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COVID-19: Statutory and Regulatory Updates for Companies

26 March 2020

Introduction

On March 24, 2020, the Finance Minister announced several relief measures across sectors, relating to Statutory and Regulatory compliance matters, in view of the COVID-19 outbreak in the country. The main relief measures have been detailed below, along with their implications for businesses.

CORPORATE LAW MEASURES UNDER THE COMPANIES ACT, 2013

1. Filing of returns

Declaration of Moratorium during the period from April 01, 2020 to September 30, 2020: During this time, all filings with the Ministry of Corporate Affairs (MCA) would not attract any ‘additional fee’. This applies to long standing non-compliant companies/LLPs.

2. Extension of interval between two board meetings

The mandatory interval of 120 days between two board meetings is allowed to be extended by an additional 60 days till next two quarters i.e., till September 30, 2020.

3. Extension of Time

Companies shall be allowed to implement Companies (Auditors Report) Order, 2020 from FY 2020-21, instead of FY 2019-20 as notified earlier.

The due date for the following has been extended from April 30, 2020 to June 30, 2020:

Creating a deposit reserve of 20% of deposits maturing during the FY 2020-21

Investing 15% of debentures maturing during a particular year

All newly incorporated companies can file a declaration of commencement of business within 12 months from incorporation instead of 6 months.

INSOLVENCY & BANKRUPTCY INSOLVENCY & BANKRUPTCY CODE, 2016 (IBC)

1. Threshold of default under Section 4 of IBC increased to INR 1 Crore from existing INR 1 Lacs, as a measure to prevent triggering of insolvency proceedings against MSMEs, i.e. medium and small enterprises.

2. Government to monitor situation till April 30, 2020, if the situation continues as it is or extends, then sections 7, 9 and 10 of IBC shall shall stand suspended for a term of 6 months thereafter, i.e. between May 01, 2020 to October 31, 2020.

GST / INDIRECT TAX

1. Taxpayers having an aggregate annual turnover of less than INR 5 Crore can file GSTR-3B due in the months of March, April and May 2020 by the last week of June 2020. No interest, late fee, and penalty to be charged.

2. Other taxpayers (having an aggregate turnover of INR 5 crores or more) can file returns due in March, April and May 2020 by last week of June 2020 but the same would attract reduced rate of interest @ 9% per annum from 15 days after the due date (current interest rate is 18% per annum). No late fee and penalty to be charged, if complied till June 30, 2020.

3. Due date for opting for composition scheme stands extended till last week of June 2020. Further, the due date for making payments for the quarter ending March 2020 and filing of annual return for FY 2019-20 by the composition dealers is extended till last week of June 2020.

DIRECT TAX

1.Extension of last date for income tax returns for Financial Year (FY) 18-19 from March 31, 2020 to June 30, 2020.

Sub-section 4 to Section 139 of the Income-tax Act, 1961, provides that where an assessee has not filed its return of income by the due date provided under sub-section (1), then such assessee may file its return of income before the end of the relevant assessment year (AY).

The relevant AY corresponding to the FY 2018-19 is the AY 2019-20 and for which the return of income can be filed by March 31, 2020. The press release extends the date of such filing of return of income to June 30, 2020 as against the due date of March 31, 2020.

2. The date of linking of Aadhar number with permanent account number (PAN) has been further extended from March 31, 2020 to June 30, 2020. The earlier extension was made vide notification no. 107/2019 to move it from December 31, 2019 to March 31, 2020.

3.Vivad se Vishwas scheme – no additional 10% amount, if payment made by 30.06.2020

Section 3 of the Direct Tax Vivad Se Vishwas Act, 2020 provides that where a declarant opts for the scheme and files a declaration then the amount payable by such declarant shall be only the disputed tax if such amount is paid by March 31, 2020. However, where the said declarant pays the amount on or after April 01, 2020, the amount payable shall be the disputed tax plus 10% of such disputed tax.

The government has decided to waive the classification of dates and proposed that a taxpayer can pay the disputed tax by June 30, 2020 without having to pay additional 10% of the disputed tax.

CUSTOMS

The facility of 24X7 clearance at all customs formations has been extended till June 30, 2020.

The due date for issuance of notice, notification, approval order, sanction order, filing of appeal, furnishing of applications, etc. and time limit for any compliance under the Customs Act, 1962 and other allied laws has been extended to June 30, 2020, where the said time limit was expiring between March 20, 2020 to June 29, 2020.