Watch my video to understand in layman’s terms.
Category: finance
The Law Slayer
Continuing the spree of merging various laws and consolidating it under a few manageable ones, the Govt has released draft Labour codes for public review. As the last date for public comment on the draft Labour code is approaching, here is a brief review of the structure and nuances, for which, the brainstorming started way back in 2002.
In India, the law relating to employees/workmen has always been a complex subject due to various factors whether due to its archaic laws, multiplicity of laws/regulatory authorities, central v/s states legislation and so on. One of the key factors to remember is that labour laws are part of the concurrent list and accordingly both the central and the state government can legislate wherever they feel need for the same. However, instead of bringing clarity, this has created confusion due to overlapping and multiplication. Central Government has passed more than fifty laws till date pertaining to labour and related aspects while various state governments have also passed more than one hundred and fifty laws on similar or the same subject. Secondly, not only the state and central laws clash on the same subject and create confusion but even in central laws also, a single subject has been placed under multiple laws. For instance, the maternity benefits aspect has been provided in more than four legislations. Wages definitions also have been provided in various Acts leading to varying interpretations. Lastly, some of these laws were too old, archaic and not in line with current economic and industrial requirement. Therefore, consolidation and codification of the entire set of labour laws was the urgent need of India and its manufacturing industry in order to scale up further and put its footprint in global manufacturing base. In order to improve its ranking further, attract more foreign investment, augment domestic capital in order to make India a truly manufacturing hub as envisaged in “Make in India” scheme, we need to create a conducive environment that can facilitate and nurture industrial and manufacturing set up(s). To achieve this, it is necessary to reform and replace, on top priority basis, its’ old and archaic labour laws, which are often considered to be one of the key bottlenecks in making it a manufacturing power house in the global map.
Here is a brief structure of the new codes:
Code of Wages, 2019
The Preamble of Code on Wages, 2019, states its aim is to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto and therefore, four laws directly impacting wages and bonus have been submerged and subsumed into one. The first three aspects are minimum wages, governed by The Minimum Wages Act, 1948, payment of wages, governed by The Payment of Wages Act, 1936, and payment of bonus, governed by The Payment of Bonus Act, 1965. In addition to these, another aspect pertaining to wages (i.e. equal remuneration for equal work irrespective of gender of employee in the form of Equal Remuneration Act, 1976) has also got subsumed in the Code on Wages Act pursuant to the Section 69 (Repeal and Savings) of Code on Wages, 2019.
Key Highlights:
- Definition of wages revamped and made uniform for all chapters
- Consistency in provisions across all sections of the Code
- Includes all remuneration payable to a person; Exclusions specifically listed to be limited to 50% of total wages; Benefits in kind to be part of wages
- Managerial employees included;
- Contractor identified as employer
- Concept of floor wages introduced in addition to minimum rate of wages;
- Early settlement of claims envisaged.
CODE ON OCCUPATIONAL SAFETY, HEALTH AND WORKING CONDITIONS, 2019
The Preamble to the Code on Occupational Safety, 2019 states that it will consolidate and amend the laws regulating the occupational safety, health and working conditions of the persons employed in an establishment and the matters connected therewith or incidental thereto.Therefore, it intends to consolidate the various laws which deals with occupational safety, health and working conditions of employees for example Factories Act, 1948, Contract Labour (Regulation and Abolition) Act, 1970 etc. Clause 134 (Repeal and Saving) of the Code on Occupational Safety, 2019 clearly mentions the acts which will be repealed once this Code gets the force of law. The Laws getting consolidated are:
- The Factories Act, 1948
- The Mines Act, 1952
- The Dock Workers (Safety, Health and Welfare) Act, 1986
- The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
- The Plantations Labour Act, 1951
- Contract Labour (Regulation and Abolition) Act, 1970
- The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955
- The Working Journalist (Fixation of Rates of Wages) Act, 1958
- The Motor Transport Workers Act, 1961
- The Sales Promotion Employees (Conditions of Service) Act, 1976
- The Cine Workers and Cinema Theatre Workers Act, 1981
Key Highlights are:
- Employees include workers and all other persons employed in a managerial, administrative, or supervisory role (with monthly wage of at least INR 15,000)
- Applicable to all establishments having 10 or more employees and mines and docks
- Consolidates procedural aspects and provides uniformity in threshold
- Mandatory registration and licensing process for establishments covered by the Code
- Work hours, working conditions and welfare facilities to be notified
- Entitled to one day of leave for every 20 days of work per year.
- Bar on civil courts from hearing matters under the Code
CODE ON Social Security, 2019
The Preamble to the Code on Social Security, 2019 states that its a bill to amend and consolidate the laws relating to social security of the workers and the matters connected therewith or incidental thereto and therefore it amends and consolidate the aspects relating to PF, ESI, maternity, gratuity, welfare fund aspects in line with the overall scheme of the Code. Clause 157 (Repeal and Savings) of the Code specifies that following Acts (explained in brief) will be repealed once this Code becomes effective:
- Employees’ Compensation Act, 1923
- Employees’ State Insurance Act, 1948
- Employees’Provident Fund and Miscellaneous Provisions Act, 1952
- Payment of Gratuity Act, 1972
- The Cine Workers Welfare Fund Act, 1981
- The Building and Other Construction Workers Cess Act, 1996
- The Unorganized Workers’ Social Security Act, 2008
Salient Features of the code are;
- Broad based applicability –coverage for gig, platform and unorganized workers, thresholds for specified chapters
- Limitation period of five years for initiation and two years for concluding enquiries
- Provision for filing single return electronically or otherwise by the employer
- Significant increase in penalties and prosecution –No compounding for repeat offences
- Aadhaar linked identification of employee / beneficiary
- Impact of the wage definition on contribution / entitlement
- Provisions predominantly aligned with those in the erstwhile statutes;
- Change in definitions –to apply consistently to all chapters of the Social Security Code;
- Provisions relating to Employees’ State Insurance mutually exclusive to those providing for maternity benefit, employees’ compensation;
- Specific provision for creation of social security boards for unorganized workers;
- Inclusion of gig / platform workers widens coverage of social security;
- Provides for funding of notified schemes for unorganized workers through Corporate Social Responsibility Fund besides other funding mechanisms (partly by Central / State Governments, contributions collected etc.)
CODE ON INDUSTRIAL RELATIONS
The Code on Industrial Relations is not yet in public domain. However, a good guess is it may subsume The Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946 and Industrial Dispute Act, 1947.
The Key differentitors are:
- Treats fixed term workers on par with regular employee for benefits
- Provides for sole negotiating trade union
- Re skilling fund for training of retrenched employees.
Once Enacted, the labour codes will be a game changer for Indian employees and also increase the attractiveness of Indian economy in the eyes of global investors. However, there are many grey areas(like inclusion of value of remuneration in kind; capping of Min 50% remuneration to be considered as wages, etc), if not fixed, may increase the litigations going forward.
Legal Disclaimer: All though due care has been exercised while writing this article, this should be read for purely academic interests. This is not to be constructed as legal advice. No responsibility for the actions, if any, arising out of use of this article binds the author
Incentives Schemes under the FTP
CA Harikrishna Puranik
Recently the GoI has extended various cut off dates for claiming incentives such as SEIS/MEIS. This may be your chance to encash such benefit, adding to your arsenal in fighting the CoVid Crisis.
Govt Of India, in order to facilitate and encourage the industry towards achieving positive Current Account Deficit, and level the playing field for Indian Exporters to compete in the global Market, announces various schemes for exporters of good and services.
Major Schemes are:
1 Duty Exemption Schemes (such as AA and DFIA)
2 Duty Remission Schemes (Currently Duty Drawback scheme)
3 Incentive schemes such as MEIS/SEIS.
Though there are lot many articles about incentive schemes, they mainly concentrate at conventional schemes such as Drawbacks (DBK) and Advance Authorisation (AA). In the current article, we will try to explain in simple terms, the concept and procedure of benefitting from SEIS Schemes.
Background:
Central government notified a scheme called Service Exports from India Scheme (“SEIS”) under Foreign Trade Policy 2015-20 (“FTP”). This scheme replaced its predecessor ‘Served From India Scheme (“SFIS”) under which the benefit was not available for foreign brand of the Indian companies. Exporters of the notified services will be awarded an incentive ranging from 3-7% of your Net Foreign Exchange Earning. These incentives are in the form of Duty Credit Scrips, which can be used for payment of import duties such as BCD. Don’t throw down the hat yet, saying we don’t have any imports, to use these duty scrips. The scrips are transferable and are usually purchased in the market at a marginal discount. So you can still pocket the remaining cash.
Pre-requisites:
1. The Services fall under the broad classification as;
- Cross border trade of eligible services from one country’s to the other country.
- Consumption of eligible services abroad.
- Services rendered in the commercial presence of one country in the territory of another is not eligible.
- Presence of natural person of one country providing their service in the territory of another is also not eligible.
2. Types of Services Notified in Schedule under Appendix 3D;
| Sl. No. | Name of the Service | Percent of incentive |
| Professional services | ||
| a. | Legal Services | 7 |
| b. | Accounting, auditing and book-keeping services | 7 |
| c. | Taxation services | 7 |
| d. | Architectural services | 7 |
| e. | Engineering services | 7 |
| f. | Integrated engineering services | 7 |
| g | Urban planning and landscape architectural services | 7 |
| h | Medical and dental services | 7 |
| I. | Veterinary services | 7 |
| j | Services provided by midwives, nurses, physiotherapists, and paramedical personnel | 7 |
| Research development services | ||
| a. | R&D services on natural sciences | 7 |
| b. | R&D services on social sciences and humanities | 7 |
| c. | Interdisciplinary R&D services | 7 |
| Rental/Leasing services without operators | ||
| a. | Relating to ships | 7 |
| b. | Relating to aircraft | 7 |
| C | Relating to other transport equipment | 7 |
| d. | Relating to other machinery and equipment | 7 |
| Other business services | ||
| a. | Advertising services | 5 |
| b. | Market research and public opinion polling services | 5 |
| c. | Management consulting service | 5 |
| d. | Services related to management consulting | 5 |
| e. | Technical testing and analysis services | 5 |
| f. | Services incidental to agricultural, hunting and Forestry | 5 |
| g. | Services incidental to fishing | 5 |
| h. | Services incidental | 5 |
| I. | Services incidental to manufacturing | 5 |
| J. | Services incidental to energy distribution | 5 |
| k. | Placement and supply services of personnel | 5 |
| l | Investigation and security | 5 |
| m. | Related scientific and technical consulting Services | 5 |
| n | Maintenance and repair of equipment (not 8861-8866 including maritime vessels, aircraft or other transport equipment) | 5 |
| o. | Building cleaning services | 5 |
| P | Photographic services | 5 |
| q | Packaging services | 5 |
| r. | Printing, publishing | 5 |
| s. | Convention services | 5 |
| Audio-visual services | ||
| a. | Motion picture and video tape production and distribution service | 7 |
| b. | Motion picture projection service | 7 |
| c. | Radio and television services | 7 |
| d. | Radio and television transmission services | 7 |
| e | Sound recording. | 7 |
| General construction work for building | 7 | |
| General construction work for civil engineering | 7 | |
| Installation and assembly work | 7 | |
| Building completion and finishing work | 7 | |
| Primary education services | 7 | |
| Secondary education services | 7 | |
| Higher education services | 7 | |
| Adult education | 7 | |
| Sewage services | 7 | |
| Refuse disposal services | 7 | |
| Sanitation and similar services | 7 | |
| Hospital services | 7 | |
| 7 | TOURISM AND TRAVEL-RELATED SERVICES | |
| A. Hotels and Restaurants (including catering) | ||
| a. | Hotel | 5 |
| b. | Restaurants (including catering) | 5 |
| B. Travel agencies and tour operators services | 7 | |
| C. Tourist guides services | 7 | |
| 8 | RECREATIONAL, CULTURAL AND SPORTING SERVICES (other than audio-visual services) | |
| A | Entertainment services (including theatre, live bands and circus services) | 7 |
| B | News agency services | 7 |
| C | Libraries, archives, museums, and other cultural services | 7 |
| D | Sporting and other recreational services | 7 |
| 9 | TRANSPORT SERVICES | |
| A | Maritime Transport Services | |
| a. Passenger transportation | 7 | |
| b. Freight transportation | 7 | |
| c. Rental of vessels with crew | 7 | |
| d. Maintenance and repair of vessels | 7 | |
| e. Pushing and towing services | 7 | |
| f. Supporting services for maritime transport | 7 | |
| B | B. Air transport services | |
| a. Rental of aircraft with crew | 7 | |
| b. Maintenance and repair of aircraft c. Airport operations and ground handling | 7 | |
| C | C. Road Transport Services | |
| a. Passenger transportation | ||
| b. Freight transportation | 7 | |
| c. Rental of commercial vehicles with operator | 7 | |
| d. Maintenance and repair of road transport equipment | 7 | |
| e. Supporting services for road transport services | 7 | |
| D | D. Services auxiliary to all modes of transport | |
| a. Cargo handling services | 7 | |
| b. Storage and warehouse services | 7 | |
| c. Freight transport agency services | 7 |
3. Exclusions:
i) Foreign exchange remittances other than those earned for rendering of notified services would not be counted for entitlement. Thus, other sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible.
ii) Following Foreign Exchange remittances shall not be considered for calculation of entitlement under this scheme:
I) Related to Financial Services Sector include
a) Raising of all types of foreign currency Loans,
b) Export proceeds realization of clients,
c) Issuance of Foreign Equity through ADRs/GDRs or other similar instruments,
d) Issuance of foreign currency Bonds,
e) Sale of securities and other financial instruments,
f) Other receivables not connected with services rendered by financial institutions
II) Earned through contract/regular employment abroad (e.g. labour remittances) would include
a) Payments for services received from EEFC Account,
b) Foreign exchange turnover by Healthcare Institutions like equity participation, donations etc.,
c) Foreign exchange turnover by Educational Institutions like equity participation, donations etc.,
d) Export turnover relating to services of units operating under EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units,
e) Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA Service Providers
f) Exports of Goods
g) Foreign Exchange earnings for services provided by Airlines, Shipping lines service providers plying from any foreign country X to any foreign country Y routes not touching India at all
h) Service providers in Telecom Sector
4. Other Conditions
- Service provider must be located in India.
- Net Free Foreign Exchange Earning during the year must be higher than $15000($10000 in case of Sole Proprietorship)
- Must have a Valid IEC number.
- Incase of entities engaged in both manufacturing as well as service then the net foreign exchange earned by such entity shall be considered for services only (although you can claim MEIS on the goods exported)
- Earnings in INR is also considered as equalling FC where exports are made in INR.
- Earning via credit card is also eligible.
- You must posses a DSC registered with DGFT since the application should be submitted online.
Aatmanirbhar Bharat Abhiyan – Summary
As we were all eagerly waiting on how the FM will spend off Mr. Modi`s 20 Lakh Crores kitty, here is the summary of announcements.
Although todays package mostly revolved around MSMEs, It can broadly divided into 6 categories as below;
- MSME
- EPF
- NBFC & MFI and Discoms
- Contactors
- Real Estate
- Direct Tax
1. MSME
- In a most welcomed move, FM announced the revision of MSME norms which were long overdue. The revised MSME criteria looks as below now:
Micro: Limit revised upward Investment upto 1 cr. or Turnover upto 5 cr.
Small: Limit revised upward Investment upto 10 cr. or Turnover upto 50 cr.
Medium: Limit revised upward Investment upto 20 cr. or Turnover upto 100 cr.
Note: There is no Differentiation between Manufacturing and service enterprises.
However, this still looks lesser compared to the current economic growth India had witnessed prior to Covid setback.
- Collateral Free Automatic Loan to MSME. No guarantee required. Period 4 Years. No principal repayment for 1 year.
- Stressed MSME: Subordinate Debt 20,000 crore
- MSME doing viable business: 50,000 cr. equity infusion for expansion
- Government Tenders: Global tenders will be disallowed upto 200 cr.
- E-market linkage for MSME. Within next 45 days all payments will be made to MSME.
2. EPF
- Government to continue to contribute PF for firms with 100 staff, earning less than Rs 15,000
- To provide more take-home salaries and increase cash-in-hand for employers statutory PF contribution reduced from 12% to 10%. However for state PSUs, govt will continue to pay 12%, while govt staff pays 10%
- Liquidity relief to be given for all EPF establishment
- Govt support towards EPF contribution extended by another 3 months – June, July, August
- Relief of Rs 2,500 crores to be provided to benefit 70.22 lakh employees
3. NBFC, MFI and Discoms
- Rs 30,000 crore special liquidity scheme announced
- Investment to be made in primary & secondary investments
- The debt papers will be fully guaranteed by government of India
- Government announces Rs 45,000 crore liquidity infusion through a Partial Credit Guarantee Scheme 2.0 for NBFCs
- Emergency liquidity injection of Rs 90,000 crore to Discoms
4. Contractors
- All GoI agencies, such as railways, roadways, will provide 6 month extension to contractors
- No cost extension of upto six months for govt contractors to comply with contract conditions construction work, goods and services contract, completion of work
5. Real Estate
- Covid period should be treated as a force majeure and relax timelines
- Registration and completion date should be extended suo-moto by 6 months for all registered projects expiring on or after 25th March, 2020 without individual applications
6. Taxes
- All pending refunds to charitable trusts, non-corporate business, LLPs and co-operatives will be processed immediately
- Due date of all IT Return filings extended from July 31 to November 30
- Vivaad say Vishwas scheme extended upto December 31, 2020. No extra payment sought.
- Date of assessments getting barred as on September 30, 2020 now being extended to December 31, 2020. Those getting barred on March 31, 2021 extended by six months.
- In order to provide more funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts shall be reduced by 25% of the existing rates.
Mr. Modi has pledged almost 10% of the nation`s GDP towards this package, matching that of the developed countries like Germany. However, two questions looms on the horizon, how will the govt raise funds to nurture this ambitious package, and will it be enough?? What do you think?
