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JSA Viewpoint – GST Changes, Budget 2021

In the backdrop of improving GST collections, the GST proposals contained in the Union Budget presented today, largely focus on easing the compliance burden for the assesses and strengthening the penal provisions in case of defaults.

Doing away with the requirements of submission of Audited financial and reconciliation statements should avoid delays in discharge of annual compliances and bring simplicity. However, this would increase the onus on the assesses to ensure proper disclosures in the Annual Returns, which now need to be filed on self-certification basis.

Among other changes, giving retrospective effect to the provisions for charging of interest on net cash liability provides much-needed clarity and will avoid litigation.

Proposal to limit the option of effecting zero-rated supplies with payment of tax, only to specified class of goods and services or taxpayers could be restrictive and need to be analysed in greater detail, once appropriate notifications are issued in this regard.

JSA Viewpoint by Manish Mishra.

Impact of COVID-19, on proposed inclusion of Aviation Turbine Fuel (ATF) under the ambit of Goods and Services Tax (“GST”)

With the aviation sector reeling under the impact of COVID-19, the Government may propose inclusion of Aviation Turbine Fuel (ATF) under the ambit of Goods and Services Tax (“GST”). Since GST is a creditable levy which can be offset against the GST liability suffered by the airlines on their revenues, the move would result in lower tax costs for the airlines and would provide the industry a much-needed relief from high operational costs.

While the proposal would require an approval from the GST Council, the budget may put forth a roadmap for this legislative change and initiate the process for building the consensus amongst Centre and the States on this sensitive matter, which has been a bone for contention for quite some time. This may subsequently pave the roadmap for inclusion of other petroleum products into GST over a period of time, starting with Natural Gas and extending to other petroleum products. “

Economic challenges of pandemic: Indirect tax measures that govt may consider

This article was originally published in Times Now on 13 May 2020. Link to article available here.

As the world deals with the challenges posed by the COVID-19 pandemic, India Inc. struggles to overcome the economic slowdown triggered by unceasing lockdowns. The shutdown of businesses, slowdown in demand, and complete disruption in the supply-chain have wrought a severe liquidity crisis in the economy.


Goods and Services Tax (‘GST’) collections are major source of revenue for the Government and key indicators to the country’s economic health. GST collections in the month of March 2020 stood at a five-month low of Rs. 97,500 crore, falling short of the target of Rs. 125,000 crore. The release of data for the month of April has been deferred due to the lower mop-ups expected on account of the lockdown and extended timelines for return filing announced by the Government. However, the April collections are expected to be significantly lower, as only a few sectors, such as telecom, pharma, food, and fast-moving consumer goods (FMCG), have been operational during the lockdown.


At the same time, GST being a transactions tax has a significant impact on the prices as well as working capital requirements of businesses. Demand slowdown and the liquidity crisis have disrupted the payment cycles, challenging businesses in meeting their GST liabilities, even with the extended timelines prescribed by the Government.


The unfavourable business climate has led to increasing demand for a stimulus package, including GST rate cuts, to stabilize the economy. This compels the Government to be ready for a tightrope walk, as it evaluates the indirect tax measured that may be taken while keeping an eye on managing the increasing fiscal deficit.


GST rate cuts across the board may not be viable in the long run, as they could cause a fund crunch for the Government. At the same time, certain sectors, such as aviation, tourism, and hotels and restaurants, which have borne the brunt of the crisis while being virtually shut down for the last couple of months, need robust support for survival. Government should offer relief to these vulnerable sectors by lowering the GST rates, and possibly suspending GST payments for a couple of quarters until such time that demand picks up again.


With the crude oil prices expected to remain at an all-time low in near future, the time is opportune to revisit the exclusion of petroleum products from the GST ambit. However, considering that transportation fuels contribute to a significant proportion of the Centre and State revenues, a complete inclusion may be strongly opposed. However, the way forward could begin by including aviation fuel under the purview of GST, providing substantial working capital to the airlines and thereby enabling them to claim credits of taxes levied for such fuel procurement. States may be more amenable to include aviation fuels under GST rather than face the threat of larger revenue loss in the event some airlines shut down or curtail their operations.


Another step that may ease industry’s anxiety is to allow businesses to pay GST on a cash basis instead of accruals, as was the norm in the Service tax regime prior to April 2011. This would allow businesses to discharge their GST liability as and when they receive the consideration along with GST charged on invoices instead of from their own pocket. In addition, provisions may be created in the law to claim adjustments in GST payment for bad debts and short realization of invoices.


On the export front, while the Government has issued instructions to clear the pending GST refunds filed by the exporters, in addition it needs to institute an incentive package for exporters to motivate competitiveness and ensure availability of sufficient working capital. To this end, Merchandise Exports from India Scheme (‘MEIS’) and Services Exports from India Scheme (‘SEIS’), which provide incentive to exporters as a percentage of the value of goods and services exported, need to extend the period of their offer as may be necessary to help exporters meet the challenge of the current global slowdown in demand.


As the country prepares to come out of the lockdown, the liquidity crisis and the demand and supply vacuum must be addressed. The measures suggested may provide partial relief to businesses without substantially compromising the fiscal realities for the Government. However, with day-to-day life and the business environment showing no signs of an early return to normalcy, these are merely few of many steps that may be vital to revive the economy.

Further relaxations for compliances under Goods and Services Tax and Customs Laws

In view of the extension of the nation-wide lockdown on account of the COVID-19 pandemic, the Government of India and the State Government of Kerala have issued further relaxations pertaining to extension of due dates for filing returns for Kerala Flood Cess and extension of facility of accepting undertaking in lieu of bonds.
Key relaxations have been summarized below, for ease of reference.

A. Extension of due date for filing of return for Kerala Flood Cess

The Government of Kerala had notified that the due date of filing returns in Form GSTR 3B (i.e. 20th of the succeeding month) will also be applicable to filing returns for Kerala Flood Cess. However, on account of practical challenges in filing the said return due to the unprecedented spread of the COVID-19 pandemic, the due dates for the tax periods from February, 2020 to May, 2020 have been extended vide Notification No. 7/2020-State Tax dated April 28, 2020 as follows:

Class of registered persons Tax Period Extended Date
Taxpayers having an aggregate turnover of more than INR 5 crores in the preceding financial year February 2020, March 2020 and April 2020 June 24, 2020
Taxpayers having an aggregate turnover of more than INR 1.5 crores and up to rupees five crores in the preceding financial year February 2020 and March 2020 June 29, 2020
April 2020 June 30, 2020
Taxpayers having an aggregate turnover of up to INR 1.5 crores in the preceding financial year February 202 June 30, 2020
March 2020 July 3, 2020
April 2020 July 6, 2020
Taxpayers having an aggregate turnover of more than INR 5 crore rupees in the previous financial year May 2020 June 27, 2020
Taxpayers having an aggregate turnover of up to INR 5 crore rupees in the previous financial year May 2020 July 12, 2020

B. Extension of facility of accepting undertaking in lieu of bonds

Central Board of Indirect Taxes & Customs (‘CBIC’) has issued Circular No. 23/2020-Customs dated May 11, 2020 for reviewing Circular No. 17/2020 dated April 3, 2020 on ‘Measure to facilitate trade during the lockdown period- section 143AA of the Customs Act, 1962’. On account of the outbreak of the COVID-19 pandemic, CBIC had issued Circular No. 17/2020 dated April 3, 2020 providing relaxation to the taxpayers, by accepting an undertaking in lieu of a bond required during customs clearance, subject to conditions as underlined in the circular. The facility was extended till May 15, 2020 vide Circular No. 21/2020 dated April 21, 2020. Given the further extension of lockdown, and considering the time required to normalise the situation, this facility will continue for the period till May 30, 2020 and, consequently, the date for submission of proper bond in lieu of the undertaking is now extended till June 15, 2020. This relaxation will be revisited by CBIC at the end of the lockdown.

Relaxations for Compliances under Indirect Tax Laws

In view of the nation-wide lockdown on account of the COVID-19 pandemic, the Government of India has issued various notifications to ensure compliances by embracing accessible technology and extending time limits for specified compliances.

Key relaxations provided by way of the notifications are summarised below:

1. GST returns can be furnished through electronic verification code (‘EVC’) – Notification No. 38/2020-Central Tax dated May 5, 2020

  • This notification amends Rule 26(1) of Central Goods and Services Tax Rules, 2017 (‘CGST Rules’), to allow a GST-registered person, registered under the Companies Act, 2013 to, during the period April 21, 2020 to June 20, 2020, furnish returns in Form GSTR 3B, which can be authenticated using an EVC sent to the registered mobile number. Such facility is made effective from April 21, 2020.

  • For an assessee who is required to furnish a Nil return in Form GSTR 3B, a new Rule 67A has been inserted in the CGST Rules, to allow furnishing of such return for a tax period through short messaging service (‘SMS’), verified by a registered mobile number-based one-time password (‘OTP’) facility. Such facility will be made effective from a date to be notified later.

2. Amendment of notification issued in relation to GST compliance by corporate debtors under Insolvency and Bankruptcy Code, 2016 – Notification No. 39/2020-Central Tax dated May 5, 2020

  • Time limit for interim resolution professionals (IRP) or resolution professionals (RP) to obtain new registration as a distinct person of the corporate debtor, has been amended to be 30 days from date of appointment of IRP/ RP or June 30, 2020, whichever is later (effective from March 21, 2020).

  • The class of persons covered under Notification No. 11/2020-Central Tax dated March 21, 2020 will not include corporate debtors who have furnished the GST returns for all tax periods prior to appointment of IRP/RP.

3. Extension of validity of e-way bills – Notification No. 40/2020-Central Tax dated May 5, 2020

  • The validity of e-way bills generated prior to March 24, 2020, and expiring during the period March 20, 2020 to April 15, 2020, has been extended till May 31, 2020.

4. Extension of time limit for filing annual return for FY 2018-19 – Notification No. 41/2020-Central Tax dated May 5, 2020

  • The time limit for furnishing annual returns in Form GSTR 9 and Form GSTR 9C for FY 2018-19 has been extended till September 30, 2020.

5. Due dates for filing return in Form GSTR 3B for the Union territories of Jammu and Kashmir and Ladakh – Notification No. 42/2020-Central Tax dated May 5, 2020

  • The said notification amends the due date for filing of return in Form GSTR 3B for registered persons whose principal place of business is in the Union Territories of Jammu and Kashmir and Ladakh as follows:

This notification is effective from March 24, 2020.

6. Extension of time limit for filing acknowledgement of declaration under Himachal Pradesh (Legacy Cases Resolution) Scheme, 2019 – Notification No. EXN-F-(10)-7/2019- Vol.-I dated April 27, 2020

  • On account of complete lockdown in the country due to COVID-19 pandemic, the time limit for filing acknowledgement of declaration as per the provisions of Himachal Pradesh (Legacy Cases Resolution) Scheme, 2019 has been extended till September 30, 2020.

Further Relaxations under Customs and GST Laws due to the COVID -19 Outbreak

The Government of India has announced various additional relaxations for taxpayers under Customs Law and Goods and Services Tax (GST) in order to overcome the unprecedented hardships caused by the COVID-19 outbreak. In order to ensure smooth facilitation of trade, some practical difficulties have also been eased by way of circulars issued under Customs and GST law. (See also our earlier posts on relaxations under the Foreign Trade Policy, Customs laws, and GST)

We have summarised key takeaways from recent circulars below.

1. Acceptance of an undertaking in lieu of bonds: Circular No. 17/2020-Customs dated 3 April 2020

  • CBIC has clarified that an undertaking can be submitted in lieu of the bonds required to be filed for various purposes (such as provisional assessment, warehousing of goods etc.) under the Customs Act, 1962 (‘Customs Act’). This relaxation will apply to Government/public sector undertakings, manufacturer/actual user importer, authorised economic operators, status holder, and importers availing warehouse facilities. The aforesaid relaxation is applicable till 30 April 2020, upon fulfilment of prescribed conditions which, inter alia, include the following:

  • The undertaking has to be on the letterhead of the Importer Exporter Code (‘IEC’) holder, duly signed and submitted vide registered email ID of the IEC holder/their authorised customs broker.

  • The IEC holder must undertake to submit the proper bond in the prescribed format on notarised stamp paper on or before 7 May 2020.

  • This undertaking will not substitute the requirement of security prescribed under Customs Act, and the authorities may require some security to be furnished in specific cases.

2. Clearance of imports under Trade Agreements without original signed copy of Certificate of Origin (‘COO’): Trade Notice No. 59/2019-20 dated 28 March 2020, 62/2019-20 dated 6 April 2020 and Circular No. 18/2020-Customs dated 11 April 2020

  • The trade notices issued by DGFT and the customs circular prescribe as follows:

  • The original signed copy of the COO will be issued retrospectively, after the concerned Indian agencies resume operations post removal of lockdown.

  • Online applications for COO will be processed and a digitally signed copy will be provided to the applicant. However, the original signed copy of the COO will only be issued after the authorised agencies resume operation.

  • Fee of INR 600 will be payable for all COOs irrespective of whether they are retrospective or not.

  • The competent authorities of the countries with whom India has a trade agreement have been requested to accept the digitally signed COOs, and to provisionally clear the consignments at the preferential rate of duty until the circumstances on account of the COVID 19 pandemic normalise. Such provisional clearance may be allowed subject to execution of an undertaking or a bond.

  • Customs authorities have also been instructed to provisionally assess and clear import consignments on the basis of digitally signed copy or an unsigned copy of COO. The assessment will attain finality upon submission of the original COO by the importer. The provisional assessment and clearance may be subject to execution of an undertaking or a bond.

3. Electronic Communication of PDF based gate pass (‘e-Gate pass’) and electronic Out of Charge copy of Bill of Entry (‘e-OoC copy of BoE’) to custom brokers/ importers: Circular No. 19/2020-Customs dated 13 April 2020

In order to facilitate and expedite customs clearance and to make it more contactless, CBIC has decided to enable electronic communication of PDF based e-OoC copy of BoE and e-Gate pass to the importers/ customs brokers w.e.f. 15 April 2020. All custodians are required to register themselves on ICEGATE to ensure that the potential benefits can be availed across the Customs ecosystem.

4. Manner of Continuation of Merchandise Exports from India Scheme (‘MEIS’) for shipments exported on or after 01 April 2020 and Introduction of the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme: Trade Notice no. 3/2020-21 dated 15 April 2020

The RoDTEP scheme has been approved by the Cabinet and will replace the existing MEIS scheme. Further, in view of the extension of FTP 2015-20 till 31 March 2021, the benefits for goods listed in MEIS schedule has been extended till 31 December 2020. It has also been clarified that as and when any goods from MEIS schedule are notified under RoDTEP, the same will no longer be eligible for benefit under MEIS. Detailed operational framework of RoDTEP will be separately notified.

5. Special refund and drawback disposal drive: Instruction No. 03/2020-Customs dated 9 April 2020

CBIC has instructed the concerned officers to expedite processing of all pending Customs refund and drawback claims. This special drive shall be effective till 30 April 2020, and shall be applicable to all refund and drawback claims pending for disposal as on 07 April 2020.

6. Clarification in respect of certain challenges faced by registered persons in the implementation of provisions of GST Law: Circular No. 137/07/2020-GST dated 13 April 2020

  • Advances received under a service contract which is cancelled subsequently: CBIC has clarified that those service contracts in respect of which advance payment was received but such contract subsequently got cancelled, and the taxpayer has issued invoice as well as deposited tax on such contracts, a credit note will have to be issued for adjustment of tax by declaring such credit note in the GST return for the month during which it was issued. However, in case there is no output liability against which a credit note can be adjusted, refund of tax paid can be claimed under “Excess payment of tax, if any”. Similarly, in cases where a receipt voucher was issued on receipt of advance, a refund voucher will have to be issued and refund application for such GST paid on advance can be filed in FORM GST RFD-01 under the category “Refund of excess payment of tax”.

  • Goods supplied under an invoice which is subsequently returned: A credit note will have to be issued for adjustment of tax by declaring the same in the return for the month during which such credit note was issued. However, in case there is no output liability against which a credit note can be adjusted, refund of tax paid can be claimed under “Excess payment of tax, if any”.

  • Time limit for filing of Letter of Undertaking (‘LUT’) for the financial year 2020-21: The time limit for filing the LUT in respect of exports to be made after 1 April 2020 has been extended till 30 June 2020. It has been further clarified that exporters may continue to export without payment of IGST under the existing LUT pertaining to financial year 2019-20.

  • Due date for furnishing FORM GSTR-7 (TDS statement): Tax deducted for period from 20 March 2020 to 29 June 2020 can be deposited till 30 June 2020. Further, no interest will be leviable if such tax deducted is deposited by 30 June 2020.

  • Due date for filing a refund claim: Application for submission of refund claims due to be filed by 31 March 2020, is extended till 30 June 2020.

Relaxations of compliances under Goods and Services Tax

In view of the COVID-19 outbreak and the nation-wide lockdown, the Government has issued notifications in line with the Taxation and other Laws (Relaxation of certain provisions) Ordinance, 2020, amending the Goods and Services Tax Rules, 2017 (“CGST Rules”) and providing relaxations for compliances to the taxpayer.

Key relaxations under such notifications are summarised below.

1. NIL/reduced rate of interest payable on late payment of taxNotification No. 31/2020-Central Tax dated April 3, 2020
Prescribes NIL or reduced rate of interest for delayed filing of form GSTR-3B for the months of February 2020, March 2020 and April 2020, subject to the condition that form GSTR-3B for the said months are filed within the prescribed due dates. Please refer the below table for the due dates and applicable rates of interest.

Class of registered personRate of interestTax periodDue dates
Taxpayers having an aggregate turnover of more than INR 5 crores in the preceding financial yearNil for the first 15 days from the due date and 9% thereafterFebruary 2020, March 2020 and April 2020June 24, 2020
Taxpayers having an aggregate turnover of more than INR 1.5 crores and up to INR 5 crores in the preceding financial yearNilFebruary  2020 and March 2020June 29, 2020
April 2020June 30, 2020
Taxpayers having an aggregate turnover of up to INR 1.5 crores in the preceding financial yearNilFebruary 2020June 30, 2020
March 2020July 03, 2020
April 2020July 06, 2020

2. Late fees waived on delayed filing of Form GSTR 3BNotification No. 32/2020-Central Tax dated April 3, 2020
Waives the amount of late fee payable on account of delayed filing of form GSTR-3B for the months of February 2020, March 2020 and April 2020, subject to condition that form GSTR-3B for the said months are filed within the prescribed due dates (as mentioned in the above table).

3. Late fees waived on delayed filing of Form GSTR 1Notification No. 33/2020-Central Tax dated April 3, 2020
Waives late fee payable on account of delayed filing of form GSTR-1 for the months of February 2020, March 2020 and April 2020 subject to the condition that form GSTR-1 for the said months are filed by June 30, 2020.

4. Due date for filing Form GSTR 3B for the month of May 2020Notification No. 36/2020-Central Tax dated April 3, 2020
Prescribes staggered due dates for filing form GSTR-3B for the month of May 2020. The due dates are tabulated below for ease of reference.

Class of registered personDue date
Aggregate turnover in the preceding financial year of more than INR 5 croresJune 27, 2020
Aggregate turnover in the preceding financial year upto INR 5 crores, in the states of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or LakshadweepJuly 12, 2020
Aggregate turnover in the preceding financial year upto INR 5 crores in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or DelhiJuly 14, 2020

5. Time limits pertaining to various proceedings extended Notification No. 35/2020-Central Tax dated April 3, 2020
Provides relaxation of completion or compliance of any action required to be undertaken by a registered person and/ or a tax authority (such as issuance of notices, orders, etc. and filing replies, appeals, etc.) during the period March 20, 2020 to June 29, 2020, under the provisions of Central Goods and Service Tax Act, 2017 (‘CGST Act’) and CGST Rules, by extending such time limit to June 30, 2020.

However, the said extension will not be available for undertaking compliances pertaining to obtaining registration, issuance of tax paying documents, filing of returns, payment of interest and late fees, power to arrest, liability of partners under Section 90 of CGST Act, levy of penalties for various offences, detention and seizure of goods and generation of e-way bills.

Further, the said notification provides relaxation in relation to e-way bills, by extending the validity of e-way bills expiring during the period March 20, 2020 to April 15, 2020, till April 30, 2020.

6. Relaxation in compliance with Rule 36(4) of CGST RulesNotification No. 30/2020-Central Tax April 3, 2020 and Circular No. 136/06/2020-GST dated April 3, 2020
Provides that restriction prescribed for availing input tax credit as per the provisions of Rule 36(4) of CGST Rules, will not apply to input tax credit availed by the registered persons in form GSTR-3B for the months of February, March, April, May, June, July and August, 2020, however, the same will apply cumulatively for the said period and form GSTR-3B for the month of September, 2020 will be furnished with a cumulative adjustment of input tax credit for the said months in accordance with Rule 36(4) of CGST Rules.

7. Relaxation for dealers opting for composition schemeNotification No. 30/2020-Central Tax dated April 3, 2020
Provides for a relaxed time period for filing intimation under form GST CMP-02 and statement in for GST ITC-03 required for intimating the authorities for opting for composition scheme, for the financial year 2020-21 till June 30, 2020 and July 31, 2020, respectively.

Further, Notification No. 34/2020-Central Tax dated April 3, 2020 prescribes due date for filing statement for payment of self-assessed tax in form GST CMP-08 for quarter ending March 31, 2020 to be July 7, 2020 and due date for filing form GSTR-4 for FY 2019-20 to be July 15, 2020.

Recent Legal and Regulatory Changes Impacting Debt Transactions

In March 2020, there have been several changes in the Indian legal and regulatory landscape that will have an impact on debt transactions. Many of these changes have been precipitated due to the nationwide lock-down imposed as a result of COVID-19. The key changes are summarised below.

1. Insolvency regime

  • Increase in default threshold: The threshold for initiating the corporate insolvency resolution process (“CIRP”) under section 4 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has been increased from Rs. 100,000 to Rs. 10,000,000. This move will benefit various companies, especially medium and small enterprises, who may be unable to repay their debts in a timely manner and be forced into insolvency due to COVID-19.

  • Extension of CIRP timelines: The period of lockdown (i.e. March 24, 2020 to April 15, 2020) in relation to COVID-19 will be excluded for the purpose of calculating the 330-day period for completion of the CIRP. This will be applicable for all cases where the CIRP has been initiated and pending before any bench of the National Company Law Tribunal (“NCLT”) or in appeal before the National Company Law Appellate Tribunal (“NCLAT”).

  • Extension of timelines due to lockdown: The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) were amended to provide that if any activity in relation to the CIRP cannot be completed during the lockdown period imposed by the Government due to COVID-19, then such lockdown period will not be counted for the purposes of any timeline within which such activity has to be completed under the CIRP Regulations. This will provide a breather to many resolution professionals who were struggling to complete certain activities given the nationwide lockdown.

  • Priority financing: The Central Government has sponsored the Special Window for Affordable and Middle-Income Housing Investment Fund I for providing priority debt financing for completion of stalled housing projects that are in the affordable and middle-income housing sector. Any debt availed from such fund will be treated as “interim financing” under the IBC and will receive priority in repayment under the CIRP or liquidation of the corporate debtor.

  • Special GST process: Corporate debtors undergoing CIRP have to obtain a new GST registration in each state and union territory where they are carrying on business. The same must be obtained within 30 days of appointment of the interim resolution professional or resolution professional. Where any CIRP is ongoing on March 21, 2020 (the date of the notification), then the new registration has to be obtained within 30 days of such notification. The process set out in the notification has to be followed for filing returns and availing input tax credit.

  • Applicability to Jammu & Kashmir: The application of the IBC has been extended to the Union Territory of Jammu and Kashmir with effect from March 18, 2020 pursuant to the Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Order, 2020.

  • December 2019 Ordinance codified by an IBC amendment: Various amendments that were introduced to the IBC pursuant to an ordinance in December 2019 were codified pursuant to a formal amendment to the IBC on March 13, 2020. These amendments are effective from December 28, 2019 (the date of the ordinance). The key changes brought about pursuant to the ordinance and this amendment include the following:

    (i) Restrictions on governmental authorities and regulators from suspending or terminating any license, quota, concession, clearance or similar right granted to the corporate debtor;(ii) No interruption of supply of goods and services to the corporate debtor which are critical to preserve the value and manage the operations of the corporate debtor

    (iii) Protection to the corporate debtor its assets from offences committed prior to the CIRP period by the erstwhile management and promoters of the corporate debtor; and

    (iv) Minimum number or percentage of applicants required to initiate CIRP proceedings by certain classes of creditors.

 

2. Moratorium permitted by the Reserve Bank of India (“RBI”)

On March 27, 2020, the RBI announced certain regulatory measures to ease the burden of debt servicing brought about by disruptions on account of COVID-19. The measures were aimed at ensuring continuity of viable businesses. One of the measures was to provide a moratorium to borrowers.

  • Moratorium on Term loans: The RBI permitted all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and non-banking financial companies (including housing finance companies) (“lending institutions”) to grant a moratorium in respect of term loans (including agricultural term loans, retail and crop loans), of three months on payment of all “instalments” falling due between March 1, 2020 and May 31, 2020. The “instalments” will include (i) principal and/or interest components, (ii) bullet repayments, (iii) equated monthly instalments, and (iv) credit card dues. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. However, interest will continue to accrue on the outstanding portion of the term loans during the moratorium period. It is noteworthy that the moratorium related provisions are not applicable to foreign lenders, foreign portfolio investors (“FPIs”), mutual funds or alternative investment funds that have extended any debt to Indian borrowers.

  • Deferment of interest on Working capital facilities: In relation to working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions have been permitted by RBI to defer the recovery of interest applied in respect of all such facilities during the period from March 1, 2020 upto May 31, 2020 (“deferment”). The accumulated accrued interest will be recovered immediately after the completion of this period.

  • Recalculation of Drawing power: Lending institutions can also recalculate the drawing power of borrowers facing stress due to COVID-19 in relation to CC/OD facilities sanctioned to them. The recalculation can be by reducing the margins and/or by reassessing the working capital cycle. This relief is available in respect of all such changes effected up to May 31, 2020 and contingent on the lending institutions being satisfied that the change is necessitated due to a fallout of COVID-19.

  • Asset classification: Any moratorium / deferment / recalculation of drawing power will not be treated as a concession or change in terms and conditions of loan agreements due to financial difficulty of the borrower under the RBI (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 7, 2019. Therefore, such measure itself will not result in a downgrade of asset classification. The asset classification of term loans which are granted any relief mentioned above will be determined based on the revised due dates and the revised repayment schedule. Further, for working capital facilities where relief is provided, the special mention account status and the out of order status will be evaluated considering the application of accumulated interest immediately after the completion of the deferment period as well as the revised terms.

  • No adverse impact on credit history: Any rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (“CICs”) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

  • Board approved policy: The board of each lending institution must frame appropriate policies to deal with the above measures. The policies must set out objective criteria for considering the abovementioned reliefs and must also be made available in the public domain.

 

 

3. Increased corporate bond limits

The RBI has increased the limit for FPI investment in corporate bonds to 15% of the outstanding stock for the financial year April 1, 2020 to March 31, 2021. The revised limits for FPI investment in corporate bonds are as follows:

FPI Investment limit in corporate bonds for FY 2020-2021 Rs. (crores)
Current limit 3,17,000
Revised limit: April 1, 2020 to September 2020 429,244
Revised limit: October 2020 to March 2021 541,488

 

4. Time periods for creating reserves extended

  • Under the Companies Act, 2013, certain type of companies that have issued secured debentures are required to invest at least 15% of the value of debentures maturing in the next financial year into certain prescribed form of investments by April 30. The timeline to make such prescribed investments has now been extended to June 30 for this financial year.

  • Under the Companies Act, companies which have accepted deposits from the public or its members have to deposit an amount equal to 20% of the deposits maturing in the following financial year in a separate deposit repayment reserve account with a scheduled bank. Such deposit has to be made by April 30 each year. The timeline for this deposit has now been extended to June 30 for this financial year.

 

 

5. Certain relaxations under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”)

  • Financial information: Companies that propose to issue non-convertible debentures, non-convertible preference shares or commercial paper which are to be listed can now provide audited financial information for the period ending September 30, 2019 for all issuances upto May 31, 2020 (instead of issuances upto March 31, 2020).

  • Extension of timelines for filings/disclosures: Timelines for certain filings and disclosures that need to be made in relation to listed non-convertible debentures, non-convertible preference shares or commercial paper have been extended. These include the following: (i) The timeline for initial disclosures for large corporates have been extended by 45 days upto June 30, 2020; (ii) The timeline for annual disclosures for large corporates have been extended by 60 days upto June 30, 2020; (iii) The timeline for declaration of half-yearly financial results has been extended by 45 days to June 30, 2020; and (iv) The timeline for declaration of annual financial results has been extended by 30 days to June 30, 2020.

 

 

6. Encumbrances on units of Real Estate Investment Trusts (“REITs”)

  • Creation of encumbrance: On March 23, 2020, the Securities and Exchange Board of India (“SEBI”) has, by way of a circular, permitted sponsors and sponsor group entities holding any units under the SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”) during the mandatory holding period to create an encumbrance on such units. The encumbrance will include a pledge, lien, negative lien, non-disposal undertaking etc. or any other covenant, transaction, condition or arrangement in the nature of encumbrance. Any agreement in relation to the encumbrance shall include the conditions for creation and invocation of encumbrance under the SEBI circular.
  • Invocation of encumbrance: Any encumbrance cannot be invoked during the holding period prescribed under the REIT Regulations unless the following conditions are fulfilled: (i) the person(s) invoking the encumbrance (whether directly or through any trustee or agent acting on its behalf) shall get itself or its nominee to become re-designated sponsor upon compliance with the terms and conditions for re-designation of sponsor as specified under REIT Regulations; however this condition is not applicable in case the person invoking the encumbrance is already a member of the sponsor group; and (ii) the re-designated sponsor has to fulfil the obligations specified for sponsor under REIT Regulations.
  • Disclosures of encumbrance to the REIT manager: The sponsor(s) and sponsor group entity creating any encumbrance on the REIT units held by them has to provide details of the encumbrance to the manager of the REIT within two working days from the date of creation of such encumbrance in a prescribed format. Further, they must also notify the manager of any change in the above information pursuant to release or invocation of encumbrance, or in any other manner, within two working days from the date of such event.
  • Disclosures to stock exchanges: Within two working days from the receipt of encumbrance related details mentioned above, the REIT must disclose such information to every stock exchange where units of the REIT are listed. The disclosure has to be in a prescribed format.

 

 

7. Encumbrances on units of Infrastructure Investment Trusts (“INVITs”)

  • Creation of encumbrance: On March 23, 2020, the SEBI has, by way of a circular, permitted sponsors and sponsor group entities holding any units under the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“INVIT Regulations”) during the mandatory holding period to create an encumbrance on such units. The encumbrance will include a pledge, lien, negative lien, non-disposal undertaking etc. or any other covenant, transaction, condition or arrangement in the nature of encumbrance. Any agreement in relation to the encumbrance shall include the conditions for creation and invocation of encumbrance under the SEBI circular.

  • Invocation of encumbrance: Any encumbrance cannot be invoked during the holding period prescribed under the INVIT Regulatio

  • Disclosures of encumbrance to the INVIT manager: The sponsors creating any encumbrance on the INVIT units held by them has to provide details of the encumbrance to the manager of the INVIT within two working days from the date of creation of such encumbrance in a prescribed format. Further, they must also notify the manager of any change in the above information pursuant to release or invocation of encumbrance, or in any other manner, within two working days from the date of such event.

  • Disclosures to stock exchanges: Within two working days from the receipt of encumbrance related details mentioned above, the INVIT must disclose such information to every stock exchange where units of the INVIT are listed. The disclosure has to be in a prescribed format.

 

 

8. Extension of amendments to stamp duty on Debentures

  • Pursuant to certain amendments that were made to the stamp duty law, the stamp duty rate on the debentures was modified from a maximum of 0.25% or Rs. 25 lacs, whichever was lower, to an ad valorem rate of 0.005% of the value of the debentures. These new stamp duty rates were to come into effect from April 1, 2020. However, they are now proposed to come into effect from July 1, 2020.

21-day nationwide lock-down – Guidelines issued by the Ministry of Home Affairs

On 24 March 2020, the Ministry of Home Affairs vide its order no. 40-3/2020-DM-I(A) issued guidelines to be followed by ministries/departments of the Government of India, State/ Union Territory Governments and Authorities, containing measures to combat the spread of COVID-19.

These guidelines were issued by the National Executive Committee under the directions of the National Disaster Management Authority (order No. 1-29/2020-PP(Pt. II) dated 24 March 2020) and in exercise of its powers conferred under Section 10(2)(l) of the Disaster Management Act, 2005.

The Guidelines, inter alia, provide for the following containment measures which shall remain applicable for a period of 21 days with effect from 25 March 2020:

  1. All offices of the Government of India, its autonomous/subordinate offices and public corporations shall remain closed except for defence, central armed police forces, public utilities (including petroleum, LPG, CNG, PNG), disaster management, power generation and transmission units, post offices, National Informatics Centre, Early Warning Agencies etc. Certain offices, like that of the treasury, MCA-21 registry, GSTN, RBI etc., shall function with bare minimum staff.
  2. The offices of the State/Union Territory Governments, their autonomous bodies and corporations etc. shall remain closed except for police, home guard, civil defence, fire and emergency services, disaster management, prisons, district administration and treasury, electricity, water, sanitation and municipal bodies (relating to essential services like water supply and sanitation only), Mandis operated by the Agricultural Produce Market Committee or as notified by the state government, etc.
  3. All hospitals and related medical establishments including dispensaries, chemist, medical equipment shops, laboratories, clinics, nursing homes, ambulance, veterinary hospitals, pharmacies and pharmaceutical research labs etc. shall remain functional. Further, transportation of medical personnel, nurses, other hospital support services etc. shall be permitted.
  4. All commercial and private establishments to be closed other than shops dealing in food, groceries, fruits and vegetables, dairy, meat, fertilizers, seeds, pesticides etc.; bank, ATMs, insurance offices; print and electronic media; telecommunication, internet services, broadcasting and cable services; delivery of essential goods through e-commerce; petrol pumps, LPG, petroleum and gas retail and storage outlets; power generation and transmission units; private security services; farming operations by farmers and farm workers in the field, etc.
  5. All industrial establishments shall remain closed; other than those engaged in the manufacturing of essential goods, including drugs, pharmaceuticals, medical devices, their raw materials and intermediates; those production units which require continuous process and have obtained the approval from the state government; coal and mineral production, transportation, supply of explosives etc.; manufacturing units of packaging materials for food items, drugs, pharmaceuticals and medical devices and manufacturing and packaging units for fertilizers, pesticides and seeds.
  6. All transport services, other than for the transport of essential commodities or of fire or law and order or emergency services or for cargo movement, relief and evacuation and their related operational organisations, inter-state movement of goods/cargo for inland and exports, transit arrangements for foreign nationals in India according to the specified standard operating procedure, etc., shall remain suspended.
  7. All educational, training, research, coaching institutions etc. to remain closed.
  8. All places of worship shall remain closed.

(Please refer to the Guidelines, the first Addendum to the Guidelines (dated 25 March 2020), the second Addendum to the Guidelines (dated 27 March 2020), the third Addendum to the Guidelines (dated 02 April 2020), the fourth Addendum to the Guidelines (dated 03 April 2020) and the fifth Addendum to the Guidelines (dated 10 April 2020) for the complete list of containment measures and exceptions)

Wherever any exception has been provided to the containment measures, the organisation/ employer shall ensure necessary precautions, including social distancing measures, as advised by the Health Department.

Any violation of the containment measures specified in the Guidelines shall be liable to action under Sections 51 to 60 of the Disaster Management Act, 2005 and Section 188 of the Indian Penal Code, 1860.

Ministry of Health: Advisory on Social Distancing

According to the Ministry Health and Family Welfare, “Social distancing is a non-pharmaceutical infection prevention and control intervention implemented to avoid/decrease contact between those who are infected with a disease causing pathogen and those who are not, so as to stop or slow down the rate and extent of disease transmission in a community. This eventually leads to decrease in spread, morbidity and mortality due to the disease.”


The Ministry proposed certain interventions which shall be in force until 31st March 2020. The measures include,

  1. Closure of all educational establishments (schools, universities etc), gyms, museums, cultural and social centres, swimming pools and theatres. Students should be advised to stay at home. Online education to be promoted.
  2. Possibility of postponing exams may be explored. Ongoing exams to be conducted only after ensuring physical distance of one meter amongst students.
  3. Encourage private sector organizations/employers to allow employees to work from home wherever feasible. Certain stated have issues compulsory shut down orders even for private sector employers, this is an evolving situation.
  4. Meetings, as far as feasible, shall be done through video conferences. Minimize or reschedule meetings involving large number of people unless necessary.
  5. Restaurants to ensure hand-washing protocol and proper cleanliness of frequently touched surfaces. Ensure physical distancing (minimum 1 metre) between tables; encourage open air seating where practical with adequate distancing.
  6. Keep already planned weddings to a limited gathering, postpone all non-essential social and cultural gatherings.
  7. Local authorities to have a dialogue with organizers of sporting events and competitions involving large gatherings and they may be advised to postpone such events.
  8. Local authorities to have a dialogue with opinion leaders and religious leaders to regulate mass gatherings and should ensure no overcrowding/at least one metre distance between people.
  9. Local authorities to have meeting with traders associations and other stakeholders to regulate hours, exhibit Do’s and Don’ts and take up a communication drive in market places like sabzi mandi, anaj mandi, bus depots, railway stations, post-offices etc., where essential services are provided.
  10. Non-essential travel should be avoided. Buses, Trains and Aeroplanes to maximize social distancing in public transport besides ensuring regular and proper disinfection of surfaces.
  11. Hygiene and physical distancing has to be maintained. Shaking hands and hugging as a matter of greeting to be avoided.
  12. Special protective measures for delivery men/ women working in online ordering services.
  13. Hospitals to follow necessary protocol related with COVID-19 management as prescribed and restrict family/friends/children visiting patients in hospitals


Social distancing is the single most powerful tool available to individuals as we all fight to stem the tide, prevent community transmission and flatten the curve. This mechanism prevents lightly infected/asymptomatic patients from becoming vectors who could infect far more vulnerable populations. The governments are trying to implement social distancing through advisories, shutdowns and lock-downs, janata (voluntary) curfews, Section 144 orders, suspension of public transport facilities etc. If India can succeed where so many nations have failed, and stop COVID-19 from reaching critical mass we could avert a public health disaster.