BMC Advisors. MCA Update SEBI Update RBI Update. Income Tax Update IPR Update Service Tax. Excise Update Custom Update GST Update.

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1 Issue: May 2018 Vol. 5 No. 4 BMC Advisors Corporate Laws and Intellectual Property Rights Consultants MCA Update SEBI Update RBI Update Income Tax Update IPR Update Service Tax Excise Update Custom Update GST Update DGFT Update 1

2 WEEKLY UPDATES MAY 21 st, MAY 27 th,

3 INDEX SEBI UPDATE Investment of own funds (excluding funds lying in Core Settlement Guarantee Fund) by 4 Clearing Corporations in International Financial Services Centre (IFSC) Segregated Nominee Account Structure in International Financial Service Centre (IFSC) 5-6 CUSTOM UPDATE Seeks to increase tariff rate of basic customs duty (BCD) on Walnuts in shell [ ] from 7 30% to 100% and increase tariff rate of basic customs duty (BCD) on Protein concentrates and textured protein substances [ ] from 30% to 40% by invoking section 8A (1) of the Customs Tariff Act, 1975 Seeks to further amend notification No. 50/2017- Customs dated so as to: 8 i. increase basic customs duty (BCD) on shelled Almonds [ ] from Rs.65/Kg to Rs.100/Kg ii. increase basic customs duty (BCD)on wheat [ , ] from present 20% to 30% iii increase basic customs duty (BCD) on Protein concentrates [ ] from 10% to 40% Amendment of Notification No. 40/2012-Customs (N.T.) dated Customs Audit Regulations, Regarding amendment in notification No. 89/2017-Cus (N.T.) dated relating to AIRs 11 of Duty Drawback on Silver Jewellery and Silver Articles GST UPDATE Notifications regarding E-way bill in Union Territories (without legislature) 12 Notifications regarding E-way bill in Union Territories (without legislature) 13 Applicability of Integrated Goods and Services Tax (integrated tax) on goods supplied while being deposited in a customs bonded warehouse-reg. DGFT UPDATE Service Providers (and not Ports) are eligible for SFIS/SFIS benefit 16 Clarification on the term `Duty` under Sl.No.3 of Appendix-3A of Foreign Trade Policy Amendment in Para 3.08 (b) of Chapter-3 of FTP

4 SEBI UPDATES CIRCULAR SEBI/HO/MRD/DRMNP/CIR/P/2018/82 May 21, 2018 All recognized Clearing Corporations in International Financial Services Centre (IFSC) Dear Sir / Madam Investment of own funds (excluding funds lying in Core Settlement Guarantee Fund) by Clearing Corporations in International Financial Services Centre (IFSC) SEBI vide circular SEBI/HO/MRD/DRMNP/CIR/P/2016/54 dated May 04, 2016, has specified Investment policy of a clearing corporation. 2. Currently, the clearing corporations are permitted to invest their own funds as well as funds lying in Core Settlement Guarantee Fund in Fixed Deposits/ Central Government Securities and Liquid schemes of Debt Mutual Funds. 3. Upon review of investment instruments/avenues available for Clearing Corporations in IFSC and based on the feedback received, it has been decided to permit the Clearing Corporations in IFSC to invest their own funds in AAA rated Foreign Sovereign Securities. However, the investment in such AAA rated Foreign Sovereign Securities shall not exceed a limit of ten per cent of the total investible resources, excluding funds lying in Core Settlement Guarantee Fund of the Clearing Corporation. 4. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market. Yours faithfully, Sanjay Purao General Manager Division of Risk Management and New Products Market Regulation Department sanjayp@sebi.gov.in 4

5 CIRCULAR SEBI/HO/MRD/DRMNP/CIR/P/2018/83 May 24, 2018 All recognized Stock Exchanges and recognized Clearing Corporations in IFSC Dear Sir/Madam Segregated Nominee Account Structure in International Financial Service Centre (IFSC) With a view to further facilitate ease of market access for foreign investors in IFSC and based on feedback received from market participants, it has been decided to permit Segregated Nominee Account Structure in IFSC wherein orders of foreign investors may be routed through eligible Segregated Nominee Account Providers (hereinafter referred to as Providers ), for trading on stock exchanges in IFSC while adhering to regulatory requirements, inter alia, relating to identification of end-client, Unique Client Code, order placement at client level, client level margining and position limits. 2. The broad features of the Segregated Nominee Account Structure are given in Annexure, enclosed herewith. 3. It shall be obligatory on the stock exchanges, brokers and Providers to furnish to SEBI, inter alia, information relating to trades on stock exchanges in IFSC originated by/through Providers, including KYC details of their end-clients, as and when requested. 4. Stock exchanges in IFSC shall ensure that the provisions of Prevention of Money Laundering Act, 2002 (PMLA) and the rules thereof, including those relating to capturing the KYC information for sharing with the Central KYC Registry (CKYCR) to the extent applicable to FPIs, are adhered to by Providers for their end-clients. 5. Stock Exchanges and Clearing corporations are directed to: a) take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations; b) bring the provisions of this circular to the notice of their members and also disseminate the same on their websites; and c) communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Report. 6. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Yours faithfully (Sanjay Purao) General Manager Market Regulation Department sanjayp@sebi.gov.in Annexure A. Entities eligible to offer Segregated Nominee Account Structure i. SEBI-registered brokers in IFSC, ii. SEBI registered FPIs (Category I and II), and iii. Trading / Clearing members of international stock exchanges / clearing corporations that are regulated by a member of Financial Action Task Force (FATF) 5

6 Such eligible entities shall be called Segregated Nominee Account Providers. B. Registration of Provider Providers shall be registered with Stock Exchange/ Clearing Corporation in IFSC for providing Segregated Nominee Account services to their end-clients. C. Eligibility criteria/norms for Providers Stock Exchanges shall lay down eligibility criteria/norms for Providers, including net worth, which shall not be less than that prescribed by other leading stock exchanges offering similar structures. The conditions for registration shall include clauses/provisions for obtaining information relating to the end-clients of Providers, as and when sought. D. KYC of end-clients i. Providers shall be required to ensure appropriate due diligence of end-clients as per global standards including KYC and AML compliance before on-boarding clients for offering Segregated Nominee Accounts to them. ii. An end-client shall open Segregated Nominee Account with only one Provider. Legal Entity Identifier (LEI) code may be used to ensure that the end-client does not open Segregated Nominee Account with more than one Provider and trades of an end-client are cleared and settled only through one clearing member. iii. Each end-client shall be assigned a Unique Client Code (UCC), which shall be unique across all endclients of all Providers, by Stock exchange/clearing corporation in IFSC. E. Order entry Unique Client Code shall be used at the time of order entry by the Providers for their end-clients. F. Margin Computation and Reporting i. Margins shall be computed at the end-client level of Provider. ii. Margins shall be grossed up at and collected from Provider. iii. Margin reporting shall be at the level of the Provider. G. Margin Collection i. Margin shall be payable by the end-client to the Segregated Account Provider. However, the margins may be funded by the Provider based on clearly defined bilateral agreement between Provider and the endclient. ii. Stock Exchanges shall ensure that commercial terms and documentation / agreement entered into between Provider and the end-client contains the clause regarding the aforesaid arrangement. H. Monitoring of Position Limits Position limits shall be monitored at end-client level by stock exchanges / clearing corporations. I. Other Risk Management Framework All other provisions relating to risk management as applicable in IFSC shall also be applicable to end-clients of Providers, unless otherwise specified. 6

7 CUSTOM UPDATES [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB- SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) Notification No. 45 /2018 Customs New Delhi, the 23rd May, 2018 G.S.R. (E). - Whereas the Central Government on being satisfied that the import duty leviable on goods falling under heading and of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), should be increased and that circumstances exist which render it necessary to take immediate action. Now, therefore, in exercise of the powers conferred by sub-section (1) of section 8A of the said Customs Tariff Act, the Central Government, hereby directs that the First Schedule to the said Customs Tariff Act, shall be amended in the following manner, namely:- In the First Schedule to the said Customs Tariff Act,- (i) in Section II, in Chapter 8, against tariff item , for the entry in column (4), the entry "100%" shall be substituted. (ii) in Section IV, in Chapter 21, against tariff item , for the entry in column (4), the entry "40%" shall be substituted. [F.No.354/170/2018-TRU] (Mohit Tewari) Under Secretary to the Government of India 7

8 [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY PART II, SECTION 3, SUB- SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) Notification No. 46 /2018-Customs New Delhi, the 23rd May, 2018 G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and sub-section (12) of section 3 of the Customs Tariff Act, 1975 (51 of 1975), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), No. 50/2017-Customs, dated the 30th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide, number G.S.R. 785(E), dated the 30th June, 2017, namely:- In the said notification, in the Table,- (i) serial number 25 and the entries relating thereto shall be omitted; (ii) against serial number 37, for the entry in column (4), the entry 30% shall be substituted; (iii) serial number 102 and the entries relating thereto shall be omitted. [F.No. 354/68/2006- TRU] (Mohit Tewari) Under Secretary to the Government of India Note: The principal notification No. 50/2017-Customs, dated the 30th June, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 785(E), dated the 30th June, 2017 and last amended vide notification No. 44/2018-Customs, dated the 10th April, 2018, published vide number G.S.R. 358 (E), dated the 10th April,

9 [To be published in the Gazette of India, Extraordinary Part ii, Section 3, Sub-Section (I)] Government of India Ministry of Finance (Department of Revenue) (Central Board of Indirect Taxes and Customs) Notification No. 44 /2018-Customs New Delhi, the 24 th May, 2018 S.O. (E)- In exercise of the powers conferred by clause (34) of Section 2 of the Customs Act, 1962 (52 of 1962), the Central Board of Indirect Taxes and Customs, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 40/2012- Custom (N.T.) dated the 2 nd May, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (ii), vide number S.O. 993 (E), dated the 2 nd May, 2012, namely:- In the said notification, in the table, against serial number 3, in column (3) after item no (xxx), the following item shall be inserted, namely:- (xxxa) Section 99A; [F. No. 437/1/2011-Dir (Cus)] Zubair Riaz Director (Custom) Note: The principal notification number 40/2012- Custom (N.T.), dated the 2 nd May, 2012 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub- Section (ii) vide number S.O. 993 (E), dated the 2 nd May, 2012 and was last amended vide notification no. 115/2017-Custom (N.T.) dated the 14 th December, 2017 published vide number S.O (E) dated the 14 th December,

10 [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY PART II, SECTION 3, SUB- SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) Notification No. 45/2018-Customs New Delhi, the 24 th May, 2018 G.S.R. (E) In exercise of the powers conferred by clause (k) of section 157, read with section 99A and clause (ii) of sub-section (2) of Section 158, of the Customs Act, 1962 (52 of 1962) and in suppression of the on-site post clearance audit at the premises of the Importers and Exporters Regulation, 2011, except as respect things done or omitted to be done before such suppression, the Central Board of Indirect Taxes and Customs hereby makes the following regulations, namely Customs Audit Regulations, For full stated regulations, please follow below mentioned link: [F. No. 450/100/2017-Cus. IV (Part-A)] Zubair Riaz Director (Customs) 10

11 [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB- SECTION (i)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) Notification No. 46/ CUSTOMS (N.T.) New Delhi, 25 May, 2018 G.S.R. (E). In exercise of the powers conferred by sub-section (2) of section 75 of the Customs Act, 1962 (52 of 1962) and sub-section (2) of section 37 of the Central Excise Act, 1944 (1 of 1944), read with rules 3 and 4 of the Customs and Central Excise Duties Drawback Rules, 2017, the Central Government hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 89/2017- Customs (N.T.), dated the 21st September, 2017, published vide number G.S.R (E), dated the 21st September, 2017, namely:- In the said notification, in the Schedule, in Chapter - 71,- (i) Against tariff item , in the entry in column (4), for the figures , the figures 2851 shall be substituted; (ii) Against tariff item , in the entry in column (4), for the figures , the figures 2851 shall be substituted. [F. No. 609/36/2018-DBK] (Anand Kumar Jha) Under Secretary to the Government of India Note: The principal notification No. 89/2017-Customs (N.T.), dated the 21st September, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 21st September, 2017 vide number G.S.R. 1178(E), dated the 21st September, 2017 and was last amended by notification No. 8/2018- Customs (N.T.), dated the 22nd January, 2018, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 22nd January, 2018 vide number G.S.R. 50 (E), dated the 22nd January

12 GST UPDATES [To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)] Government of India Ministry of Finance (Department of Revenue) Notification No 10/ Union Territory Tax New Delhi, the 21st May, 2018 Vaisakha, Saka 1940 G.S.R. (E).- In exercise of the powers conferred under sub-section (1) of section 22 of the Union Territory Goods and Services Tax Act, 2017 (No. 14 of the 2017) and section 164 of Central Goods and Services Tax Act, 2017 (No. 12 of 2017) read with clause (d) of sub-rule 14 of rule 138 of the Central Goods and Services Tax Rules, 2017, the Central Government, on the recommendation of the Council, hereby rescinds the notification number G.S.R. 315(E), dated the 31st March, 2018, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 31st March, 2018, with effect from the 25th day of May, [F. No. S /25/2017-ST-I-DoR] (Rajendra Kumar Jatav) Under Secretary to the Govt. of India 12

13 [To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)] Government of India Ministry of Finance (Department of Revenue) Notification No 11/ Union Territory Tax New Delhi, the 21st May, 2018 Vaisakha, Saka 1940 G.S.R. (E). - In exercise of the powers conferred under sub-section (1) of section 22 of the Union Territory Goods and Services Tax Act, 2017 (No. 14 of the 2017) and section 164 of Central Goods and Services Tax Act, 2017 (No. 12 of 2017) read with clause (d) of sub-rule 14 of rule 138 of the Central Goods and Services Tax Rules, 2017, the Central Government, on the recommendation of the Council, hereby rescinds the notification number G.S.R. 319(E) dated the 31st March, 2018, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 31st March, 2018, with effect from the 25th day of May, [F. No. S /25/2017-ST-I-DoR] (Rajendra Kumar Jatav) Under Secretary to the Govt. of India 13

14 Circular No. 3/1/2018-IGST F. No. CBEC/20/16/03/2017- GST Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs GST Policy Wing New Delhi, Dated the 25th May, 2018 To, The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)/ The Principal Directors General/ Directors General (All) Madam/Sir, Subject: Applicability of Integrated Goods and Services Tax (integrated tax) on goods supplied while being deposited in a customs bonded warehouse-reg. Attention is invited to Circular No. 46/2017-Customs dated whereby the applicability of integrated tax on goods transferred/sold while being deposited in a warehouse (hereinafter referred to as the warehoused goods ) was clarified. 2. Various references had been received by the Board on the captioned issue which has now been reexamined by the Board. 3. It is seen that the transfer/sale of goods while being deposited in a customs bonded warehouse is a common trade practice whereby the importer files an into-bond bill of entry and stores the goods in a customs bonded warehouse and thereafter, supplies such goods to another person who then files an exbond bill of entry for clearing the said goods from the customs bonded warehouse for home consumption. 4. It may be noted that as per sub-section (2) of section 7 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the IGST Act ), the supply of goods imported into the territory of India, till they cross the customs frontiers of India, is treated as a supply of goods in the course of inter-state trade or commerce. Further, the proviso to sub-section (1) of section 5 of the IGST Act provides that the integrated tax on goods imported into India would be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the CTA ). Thus, in case of supply of the warehoused goods, the point of levy would be the point at which the duty is collected under section 12 of the Customs Act, 1962 (hereinafter referred to as the Customs Act ) which is at the time of clearance of such goods under section 68 of the Customs Act. 5. It may also be noted that sub-section (8A) has been inserted in section 3 of the CTA vide section 102 of the Finance Act, 2018,with effect from 31st March, 2018,so as to provide that the valuation for the purpose of levy of integrated tax on warehoused imported goods at the time of clearance for home consumption would be either the transaction value or the value as per sub-section (8) of section 3 of the CTA (i.e. valuation done at the time of filing the into-bond bill of entry), whichever is higher. 6. It is therefore, clarified that integrated tax shall be levied and collected at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry and the value addition accruing at each stage of supply shall form part of the value on which the integrated tax would be payable at the time of clearance of the warehoused goods for home consumption. In other words, the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse. 14

15 7. This Circular would be applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse, on or after the 1 st of April, It is requested that suitable trade notices may be issued to publicize the contents of this Circular. 9. Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board. (Upender Gupta) Commissioner (GST) 15

16 DGFT UPDATES Government of India Department of Commerce Directorate General of Foreign Trade To 1. All Regional Authorities of DGFT 2. All Exporters/Members of Trade Policy Circular No. 06 /2018 Date: 22nd May 2018 This Directorate has received references from exporters providing port related services seeking clarification whether the actual service providers rendering the eligible services should be entitled for the SFIS/SEIS benefits or the aggregator of services (Ports). 2. The issue has been examined in this Directorate in the light of the applicable FTP Provisions and through inter-ministerial consultations as well as opinion received from Ministry of Law and Justice. 3. It is clarified that the actual Service Providers (and not Ports) are eligible for SFIS/SEIS benefit in respect of their share of earnings made by performing the notified services under SFIS/SEIS Scheme. 4. The aggregator of services (Ports) shall be entitled for benefits under SFIS/SEIS for services exclusively rendered by them and for which the foreign exchange earnings (or INR payments as allowed under the scheme) are received and retained by them on this account. The Ports cannot claim benefits to the extent of free foreign exchange earnings (or INR payments as allowed under the scheme) simply routed through them as receipt of service charges with regard to services rendered by other actual service providers. 5. It should be ensured that there is no double claim by the aggregator (port) and the actual service providers. 6. This issue with the approval of the Competent Authority Lokesh HD Joint Director General of Foreign Trade 16

17 File No. 01/61/18017IAM19/PC-3 Government of India Ministry of Commerce & Industry Department of Commerce Directorate General of Foreign Trade *** Dated, the 23 May, 2018 To 1. All Exporters/Members of Trade 2. All Regional Authorities of DGFT. 3. All Customs Authorities Policy Circular No. 07/ Subject: Clarification on the term 'Duty' under S. No. 3 of Appendix- 3A of Foreign Trade Policy This Directorate has received reference seeking clarification on whether the term "Duty" appearing in Appendix-3A, SI. No. 03 is "Basic Customs Duty" only or all Customs duties (including BCD + SAD/IGST) 2. The issue has been examined in this Directorate. It is clarified that the term "Duty" used in respect of the items listed in Appendix 3A is to be read as "Basic Customs duties" only and not "all Customs duties (including BCD=SAD/IGST)" 3. This is issued with the approval of the Competent Authority. Lokesh HD Joint Director General of Foreign Trade 17

18 [To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)] Government of India Ministry of Commerce & Industry Department of Commerce Udyog Bhawan, New Delhi Notification No. 8/ New Delhi, the 24 th May, 2018 Subject: Amendment in Para 3.08 (b) of Chapter-3 of FTP S.O. (E) In exercise of power conferred by section 5 of the Foreign Trade (Development and Regulation) Act, 1992 read with paragraph 1.02 of the Foreign Trade Policy, , the Central Government hereby makes the following amendments in the Foreign Trade Policy with immediate effect:- Para no. of FTP Existing Para (b) Such service provider should have minimum net free foreign exchange earnings of US $ 15,000 in preceeding financial year to be eligible for Duty Credit Scrip. For Individual Service Provider and Sole Proprietorship, such minimum net free foreign exchange earnings criteria would be US $ 10,000 in preceding financial year. Amended Para Such service provider should have minimum net free foreign exchange earnings of US $ 15,000 in year of rendering service to be eligible for Duty Credit Scrip. For Individual Service Provider and Sole Proprietorship, such minimum net free foreign exchange earnings criteria would be US $ 10,000 in year of rendering service. Effect of this Notification: The provision in Para 3.08 (b) FTP relating to the threshold level of earnings has been amended to bring in clarity. (Alok Vardhan Chaturvedi) Director General of Foreign Trade dgft@nic.in 18

19 (Corporate Laws and Intellectual Property Rights Consultants) Delhi I Mumbai I Pune I Kanpur Corporate Office: 63/12, First Floor, Main Rama Road, New Delhi Ph: /17, Mob: brijesh@bmcadvisors.in, brijesh@brijeshmathur.com Website: 19