INTRODUCTION:

GST is globally enshrined as a successful tax reform that will reduce the cascading effect of taxes, ensuring no tax burden on business houses and shifts the complete tax burden on to the end customer or consumer. Seamless Input Tax Credit (ITC) is often lauded as major benefit of GST by tax and economic experts. This is the driving force behind our country in embracing GST. Recently the CGST, IGST, UTSGST, GST Compensation bills are tabled in Parliament. The provisions of CGST bill relating to ITC will act as a litmus test for Government’s commitment towards the objective of conferring seamless credit to business houses. This article aims at bringing some aspects of the provisions relating to ITC which do not go in hand with seamless credit.

ITC AVAILABLE ON ANY SUPPLY USED OR INTENDED TO BE USED IN BUSINESS:

Sub-section (1) of Section 16 of CGST bill provides for entitlement to ITC which is reproduced as under—

“(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person”

In terms of this section, a registered taxable person can claim ITC on procurement of all goods or services or both when they are used or intended to be used in the course or furtherance of his business. The expression ‘used or intended to be used in the course or furtherance of businesses’ is of wide connotation and this would simply imply that any expenditure which is incurred for the purpose of providing taxable supply of goods or services or both would be eligible for ITC. This is a welcoming move. Unlike the case of CENVAT Credit Rules, 2004 (CCR,2004), there are no definitions given for ‘input’, ‘input service’ and ‘capital goods’ which prescribe various conditions for eligibility viz. usage within the factory of production, direct nexus with provision of output service etc. That is to say even these terms appear in GST law, the same are without any conditions or restrictions as were there in earlier law. Thus, under GST regime every expenditure incurred for business would be entitled to ITC.

However, ITC has been barred on various items by way of exclusions under sub-sections (5) of Section 17 of the CGST bill. These items are similar to the exclusions given under the definitions of ‘inputs’, ‘input services’ of present CCR, 2004. Upon closer scrutiny of these exclusion clauses, they are even more detrimental compared to those under CCR, 2004. The comparative analyses of these exclusions are tabulated as under;

ITC ON WORKS CONTRACTS ALLOWED IN CASE OF PLANT & MACHINERY:

Under the present CCR, 2004, credit of service tax/excise duty paid with respect to works contracts for construction of buildings, civil structures or for laying of foundation or making of structures for support of capital goods is not allowed. Credit is allowed only to a works contractor who is in turn providing similar works contract services. However service tax paid on works contract services used for construction of capital goods (other than foundation or support structures) is allowed as credit.

Under the GST regime, the said restriction on availment of ITC on works contract services is retained and ITC is allowed only to the said works contract service that is used for further supply of works contract service. The only exception for this restriction is works contract services relating plant and machinery, where all the receivers of the said supply are entitled to take ITC. For this purpose, the expression ‘Plant and Machinery’ is defined which is reproduced as under—

“plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes—

• land, building or any other civil structures;
• telecommunication towers; and
• pipelines laid outside the factory premises

In view of this definition, ITC is not available on all types of works contracts relating to capital goods but only those that fit into the definition of plant and machinery. Further, ITC is restricted on works contracts relating to land, buildings, telecommunication towers and pipelines. However on a positive note, works contract services relating to foundation and structural supports for plant and machinery are eligible for ITC which are currently barred from CENVAT credit under CCR, 2004

NO ITC ON INPUTS & CAPITAL GOODS USED IN MANUFACTURE OF ELECTRICITY FOR USE IN PRODUCTION:

Electricity is not excisable goods but yet CENVAT Credit is allowed under the present CENVAT Credit Rules, 2004 on inputs used in manufacture of electricity that is captively consumed in factory for production of dutiable goods. Electricity is going to be outside the GST tax net as they continue to be subjected to tax by electricity duty by States. There is no corresponding provision under the model GST law to prescribe for availing ITC on inputs and capital goods used in manufacture of electricity for captive consumption to manufacture goods that are subject to GST. In such absence, manufacturers cannot avail ITC of such inputs and capital goods which they are allowed to do so under the current regime. This will certainly shoots up the cost of the goods and thereby contributes to the cascading effect which is against the objective of GST.

ITC ON PRE-REGISTRATION EXPENSES— ELIGIBLE ONLY UPON TIMELY REGISTRATION:

Unlike the present Central Excise and Service Tax laws, ITC under GST regime is allowed only if the assesse is registered under GST at the time of procuring goods or services. In case of any procurement prior to registration, ITC can be claimed only in accordance with the manner provided under Section 18(1) of the CGST bill which is reproduced as under—“A person who has applied for registration under the Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.”

In view of the above provisions, ITC relating to procurements prior to GST registration will be allowed only if GST registration is sought within the stipulated time period of 30 days from the date on which the assesse is liable for registration and the registration has been granted. In case of delay in applying the registration beyond the stipulated period, it seems that this provision is barring the assesse to claim ITC on expenditure incurred prior to registration.

Further, the section allows the assesse to claim ITC only to the extent relating to inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable for registration. This implies that there is no enabling provision to avail ITC relating to input services (otherwise related to stock) and capital goods that are procured prior to registration even though registration is obtained within the stipulated time period.

The condition of mandatory registration at the time of procurement is quite understandable as credit availment under GST regime is under a controlled electronic environment as supplier has to accept the corresponding liability and pay the tax by disclosing the said supply in his monthly GST returns.However this should not by any means operate as hindrance to deny credit to an assesse who failed to obtain registration within the stipulated time period.

It is advisable to prescribe a suitable mechanism to bring the procurements prior to GST registration under the said controlled electronic environment and allow assesseto avail the ITC. May be the fresh registrant is permitted to file a return immediately after registration with information relating to his procurements and ITC shall be allowed only when such information is matched with that the corresponding supplier.

ITC AVAILMENT ON GOODS NOT IN ALIGNMENT WITH TIME OF SUPPLY:

There is no concept of time of supply for goods either under VAT or Excise laws under the existing regime. The concept of point of taxation (akin to time of supply) is prevalent under Finance Act, 1994. The CCR, 2004 provides for availment of CENVAT Credit by receiver of services in case where he has paid advances towards taxable services and service tax is charged on such advances by the provider of services.

In terms of section 12 and section 13 of the CGST Bill, the liability to pay GST arises at the time of supply of goods or services which in general is the earlier of the date of issue of invoice (the prescribed last date for such issuance in the event invoice not issued) or the date on which supplier receives the payment with respect to the supply.

Subsection (2) of Section 16 of the CGST Bill provides for the conditions to be satisfied by registered taxable person in order to be entitled to ITC in respect of supply of goods or services. The relevant part of the section is reproduced as under;

“Notwithstanding anything contained in this section, but subject to the provisions of section 36, no registered taxable person shall be entitled to the credit of any input tax in respect of any supply of goods and/or services to him unless,-

• he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying document(s) as may be prescribed;

• he has received the goods and/or services;

• the tax charged in respect of such supply has been actually paid to the account of the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

• he has furnished the return under section 34:

PROVIDED that where the goods against an invoice are received in lots or instalments, the registered taxable person shall be entitled to take credit upon receipt of the last lot or installment:

PROVIDED FURTHER that where a recipient fails to pay to the supplier of services, the amount towards the value of supply of services along with tax payable thereon within a period of three months from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in the manner as may be prescribed.

Explanation.—For the purpose of clause (b), it shall be deemed that the taxable person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such taxable person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise“

In terms of the above reproduced section, a registered taxable person is allowed to take ITC only upon receipt of goods or services apart from holding invoice, filing the return, tax charged has been paid by supplier etc. In cases where advances are given towards the taxable supply of goods or services, though the tax has been paid upon such advances by virtue of the provisions of time of supply, the receiver cannot avail ITC immediately and can only avail ITC after the receipt of goods or services.

This intention is further clearly evident from the first proviso of said section 16(2), which provides that in case where goods are received in lots or installments, ITC can be availed only upon the receipt of last lot or installment. Thus under GST regime, ITC cannot be availed immediately upon payment of tax towards advances paid towards supply of taxable goods or services. The recipient of supply has to wait till receipt of goods or services to avail ITC. This may cause undue hardship and may have a bearing on working capital of business houses.

REVERSE CHARGE IS AN EXEMPTED SUPPLY:

Sub-section (2) of section 17 of the Revised Model GST law provides for reversal of proportionate ITC in case where the registered taxable person is engaged in providing both taxable and exempted supply. The said provision is reproduced as under;

“Where the goods and / or services are used by the registered taxable person partly for effecting taxable supplies including zero-rated supplies under this Act or under the IGST Act, 2016 and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

• The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building

Under the present Service Tax laws, a service for which reverse charge is applicable cannot be treated as an exempt service and there is no requirement to reverse the common CENVAT Credit on proportionate basis. However under GST regime, in terms of the above reproduced sub-section (3), exempt supplies include those supplies provided by a registered taxable person for which GST is required to be paid by recipient of supply under reverse charge mechanism.

In such event, the registered taxable person is required to reverse a portion of ITC though he is engaged in providing those supplies which are subject to GST payable either by him or by the recipient of supply. This will also mean that with respect to supplies that are going to be notified under GST for reverse charge, Government on one hand is going to get the revenue in full on such supplies and on the other hand it will deny the ITC by requiring the corresponding supplier to restrict ITC. This requirement of reversal of ITC by supplier to extent of his supplies covered under reverse charge would break the ITC chain and contribute to the cascading effect. This provision requires reconsideration in light of the spirit behind GST (seamless credit).

CONCLUSION:

In view of the above discussion, it is amply clear that the provisions of ITC under the CGST Bills incorporated enough hurdles to restrict the free flow of credit and some of the provisions are even more detrimental in denying ITC as compared to the current CCR, 2004.Thus seamless credit, the much hyped benefit of GST is seemingly still out of reach for business houses. Industry, trade and professional bodies have to make suitable representations in this regard and GST Council, Centre and State Governments have to re-consider these in fair manner after all the reason for introduction of GST is to overcome the trade barriers and reduce the cascading effectthereby encouraging the industry for voluntary and prompt tax compliance.

CONDUCTING BOARD MEETINGS THROUGH VIDEO CONFERENCE – PROCEDURE-PROCESS

Section 173of the Companies Act, 2013, provides for the participation of directors in a Board meeting, either in person or through video conferencing or other audio visual means, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time.

As per the rules framed under the Act, the following are the compliances for holding/attending meetings through Video Conference.

"Video Conferencing Or Other Audio Visual Means" means “audio-visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting”.

From the above definition, it is clearly evident that holding of a Board meeting through Video Conferencing or through Audio Video means, is not simply conducting a meeting through skype or a third party video conferencing facility/means.

For the time being, the Companies Act, 2013, restricts for the following matters/decisions of the Board to be dealt by a meeting held through video conferencing or other audio visual means:

• Approval of the annual financial statements; (ii) Approval of the Board’s report;

(iii) Approval of the prospectus;

(iv) Audit Committee Meetings for consideration of financial statement including consolidated financial statement if any, to be approved by the board under sub-section (1) of section 134 of the Act; and

(v) Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

NOTE: The Companies Amendment Bill, 2016 (Bill No.73 of 2016), proposes to amend Section 173, by inserting a second proviso to sub-section (2) of Section 173, that, where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting on any matter, including the restricted matters.

Process/Procedure for conducting of Meeting through Video Conference and Compliance is as below:

1. Notice of Board Meeting:

A meeting of the Board shall be called by giving not less than 7 days in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means.

The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means.

The Notice of the Meeting, wherein the facility of participation through video conferencing mode or other audio visual means, shall clearly mention a venue, whether registered office or otherwise, to be the venue of the Meeting and it shall be the place where all the recordings of the proceedings at the Meeting would be made.

Requirements to participate/attend a meeting through Video Conference:

A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairperson or the Company Secretary of the company, if any.

If the director intends to participate through video conferencing or other audio visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf.

The director, who desire, to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

In the absence of any intimation from the Director, it shall be assumed that the director shall attend the meeting in person.

2. Arrangements and requirements for/at the Meeting:

The Company shall make necessary arrangements to avoid failure of video or audio visual connection.

The Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care:

• to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;

• to ensure availability of proper video conferencing or other audio visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorised participants at the Board meeting;

• to record proceedings and prepare the minutes of the meeting;

to store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year.

• to ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing mode or other audio visual means; and

• to ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting; Provided that the persons, who are differently abled, may make request to the Board to allow a person to accompany him.

3. Roll Call at the Commencement of the Meeting, Invitees and Quorum:

At the commencement of the meeting, a roll call shall be taken by the Chairperson when every director participating through video conferencing or other audio visual means shall state, for the record, the following namely:-

• name;
• the location from where he is participating;
• that he has received the agenda and all the relevant material for the meeting; and

• that no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in clause (b);

Information as to any Invitees for the Board meeting:

After the roll call, the Chairperson or the Company Secretary shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the Chairperson.

From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors, Company Secretary, if any, and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board.

Quorum:

The quorum for a meeting of the Board of Directors of a company shall be1/3rd of its total strength or 2 directors, whichever is higher, and the participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum. The Articles of Association of the Company to be verified for any requirement, for having a higher quorum

Participation through video Conferencing shall be counted for the purpose of Quorum is the quorum unless he is to be excluded for any items of business under the provisions of the Act, as detailed above i.e., matters not to be dealt through Video Conference.

The Chairperson shall ensure that the required quorum is present throughout the meeting.

4. Venue of the Meeting and placing of the Statutory Registers:

In respect of every meeting conducted through video conferencing or other audio visual means, the scheduled venue of the meeting as set forth in the notice convening the meeting, shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting.

5. Proceedings at the meetings, manner of transacting an item at the meeting, Recording of Minutes: Director to Identify himself:

Every Director shall identify himself for the record before speaking on any item of business on the agenda.

If a statement of a director in the meeting through video conferencing or other audio visual means is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.

Voting:

If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote.

Summarisation of decisions taken:

At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

Recording of Minutes:

The minutes shall disclose the particulars of the directors who attended the meeting physically and through video conferencing or other audio visual means.

The draft minutes of the meeting shall be circulated among all the directors within 15 days of the meeting either in writing or in electronic mode as may be decided by the Board.

Every director who attended the meeting, whether personally or through video conferencing or other audio visual means, shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed.

The minutes shall be entered in the minute Book and signed by the Chairperson.

The recordings of the proceedings of the meeting along with date and time, shall be kept in the safe custody of the Chairperson or any Director of the Company.

From the above, it can be clearly seen that the facility of conducting Board Meetings through Video conference enable ease of operations and enhances the ability of the Board of Directors to take decisions in the interest of the Organisation.

Section 11of the Income-tax Act, 1961 (“Act”) provides for exemption of income derived from property held under a trust or legal obligation wholly for charitable purposes to the extent of income applied for such purposes in India. Such trust or legal obligation can accumulate or set apart not exceeding 15% of the income from such property subject to exceptions provided in subsection 2 of section 11.

Section 2(15) defines “Charitable Purposes”. It includes relief of poor, education, medical relief, Yoga ¹, preservation of environment² including watersheds, forests and wildlife and preservation of monuments or places or object of artistic or historic interest and advancement of any other object of general public utility.

Section 11(1)(d) provides that income in the form of voluntary contributions made with a specific direction that they shall form part of corpus of the trust or institution are not subject to application. In nutshell corpus donations are not income of the trust or institution.

Explanation to Section 11(2) provides that the amount credited or paid out of accumulated income to any trust or institution registered U/S 12AA or any fund or institution or other educational institution or any hospital or other medical institution referred to in (iv)/(v)/ (vi)/(via) of Section 10(23C)shall not be treated as application of income for charitable purpose either during the period of accumulation or thereafter.

By reading the provisions of section 11(1)(d) and explanation to section 11(2) together one may conclude that it is allowed for a trust or institute to donate out of current year income to another trust or institution registered U/S 12AA/10(23C) and claim it as application of income.

The above view was supported by Gujrat HC Judgement³ where the Court held that the provisions of section 11(1)(a) can be said to have been met out where a donor -trust, which is charitable and religious trust, donates its income to another charitable and religious trust even though such contribution is towards corpus of donee- trust or institution. Further the Court held that instruction no. 1132 issued by the CBDT on 05-01-1978 squarely covers the facts of the present case.

New Proposal by Finance Bill 2017: -

A new explanation (Explanation 2) inserted to the section 11(1) w.e.f 01-04-2018. It provides that any amount credited or paid out of income referred to in Section 11(1) (a) or (b) to any other trust or institution registered U/ S 12AA, being contribution with specific direction that they shall form part of corpus of the trust or institution shall not be treated as application of income for charitable or religious purpose.

The reason behind the amendment is avoid the double benefit being that in the hands of donor trust it is treated as application of income and in the hands of donee such receipt is not income for the purpose of application.

However, donations with no specific directions to the recipient continue to be eligible as application of income.

The new proposal in Finance Bill 2017 is prospective in nature. To support this view reliance can be place on Supreme Court Judgement⁴ and ITAT JAIPUR⁵ where in it was held that “of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.” The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. One principle of law is known as lexprospicit non respicit: law looks forward not backward.

Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect;

While interpreting whether amendment to be applied retrospectively or prospectively one has to consider the notes on clauses appended to the Finance Bill.

The Memorandum to Finance Bill 2017 provided that new explanation to section 11 will take effect from 1^st April 2018 and apply in relation to the assessment year 2018-19 and subsequent years.

Therefore, the proposed amendment brought by Finance Bill 2017 by insertion of new explanation to section 11(1) will apply prospectively.

In view of the NRI Inflows into India, playing pivotal role for India’s Foreign Exchange, an attempt is made to provide brief introduction about the MTSS Scheme through which such remittances are being received into the India.

What is MTSS?

Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Under MTSS the remitters and the beneficiaries are individuals only. The MTSS is having statutory recognition under Payment and Settlement Systems Act, 2007 and rules made thereunder

Permitted nature of remittances

Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. No outward remittance from India is permissible under MTSS

Donations/ contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts shall not be made through this arrangement.

Nature of Players Involved in the MTSS

The system envisages a tie-up between reputed money transfer companies abroad known as Overseas Principals and agents in India known as Indian Agents who would disburse funds to beneficiaries in India at ongoing exchange rates. The Indian Agents can in turn also appoint sub-agents to expand their network.

Prominent Overseas Principals under this scheme areWestern Union Financial Services Incorporated, USA (“Western Union or WU”), Wall Street Exchange Centre LLC, UAE (“Instant Cash”), UAE Exchange Centre LLC, UAE (“Xpress Money”), Royal Exchange (USA) Inc., USA, and MoneyGram Payment Systems Inc, USA(“MoneyGram or MoneyGram International”) etc. Many Indian Agents have tied up with these players for quick remittances of Foreign Currency into India.

Entry Norms for Indian Agents

The applicant, in order to become an Indian Agent, should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), or a Scheduled Commercial Bank or the Department of Posts and should have minimum Net Owned Funds of Rs.50 lakh.

Guidelines for Overseas Principals

Indian Agents entering into arrangements with Overseas Principals, need to have adequate volume of business, track record and outreach etc.

Applicant Indian Agents should submit the following documents/ comply with the following requirements, in respect of their Overseas Principals:

1. The Overseas Principal should obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007 to commence/ operate a payment system. Prior to such authorization, the RBI will verify the background and antecedents of the Overseas Principal with the help of Govt. of India,

1. The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant.

1. The minimum net-worth of Overseas Principals should be at least USD 1 million as per the latest audited balance sheet, which should be maintained at all times. However, the Reserve Bank may consider relaxing the minimum Net Worth criterion in case of Overseas Principals incorporated in FATF member countries and are supervised by the concerned Central Bank/ Government or financial regulatory authority.

1. The Overseas Principal should be well established in the money transfer business with a track record of operations in well regulated markets.

1. The arrangement with Overseas Principal should result in considerably increasing access to formal money transfer facilities at both ends.

1. The Overseas Principal should be registered with the overseas trade / Industry bodies.

1. The Overseas Principal should have a good rating from one of the international credit rating agencies.

1. The Overseas Principal should submit confidential reports from at least two of its bankers.

1. The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti-money laundering norms in the home/ host country.
2. The Overseas Principals will be fully responsible for the activities of their Agents and Sub Agents in India.

1. Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or other agencies of the Government of India, viz., Ministry of Finance, Ministry of Home Affairs, FIU-IND, etc. Full details of the remitters and the beneficiaries should be provided by the Overseas Principals, if called for.

Receipt of Cross Border Remittances by Indian Residents/ foreign tourists

A cap of USD 2500 has been placed on individual remittance under the scheme. Amounts up to Rs.50,000/- may be paid in cash to a beneficiary in India. Any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc., or credited directly to the beneficiary's bank account only.

However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Full details of such transactions should be kept on record for scrutiny by the auditors/ inspectors.

Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year.

To facilitate receipt of foreign inward remittances directly into bank account of the beneficiary, the foreign inward remittances received under MTSS can be transferred to the KYC compliant beneficiary bank account through electronic mode, such as NEFT, IMPS etc.

Foreign inward remittances received by the bank acting as Indian Agent under MTSS, may also be electronically credited directly to the account of the beneficiary, held with a bank other than the Indian Agent Bank