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Budget 2021 On Corporate Finance

Budget 2021 On Corporate Finance

Budget measures: Direct and Indirect Tax changes

  1. Relief granted on dividend income earned by shareholders:
    1. Advance tax liability will now be computed on dividends only after declaration or receipt whichever is earlier;
    2. TDS exemption on dividends paid by SPVs to REITs and InvITs;
  2. TDS related provisions have been made more stringent:
    1. TDS at 0.1% to levied on the purchase of goods above INR 5 mn a year, where the turnover of the buyer exceeds INR 100 mn
    2. The rate of TDS/ TCS shall be higher than 2x actual rate, or 5%, in case of non-filing of ITR for the last 2 years
  3. Late deposit of employee contribution to labor welfare funds would not be allowed as a deduction to the employer.
  4. Tax Audit applicability based on turnover limit has been increased from INR 50 mn to INR 100 mn, with 95% of receipts and payments being digital;
  5. GST minor compliance changes – Form 9 substituted with self-reconciliation and Form 9C being scrapped.

Has the Budget made managing Corporate Finance somewhat easier?

  1. Relief on dividend income is a welcome move since this helps CFOs to pay dividends more tax-efficiently, making future investments in their companies more lucrative;
  2. Additionally, dividend relief to REITs and InvITs shows the government’s commitment to continue providing support to the conglomerates operating in real estate and infrastructure space (eg. Logistics);
  3. However, the government seems to be more and more unforgiving to defaults in TDS/ TCs norms. Companies/ CFOs ought to take note and ensure compliances accordingly;
  4. With easing of tax audit norms (both income and GST), it has reduced the compliance burden for smaller and subsidiary companies of larger MNC groups, whose turnover is within the limits, helping the CFOs to focus on running financing operations of the group.

Conclusion

CFOs ought to take note of the changes in the Budget and plan their next financial year accordingly. The budget may come off as somewhat bittersweet, however, relief in dividend provisions, including for REITs and InvITs, is an indicator for the government’s push to bring more investment into India. TDS provision becoming more stringent comes as no surprise given the current risk of non-compliance (monetary penalties in addition to the risk of prosecution of managerial personnel of the defaulting companies).

Atmanirbhar Bharat Abhayan – Benefits for MSME

BENEFITS FOR MSME
DEFINITION OF MSME CHANGED (EXISTING AND REVISED DEFINITION OF MSMES)

Existing MSME Classification

Criteria: Investment in Plant & Machinery or Equipment

Classification Micro Small Medium
Mfg. Enterprises Inv. < Rs. 25 lac Inv. < Rs. 5 cr. Inv. < Rs.10 cr.
Services Enterprise Inv. < Rs. 10 lac Inv. < Rs. 2 cr. Inv. < Rs. 5 cr.

Revised MSME Classification

Composite Criteria : Investment And Annual Turnover

Classification Micro Small Medium
Manufacturing & Services Inv. < Rs. 1 cr.
and
Turnover < Rs.5 cr.		 Inv. < Rs. 10 cr.
and
Turnover < Rs.50 cr.		 Inv. < Rs. 20 cr.
And
Turnover < Rs.100 cr.

Major Benefits for MSME

  • Collateral Free automatic loan to MSME up to 20% of entire outstanding credit as on 29th February 2020. Borrowers up to Rs 25 crore outstanding & turnover up to Rs. 100 crore are eligible. Loans for 4 years with a moratorium of 1 year of principal repayment. No guarantees required. Scheme can be availed till 31st October 2020.
  • CGTMSE with the support of 4000 Cr from Govt, will give partial credit guarantee to bank to allow them to give debt to promoters of MSME, who then will infuse the fund as equity.
  • 50,000 crore equity infusion for expansion of MSME through Funds of Funds.
  • Government will facilitate provision of Rs 20,000 crore subordinate debts for Stressed MSME which are NPA or stressed.
  • Receivables from Govt and CPSEs to be released in 45 days.
  • Global tenders will be disallowed in Government procurement tender upto Rs 200cr.
  • E market linkage for MSME to be promoted.

Tax Changes

  • All TDS and TCS rates reduced by 25% for Non-Salaried Resident Payments. Reduction is applicable from 14th May 2020 to 31st March 2021.
  • All refunds to non-corporate business & profession to be issued immediately.
  • All Income tax returns due date extended to 30th November 2020.
  • Tax audit due date extended to 31st October 2020.
  • All assessment getting barred on 30th September 2020 extended to 31st December 2020
  • All assessment getting barred on 31st March 2021 extended to 30th September 2021
  • Vivid Se Vishwas Scheme extended to 31st December 2020 without any additional payments.

EPF Benefits

Establishment Under Pradhan Mantri Garib Kalyan Package (PMGKP):

  • EPF relief extended for the month of June, July & August and will be paid by Government.

Other Establishment covered by EPFO

  • Statutory PF contribution of both employer and employee will be reduced to 10% from 12% for next 3 months (except CPSEs & PSU’s employer’s contribution).

NBFCs

  • Government will launch a Rs 30,000 crore Special Liquidity Scheme for NBFCs/HFCs/MFIs. Under this scheme investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs/HFCs/MFIs. Securities will be fully guaranteed by Government.
  • Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs/HFCs/MFIs. First 20% of loss will be borne by Government. AA paper & below will be eligible for investment.
  • PFC/REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables
  • Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries).

RERA

  • Treat COVID-19 as an event of ‘Force Majeure’under  RERA.
  • Extend the registration and completion date suo-moto by 6 months.
  • Regulatory Authorities may extend this for another period of upto 3 months, if needed.
  • Issue fresh ‘Project Registration Certificates’ automatically with revised timelines.
  • Extend timelines for various statuary compliances under RERA.

Contractors

  • PSU contracts to be extended for upto 6 months so that contract may be completed including for PPP contracts.

Balance Confirmation Letter

Balance Confirmation Letter

Illustrative of Balance Confirmation Letter to be sent to Debtors – Positive Form

[Letterhead of Entity]

[Date]

[Name and address of debtor]

Dear Sir,

For audit purposes, kindly confirm directly to our auditors (name and address of  the auditors) that  the balance of  Rs xx due by you as on ________ , as shown by our books, is correct. The details of the balance are as under: Note: In case the list of invoices forming the balance is too large, these details may not be given

Invoice No Date Order Reference / Acceptance / Tender No. etc. Amount
Total
Less : Advanced Received
Net Amount due by you		 xxxx
(xxx)
xxxx

A stamped envelope addressed to our auditors is enclosed for your convenience.

If the amount shown is in agreement with your books, kindly strike-out the paragraph marked (B) below. If the amount shown is not in agreement with your books, kindly furnish the details in the proforma given in the paragraph marked (B) below and strike-out paragraph (A).

In either case, kindly sign at the place provided below and return this entire letter directly to our auditors in the enclosed envelope.

Your prompt compliance with this request will be appreciated.

Kindly return this form in its entirety.

Yours Faithfully,

 

(Signature of responsible official of the entity)

(Name and Address of entity)

(A) We confirm that the above stated amount is correct as at ______

OR

(B) We state that the above-stated amount is not correct as per our records. The details of the balance as at _________ as per our records are as below:

Invoice Number Date Order Reference Amount
xxxxxxxxxxx xxxx Total xxxxxx
xxxxxxxxxxx xxxx Less : Advanced paid (xxxxx)
xxxxxxxxxxx xxxx Net Amount due from us(Rs) xxxxxx

Yours faithfully,

(Signature of debtor/responsible official)

Illustrative Balance Confirmation Letter to be Sent to Debtors Negative Form

[Letterhead of Entity]

[Date]

[Name and address of debtor]

Dear Sir,

For audit purposes, kindly write directly to our auditors (name and address of the auditors) if the balance of Rs. due by you as on _______ as shown by our books, is not correct, giving details of the differences. The details of the balance are as under:

Note: In case the list of invoices forming the balance is too large, these details may not be given

Invoice No Date Order Reference /Acceptance/ Tender No. etc Amount
Total
Less : Advanced Received
Net Amount due by you		 xxxx
(xxx)
xxxx

If you do not notify our auditors of any difference within ten days of the date of this letter, it will be presumed that the balance stated above is correct.

A stamped envelope addressed to our auditors is enclosed for your convenience.

Yours faithfully,

(Signature of responsible official of the entity)

Source: Guidance Note on Audit of Debtors, Loans and Advances published in June, 1994 issue of ‘The Chartered Accountant’.

Use Firmway.in for obtaining balance confirmation in compliance with the Guidance Note.

MSME Form 1 – All that you need to know

MSME Form 1 – All that you need to know

 

What is the fuss around MSME Form 1?

MCA came with an order dated 22nd Jan 2019 that:

 

Every Company which has received goods or services from Micro & Small Enterprise

AND

Payment is due/ not paid to such enterprise for 46 days from date of acceptance

Shall file in MSME Form 1

Note:

  • Only Micro and Small Enterprise Suppliers are considered. Medium Enterprise suppliers are not considered as per the notification.
  • The 45 days calculation starts from the date of acceptance/deemed acceptance and not from the date the balance becomes due

 

Who is MSME?

MSME is classified into two categories:

  1. Manufacturing enterprise; and
  2. Service enterprise.

They are defined in term of investment in Plant and Machinery/ Equipment  as below

MICRO SMALL MEDIUM
Manufacturing Enterprises < Rs 25 Lacs < Rs 5 Crs < Rs 10 Crs
Service Enterprises < Rs. 10 Lacs < Rs 2 Crs < Rs 5 Crs

 

Note: Only registered enterprises having valid MSME certificate shall be considered. Udyog Aadhar is also considered as MSME registration.

 

What is MSME Form 1?

A Half yearly return to the Ministry of Corporate Affairs stating the following:

  • Name of Supplier,
  • PAN of Supplier
  • Amount Due*
  • Date from which such amount is due
  • Reasons for Delay (Generic) (eg – Credit period>45 days, Goods in Transit, Material rejected/returned, etc)

Note:

  • Here the details like amount and date are with respect to the due date and not the date of acceptance.
  • For example, an MSME vendor delivered you goods on 1/12/18. The credit period is 60 days. Hence you have to report this vendor in MSME form 1 since it is more than 45 days as on 22/1/19. However, the amount due would be Nil and date from which such amount is due – 30/01/2019.

 

What is the due date?

Filing Period Due date of Filing
Initial Return (Payable for more than

45 days as on 22nd Jan 2019)

 30th May 2019
From April to September 31st October
From October to March 30th April

 

Note: Only the first return is an “as on 22nd Jan 2019” return. For regular returns post that, you have to report all the MSME vendors to whom the payment was not made within 45 days from the date of acceptance in the said period.

 

How do we do it?

Step 1: Go through your list of vendors to whom Payment is due/ not paid for 46 days from date of acceptance

Step 2: Identify the list of vendors you think can be MSME

Step 3: Send them MSME confirmation asking whether they are MSME as on the said date. And if yes, ask them to attach their registration certificate as on the said date

Step 4: Once you receive the certificate, furnish their details in Form MSME -1

 

Is it Mandatory to file MSME Form 1?

Yes.

Is there any Penalty?

Yes

  • On Nonfilling or
  • On Knowingly furnishes incorrect/ Incomplete Information.

 

Particulars Penalty
On defaulting company Extended Up to  Rs. 25,000/-
Every Officer who is in default

(Directors, CFO and CS)

 Minimum Fine Rs. 25,000/- which may extend to Rs. 3,00,000/-

Or

Imprisonment which may extend to 6 Months

Or

Both

 

What if I missed the due date?

Don’t Worry! MCA is currently allowing (as on 6/6/2019) filling of MSME Form 1 – Without Penalty.

 

What if I missed filling some vendors in the return?

Don’t worry! You can file another return for the same period with the vendors you missed in your earlier return

 

Is there any software which can easily get MSME confirmation from all Vendors?
The Firmway tool can allow the companies to manage their entire MSME confirmations for one time and recurring return. Just upload a simple excel file with Vendor Name, Email Id and mobile number. The software will automatically trigger email and SMS to every vendor, do a rigorous follow-up and provide a real-time dashboard.

Know more about it – firmway.in

Links:
MCA Notification – http://www.mca.gov.in/Ministry/pdf/MSMESpecifiedCompanies_22012019.pdf

MCA Form Download – http://www.mca.gov.in/MCA21/dca/downloadeforms/eformTemplates/NCA/Form_MSME_help.zip

 

Disclaimer:

All Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above or not. The author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write-up.

One of the most unprecedented order in the country “Price Waterhouse banned from auditing listed firms for 2 years”

One of the most unprecedented order in the country “Price Waterhouse banned from auditing listed firms for 2 years”

SEBI on January 10, 2018, has barred all 11 Price Waterhouse (PW) firms practicing as Chartered Accountants in India from issuing audit certificates and compliance certificates for listed companies and intermediaries for two years.

SEBI has also imposed penalty of Rs.13 crores along with 12% interest in wrongful gains by Price Waterhouse and its two erstwhile partners S Gopalakrishnan & Srinivas Talluri

Few findings from the investigation carried out by SEBI in Satyam Computers Services Limited (SCSL) wherein “systemic problem” in the audit processes were noted, have been excerpted below:

  1. Inflated cash/bank balances of Rs 5,040 crores:
  • The auditors did not carry Independent verification of bank statements and fixed deposit.
  • The auditors did not maintain necessary control over the process of sending and receiving balance confirmations from banks directly in complete disregard of the Auditing and Assurance Standards (AAS) prescribed by ICAI.
  • Even a single copy of balance confirmation request was not sent by them directly to the Bank of Baroda, New York Branch (75% of all current account balances).
  • They chose to rely on the balance confirmations received from SCSL which had glaring anomalies and huge differences without any further examination or inquiry into the matter and ignored the balance confirmations received directly from banks which were showing true balances.
  1. Inflated sales revenues using 7,588 fake invoices: Sales revenues in the audited accounts were inflated by accounting for 7,561 fake invoices raised in respect of fake transactions and 27 invoices with respect to non-existent customers. 
  1. Overstated debtors’ position by Rs.490 crores: The auditors, while conducting the audit of SCSL did not seek external confirmation of debt from the debtors in violation of its own audit manual and various provisions in AAS and the Guidance Note on Audit of debtors, loans, and advances.

SEBI’s order comes into force with immediate effect but for removal of operational difficulties, the order will not impact audit assignments for FY 2017-18. However, Price Waterhouse has said that it is confident of obtaining a stay against the SEBI order.

SEBI’s Order

SEBI has set a strong message that wrong practices and market abuse would not be tolerated in India. We at Firmway strongly believe in supporting auditors in complying to the Auditing Standard as external confirmations are extremely powerful audit practice and are more reliable audit evidence. Over past two years, we have built a robust high-quality audit tool which helps auditors in getting direct confirmation from the parties. Further, to identify and fake entities we also provide verification service. To know more about our services please visit  firmway.in

Audit Confirmation Software

Audit Confirmation Software

Firmway helps to enhance the credibility of financials, detect and prevent frauds to uphold the interests of the various stakeholders.

Confirmations being an important source of authentication for the various stakeholders, the various flaws associated with the manual process had to be mitigated. To ensure a flawless and effortless process of obtaining confirmations, an effective and proficient platform was obligatory – this led to the birth of FIRMWAY. The unique verification process makes it the best way of obtaining confirmations.

Types of confirmations taken:

  • Debtor
  • Creditor
  • Loan
  • Stock
  • Bank Balance

Firmway sends the Confirmation, Verifies the Confirmer, carries out regular follow-ups with the Confirmer and Summarises Responses.

To Register please click here: https://app.firmway.in/register

Balance Confirmations – Never ending Nightmare for Finance department

Balance Confirmations – A Never ending Nightmare for Finance department

Financial year closure ensures that the accounts team is occupied with winding up their chef-d’oeuvre “Financials”, but the idea itself of obtaining manual #confirmations from debtors, creditors, banks proves out to be one of the culprits for undesirable hitches.

Finance team can relate their acquaintance with the daunting task of confirmations in regards to sending hundreds of confirmations, thousands of follow ups, lakhs of minutes spent over calls. The ever amounting #audit pressure is capable enough of driving an individual insane.

And if the individual survives the above-stated stages along with the unrealistic excuses like person is not on place, attending meeting, on leave, system issues, tight schedule etc., he is then exposed to the challenges of pursuing and closing the unreconciled differences by re-contacting those parties, asking ledgers, tallying line items, finding differences, communicating it, discussing it, negotiating it and finally closing it.

The story does not conclude at closure unless one has completed that one thing the whole world approves of – #‘Documentation’.

In spite of hundreds of days of hard work, the manual process leaves rooms for errors, #frauds, etc.

And by the time the whole cycle is about to complete; confirmations for the next quarter are at your doorstep awaiting actions

 

Are you facing similar problems?

No need to be worried anymore, a young team of Chartered Accountants in support with senior professionals of the fraternity have come up with a unique software to streamline the entire process – “FIRMWAY” – Confirmations. Simplified.

Firmway aligns with your existing accounting software, sends confirmations, does timely follow ups, assist in reconciling balances, summarizes the responses and gives you a real time dashboard for monitoring.

With the help of technology, it takes the legal validity of confirmations to a higher level, verified parties, authorized responses, IP address tracking and much more, at absolutely reasonable cost.

– Prashant Gupta

Co founder | CEO

FIRMWAY

Visit www.firmway.in or email at [email protected] for a quick web demo or a physical demo.

GSTR-3B – Insights

GSTR-3B – Insights

Government has published #GSTR-3B format for filing #GST return for the month July’17 and Aug’17.

With the objective of ensuring smooth roll out of GST and taking into account the concerns expressed by the trade and industry regarding filing of the returns in GST regime, it was decided that, for the first two months of GST implementation, the tax would be payable based on a simple return (Form GSTR-3B) containing summary of outward and inward supplies which will be submitted before 20th of the succeeding month.

Return in Form GSTR-3B notified contains details to be filed by the registered person in a simplified manner.

Details to be furnished in Form GSTR-3B is as under:

• Consolidated taxable value and tax amount of Outward and inward supplies liable under RCM

• Consolidated taxable value and tax amount of inter-state supplies made to unregistered persons, composition taxable persons and UIN holders

• Details of Eligible input tax credit

• Details of Exempt, nil-rated and non-GST inward supplies

• Details of Payment of tax • Details of GST TDS/TCS credit

GSTR-3B will have to be filed for the month of July and August, 2017 as per the timeline given below:

Firmway – Assisting GSTR-3B

Firmway – Assisting you for GSTR-3B

Firmway assists you in aligning with your vendors and customers for filling of your FIRST GST Return (GSTR-3B) in a week’s time protecting you from unintentional interest cost. For more information please refer the details below:

Links:

LinkedIn: https://www.linkedin.com/feed/update/urn:li:activity:6295613904668196865

Twitter: https://twitter.com/firmway/status/891977846364659712

Would only registration lay the perfect platform for smooth transition to GST?

Would only registration lay the perfect platform for smooth transition to GST?

While ruling out the possibilities for any further delay in implementation of GST, Finance Minister Arun Jaitely had expressed, “Of the total 8.09 million existing tax payers, 81.1% have already registered.” But would only registration itself suffice for smooth transition to GST? When the whole law has been drafted with an intention to ensure “Financial Discipline” from the very grass root level.

How can we expect from a boy, who is not well dressed while entering to the school, to be discipline throughout the day? Similarly, how we can expect the tax payers to attain financial discipline, without cleaning their books and ensuring accurate carry forward of input tax credit.

Less carry forward of input tax credit would result in blockage of fund while excess would attract scrutinized assessment and interest cost.

So how to ensure accurate carry forward of tax credit with invoice level matching for the tax credit lying in our books?

Reasons for inaccurate input tax credit:

  1. Deduction made for quality issues, delay in delivery, damages etc.
  2. Rejected material not sent back.
  3. In case of works contract where quantum of work completed is pending to be approved, escalation claims, claim for change of scope etc.
  4. Service tax credit on advance payment.
  5. Invoice for goods and services not received; and so on,

Now what can be done to ensure that accurate input credit is availed?

A.  Request your suppliers, service providers and customers to notify about all pending invoices, debit notes, credit notes and details of the deduction or rejection made and not communicated.

OR

B.  Get transaction and balance confirmation from suppliers, service providers and customers.

The feasibility of the above activity is effected due to the strict deadlines a firm has to adhere with respect to Excise & VAT returns for month ended June 30, 2017. And that’s where FIRMWAY plays a pivotal role of expediting the process by using a digital platform for obtaining these confirmations. Firmway has a track record of 80% reconciliations (In value) within a week’s time with very minimal involvement of accounts team.

 firmway.in to know more about Firmway.

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