MCA seeks suggestions/comments on proposed Audit curbs

A consultation paper to examine the existing provisions of law and make suitable amendments therein to enhance audit independence and accountability has been placed and need suggestions/comments.

  • Whether to reduce the number of audits per one audit firm/ auditor?
  • Whether to reduce or set the number of partners under one audit firm?
  • How can those Big-4’s burden be reduced? Which other audit firms are in a position to compete with them and reduce the workload of Big4?
  • Whether the auditors in listed companies to be appointed from a separate auditors ‘ panel to be repaired by NFRA?
  • Whether non-audit services can be included in the list u/s 144?
  • Whether the Joint Audit for bigger companies should be made compulsory?
  • What should be the threshold for the bigger companies?

 Economic Concentration of audit [Big 4] – Positive & Negative effects on the economy

Most of the large global corporations use the Big Four accounting companies to audit their financial statements.This audit industry concentration of listed companies is characterized by an oligopoly of “Big Four” audit firms and in large-company audits would result in inadequate levels of competition.

Finding a new auditor would be more complicated because

  • Less competition in many geographic markets where some of these companies do not have a significant presence.
  • The lack of sufficient auditing experience by the remaining companies, in particular industries.
  • Many other businesses are not independent because of the provision of non-audit services

The Companies Act, 2013  provides mandatory audit firm rotation and non-audit services In order to tackle this economic concentration of audit. The main purpose of this provision is to increase the number of audit firms capable of carrying out the most complex audits.

 Non-audit services not to be taken by auditors

It has been noted that some of the audit firms are observing self-regulation and are making decisions not to participate in non-attested work such as consultancy and transaction advisory services from listed companies that they are auditing. Such a move that comes in the midst of auditors who are facing heat in high-profile corporate scandals seems a welcome change. Deloitte announced recently that it will not underatake any non- audit services in public domain.i.e. listed entities with Banks & Insurance Companies in particular.

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Challenges faced at GST Process

GST Imperative for Small & MSME’s

  • No Facility to Amend or Revise the Returns
  •  Back to Back Returns per month filing or Quarterly submissions instead of Single Comprehensive Annual return
  •  Payment of Taxes and Filing of Return with the same due date
  •  Payments of Tax under different heads often leading to a lot of confusion in terms of set-off and the overall incidence
  •  Setoff of taxes often precede in importance compared to Tax Payment Date, thereby the process getting diluted
  •  Late Fees being levied at the initial stages with stringent overall process thereby negative responses
  •  Lack of Trust in filers, training gaps in dealers and distribution channels along with many procedures, Document & Returns
  •  GSTN software issues often failing and the government’s stance of not acknowledging the same
  •  Forms & Utilities often released late without proper planning
  •  Input credit often a point of debate as the onus lies on business, with severe penalties and cash crunch due to the model of low acceptance and no cross-verification of sellers for input
  •  No Dedicated helpline, Inadequate resources to look into the shortcomings to date

Thus Course Correction in System, process n model is required urgently to instill trust and confidence in the Community

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3.4 Lakh escape the tax on capital gains, MF sales

3.4 Lakh escape the tax on capital gains, MF sales

More than 3.4 lakh holders trading in classified equity shares and mutual funds are accused of evading or not disclosing long-term capital gains tax, an estimate by the income tax department revealed, leading officials to ignore demands for elimination of the levy introduced two years ago.

Data analysis on the impact of LTCG showed that in 2018-19, around 91,000 individuals and Hindu Undivided Families (HUFs), or 16 percent, did not file returns on listed shares and mutual funds that sold listed shares or mutual funds exceeding Rs 20 lakh. The selling value of these shares and units of the mutual fund was valued at 99,000 crore rs.

About 2.5 lakh individuals and HUFs, or 44 percent of the population who sold shares or MF units, reported either zero or significantly reduced interest in their income tax returns although the sales added up to more than Rs 4 lakh crore. The government has yet to decide the course of action to be taken against these bodies. This may explain why there is a desire for the elimination of LTCG and Securities Transaction Tax (STT) so that people’s earnings from shares etc. are not included in their taxes … When LTCG is eliminated, it will open up a major backdoor for tax avoidance, “an officer stated.

Government sources have said the tax also helps trace shareholders who would otherwise have gone unnoticed if they don’t pay income tax. Many of the penny stock transactions or those involving black money can be traced along this path, officials argued

“For decades, it has been a normal tax globally of approximately 95 percent, including the United States, Canada, Australia, China and several European countries levying it,” said the official, while pointing out the tax varies from 10 percent to 35 percent on profits from the sale of shares or mutual fund units.

The sources said demands for removal of a levy imposed two years ago were not in line with tax policy recommendations for stability and continuity.

Starting in April 2018, the selling of shares and equity-oriented mutual funds, held for one year or more, began to receive 10 percent LTCG (plus cessation) if a year’s benefit reached Rs 1 lakh.

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