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Tax & Regulatory Updates: August -2019

 

Direct Tax Updates

Clarification regarding taxability of income earned by a non-resident investor from off-shore investments routed through an Alternate Investment Fund reg.
 
In Circular No. 14 /2019 CBDT has clarified regarding taxability of income from investment made by the non –resident investor through these AIFs , outside India (off-shore investment).The Board is of the view that the investment made by category I or category II AIFs are deemed to have been made by the investor directly outside India, it is hereby clarified that any income in the hands of the non resident investor from off shore investment routed through the above category , being a deemed investment outside India by the non resident investor, is not taxable under section 5(2) of the Act. In this regard, CBDT further clarifies that loss arising from the off-shore investment relating to non-resident investor, being an exempt loss, shall not be allowed to be set-off or carried-forward and set off against the income of the Category I or Category II AIF.
 
 

Indirect Tax Updates

 
Issues related to GST on monthly subscription/contribution charged by a Residential Welfare Association from its member
 
In this Circular No. 109/28/2019-GST CBIC has clarified that the subscription/contribution paid by residents to RWAs are exempt from GST if the contribution does not exceed 7500 per month per member. Prior to 25th January 2018, the exemption was available if the contribution did not exceed 5000 per month per member.
 
Clarification in respect of goods sent/taken out of India for exhibition or on consignment basis for export promotion.
 
In this Circular No. 108/27/2019-GST CBIC has clarified that the sending /taking the goods out of India for exhibition or on consignment basis for export promotion do not constitute supply as the said activity does not fall within the scope of Section 7 of the CGST Act and there is no consideration at that point of time. Since such activity is not a supply, the same cannot be considered as zero rated supply as per provisions of Section 16 of the IGST Act. The provision does not apply to the activitirs laid down in Schedule I of the CGST Act which are treated as supply even without consideration.
 
Decisions Approved by the GST Council in its 36th meeting held on 27/07/2019
 
In this press release CBIC has recommended reduction in GST rate on supply of goods and services as follows:-
- The GST Rate on all electric vehicles be reduced from 12% to 5%
- Hiring of electric buses (carrying capacity of more than 12 passengers ) by local authorities be exempt from GST.
New Rates shall be applicable from 1st August 2019.
 
 

FEMA Updates

Liberalisation of External Commercial Borrowings (ECB) Framework
 
Eligible borrowers will now be permitted to raise ECBs for the following purposes from recognised lenders, except foreign branches/ overseas subsidiaries of Indian banks:

 

  1. ECBs with a minimum average maturity period of 10 years for working capital purposes and general corporate purposes. Borrowing by NBFCs for the above maturity for on lending for the above purposes is also permitted.                                                                       
  2.  ECBs with a minimum average maturity period of 7 years can be availed by eligible borrowers for repayment of Rupee loans availed domestically for capital expenditure as also by NBFCs for on-lending for the same purpose. For repayment of Rupee loans availed domestically for purposes other than capital expenditure and for on-lending by NBFCs for the same, the minimum average maturity period of the ECB is required to be 10 years.                                                                                                                                    
  3. It has been decided to permit eligible corporate borrowers to avail ECB for repayment of Rupee loans availed domestically for capital expenditure in manufacturing and infrastructure sector if classified as SMA-2 or NPA, under any one time settlement with lenders. Lender banks are also permitted to sell, through assignment, such loans to eligible ECB lenders, except foreign branches/ overseas subsidiaries of Indian banks, provided, the resultant external commercial borrowing complies with all-in-cost, minimum average maturity period and other relevant norms of the ECB framework.
 
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