The Government of India has linked the 12- digit unique identification number, i.e. Aadhaar to various centrally sponsored schemes including Pradhan Mantri Ujjwala Yojana (provision of free LPG connection to below poverty line people), Pradhan Mantri Jan Dhan Yojna (universal access to banking facilities), Janani Suraksha Yojana (promotion of institutional delivery among poor pregnant women), etc.

A number of petitions have been filed in the Supreme Court questioning the move of the Government to make Aadhaar mandatory for availing benefits of social welfare schemes. They have challenged the constitutional validity of the Aadhaar Scheme and have alleged that parting of Aadhaar and biometric details of citizens to access welfare and benefits would violate their fundamental right to privacy as it may probably result in data breaches, etc.

In two of the Supreme Court’s earlier decisions in M. P. Sharma and Others vs. Satish Chandra 1954 (eight-Judge Bench) and Kharak Singh vs. the State of U. P. & Others 1963 (six- Judge Bench), it has held that right to privacy was not a fundamental right.

This Court has also recently upheld the validity of Section 139AA of the Income Tax Act, 1961 which provides for mandatory linking of Aadhaar with permanent account number (PAN) by income tax assessees as it is the only robust method of de-duplication of PAN database and it may ensure that one person does not have more than one PAN card or a person is not able to get PAN cards in assumed/fictitious names.

Therefore, the Supreme Court has decided to set up a nine-judge bench to decide and settle the issue about whether right to privacy can be declared as a fundamental right under the Constitution of India.


Harini Daliparthy

Legal Associate

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Mr. Narendra Modi becomes the first Indian Prime Minister to visit Israel, after the end of three day visit in Israel, both the countries expressed interest in building a broad economic base, rather than merely a contractual exchange based around defence.

A total of seven Agreements were signed in sectors ranging from agriculture to water conservation and space as they sought to deepen ties beyond high-priced defence deals.

The two leaders presented a series of Agreements between India and Israel for cooperation on satellite technology, water and agriculture, as well as the creation of a $40 million innovation fund.

The Agreements are part of efforts to extend relations in civilian areas between both countries, with Israel already selling India an average of $1 billion per year in military equipment.

India is the world’s biggest importer of defence equipment and Israel has become one of its major suppliers, both the countries have committed to extending that relationship with a special emphasis on PM Modi’s “Make In India” campaign that asks foreign vendors to ensure the transfer of technology to Indian partners with the goal of reducing India’s dependence on foreign arms.

In April 2017, State-owned Israel Aerospace Industries (IAI) said India would buy nearly $2 billion worth of weapons technology, making it the military exporting giant’s largest ever defence contract.

The deal will see IAI provide India with an advanced defence system of medium-range surface-to-air missiles, launchers and communications technology.

Israeli equity crowd funding group OurCrowd just closed three deals with India, joining with Reliance Industries for a hi-tech incubator that helps to grow young companies in Jerusalem, bringing Israeli technology to India with Reliance Capital and collaborating with India’s Lets Venture to invest in start-ups.


Taruna Verma

Senior Associate

The Indian Lawyer

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The Delhi High Court clarified that the Goods and Services Tax (GST) on all legal services provided by Lawyers or Law Firms would be paid on reverse charge basis by the client.

Reverse Charge basis means that the tax will have to be paid by the service recipient which will be litigants under the present circumstances.

Several queries were posed regarding the release issued by the Finance Ministry subsequent to the High Court’s order on 12.07.2017 asking the Government to clarify on which legal services the GST was to be paid on Reverse Charge basis.

While listing the matter for further hearing on 14.09.2017, the Interim Order on 12.07.2017 of not taking coercive action against Lawyers and Law Firms for non-compliance of the GST Law, shall continue and would also cover the Limited Liability Partnerships (LLPs).

The Court also said that till further orders, all the legal services provided by the advocates, including senior counsel, Law Firms and LLPs will continue to be governed by the Reverse Charge mechanism.


Sanchayeeta Das

Legal Associate

The Indian Lawyer

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India’s biggest tax reform since independence is expected to be positive for the fast-moving consumer goods (FMCG) companies and firms producing consumer durables. This historic tax reform will irrevocably impact consumers, traders, businesses as well as the revenue collection machines of the States and the Centre.

Goods and services tax (GST) is divided into five categories. i.e. 0, 5, 12, 18 and 28 percent. It must be clarified that the tax will be levied along additional cess. So the rates for different products may increase. For example, the luxury cars are placed in the highest slab of 28 percent but GST Council levied an additional cess of 15 percent which will add up to total 43 percent.

FMCG Sector will benefit from the GST due to current huge unorganised market. GST rate for products like hair oil, soaps and toothpaste has been lowered by 500-600 basis points from the previous rates. Companies such as Colgate-Palmolive, HUL, Britannia, Heritage Foods etc will benefit from the move.

Pharma and healthcare: Pharmaceutical products will see 12 per cent GST as against earlier rate of 10 per cent. The Healthcare Sector will remain exempt from the GST however the inputs by the healthcare sector will be taxed at 18 per cent leading to rise in the operating costs.

Airlines: Travelling in business class will become expensive as after the rollout of GST, tax rate will increase from 9 per cent to 12 per cent. However, GST on economy class is set at 5 per cent, lower than the previous 6 per cent. Aviation Turbine Fuel has kept outside the GST and the indirect tax structure will continue. As a result, aviation companies will now face two set of taxes, i. e. GST and indirect tax. Tax input credit under the GST is only available on input services for economy class travel. Lower tax rate on economy travel is positive for companies like InterGlobe Aviation, Jet Airways and SpiceJet.

Telecom- The Sector is facing severe pressure in the form of intense competition from Reliance Jio. Under the GST regime, telecom services will be taxed at 18 per cent as against 15 per cent earlier. There are expectations that it will work as a salt on the wound for the sector. Any price increase will further dampen the scenario. Bharti Airtel, Idea Celluar and Reliance Communication should be eyed on stock market.

Automobile and auto ancillaries- The GST rates are mostly expected to be neutral to the Auto Sector except for the hybrid cars which will be taxed at the 28 per cent GST +15 per cent cess. Most other vehicle categories will not see significant change from the current tax structure. Tractors category will be taxed at 12 per cent against current 6-7 per cent which will be negative for the tractor companies. Demonetisation and Bharat Stage (BS) III norms have already hurt the Sector during the first half of 2017. Under the GST, input tax credit will not be available for the dealers for the stocks existing before 1st July hence companies are offering discounts on their vehicles. Stocks such as Exide Industries, Minda Industries and Amara Raja Batteries should be watched by investors.

Real Estate- The effective GST rate on under-construction real estate projects will be 12 per cent only and not 18 per cent as there will be abatement for land cost. Brokerage firm Edelweiss in a research note said, “We believe impact on property prices under GST will be driven by cost structure and extent of input credit available under GST passed to buyer.”


  • Traders below Rs 20 Lakh annual turnover are exempt under GST as compared to the current threshold of Rs 10 Lakh in indirect taxes.
  • Traders manufacturers and restaurants with up to Rs 75 Lakh turnover can go for the Composition Scheme and pay 1, 2 and 5 per cent tax respectively. Such businesses though will not get input tax credit but will have to file only one quarterly return.
    Rest of the traders will have to file three returns every month out of which two will be auto-populated.

The input tax credit under Central Value Added Tax (CENVAT) credit will be carried forward into the new regime.

Integrated GST (IGST) and GST Compensation Cess would be levied on cargo arrived on 1st July 2017. Cargo arrived up to June 30 would not attract IGST and compensation cess even though the clearance may happen after 1st July 2017. However, additional duty of customs would continue to be levied for imports of petroleum and tobacco products.

It is mandatory for all importers/ exporters to declare GST Registration Number (GSTIN) along with Import Export Code (IEC) in the bills of entry, shipping bills and courier forms. Provisional IDs issued by Goods and Services Tax Network (GSTN) also be declared during the transition period. Input tax credit of IGST would be available based on GSTIN declared in the bill of entry.

Exports are zero-rated under GST. Exporter would be entitled to refund of IGST paid on exports or refund of accumulated tax credit on inputs used towards exports. Refund of IGST for exports would be based on GSTIN declared in the shipping bill.



Taruna Verma

Senior Associate

The Indian Lawyer

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The Government of India has successfully implemented the long awaited Goods and Services Tax (GST) regime across the country on 1st July 2017. The GST is a comprehensive tax to be levied upon the manufacture, sale and consumption of goods and services with value addition at every stage of supply i.e. from the level of the service provider up to the level of retailer where the end consumer would bear the tax. The GST may impact the tax structure, tax computation, tax compliance, etc and thereby, affect various aspects of business operations including pricing of goods and services, accounting, inter and intra state transport of goods and services etc.

According to a US ratings agency, Moody, GST may increase the revenues of the Indian Government through improved tax compliance, reduction of costs of compliance from levy of uniform and simplified taxes across the country and ease of compliance through use of a common information technology (IT) infrastructure between the Centre and the states.

The new GST structure has ensured that the small and medium enterprises are not much affected by the tax reforms and that they are encouraged to set up business in India. The Composition Scheme under the GST regime has provided that business enterprises trading in certain goods and services, whose aggregate turnover in the preceding financial year has not exceeded Rs.75 lakh, have to pay a GST ranging between 0.5% or 1% or 2.5%, as the case may be.

A uniform and less complex system of levy and payment of taxes may also help in attracting private and foreign business investors to set up business in India as it may result in easier movement of goods within the country as well as overseas at economical costs; increased productivity gains; automated procedures for various compliances such as GST registration, returns, refunds, tax payments, checking input tax credits online, etc.  Therefore, the aforesaid system of levy and payment of GST may ensure that India continues to be an investment destination.



Daliparthy Harini

Legal Associate


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The goods and Services Tax (GST) Act, 2017 came into force from 1st July, 2017. Here is a list of the major changes proposed in GST bill:-

  1. Applicability of GST Law in the State of Jammu and Kashmir (J&K)

J&K Finance Minister Haseeb Drabu has confirmed that J&K will apply GST. However, since J&K has a separate Constitution and has special provisions regarding legislature, Central GST (CGST) & Integrated GST (IGST) will be passed separately. State GST (SGST) will be passed separately, similar to the other states.

  1. Employer’s Gifts to Employee Will No Longer be Taxed under GST

Earlier the supply of goods or services between related persons (made during the course of business) was treated as ‘supply’ even when there is no consideration. Employer and employee were covered in the definition of related person. So, it stood that any supply of goods or services by employer to his employees (even if free of cost) would have been covered under the scope of GST.

Proposed change to the Act provides that GST will not apply on gifts upto Rs. 50,000 by an employer to a particular employee. However, gifts above Rs. 50,000 will attract GST.

  1. GST not Applicable on Sale of Land/Building

Earlier, the term ‘goods’ included all movable property including actionable claims. Only money and securities were excluded. “Services” had a vague definition of “anything other than goods”.

Thus, there was an apprehension that the Government may levy GST on supply of immovable property (land/building) apart from levy of Stamp duty.

Now, the government has clearly mentioned in Schedule III that sale of land and/or building will neither be treated as a supply of goods nor a supply of services, i.e., GST will not be applicable on this.

So currently it stands that:

  • GST will apply on renting, leasing of land and/or building
  • GST will not apply on sale of land/building (Stamp duty will continue to apply)
  • GST will apply on works contract, i.e., constructing a building
  • GST will apply on sale of an under-construction building

However, there are discussions of bringing in sale of land and/or building under GST within 1 year from GST implementation date.


  1. Fixing the Upper limits of GST rates- CGST- 20% & IGST- 40%

Earlier, the upper cap fixed was 14% and 25% respectively in both the laws. Now, the upper cap has been fixed at 20% and 40% respectively under CGST and IGST Law to keep flexibility for rates increase in future. However, the GST slabs remain the same – 5%, 12%, 18% and 28%.

  1. Petroleum Products will come under GST

The petroleum products (crude oil, high speed diesel, petrol, natural gas and aviation turbine fuel/ATF) have now been brought under GST.

This will be highly beneficial to Indian businesses as businesses now can take input credit on petrol products purchased. Many industries like the plastic and chemical industries have petroleum products as inputs for manufacture. Besides, machinery, vehicles use petrol/ATF to run. Availability of input credit will help to reduce prices of goods.

  1. Unregistered Seller and registered Buyer – GST is Applicable on Reverse Charge Basis

An unregistered supplier cannot charge GST on sales. The Model law did not mention the tax treatment if an unregistered dealer sold to a registered buyer.

The Act now provides that when a registered buyer buys from an unregistered dealer, then reverse charge is applicable, i.e. the buyer (recipient of goods/services) is liable to pay GST. This is similar to the current purchase tax on purchase of goods from an unregistered dealer applicable in many states.

  1. Reduction in Composition Rates


The Composition Scheme is one such scheme, applicable to all traders in India with a turnover of between Rs. 10 lakh and Rs. 50 lakh.

Particulars Earlier Composition Scheme Now in GST Act
Trader 1% 0.5%
Manufacturer 2.5% 1%
Restaurant N/A 2.5%
Service provider N/A N/A


Reduction in composition rates is a welcome move for the MSME sector. Composition scheme has many restrictions such as non-availability of ITC, not eligible for inter-state transactions. Reduction in composition rates will attract more taxpayers to register.

However, service providers are still not eligible for composition scheme thus burdening the various professionals and freelancers.

  1. Change in the Provision Time of Supply of Services

Model GST law contained that the time of supply of services (i.e., the point of taxation when liability to pay tax arises) would be the earlier of:

  • Date of issue of invoice, or
  • The last date on which the invoice should have been issued, or
  • Date of receipt of payment by the supplier.

Now in the Act, the provisions for determining time of supply for services have been changed. Thus, the time of supply of services shall be earlier of the following dates:

  • If the invoice is issued within time prescribed:
  • Invoice issue date, or
  • Date of receipt of payment

—whichever is earlier

  • If the invoice is not issued within time:
  • The date of providing of services, or
  • The date of receipt of payment

—whichever is earlier

If clauses (a) & (b) are not applicable then:

The date on which the recipient shows the receipt of services in his books of accounts.

  1. Change in conditions for disallowing ITC

According to the earlier provisions of GST Law, if the recipient/buyer failed to pay the service provider within 3 months, then the Input Credit Tax (ITC) availed by the buyer would be disallowed. He would be required to pay the amount of ITC availed along with interest. This was only for services. There were no provisions of re-allowing the ITC if the buyer paid after 3 months.

Now, in the amended Act, this provision includes goods also. Further, the time period for payment is extended to 180 days instead of 3 months before ITC is disallowed. Now, if payment is made even after 180 days then the ITC will be re-allowed.

  1. Credit of Rent-a-cab, Life Insurance and Health Insurance allowed if used against sale of same category

Earlier rent-a-cab, life insurance, and health insurance businesses were not eligible to take input tax credit. Only those services, as notified by the government, which are mandated to be provided to an employee by the employer will enjoy input tax credit.

Now, in the amended Act, to reduce the taxpayer’s burden, input tax credit will be allowed for the above services subject to the following conditions:

  • Credit must be adjusted only against outward supply (sale) of the same category of service. It can also be a part of mixed or composite supply.
  • GST will apply on petrol on a date and at a rate notified by the Government on the recommendations of the Council.



Sanchayeeta Das

Legal Associate

The Indian Lawyer

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Real Estate (Regulation and Development) Act (RERA), 2016 came into effect on 1st May 2017. RERA marks the beginning of new era with bringing in more clarity in deals between developers and buyers leaving out ambiguities. This Act will help the buyers in many ways and will increase the confidence of homebuyers and ensure if there is any wrongdoing by the developer, there will be a redressal mechanism through RERA court or consumer forum.

RERA is a Central Act and under the Central Law, each State has to notify rules and set up a Regulatory Authority to manage the real estate Sector which shall improve the governance and hold on the Sector reducing disputes to a great extent.


According to the Ministry of Housing and Urban Poverty Alleviation (HUPA), there were 76,044 companies operating in the real estate sector at the time of passing of the Bill in Rajya Sabha in March 2016. RERA is of extreme importance as it will be applicable to more than76,000 companies across the country.

More transparency: builders will have to deposit 70% of the funds collected from buyers in a separate bank account in case of new projects and 70% of unused funds in case of ongoing projects to ensure sufficient funds for the project to get completed on time. This will be a big relief to the buyers as timely delivery of the project is the biggest factor or cause of concern for the buyers.

As RERA aims to make transactions clearer and more transparent it will benefit the homebuyers. It will further attract more Foreign Direct Investments (FDI’s).

Developers will now have to get all the ongoing projects that have not received completion certificate and the new projects registered with Regulatory Authorities by July end, 2017. However, Cost of developers will rise as project can continue or start only after the project has been registered with the concerned Regulatory Authority.

Both developers and buyers will now have to pay the same penal interest of SBI’s marginal cost of lending rate plus 2% in case of delays.

Developers will be liable for structural defects for five years.

RERA will impact the real estate or real estate brokers in many ways- Now even brokers are to be registered with state level real estate Regulatory Authority. Brokers in unorganized sector need to get a license to operate.

Under RERA there shall be a code of conduct for the agents and all transactions have to be official this will ensure there is a no unfair trade practices.


Taruna Verma

The Indian Lawyer



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GST Transitional Provisions


The much awaited tax reform is set to roll on 1st July 2017. The Government which has made the GST the main stay of its economic reforms is set to ride the rough road of implementation that will start in a few days time. One of the keys to the success of Goods & Services Tax (GST) is smooth migration to new regime with minimum disturbance to existing businesses. It further looks at the enrollment of existing or new taxpayers to GST as the first step towards Transitional Provisions in the new regime.

The GST Council has approved rate structure on various items and also approved rules relating to GST Returns and Transition Provisions.


A registered person shall be entitled to claim Input Tax Credit (ITC) of the Central Value Added Tax (CENVAT) credit carried forward in the return relating to the period immediately preceeding the appointed day subject to the following prescribed conditions:

  • The amount of credit is admissible as ITC under GST
  • All Returns for preceding 6 months filed under existing laws and admissible credit is reflected in last returns filed
  • ITC / CENVAT credit does not relate to exempted goods



Taxes and duties on Inputs which are held in raw material / semi-finished / finished goods which were for manufacture of exempted goods under the earlier law will be eligible as credit by the following person:

  • Those who were not liable to be registered under the earlier law, or
  • Those who were engaged in the manufacture of exempted goods or provision of exempted services,
  • Those who were providing works contract service and was availing the benefit of notification
  • A first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer.



A registered person shall be entitled to claim credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law subject to the condition:

The invoice or any other duty or taxpaying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day (may be extended by a further period of thirty days by the Commissioner);

The registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section.


Where raw material, semi-finished or finished are sent for job work under earlier law and are lying with the job worker on the appointed day, job worker need not pay GST on its return to principal provided the goods are returned within 6 months or extended period of 2 months, from the appointed day.

Principal is required to file an application in FORM GST TRAN-1, specifying the stock or capital goods held by him as a principal at the place/places of business of his agents/branch, separately agent-wise and branch-wise.

If goods are not returned within the specified period, the input tax credit shall be liable to be recovered as an arrear of tax under GST and the amount so recovered shall not be admissible as input tax credit.


Condition I: Such goods are returned within 6 months or such extended period from the appointed day

In this case, the supplier of the duty paid goods is entitled to get refund of excise duty paid by him under the earlier law on removal of goods provided:

  • Duty paid goods were removed in earlier law 6 months prior to the appointed date
  • Goods are returned by person other than registered taxable person
  • Such goods are identifiable to the satisfaction of the GST authorities


If such goods are returned by registered taxable person, then the return of goods shall be deemed to be a supply.

Condition II: Such goods are returned after 6 months or such extended period from the appointed day

If goods are returned by registered taxable person, he will be liable to GST on such supply.

If goods are returned by person other than registered person, then GST will be paid by recipient of goods under reverse charge mechanism.


For upward revision, taxable person is required to issue supplementary invoice or debit note within 30 days from the date of revision in prices of contract entered into before appointed day.

For downward revision, the taxable person shall issue a credit note within 30 days from the date of such revision.


Claim for refund of CENVAT credit any duty, tax, interest or any amount paid under the existing law shall be disposed of in accordance with the provision of existing law.


In respect of a contract entered into prior to GST regime, the goods or services or both which are supplied on or after the introduction of GST would be liable to tax under the GST to the extent the supply takes place after introduction of GST.


No GST shall be payable for goods sent on approval basis, returned to the supplier due to rejection or non approval by the buyer within a period of 6 months or the extended period of 2 months.


Sanchayeeta Das

The Indian Lawyer

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The Central Governmenton 26th May 2017 announced strict rules to prohibit sale of animals for slaughter and sale. The ban on slaughter is alsoapplicable to religious sacrifice at livestock markets and animal fairs that are a common occurrence in rural areas. The animals under purview are cows, bulls, bullocks, buffaloes, steers, heifers, calves and camels.

The reasonbehind the order is intended to end uncontrolled and unregulated animal trade. The rules won’t apply to goats and sheep, often sacrificed during Id.

Meat export organizationsprotested the move saying it was sudden and arbitrary and that it will affect their business.

With the onus being on cattle owners to certify that cattle will not be sold for slaughter or sacrifice, the trade in animals will be more regulated.

The rules will bring in new norms for the functioning of well-known livestock markets or annual cattle fairs like the ones at Sonepur (Bihar) and Pushkar (Rajasthan) or in other states including Uttar Pradesh, Maharashtra, Tamil Nadu and Andhra Pradesh.

Animals for slaughter can now be bought directly from farms — a move expected to ensure traceability and food safety standards and weed out middlemen between farmers and slaughterhouses, and increase the income of farmers who rear such animals for trade. New rules have, however, not banned sale of such animals for agriculture purposes or milk. But it can be done only through regulated livestock markets which will have to adhere to safety standards and certain do’s and don’ts to avoid cruelty against the animals.

The rules, notified by the Ministry of Environment, will have to be implemented within three months across the country, including Kerala, which allows cow slaughter. Though the issues relating to cow slaughter come under the ‘State’ subject in terms of making law and framing the rules, the new central rules are notified under the Prevention of Cruelty to Animals (PCA) Act of 1960 that gives the Centre power over animal welfare.

The rules also provide for setting up a district-level authority to enforce animal protection laws on the ground, including those against illegal slaughter. As part of the Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules, 2017, it makes a provision of constitution of Animal Market Committee for management of animal markets in the district. The Committee will have to ensure that no person will bring a cattle to an animal market unless upon arrival he has furnished a written declaration signed by the owner of the cattle that “the cattle has not been brought to market for sale for slaughter”.

The purchaser will have to give an undertaking that he/she will not sell the animal for purpose of slaughter, follow the state cattle protection or preservation laws, not sacrifice the animal for any religious purpose and not sell the cattle to a person outside the State without the permission as per the State cattle protection laws.

Under the rules, no animal market will be allowed in a place that is within 25 km from any State border or that is within 50 km from any international border. Besides, unfit animals, pregnant animals, animals who have not been vaccinated and animals under six months of age cannot be displayed or sold at any of the cattle market anywhere in the country.

The market committee will have to keep a record of name and address of the purchaser and procure his identity proof. The committee will also have to ensure that the purchaser of the animal gives a declaration that he shall not sell the animal up to six months from the date of purchase and shall abide by the rules relating to transport of animals made under the Act or any other law for the time being in force.

Since the rules include buffaloes in their definition of cattle, big traders and exporters will initially feel the heat in procuring the animals for meat. But the regulation of slaughter houses and closure of illegal ones will ultimately bring consistency of supply in the market and ensure food safety standard. India is currently a major buffalo meat exporting country which grew from Rs 3,533 crore in 2007-08 to Rs 26,685 crore in 2015-16.


Sanchayeeta Das

The Indian Lawyer

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Participatory Notes commonly known as P-Notes or PNs are instruments issued by registered Foreign Institutional Investors (FII) to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator, the Securities and Exchange Board of India (SEBI)

Markets Regulator, SEBI on Monday, 29th May 2017, proposed to levy a regulatory fee of USD 1,000 for each Participatory Note (P-Note) issued by foreign investors and bar issuance of such derivative-based instruments for speculative purposes to check any misuse of these products for channelizing black money as the concerns remain that P-Notes are misused by some to channelize black money from abroad into the country through the stock markets.

In a consultation paper issued on Monday, SEBI said it has been continuously making regulatory changes in order to ensure that the Offshore Derivative Instrument (ODI) route is not misused.

In the context of the Indian market, ODIs are investment vehicles used by overseas investors for an exposure in Indian equities or equity derivatives. These investors are not registered with SEBI, either because they do not want to or due to regulatory restrictions.

SEBI incurs a significant expenditure in terms of capital and manpower when it comes to monitoring of investments coming through the ODI route.

It is proposed that beginning 1st April 2017, for a period of every three years, regulatory fees of USD 1,000 be levied on each ODI issuing Foreign Portfolio Investment (FPI) for each and every ODI subscriber coming through such FPI.

SEBI said quite a few ODI subscribers invest through multiple issuers and the proposed fee will discourage the ODI subscribers from taking ODI route and encourage them to directly take registration as an FPI.

Besides, SEBI has proposed to prohibit ODIs from being issued against derivatives for speculative purpose. Further, the ODI issuers would be given time till December 31, 2020, to wind up the ODIs issued against derivatives which are not for hedging purpose.

Presently, ODIs are being issued against derivatives along with equity and debt. As of April 2017, the ODIs issued against derivatives had a notional value of Rs 40,165 crore, which is 24 per cent of the total notional value of outstanding ODIs.

P-notes are issued by registered FPIs to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They, however, need to go through a proper due diligence process.

SEBI has sought suggestions from public on the proposals till 12th June 2017 and a final regulation will be put in place after taking into the considering views of all the stakeholders.

Taruna Verma

Senior Associate

The Indian Lawyer

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