the Registrar of Companies through an in-house adjudication mechanism.

This will lead to de-clogging National Company Law Tribunals.

The government-appointed committee headed by Ministry of Corporate Affairs (MCA) secretary Injeti Srinivas had submitted its report last month to the finance minister Arun Jaitley after a review of offences and the existing mechanism of penalty under Companies Act.

The report recommended bringing 16 offences of a total of 81 out of the category of compoundable offences. The panel had suggested re-categorisation of these offences and instead placing them under the in-adjudication framework. Such defaults would be liable for a penalty.

The other recommendations included declaration of significant beneficial ownership and re-introduction of declaration of commencement of business provision to better tackle the menace of shell companies.

Source: DNA Money

The maximum number of defaults (around 6,000) under the Companies Act have been on account of non-filing of financial statement and annual report. The law provides for a fine of Rs 50,000 with a maximum of Rs 5 lakh or an imprisonment of up to six months or both.


Crime no longer soon! Big relief for businessmen on these 16 corporate offences

&nbsp;The government on Wednesday said that the autonomy of the central bank is essential and an accepted governance requirement as Reserve Bank of India (RBI) called for a Board meeting on November 19. The Board meeting would discuss pending issues of the meeting held last week that are believed to have created a rift between the government and the central bank.

The RBI’s Board meeting call came within hours of a statement issued by the finance ministry that many viewed as a sign of easing tensions between the two sides.

The ministry clarification came amid reports of growing rift between the central government and the central bank and speculations that the RBI governor may resign following the tussle.

“The autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement,” the finance ministry said in a statement released around noon, adding that the governments in India have nurtured and respected it.

It said that both the government and the central bank in their functioning have to be guided by the public interest and the requirements of the economy.

“For the purpose, extensive consultations on several issues take place between the government and the RBI from time to time…”

The government through these consultations places its assessment on the issues and suggests possible solutions and will continue to do so, the statement said.

Responding to a question on growing rift between the government and the central bank later in the day during a press conference, finance minister Arun Jaitley said that the government has never made public the subject matter of these consultations and that only the final decisions are communicated.

 
The tension between the government and the central bank escalated after deputy governor Viral Acharya last week warned the government of “potentially catastrophic” implications of undermining the RBI’s independence.

Miffed over Acharya’s public comments, Jaitley on Tuesday blamed the central bank for failing to prevent indiscriminate lending, saying that the central bank looked the other way when banks gave loans indiscriminately during 2008-2014.

The government is having major differences with RBI over the issue of liquidity in the system.

The matter also came up for discussion during the meeting of the Financial Stability and Development Council (FSDC) held in New Delhi on Tuesday.

While the Reserve Bank of India has maintained that there is adequate liquidity in the system, the government strongly feels the central bank is not taking enough measures to tackle the liquidity stress in the non-banking finance company (NBFC) sector.

“The liquidity crunch is affecting the construction sector, flat buyers and even automobile sales are down,” a senior official said.

The interest rates issue is another point of contention between the two, with the government saying that the high-interest rates are impacting the industry and RBI maintaining that there is adequate liquidity in the system. 
Upset over the problem of liquidity crunch, the government recently wrote three letters to RBI referring to the unused Section 7 of RBI Act, 1934, on relaxing the Prompt Corrective Action (PCA) norms for banks, so that more funds could be made available to the NBFCs and to ease lending to micro, small and medium enterprises (MSMEs), as well as to reclassify power sector loans.

The government, in the letters to RBI, though mentioned Section 7, actually did not invoke it, sources said as the government faced criticism for using the Section to issue instructions to the central bank.

As per Section 7 of RBI Act, the government can give directions to RBI from time to time after consultation with the governor on the issues it considers necessary in the public interest. It has, however, never been used to give directions to the central bank.

Source: DNA Money

The RBI’s Board meeting call came within hours of a statement issued by the finance ministry that many viewed as a sign of easing tensions between the two sides.&nbsp;The ministry clarification came amid reports of growing rift between the central government and the central bank and speculations that the RBI governor may resign following the tussle.


Govt, RBI rift: FM assures on central bank autonomy; sources say Section 7 of RBI Act not invoked

Tax sleuths have detected Goods and Services Tax (GST) evasion of over Rs 4,400 crore during last one year after the new tax regime was implemented in the country. Investigators have booked the evaders for misuse of input tax credit (ITC), mis-declaration and non-filing of GST returns.

“In many cases, traders are filing bogus invoices to claim ITC. There are many instances where invoices are issued on behalf of the companies that existed on papers for the purpose of availing GST refunds,” sources in the finance ministry’s Central Board of Indirect Taxes and Customs (CBIC) said.

The Director General of Goods and Services Tax Intelligence (DGGI) has detected 604 cases of tax evasion amounting to Rs 4,441 crore during July 2017 and September, 2018. About 57% of the taxes evaded have been recovered. The data available with the ministry shows a recovery of Rs 2,547 crore of GST during the past one year. The number of cases filed for recovery during this period was 450. The filing of cases started three months after the GST was implemented on July 1, 2017, to make the process of GST implementation smooth.

Though the tax recovery rate is much better than the pre-GST regime, as much as Rs 1,900 crore of tax revenues have been taken away on account of evasion so far.

Experts feel that tax collections will eventually go up once the government introduces invoice matching on real-time basis. However, in the absence of online matching of invoices, tax evasion could be much more than ha been unearthed by the tax sleuths, they said. “The original idea was 100% invoice matching. Once we are able to achieve it, evasion would be minimal,” said D K Srivastava, chief policy advisor at EY.

Internationally also, the modus operandi for tax evasion under the GST involves the use of fake bills and claims are made on that account, tax evasion remains minimum at only half a percent in most European countries, Srivastava said. A key feature of the GST regime, the matching of invoices, has been put on hold by the GST Council. Currently, the companies are filing input credit on the basis of self-declaration.

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Experts feel that the lack of enough measures to check tax evasion have contributed to the revenue shortfall. The GST collections have not kept pace with a monthly target of Rs 1 lakh crore. During 2017-18, the government collected Rs 7.41 lakh crore. About 1% (1 lakh) of the registered taxpayers are paying 80% of the tax.

Tax sleuths have detected Goods and Services Tax (GST) evasion of over Rs 4,400 crore during last one year after the new tax regime was implemented in the country. Investigators have booked the evaders for misuse of input tax credit (ITC),&nbsp;mis-declaration&nbsp;and non-filing of GST&nbsp;returns .


Taxing times: Rs.4,400 cr worth GST evasion detected, evaders booked

The Director General of Anti-Profiteering (DGAP) has alleged that the fast moving consumer goods (FMCG) major Nestle has deprived customers of goods and services tax (GST) cuts of Rs 98 crore, according to sources. The DGAP last week submitted the investigation report to the National Anti-Profiteering Authority (NAA), the apex anti-profiteering body functioning under Ministry of Finance. The NAA will now hear the parties and come up with a final order in three months.

On its part, Nestle India spokesperson, in an e-mail reply, said “While the company had taken appropriate measures to pass on commensurate benefits to our consumers, in situations where the benefit could not be passed on instantly by reduction in maximum retail price or increase in grammage, the amount was set aside to be subsequently passed on and was not reckoned either in sales or in profit”.

However, a source said, “The investigation reveals that the company did not pass on the benefits of the tax cuts to consumers by way of commensurate reduction in the prices of over 300 product."&nbsp;The GST Council had reduced the rates on a large number of confectionery and FMCG items by as high as 10% in November, 2017, and January this year, respectively.

Products where prices were not brought down in line with the GST rate cuts span food, confectionery, dairy and nutrition portfolio segments, as per sources. “In many cases, the prices were not reduced uniformly across all packet sizes. For example, the benefit accrued on a small packet was passed on to consumer by reducing the price of the bigger packet in the same category of product,” a source said.

As per rule 171 of the Central GST Act (CGST), 2017, any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.

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The anti-profiteering watchdog had ordered the probe in May after Nestle admitted to having accrued gains post rate cuts. Earlier, the company had voluntarily offered to deposit a sum of Rs 15 crore as a compensatory measure for not passing on the benefits to consumers immediately at the time of GST rate reduction. The amount was deposited in the Consumer Welfare Fund. The company spokesperson revealed, “While we were in the process of taking the next steps to pass on the benefits to consumers, we had a discussion with the NAA, which was cordial and constructive and we decided to deposit, suo moto, the amount which was set aside”.

The anti-profiteering watchdog had ordered the probe in May after company admitted to having accrued gains post rate cuts.&nbsp;


Accused of profiteering from GST rate cuts, Nestle says 'had taken appropriate measures to pass on commensurate benefits'

The newly-appointed Board of the beleaguered financial firm Infrastructure Leasing &amp; Financial Services Ltd (IL&amp;FS) is likely to hold its first meeting on Thursday in Mumbai. The seven-member Board, led by billionaire banker Uday Kotak, will make a first-hand assessment of the financial situation and the immediate needs of the company, sources said.

“The Board is scheduled to meet in afternoon after getting some regulatory approvals. The agenda will be to make a first-hand assessment of the crisis,” sources said. The government has to submit the Board’s assessment report before the NCLT by October 8.

More members may be inducted to the Board. The Board will take a call on it, sources said.

As part of its prima facie assessment of the crisis, the Board is likely to consider a possible solution and whether any short-term measures can be taken immediately.

More members may be inducted to the Board, sources said, adding, the Board will take a call on it.

More members may be inducted to the Board. The Board will take a call on it, sources said.

After the first meeting, the Board will work on an action plan, sources said. The new board is likely to submit a new probable revival action plan within a fortnight, sources added. The claims of the government-owned entities due on IL&amp;FS are likely to be settled by the debt-laden firm soon.

“The new Board will immediately start looking at honouring short-term payment obligations. The Board will not allow the company to default on any repayments. As far as long-term borrowings are concerned, they are likely to be rolled over. The government-owned banks may restructure outstanding debts,” sources said.

The Board will also look at the possibility of settling arbitration cases out of court. “Some public sector banks are likely to consider restructuring debts of the company. The Board will take a call on whether the company can expand or take new orders,” sources said.

Meanwhile, the government is likely to provide immunity to the new Board through NCLT.

Source: DNA Money

The newly-appointed Board of the beleaguered financial firm Infrastructure Leasing &amp; Financial Services Ltd (IL&amp;FS) is likely to hold its first meeting on Thursday in Mumbai. The seven-member Board, led by billionaire banker Uday Kotak, will make a first-hand assessment of the financial situation and the immediate needs of the company, sources said.

&nbsp;


Uday Kotak led new IL&FS Board set to meet; here is what is on agenda

Amid concerns raised by directors over delay in Know-Your-Customer (KYC) filings, the government is likely to allow close to 21 lakh defaulting directors to file the mandatory electronic-KYC form DIN-3 after the last date for complying with the new norm ended on September 15.

Director Identification Numbers (DINs) of nearly 21 lakh directors were deactivated by the Ministry of Corporate Affairs (MCA) following non-filing of KYC details.

“The directors will be given another 15-day extension to reactivate their DINs by filing the e-form along with a nominal fee, which is likely to be much lower than the current late fee of Rs 5,000,” top government sources said. The decision is likely to be announced in a day or two, sources said.

Many individuals and professional bodies, including the Institute of Companies Secretaries of India (ICSI), have written to the government seeking extension in the date of submission for KYC without any additional fee. They have citied practical difficulties such as time-consuming process of obtaining digital signatures, video verification, reaching out to foreign directors and Kerala floods among the reasons for the delay.

After the last date for filing of the e-KYC form, the MCA deactivated DINs of nearly 21 lakh directors, about 63% out of a total of 33 lakh directors registered in the country after they failed to furnish their KYC details. Only 12.15 lakh directors filed their KYC details within the stipulated time.

DIN is the unique number allotted to the directors on the Boards of registered companies without which they can’t sign any compliance document on behalf of the company.

According to some government officials, not more than two lakh directors are likely to come forward if more time is allowed for filing. “A large number of directors will be dummy directors or the ones having multiple DINs,” said an official.

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“It took us an average time of one to one-and-a-half hour to do one KYC filing. It is quite time consuming to get the digital signature and then feed the client details on MCA software. Many a times the site shows glitches,” said Ashok Tyagi, a company secretary, who is looking forward to an extension in the filing time.

The MCA launched the e-KYC form under the MCA 21 system on July 14, this year. All the 33 lakh directors were required to provide their personal details such as e-mail address, Permanent Account Number (PAN) and Adhaar number in an e-filing with the government in a major clean-up drive on ‘fly by night and dummy directors’. The directors also had to upload their short videos introducing themselves. The directors who could not comply with the new rule could, however, get their DINs activated provided they paid a sum of Rs 5,000 as late fee.

Source: DNA Money

Amid concerns raised by directors over delay in Know-Your-Customer (KYC) filings, the government is likely to allow close to 21 lakh defaulting directors to file the mandatory electronic-KYC form DIN-3 after the last date for complying with the new norm ended on September 15.


Massive relief for whopping 21 lakh defaulting directors in India despite deadline miss

Even as petrol and diesel prices continue to soar, worries about falling revenues and impact on the country’s fiscal deficit, which the officials say, is holding back the government&nbsp;from cutting taxes on fuel.

“The government will hold the excise duty cut for now. Cutting excise duty at the current level of rupee may lead to twin deficit,” a top government official said.

The prices of petrol and diesel remain at an all time high. Petrol prices in Mumbai have already touched Rs 88.26 a litre, while diesel is sold at Rs 77.47. Delhi consumers are paying Rs 80.87 for petrol and Rs 72.97 for diesel.

“The government may not lower duties as Rs 2 per litre cut in fuel prices is likely to result in a revenue hit of around Rs 2,500 crore per month. A shortfall in revenue collections will impact the fiscal deficit target for this year,” a senior finance ministry official told DNA Money.

There is already a fear that the fiscal target could be breached this year as GST collections are yet to stabilise over Rs 1 lakh crore a month as against an average collection of Rs 95,000 crore per month in the current fiscal. The government feels that it needs to increase the share of non-oil tax revenues.

The government is not likely to go for an expenditure cut to meet the fiscal deficit target as it is in the last year of its term. “The government will not go for an expenditure cut,” the official said.

A call on the price reduction will be taken at the highest political level if the government decides to provide immediate relief to common man at some point of time. The Prime Minister’s Office (PMO) is expected to hold meetings starting this weekend to review the economic situation. The government concedes that it is like a double edged sword. “If fuel prices are not reined in, it has an inflationary impact. But if it is unable to meet the fiscal deficit target which is set at 3.3% of the GDP for 2018-19, investors will lose confidence in the economy and abandon us,” said another official.

“Any impact on fiscal deficit will shake the faith that foreign investors have reposed in&nbsp; our economy,” the official added.

A fall in revenue from petrol and diesel will impact the states’ finances too. Over 40% of the central excise tax collections from fuel go to states. In absence of that, their capital expenditure and welfare schemes will get impacted, an advisor in the ministry said. 
However, some of the state governments - Rajasthan, Andhra Pradesh and West Bengal - have already reduced VAT on fuel. 
Meanwhile, the government is looking at the Reserve Bank of India (RBI) for a rate cut. “Monetary Policy Committee (MPC) is keeping a watch on the rupee situation and the inflation impact due to&nbsp;weakening currency.

The MPC committee, which is expected to meet in the first week of October, might hike rates,” the official said.

The finance ministry and the RBI are in regular touch, he said. The ministry is also considering the NRI deposit scheme to stabilise rupee.

Though used as a measure to stabilise rupee in 2003, the government raised $26 billion through foreign currency non-resident bank account (FCNR-B) deposits, while the repayment on maturity was estimated at $20 billion.

Source: DNA Money

Even as petrol and diesel prices continue to soar, worries about falling revenues and impact on the country’s fiscal deficit, which the officials say, is holding back the&nbsp;government&nbsp;from&nbsp;cutting taxes on fuel.

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Petrol, diesel prices: This is what stops govt from cutting taxes on fuel

It is ‘testing’ times for an estimated five lakh independent directors in the corporate sector. The government is planning to introduce a mandatory online certificate course followed by a test for them.

To improve corporate governance, a basic 60-hour online course for independent directors is being considered by the Ministry of Corporate Affairs (MCA). “It is likely to be more of a self-taught, self-tested online course which will focus on making independent directors aware of their liabilities and rights,” a senior government official said. The ministry plans to make it operational in two-three months, the official added.

The Indian Institute of Corporate Affairs (IICA) will be the designated authority for rolling out the online course as well as exam/test.

This comes amid a growing number of frauds being reported in the corporate world raising questions about the standard of corporate governance being followed by the companies.

An independent director is a non-executive director, also known as outside director of a Board of directors, who does not have a pecuniary relationship with the company or related persons, except for sitting fees. Their role broadly includes improving corporate credibility and governance standards and act as a watchdog. At least one-third of the Board should comprise of independent directors.

At present, the government is having a dialogue with industry and other stakeholders.

“We are considering two options. If people are meeting certain criteria, they can just go for self-test, while others will take an external examination. Another alternative is that we may allow everybody to do self-test. However, the online study course will be compulsory for everyone,” according to a source.

As the independent directors have a very important role in a company, “it is very critical to ensure that they possess the requisite knowledge to discharge their duties. So many cases of fraud and corporate mis-governance have come before us. It shows that the institution of independent directors needs to be strengthened,” said another official.

An independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations, as per the latest Companies (Appointment &amp; Qualification of Directors) Rules. In addition to a minimum qualification, the requirement for the certificate course will also come into play.

The independent directors will have to file the score certificate on the government portal MCA-21.

Source: DNA Money

It is ‘testing’ times for an estimated five lakh independent directors in the corporate sector. The government is planning to introduce a mandatory online certificate course followed by a test for them.

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Centre to test 500,000 independent directors; online certificate course in offing

The government is planning to add more courts to the National Company Law Tribunals (NCLTs) to augment their capacities and expedite the insolvency and bankruptcy proceedings of companies. As many as three courts will be added in Delhi and four in Mumbai apart from some other places. Similarly, 36 members are being recruited to the courts. Union Minister of state for Corporate Affairs&nbsp;PP Chaudhary in an interview with Anjul Tomar spoke about strengthening NCLTs, decriminalising certain offences to ease burden on the courts and dealing with a recent spate of auditor exits. He also spoke about his ministry’s efforts to weed out ‘shell’ companies.

India Inc has been witnessing rising instances of auditors quitting audit work, raising questions about corporate governance. How is the government looking at it? 
Auditors of as many as 204 listed companies have resigned between January 1 and July 17 this year, as per the MCA-21 filings. We are examining the cases. The matter will be taken up with the company and the auditor if the reasons mentioned by the auditors warrant further inquiry. Auditors at the time of resigning have to file with the concerned Registrar of Companies (ROC) an e-form (ADT-3) in which they are required to furnish the reasons.

The Ministry of Corporate Affairs (MCA) is probing crisis-hit Jet Airways. What are the allegations against the airline? 
The airline is being investigated for alleged financial irregularities. The ministry has ordered the inspection of books and papers of Jet Airways under Section 206(5) of the Companies Act, 2013 on August 30.

What is the status of the probe against the companies related to ICICI Bank CEO’s husband Deepak Kochhar? 
The inspections are under progress. The ministry had ordered the inspection of books and papers of six firms- NuPower Renewables, Videocon Industries, Supreme Energy, Pacific Capital Services, NuPower Wind Farms and EchandaUrja.

How is the government planning to strengthen the NCLTs amid rising number cases coming in the wake of Insolvency and Bankruptcy Code? 
The government has decided to increase the number of courts and recruit 36 members for speedy disposal of cases. NCLT courts are being set up in a phased manner, keeping in view the workload. More than one court has already started functioning at the places where the number of cases is comparatively high. More are in progress. The process to recruit members at the NCLT has also started. Applications have been invited for the posts of 22 technical and 14 judicial members. Meanwhile, the government is also considering to declog the NCLT by reducing the number of compoundable cases by bringing in suitable amendments in the rules.

What are the major offences proposed to be moved away from the NCLTs? 
The government-appointed committee submitted a report after a review of the existing mechanism of penalty under the Companies Act. The panel has recommended shifting 16 out of 81 compoundable offences to an in-house adjudication mechanism. These include non-filing of annual returns and financial statements within specified time, failure to file statement after resigning as auditor of a firm, accepting directorships beyond specified limits, managerial remuneration in case of inadequate profits, failure to inform about a change in share capital and issuance of shares on discount. The panel has suggested re-categorisation of these offences and placing them under the in-adjudication framework. Such defaults would be liable for penalty. The government is examining the report. 
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Is the National Financial Reporting Authority (NFRA) likely to start functioning?&nbsp; 
The government is in the process of appointing a chairperson and three full time members to NFRA. The consultations are going on with stakeholders to finalise technical rules.

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The ministry has started examining top 1,000 companies for CSR expenditure. How many companies have failed to spend 2% profits on Corporate Social Responsibility (CSR) and what action has been taken against them? 
The ministry has recently set up Centralised Scrutiny and Prosecution Mechanism (CSPM) to examine the records of top 1,000 firms which are mandated to spend on CSR. The ministry after an inquiry has sent preliminary notices to 272 companies for violations committed during 2015-16.

Source: DNA Money

The government is planning to add more courts to the National Company Law Tribunals (NCLTs) to augment their capacities and expedite the insolvency and bankruptcy proceedings of companies. As many as three courts will be added in Delhi and four in Mumbai apart from some other places. Similarly, 36 members are being recruited to the courts.


Jet Airways is being investigated for alleged financial irregularities: PP Chaudhary   

A Parliamentary Committee has expressed apprehension over the Prompt Corrective Action (PCA) framework, a measure to check banks' financial health, of the Reserve Bank of India (RBI) saying that it may end up bringing more and more banks under the PCA, according to sources having access to the report of the Standing Committee on Finance.

The report, titled 'Banking Sector in India — Issues, Challenges and the Way Forward including Non-Performing Assets/Stressed Assets in Banks/Financial Institutions' was adopted at the meeting of the Parliamentary Standing Committee on Finance here in New Delhi. It is likely to be placed in the winter session of Parliament.

The panel has recommended that the RBI should provide a roadmap for 11 public sector banks to come out of PCA framework within a stipulated time-frame, sources said. Both the RBI and government should constantly monitor banks and relax or review PCA in case of banks where even retail banking is prohibited, according to the sources.

The committee also advised the central bank against resorting to "knee-jerk" measures such as discontinuing the practice of issuing Letter of Undertaking (LoU), a bank guarantee that allows an importer to get short-term credit from another Indian bank's overseas branch to pay suppliers abroad. The RBI discontinued the LoUs after it came to light that the financial instrument was misused by billionaire jeweller Nirav Modi misused to defraud the Punjab National Bank in the biggest scam of corporate sector.

On the issue of RBI seeking more powers, the committee recommended the government to critically examine the submission of RBI to empower the regulator in respect of PSBs while evaluating the existing powers as far as digressions by private banks such as ICCI Bank and HDFC Bank is concerned, sources said.

The committee has expressed concern over the quantum of funds involved in frauds in the banks and other financial institutions during 2017-18. "It increased to Rs 32,048 crore during last fiscal as against Rs 23,930 crore in the previous year mainly due to banks such as HDFC, ICICI and PNB. Of this, public sector banks, it has gone up significantly from Rs 19,527 crore to Rs 29,246 crore mainly due to PNB fraud," the report points out as per the sources.

The committee has also recommended that the RBI should review the requirement for a higher capital percentage under both Basel III and International Financial Reporting Standards (IFRS) beyond even global norms, which stipulate the requisite minimum percentage of 9.5% while the same for our banks is much higher at 10.5%, the sources said.

"Such a significant percentage point differential would actually require our banks to needlessly maintain a much higher capital base and baggage, which is uncalled for, particularly at this critical juncture when our banks are short of capital and their provisioning requirement is also growing higher," sources familiar with the report said.

RBI has asked banks to maintain Capital to Risk-weighted Assets Ratio (CRAR) 1% higher than global Basel norms both under Basel II and Basel III framework. The committee finds that CRAR norm of 11.5% by the end of 2018-19 under the Basel III by RBI is higher by 3.5% than the CRAR required under global Basel II framework, the sources said.

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In respect of nine PSBs - Central Bank of India, Andhra Bank, OBC, Corporation Bank, Vijaya Bank, Bank of Maharashtra, United Bank of India, Dena Bank and Punjab &amp; Sind Bank which had aggregate risk-weighted assets of Rs 9.93 lakh crore as of March 2018, this translates into additional capital requirement of Rs 35,000 crore.

Such stringent norms stipulated by the RBI for our banks, particularly these nine banks which are not active globally, is unrealistic and unwarranted, the committee observed as per the sources.

GROWING PILE

<ul>
	<li>On RBI seeking more powers, the committee has recommended the government to critically examine the submission of RBI to empower the regulator in respect of PSBs&nbsp;&nbsp;</li>
	<li>The committee has recommended the RBI should review the requirement for a higher capital percentage under both Basel III and IFRS beyond even global norms</li>
</ul>

Source: DNA Money

A Parliamentary Committee has expressed apprehension over the Prompt Corrective Action (PCA) framework, a measure to check banks' financial health, of the Reserve Bank of India (RBI) saying that it may end up bringing more and more banks under the PCA.

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Panel warns RBI over "knee-jerk" measures, expresses apprehension over PCA

In a major relief to the corporate sector, non-filing of financials by the companies with the government may soon be decriminalised and recategorised as a civil offence punishable with fine only. Currently, non-filing of financial statement and annual return is a criminal offence with a provision of imprisonment as well as fine.

A high-level committee appointed by the government is likely to submit its report on the review of offences under Companies Act, 2013, to the Finance and Corporate Affairs minister Arun Jaitley today.

The 10-member panel headed by the corporate affairs secretary Injeti Srinivas and comprising top banker Uday Kotak, industrialist Sidharth Birla, noted lawyer Shardul S Shroff and former bureaucrat T K Vishwanathan has recommended decriminalisation of certain offences including violations related to non-filing of financial statement and annual report, sources told DNA Money.

The maximum number of defaults by the firms is on account of non-filing of financial statements and annual returns, a senior official said.

The panel has suggested that “some simple violations, including non-filing of financial statement and annual return could be treated as civil offence. Such cases could thus be handled through an in-house adjudication mechanism involving Registrar of Companies (RoC) and Regional Directors (RD) of the Ministry of Corporate Affairs (MCA) and not tried in the court. The adjudicating officer can levy a fine on the erring company,” sources said.

At present, the MCA files these cases in a court.

Currently, non-filing of annual return and financial statement by a firm is a criminal offence under section 92 and 137, respectively of the Companies Act.

The law provides for a fine of Rs 50,000 with a maximum of Rs 5 lakh or an imprisonment of up to six months or both.

A company has to file annual returns with the RoC within 60 days and financial statement within 30 days from Annual General Meeting (AGM), mostly by October 30.

Annual return is a snapshot of the company’s yearly report, which has information about the firm’s activities, financial position and composition.

Meanwhile, financial statement, which includes balance-sheet, income statement, cash flow statement, is a record of the company’s financial position and performance.

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The committee has reviewed about 80-90 sections under the Companies Act involving criminal offences with a provision of fine as well as imprisonment. There are already some 18 sections related to civil offences where a company or the person found guilty is liable for penalty through in-house adjudication mechanism. These include violation of conditions regarding private placement and registered office. More would be added to it once the committee’s report is accepted by the government.

“The implementation of the report will warrant a Bill. The government is likely to introduce the amendments in the Companies Act when Parliament is reconvened,” sources said.

“The committee has suggested decriminalisation of some offences but with a cautious approach considering that there is a rise in the number of frauds. The minor offences where non-compliance is technical or procedural in nature can be recategorised as civil offences. The committee has tried to create a more friendly, remedy structure for small offences so that there is higher compliance, said a source. On the other hand, the committee has given suggestions to make laws more stringent for serious offences,” the source said. This will also lead to the courts getting more time to deal with offences of a serious nature, the source said.

Source: DNA Money

In a major relief to the corporate sector, non-filing of financials by the companies with the government may soon be&nbsp;decriminalised and&nbsp;recategorised as a civil offence punishable with fine only.

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Big gift from Modi govt to India Inc; this rule may be decriminalised   

Food regulator Food Safety and Standards Authority of India (FSSAI) has ordered testing of the popular brands of honey, including Dabur, Zandu and Patanjali, for authenticity.

This comes in the backdrop of growing concern among the public that the honey sold in the market could be adulterated with corn syrup or sugar syrup.

The 'surveillance' report is likely to be made public within a couple of weeks, a senior government official said.

"As part of our surveillance mechanism, we have picked up samples of all the brands of honey sold in the market. The testing is going on. We may release the report in a couple of weeks, though without naming the brands or companies," Pawan Agarwal, CEO, FSSAI, told DNA Money.

The new standards for honey have recently been approved by the health ministry and are likely to be notified in a few days. The compliance and enforcement will start from January 1. "Whenever we implement new standards, we give time to the industry," the CEO said. However, before taking any penal action against the erring firms, the regulator is conducting surveillance tests so that the companies are careful.

"The general sense is that a lot of honey sold in the market is not real but corn syrup or sugar syrup. Whether the perception is right or wrong, the honey has to be tested," said Agarwal. Earlier, the FSSAI didn't have testing methods and parameters to figure out if the honey was authentic or not.

"Hopefully, those who are doing it (adulteration) will be careful now that the FSSAI has standards and methods of analysis," he said.

The violation of the standards will attract a fine of up to Rs three lakh and imprisonment of a maximum of six months for adulteration under Food Safety &amp; Standards Act.

"Our objective is to ensure that the consumer gets what he or she is paying for. Corn or sugar syrup itself is not unsafe, but by calling it honey when it isn't is like deceiving consumers," the official said, adding that consumers would get genuine honey in the market. While the enforcement of the new regulation will start next year, the surveillance is likely to continue.

Corn syrup, also known as glucose syrup to confectioners, is made from the starch of corn or maize and is used in foods to soften texture, add volume, prevent crystallisation of sugar, and enhance flavour.

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"FSSAI has been regularly conducting such tests on all food products. It's a welcome move on the part of the authorities as this ensures that only good quality food products reach the consumers," a Dabur spokesperson said when contacted.

According to an Emami spokesperson, "We would like FSSAI to come up with a policy to control the presence of corn syrup and any other form of added sugar which is widely being used for adulteration of honey. There needs to be a standardisation in place based on the international food standards which deals with these kinds of adulteration. These steps if taken would ultimately benefit the consumers."

Patanjali did not respond to e-mailed query till the time of going to press.

A SUGARY SYRUP?

<ul>
	<li>The general sense is that a lot of honey sold in the market is not real but corn syrup or sugar syrup&nbsp;&nbsp;</li>
	<li>The 'surveillance' report is likely to be made public within a couple of weeks</li>
</ul>

Source: DNA Money

Food regulator Food Safety and Standards Authority of India (FSSAI) has ordered testing of the popular brands of honey, including Dabur, Zandu&nbsp;and&nbsp;Patanjali, for authenticity.


Anjul Tomar