Atul veeresh & Associates, Mumbai (2026)

05/11/2015

New Stringent Corporate Laws Make CFOs, Auditors Quit Cos

These professionals can now land in jail in case their co is found involved in any financial fraud

The chief financial officer of a BSE-listed infrastructure company recently quit his job within months of joining, fearing he could be prosecuted because his employer — part of a group that has half a dozen other listed firms —was fabricating its accounts.

“They literally made three sets of balance sheets; one for the auditor, one for the banks and one for everyone else,” the former CFO said on the condition that he and his former employer would not be named. He had quit one of the biggest oil companies in the country to join the infrastructure company about six months ago and now he is hunting for a job with some auditing firms in Mumbai at 55.

It may sound like a one-off case, but it’s not; industry insiders say there have been several incidents of CFOs and other professionals fleeing from such companies, and that such cases have increased in the past six months due to stricter laws.

Under the new regulations around corporate governance, company secretaries, CFOs, auditors and independent directors risk landing in jail for irregularities and few such executives are willing to continue with such organisations. The new Companies Act and Internal Financial Controls (IFC) have made it tough for not just those found in connivance with the promoter in a fraud but even for those senior executives turning a blind eye to the issue. In a similar case, an official recently quit a cement company, which is part of a known conglomerate. “There is a ballooning debt problem. For some years the company somehow managed to show the debt lower than what it actually is with some `creative accounting', but that has become impossible now as the problem has become too big,“ the person told ET on condition of anonymity .

The official, who had a crucial role in the company, feared that if there is an investigation ever in the company, he could be one of the people who may land up in trouble. Industry trackers say that while most promoters who indulge in these practices remain defiant, many professionals are not willing to take that risk.

“The new rules are aimed at ending the malice in some companies and I am glad that the professionals are taking this seriously,“ said Manoj Fadnis, president at the Institute of Chartered Accountants of India. “As far as we are concerned, we have always taken a tough stand and we would bar anybody who is found to be involved in a scam or anything that is remotely against the regulations,” said the head of the CA institute.

In many cases, even the role of the auditors in the past has come under the scanner. The former CFO quoted earlier claimed that the auditor of the infrastructure firm knows about the whole cooking up of books but was ignoring it.

ET reached out to the auditor, which is part of a known professional network. The audit head of the firm said resignations by professionals should not be construed as a problem issue as “people move out”.

Many audit firms are, meanwhile, dropping “risky accounts”. Some are doing a thorough risk assessment of companies before accepting their audit. Some of the smaller auditors are taking a middle route by asking their clients to clean up their books before the next financial year, when the regulatory environment becomes stricter due to the new regulations, industry sources said.

“We have told our clients to do all the adjustments before March 31, as otherwise we would have no choice but to reflect all the issues in the audit report,“ said the head of a Mumbai-based audit firm.

02/11/2015

Govt’s e-services to pinch your pockets soon

The Delhi government has taken several measures to promote e-governance but the services under it will soon come at a cost.

The government is planning to levy user charges — ranging from Rs.50 to Rs.500 — for issuing different kinds of certificates online, officials said.
Around two months back, the Delhi government’s revenue department launched its e-districts project under which the certificates are issued and delivered to city residents online. No extra cost is charged for it.

However, now the revenue department has decided to levy charges for providing the service.

The revenue department issued an order earlier this month fixing the user charges for different certificates. Of ficials said the order is likely to be implemented by November-end.

“Efforts are on to integrate the payment gateway of the e-district portal with State Bank of India. The discussions are in an advanced stage and is likely to become operational by November-end. The user charges order would be implemented along with it,” a senior official said.

Officials hope the people won’t mind paying the extra cost as the facility would make the process convenient and transparent.

“Earlier, people would run from pillar to post for the certificates, often being fleeced by touts. After the launch of the project around two months back, people could apply sitting at home. The certificates are also delivered online. Moreover, we are also simplifying the documentation process. The number of affidavits required for it is also being reduced,” an official said.

Eight certificates for which user charges would be levied include income, domicile, birth, caste, lal dora, surviving member certificate, solvency and marriage.

Officials said death certificate and Disability certificates would be kept out of the new regime.

30/10/2015

National Pension System opened up for NRIs

To enable Indians living abroad to access old age income security, the Reserve Bank of India on Thursday allowed non- resident Indians ( NRIs) to subscribe to the National Pension System ( NPS).

“It has now been decided, in consultation with the government, to enable National Pension System ( NPS) as an investment option for NRIs under FEMA, 1999,” RBI said in a notification here on Thursday.

NRIs may subscribe to the NPS governed and administered by the Pension Fund Regulatory and Development Authority ( PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest according to the provisions of the PFRDA Act, it said.

The subscription amounts shall be paid by the NRIs either by inward remittance through normal banking channels or out of funds held in their NRE/ FCNR/ NRO account.

RBI, however, said there would be no restriction on repatriation of the annuity/ accumulated savings.

NPS was launched on January, 1 2004, with the objective of providing retirement income to all the citizens.

NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.

Initially, it was introduced for the new government recruits ( except the armed forces). With effect from May 1, 2009, NPS is open for all citizens of the country, including unorganised sector workers, on a voluntary basis.

HOW IT WORKS

Subscriptions should be made through normal banking channels
The person is eligible to invest according to the provisions of the PFRDA Act

29/10/2015

GST key for creating single market in India’

The proposed Goods and Services Tax ( GST) law is the most important reform towards creating a single market in India and if implemented by April 2016 its impact will be visible by 2018, the World Bank said on Wednesday. “... GST will make it easier to pay tax. For example, if it gets introduced by April 2016... you would only see its impact by 2018 as per a survey- based methodology,” World Bank country director in India Onno Ruhl said.

26/10/2015

You May Have to Pay a Penalty for Switching Loans in First 2 Years

NHB nod for such a move will hit borrowers looking to gain from falling rates

The National Housing Bank is considering allowing lenders to levy prepayment penalty on housing loan customers who transfer the outstanding amount to another lender in the first two years of the loan tenure, a dampener for borrowers wanting to make the most of falling interest rates.

Sriram Kalyanaraman, chairman of National Housing Bank, the regulator for housing finance companies (HFCs), believes that home loan `shopping' could lead to risks building up in the system as banks and HFCs are vying for the same customers to expand their market share.

“I think there should be some form of lock-in for the customers in the initial days, say 18 to 24 months, before they are allowed to transfer loans,“ said Kalyanaraman. “CompaniesHFCsbanks are trying to woo customers with lower interest rates, which is good for customers, but there could be a bubble due to everyone concentrating on the same segment and also topping up loans when they do bal ance transfer.“

In October 2011, NHB had waived off pre payment penalty on money borrowed from housing finance companies on float ing rate. So, borrowers could prepay the loan by borrowing from a bank or a non banking finance company while moving l to lower interest rates.

The following year, the Reserve Bank of India barred banks from levying foreclo sure charges, or pre-payment penalties, on home loans with floating interest rates. In 2014, the RBI asked banks not to e levy pre-payment penalties or foreclosure d charges on all floating rate term loans sanctioned to individual borrowers.

Other than housing, floating loan products include corporate, vehicle and personal loans. Earlier, banks were charging pre-payment penalty of up to 2% of the outstanding loan amount.

Banks, HFCs and nonbanking finance companies try to woo customers with lower interest rates. As loan demand from corporates is yet to pick up, lenders are focusing on their retail portfolio, especially home loans, which is more secured lending.

The housing loan market continues to be dominated by the five large groups -SBI Group, HDFC Group, LIC Housing Finance, ICICI Group and Axis Bank. Together they accounted for 60% of the total housing credit in India on December 31, 2014. Since then, a number of new HFCs have emerged in niche segments like affordable housing and self-employed customer segments, growing at more than 50% and slowly gaining market share, according to recent report by rating company Icra.

With competition intensifying, lenders have dropped rates after the recent policy action by the RBI. SBI had recently cut its base rate by 40 bps but raised spreads on home loans so borrowers can look for loans at 9.55%. HDFC, which prices home loans over a retail prime lending rate, had reduced rates by 25 basis points to 9.65%.

The RBI has cut the repo rate by 125 basis points since January this year, while banks have reduced base lending rates by 50 basis points.

The Icra report said the government's focus on affordable housing and favourable regulations could push overall housing credit growth to 20-22% from financial year 2015-16.

23/10/2015

GST OVERVIEW

Under the proposed GST regime a system of “GST compliance rating” may be introduced where a dealer shall be given a rating and any fall in the rating below a prescribed level will have impact of blacklisting of a Dealer. While making a purchase from the dealer his compliance rating can be verified and decision of purchase will be dependent on the rating of selling dealer. GST compliance rating will work like CIBIL in the banking industry where borrower with good CIBIL scores is eligible for loan. The input tax credit on purchase from a blacklisted dealer shall not be available unless the rating of the dealer is improved to normal and on the other hand input tax credit from a non blacklisted is not assured by govt. and it mainly depends on tax invoices and payment of due taxes. For example if M/s ABC limited has “GST compliance rating” below its standard say “5” then input tax credit to the buyer is not available against the purchases made from M/s ABC limited . In case the above dealer file his return and pay due taxes with interest his rating shall be improved to normal and in that case reversed input tax credit can be reclaimed by the buyer.
Trigger points for blacklisting:
Depending on various factors following are the key points for blacklisting of a dealer under GST law:
Continuous default for 3 months in paying ITC that has been reversed.
Continuous default of 3 months or any 3 month-period over duration of 12 months in uploading sales details leading to reversal of ITC for others.
Continuous short reporting of sales beyond a prescribed limit of 5% (of total sales) for a period of 6 months.
Defaulters of even a single event should also be flagged and put in public domain as being a potential black listed dealer so as to alert the buyers. The profiles for all dealers would be posted in public domain so that the dealer community is kept aware of the compliance profile of all registered dealers with whom they may have to deal with during the course of their business. As of now many States including Delhi are facing heat from the “fly over night” dealers as they make huge sales in few days of operations and later on stop filing return or underreport the sales. The concept of blacklisting once incorporated in GST law will overcome the issue of “fly over night” dealers.
Advantages of blacklisting a dealer:
It will act as panacea for regulating input tax credit for buyer
A proactive buyer can take decision based on the compliance rating of his seller
Auto-SMS will be sent to all dealers who have pre-registered this dealer (black listed now) as their supplier.
Blacklisted GSTINs cannot be uploaded in purchase details and result in denial of input tax credit
Once blacklisting is lifted, buyers can avail unclaimed ITC subject to this dealer uploading sales details along with payment of tax and interest.
Concluding remarks:
The concept of blacklisting of dealers seems very convincing and may control the wrongdoing by unscrupulous dealers. Today the professionals find it very difficult to convince the tax authorities for denial of input credit on purchase from such bogus dealers. The proposed concept once incorporated in GST law can mitigates the tax disputes arising due to denial of input tax credit.

23/10/2015

GST Regime to Have 8 Forms for Filing Returns

The proposed GST regime is likely to provide for monthly filing of returns for business to business dealings through a set of eight forms for different categories of transactions.

The Joint Committee on Business Process for GST in relation to GST Return has suggested filing of a periodic e-return for Central GST, State GST and Integrated GST.

As per the proposal, the returns can be filed on a specific date of a month, like on 10th of next month for outward supplies, 15th for inward supplies and 20th in case of monthly returns. The Committee suggested that in the GST regime there should be eight forms for filing of returns by tax payers.

There will also be provision for filing of GST returns by non-resident tax payers in form GSTR-5. Non-resident tax payers could include taxi aggregators like Uber.

The report said there will be a defaulters list of those failing to file returns periodically and such details would be forwarded to GST authorities for necessary action.

The Joint Committee also suggested that the GST law should provide for automatic imposition of late fees for non-filers and late filers of returns. In case the return is filed without full payment of taxes, the report said they should be rendered invalid. There will, however, no provision for revision of GST returns.

The finance ministry had earlier put up three reports of the Empowered Committee, pertaining to registration, payment process and refunds in the GST regime in the public domain for stakeholder comments.

08/10/2015

Global Travellers May Get Tax Refund While Leaving India

Move may spell trouble for exporters, who will lose access to duty-free imported inputs and will have to make upfront payment of GST that will be refunded later

International travellers buying goods in India will be able to claim tax refunds in the proposed goods and services tax regime, which seeks to replace a plethora of state and central government taxes with a single levy.

That's among the proposals of panels set up by the empowered committee of state finance ministers which submitted their reports on the business process for GST. The three reports dealing with refunds, registration and payment processes have been put up for stakeholder consultations, clearly indicating the government's intent to go full throttle with preparations for a rollout of the tax from 2016.

“It is encouraging to see that the government has issued these reports for public feedback even while the Constitutional amendment bill is yet to be passed by the Rajya Sabha. This does indicate that the government is serious about implementing GST in 2016,“ said Pratik Jain, a partner with KPMG in India.

However, the new regime could spell some trouble for exporters, who will lose access to duty-free imported inputs and will have to make upfront payment of GST that will be refunded later. Payment of the new tax could be made by debit or credit cards.

Jain said upfront payment of GST for procurement of inputs by exporters requires a larger debate as it could result in substantial cash flow issues for business es. The reports lay emphasis on technology-driven compliance under GST, which would promote ease of doing business in India. Anyone engaged in the supply of goods and services would be required to be registered through a common portal set up by the Goods and Services Tax Network, a company set up to provide IT infrastructure and services to the Central and state governments, taxpayers and other stakeholders for implementation of GST. At present, taxpayers are separately registered with state or central tax administrations or both, based on their business activity.

System should be designed to migrate cleaned up and verified data of existing registrants with states or the Centre to the GST common portal. “A quick perusal of the reports indicates that the processes accommodate the peculiarities of state laws such as casual dealer, voluntary registration and compounding schemes as well as peculiarities of central laws such as input service distribution mechanism for service providers,“ said Prashant Deshpande, senior director at Deloitte in India. They will be provided a GST Identification Number and registration will be done within three days. The Reserve Bank of India's core banking solution, e-Kuber, should be used to consolidate and settle accounts under the GST system.GST, touted as the most comprehensive reform of indirect taxes since Independence, could lift the country's GDP growth by 1-2 percentage points.

07/10/2015

India to remain the world's fastest growing economy: IMF

The International Monetary Fund (IMF) on Tuesday marginally lowered its 2015-16 growth forecast for India, which will still remain the world’s fastest growing major economy, and expressed optimism about its future prospects.

IMF now expects the Indian economy to grow 7.3% this year, lower than the 7.5% it projected in July. It expects growth to accelerate to 7.5% the following year.

That will cement India’s position as the fastest growing major economy, ahead of China, which the IMF expects will grow 6.8% this year, followed by 6.3% in the next.

IMF also lowered its global growth forecast by 0.2 percentage points to 3.1%, citing an uneven recovery as well as increasing downside risks to the growth outlook for emerging market economies that are grappling with declining commodity prices, depreciating currencies and growing volatility in financial markets.

The Washington-based multilateral institution attributed the lowering of India’s growth forecast to the weakening of global external demand and the consequent impact on Indian exports.

“India is not as open as China but when external demand weakens, it will impact Indian exports. Though domestic demand remains resilient, global developments are going to have an impact on India,” Gian Maria Milesi-Ferretti, deputy director of the research department at IMF, said at a press conference.

Indian exports contracted for the ninth consecutive month in August falling 20.7% to $21.2 billion in the month.

Still, falling commodity prices will help India because it is a net commodity importer and also in controlling inflation, Milesi-Ferreti said.

In its bi-annual World Economic Outlook, the release of which coincided with IMF’s annual meetings in the Peruvian capital Lima, the multilateral agency said India’s economy will also benefit from the “recent policy reforms, (and) a consequent pick-up in investment”.

It also said a sharp fall in inflation, on account of lower oil and agricultural commodity prices, has created space for further monetary policy easing but warned of upside risks to inflation. Retail inflation eased to 3.66% in August from a revised 3.69% a month ago.

19/09/2015

old deposits over 500gm without known income sources will attract tax

Govt says existing tax regulations for gold holdings will apply to the gold monetization scheme as well

Gold deposits over 500gm, not explained by known source of income, will attract income tax under the gold monetization scheme, the government in an internal note dated 15 September that was released on Friday.

It is likely to discourage large depositors with undisclosed source of income but will encourage small depositors as it brings clarity on the tax implications of the scheme. It is in line with the government’s intent to ensure the scheme does not facilitate conversion of black to white money.

Banks will not be allowed to use the gold deposits to meet their statutory liquidity ratio and cash reserve ratio requirements as proposed by the earlier draft.

The finance ministry, in a recent circular, said the existing income-tax regulations for gold holdings will apply to the gold monetization scheme as well.

A certain amount of the gold holdings as explained by known sources of income can be held by an individual who is not a wealth-tax assessee and will not be seized by officers at the time of a search operation, as per instructions under section 132 of the Income-Tax Act that deals with search and seizure operations by the tax department.

“Depositors may be informed by the banks that as per CBDT (Central Board of Direct Taxes) instructions...in the course of IT search u/s 132, gold jewellery to the extent of 500 grams per married lady, 250 grams per unmarried lady and 100 grams per male member of the family need not be seized by tax authorities, but the tax penalties, as applicable, will be levied,” the guidelines said.

For those who have been paying wealth tax, only gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return will be seized.

However, these ceilings can be raised at the discretion of the assessing officer.

“The authorized officer may, having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure,” according to CBDT’s instructions.

After the cabinet cleared the gold monetization and sovereign gold bond schemes last week, the government made it clear that there will be no relaxation in know-your-customer guidelines or the reporting requirements of banks.

“This is not a black money immunity scheme and normal taxation laws will be applicable,” finance minister Arun Jaitley said.

“This is a very good move. It will be wrong to give any kind of special dispensation to any asset class. This provides clarity to small retail depositors that they will not be subject to income-tax scrutiny and at the same time ensures that the scheme is not misused. Why should retail depositors be subject to scrutiny under this scheme when they are not asked any questions when they use their gold holdings as a collateral to get a loan,” said Somasundaram P.R., managing director, India, World Gold Council. “But the scheme should be marketed well, clarifying all these aspects,” he added.

The two schemes are aimed at reducing India’s gold imports as well as converting gold into a productive asset. Gold holdings are estimated at more than 20,000 tonnes but since they are rarely commercially deployed, India still imports 800-1,000 tonnes of gold a year.

While under the gold monetization scheme, gold holdings of households can be deposited with banks, allowing them to earn interest, the gold bond scheme is designed to enable individuals to benefit from the appreciation in gold prices without actually physically holding the gold.

Atul veeresh & Associates

05/11/2015

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