| |DECEMBER 20199Consultants ReviewIt is to be seen in the context of how the economy can support higher price levels and therefore provide a viable compensation to such small businessesbefore, but I am prepared to make that concession to a Government which was bold enough to bring-in GST and remains responsive enough to make the amendments. In addition to rate rationalisation, input tax credit is now made available on items like canteen services received, life and health insurance premiums paid. For paying incentives or rebates on sales, the linking can be done to multiple invoices under one credit note. Separate GST registrations are allowed now in the same state, which businesses can use for separate divisions. These are positive changes.Some pain points still exist. Issues are being put-up to Advance Ruling Authorities in different states. In some cases, the rulings from different states are conflicting. There is an immediate need for a national adjudicating authority to take decisions above the advance ruling authorities.One such recent decision is that normal corporate services provided by a company to its branches across the country would be liable to GST. This is in spite of the fact that the company is serving itself, using its own resources of employed manpower. Another such ruling is that Liquidated Damages (LD) received on a project from a contractor is liable to GST; the explanation is that LD is in itself a compensation received for `pains' of delays. In the absence of a strong national adjudicating body, all such disputes will clog the courts.The other milestone was the introduction of IBC (Insolvency and Bankruptcy Code 2016). In principle, the IBC is to fast track actions on a company which has defaulted to its creditors; the action being by way of a buy-out of the company by another party in a deal accepted by a Committee of Creditors and by the NCLT, or by liquidation of the defaulting company. The IBC proceedings can be triggered by creditors and goes through an Insolvency Professional.The IBC has seen considerable action. Large financial creditors have triggered the Code on defaulting companies. While some companies have gone into liquidation, buy-out processes have been initiated for other defaulting companies. The number of qualified Insolvency Professionals is increasing which will help to deal with the cases coming-up. However, the application of the Code has led to some issues which are before the NCLAT or the courts for resolution. The issue around the pre existence of a dispute, which under IBC leads to rejection of the petition of Creditors by the NCLT, was settled by the Hon'ble Supreme Court in a decision in 2017, clarifying a critical point. Another issue currently under resolution relates to bids made by prospective buyers under the IBC process. In a particular case, the Committee of Creditors examined the bids and recommended the selection of the highest bidder to the NCLT. A higher bid was subsequently received and the question arose on whether such a bid can be accepted. The essence of the IBC is resolution in a timebound manner. This has been pointed-out by the Hon'ble Supreme Court earlier. Therefore, the sanctity of the process timeline should be paramount.Another area of contention has been around the fact that existing promoters of the defaulting company cannot bid for the company under this process. The haircut taken by Creditors is not to be misused by the same promoters who ran the company, to come back and control the company again, now devoid of debt. The contention is on beneficial ownership; how far the concept of beneficial ownership can be stretched.Overall, the IBC is changing the landscape; a recent survey on banks indicate that bad loan recovery has improved, not only through the IBC process, but since IBC has been implemented, defaulting companies are coming forward more readily to settle old debts.Spokespersons have said that the Government remains open to consider sharpening of the Code to provide clarity and address ambiguities in the areas where disputes are arising. We remain positive that both the above will be positive for our economy.
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