Competition Commission vs Small Medium Enterprises

The Competition Commission of India and Small and Medium Enterprises (SMEs)

The Small and Medium Enterprises (SMEs) have been globally recognized as a priority sector for growth and development and India is not an exception to this generality. In India, the Micro, Small and Medium Enterprises (MSMEs) contribute over 45 percent of the country s industrial production and around 40 percent of total exports. The SMEs increase competition, contribute comprehensively by the GDP ensure varied supply of goods and services and give customers wider and customized choice. Thus MSMEs unhesitatingly play a vital role and in fact they are the backbone of the Indian economy and prudence suggests that the backbone not only be protected but strengthened too on a perennial basis.

Small and Medium Enterprises (SMEs) needs to know

What SMEs needs to know is that the law is applicable to them as well. The focus of law is not on “size of the enterprise” which could be in terms of assets /turnover or investment in plant and machinery etc. but on the effects of business practices on competition in the relevant market in India. However, it is unlikely that SMEs would unwittingly fall foul of the law. On individual basis, since SMEs lack market power, their actions are not likely to have appreciable adverse effects on competition in India. Moreover, the exclusions and exemptions from the applicability of law are likely to dilute the effectiveness of competition law which is increasingly believed to be benign for consumers, enterprises as well as economies.

Power of Small and Medium Enterprises (SMEs)

A SMEs or an Association can file information in the prescribed form with the CCI and request for enquiry against any delinquent enterprises in case the latter is allegedly indulging in anti-competitive practices/ agreement or abuse the dominant position. SMEs can also file objection with the CCI in response to public notice or otherwise against any proposed acquisition, merger or amalgamation as sometimes a survival of SME is threatened. Thus, there is an obligation on the CCI to listen to the aggrieved SMEs.

Competition Commission of India and Competition Appellate Tribunal (COMPAT)

The Amendment made to the Act in 2007, casts an obligation upon the Central Government to establish Competition Appellate Tribunal (COMPAT), which shall be a three member quasi –judicial body to

•Hear and dispose of appeals against any direction issued or decision made or the Order passed by the Commission;

•Adjudicate on any claim for compensation that may arise from the findings of the Commission or the Orders of the Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or sub-section (2) of section 53Q of this Act, and pass Orders for the recovery of compensation under section 53N of the Act.

The Competition Appellate Tribunal will be guided by principle of natural justice and it can regulate its own procedure. COMPAT can dismiss a petition for default or decide it ex parte and such order of dismissal or ex parte order can be set aside. The proceedings before COMPAT are deemed to be judicial proceedings. If Appellate Tribunal cannot execute its order, it will be sent to Court within whose local jurisdiction the registered office of the company or place of residence of the person is situated. Order of the C OMPAT will be executed as a degree of court. COMPAT can directly send the order to a civil court for execution. The order will be executed by that Court as if it is a decree of that Court.

Procedure for Investigation of Combination by the Competition Commission of India

On coming to a prima facie opinion that the combination is likely to cause or has caused appreciable adverse effect on competition within the relevant market, the commission shall issue a show cause notice to parties to the combination calling upon them to show within 30 days of receipt as to why investigation of such combination should not be conducted. After the receipt of the response from the parties, the commission may call for a report from the DG within the time as may be specified.

Orders that CCI can pass in respect of Combinations

The commission is empowered to pass the following orders after the due process:

a)        Approve the combination where no appreciable adverse effect on competition in the relevant market in India;

b)        Direct that combination shall not take effect where the Commission is opinion that there is or is likely to have appreciable adverse effect on competition;

c)        Propose modification in the combination where the commission is of the appreciable adverse effect cause or likely to be caused by the combination can be eliminated by the modification.

Competition Law and Leniency Provisions

Most competition laws either exempt specific sectors and/ or types of economic activity, and /or have provision s for the granting of such exemptions in given situations. It is worth observing that there generally tend to be fewer exemptions in countries which have recently adopted competition laws (mainly developing and transition market economies) as compared with more industrialized nations. In India the Competition Commission of India ,While passing orders in respect of cartels , the Commission is vested with the discretion to impose a proportionate /lesser penalty than leviable under the Act upon a producer, seller, distributor, trader or service providers, provided the following conditions are met;

1.        Such producer, seller, distributor, trader or service provider included in the cartel had made full and true disclosure in respect of the alleged violations and such disclosure is vital.

2.        Such disclosure has been made before receipt of DG s report on investigation order under section 26 of the Act

3.        The party making disclosure s continues to co-operate with the Commission till the completion of proceedings before the commission.

4.        The party making disclosure s has;

a)        Complied with the condition of which the lesser penalty was imposed and

b)        Not given false evidence.

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FINANCIAL INFORMATION TRANSPARENCY

FINANCIAL INFORMATION AND TRANSPARENCY RELATED DISCLOSURE FOR GOOD CORPORATE GOVERNANCE

1)        Financial Calendar

2)        Listing of Shares in Stock Exchange

3)        Details of Shareholders/ Shares

4)        International Listing

5)        Stock Market Data (Share Price Volatility)

6)        Share Transfer Process

7)        Dividend Payment

8)        Special Resolution by Postal Ballot

1)     Financial Calendar:

In all the companies disclosure of financial calendar include following data:

•Financial Calendar •Date, Time and Venue of Last Annual General Meeting •Book Closure Date •Dividend Payment Date •Date of Posting of Annual Report •Last Date of Receipt of Proxy forms •Approval Date of Quarterly Results •Stock Code •Special Resolution of Postal Ballot •Reporting on Conciliation of Account GAAP •Board Meeting Date •Probable Date of Dispatch of Warrants for Dividend

2)     Listing of Shares in Stock Exchange:

Listing means admission of securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State Government, quasi-governmental and other financial institutions/corporations, municipalities, etc.

The objectives of listing are mainly to:

•          Provide liquidity to securities;

•          Mobilize savings for economic development;

•          Protect interest of investors by ensuring full disclosures.

3)     Details of Shareholders/ Shares:

Following details of shareholders/shares are disclosed in sampled companies include:

•                   Name of Investors/Shareholders

•                   Number of shares and number of Shareholders

•                   Percentage of total shares and total Shareholders

•                   Percentage of Share Capital

•                   Amount of Shareholding

•                   Shareholding of Nominal Value

•                   Number of Shares held in demat form

4)     International Listing:

GDR (Global Depositary Receipt):

A global depositary receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches.

A financial instrument used by private markets to raise capital denominated in either U.S. dollars or Euros.

ADR (American Depositary Receipt):

An American depositary receipt (ADR) is a negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction. This is an excellent way to buy shares in a foreign company while realizing any dividends and capital gains in U.S. dollars. However, ADRs do not eliminate the currency and economic risks for the underlying shares in another country. For example, dividend payments in Euros would be converted to U.S. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement. ADRs are listed on the NYSE, AMEX or Nasdaq as well as OTC.

5)     Stock Market Data (Share Price Volatility):

Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. Stock price volatility is an indicator that is most often used by options traders to find changes in trends in the market place. There are two main types of stock volatility including Historical Volatility and Implied Volatility that are used in the options markets. The increase or decrease in volatility results from changes in investors emotions in the market place. More specifically greed and fear in the market place are the two main factors that cause stock prices to change. Stock price volatility tends to rise when there is new information released in the markets however the extent to which it rises is determined by the relevance of that new information as well as to the degree in which the news surprises investors.

6)     Share Transfer Process:

The shares of a company are movable property and are generally freely transferable. Though there might be certain restrictions on transfer of shares of private companies provided in the articles of the company, such restrictions are generally added to protect the rights of one set of investors or the shareholders. However, shares of a public company are always freely transferable. Here, researcher has taken 3 aspects of share transfer process which are normally disclosed in sampled companies.

•          Shares in physical form

•          Share transfer is allotted agent

•          Time period for share transfer process

Power of refusal to register transfer of shares is to be exercised by the company within thirty (30) days from the date on which the instrument of transfer or the intimation of transfer, as the case may be is delivered to the Company.

7)     Dividend Payment:

The term ‘dividend’ has been defined under Section 2(35) of the Companies Act, 2013. The term “Dividend” includes any interim dividend. It is an inclusive and not an exhaustive definition. According to the generally accepted definition, “dividend” means the profit of a company, which is not retained in the business and is distributed among the shareholders in proportion to the amount paid-up on the shares held by them.

8)     Special Resolution by Postal Ballot:

Applicable for E-Voting:

•                   Every listed company or

•                   A company having not less than one thousand shareholders shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

•                   E-Voting Period:

•                   The e-voting shall remain open for not less than one day and not more than three days.

•                   In all such cases, such voting period shall be completed three days prior to the date of the general meeting.

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THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

The Real Estate (Regulation and Development) Act, 2016 which seeks to protect home-buyers as well as help boost investments in the real estate industry.

Coverage of this act:-

Ø The Real Estate Act makes it mandatory for all commercial and residential real estate projects where the land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project, in order to provide greater transparency in project-marketing and execution

Ø For on-going projects which have not received completion certificate on the date of commencement of the Act, will have to seek registration within 3 months. Application for registration must be either approved or rejected within a period of 30 days from the date of application by the RERA. On successful registration, the promoter of the project will be provided with a registration number, a login id and password for the applicants to fill up essential details on the website of the RERA. For failure to register, a penalty of up to 10 percent of the project cost or three years' imprisonment may be imposed.

PROTECTION OF BUYERS

Ø The Act prohibits unaccounted money from being pumped into the sector and as of now 70 per cent of the money has to be deposited in bank accounts through cheques.

Real Estate Regulatory Authority and Appellate Tribunal

It will help to establish state-level Real Estate Regulatory Authorities (RERAs) to regulate transactions related to both residential and commercial projects and ensure their timely completion and handover. Appellate Tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and Regulatory Authorities to dispose of complaints in 60 days while no time frame was indicated in earlier Bill.

Certain areas to be exempted from the RERA

Ø The Real Estate Act makes it mandatory for all commercial and residential real estate projects where the land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project, in order to provide greater transparency in project-marketing and execution. Where the area of land does not exceed to 500 square meters or the no. of apartments does exceed to be developed.

Ø Provided that: If the appropriate government considers it necessary, it may, reduce the threshold below five hundred square meters or eight apartments, as the case may be.

Ø Promoter has received the completion certificate for real estate project prior to commencement act.

REAL ESTATE REGULATORY AUTHORITY

Ø  Authority is established and incorporated under section 20. According to section u/s 35 Authority has power to take sue motto complaints and inquire against information and conduct the enquiry or invest on that matter. Authority can take cognizance on the sue motto if they necessary to so.

Ø According to section 36 interim order cabs are passed by the authority. 

Ø  Authority can be issue direction u/s 37.

Ø Authority has power u/s 38 to impose the penalty or interest.

Ø Authority has power to rectify its order any time within a period of 2years from the date of order made u/s 39.

If somebody does not agree to the direction or order of Authority then that person can file an appeal under REAL ESTATE APPELATE TRIBUNAL.

REAL ESTATE APPELATE TRIBUNAL

Ø REAL ESTATE APPELATE TRIBUNAL is established under section 43. As per s.43 (5) appeal of promoter would be entertained only on depositing at least 30% of the penalty on higher percentage determined by the appellate tribunal.

Ø As per section 44(5) appellate authority should be endeavor to dispose off the appeal within a period of 60days from the date of receipt.

Ø As per section 58 appeals can be filled against Appellate Tribunal within 60 days of communication of the order of the Appellate tribunal. In case of delay adequate reasoning is required.

OFFENSES AND PENALITIES

Ø As per section 59(1) punishment for non registeration u/s 3 for promoter would be penalty which may extend up to 10% of the estimated cost of the Real Estate Project as determined by the Authority.

Ø As per s.59(2) if the order passed u/s 59(1) is not complicated then promoter shall be punishable with imprisonment for a term which may extended up to 3yrs or with fine which extend to further 10% of the estimated cost of the project.

Ø As per s.60 the penalty for contravention of s4. of promoter would be penalty which may extend up to 5% the estimated cost of the Real Estate Project as determined by the Authority.

Ø As per the s.61 penalty for the contravention of provision of this act and rules other than s.3 and s.4 for the promoter shall be a penalty which may extend to 5% of the estimated cost of the real estate project as determined by the authority

Ø As per s.62 non registration and contravention u/s 9 and 10 done by Real estate agent, in such case he shall be liable to a penalty of rs10000 for everyday during such default continues, which may cumulatively extend up to 5%of the cost of the plot, apppartment or building, as the case may be, of the Real estate project, for which the sale or purchase has been facilitated as determined by the authority.

Ø As per s.63 penalty for failure to comply with the order of Authority would be penalty for everyday during which such default continues, which may cumulatively extend up to 5% of the real estate project as determined by the authority

Ø As per s.64 punishment for contravention of order of Appellate Tribunal by promoter shall be imprisonment for term which may extend up to 3yrs or fine for everyday during which such default continues, which may cumulatively extend up to 10% of the estimated cost of the real estate project or with both.

Ø As per s.65 penalty for failure to comply with order of the Authority by the real estate agent shall be a penalty for everyday during which default continues, which may cumulatively extend up to 5% of the estimated cost of plot, apartment or building or the case may be.

Ø As per s.68 punishment for the failure to comply with order of Authority by allottee shall be imprisonment for a term which may extend up to one year or with fine for everyday during which default continues, which may cumulatively extend up to 10% of the plot or with both

Ø As per the compounding of offences can be done either before or after institution of prosecution before court and any payments of sum shall not in any case, exceeded the maximum amount of the fine which may be imposed for the offense so compounded.

Ø As per section s.80 cognizance of offence can be taken by court on a complaint in writing made by the authority or by any officer of the authority duly authorized by it for this purpose.

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How to Apply for a New GST Registration

If you are a regular dealer or a composite tax payer, you need to do the following for GST registration:

1.    Fill Part-A of Form GST REG-01. Provide your PAN, mobile number, and E-mail ID, and submit the form.

2.    The PAN is verified on the GST Portal. Mobile number, and E-mail ID are verified with a one-time password (OTP).

3.    You will receive an application reference number on your mobile and via E-mail.

4.    Fill Part- B of Form GST REG-01 and specify the application reference number you received. Attach other required documents and submit the form. Following is the list of documents to be uploaded –

5.    Photographs: Photographs of proprietor, partners, managing trustee, committee etc. and authorized signatory

6.    Constitution of taxpayer : Partnership deed, registration certificate or other proof of constitution

7.    Proof of principal / additional place of business :

8.    For own premises – Any document in support of the ownership of the premises like latest property tax receipt or Municipal Khata copy or copy of electricity bill.

9.    For rented or leased premises – copy of rent / lease agreement along with owner’s (landlord) documents like latest property tax receipt or Municipal Khata copy or copy of electricity bill.

10.                       Bank account related proof : Scanned copy of the first page of bank pass book or bank statement

11.                       Authorization forms: For each authorized signatory, upload authorization copy or a copy of resolution of managing committee or board of directors in the prescribed format.

12.                       If additional information is required, Form GST REG-03 will be issued to you. You need to respond in Form GST REG-04 with required information within 7 working days from the date of receipt of Form GST REG-03.

13.                       If you have provided all required information via Form GST REG-01 or Form GST REG-04, a certificate of registration in Form GST REG-06 will be issued within 3 days from date of receipt of Form GST REG-01 or Form GST REG-04.

14.                       If the details submitted are not satisfactory, the registration application is rejected using Form GST REG-05

Casual Registration

A person who occasionally supplies goods and/or services in a territory where GST is applicable but he does not have a fixed place of business. Such a person will be treated as a casual taxable person as per GST.

Example: A person who has a place of business in Bangalore supplies taxable consulting services in Pune where he has no place of business would be treated as a casual taxable person in Pune.

Composition Dealer

This is an option available to small businesses and taxpayers having a turnover less than Rs. 50 lakhs. They can opt for Composition scheme where they will tax at a nominal rate of 1% or 2.50% (for manufacturers) CGST and SGST each (rates will be notified later).

They will be required to maintain much less detailed records and file only 1 quarterly return instead of three monthly returns. However, they cannot issue taxable invoices, i.e., collect tax from customers, but are required to pay the tax out of their own pocket. They cannot also claim any input tax credit.

Composition levy is available to only small businesses. It is not available to interstate sellers, e-commerce traders, and operators.

Applicability

GST will apply when turnover of the business exceeds Rs 20 lakhs (Limit is Rs 10 lakhs for the North Eastern States). [Earlier the limit was Rs 10lakhs and Rs 5lakhs for NE states.]

Migration to GST

All existing Central Excise and Service Tax assessees and VAT dealers will be migrated to GST. To migrate to GST, assessees would be provided a Provisional ID and Password by CBEC/State Commercial Tax Departments.

Provisional IDs would be issued to only those assessees who have a valid PAN associated with their registration. An assessee may not be provided a Provisional ID in the following cases:

1.    The PAN associated with the registration is not valid

2.    The PAN is registered with a State Tax authority and Provisional ID has been supplied by the said State Tax authority.

3.    There are multiple CE/ST registrations on the same PAN in a State. In this case, only 1 Provisional ID would be issued for the 1st registration in the alphabetical order provided any of the above 2 conditions are not met.

The assessees need to use this Provisional ID and Password to login to the GST Common Portal (https://www.gst.gov.in) where they would be required to fill and submit the Form 20 along with necessary supporting documents.

Penalties for Not Registering Under GST

An offender not paying tax or making short payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000. The penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud.

However, for other genuine errors, the penalty is 10% of the tax due.

Multiple Registrations Under GST

A person with multiple business verticals in a state may obtain a separate registration for each business vertical.

PAN is mandatory to apply for GST registration (except for a non-resident person who can get GST registration on the basis of other documents).

A registration which has been rejected under CGST Act/SGST Act shall also stand rejected for the purpose of SGST/CGST act.

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Our sophisticated team has complete knowledge of various exercises and technicalities that are used in our services. Our services includes Strategy Consulting, GST Consulting, Asset Management, Feasibility Study, International Arbitration, Due Dilligence, Franchisee Consulting, Financial Audits, Operational Audits, Tax Heaven Registrations, Shareholder Agreements, Start up Consulting, IP Consulting, Taxation Services, Accounting system design and Mergers Acquisitions.

Contact at parascs@gmail.com or refer website www.pnjlegal.com