Surat Branch E-Newsletter August 2022

SURAT BRANCH OF WIRC OF ICAI

ICAI Bhawan, B/h. VR Mall, Dumas Road, Rundh Magdalla, Surat - 395007.
Ph.: (0261) 3506372/ 73 / 74 / 75, Mob. : +91 98105 82383
E-mail : [email protected] Web Site : www.surat-icai.org

E - Newsletter SURAT BRANCH August 2022

Office Bearers Vice Chairperson : Secretary : Treasurer :
CA. Dushyant Vithlani
Chairperson : CA. Arun Narang CA. Ashwin Bhauwala
CA. Nikesh Kothari 93270 79369 99797 64643 93762 72725

93760 36646

Committee Members : Ex. Officio Member

CA. Shailesh Lakhankiya CA. Manthan Chawat CA. Preetesh Shah CA. Ishwar Jivani
97251 90123 99049 54005 90670 03989 96248 67495

CA. Chimpu Lapsiwala CA. Joni Jain

90042 88880 99092 74436 INDEX 01 From Chairman’s Desk 01

Newsletter Committee : 02 From Editorial Desk 02
03 Brief Analysis of Latest GST Cases 04

Chairperson : 04 Section 194-O 08

CA Shailesh Lakhankiya 05 Can a minor open a DEMAT Account 10
06 Investment Mistakes to be avoided 12
Members : 07 SUMMERY & COMPILATION OF 15

CA. Rajiv Shah CA. Atit Shah CA. Mihir Modi CIRCULAR NO. 177, 178 & 179 22
CA. Kajal Deora 08 Capital Account Transactions 32
CA. Ronak Parekh CA. Jinendra Mehta CA. Sweta Panelia 09 Event Snap Shot 35
10 Library & Reading Room Facility at Branch
CA. Kalpesh Lakhani CA. Kanchan Agarwal

CA. Viral Shah CA. Rahul Agarwal

11 Upcoming Sessions for the Month of August 37

SURAT BRANCH OF WIRC OF ICAI

From Chairman’s Desk:

Dear Professional Colleagues,

I look forward to communicate with you through these Newsletter to keep you abreast with the
developments that are taking place in our branch and our profession. With every communication, I see
time ticking by and feel that there are so many things to do in the limited time at my disposal. However, I
am sure that with relentless pursuit we will be able to carry out the task effectively this year with the
cooperation and support of Surat branch United team and members, who have been my source of
inspiration and strength. Let me take this opportunity to extend my sincere wishes and congratulate to
all.

1st July the Foundation Day of our Institute ICAI was well celebrated in Surat Branch with many
programmes and events including the flag hosting ceremony, Mega Blood donation camp, tree
plantation, CA walk, GST Day celebration event, Kit distribution to underprivileged students etc. and
Cultural event by WICASA Student as well.

I firmly believe that we should always welcome challenges and update in a positive manner.
Therefore, my humble request you to post only positive messages about our profession and country. So
please be careful and avoid supporting any negative messages for the profession or for the country.

Many programmes and initiatives are being taken in upcoming month by Surat Branch of WIRC,
ICAI

Surat branch is going to host / organise National Conference on 13th & 14th August in which topics
are selected on the basis of current opportunities for members of Surat Branch. The theme of the
National Conference is VIBGYOR: Colors of Professions. I am sure that insights and narratives of varied
and new topics by our learned speakers will be great source of knowledge and learning for all the
participants. So kindly register yourself for National Conference-2022.

It was great pleasure for Surat Branch of ICAI that 304 Students passed their CA final exam and
become CA. A felicitation programme is being organised on 15th August for motivating and welcoming
all 304 newly qualified CAs in fraternity. My best wishes for their shining future.

I end up my communication with one a note to join the celebrations of “AZADI KA AMRIT MAHOSTAV”
by joining in “HAR GHAR TIRANGA”

I expect your enthusiastic participation and overwhelming response for the upcoming events.

Thanking you,

Best wishes and regards
Kindly reach out to us on official Branch:-
k [email protected]
# +91 95105 82383
Best wishes and regards

CA. Nikesh Kothari
Chairperson

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From Editorial Desk:
Together, we are committed towards strengthening the foundation of

resurgent India and taking the profession to the newer zeniths
ICAI – President

Dear Members of Surat Branch,
We would be celebrating 75th year of our Independence on 15th August, 2022. Our Government of

India has taken many initiatives to make us aware us about our culture, our glorious history and our values
and achievement through the “AZADI KA AMRIT MAHOTSAV” celebrations since 12th March 2021. At this
juncture, first I wish you all a Happy 75th Independence Day and let's celebrate our Independence Day with
great joy.

Dear members, 31st July 2022 was the last date to file return of Income Tax for non-audited assessee
and as the dates were not extended we all have achieved this milestone successfully with lots of efforts, and I
congratulate each one of you for the same.

The Chartered Accountant act was enacted on 1st July 1949 even before our constitution was enacted.
My point is that nobody can undermine the importance of Audit for any organisation which wants to
progress. But when we compare skills and requirement of an auditor at the time of starting era of our
Independence with current situation, traditional method of audit have given place to more advanced and
system based methods of auditing. The use of technology, automation and Artificial Intelligence in audit will
increase day by day so, we Auditor should make our self well equip by learning these new skill sets.

According to a survey, India today is among one of the most youthful country in the world. And as
majority of the population in the country is represented by skilled and talented youth, the vision for INDIA to
become an Economic Superpower are not far. This Youth power is purely visible presently in CA Profession
as well. May 2022 attempt for Surat City was marked with a great success as 304 Students cleared the
prestigious CA final exam and entered to our noble profession and became part of our fraternity.

On behalf of entire Managing Committee, I congratulate to all the newly qualified CA's. My message to
you will be to always remember that you are representing whole CA Community with your actions. So hold
true to your ethics and hold high standards in your professional life. Success will be yours eventually.

This Newsletter includes insights on Brief Analysis of Latest GST Cases, Section 194-O, Can a minor
open a DEMAT Account, Investment Mistakes to be avoided, Capital Account Transactions, Upcoming CPE
Programme by Surat Branch.

Let's learn together, grow together, shine together and succeed together and take a pledge to make
Surat branch reach newer heights in alignment with our theme of this year “United WE CAN”.

I urge all the Members of Surat Branch who are willing to contribute for E-newsletter, kindly share your
insights on topics of your choice with us on [email protected].
Happy Learning!!
Stay safe and enjoy the ensuing festival and holidays.
CA Shailesh Lakhankiya
Chairperson
Editorial Committee

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ADV. CA. AVINASH PODDAR

Brief Analysis of Latest GST Cases

S r. Issue QR Code for
No. Original Order
1 Issue Can summon be issued where the assessee is providing
documents and information in response to the normal
1. communication by the officer?

2. Whether summon can be issued only as a last resort?

Answer – 1. NO 2. YES

This seems to be a reasonable direction to the respondents as they usually
try to harass the taxpayer by summoning the directors or top officers. This
order makes it very clear that till the documents are being furnished to the
respondents, summon is to avoided. The Hon’ble Court has made it very

clear that if the respondents feel the necessity of issuing summon, they
are free to decide but, 7 days’ time to be given to the person summoned.

2 Issue

Due to search action and the seizure of documents, filing appeal u/s 107
was becoming difficult for the petitioner. Whether delay, if any, would be
condoned?

Answer

Court has directed to the respondents to hand over thedocuments, if
necessary, expeditiously. Court observed that appeal should not be
dismissed on the ground of delay provided it is filed within 2 weeks.

3 Issue

Whether department can detain goods in transit where there is difference
of 1 or 2 numbers between invoice number mentioned in Tax Invoice and
E-Way Bill?

Answer - NO

The circulars which are issued by the board is binding on the departmental

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S r. Issue QR Code for
No. Original Order

officers. Therefore, they are supposed to act in accordance with the
circulars issued. Circular dated 14.09.2018 provides for no action in case of

error in 1 or 2 digits.

4 Issue

Whether bank account of a director of the company can be provisionally
attached where proceeding u/s 67 of the act was initiated against the
company and not against the director?

Answer – NO

Section 83 provides for the empowerment of the Commissioner to
provisionally attach the property including the bank account of the taxable
person. It clearly means that the property or bank account of any person
other than taxable person against whom the proceedings under section 62
or 63 or 64 or 67 or 73 or 74, is not pending cannot be attached and
therefore the Hon’ble Court was please to held that the order of
attachment is without jurisdiction.

5 Issue Whether best judgement order can be passed
1. withoutstating by which method principal amount was
arrived to the best of their knowledge?

2. Whether penalty can be levied without mentioning under
which section penalty is being levied?

Answer – 1. NO 2. NO

The first issue in this was that the best judgement assessment was done by
the learned Assistant Commissioner. The manner in which the amount
was calculated was not having any proper base and explanation. The
officer has also imposed 100% penalty in the order but the section that
was invoked for the imposition of penalty was not specified. Therefore,
the Hon’ble Court was pleased set aside the order of assessment and
remanded the case back to the officer asking for afresh assessment to be
done in 8 weeks.

6 Issue

Whether refund of CGST and IGST can be denied on the ground that his
petitioner’s claim got consolidated under one head of SGST due to
technical error?

Answer – NO

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S r. Issue QR Code for
No. Original Order

In the present matter the error was committed due to new software and
the procedural issue. Therefore, the Hon’ble Court has rightly remanded
back the matter to the file of the respondent authority to verify whether
the petitioner is entitled for refund legally and if yes then the refund to be

made. This exercise to be done within 8 weeks from the date of receipt of
the copy of order. A legal right cannot be withheld merely due to some
procedural issue and in this matter there was issue at the end of the
software.

7 Issue

Whether imposition of IGST on the oxygen concentrators imported as gift
for the personal use is constitutional.?

Answer

Hon’ble Supreme Court has stayed the order of the Hon’ble Delhi HC
which held that the imposition of IGST on oxygen concentrators which are
imported by individuals and are received by them as gifts [i.e. free of cost]
for personal use, is unconstitutional. This is going to be very interesting
how the SC takes this argument that the Hon’ble HC has trenched upon a
pure issue of policy..

8 Issue

Whether the Proper Officer and the Appellate Authority are correct in
rejecting the application for registration where all documents as required
by the law are submitted?

Answer – NO

cement by the Hon’ble Court. As per me now a days due to the increase in
cases pertaining to wrongful availment or utilization of credit or Bogus
invoicing, the department has become very reluctant to give registration.
The fact is merely because some percentage of taxpayers are defrauding
the revenue you cannot victimize everyone. Also, the department cannot
and must not restrict the entry of new business entrepreneurs. Besides
this the officers are empowered to demand for the documents prescribed
under law. They cannot just take some harsh action of denial of
registration merely because the documents asked by them is not supplied
by the applicant seeking registration.

9 Issue

Whether it is deemed that notice, order etc. has been received by the

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S r. Issue QR Code for
No. Original Order

registered person when notice, order etc. has been served through
mediums as specified u/s 169(1) of the CGST Act?

Answer – Yes

Although the provisions of Section 169 provides for various modes of
service but still the practical situation and the facts need not be denied.
And therefore in the given case the Hon’ble Court was kind enough to
direct the respondents to serve copy of the order so that the alternative
statutory remedy can be exhausted by the taxpayer.

10 Issue

Whether the hon’ble high court can be approached praying to refund the
amount paid under coercion where the adjudication is still pending?

Answer – No

The petitioner approached this Hon’ble seeking refund of the money that
was deposited during the visit of officers at the premises of the petitioner.
But the Hon’ble court observed this to be a pre-mature petition and
therefore declined to entertain but still the Hon’ble Court directed the
respondents to proceed with the matter in accordance with law.

k [email protected]
# 98251 13570

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CA ABHINAV SHARMA

Section 194-O

Tax Deducted at Source commonly known as TDS, is a system of deduction of tax at the point of generation of
income. E-Commerce is a huge platform which is growing at an unprecedented rate all over the world. Thus, to
widen the Tax base, In the Union Budget 2020, Section 194-O was introduced
According to Section 194-O, an E-Commerce operator is required to deduct TDS for facilitating any sale of
goods or providing services through an e-Commerce participant.
It came into effect from 31st October, 2020
Now to get a better clarity, let’s go deeper to understand what E-commerce operator and participants are and
what will the impact from the introduction be.
Who are e-commerce operator and participants?
E-Commerce Operator: An E-Commerce operator is a person who owns, operates, or manages a
digital/electronic facility for the sale of goods and services. He is responsible for making payments to the e-
Commerce participant on such sales. For example, Amazon, Flipkart, Snapdeal, Swiggy, Zomato, Uber etc.
E-Commerce Participant: An E-Commerce participant means a person resident in India selling goods or
providing services or both, including digital products, through digital or electronic facility or platform for
electronic commerce.
What does the Section 194-O say?
Where sale of goods or provision of services of an e-commerce participant is facilitated by an e commerce
operator through its digital or electronic facility or platform,
E-Commerce operators should deduct TDS @1%
at the time of credit of the amount of sale of goods, services, or both to the account of an e commerce
participant or at the time of making payment to an e-Commerce participant, by any other mode, whichever is
earlier If the E-Commerce participant does not furnish PAN, TDS must be deducted at the rate of 5%, as per
provisions of Section 206AA.
Exceptions
E-commerce operator is not required to deduct TDS if, the gross amount of sale of goods, services, or both
during the previous year of the E-commerce participant being a resident individual or HUF does not exceed Rs
5 lakh and if the participant has furnished his PAN or Aadhaar.

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No TDS will be deducted if the participant is a non-resident.
Example
Pre TDS scenario
If Mr. A bought gadget from M/s E-retail through an e-commerce operator for ₹10,000, M/s/ Eretail received
₹9,000 for such sale (after deduction of commission, service fee etc.) from the ecommerce operator.
Post TDS scenario
Under the provisions of section 194-O, the e-commerce operator will now deduct tax at source at 1% before
remitting the payment to M/s. E-retail i.e.
Amount paid by customer 10,000
Less: Commission/ service fee 1,000
Less: TDS @1% of 10,000= 100
Amount credited or paid to M/s E-retail’s account = 8,900
When TDS is to be deducted?
For example, M/s. E-retail is selling its products through Flipkart. Mr. A buys this product online from M/s E-
retail for 49,500 on 10th October 2020.
Flipkart credits the account of M/s E-retail on 10th October 2020, but Mr. A makes the payment directly to M/s
E-retail on 25th October 2020.
Here, Flipkart is required to deduct TDS at the time of credit to the party or making payment, whichever is
earlier.
In this case, TDS should be deducted on 10th October 2020.
Thus, the income tax department plans to bring the unorganized sector into the tax net and widen
the overall tax base. The move to tax e-commerce transactions at source was one way to reduce litigation.

# 84602 75778
k [email protected]

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CA SHRIGOPAL MALANI

Can a minor open a DEMAT Account

What is Demat account?
Demat Account is an account that is utilized to buy, sell and hold shares and securities in electronic format.
The full name of Demat account is a dematerialized account. In India, NSDL and CDSL are depositories which
provide free Demat Account services. Demat Account is the first and foremost requirement for trading in
shares, Investment in IPO etc.

Can a demat account be opened for a minor?
Yes. Demat account can be opened in the name of a minor. The account will be operated by a guardian till the
minor becomes major. Guardian has to be the father or in his absence mother. In absence of both, father or
mother, the guardian can be appointed by court.

Can a trading account be opened in the name of a minor?
Trading account can be opened in the name of the minor only for the sole purpose of sale of securities which
minor has possessed by way of investment in IPO (Initial Public Offer), inheritance, corporate action, off
market transfers under the following reason like Gift, Donation, Transfer between family members etc.
That means Trading in open market is not allowed in Minor’s account but applying IPO is allowed in Minor’s
Demat Account.
However, such an account will be operated by the natural guardian till the minor becomes a major.

Does minor need a bank account before opening a demat or trading account?
No, a separate bank account on minor’s name is not required. Simply add minor to any of your (Guardian)
bank account. This is sufficient to open demat / trading account.
Anyway, for tax purpose, minor income is added to the parent’s income, it doesn’t make sense to have a
separate bank account
How to apply for IPO in Minor’s Demat Account?
Most of the intermediaries do not allow applying for IPO directly through their application. However, a minor

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can use net banking ASBA with their demat account details to apply.
What are the income tax implications in the case of Minor?
The minor’s income is added in father or mother whose income is more. The provision of Income tax says:
“Any income that accrues or is paid to a minor, other than income earned by minor by his talent or skills, is
added to the parent’s income under section 64(1A) and the parent will be taxed just like if it were their own
income.”
Whether the natural guardian and the minor are required to comply with know your client (KYC) norms at the
time of opening demat/ trading account for the minor?
Yes. The guardian and the minor have to strictly comply with the applicable KYC norms.
Can a minor’s demat/ trading account be continued when he/she becomes major?
Yes. A minor’s demat/ trading account can be continued when the minor becomes major. However, on
attaining majority, the erstwhile minor should confirm the balance in his/her account and he/she has to
complete formalities as are required for opening a demat/ trading account to continue in the same
account/s.

# +91 88662 52846
k [email protected]

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CA Kanchan Agarwal

Investment Mistakes to be avoided

Since the pandemic hit the world very hard in 2020, people have realized the importance of multiple sources of
income, As a result, people started investing in equities, mutual funds, Real estate, and ETFs. People also
started monetizing their passion to have that extra amount of money.

In the need of creating that extra source of income, people started investing in equities, and mutual funds even
without having proper knowledge or researching about the avenues in which they are investing their hard-
earned money.

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In this article, I will discuss mistakes people make while investing.
Goals
People start their investment journey withoul!ll!,in.::.g goals like how many years they want to remain
invested and at what percent are not clear if they want to invest in the long term or short term.

FOMO
Fear of missing out is the new trend, People start investing in the fear "Kahin hum Piche na reh jayein" If our
friends and family members will earn more than me.
People even wonder if they don't start investing they will not form part of the talk of the town or get together.

No Diversification or Asset Allocation.

Beginners in their investment journey underestimate the importance of diversification of assets. Some invest
totally in equities ignoring other investment options such as debt funds, dividend-yielding equities, mutual
funds, and index funds.

No Risk calculation

Calculating risk-taking capacity according to age, and dependent on other factors make investment less risky.
Beginners without considering these factors are likely to make investment mistakes.

No Self Assessment

Nowadays every investor wants to be Rakesh Junjunhwala, Damani, or Warren Buffet by investing in the same
stocks or same companies in which the successful investors have parked their money underestimating the fact
that they have early access to crucial news of the company. Till the time a common man gets the news about
the company these investors have already withdrawn their money.Overlapping Historical Returns with Future
Expectations

Investors depending upon the returns given in the past are often misinterpreted as future returns too
overlooking the fact about inflation, economic situation, company product or service demand in the future.

Prey to Bear Market

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"Darr aage jeet hai", is the slogan to be recited in the bear market. Investors start withdrawing money from the
market or stop their SIP due to correction or downfall in the market, which is like "Aa Behl Mujhe maar", selling
in low and purchasing in high i: the blunder which is made by the investors during Bear Market.
Financial Education
# 78200 85385
k [email protected]

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CA HARDIK P SHAH

SUMMERY & COMPILATION OF CIRCULAR SUMMERY & COMPILATION OF
CIRCULAR NO. 177, 178 & 179 (ISSUED ON DT. 03.08.2022)

Circular No. 177 / 10 / 2022 Dt. 03.08.2022

Subject: Clarifications regarding Applicable GST Rates & Exemptions on certain Services.

The issue-wise clarifications as recommended by the GST Council are below:

(1) It is clarified that past cases of payment of GST on supply of Ice-Cream by Ice-Cream Parlors
@5% without ITC shall be treated as fully GST paid to avoid unnecessary litigation. Since the
decision is only to regularize the past practice, no refund of GST shall be allowed, if already
paid at 18%. With effect from Dt. 06.10.2021, the Ice Cream Parlors are required to pay GST on
supply of Ice-Cream at the rate of 18% with ITC.

(2) It is clarified that the amount or fee charged from prospective students for entrance or
admission, or for issuance of eligibility certificate to them in the process of their
entrance/admission as well as the fee charged for issuance of migration certificates by
educational institutions to the leaving or ex-students is covered by exemption under Sr. No. 66
of Notification No. 12 / 2017 - CT (Rate) Dt. 28.06.2017.

(3) It is clarified that service by way of storage or warehousing of cotton in ginned and or baled
form was covered under Entry 24B of Notification No. 12 / 2017 - CT (Rate) Dt. 28.06.2017 in
the category of raw vegetable fibres such as cotton. It may, however be noted that this
exemption has been withdrawn w.e.f 18.07.2022.

(4) It is clarified that if sanitation and conservancy services are procured by Indian Army or any
other Government Ministry / Department which does not perform any functions listed in the
11th and 12th Schedule, in the manner as a local authority does for the general public, the
same are not eligible for exemption under Sr. No. 3 and 3A of Notification 12/2017- Central Tax
(Rate).

(5) It is clarified that the “Sale of Space for Advertisement in Souvenir Book” is covered under Sr.
No. (i) of Entry 21 of Notification No. 11 / 2017 – CT (Rate) and attracts GST @ 5%.

(6) It is clarified that Renting of Trucks and other Freight Vehicles with Driver for a period of time is
a “Service of Renting of Transport Vehicles” with operator falling under Heading 9966 and not
service of “Transportation of Goods by Road”. This being so, it is not eligible for exemption
under Sr. No. 18 of Notification No. 12 / 2017 - CT (Rate) Dt. 28.06.2017. On such rental
services of goods carriages, where the cost of fuel is in included in the consideration charged

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from the recipient of service, GST rate has been reduced from 18% to 12% with effect from
18.07.2022. Prior to 18.07.2022, it attracted GST at the rate of 18%.

(7) it is clarified that location charges or preferential location charges (PLC) paid upfront in
addition to the lease premium for long term lease of land to the State Government Industrial
Development Corporations or Undertakings or by any other entity having 20 per cent or more
ownership of Central Government, State Government, Union territory to the industrial units
or the developers in any industrial or financial business area constitute part of upfront amount
charged for long term lease of land and are eligible for the same tax treatment, and thus
eligible for exemption under Sr. No. 41 of Notification No. 12 / 2017 - CT (Rate) Dt. 28.06.2017.

(8) It is clarified that supply of all goods & services are taxable unless exempt or declared as
'neither a supply of goods nor a supply of service'. Services provided by the “Guest Anchors” in
lieu of honorarium attract GST liability. However, guest anchors whose aggregate turnover in a
financial year does not exceed Rs 20 lakhs (Rs 10 lakhs in case of special category states) shall
not be liable to take registration and pay GST.

(9) It is clarified that additional fee collected in the form of higher toll charges from vehicles not
having Fastag is essentially payment of toll for allowing access to roads or bridges to such
vehicles and may be given the same treatment as given to toll charges and hence will be
exempted as Entry 23 of Notification No. 12 / 2017 - CT (Rate) Dt. 28.05.2017 exempts service
by way of access to a road or a bridge on payment of toll charges.

(10) It is clarified that services by way of IVF are also covered under the definition of health care
services for the purpose of Sr. No. 74 of Notification No. 12 / 2017 - CT (Rate) Dt. 28.06.2017
and hence the exemption will be available.

(11) It is clarified that Sale of Land, it may be sold either as it is or after some development such as
levelling, laying down of drainage lines, water lines, electricity lines, etc. i.e. developed land, is
also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax
Act, 2017 and accordingly does not attract GST. However, it may be noted that any service
provided for development of land, like levelling, laying of drainage lines (as may be received by
developers) shall attract GST at applicable rate for such services.

(12) It is clarified that where the Body Corporate hires the Motor Vehicle (for Transport of
Employees etc.) for a period of time, during which the Motor Vehicle shall be at the disposal of
the Body Corporate, the service would fall under Heading 9966 (Renting of Motor Vehicle
designed to carry Passengers), and the Body Corporate shall be liable to pay GST on the same
under RCM.

However, where the Body Corporate avails the Passenger Transport Service for specific
journeys or voyages and does not take vehicle on rent for any particular period of time, the
service would fall under Heading 9964 (Service of Transportation of Passengers) and the Body
Corporate shall not be liable to pay GST on the same under RCM.

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(13) It is clarified that “charter or hire” excluded from the Sr. No. 15 (b) of Notification No. 12 / 2017
– CT (Rate) Dt. 28.06.2017, is “charter or hire of a motor vehicle for a period of time”, where the
renter defines how and when the vehicles will be operated, determining schedules, routes and
other operational considerations. In other words, the said exemption would apply to
passenger transportation services by non-air conditioned contract carriages falling under
Heading 9964 where according to explanatory notes, transportation takes place over pre-
determined route on a pre-determined schedule. The exemption shall not be applicable
where contract carriage is hired for a period of time, during which the contract carriage is at
the disposal of the service recipient and the recipient is thus free to decide the manner of
usage (route and schedule) subject to conditions of agreement entered into with the service
provider.

(14) It is clarified that the exemption under Sr. No 17(d) of Notification No. 12 / 2017 – CT (Rate) Dt.
28.06.2017 would apply to tickets purchased for transportation from one point to another
irrespective of whether the ferry is owned or operated by a private sector enterprise or by a
PSU / government. It is further clarified that, the expression 'public transport' used in the
exemption notification only means that the transport should be open to public. It can be
privately or publicly owned. Only exclusion is on transportation which is predominantly for
tourism, such as services which may combine with transportation, sightseeing, food and
beverages, music, accommodation such as in Shikara, Cruise etc.

Circular No. 178 / 10 / 2022 Dt. 03.08.2022

Subject: GST applicability on Liquidated Damages, Compensation and Penalty arising out of Breach of
Contract or other Provisions of Law.

Liquidated Damages

Where the amount paid as 'liquidated damages' is an amount paid only to compensate for injury, loss
or damage suffered by the aggrieved party due to breach of the contract and there is no agreement,
express or implied, by the aggrieved party receiving the liquidated damages, to refrain from or
tolerate an act or to do anything for the party paying the liquidated damages, in such cases liquidated
damages are mere a flow of money from the party who causes breach of the contract to the party who
suffers loss or damage due to such breach. Such payments do not constitute consideration for a
supply and are not taxable.

Examples of such cases are damages resulting from damage to property, negligence, piracy,
unauthorized use of trade name, copyright, etc. Other examples that may be covered here are the
penalty stipulated in a contract for delayed construction of houses. It is a penalty paid by the builder
to the buyers to compensate them for the loss that they suffer due to such delayed construction and
not for getting anything in return from the buyers. Similarly, forfeiture of earnest money by a seller in
case of breach of 'an agreement to sell' an immovable property by the buyer or by Government or
local authority in the event of a successful bidder failing to act after winning the bid, for allotment of
natural resources, is a mere flow of money, as the buyer or the successful bidder does not get anything

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in return for such forfeiture of earnest money. Forfeiture of Earnest money is stipulated in such cases
not as a consideration for tolerating the breach of contract but as a compensation for the losses
suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being
merely flow of money are not a consideration for any supply and are not taxable. The key in such cases
is to consider whether the impugned payments constitute consideration for another independent
contract envisaging tolerating an act or situation or refraining from doing any act or situation or simply
doing an act. If the answer is yes, then it constitutes a 'supply' within the meaning of the Act,
otherwise it is not a “supply”.

If a payment constitutes a consideration for a supply, then it is taxable irrespective of by what name it
is called; it must be remembered that a “consideration” cannot be considered de hors an
agreement/contract between two persons wherein one person does something for another and that
other pays the first in return. If the payment is merely an event in the course of the performance of the
agreement and it does not represent the 'object', as such, of the contract then it cannot be considered
'consideration'. For example, a contract may provide that payment by the recipient of goods or
services shall be made before a certain date and failure to make payment by the due date shall attract
late fee or penalty. A contract for transport of passengers may stipulate that the ticket amount shall be
partly or wholly forfeited if the passenger does not show up. A contract for package tour may stipulate
forfeiture of security deposit in the event of cancellation of tour by the customer. Similarly, a contract
for lease of movable or immovable property may stipulate that the lessee shall not terminate the
lease before a certain period and if he does so he will have to pay certain amount as early termination
fee or penalty. Some banks similarly charge pre- payment penalty if the borrower wishes to repay the
loan before the maturity of the loan period. Such amounts paid for acceptance of late payment, early
termination of lease or for pre-payment of loan or the amounts forfeited on cancellation of service by
the customer as contemplated by the contract as part of commercial terms agreed to by the parties,
constitute consideration for the supply of a facility, namely, of acceptance of late payment, early
termination of a lease agreement, of pre- payment of loan and of making arrangements for the
intended supply by the tour operator respectively. Therefore, such payments, even though they may
be referred to as fine or penalty, are actually payments that amount to consideration for supply, and
are subject to GST, in cases where such supply is taxable. Since these supplies are ancillary to the
principal supply for which the contract is signed, they shall be eligible to be assessed as the principal
supply, as discussed in detail in the later paragraphs. Naturally, such payments will not be taxable if the
principal supply is exempt.

Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment
before the minimum agreed period

An employer carries out an elaborate selection process and incurs expenditure in recruiting an
employee, invests in his training and makes him a part of the organization, privy to its processes and
business secrets in the expectation that the recruited employee would work for the organization for a
certain minimum period. Premature leaving of the employment results in disruption of work and an
undesirable situation. The provisions for forfeiture of salary or recovery of bond amount in the event

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of the employee leaving the employment before the minimum agreed period are incorporated in the
employment contract to discourage non-serious candidates from taking up employment. The said
amounts are recovered by the employer not as a consideration for tolerating the act of such
premature quitting of employment but as penalties for dissuading the non-serious employees from
taking up employment and to discourage and deter such a situation. Further, the employee does not
get anything in return from the employer against payment of such amounts. Therefore, such amounts
recovered by the employer are not taxable as consideration for the service of agreeing to tolerate an
act or a situation.

Compensation for not collecting Toll Charges

In the wake of demonetization, NHAI directed the concessionaires (toll operators) to allow free access
of toll roads to the users from 08.11.2016 to 1.12.2016 for which the loss of toll charge was paid as
compensation by NHAI as per the instructions of Ministry of Road Transportation and Highways. The
toll reimbursements were calculated based on the average monthly collection of toll. A question
arose whether the compensation paid to the concessionaire by project authorities (NHAI) in lieu of
suspension of toll collection during the demonetization period (from 08.11.2016 to 01.12.2016) was
taxable as a service by way of agreeing to refrain from collection of toll from users.It has been clarified
vide Circular No. 212/2/2019-ST dated 21.05.2019 that the service that is provided by toll operators is
that of access to a road or bridge, toll charges being merely a consideration for that service. During the
period from 8.11.2016 to 1.12.2016, the service of access to a road or bridge continued to be provided
without collection of toll from users. Consideration came from the project authority. The fact that for
this period, for the same service, consideration came from a person other than the actual user of
service does not mean that the service has changed.

Late Payment Surcharge or Fee

The facility of accepting late payments with interest or late payment fee, fine or penalty is a facility
granted by supplier naturally bundled with the main supply. It is not uncommon or unnatural for
customers to sometimes miss the last date of payment of electricity, water, telecommunication
services etc. Almost all service providers across the world provide the facility of accepting late
payments with late fine or penalty. Even if this service is described as a service of tolerating the act of
late payment, it is an ancillary supply naturally bundled and supplied in conjunction with the
principal supply, and therefore should be assessed as the principal supply. Since it is ancillary to
and naturally bundled with the principal supply such as of electricity, water, telecommunication,
cooking gas, insurance etc. it should be assessed at the same rate as the principal supply. However, the
same cannot be said of Cheque dishonor fine or penalty as discussed in the preceding paragraphs.

Cancellation Charges

A supply contracted for, such as booking of hotel accommodation, an entertainment event or a
journey, may be cancelled by a customer or may not proceed as intended due to his failure to show up
for availing the same at the designated place and time. The supplier may allow cancelation of supply
by the customer within a certain specified time period on payment of cancellation fee as per

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commercial terms of the contract. In case the customer does not show up for availing the service, the
supplier may retain or forfeit part of the consideration or security deposit or earnest money paid by
the customer for the intended supply.

It is a common business practice for suppliers of services such as hotel accommodation, tour and
travel, transportation etc. to provide the facility of cancellation of the intended supplies within a
certain time period on payment of cancellation fee. Cancellation fee can be considered as the charges
for the costs involved in making arrangements for the intended supply and the costs involved in
cancellation of the supply, such as in cancellation of reserved tickets by the Indian Railways.

Services such as transportation travel and tour constitute a bundle of services. The transportation
service, for instance, starts with booking of the ticket for travel and lasts at least till exit of the
passenger from the destination terminal.

All services such as making available an online portal or convenient booking counters with basic
facilities at the transportation terminal or in the city, to reserve the seats and issue tickets for reserved
seats much in advance of the travel, giving preferred seats with or without extra cost, lounge and
waiting room facilities at airports, railway stations and bus terminals, provision of basic necessities
such as soap and other toiletries in the wash rooms, clean drinking water in the waiting area etc. form
part and parcel of the transportation service; they constitute the various elements of passenger
transportation service, a composite supply.. The facilitation service of allowing cancellation against
payment of cancellation charges is also a natural part of this bundle. It is invariably supplied by all
suppliers of passenger transportation service as naturally bundled and in conjunction with the
principal supply of transportation in the ordinary course of business.

Therefore, facilitation supply of allowing cancellation of an intended supply against payment of
cancellation fee or retention or forfeiture of a part or whole of the consideration or security deposit in
such cases should be assessed as the principal supply. For example, cancellation charges of railway
tickets for a class would attract GST at the same rate as applicable to the class of travel (i.e., 5% GST on
first class or air-conditioned coach ticket and nil for other classes such as second sleeper class). Same
is the case for air travel.

Accordingly, the amount forfeited in the case of non-refundable ticket for air travel or security deposit
or earnest money forfeited in case of the customer failing to avail the travel, tour operator or hotel
accommodation service or such other intended supplies should be assessed at the same rate as
applicable to the service contract, say air transport or tour operator service, or other such services.

However, as discussed above, forfeiture of earnest money by a seller in case of breach of 'an
agreement to sell' an immovable property by the buyer or such forfeiture by Government or local
authority in the event of a successful bidder failing to act after winning the bid for allotment of natural
resources, is a mere flow of money, as the buyer or the successful bidder does not get anything in
return for such forfeiture of earnest money. Forfeiture of earnest money is stipulated in such cases
not as a consideration for tolerating the breach of contract but as a compensation for the losses
suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being

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merely flow of money are not a consideration for any supply and are not taxable.
Circular No. 179 / 11 / 2022 Dt. 03.08.2022
Subject: Clarification regarding GST Rates & Classification (Goods) based on the Recommendations of the

GST Council in its 47th Meeting.
(1) Tt is clarified that electrically operated vehicle is to be classified under HSN 8703 even if the

battery is not fitted to such vehicle at the time of supply and thereby attract GST at the rate of
5% in terms of entry 242A of Schedule I of Notification No. 1 / 2017 - Central Tax (Rate).
(2) It is clarified that Sr. No. 123 in Schedule - I to the Notification No. 1 / 2017 - CT (Rate) Dt.
28.06.2017 covers “Minor Polished Stones”.
(3) It is hereby clarified that Mangoes, Fresh falling under CETH 0804 are exempt; Mangoes
(Sliced and Dried), falling under CETH 0804 are chargeable to a Concessional Rate of 5%; while
all other forms of Dried Mango, including Mango Pulp, attract GST at the Rate of 12%. To bring
absolute clarity, the relevant entry at Sr. No. 16 of Schedule-II of Notification No. 1 / 2017 - CT
(Rate), Dt. 28.06.2017, has been amended vide Notification No. 6 / 2022 – CT (Rate), Dt.
13.07.2022.
(4) It is clarified that the supply of Treated Sewage Water, falling under CETH 2201, is exempt
under GST. Further, to clarify the issue, the word 'purified' is being omitted from the above-
mentioned entry vide Notification No. 7 / 2022 - CT (Rate), Dt. 13.07.2022.
(5) It is clarified that the condition of 90 per cent. or more fly ash content applied only to Fly Ash
Aggregates and not to fly ash bricks and fly ash blocks. Further, with effect from Dt. 18.07.2022
the condition is omitted from the description.
(6) It is hereby clarified that the goods like Chilka, Khanda, Churi, among others, are obtained
which are preferred as cattle feed by dairy industry for better palatability and higher nutritive
value and used as cattle feed ingredient are appropriately classifiable under CETH 2302 and
attract GST at the rate of 5% vide Sr. No. 103A of Schedule-I of Notification No. 1/2017 - CT
(Rate), Dt. 2806.2017 and that for the past, the matter would be regularized on as is basis.

# 98255 10422
k [email protected]

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CA. KAMLESH GAJERA

Capital Account Transactions

As you know, under FEMA, all the Current Account transactions are freely allowed to be undertaken unless it is
prohibited or restricted but all the Capital Account transactions are prohibited to be undertaken unless
permitted or allowed by RBI.

Transactions Generally (Primarily) Unless it is specifically
Current Account Allowed Prohibited or restricted
Current Account Prohibited
Allowed

As per Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000

Notification No. FEMA 1 /2000-RB dated 3rd May 2000, the followings are the PERMISSIBLE capital account
transactions.

(A) transactions, specified in Schedule I, of a person resident In India;

(B) transactions, specified in Schedule II, of a person resident outside India.

Schedule I

No. Permissible Transaction
a Investment by a person resident in India in foreign securities
b Foreign currency loans raised in India and abroad by a person resident in India
c Transfer of immovable property outside India by a person resident in India
d Guarantees issued by a person resident in India in favour of a person resident outside India
e Export, import and holding of currency/currency notes
f Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India
g Maintenance of foreign currency accounts in India and outside India by a person resident in India
h Taking out of insurance policy by a person resident in India from an insurance company outside India
I Loans and overdrafts by a person resident in India to a person resident outside India
j Remittance outside India of capital assets of a person resident in India
k Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives

abroad by a person resident in India.

Schedule II

No. Permissible Transaction
a Investment in India by a person resident outside India, that is to say,

i) issue of security by a body corporate or an entity in India and investment therein by a person
resident outside India; and
ii) investment by way of contribution by a person resident outside India to the capital of a firm or
a proprietorship concern or an association of persons in India.

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No. Permissible Transaction
b Acquisition and transfer of immovable property in India by a person resident outside India.
c Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India.
d Import and export of currency/currency notes into/from India by a person resident outside India.
e Deposits between a person resident in India and a person resident outside India
f Foreign currency accounts in India of a person resident outside India
g Remittance outside India of capital assets in India of a person resident outside India

Further, the PERMISSIBLE capital account transactions can be divided into two parts as under.
(1) Automatic Route
(2) Approval Route

Let's discuss point no. (a) of Schedule-I today.

(a) Investment by a Person Resident in India (PRI) in foreign securities

Let's take definition of person given under section 2(u) of the FEMA Act, 1999
(u) “person” includes—

(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and
(vii) any agency, office or branch owned or controlled by such person;
Now, let's see, what is the meaning of “foreign security”. The definition is given under section 2(o) of the Act.
“foreign security” means any security, in the form of shares, stocks, bonds, debentures or any other
instrument denominated or expressed in foreign currency and includes securities expressed in foreign
currency, but where redemption or any form of return such as interest or dividends is payable in Indian
currency;
As per section 2(m)
“foreign currency” means any currency other than Indian currency.
As per section 2(za)
“security” means shares, stocks, bonds and debentures, Government securities as defined in the Public Debt
Act, 1944 (18 of 1944), savings certificates to which the Government Savings Certificates Act, 1959 (46 of 1959)
applies, deposit receipts in respect of deposits of securities and units of the Unit Trust of India established
under sub-section (1) of section 3 of the Unit Trust of India Act, 1963 (52 of 1963) or of any mutual fund and
includes certificates of title to securities, but does not include bills of exchange or promissory notes other than

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Government promissory notes or any other instruments which may be notified by the Reserve Bank as security
for the purposes of this Act;

Head Transaction Regulation/Rule/Master Corresponding
Direction
Notification FEMA Section(s)
FEM (Permissible Capital
Capital All Account Transactions) No.1 dated Sec.6(2) read
Account Regulations, 2000 03.05.2000 with Sec.47(2)
Transactions

Investment Foreign Exchange Management FEMA 120/ Sec.6(3)(a)
In Securities (Transfer or Issue of Any RB-2004 dated read with Sec.47

Foreign Security) Regulations, 07.07.2004 NA
2004 (ODI Regulation)
RBI/FED/2015
FED Master Direction No. -16/10 dated
15/2015-16 updated on 01.01.2016

24.06.2021

For the purpose of better understanding, we can divide the ODI Regulation FEMA 120-RB and Master Direction
as under.

Sr. No. Part Regulation Particulars
1 1 to 4 Definition, prohibition on issue or transfer of foreign security, Purchase
I and sale of foreign security by PRI
2 5 to 18 Direct investment outside India
3 II 19 to 20 Investment abroad by an individual in India
4 III Prohibition on issue of foreign security by person resident in India
21 (This regulation is related to FCCB (Foreign Currency Convertible Bond)
5 and now shifted to FEMA (Borrowing and Lending) Regulations, 2018-
6 22 FEMA 3(R)/2018-RB.)
7 23 Permission for purchase/acquisition of foreign securities in certain cases
24 Transfer of foreign securities by person resident in India (PRI)
8 General Permission for acquisition of foreign securities as qualification
9 25 / rights shares
26 Prior permission of Reserve Bank in certain cases
Investment by Mutual Funds

Sr. No. Master Direction Particulars

1 Section General
2 Section-A Direct Investment or Financial Commitment (FC) outside India
3 Section-B Other Investments in foreign securities
Section-C

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Overseas Direct Investment (ODI)

When an investment signifying a long-term interest in the foreign entity (JV or WOS) outside India is
done by the Indian entities. It can be done by way of: -

contribution to capital or

subscription to Memorandum of Association of a foreign entity or

purchase of existing shares of foreign entity (market purchase or private placement or through
stock exchange)

loans

guarantee

Note: -

Portfolio Investment is not included in the definition of ODI

Portfolio Investment (PI) is not defined in the FEM Act, 1999. But we can differentiate as under.

Particulars ODI PI

Purpose of making Generally, earning handsome Generally, earning additional passive
investment
business/venture profit is the motive income is the motive of investment

of investment

Investment and category Strategic and as an active Routine investment as a passive
ENTERPRENEUR INVESTOR

Filing Requirement ODI has some Annual compliances or No such requirement except in

filing requirements certain cases

Substantial Control It is an investment for substantial No such substantial control.
control either singly or jointly.

Stake Investment stake is generally more Investment stake is generally less
than 10% of the total capital base. than 10% of the total capital base.

Duration It is, generally, for a long term. Generally, short term investment

Only Resident Individual and listed company are allowed to invest by way of Portfolio Investment.

For Resident Individual- Subject to LRS Limit

For Listed Indian Company- Up to 50% of net worth as on the date of the last audited balance sheet

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Resident Individual can only invest through equity shares or Compulsory Convertible
Preference Shares (CCPS)
Here, JV means Joint Venture and WOS means Wholly Owned Subsidiary.
ODI does not include Liaison Office, Project Office, Branch Office (LOPOBO) opened or
established outside India by the Person Resident in India (PRI) as it is not a direct investment & it
is in unincorporated entity regulated by other RBI regulation.

The following are the eligible entities for ODI
a. A company incorporated in India
b. A body created under the Act of Parliament
c. A partnership firm registered under the Indian Partnership Act, 1932
d. A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
e. Any other entity in India as may be notified by the RBI

Vide A.P. (DIR Series) Circular No. 48 dated December 09, 2014, with effect from 21st
November, 2014, Domestic Venture Capital Fund (VCF)/Alternative Investment Fund
registered with SEBI may invest in equity or equity linked instruments of off-shore Venture
Capital Undertakings subject to an overall limit described therein.
f. Resident Individual
Vide Notification No. 263, with effect from 5th August, 2013, a resident individual can make
investment up to the limit specified in the Liberalized Remittance Scheme (LRS) i.e. USD 250000
per financial year.
Note:
AOP/BOI, HUF etc. are not allowed to invest abroad
Unregistered Partnership Firm or Proprietorship firm (Proprietary concern) can invest abroad
only after prior approval of RBI if certain conditions mentioned below are fulfilled.

(a) The proprietorship concern / unregistered partnership firm in India is classified as 'Status
Holder' as per the Foreign Trade Policy issued by the Ministry of Commerce and Industry, Govt.
of India from time to time;

(b) The proprietorship concern / unregistered partnership firm in India has a proven track record,
i.e., the export outstanding does not exceed 10% of the average export realisation of the
preceding three years and a consistently high export performance;

(c) The Authorised Dealer bank is satisfied that the proprietorship concern / unregistered
partnership firm in India is KYC (Know Your Customer) compliant, engaged in the proposed
business and has turnover as indicated;

(d) The proprietorship concern / unregistered partnership firm in India has not come under the
adverse notice of any Government agency like the Directorate of Enforcement, Central Bureau
of Investigation, Income Tax Department, etc. and does not appear in the exporters' caution list

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(e) of the Reserve Bank or in the list of defaulters to the banking system in India; and
whichever
The amount of proposed investment (or financial commitment) outside India does not exceed
(a) 10 per cent of the average of last three years' export realisation or 200 per cent of the net

(b) owned funds of the proprietorship concern/ unregistered partnership firm in India,
is lower.

Registered Trusts and Societies engaged in manufacturing/ educational/ hospital sector are
allowed to make investment (or financial commitment) in the same sector(s) in a JV/WOS
outside India, with the prior approval of the Reserve Bank. The eligible criteria is as under.

Trust: -

i) The Trust should be registered under the Indian Trust Act, 1882;

ii) The Trust deed permits the proposed investment overseas;

iii) The proposed investment should be approved by the trustee/s;

iv) The AD Category – I bank is satisfied that the Trust is KYC (Know Your Customer)
compliant and is engaged in a bonafide activity;

v) The Trust has been in existence at least for a period of three years;

vi) The Trust has not come under the adverse notice of any Regulatory / Enforcement
agency like the Directorate of Enforcement, Central Bureau of Investigation (CBI), etc.

Society: -

i) The Society should be registered under the Societies Registration Act, 1860.

ii) The Memorandum of Association and rules and regulations permit the Society to make
the proposed investment which should also be approved by the governing body /
council or a managing / executive committee.

iii) The AD Category - I bank is satisfied that the Society is KYC (Know Your Customer)
compliant and is engaged in a bonafide activity;

iv) The Society has been in existence at least for a period of three years;

v) The Society has not come under the adverse notice of any Regulatory / Enforcement
agency like the Directorate of Enforcement, CBI etc.

In addition to the registration, the AD Category – I bank should ensure that the special
license / permission has been obtained by the applicant in case the activities require
special license / permission either from the Ministry of Home Affairs, Government of
India or from the relevant local authority, as the

When more than one such company, entity or body makes collective investment in the foreign
JV/WOS, such combination will also form an “Indian Party”.

An Indian Party can make overseas direct investment in any bona-fide activity.
Prior Approval of RBI is required to be taken in the following cases
* Real Estate Business

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As per Regulation 2(p), “Real estate business” means buying and selling of real estate or trading in
Transferable Development Rights (TDRs) but does not include development of townships, construction
of residential/commercial premises, roads or bridges;
* Banking Business

Financial Services Sector subject to certain conditions prescribed in Regulation 7.
Vide clarification issued by the RBI in April, 2013, an overseas entity, having direct or indirect
equity participation by an Indian Party, shall not offer financial products linked to Indian Rupee
(e.g. non-deliverable trades involving foreign currency, rupee exchange rates, stock indices
linked to Indian market, etc.) without the specific approval of the Reserve Bank. Any incidence
of such product facilitation would be treated as a contravention of the extant FEMA regulations
and would consequently attract action under the relevant provisions of FEMA, 1999.

Indian Party (IP) can make direct investment through JV or WOS route.
"Joint Venture (JV)"/ "Wholly Owned Subsidiary (WOS)" means a foreign entity formed, registered or
incorporated in accordance with the laws and regulations of the host country in which the Indian
party/Resident Indian makes a direct investment;
A foreign entity is termed as JV of the Indian Party/Resident Indian when there are other foreign
promoters holding the stake along with the Indian Party. In case of WOS entire capital is held by the one
or more Indian Party/Resident Indian.

The followings are the list of eligible instruments for investment.
Equity Shares, Compulsory Convertible Preference Shares (CCPS), Loans, Guarantee (it can be Primary
or Collateral, Corporate Guarantee or Personal Guarantee. It can be given by Promoter company/Sister
concern/Group company/Associate company.)

(1) In terms of Regulation 6 of the Notification No. FEMA 120/RB-2004 dated July 7, 2004, as
amended from time to time, an Indian Party has been permitted to make investment /
undertake financial commitment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries
(WOS), as per the ceiling prescribed by the Reserve Bank from time to time.
With effect from July 03, 2014, it has been decided that any financial commitment (FC)
exceeding USD 1 (one) billion (or its equivalent) in a financial year would require prior approval
of the Reserve Bank even when the total FC of the Indian Party is within the eligible limit under
the automatic route (i.e., within 400% of the net worth as per the last audited balance sheet).

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"Net Worth" means paid up capital and free reserves;
The Net worth of its holding company (which holds at least 51 % direct stake in the Indian Party)
and of its subsidiary company (in which the Indian Party holds at least 51% direct stake) may
also be taken into account.
It can be used only to the extent not availed by the holding company or subsidiary company
independently and the concerned company has furnished a letter of disclaimer in favour of the
Indian Party.
(2) For the purpose of making investment / undertaking financial commitment in overseas Joint
Ventures (JV) / Wholly Owned Subsidiaries (WOS), the Indian Party should approach an
Authorised Dealer Category - I bank with an application in Form ODI (Master Document on
Reporting) and prescribed enclosures / documents for effecting such remittances.
(3) The total financial commitment of the Indian Party in all the Joint Ventures / Wholly Owned
Subsidiaries shall comprise of the following:
a. 100% of the amount of equity shares and/ or Compulsorily Convertible Preference

Shares CCPS);
b. 100% of the amount of other preference shares;
c. 100% of the amount of loan;
d. 100% of the amount of guarantee (other than performance guarantee) issued by the

Indian Party;
e. 100% of the amount of bank guarantee issued by a resident bank on behalf of JV or WOS

of the Indian Party provided the bank guarantee is backed by a counter guarantee /
collateral by the Indian Party.
f. 50% of the amount of performance guarantee issued by the Indian Party provided that
if the outflow on account of invocation of performance guarantee results in the breach
of the limit of the financial commitment in force, prior permission of the Reserve Bank is
to be obtained before executing remittance beyond the limit prescribed for the
financial commitment.

Investment (or financial commitment) in an overseas JV / WOS may be funded out of one or more of
the following sources:
i) drawal of foreign exchange from an AD bank in India;
ii) capitalisation of exports;
iii) swap of shares (subject to valuation norms);
iv) proceeds of External Commercial Borrowings (ECBs) / Foreign Currency Convertible Bonds

(FCCBs);
v) in exchange of ADRs/GDRs issued in accordance with the Scheme for issue of Foreign Currency

Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme,
1993, and the guidelines issued thereunder from time to time by the Government of India;

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vi) balances held in EEFC account of the Indian Party and
vii) proceeds of foreign currency funds raised through ADR / GDR issues
In respect of (vi) and (vii) above, the limit of financial commitment vis-à-vis the net worth will not apply.
So, the overall limit of the overseas investment can be described as under:

Some important points of guidelines relevant to the ODI is as under.
(a) The Indian Party / entity may extend loan / guarantee only to an overseas JV / WOS in which it

has equity participation. Proposals from the Indian Party for undertaking financial
commitment without equity contribution in JV / WOS may be considered by the Reserve Bank
under the approval route. AD banks may forward the proposals from their constituents after
ensuring that the laws of the host country permit incorporation of a company without equity
participation by the Indian Party.
(b) The Indian Party should not be on the Reserve Bank's Exporters' caution list / list of defaulters to
the banking system circulated by the Reserve Bank / Credit Information Bureau (India) Ltd.
(CIBIL) / or any other credit information company as approved by the Reserve Bank or under
investigation by any investigation / enforcement agency or regulatory body.

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(c) All transactions relating to a JV / WOS should be routed through one branch of an Authorised
Dealer bank to be designated by the Indian Party.

(d) Investments / financial commitments in Nepal are permitted only in Indian Rupees.
Investments / financial commitments in Bhutan are permitted in Indian Rupees as well as in
freely convertible currencies. All dues receivable on investments (or financial commitment)
made in freely convertible currencies, as well as their sale / winding up proceeds are required
to be repatriated to India in freely convertible currencies only.

(e) Investments / financial commitments by an Indian Party are not permitted in an overseas entity
located in the countries identified by the Financial Action Task Force (FATF) as “non co-
operative countries and territories” as per list available on FATF website www.fatf-gafi.org or as
notified by the Reserve Bank of India from time to time. Investments / financial commitments
in Pakistan by Indian Parties are permissible under the approval route.

(f) An IP/ RI which has made direct investment abroad is under obligation to:
(i) receive share certificates or any other document as an evidence of investment in the foreign

entity to the satisfaction of the Reserve Bank within six months, or such further period as
Reserve Bank may permit, from the date of effecting remittance or the date on which the
amount to be capitalised became due to the Indian Party or the date on which the amount due

was allowed to be capitalized;
(ii) repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical

fees etc., within 60 days of its falling due, or such further period as the Reserve Bank may
permit:

(iii) submit to the Reserve Bank, through the designated Authorised Dealer, every year on or before
December 31, an Annual Performance Report (APR) in Part II of Form ODI in respect of each JV
or WOS outside India, and other reports or documents as may be prescribed by the Reserve
Bank from time to time. The APR, so required to be submitted, has to be based on the
audited annual accounts of the JV/WOS for the preceding year, unless specifically exempted by
the Reserve Bank.

(iv) report to RBI in the event of changes proposed in the JV/WOS regarding the activities,
investment in another concern/subsidiary or alteration of share capital etc.

# 9909700197
k [email protected]

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SURAT BRANCH OF WIRC OF ICAI

Event Snap Shot

Flag hosting by chief guest CCIT Kavita BatnagarJi MP Darshana Jardosh ji visited Surat Branch on 1st July CA Day
with Surat Branch on 1st July CA Day celebration

Felicitated of Chief Guest CCIT Kavita Bhatnagarji Plantation on occasion of CA Day by Surat Branch
on CA Day Celebration with Chief Guest CCIT Kavita Bhatnagarji

Felicilated of Dr. Arun Mehra by Surat Branch Visited Installation ceremony of SGCCI
Past Chairman CA Rupin Pachhigar

with office bearers Surat Branch

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SURAT BRANCH OF WIRC OF ICAI

Event Snap Shot

Team Surat Branch with Surat WICASA Team Lions Club os Surat Khatodara felicitated Surat Branch Team
on CA Day celebration on CA Day

Surat WICASA Team on CA Day Celebration Surat Branch office bearer Felicitated AIR of May 2022 Exam

Surat Branch office bearer Felicitated AIR of May 2022 Exam. Surat Branch office bearer Felicitated AIR of May 2022 Exam..

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SURAT BRANCH OF WIRC OF ICAI

Event Snap Shot

Surat Branch office bearer Felicitated AIR of May 2022 Exam CA Walk on CA Day Celebration

CA Walk on CA Day Celebration CA Walk on CA Day Celebration

CA Walk on CA Day Celebration CA Walk on CA Day Celebration

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SURAT BRANCH OF WIRC OF ICAI

Library & Reading Room Facility at Branch

Dear Professional Colleague,

The Surat Branch of WIRC of ICAI with great pleasure announces the opening of Reading Room/Library at our Branch
Premises for our CA Students to enable them for studying in a Positive and Healthy environment and stay connected
to the Branch as well. The Reading Room/Library is fully Air Conditioned and provides a Hygienic and positive
environment to our Students of Surat City and will facilitate them in their learning journey.

Library Fees :

With Best wishes from : CA Shailesh Lakhankiya
Co - Chairman
CA Manthan Chawat
Chairman (Library & Reading Room Committee)

(Library & Reading Room Committee)

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SURAT BRANCH OF WIRC OF ICAI

01-04-2022 21-04-2022 11-05-2022 31-05-2022 10-06-2022 11-07-2022
LOA

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SURAT BRANCH OF WIRC OF ICAI

Upcoming Sessions for the Month of August

Date & Day Event Name Time CPE
Hours
13&14th National Conference 2022 Full Day
August One Day Program on Peer Review Full Day 12

August 6

Vishal Madhavani Sameer Madhavani

# 98254 94919 # 98252 88968

ENTERPRISE

601, Valen na Business Hub, `
B.s. Shell Petrol Pump,
L. P. Savani Road, Adajan, Surat. `
Ph.: 0261-461 7161
k [email protected]

EXCLUSIVE CHANNEL PARTNER

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SURAT BRANCH OF WIRC OF ICAI

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SURAT BRANCH OF WIRC OF ICAI

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SURAT BRANCH OF WIRC OF ICAI

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SURAT BRANCH OF WIRC OF ICAI

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SURAT BRANCH OF WIRC OF ICAI

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SURAT BRANCH OF WIRC OF ICAI

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