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SSrana Newsletter 2021 Issues 14

July 22, 2021

MSME- ADDITITION OF RETAIL AND WHOLESALE TRADE

MSMEThe Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 aims at facilitating the promotion, development and enhancing the competitiveness of micro, small and medium enterprises.In accordance with the provisions of MSMED Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified into two categories..

NORMS FOR INVESTMENT AND DISCLOSURE BY MUTUAL FUNDS IN DERIVATIVES.

SEBIOn June 18, 2021, the Security Exchange Board of India (SEBI) has passed a circular for providing norms for investment and disclosure by Mutual Funds in Derivatives. This circular is with reference to “Review of norms for investment and disclosure by Mutual Funds in Derivatives.

NEW DEFINITION OF MSME- RBI.

RBIThe Reserve Bank of India (RBI) vide its notification dated June 25, 2021 has notified new definition of Micro, Small and Medium Enterprises (herein after referred to as “MSME”) with reference to RBI circular dated August 21, 2020 on New Definition of Micro, Small and Medium Enterprises..

BHUTAN LEGAL METROLOGY LAWS

LegalLegal metrology deals with legal requirements regarding measurement, units of measurement, measuring devices and methods of measurement to satisfy the needs for protection of health, public safety, the environment, enabling taxation, protection of consumers and fair trade.

Bangladesh Legal Metrology Laws.

supreme-court“Legal metrology” refers to that part of metrology (i.e. the scientific study of measurement) which treats units of weighment and measurement, methods of weighment and measurement and weighing and measuring instruments, in relation to the mandatory technical.

STAND UP INDIA SCHEME.

donation
In order to promote entrepreneurship at the grass-root level, especially amongst women, Scheduled Castes (SC) and Schedules Tribes (ST), the government of India launched the Stand Up India Scheme on April 05, 2016.


MSME- ADDITITION OF RETAIL AND WHOLESALE TRADE

MSME

By Rupin Chopra and Apalka Bareja

INTRODUCTION

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 aims at facilitating the promotion, development and enhancing the competitiveness of micro, small and medium enterprises.

In accordance with the provisions of MSMED Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified into two categories:

  1. Manufacturing Enterprises
  2. Service Enterprises

NIC CODE

The NIC Code in MSME is a classification system that enables one to classify the business activities carried by various Micro, Small and Medium Enterprises. It is a numeric code in the form of a 2 to 3 digit code, a four digit code and five digit code. 2-3 digit codes represent the group of business activities, four digit code symbolizes a class of business activity while five digit represents sub-class of the business activity.

Therefore, all enterprises which are doing activities which are mentioned under the NIC Code List are eligible for MSME registration under Udyam

ACTIVITIES ADDED UNDER THE NIC CODE LIST

On the basis of various representations received by government, the government has decided to validate and include “Retail and Wholesale trades as MSMEs” for Udyam Registration for the following activities under INC Code 45, 46 and 47 vide O.M 5/2(1)/2020-P&G/Policy dated 17.07.2020:

45 Wholesale and retail trade and repair of motor vehicle and motorcycles
46 Wholesale trade except of motor vehicles and motor cycles
47 Retails Trade Except of Motor Vehicles and motor cycles.

The Udyam Registration is allowed for the above three NIC Codes and activities mentioned against them.


 


NORMS FOR INVESTMENT AND DISCLOSURE BY MUTUAL FUNDS IN DERIVATIVES.

SEBI

By Lucy Rana and Rupin Chopra

INTRODUCTIONS:

On June 18, 2021, the Security Exchange Board of India (SEBI) has passed a circular for providing norms for investment and disclosure by Mutual Funds in Derivatives. This circular is with reference to “Review of norms for investment and disclosure by Mutual Funds in Derivatives” passed by SEBI on August 18, 2010 for prescribing the guidelines for participation of mutual fund schemes in Interest Rate Swaps (IRS)[1]. After receiving feedback from various stakeholders and industry participants, SEBI through this circular has modified the clause mentioning the guidelines Interest Rate Swaps for mutual fund schemes in Derivatives. SEBI, in order to protect the interests of investors in securities and promotion of development in security markets has exercised its powers as conferred under Section 11(1) of SEBI Act, 1992 read with Regulation 77 of SEBI (Mutual Funds) Regulation, 1996.

WHAT ARE INTEREST RATE SWAPS?

As per the Reserve Bank of India[2], “An Interest Rate Swap is a financial contract between two parties exchanging or swapping a stream of interest payments for a notional principal amount on multiple occasions during a specified period. Such contracts generally involve exchange of a fixed to floating or floating to floating rates of interest. Accordingly, on each payment date – that occurs during the swap period – cash payments based on fixed/ floating and floating rates, are made by the parties to one another.” It can be summarized as an over-the-counter derivative having agreement between two counterparties for exchange of one stream of future interest payments for another, applied on a notional principal amount, over a specified time period.

For further clarity, as per Section 45U of the Reserve Bank of India Act, 1934, “Derivative means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities, or a combination of more than one of them and includes interest rate swaps.” Different derivative instruments are regulated and permitted by regulators like SEBI, RBI, Forward Markets Commission (FMC).

GUIDELINES:

As per the circular, new norms prescribed to be modified in circular dated August 18, 2010 are:

  • Mutual Funds may enter into plain vanilla Interest Rate Swaps (IRS) for hedging purposes. The value of the notional principal in such cases must not exceed the value of respective existing assets being hedged by the scheme.
  • In case of participation in IRS is through over-the-counter transactions, the counter party has to be entity recognized as a market maker by RBI and exposure to a single counterparty in such transactions should not exceed 10% of the net assets of the scheme. However, if mutual funds are transacting in IRS through an electronic trading platform offered by the Clearing Corporation of India Ltd. (CCIL) and CCIL is the central counterparty for such transactions guaranteeing settlement, the single counterparty limit of 10% shall not be applicable.

ANALYSIS:

The new guidelines set by SEBI for investment and disclosure by Mutual Funds in Derivatives has removed the 10% prescribed cap on IRS transactions through CCIL. However, the circular has still made transactions on single counterparty through market makers under the prescribed cap. Since, there is a risk involved in execution of such transactions through market markers by the other party, the 10% cap set by SEBI reduces the extent of risk in event of default. As CCIL transactions carry no such risk (the counterparty being CCIL in such transactions) there is no particular cap set.

CONCLUSION:

Hence, SEBI conferring its power for protection of investors and regulations for markets, has modified the IRS rules for prescribing the applicable cap on single counterparty transactions through approved market makers and removing the cap of 10% on CCIL transactions.

[1] https://www.sebi.gov.in/legal/circulars/aug-2010/review-of-norms-for-investment-and-disclosure-by-mutual-funds-in-derivatives_380.html

[2] https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=457


 


NEW DEFINITION OF MSME- RBI.

RBI

By Lucy Rana and Rupin Chopra

INTRODUCTION:

The Reserve Bank of India (RBI) vide its notification dated June 25, 2021[1] has notified new definition of Micro, Small and Medium Enterprises (herein after referred to as “MSME”) with reference to RBI circular dated August 21, 2020 on New Definition of Micro, Small and Medium Enterprises – clarifications’.[2] The given circular provides extended validity of Entrepreneurs Memorandum Part-ll (EM Part – ll) and Udyog Aadhaar Memorandum (UAM) from March 31, 2021 to December 31, 2021.

BACKGROUND:

The Ministry of Micro, Small and Medium Enterprises had notified criteria for classifying MSMEs and specifics of form and procedure for filing under Udyam Registration portal vide its notification dated 26 June, 2020.[3]

June 26, 2020:

  • As per the notification, the Udyog Aadhaar Memorandum registration process was replaced by Udyam Registration to simplify the procedural compliance for registration of business under MSME norms and, a more convenient one-page registration form was set up on Udyam Registration’s official website.
  • Due to replacement of the previous registration process, the existing MSME registration holders, which includes EM and Udyog Aadhaar Number, would have become invalid post March 31, 2021.

June 16, 2021:

  • In view of this, the Ministry of Micro, Small and Medium Enterprises on June 16, 2021 published a notification[4] for making amendments in the notification published earlier on June 26, 2020.
  • As per the latest notification, the validity period for existing enterprises (registered prior to 30 June, 2020) has been extended to December 31, 2021.

NEW DEFINITION OF MSME

RBI, in lieu of the notification dated June 16, 2021 by Ministry of Micro, Small, and Medium Enterprises, has now decided to modify its pervious circular dated August 21, 2020 for establishing uniformity. The RBI’s notification dated June 25, 2021, hence, amends circular dated August 21, 2020 by extending the validity of existing enterprises by substituting March 31, 2021 with December 31, 2021.

RBI Circular dated August 21, 2020 RBI Circular dated June 25, 2021
Relevant paragraph from the circular:

 

“The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till March 31, 2021. Further, all enterprises registered till June 30, 2020, shall file new registration in the Udyam Registration Portal well before March 31, 2021.”

Relevant paragraph from the circular:

 

“The existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) of the MSMEs obtained till June 30, 2020 shall remain valid till December 31, 2021”.

 

Implication
As per the circular, all existing EM Part – ll and UAMs (registered prior to June 30, 2020) were valid till March 31, 2021. Further, such enterprises were required to register to the new Udyam Registration portal by March 31, 2021. As per the circular, the validity of existing EM Part – ll and UAMs (registered prior to June 30, 2020) has been extended till December 31, 2021. Further, it can be interpreted that such enterprises shall register to the new Udyam Registration portal by December 31, 2021.

CONCLUSION:

The extension provided through the notification shall gain EM Part – ll and UAM holders to benefit from provisions providing schemes and incentives including Priority Sector Lending Benefits. The existing holder shall migrate to the newly introduced Udyam Registration for availing such benefits. The extension provided by the Central Government is considering the various representations received from various MSME associations regarding the hardships faced due to the Covid-19 pandemic. Hence, the relaxation provided through the amendments laid by the Central Government is in interest of securing the MSME Sector.

[1] https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12122&Mode=0

[2] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11951&Mode=0

[3] https://rbidocs.rbi.org.in/rdocs/content/pdfs/IndianGazzate02072020.pdf

[4] https://rbidocs.rbi.org.in/rdocs/content/pdfs/MoMSME16062021.pdf

 


BHUTAN LEGAL METROLOGY LAWS.

Legal-Metrology-1

By Rupin Chopra and Devika Mehra

Legal metrology deals with legal requirements regarding measurement, units of measurement, measuring devices and methods of measurement to satisfy the needs for protection of health, public safety, the environment, enabling taxation, protection of consumers and fair trade[1].

However, unlike the definition of Legal Metrology, the laws of Legal Metrology are not merely restricted to the realm of governing of weighment and measurement only, but it also focuses on consumer awareness by mandating printing of certain compliances on the label of a package.

The Commonwealth Countries across the world render a similarity in their laws, as most have these laws have their origin in the United Kingdom. The Legal Metrology Laws of Bhutan, too, are quite similar to the laws prevailing in India and are governed under 3 main Statutes.

Legal Metrology Laws in Bhutan- Laws and Regulations

The Legal Metrology and Packing laws in Bhutan are primarily governed under the following Statutes:

  1. Bhutan Package Commodities Rules & Regulations 1995 – The primary purpose of these rules and regulations are to regulate sales, storage & distribution of packaged commodities in the Kingdom of Bhutan. This Act’s peculiarity is that it specifically applies to goods produced in India, Bangladesh, Nepal and Bhutan.
  2. The Food Act of Bhutan, 2005 & The Food Rules and Regulations of Bhutan, 2017 – The Act and the Rules of 2017 aim to regulate and facilitate the import, export, and trade of food in the Kingdom of Bhutan to protect human health.
  3. Bhutan Mandatory Standard for Labelling of PrePackaged Food – This Standard was issued pursuant to the Food Rules and Regulations of Bhutan, 2017 and is based on the Codex General Standard for Labelling of Prepackaged Foods [CODEX STAN 1 – 1985 and its amendments].

Legal Metrology Laws in Bhutan- Key Takeaways

  1. The packaging may or may not contain all information over a label.
  2. All compliances under the Food Act of Bhutan, 2005 are governed by the Bhutan Agriculture and Food Regulatory Authority (BAFRA).
  3. A pre-packaged food shall be accompanied by the product information printed in Dzongkha or English on a label securely affixed to the package or printed on the package itself.
  4. Name of the food shall indicate the true nature of the food and normally be specific and not generic
  5. Where a product is labelled in a language other than that prescribed in this standard, it shall be the responsibility of the importer/distributor of the product to ensure that all labelling information is presented on the label in either in English or Dzongkha.
  6. Fresh fruits and vegetables shall be exempt from date marking requirements.
  7. The label of a food which has been treated with ionizing radiation shall carry a written statement indicating that treatment in close proximity to the name of the food. The use of the international food irradiation symbol is optional but when it is used it shall be placed in close proximity to the name of the food.
  8. Small units (where the surface area is less than 10cm2) may be exempt from requirements relating to ingredient declaration and nutritional information that may be prescribed under this standard
  9. A pre-packaged food placed in the market that does not comply with the labelling standards or requirements shall be withdrawn from the market. Such pre-packaged food shall be allowed for sale subject to fulfilment of the labelling requirements within a reasonable period of time.
  10. Contravention of the Bhutan Package Commodities Rules and Regulations, 1995 shall be punishable on offence being established with a fine of Nu. 2000.00 for the first offence, and for the second time with a fine of Nu. 5000.00 and subsequent violation shall be penalized with the cancellation of the trade license.

In light of the aforesaid, it can be established that though the Legal Metrology Laws in Bhutan are not in stark contrast to those prevalent in India, there are certain aspects quite specific to the country of Bhutan.

The practice of ensuring effective use of Legal Metrology laws is a big step towards maintaining healthy consumerism and consumer awareness, whilst keeping a strict check on the quality of the products whilst ensuring transparency from the producers, manufacturers and/or importers.

[1] https://link.springer.com/chapter/10.1007/978-981-10-4166-2_88

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Bangladesh Legal Metrology Laws.

legal Metrology

By Rupin Chopra and Devika Mehra

“Legal metrology” refers to that part of metrology (i.e. the scientific study of measurement) which treats units of weighment and measurement, methods of weighment and measurement and weighing and measuring instruments, in relation to the mandatory technical and legal requirements which have been formulated with the object to ensure public guarantee from the point of view of security and accuracy of the weighments and measurements.

However, unlike the definition of Legal Metrology, the laws of Legal Metrology are not merely restricted to governing weighment and measurement, but they also focus on consumer awareness by mandating printing of certain compliances on the label of a package.

The Commonwealth Countries across the world have great similarity in their laws, since most of these countries have their roots coming from the United Kingdom. In Bangladesh, the Bangladesh Standard and Testing Institution (BSTI) strongly governs the legal metrology standards practiced across the country. Where in India, the compliances for Legal Metrology have been exhaustively covered under the Legal Metrology Act, 2009 and its Rules, the situation is Bangladesh is considerably different.

Labeling requirements or the Legal Metrology laws for products in Bangladesh are covered primarily under the following Statutes

  • Packaged Food Labeling Regulations, 2017: The regulations establish technical standards for labeling of domestic and imported packaged food products, raw materials like additives, flavouring and coloring substance, allergenic good, baby food, genetically modified food, and mild product for human consumption
  • The Bangladesh Standards of Weights and Measures (Packing and Commodities) Rules, 2007: These rules, as the name suggests, are mainly regulated by the BSTI.
  • Food Safety Act, 2013: The standardization of imported products are checked to match with the standard of BSTI under this Act.
  • Bangladesh Standards of Weights and Measures (Packing and Commodities) Rules, 2007: These include rules for packaged product selling in the retail market, wholesale market, import and export.
  • Import Policy Order 2015-18: Covers the importing conditions for wine, beer and other alcoholic beverages which is overseen by the Director General , Narcotics Control Department, Ministry of Home Affairs.

Legal Metrology and Packaging Laws in Bangladesh- Important Highlights

  • BSTI gives certification clearance to the imported products as a part of customs clearance.
  • There are no special shelf-life requirements for products imported into Bangladesh. There are no specific rules for granting an exception to the regulation.
  • There is no special labeling requirement for sample size of products or institutional product for the food service sector.
  • The Government does not have any provision of health claims.
  • There are no difference in rules for imported processed food, indicating that the exporting country will follow their packaging weight and measure rules for production and export to Bangladesh.
  • All “Genetically Modified Food” must be added on the packing of Genetically Engineered foods. Bangladesh importers usually do not import products with GMO (Genetically Modified Organisms) labelling because most do not know the clearance procedure of GMO-labeled processed food products. The importers also fear that the product may not be cleared by customs as the approval process of processed food prepared with GMO ingredients is not functional in Bangladesh.
  • Beer and wine of all categories can be imported by foreign exchange earning hotels only. In special cases, such goods can be imported with the approval of Ministry of Commerce prior permission from the Chief Controller, subject to a specified condition.

In light of the above, it can be established that though the laws in Bangladesh are not in stark contrast to those prevalent in India, there are certain aspects quite specific to the country of Bangladesh. However, the above checklist is what covers the Legal Metrology laws for exporting goods to Bangladesh. The practice of ensuring effective use of Legal Metrology laws is a big step towards maintaining healthy consumerism and consumer awareness, whilst keeping a strict check on the quality of the products whilst ensuring transparency from the producers, manufacturers and/or importers.

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STAND UP INDIA SCHEME.

donation

By Rupin Chopra and Apalka Bareja

In order to promote entrepreneurship at the grass-root level, especially amongst women, Scheduled Castes (SC) and Schedules Tribes (ST), the government of India launched the Stand Up India Scheme[1] on April 05, 2016.

The scheme aims at providing people belonging to SC, ST, or women a loan between Rs. 10 lakhs to Rs. 1 crore on the basis of their requirement. Based on recognition of the challenges they face in setting up enterprises, obtaining loans and other support needed from time to time for succeeding in business, the scheme aspires to provide and create an ecosystem which facilitates to provide a supportive environment for doing business.

KEY HIGH LIGHTS OF STAND UP INDIAN SCHEME[2]

  1. The Scheme is a part of an initiative by the Department of Financial Service (DFS), Ministry of Finance to promote entrepreneurial projects.
  2. The scheme is a composite loan that is inclusive of term loan and working capital loan.
  3. The scheme is expected to cover 85% of project costs at the lowest applicable interest rate of the bank for that category that is well within (base rate*MCLR+ 3% + tenor premium).
  4. The loan can be repaid over seven years.
  5. The scheme offers a moratorium period of up to 18 months.
  6. The designation of Stand up Connect Centres (SUCC) is provided to SIDBI and National Bank of Agriculture and Rural Development (NABARD).
  7. For a loan amount of up to Rs. 10 lakh, the sum will be sanctioned by way of overdraft. A RuPay debit card will be issued to access the funds conveniently. For a loan amount above Rs. 10 lakh, the sum will be sanctioned in the form of the cash credit limit.
  8. The people who apply for this scheme will be familiarized with the online platforms and other resources of e-marketing, web-entrepreneurship, factoring service and registration.

ELIGIBILITY FOR SCHEME[3]

  1. SC/ST and/or woman entrepreneurs, above 18 years of age.
  2. Loans under this scheme is available for only green field project[4].
  3. In case of non- individual enterprises, 51% of the shareholding and controlling stake should be held by either SC/ST and/or Women Entrepreneur.
  4. Borrower should not be in default to any bank/financial institution.

OTHER BENEFITS OF STAND UP INDIA SCHEME

In order to ensure that the new entrepreneurs get the guidance to set up their business enterprise, Standup India scheme provides handholding support through a network of agencies engaged in training, skill development, mentoring, project report preparation, application filing, work shed/utility support services, subsidy schemes etc.

The portal therefore facilitates by providing step by step guidance for connecting to various agencies with specific expertise viz. skilling centers, Mentorship support, Entrepreneurship Development Program Centers, District Industries Centre.

CONCLUSION

The Stand Up India scheme is undoubtedly a positive initiative taken up by the government to promote economic entrepreneurship at grass root level and a step towards uplifting the people of our society and being more self-sufficient. The facilitation and support provided by the Stand Up India Ecosystem is what has led the first time ventures to take a step forward.

[1] https://www.standupmitra.in/Home/SUISchemes

[2] https://www.standupmitra.in/Home/SchemeGuidelines

[3] https://www.standupmitra.in/Home/SUISchemes

[4]  A greenfield enterprise is one where new infrastructure will be built on unused land, i.e. no demolition or remodelling of an existing structure will be involved

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