Professionals’ attention is invited to the amendments in the Companies Act 2013. The companies are to adhere to the new amendments which are said to be coming in effect on 01 April 2022 vide notification of the Central Government dated 24 March 2021.
The notification, as follows,
“….Provided that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.”
Companies need to be geared up to meet the increased compliance in their accounting software and line up their Auditors to certify them. The ultimate objective of the government is to bring 100% transparency in the transactions made in the organization.
Every company that is using a software for maintaining its books in electronics mode shall use the following features with effect from 01 April 2022:
The amendments made is contained in the sub rule (1) of Rule 3 which lays the complete instructions on how the books should be maintained by the organization. It requires all relevant books & papers relating to the accounts be maintained in digital form and continued be available in the Data Centres inside the country.
Moreover, it is also important to maintain the following directives as well:
In conclusion, the accounting software must have the capability mentioned above for maintaining the electric record, creating audit trails for each transaction and Edit logs that cannot be tampered.
Although at a conceptual and regulatory level an audit trail is significant and fitting, there are several concerns lodged by the Trade & Industry Associations.
While the audit trail intends to track all the info in the original form it is generated in, also looking to log all the changes made to original information, there is a chance for human error and change made to rectify the error would also be included in the Edit Logs.
There are also concerns on the burden it places on the smaller business firms. Additionally, the ambiguity of the execution is another concern among the software vendors on the implementation of the newer measures on their databases.
As we can see that most of the larger organizations have already switched their software and ERPs to log the audit trails. These are bigger changes brought on by the institutions to bring in greater transparency. What it needs is strong and experienced leaders that could usher in the new financial year amendments and accommodate the changes it brings in your software as well as your organization.
The CESTAT Delhi in case of M/s Rajasthan Rajya Vidhyut Prasaran Nigam Ltd has set aside the order of lower authorities demanding service tax on the notice pay recoveries by the appellant from his employees for premature resignation without serving the mandatory notice period. In this well-reasoned order, the CESTAT Delhi referred to the provisions of the Indian Contract Act, 1872 and made a distinction between consideration for a contract versus compensation under the contract. In this context the CESTAT Delhi observed that while a consideration is something received for performance under the contract, compensation is received for failure to perform the contract. Consideration is the object of the contract, but compensation is not. In this case, tolerance by the employer of not serving the mandatory notice period by the employee is not the object and essence of the employment agreement, and hence the CESTAT Delhi held that, notice pay recovered by the employer is in the nature of compensation and the same cannot be regarded as consideration for rendition of any service. Referring to decision of Madras High Court and other tribunals on this similar issue, the CESTAT Delhi set aside the demand of service tax on notice pay recoveries from the employees.
The Maharashtra AAR in the case of M/s Syngenta India Limited and M/s Emcure Pharmaceuticals Limited has held that GST is not leviable on amounts recovered by the applicant-employer from his employees towards transportation and canteen facility and notice pay. As regards recovery towards transportation and canteen facility, the AAR noted that these facilities are welfare measures, and the applicant cannot be said to be supplying these services to the employees. Further the GST is discharged on the value of bills raised by the third-party vendors and the amounts recovered from the employees are part of the amount paid to the third-party vendors on which GST is already paid. As regards notice pay recovery, the AAR noted that the applicant is compensated for the employees sudden exit and it cannot be said that the applicant has provided any service or has tolerated any act of the employee for premature exit.
The Gujrat Appellate AAR in the case of M/s Aristo Bullion Pvt Ltd has allowed the appeal filed by the applicant and has held that, the applicant can use the input tax credit balance earned on inward supplies meant for bullion business for payment of output tax on outward supply of castor oil seed. Earlier the AAR has held that cross utilisation of input tax credit pertaining to bullion business is not allowed for output tax payment on castor oil seeds business and one-to-one correlation needs to be maintained by the applicant for availing and utilisation of input tax credit. The Appellate AAR rejected this observation of AAR and noted that, once a taxpayer validly avails input tax credit on inward supplies, the credit merges into a common pool of credit under the electronic credit ledger. Further, the appellate AAR observed that Section 16(1) of Central GST Act prescribes the eligibility and conditions for availing input tax credit, and it does not impose any restriction in the form of one-to-one correlation for utilisation of input tax credit.
The Madhya Pradesh AAR in case of M/s Mahaveer Prasad Mohanlal has held that the applicant is not required to reverse proportionate input tax credit in case of post supply discounts passed on by the supplier without adjustment of outward liability by the supplier. The applicant in this case received cash discount for early payment and other incentives through commercial credit note from the supplier. The applicant also submitted before AAR that both these discounts are in the nature of post supply discounts, as at the time of supply it is not known whether they are eligible for discount as well as quantum of discount, if they are eligible. The AAR on perusal of Section 15 of the Central GST Act, noted that these suppliers is eligible to adjust GST on discounts only if the fact of discount is known before or at the time of supply and recipient reverses the proportionate input tax credit. In the present case, considering that the cash discount for early payment and the other incentives passed on to the applicant are post supply discounts not known at the time of supply and the fact that the supplier has not adjusted his GST liability, the AAR held that the applicant is not required to reverse the proportionate input tax credit. On the second question of taxability of discount received, the AAR also held that with respect to these post supply discounts the applicant is not providing any service to the supplier and is only receiving the discount from the supplier, which is indirectly an adjustment to the purchase price, therefore no GST is leviable on the discount received from the supplier.
On 17 January 2022, Monetary Authority of Singapore (MAS) has issued the “Guidelines on Provision of Digital Payment Token Services to the Public” giving effect to MAS’ expectations in relation to the provision of digital payment tokens (“DPT”), more commonly known as cryptocurrency, to the general public in Singapore. The guidelines stress that the DPT service providers should conduct themselves with the understanding that trading of DPTs is not suitable for general public.
DPT service providers include payment institutions, banks and other financial institutions, as well as applicants under the Payment Services Act (PS Act). DPT services include the buying or selling of DPTs or facilitating the exchange of DPTs. The definition of DPT services will be expanded to include the transfer of DPTs, provision of custodian wallet services for DPTs, and facilitating the exchange of DPTs without possession of moneys or DPTs by the DPT service provider, when the amendments to the PS Act take effect.
MAS has consistently warned that trading DPTs is highly risky and not suitable for the general public, as the prices of DPTs are subject to sharp speculative swings. MAS has observed that some DPT service providers have been actively promoting their services through online and physical advertisements or through the provision of physical automated teller machines (ATM) in public areas. This could encourage consumers to trade DPTs on impulse, without fully understanding the attendant risks.
The new guidelines clarify MAS’ expectations that DPT service providers should not engage in marketing or advertising of DPT services:
DPT service providers can only market or advertise on their own corporate websites, mobile applications or official social media accounts.
The guidelines also note that DPT service providers should not promote payment token derivatives contracts (“PTDs”) to the public as a convenient unregulated alternative to trading in DPTs. DPT service providers should not mislead the public that PTDs are less risky than DPTs.
The Competition and Consumer Commission of Singapore (“CCCS”) has issued a Business Collaboration Guidance Note (“Guidance Note”) to provide clarity to businesses and trade associations on the ways to collaborate without harming competition. This includes providing greater guidance on the assessment factors (such as market share and structure) that CCCS would generally consider in determining whether a collaboration complies with section 34 of the Competition Act (Cap. 50B) (the “Competition Act”), when specific types of collaborations may give rise to competition concerns, and the conditions under which competition concerns are unlikely.
The seven common types of business collaborations covered in the Guidance Note are:
(i) Information sharing – Exchange of both price and non-price information among businesses;
(ii) Joint production – Collaboration to jointly produce a product, share production capacity or subcontract production;
(iii) Joint commercialisation – Collaboration in the selling, tendering, distribution or promotion of a product;
(iv) Joint purchasing – Collaboration to jointly purchase from one or more suppliers;
(v) Joint research & development (“R&D”) – Collaboration on R&D activities, such as joint investment;
(vi) Standards development – Setting of industry or technical standards; and
(vii) Standard terms and conditions in contracts – Usage of terms shared amongst competitors establishing conditions of sale and purchase of goods and services between them and their customers.
The guidance note also includes a short section each on cross-border collaborations and information for trade associations regarding their role in supporting collaborations among their members.
Singapore Exchange (SGX) has unveiled its roadmap for issuers to provide climate-related disclosures based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
All issuers must provide climate reporting on a ‘comply or explain’ basis in their sustainability reports from the financial year (FY) commencing 2022. Climate reporting will subsequently be mandatory for issuers in the (i) financial, (ii) agriculture, food and forest products, and (iii) energy industries from FY 2023. The (iv) materials and buildings, and (v) transportation industries must do the same from FY 2024.
Other key changes effective 01 January 2022 include requiring:
These requirements follow a public consultation on both sustainability reporting and board diversity disclosures which received broad support.
SGX expects the portal to house ESG information beyond the core ESG metrics. The information recorded in the portal may include material ESG factors, commentaries and explanations for reported metrics, and discussions on strategies, processes, board statements and targets relating to ESG matters.