India’s Antitrust Regulator CCI Circulates Draft Rules on Determining Company Turnover

December 26, 2023 Posted by India Briefing Written by Melissa Cyrill Reading Time: 3 minutes

The Competition Commission of India (CCI), is seeking feedback on proposed rules for determining company turnover/income from December 22, 20223 to January 12, 2024. The comments must be sent only by duly filling the form available on the website of the CCI.

The Competition Commission of India (CCI) has put forth a proposal in its draft penalty regulations to exclude indirect taxes, trade discounts, and intra-group sales when calculating the turnover of an entity for imposing penalties related to violations of competition law.

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Seeking input from the public until January 12, 2024, CCI has opened a window for comments on a set of regulations known as the CCI (Determination of Turnover or Income) Regulations, 2023. These regulations are designed to implement the amended provisions of the Competition Act. See official link to the draft regulations here.

The objective of the proposed norms is to establish a thorough and transparent framework for assessing turnover or income for both enterprises and individuals. This framework takes into account diverse scenarios, emphasizing the importance of proper certification and documentation.

Meanwhile, speaking at the 96th Annual General Meeting of FICCI on December 8, Chairperson of the CCI, Ravneet Kaur, mentioned that the regulations on settlement and commitment to operationalize recent amendments to the Competition Act, 2002 will be published soon. Notably, two distinct draft regulations for settlement and commitment have already been circulated for public and stakeholder feedback.

Key points

Status of the Digital Competition Law in India

Earlier this year, the government made crucial amendments to the competition law, including a significant enhancement in deterrence measures. This involved introducing a penalty that would be applicable to the global turnover or income of entities accused of stifling competition.

Under this provision, the penalty may reach up to 10 percent of the average sales or income over the preceding three years for each entity involved in an anti-competitive agreement or engaged in the abuse of its dominant position. This penalty will be calculated based on the global turnover or income, as determined by the regulations set forth by the CCI.

The Competition (Amendment) Act, 2023, inter alia, amended Section 27, 48 and Section 64 of the Act empowers the CCI to frame regulations for the purposes of imposition of penalty on enterprise and/or person based on turnover or income of such enterprise and/or person. Further, it has been provided that turnover or income will be determined in the manner as specified by regulations. The CCI proposes the draft CCI (Determination of Turnover or Income) Regulations, 2023 which provide for the determination of turnover or income for the purposes of Section 27(b) and Section 48 of the Act. – Competition Commission of India

If an enterprise is mandated to prepare a consolidated financial statement under Section 129 of the Companies Act, 2013, or any applicable law, the turnover or income will be derived from the audited consolidated financial statements, according to CCI.

When audited financial statements are not available, the turnover will be the amount certified by the statutory auditor of the enterprise and supported by an affidavit from any authorized person to sign financial statements.

For enterprises without a statutory auditor, turnover will be the amount certified by a chartered accountant and supported by an affidavit from any authorized person to sign financial statements, as outlined by CCI.

The determination of income for an individual is outlined as follows: firstly, it is based on the gross total income according to the specifications in the Income Tax Returns (ITRs) under the Income Tax Act, 1961, and its accompanying rules. Secondly, if ITRs are not available, filed in multiple jurisdictions, or not filed in any jurisdiction, the income is established as the total income certified by a Chartered Accountant, complemented by an affidavit from the individual. Thirdly, for individuals not obligated to file ITR, the income is ascertained as the total income certified by a Chartered Accountant, supported by an affidavit from the individual.

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