Banking Regulations Update

ISD Mechanism Is Mandatory From April 1, 2025 A recent ruling by the Tamil Nadu AAR in the case of MRF Limited has put a spotlight on a big shift in GST compliance from April 1, 2025. Earlier, businesses had flexibility - common input services could either be routed through the Input Service Distributor (ISD) mechanism or cross-charged by the Head Office. But going forward, cross charge is no longer an option. ISD is the only route. Key Takeaways from the Ruling: - From 01.04.2025, pursuant to Notification No.16/2024-CT: any office receiving common input service invoices on behalf of distinct persons must register as ISD. - ITC distribution of common input services (including RCM services under Section 9(3) & 9(4)) must be through ISD only. - In MRF’s case, the HO booked common services like advertising, audit, banking, AMC, consultancy, manpower, R&M, etc., and cross-charged them to branches with a 2% markup. - AAR held this practice cannot continue post-April 2025 – invoices for such services must be addressed to the ISD registration, and ITC distributed as per Section 20 read with Rule 39 of the CGST Rules. Why This Matters: - Businesses must revisit their current cross charge arrangements. - ISD registration becomes mandatory for common input services. - A process re-design will be required in ERP, vendor onboarding, and invoice flows to ensure compliance.

Key Amendments – FDI Regulations in India The Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2024, notified a couple of days back, introduce significant modifications to the existing regulatory framework governing foreign investments in India. The following are the key highlights of these amendments to the extant Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (NDI Rules): 1.      Introduction of Equity Instrument Swap (Rule 9A): The new Rule 9A permits the transfer of equity instruments between residents and non-residents through a swap of equity instruments or capital, subject to the prior Governmental approval in cases where such approval is necessary. Indian companies are authorized to issue equity instruments to non-residents against the swap of equity instruments, import of capital goods, pre-incorporation expenses, or swap of equity capital of a foreign company under the amended NDI Rules. Although the ODI Rules already permitted overseas direct investment through share swap, the inclusion of provisions for both issuance and transfer within the NDI Rules streamlines the regulatory framework and removes the earlier prevailing inconsistencies. This would facilitate externalization structures for Indian corporates and make their global expansion plans through mergers and acquisitions, much easier. 2.      Downstream investment by OCIs: Investments made by Indian entities owned or controlled by Overseas Citizens of India (OCIs) on a non-repatriation basis will not be considered as indirect foreign investment, on par with NRIs. 3.      Revised definition of Control and Start-up Company:            i.       The definition of ‘Control’ now aligns with the Companies Act, 2013. For Limited Liability Partnerships (LLPs), "Control" refers to the right to appoint the majority of designated partners, who manage and control the policies of the LLP.          ii.       The definition of ‘Startup Company’ now references private companies identified as a "Startup" by the Government of India notification G.S.R. 127 (E) dated February 19, 2019, issued by the Department for Promotion of Industry and Internal Trade, with provisions for future amendments. 4.      Foreign Direct Investment in White Label ATM Operations (WLAO): 100% FDI in WLAO is permitted under the automatic route, subject to conditions including a minimum net worth of INR 100 Crore for non-bank entities. These amendments emphasize GoI’s welcoming attitude to encourage foreign investors by continuously working to simplify regulations and enhance the ease of doing business in India. ANB Legal Priyal Mehta Lara Borges #fdi #NDIRules #swaps #mergers #acquisitions

The AIF industry was under the impression that issuance of partly paid-up units by AIFs to persons resident outside India was well within the realms of law because the definition of 'unit' under FEM (NDI) Rules, 2019 referred to 'beneficial interest of an investor in an AIF' and SEBI permitted issuance of partly paid-up units by AIFs. In March, 2024, this definition of 'unit' under the NDI Rules was amended to 'include' a unit that has been partly paid up. It seemed like a clarification, rather than a new position of law. However, from the circular issued by RBI last week, it seems that it was indeed a new position of law and not merely a clarification. RBI has asked AIFs to to regularise the issuances of partly paid units to persons resident outside India prior to March 14, 2024 through compounding under FEMA. #legalupdate #fundmanagement #fundmanagers #alternativeinvestments #sebi #rbi #regulatory #securitieslaw #foreignexchange

The Pakistan Federal Board of Revenue (FBR) has amended the rules for the Active Taxpayers' List (ATL) through SRO 1638(I)/2024 dated October 18, 2024. The key amendments are as follows: - The ATL will now be updated on the day following the due date or extended due date, replacing the previous update schedule of the last day of February of the following year. - The ATL will be updated on a daily basis instead of the previous weekly update schedule. - Inclusion in the ATL will now be for persons who file their return of income for the most recent tax year by the due date or by any extended due date. - If a person submits the return of income for the most recent tax year after the due date or the extended due date, their name will be included in the ATL upon payment of a surcharge. - For companies or associations of persons that have been incorporated after June 30 of the relevant latest tax year, and for which the due date for filing return of income has not yet arrived, their names will be automatically included in the ATL. - Only those persons who file their return of income in the Azad Jammu and Kashmir or Gilgit-Baltistan regions, and whose temporary and permanent addresses are within these regions, will have their names included in the ATL.

𝗕𝗶𝗴 𝗖𝗵𝗮𝗻𝗴𝗲𝘀 𝗖𝗼𝗺𝗶𝗻𝗴 𝘁𝗼 𝘁𝗵𝗲 𝗔𝗰𝘁𝗶𝘃𝗲 𝗧𝗮𝘅𝗽𝗮𝘆𝗲𝗿 𝗟𝗶𝘀𝘁 (𝗔𝗧𝗟)! FBR has proposed amendments to make the Active Taxpayer List (ATL) more dynamic and user-friendly. Following are the key implications: 𝗜𝗺𝗺𝗲𝗱𝗶𝗮𝘁𝗲 𝗜𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻: Previously, the ATL was updated for a tax year on March 1 for the following year, which caused confusion. This meant that you’d have to wait until the next year to become an active taxpayer, or file returns for two years to get onto the list. But now, the ATL will be updated right after the deadline, allowing you to become active without the long wait. 𝗗𝗮𝗶𝗹𝘆 𝗨𝗽𝗱𝗮𝘁𝗲𝘀: No more waiting until Sunday for ATL list updates. ATL will now update daily, keeping your status current specially in case of banks' systems. 𝗟𝗮𝘁𝗲 𝗙𝗶𝗹𝗲𝗿𝘀 𝗖𝗮𝗻 𝗦𝘁𝗶𝗹𝗹 𝗝𝗼𝗶𝗻: If you missed the tax return deadline but still want to be part of the ATL, you can file late with a small surcharge and become an active taxpayer immediately. However, your name will be listed as late filer, which may result in increased withholding taxes in case of property transactions. 𝗡𝗲𝘄 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀-𝗙𝗿𝗶𝗲𝗻𝗱𝗹𝘆: Newly registered businesses will also be included in the ATL, since their filing deadline hasn’t arrived yet. 𝗜𝗻𝗰𝗹𝘂𝘀𝗶𝘃𝗶𝘁𝘆 𝗳𝗼𝗿 𝗔𝗝𝗞 𝗮𝗻𝗱 𝗚𝗕: Tax filers from Azad Jammu & Kashmir and Gilgit-Baltistan will also be included in the ATL if their addresses match the region. These changes will reduce confusion, save time, and ensure a smoother tax filing process. Stay active, file your taxes, and enjoy the benefits of being on the ATL without delay!

🚨 Big Update for GST Registration Applicants! 🚨 The CBIC has issued Instruction No. 03/2025-GST dated 17 April 2025 to streamline the processing of GST Registration applications and to eliminate harassment of genuine applicants. ✅ Key Highlights: 🔹 Strictly no additional documents to be demanded beyond those prescribed in FORM GST REG-01. 🔹 One valid proof of ownership or consent (Property Tax receipt, Electricity Bill, etc.) is enough. 🔹 Registered Rent Agreement = No need for ID proof of lessor. 🔹 Unregistered Agreement? Add lessor’s ID proof only if required. 🔹 Consent letter allowed for spouse/relative-owned premises. 🔹 No presumptive queries like MD's residential city mismatch, business feasibility, or banned HSN codes! 🔹 Application to be processed in 7 working days (normal) or 30 days (with physical verification). 🔹 Physical verification (if any) must be backed by GPS photos and proper documentation. 🛡️ Officers instructed to follow timelines, avoid unjustified rejections, and not seek extra documents without proper approval. 📄 This instruction replaces Instruction No. 03/2023-GST and aims to balance fraud prevention with smooth onboarding of genuine businesses. 📌 Let’s ensure transparency, efficiency, and ease of doing business in India’s GST ecosystem.

While everyone is talking about GST rate cuts There are two silent changes which no one knows about. Now, 90% provisional refunds will be provided on inverted duty structures👇 [1] What’s an “inverted duty” setup? When GST on your purchase is higher than GST on your sales, Input Tax Credit (ITC) piles up. More working capital money gets stuck in ITC. Let’s Understand this with an example: [2] Example 🔸 Li-ion battery: ₹10,000 @ 18% → ITC ₹1,800 🔸 Solar module: ₹12,000 @ 5% → ITC ₹600 🔸 Other parts: ₹8,000 @ 18% → ITC ₹1,440 🔸 Total ITC (₹1,800 + ₹600 + ₹1,440): ₹3,840 🔸 Finished lamp (output): ₹40,000 @ 5% → GST payable ₹2,000 🔸 Unutilised ITC: ₹3,840 − ₹2,000 = ₹1,840 [3] How the taxpayer gets the refunds 🔸 Section 54(3) allows refund of unutilised ITC (with exclusions) 🔸 Rule 89(5) gives the computation formula [4] Earlier, what was the challenge? 🔸Process-heavy claims,  🔸Multiple clarifications,  🔸No tight timelines  Cash cycles felt the strain even when business was sound. [5] What new from Nov 2025 🔸 90% of eligible refund will be released provisionally, based on risk. 🔸 Balance 10% after verification 🔸 In exceptional cases, officers may record reasons for a deeper check [6] Let’s go back to our example  Unutilised ITC (illustrative) ≈ ₹1,840 → 90% provisional ≈ ₹1,656 hits faster; \~10% after checks. Net effect: smoother raw-material planning, quicker vendor payments, better cash rhythm. [7] One more change → Registration No GST Number → no invoices → no ITC flow. [8] Registration: what it was To get the GST No. → Earlier Manual checks, site visits in some cases and variable timelines.  For many new businesses, the first invoice got pushed out. [9] Registration: what’s new 🔸 “Simplified Registration” for low-risk applicants 🔸 Automated approval within 3 working days 🔸 Opt-in/opt-out flexibility 🔸 Eligible if B2B output tax ≤ ₹2.5 lakh/month 🔸96% of new applicants covered Roll-out: Nov 1, 2025. Like the content? Follow me (Sujit Bangar) for more on personal taxation.

📋 Regulatory Update: Central Bank Consultation Papers Now Open The Central Bank of Ireland has published two important consultation papers today that will be of significant interest to the investment funds industry: 🔹 CP 161: Proposed amendments to the Central Bank UCITS Regulations and Guidance on performance fees for UCITS and certain types of Retail Investor AIFs 🔹 CP 162: Proposed amendments to the Central Bank Alternative Investment Fund Rulebook (AIF Rulebook) These consultations represent important developments in the regulatory framework governing investment funds and performance fee structures. The Central Bank is actively seeking stakeholder input on these proposed changes. 📅 Key Date: Consultation period closes on 5 November 2025 For investment managers, fund administrators, and legal/compliance professionals working in the funds space, these papers warrant careful review and consideration for formal responses. The full consultation papers are available on the Central Bank's website here-> (https://lnkd.in/eCfvqfjf) for detailed analysis. #Regulatory #InvestmentFunds #UCITS #AIFs #CentralBank #Compliance #FinancialServices #Ireland

FBR Introduces Comprehensive Amendments to Combat Sales Tax Fraud 🔍 The Federal Board of Revenue (FBR) has recently implemented significant changes to the Sales Tax Rules of 2006, aiming to curb tax fraud and enhance transparency in tax-related activities. 📝 Declaration of Business Capital to Commissioner – Rule 5(2)(f): Under this amendment, all new registrants, including importers, commercial exporters, Tier-1 retailers, wholesalers, and distributors, other than manufacturers, are required to submit a balance sheet reflecting their business capital and corresponding assets in the bank. Additionally, existing registrants who fail to meet this requirement within 30 days of its implementation must seek prior authorization from the Commissioner through IRIS for electronic filing. 🔎 LRO Approval - Rule 5(3): Previously, new registrations were processed upon furnishing necessary documents. However, the recent amendment mandates that the Local Registration Office (LRO) verifies and approves applications before registration. This step adds an additional layer of scrutiny to prevent fraudulent registrations. 👤 Periodic Biometric Verification – Rule 5(4): To authenticate taxpayer identities, individuals, members of associations of persons, and directors of companies with a single shareholder or member must undergo biometric re-verification annually at designated NADRA e-Sahulat Centres during the month of July. Failure to comply results in restricted e-filing privileges. 🔒 Pre-Verification for ST Registration - Rule 5(5): In an effort to minimize fraudulent entries, the FBR has introduced pre-verification requirements for sales tax registration. All new applications undergo rigorous scrutiny before approval, ensuring that only legitimate entities are granted registration. 💼 Restrictions on Sales in Proportion to Business Capital – Rule 18(1): This amendment imposes limitations on businesses whose sales exceed five times their capital. Such businesses are required to obtain prior authorization from the Commissioner through IRIS for electronic filing, promoting responsible financial management and preventing potential tax evasion. 💰 Reduction in Output Tax Not Allowed - Rule 18(4A): To prevent misuse of tax credits, this amendment stipulates that claims of credit must align with declared sales to withholding agents. This measure ensures that tax credits are accurately reported and claimed, preventing tax revenue loss. 📊 Introduction of Provisional Sales Tax Return – Rule 18(3): To maintain tax continuity in transactions, provisional returns are introduced for buyers until sellers file their returns. This measure ensures uninterrupted tax compliance and streamlines the tax filing process. Post Continued in Comments.