Ergo Update

Introduction:

Taxability of payments made under contractual obligations like non-compete fees, early termination charges, liquidated damages, notice pay payments by employees, cancellation charges, late payment charges etc have been a subject matter of debate under Goods and Services Tax (“GST”) as well as service tax before that – a debate that has revolved around the interpretation of the words “Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act” (which have effectively been made part of t

As on 30 April 2022, the assets under management of the mutual fund (MF) industry in India stands at INR 38.04 lakh crore, with 45% of the total assets being routed through direct plans. With increasing focus on financial literacy, digitization, online banking, smartphones, and awareness about MFs, investors can leverage technology and directly invest in MFs, thereby necessitating the need to regulate the domain, especially the digital / technology platforms through which the execution of MF investments is undertaken for a direct plan.

By way of a circular dated 27 July 2022 (New Circular), the Employees’ Provident Fund Organisation (EPFO) issued a clarification on the status of student-trainees ‘under any scheme’ vis-à-vis the applicability of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act). This circular has been issued in furtherance of EPFO’s circular dated 12 October 2015 (Old Circular), wherein a distinction was made as regards student-trainees and their coverage under the EPF Act.

Issuance of listed debt securities in India is currently by way of: (a) public issuance through the Stock Exchanges and Depositories; and (b) private placements to an identified set of mostly institutional investors. Over the last 3 financial years, the Securities Exchange Board of India (SEBI) has observed that the volume of private placements has far exceeded that of public issuances. It has also noted that, within private placements, the investor class has largely been restricted to institutional investors.

The Supreme Court, in an order dated 22 July 2022, has decided a batch of nearly four hundred petitions and has directed opening of the Goods and Services Tax (GST) portal from 1 September 2022 till 30 October 2022 to facilitate claiming of transitional credit by all taxpayers who have missed to take such credit in past.

Amongst the myriad representations placed before the Goods and Service Tax Council (GST Council) for consideration in their 47th meeting, one of the significant issues was rate rationalization on food products.

The Securities Exchange Board of India (SEBI) released a consultation paper on 8 July 2022 proposing applicability of SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) to ‘units of a mutual fund’ (hereinafter “the Consultation Paper”). The PIT Regulations currently apply to dealings in ‘securities’ of listed / to be listed entities.

The Special Economic Zone (SEZ) regime, which was introduced in 2005 to promote exports and improve balance of payments, became less lucrative with sunset of income tax benefits granted thereunder. In view thereof and with an objective of unfettering the exporters from procedural hindrances, the Hon’ble Finance Minister, in her budget 2022 speech, announced replacement of this framework by September 2022.

In the backdrop of the Indian Rupee (INR) continuously depreciating against the US dollar (USD), the Reserve Bank of India (RBI) on 6 July 2022, issued a press release on ‘Liberalisation of Forex Flows (Revised)’ (Press Release) and announced the following measures, inter alia, to augment the foreign exchange flows in India and to expand and diversify the source of forex funding