GST – Issues & Enhancements!!

Grievance Redressal Committee comprising of Chief Commissioner, CGST, IAS, Commissioner, SGST and other senior Departmental Officers discussed the following points –

1. Interest should be calculated on on cash component only u/s 50(1) of CGST / SGST Act, 2017 and liability should also be generated accordingly. Provision should be made effective from the date of implementation of the Act.

2. Unblocking of ITC immediately in case figures are reconciled.                                                                              Further, blocking if required should be made after giving notice to the dealer.

3. Problems and Issues in GST Annual Return for the year 2018 – 19 should be simplified from Approach and design perspective.

4. GST returns in new format can also look to be deferred to a date ahead for smoother transition.

5. Reconciliation statement in form 9C may kindly be merged with form 9.

However, no final decision is taken on the same as we look to hear more from the GST Council in next few days.

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Major Changes in CARO 2020 Comapred to CARO 2016

As you would Know, MCA has notified Companies (Auditor’s Report) Order 2020 or CARO 2020, with effect from February 25th, 2020. Notice that it was 16 Clauses earlier and there are 21 Clauses now. It added 5 Additional Clauses.

Below are 10 major changes in CARO 2020

1) Fixed Asset Rejig

a. Before words Fixed Assets, Now it is replaced with land, plant, equipment and intangible assets (PPEIA).

b.When Title Deed is not in the company’s name (except in the case of Lease) then all these instances disclose with justification in the tabular format.

c.Any Revaluation to be recorded in PPEIA.

d.Any Benami proceedings started to be reported.

2) Inventory Physical Verification & Bank Limit Rejig

a. Coverage of inventory verification and the procedure to be disclosed.

b. Any dis.crepancy to be closed above 10 percent

c. Any Working Capital Limit beyond 5 Cr on Current Assets Collateral to be reported and returns filed with Bank in compliance with Records

3) Loans & Advances Rejig

a. Earlier payments settled by extension, renewal or new loans to be reported.

b. Any loans on a request basis to be reported separately.

4) Default in Loan Repayment Rejigs 

a. Specified Default Reporting table

b. Disclosure of Financial Institutions found willful defaulter.

c. Terms of loan used for the right purpose or not

d. Whether Short term loans are applied for long term purposes.

e. Funds received under the service obligation of Subsy, JV or Associate Companies

f. Funds received for the commitment of shares of Subsy, JV or Associate Companies

5) Fraud Reporting Rejig

a. ADT-4 Filed by the Auditor, if any, to be reported.

b. Any complaint made to the whistleblower during the audit

6) Managerial Remuneration Clause Deletion

a. Payment of management remuneration in accordance with Sch V has been withdrawn

7) Five New Clauses

a. 17 – Cash Losses – Cash losses need to be reported to the FY if any

b. 18 – Resignation of Auditor – Issues raised by him whether they were considered or not if any.

c. 19 –The willingness of the Company to meet its current liabilities in the auditor’s view on the basis of ratios results and aging.

d. 20 – CSR Compliance – Ongoing project whether the unused amount was transferred to the fund within 6 months / Special account

e. 21 – Companies in Consolidation –All negative comments of CARO, whether of any grant, JV or Associate company as consolidated, must be reported in Holding Company Clause 21 of CARO.

8) NBFC Companies Compliance Reporting Rejig

a.  Whether NBFC is having a valid Certificate from RBI

b. Whether it’s CIC, whether there is more than 1 CIC and compliance in the community.

9) Internal Audit Rejig

a. Whether the Internal Audit System exists as per the Company Size or not?

b.Whether any internal audit report was considered by the auditors

10) Income Tax Transactions not in Books

a. Whether any transactions offered for income tax purposes, but not recorded in Books.

Conclusion:-

Welcome Changes, these will improve the reporting especially after ILFS, DHFL Fiasco

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Managing StartUps with Regular Compliance – Virtual CFO

We have many inspiring stories that have given birth to budding entrepreneurs and in turn, have inspired a generation of young minds to solve complex practical issues of life and thus create a living for self and also employment for society.

Startup India is also a govt initiative to promote and nurture entrepreneurship across the country. As per Startup India Program, the main focus is to promote bank financing and encourage startups with newer business ideas and thus help the Govt in the moto of job creation.

Therefore Start-ups not only cross new horizons on their business but also need to keep the requirements of other stakeholders like Govt. Compliance, Banks, FI’s, Auditors, Investors like HNI, PE or VC’S.

Again, Finance is often ignored in most of the start-ups as the focus is always on getting business, model validation & tech enablement.
Its often seen that there is a huge chunk of money remaining either unutilized or being spent on unwanted penalties which are often overlooked within the given due dates and compliance calendar.

Common Asks:-

Basic Requirements mainly stems around say accounting, finance & compliance on a day to day basis
Other growing organizations may have constant requirements for Cash Flow Management & Project Management
Again some established setups may require a complete control on Inventory Management or a constant watch on Working Capital Requirements

Again, Start-ups go through the cycles of their own, in terms of starting high and growing multiple times and again a few of them ending with no salaries to pay, failing on compliances.
Often the business managers depend on excels and all calculations are done with no focus on actual tax filings, regulations or cash management.
Therefore, no matter whatever it is, Budding entrepreneurs are always on their toes to keep up the pace with compliance n certification.
Hence the Finance function should be taken perhaps a bit on individual perspective

Model:-

Idea is to start small and simple with minimal compliance and then build big as per customer profile, business operations, nature of transactions, etc.
Sometimes projects are it with Govt or some large corporate (domestic or global )drives the registration process or other times it is decided by the Investors and their involvement including entry-exit criteria.
We @ Certicom suggest starting lean with minimal compliance & then build as per Growth path as the transition is handhold-ed to the Directors and partners with end to end support.

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