The list of Legislative changes proposed to 13 Acts in the Union Budget 2019-20 are as follows: –
1. Central Goods and Services Tax Act, 2017: Under the Act, an applicant can apply for an advance ruling from an Authority constituted under various GST laws of various state or union territories. An advance ruling can be sought to clarify certain matters, such as the determination of GST liability. The National Authority may decide appeals against conflicting advance rulings on the same question by Authorities of two or more states or union territories. The Bill provides for the qualification, term, and conditions of services of the National Authority.
2. Reserve Bank of India Act, 1934: Under the Act, RBI may set a minimum net worth requirement for NBFCs between Rs 25 lakh and two crore rupees. The amendment allows RBI to set the minimum requirement up to Rs 100 crore. The Act is being amended to enable the RBI to take several measures in relation to the management of NBFCs. These include:
Framing schemes for resolution: The Act is being amended to allow the RBI to frame schemes for the resolution of NBFCs. These include schemes for: (i) amalgamation of two NBFCs, (ii) reconstruction of the NBFC, or (iii) splitting the NBFC to preserve the continuity of those activities of the NBFC which are critical to the functioning of the financial system. As a part of these schemes, the RBI may reduce the pay, or cancel the shares of the senior management of the NBFC, without any compensation for the loss.
Scrutiny of group companies: The Act is being amended to enable RBI to: (i) direct the NBFC to attach to its financial statements, any information on the business of its group companies, or (ii) direct an inspection or audit of the group company. Group companies of the NBFC will include its subsidiaries, associates, and joint venture companies.
Supersession of Board of Directors: The Act is being amended to provide for supersession of the Board of Directors of the NBFC for a period of five years. In the interim period, the central government may appoint an administrator to carry out the functions of the Board of Directors.
Removal of directors: The RBI may remove any director of a non-government NBFC and replace him with a temporary director for a period of three years.
Penalties: Penalties for certain offenses have been increased. For example, failure to furnish information under the Act is punishable with Rs 2,000. This has been increased to Rs 1,00,000. Further, the penalty for an auditor for failing to comply with the directions of the RBI has been increased from Rs 5,000 to Rs 10,00,000.
3. National Housing Bank Act, 1987: The Act regulates the functioning of housing finance institutions through the National Housing Board. The amendments being made include: To register as a housing finance institution, a company must have a net-owned fund of 25 lakh rupees or higher notified amount. This threshold is being increased to 10 crores or more.
An application for registration as a household finance institution is to be made to the National Housing Bank. This is being amended to state that all applications will be made to the RBI. Further, all pending applications with the National Housing Board are to be transferred to RBI.
Under the Act, processes relating to registration, including consideration, grant, and cancellation of applications are to be carried out by the National Housing Board. The Act is being amended to transfer these to the RBI.
The Act provides the National Housing Bank with various powers such as: (i) specifying the percentage of assets a housing finance institution must invest in securities in India, (ii) require housing finance institutions to maintain an account with a Scheduled Bank or the National Housing Board, and (iii) requiring them to file returns. This is being amended to transfer these powers to the RBI.
4. Insurance Act, 1938: The Act is being amended to require net owned funds of at least Rs 1,000 crore for registration of foreign insurers engaged in re-insurance business and operating in an International Financial Services Centre (set up in Special Economic Zones).
5. Securities Contract (Regulation) Act, Securities, 1956 (SCRA): The Act imposes penalties on entities who fail to furnish information required under law to a stock exchange or furnish incorrect information to the stock exchange. These penalties range from one lakh rupees to one crore rupees. The Act is being amended to extend the penalty for failure to furnish this information to the SEBI in addition to the stock exchange.
6. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970: The Act nationalized banks such as the Central Bank of India, Punjab National Bank, and Corporation Bank. Under the Act, the Board of Directors of the bank will include four whole-time directors, appointed by the central government in consultation with the RBI. The Act is being amended to increase the number of directors from four to five.
7. General Insurance Business (Nationalisation) Act, 1972: The Act nationalized Indian insurance companies and reorganized them into four insurance companies (excluding the General Insurance Corporation). The Act is being amended to enable a reduction in the number of such companies.
8. Prohibition of Benami Property Transactions Act, 1988: The Act is being amended to increase penalties under the Act. In addition to existing penalties, any person who fails to comply with a summons or furnishes false information will be liable to pay Rs 25,000 for each such failure. Further, under the Act, prior sanction is required for prosecution of certain offenses under the Act from the CBDT. The sanctioning authority has been changed to Commissioner, Director, Principle Commissioner, or Principle Director of Income Tax.
9. Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: The Finance Bill changes the definition of ‘assessee’ in the 2015 Act. Currently, the Act applies to a resident of India. The Bill amends this to make the Act applicable to both Indian residents and non-residents as defined under the Income Tax Act.
10. Payment and Settlement Systems Act, 2007: The Bill is being amended to prohibit any bank or payments system provider from charging customers for the use of electric modes of payment (prescribed under Income-tax Act, 1961).
11. Prevention of Money Laundering Act, 2002: The Bill is being amended to increase the responsibilities of reporting entities (such as banks and other financial institutions). These entities will be additionally required to authenticate the identities of their clients, the source of their funds, and the nature of the relationship between the transacting parties. Data obtained while verifying transactions must be kept for five years. Further, the amendments seek to allow the government to notify an Inter-Ministerial Coordination Committee for inter-departmental and inter-agency coordination. The purpose of this committee will include the development and implementation of policies on anti-money laundering or countering the financing of terrorism.
12. Central Road and Infrastructure Fund Act, 2000: Currently, the central government is responsible for formulating criteria on the basis of which specific projects of state roads are financed out of states’ share of funds. The central government will now be responsible for formulating criteria for any state road projects.
13. Securities and Exchange Board of India Act, 1992: The Act is being amended to add capital expenditure to the list of expenses incurred by the General Fund maintained by SEBI. Additionally, the Bill amends the Act to constitute a Reserve Fund which will be credited with 25% of the annual surplus of the General Fund. Further, the amendment adds penalties for concealment, destruction, or falsification of records, or access to unauthorized information. The penalties may range from one lakh rupees to up to ten crore rupees or three times the amount of profits made from the act, whichever is higher.
The other legislative changes proposed in the Union Budget 2019-20 is as follows:
Dispute resolution scheme: A dispute resolution cum amnesty scheme called the Sabka Vishwas Legacy Dispute Resolution Scheme is being introduced for resolution and settlement of legacy cases pending under various Acts, including the Central Excise Tax, 1944, and the Sugar Cess Act, 1982.