What U.S. Businesses with India Operations Need to Know about Modi’s Shutdown
Kegler Brown Global Business News March 27, 2020
The pandemic has now crippled the Indian labor market. At midnight on March 25 and under its authority under the Disaster Management Act of 2005, the Government of India (GOI) ordered the entire country of India locked down for 21 days. The Order, amongst other restrictions, mandates that all private businesses and establishments shall remain closed, but for some limited operations and government offices defined as “essential” by the guidelines noted here.
In anticipation of non-compliance with the Order and to mitigate potential losses, government agencies have also set forth measures either relaxing compliance and filing requirements or postponing them indefinitely.
1. Relaxed Regulations for Companies Incorporated in India.
The Ministry of Corporate Affairs (MCA) is providing corporate relief in a number of ways, including by:
- waiving any penalty fees for delay in compliance filings until September 30;
- eliminating requirements for holding quarterly board meetings;
- extending the timeline for newly incorporated companies to procure a commencement of business certificate;
- waiving the requirement for a company to have 1 resident director; and
- deferring the requirement to have a physical presence of a majority of directors in a board meeting for certain matters until June.
2. Directives Not to Terminate Employees or Reduce Wages.
But for the exceptions mentioned in the Order linked above, all non-essential commercial establishments have been mandated to remain closed and to have all their employees work remotely, if possible. The GOI is also encouraging employers not to terminate employees or reduce wages. Accordingly, the Commissioner of Labor in Mumbai has issued a directive to all employers not to terminate or reduce the wages of any employee or worker, including casual or contract workers, which we expect to be echoed by labor commissioners in other Indian cities shortly.
Companies with India operations must evaluate the legal impact of the labor commissioner mandates and seek proper advice before initiating any termination or wage reduction processes.
3. Postponement of All Court Filings.
In light of the pandemic, the Supreme Court of India issued an order extending the period of limitation, whether condonable or not under law, for the filing of all proceedings (i.e. petitions, applications, suits, appeals) in all courts, tribunals and authorities across the country from March 15 until further notice.
4. Extension to Business Tax Filing Deadlines.
Tax deadlines that arise in the normal course of business for filings and other matters have been extended to the last week of June.
5. Changes to Personal Tax Filing Deadlines + Penalties.
The deadline for the filing of 2018-2019 income tax returns has been extended from March 31 until June 30. And for any advance taxes or Tax Deducted at Source that were to be paid already but have not been, the government has reduced the interest rates to 9% from the previous 12%-18%.
6. New Measures for Indirect Taxes.
The filing deadline for the Goods and Services Tax has been extended until June.
7. Customs Classified as Essential Service.
The importation of goods through customs has been classified as an essential service and will operate as normal.
The Indian government has taken aggressive action to assist businesses in India in navigating and sustaining operations during the pandemic. Much like the U.S., we predict that India will soon be offering an economic stimulus package that will focus on companies impacted by this lockdown.
Any U.S. companies with operations in India should take advantage of these measures to mitigate some of the uncertainty related to the regulatory compliance and legal obligations of their subsidiaries and companies in India.