Are we really growing?

The Government of India is continuously taking significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world. But are the initiatives fair enough to lead to growth? Are we really growing or making ourselves believe that we are growing? Each initiatives will have its own pros and cons. Praising the pros alone is not enough but getting a remedial action for cons is equally important to make the initiative successful.

How good is the Zero fee incorporation is what we will be discussing in this edition.

This edition, we will be discussing about new Incorporation procedure and Highlights on Financial Budget, 2018 along with our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST.

 Saranya Deivasigamani,
CEO

New incorporation procedure

In this article we are going to discuss whether Zero fee incorporation is a boon or indirect threat to business aspirants and share our experience and opinion. Right to an opinion does not make the opinion right. If our opinion is not your reality, do not worry it need not match always.

Last year, The Ministry of Corporate Affairs focused on the agenda of incorporating a company in India in just 1 day. Now the campaign of ease of doing business in India has levelled up its bar by:

· Waiving off the Incorporation fee.

· Introducing a new Web Form for Name Approvals.

· Streamlining DSC and DIN.

To foster and promote new startups and businesses, the Ministry of Corporate Affairs (MCA) has announced zero fees of incorporation for SPICE Forms, e-MoA and e-AoA. This will enable the saving of a few thousand rupees, thereby encouraging more startups to formally register their company. Stamp duty will still be applicable at a rate depending upon the state of incorporation.

The zero fees incorporation scheme is really an appreciable step taken by MCA. Another one is Reserve Unique Name (RUN), the Government Process Re-engineering (GPR) initiatives for making the incorporation process speedy, smooth, simple and reducing number of procedures involved for starting a business. DSC & DIN not required for filing of RUN form for reservation of Name. Only account of MCA portal is mandatory.

Every applicant if they want can file the web-based Reserve Unique Name form before filing the SPICe form for incorporation. The RUN form gives an applicant only a single chance to get a suitable unique name approved. In case of rejection of the name due to any similarity of name with a registered company, an LLP or a trademark or due to non-adherence of the Companies (incorporation) Rules, 2014; there are no second chances available. In every good there is one bad, likewise though the Act talks about many merits about RUN web form there are some demerits which need to be considered for the sake of professionals and business aspirants.

Usually in incorporation process initial step is Name Approval. The Act introduces RUN instead of INC-1 and states that it was introduced to reduce the procedures in incorporation. But in our experience we would say it’s quite a risky procedure and it is difficult for professionals to convey the risky parts to clients. Using RUN service we can give only one name which must be unique and our form will be either approved or rejected by Central Registration Center (CRC) and now on wards we will not get re-submission (RSUB). While using INC-1 we had option to give 6 names of the proposed company in order of preference but now this option is no more available in RUN.

In the RUN form there is one option called Auto check, if we type the companies name and click that it will shows the availability. But, our bad we can’t trust it because it checks generally and not deeply. Few months back we are into incorporation of a Private Limited Company. A client of us wanted to incorporate their company with name something like “IKYA”. We checked in MCA and Trademark website and got “no match found”. Bingo! we are ready to get the name. But guess what there exist a Company with name “AIKYA” and the form got rejected because of that. Common Sense! In TradeMark Search you have options to search the word start with, contain, match with, etc., but MCA name search will search only start with but no other option of end with or contain or match with. How can we guess that there is a similar company existing? Even now the name search remains the same. Expecting atleast RUN form will give a solution to it, we tried the names “IKYA Private Limited” and “AIKYA Private Limited” in RUN form using Auto check. To our surprise it showed that the name is available and we can apply. Reason is as simple as that it checks only the name “Aikya Private Limited” and not bothered about the uniqueness. As like, as per RUN’s auto check, “Zappy Private Limited” is available and “Zappy Consults Private Limited” is not available. As professionals, we know if we apply with these flaws in the system there are more possibilities to get our forms rejected and as additional bonus we do not have any option for resubmission.

The fee of RUN form is ₹.1,000 and once it gets rejected we have to again file with fresh form with fees. So, getting a name approval will become a big task. To our view, the MCA would have given 3 chances or no fee for name approval. Though, we can avoid this by filing spice form with proposed name to avoid extra fees but, if the name gets rejected we have to file all with proposed name again till it gets approval and we have only 2 chances. RUN has indeed proved to be a blessing in disguise with its user-friendly form which will make the applicant pay off more.

Cost Comparison of RUN vs. SPICe (stamp duty for Delhi)

Let us evaluate the number of chances we get in SPICe form over the RUN web form when you pay about the same price.

Particulars	Cost for Run (exclusive of SPICe)	Cost for SPICe	Cost You save for opting for SPICe
First attempt	.1,000/-	.600/-	.1,000/-
Second attempt	.1,000/-	Nil	.2,000/-
Third attempt	.1,000/-	.600/-	.2,400/-
Fourth attempt	.1,000/-	Nil	.3,400/-
Fifth attempt	.1,000/-	.600/-	.3,800/-
Sixth attempt	.1,000/-	Nil	.4,800/-
Total cost for 6 name options	6,000 +600* =.6600/-	.1,800/-	You end up saving .4,800/- for 6 name options

This comparison makes the ambiguity of opting for RUN web form over SPICe form, more clear.

The MCA always try to introduce a new innovative things and it is really an appreciable try but manytimes it is ignoring the technical difficulties and practical difficulties that are causing to the stakeholders. They must be more caution and make hassle free incorporation for both the professionals and business aspirants. If it is hassle free then more persons will be impressed to start their own business at zero fees and it will reduce an unemployment rate and will raise the Government revenue and India will become a developed country in few years. As learned professionals, if you have any ideas to give a push to MCA for technology upgradation, please write to us.

 Vidhyaa Ragavendran,
Executive Consultant

HIGHLIGHTS OF BUDGET, 2018

Some of the key highlights of the budget are given hereby for the reference:

• Minimum support price for kharif crops will now be 1.5 times the production cost.
• The government plans to set up an agricultural market fund with corpus of .2,000 crore.
• Government proposes to launch Operation Green for which a sum of .500 crore will be allocated.
• The government will contribute 12 percent EPF in wages of new employees in all sectors. Women contribution to EPF slashed for initial three years to 8 per cent.
• SEBI will consider mandating large corporates to meet 25 percent of debt needs from the market.
• For senior citizens, exemption of interest income on bank deposits raised to .50,000.
• For 2018-19, the disinvestment target is set at .80,000 crore.
• Proposed spending on rural infra is .14.34 lakh crore.
• Custom duty on mobile phones increased from 15 to 20 percent.
• Revised fiscal deficit for 2017-18 is at .5.95 lakh crore or 3.5 percent of GDP. Fiscal deficit at 3.3 percent of GDP for 2018-19.
• Corporate tax for 2018-19 has been cut to 25 percent for companies with revenue up to .250 crore.
• Standard deduction of .40,000 for salaried taxpayers.
• Capital gains exceeding .1 lakh to be taxed 10 percent without indexation benefit with certain cautions.
• Equity Oriented Mutual Funds will now face a dividend distribution tax of 10 percent.
• PAN to be used as Unique Entity Number for non- individuals from April 1.
• PAN is mandatory for any entity entering into a financial transaction of .2.5 lakh or more.
• Budget proposes to tax long term capital gains exceeding .1 lakh at 10 per cent without indexation. Short term capital gains tax to remain unchanged at 15 per cent.

Legal Term

De Minimis

An abbv. form of the Latin Maxim de minimis noncurat lex, “the law cares not for small things.” A legal doctrine by which a court refuses to consider trifling matters.

MCA Updates

• Notification regarding Exemption to Government Companies under section 129(6) of Companies Act, 2013 from recognizing Deferred Tax Assets/ Deferred Tax Liability under AS-22/Ind AS-12.
• Appointment and Qualification of Director Amendment rules 2018.
• Companies (Regn office and fees) Amendment Rules 2018.

SEBI Updates

• Online Registration Mechanism and Filing System for Stock Exchanges.
• Online Filing System for Offer Documents, Schemes of Arrangement, Takeovers and Buy backs.
• Charging of additional expenses of upto 0.20% in terms of Regulation 52 (6A) (c) of SEBI (Mutual Funds) Regulations, 1996.

RBI Updates

• Relief for MSME Borrowers registered under Goods and Services Tax (GST).

Income Tax Updates

• Tax Return Preparer (Amendment) Scheme, 2018.

GST Updates

• Reduction of late fee in case of delayed filing of FORM GSTR-1, 5, 5A and 6.
• First Amendment 2018, to CGST Rules.
• Extension of date for filing the return in FORM GSTR-6.,