1. Compliance
and Legal
Objective of Compliance and Legal Department is to
ensure that business follows all the norms required in operating environment,
some of these norms are mandatory as Law of Land, whilst are followed by
company as part of social obligation it has put on itself and decided to adhere
to it as per discretion of Management.
In ABC3M the same norms are used for evaluation
of company for its performance analysis and creation of Benchmark that allows
company to compare with peers to redefine targets for improvement.
The aspects covered are in line with following Statutory
Regulations:
a.
Accounting Standards
b.
Income Tax
c.
GST
d.
Customs
e.
ROC
f.
Employee Related Laws
g.
Pollution Related Compliances
For a Management Accountant these parameters of Operations
and Compliance Norms represent the obligation company has to fulfil and also
dictates the working constraints when there is conflict of interest between
company and Norms, but it also enables Management Accountant to set up tone of
operations to optimize the resources at hand. Another aspect needed to consider
that through these compliance norms Regulators are allowing company to take
advantage of certain benefits and for same reason we are going to discuss these
aspects in in way of obligation vs advantage.
Areas of Compliance and their effects:
a. Accounting
Standards (Discussed Earlier)
b. Income Tax
Income Tax is levied on Direct
Income and is proportional to levels of income, From Companies Point of view;
we have to analyse its effects on all stake’s holders; Mainly Company itself,
Employees, Directors, Investors, Promoters, Security Holders, Creditors and
Debtors and from Regulators perspective. We will discuss these all in step by
step manner. But before same we have to understand that Income Tax is charged
on the basis of Nature of Income that is arising from Transactions that occur
while carrying out business or venture. For Taxation purpose these transactions
are categorised as heads of income and current heads of income under Income Tax
are as follows:
The heads of Income under INCOME TAX:
·
Income from Salary
·
Income from House Property
·
Income from Business and Profession
·
Income from Capital Gain
·
Income from Other Sources
As management Accountant we are going to discuss all heads
on income from Company and Its Stake Holder’s perspective and how we can plan
Tax Management within allowable bounds under regulations. But before that we
will have to compile a list of Incomes that are currently exempt under Income
Tax and then We will start with INCOME FROM SALARY.
List of Items Covered Exempt Income Under Sec 10, 11, 12 and
13
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10(2) |
Payments received from HUF to its Members |
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10(2A) |
Share of Profit from a Firm |
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10(4) |
Int received by Non-Resident from Prescribed Securities |
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10(4) |
Interest received from person who is resident outside India credited
to his NRE Account |
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10(5) |
LTC to Employees |
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10(6) |
Remuneration to Foreign Diplomats |
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10(6)(vi) |
Salary of Foreign Citizen as employee of Foreign Enterprise if stay
is Less than 90 Days |
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10(6)(viii) |
Salary of Non-Resident Foreign Citizen as a Member of Ships crew when
Stay is less than 90 Days in INDIA |
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10(6)(xi) |
Remuneration of Foreign National deputed in INDIA for Training in
GOVT Establishment or PSU |
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10(6A) |
Tax Paid on Behalf of Foreign Companies |
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10(6B) |
Tax Paid by Govt or PSU on behalf of Foreign or non-resident Company |
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10(6C) |
Income arising to notified Foreign Companies from Services In or
Outside of India in Project Connected with the Security of INDIA |
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10(7) |
Foreign Allowance granted by GOVT of INDIA to its employees posted
abroad |
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10(8) & 10(9) |
Remuneration received from Foreign Govt by an Individual who is in
INDIA in connection with any sponsored co-operative technical assistance
programme with Foreign Government and the Income of Family Members of such
employee |
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10(8A), 10(8B) and 10(9) |
Remuneration/ Fees received by Non-resident Consultants and their
Foreign Employees |
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10(10) |
Death cum Retirement Gratuity |
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10(10A) |
Commuted Value of Pension From LIC or any Other Approved Fund |
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10(10AA) |
Leave Salary |
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10(10B) |
Retrenchment Compensation |
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10(10C) |
VRS Money from PSU |
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10(10CC) |
Tax on Perquisites paid by Employer |
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10(10D) |
Any Sum on Life insurance Policy |
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10(11) |
PF to Retiring Employee |
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10(13) |
Superannuation Fund payment to Legal Heirs of employee |
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Points to be verified
Allowable Deductions Claimed or not
TDS Records
GST Returns
Availed benefits regarding EPS and EPF
Depreciation Block
Scientific Research Benefits
Write Off of BAD DEBTS
Payments towards Gratuity and other Statutory Payments
c. GST
The common issues with any tax regime change are
the understanding of new rules, Identification of allowable variations in
interpretations which are applicable to company, Identification of ways that
will reduce Cost of Tax and Process Compliance Cost, With Implementation of GST
this is Second Revision of Tax Regime in last two decades, First Implementation
of VAT over Sales Tax and then GST to supplant all taxes except Local taxes,
Custom Duty and VAT on Specified Commodities.
But it also provided opportunities for companies to become
competitive across all states with unprotected pricing and uniformity with
compliance procedure and with use of technology centric compliance process the
lacuna of manual process and inefficiencies are eliminated, at same time the
teething problems had hindered the implementation process but the key aspect
from Management Accountants Perspective are as Follows:
Aspects to be considered by Management Accountant from
GST Compliance Perspective:
1.
CORRECT Classification of Goods for Rate
Determination Purpose
2.
Availability of Input Tax Credit from Input
Goods/Service
3.
Compliance required from Vendors for correct
Input Tax Credit
4.
Instance of Tax Liability Arise
5.
Collection of Output Tax from Users/ Clients and
Purchaser of Goods
6.
HSN Based Linking of Various Input Goods and
Services to Output Goods and Services to Identify Effect of Change of Rate and
Margin Management and Value Addition
7.
Taxability of Goods not Moved or Where Dispute
over Supply Exists
8.
Taxability of Input Goods where Goods are Short
Landed or any variation from Terms for Supply
9.
Debit Notes and Credit Notes and Its Accounting
in Government Records
10.
Valuation of Goods
11.
Valuation of Services when Goods are sent
outside Factory for Outsourced Work
12.
Tax Treatment of Waste arising from Process of
Manufacturing or Providing Service
13.
Treatment of Discount in Tax Portal and Adequate
Tracking of same in Accounting and MIS System
14.
Existance of Barter in course of Supply and its
Taxation particularly Valuation of same (Discussed in Detail in Accounting
Standards)
15.
Issue related to Non-Taxable Supply from
Unregistered Suppliers
16.
Issues relating to Supply from Composite Supply
(inward)
17.
Issues Related Input Tax Credit on Customs Duty
Paid in lieu of GST on Imported Goods
18.
Issue of Unclaimed Input Tax Credit for Pre
GST-Inputs
19.
Issues related to Consumables Provided to Sub
Contractors and Its Tax Treatment
20.
Accounting for Capital Goods Imported and ITC on
Same
21.
Mandatory Provisions Relating to INVOICING
22.
Rules regarding E Way Bill
23.
Procedural Rules in GST
24.
Penalties and Punishment in GST for
Non-Compliance
25.
Areas on which ambiguity exists about procedural
aspects and notices or explanations demanded by Department.
26.
Clarity regarding Place of Supply and
Applicability of Supply
27.
Issue relating to Services received at Site and
ITC Claim Procedure for same.
28.
When Company is Input Tax Credit Distributor
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