27 January 2010

Revenue Dept Comments on GST

Comments of the Department of Revenue (DoR) on the First Discussion Paper on GST

Sr. No.	Para No. of the Discussion Paper	Issues	Comments of the DoR
1	3.1	It is important to take note of the significant administrative issues involved in designing an effective GST model in a federal system with the objective of having an overall harmonious structure of rates. Together with this, there is a need for upholding the powers of Central and State Governments in their taxation matters. Further, there is also the need to propose a model that would be easily implementable, while being generally acceptable to stakeholders.	Agreed.
2	3.2	Keeping in view the report of the Joint Working Group on Goods and Services Tax, the views received from the States and Government of India, a dual GST with defined functions and responsibilities of the Centre and the States is recommended. An appropriate mechanism that will be binding on both the Centre and the States should be worked out whereby the harmonious rate structure along with the need for further modification could be upheld, if necessary with a collectively agreed Constitutional Amendment.	Dual GST model with appropriate binding mechanism to harmonise the various important aspects of the GST like rate structure, taxation base, exemption etc. between Centre and States is agreed.
3	3.2 (i)	The GST shall have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States [hereinafter referred to as State GST]. Rates for Central GST and State GST should be prescribed appropriately, reflecting revenue considerations and acceptability. This dual GST model would be implemented through multiple statutes (one for CGST and a SGST statute for every state). However, the basic features of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification etc. should be uniform across these statutes as far as practicable.	Agreed. In addition, IGST on inter-State transactions should be levied by the Centre. SGST on imports should also be levied and collected by the Centre. Centre should pass on SGST collection on imports to concerned States on the destination principle.
4	3.2 (ii)	The Central GST and the State GST should be applicable to all transactions of goods and services made for a consideration except the exempted goods and services, goods are outside the purview of GST and the transactions which are below the prescribed threshold limits.	Agreed. There should be a common base for taxation between Centre and States.
5	3.2 (iii)	The Central GST and State GST are to be paid to the accounts of the Centre and the States separately. It would have to be ensured that account-heads for all services and goods would have indication whether it relates to Central GST or State GST (with identification of the State to whom the tax is to be credited).	Agreed. In addition, IGST should be paid to the accounts of the Centre.
6	3.2 (iv)	Since the Central GST and State GST are to be treated separately, taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST. A taxpayer or exporter would have to maintain separate details in books of account for utilization or refund of credit. Further, the rules for taking and utilization of Credit for the Central GST and the State GST would be aligned.	Agreed.
7	3.2 (v)	Cross utilization of ITC between the Central GST and the State GST should not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained later.	Agreed.
8	3.2 (vi)	Ideally, the problem related to credit accumulation on account of refund of GST should be avoided both by the Centre and the States except in the cases such as of exports, purchase of capital goods, input tax at higher rate than output tax etc. where, again refund/adjustment should be completed in a time bound manner.	Agreed.
9	3.2 (vii)	To the extent feasible, uniform procedure for collection of both Central GST and State GST may be prescribed in the respective legislation for Central GST and State GST.	Agreed.
10	3.2 (viii)	The administration of the Central GST to the Centre and for State GST to the States would be given. This would imply that the Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre.	Agreed. The threshold for goods and services should be common between Centre and State on one hand and between goods and services on the other.
11	3.2 (ix)	The present thresholds prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is desirable and, therefore, it is recommended that a threshold of gross annual turnover of Rs.10 lakh both for goods and services for all the States and Union Territories may be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept Rs.1.5 Crore and the threshold for Central GST for services may also be appropriately high. It may be mentioned that even now there is a separate threshold of services (Rs. 10 lakh) and goods (Rs. 1.5 crore) in the Service Tax and CENVAT.	There should be a uniform threshold for goods and services for both SGST and CGST. This annual turnover threshold could be Rs.10 lakh or even more than that. The threshold exemption should not apply to dealers and service providers who undertake inter-State supplies. The problem of dual control is better addressed through a compounding scheme as well as administrative simplification for small dealers through measures such as: · Registration by single agency for both SGST and CGST without manual interface · No physical verification of premises and no pre-deposit of security · Simplified return format · Longer frequency for return filing · Electronic Return filing through certified service centres / CAs etc. · Audit in 1-2% cases based on risk parameters · Lenient penal provisions There may not be any need to have direct link between compensation package, if decided for, and the threshold for registration for North-Eastern and special category States.
12	3.2 (x)	The States are also of the view that Composition / Compounding Scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to gross annual turnover. In particular there will be a compounding cut-off at Rs.50 lakh of gross annual turnover and a floor rate of 0.5% across the States. The scheme should also allow option for GST registration for dealers with turnover below the compounding cut-off.	Agreed. Centre may also have a Composition Scheme up to gross turnover limit of Rs. 50 lakh, if threshold for registration is kept as Rs.10 lakh. The floor rate of 0.5% will be for SGST alone, in case Centre also brings a Composition Scheme for small assesses. The Centre may consider leaving the administration of Compounding Scheme, both for CGST and SGST to the States.
13	3.2 (xi)	The taxpayer would need to submit periodical returns, in common format as far as possible, to both the Central GST authority and to the concerned State GST authorities.	In addition, taxpayers having inter-State transactions will require submission of returns to related Central IGST authority.
14	3.2 (xii)	Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax facilitating data exchange and taxpayer compliance.	There should be a uniform registration system through-out the country and this registration system should enable easy linkage with Income Tax database through use of PAN number.
15	3.2 (xiii)	Keeping in mind the need of taxpayers convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.	Since the tax base is to be identical for the two components, viz., CGST and SGST, it is desirable that any dispute between a taxpayer and either of the tax administrations is settled in a uniform manner. The possibility of setting up a harmonised system for scrutiny, audit and dispute settlement may be developed.
16	3.4	On application of the principle, it is recommended that the following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax: (i) Central Excise Duty (ii) Additional Excise Duties (iii) The Excise Duty levied under the Medicinal and Toiletries Preparation Act (iv) Service Tax (v) Additional customs duty, commonly known as countervailing duty (CVD) (vi) Special Additional Duty of Customs - 4% (SAD) (vii) Surcharges, and (viii) Cesses.	Agreed.
		Following State taxes and levies should be, to begin with, subsumed under GST: (i) VAT / Sales tax (ii) Entertainment tax (unless it is levied by the local bodies). (iii) Luxury tax (iv) Taxes on lottery, betting and gambling. (v) State Cesses and Surcharges in so far as they relate to supply of goods and services. (vi) Entry tax not in lieu of octroi.	Electricity duty, Octroi, purchase tax and taxes levied by local bodies should also be subsumed under GST.
		Purchase tax: Some of the States felt that they are getting substantial revenue from Purchase Tax and, therefore, it should not be subsumed under GST while majority of the States were of the view that no such exemptions should be given. The difficulties of the food grain producing States and certain other states were appreciated as substantial revenue is being earned by them from Purchase Tax and it was, therefore, felt that in case Purchase Tax has to be subsumed then adequate and continuing compensation has to be provided to such States. This issue is being discussed in consultation with the Government of India.	Purchase tax is nothing but sales tax where the responsibility for collection of tax is with the purchaser (and not with the seller as in the case of sales tax). Keeping 'purchase tax' outside will give the loophole to the States to impose 'purchase tax' on any commodity (food-grains, agricultural / forest produce, minerals, industrial inputs etc.) over and above GST. Hence, purchase tax must be subsumed. The compensation package, if agreed, need not have any link to any particular tax being subsumed.
		Tax on items containing Alcohol: Alcoholic beverages may be kept out of the purview of GST. Sales Tax/VAT can be continued to be levied on alcoholic beverages as per the existing practice. In case it has been made Vatable by some States, there is no objection to that. Excise Duty, which is presently being levied by the States may not be also affected.	Alcoholic beverages should be brought under the purview of GST in order to remove the cascading effect on GST paid on inputs such as raw material and packaging material. Sales tax / VAT and State excise duty can be charged over and above GST. Similar dispensation should apply to opium, Indian hemp and other narcotic drugs and narcotics but medicines or toilet preparations containing these substances should attract only GST.
		Tax on Tobacco products: Tobacco products should be subjected to GST with ITC. Centre may be allowed to levy excise duty on tobacco products over and above GST without ITC.	Agreed.
		Tax on Petroleum Products: As far as petroleum products are concerned, it was decided that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD should be kept outside GST as is the prevailing practice in India. Sales Tax could continue to be levied by the States on these products with prevailing floor rate. Similarly, Centre could also continue its levies. A final view whether Natural Gas should be kept outside the GST will be taken after further deliberations.	Keeping crude petroleum and natural gas out of the GST net would imply that the credit on capital goods and input services going into exploration and extraction would not be available resulting in cascading. Diesel, ATF and motor spirit are derived from a common input, viz., crude petroleum along with other refined products such as naphtha, lubricating oil base stock, etc. Leaving diesel, ATF and motor spirit out of the purview of GST would make it extremely difficult for refineries to apportion the credit on capital goods, input services and inputs. These products are principal inputs for many services such as aviation, road transport, railways, cab operators etc. As such, these may be levied to GST and in select cases credit of GST paid on these items may be disallowed in order to minimize the possibility of misuse.
		Taxation of Services: As indicated earlier, both the Centre and the States will have concurrent power to levy tax on all goods and services. In the case of States, the principle for taxation of intra-State and inter-State has already been formulated by the Working Group of Principal Secretaries/Secretaries of Finance / Taxation and Commissioners of Trade Taxes with senior representatives of Department of Revenue, Government of India. For inter-State transactions an innovative model of Integrated GST will be adopted by appropriately aligning and integrating CGST and SGST.	The sub-working group of the Empowered Committee in its report has suggested two options each for B to B and B to C transactions. A decision is required to be taken by the Empowered Committee with respect to the option to be adopted. Such a decision may be taken and communicated to DoR.
17	3.5	Inter-State Transactions of goods & services: The Empowered Committee has accepted the recommendations of the Working Group of concerned officials of Central and State Governments for adoption of IGST model for taxation of inter-State transaction of Goods and Services The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. The major advantages of IGST Model are: a) Maintenance of uninterrupted ITC chain on inter-state transactions. b) No upfront payment of tax or substantial blockage of funds for the inter-state seller or buyer. c) No refund claim in exporting State, as ITC is used up while paying the tax. d) Self monitoring model. e) Level of computerization is limited to inter-state dealers and Central and State Governments should be able to computerize their processes expeditiously. f) As all inter-state dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially. g) Model can take 'Business to Business' as well as 'Business to Consumer' transactions into account.	Agreed. It may however be noted that IGST model will work smoothly only when there is a common threshold for goods and services and for Centre and States. Having more than one rate either for CGST or SGST will complicate the working of IGST model.
18	3.6	GST Rate Structure: The Empowered Committee has decided to adopt a two-rate structure – a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For upholding of special needs of each State as well as a balanced approach to federal flexibility, and also for facilitating the introduction of GST, it is being discussed whether the exempted list under VAT regime including Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST.	There should be a single rate of SGST both for goods and services. A two rate structure for goods would pose the following problems: a) Likelihood of inversions in duty structure with raw materials and intermediates being at a higher rate and finished goods being at a lower rate, especially as the intention is to apply the lower rate to necessities. b) Inversions would result in input credit accumulation and demand for refunding the same from time to time. c) The general rate (RNR) would have to be higher than under a single rate structure. d) Currently, services are chargeable to tax at a single rate. Adopting a dual rate for goods would generate a similar demand for services too. e) Having different rates for goods and services would imply that the distinction between goods and services should continue. Around 99 items presently exempted under VAT may continue to remain exempted in GST regime. There should be no scope, with individual States, for expansion of this list even for goods of local importance. Efforts will be made by Centre to substantially reduce the number of items presently exempted under CENVAT regime. At the end, there must be a common list of exemptions for CGST and SGST.
		The States are of the view that for CGST relating to goods, the Government of India may also have a two-rate structure, with conformity in the levels of rate under the SGST. For taxation of services, there may be a single rate for both CGST and SGST.	There should be one CGST rate both for goods as well as services.
		The exact value of the SGST and CGST rates, including the rate for services, will be made known duly in course of appropriate legislative actions.	SGST and CGST rates are required to be put in public domain much before initiation of legislative action.
19	3.7	Zero Rating of Exports: Exports should be zero-rated. Similar benefits may be given to Special Economic Zones (SEZs). However, such benefits should only be allowed to the processing zones of the SEZs. No benefit to the sales from an SEZ to Domestic Tariff Area (DTA) will be allowed.	Agreed.
20	3.8	GST on Imports: The GST is proposed to be levied on imports with necessary Constitutional Amendments. Both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the SGST amount will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.	Levy of GST on imports may be handled by Centre through a Central legislation either as a customs duty (as is being done now) or along the lines of IGST. SGST collected by Centre may be passed on to concerned State following the destination principle. Taxation of import of services may be on the basis of reverse charge model, as is being done at present.
21	3.9	Special Industrial Area Scheme: After the introduction of GST, the tax exemptions, remissions etc. related to industrial incentives and special industrial area schemes should be converted, if at all needed, into cash refund or subsidy schemes after collection of tax, so that the GST scheme on the basis of a continuous chain of set-offs is not disturbed. Regarding Special Industrial Area Schemes, it is clarified that the benefits of such exemptions, remissions etc. would continue up to legitimate expiry time both for the Centre and the States. Any new exemption, remission etc. or continuation of earlier exemption, remission etc. would not be allowed. In such cases, the Central and the State Governments could provide reimbursement after collecting GST.	Agreed.
22	3.10	IT Infrastructure: After acceptance of IGST Model for Inter-State transactions, the major responsibilities of IT infrastructural requirement will be shared by the Central Government through the use of its own IT infrastructure facility. The issues of tying up the State Infrastructure facilities with the Central facilities as well as further improvement of the States' own IT infrastructure, including TINXSYS, is now to be addressed expeditiously and in a time bound manner.	Agreed.
23	3.11	Constitutional amendments, legislations and rules for administration of CGST and SGST: It is essential to have Constitutional Amendments for empowering the States for levy of service tax, GST on imports and consequential issues as well as corresponding Central and State legislations with associated rules and procedures. With these specific tasks in view, a Joint Working Group has recently been constituted (September 30, 2009) comprising of the officials of the Central and State Governments to prepare, in a time bound manner a draft legislation for Constitutional Amendment, draft legislation for CGST, a suitable Model Legislation for SGST and rules and procedures for CGST and SGST. Simultaneous steps have also been initiated for drafting of a legislation for IGST and rules and procedures. As a part of this exercise, the Working Group may also address the issues of dispute resolution and advance ruling.	The Joint Working Group (JWG) has held several meetings by now. Department of Revenue is closely working with Ministry of Law, Government of India, for finalisation of draft Constitutional amendment. The issue of empowering States to levy GST on imports has been deliberated by the JWG and the view which has emerged out of discussion is that the Centre shall collect GST on imports and pass on the SGST component of it to concerned State on destination principle.
24	3.12	Harmonious structure of GST and the States' autonomy in federal framework: As a part of the exercise on Constitutional Amendment, there would be, as mentioned earlier, in para 3.2, a special attention to the formulation of a mechanism for upholding the need for a harmonious structure for GST along with the concern for the States' autonomy in a federal structure.	Agreed in principle.
25	3.13	Dispute Resolution & Advance Rulings: As a part of the exercise on drafting of legislation, rules and procedures for the administration of CGST and SGST, specific provisions will also be made to the issues of dispute resolution and advance ruling.	The provisions related to dispute resolution, advance rulings and other business processes need to be harmonised between Centre and States.
26	3.14	Need for compensation during implementation of GST: Despite the sincere attempts being made by the Empowered Committee on the determination of GST rate structure, revenue neutral rates, it is difficult to estimate accurately as to how much the States will gain from service taxes and how much they will lose on account of removal of cascading effect, payment of input tax credit and phasing out of CST. In view of this, it would be essential to provide adequately for compensation for loss that may emerge during the process of implementation of GST for the next five years. This issue may be comprehensively taken care of in the recommendations of the Thirteenth Finance Commission. The payment of this compensation will need to be ensured in terms of special grants to be released to the States duly in every month on the basis of neutrally monitored mechanism.	Empowered Committee has already referred the issue to the Thirteenth Finance Commission (TFC). TFC is likely to submit its report shortly. A view on the subject will be taken after more clarity on the subject is available.
27	3.15	With this First Discussion Paper and the Annexure on frequently asked Questions and Answers on GST, interaction with the representatives of industry, trade and agriculture would begin immediately at the national level, and then also simultaneously at the State levels. Similarly awareness campaign for common consumers would also be initiated at the same time. As a part of the discussion and campaign the views of the industry, trade and agriculture as well as consumer may be sought to be obtained in a structured and time bound manner.	Empowered Committee may prepare a plan with clear timelines for orientation of stakeholders so that required steps may be taken by all the States in time.

GST: Centre, States differ on taxing alcohol, petro goods

The Centre has rejected the States' suggestion that alcoholic beverages may be kept out of the purview of proposed Goods and Services Tax (GST) system. The Revenue Department has taken a stance that alcoholic beverages should be brought under the purview of GST and that the State excise duty can be charged over and above GST.

Two-rate structure

The Centre has also rejected the States' proposed move to adopt a two-rate structure. There should be a single rate of SGST both for goods and services. There should be one CGST rate both for goods as well as services, the Revenue Department has said.

Another important area where the Centre and the States now have a differing stance is on the levy of GST on petroleum products. The first discussion paper of the States suggested that sales tax continue to be levied by the States on these products with prevailing floor rate. However, the Revenue Department in the Union Finance Ministry has said that petroleum products may be levied to GST and in select cases credit of GST paid on these items may be disallowed in order to minimise the possibility of misuse.

The Revenue Department's comments on the first discussion paper on GST were released here on Monday. It has noted that keeping crude petroleum and natural gas out of the GST net would imply that the credit on capital goods and input services going into exploration and extraction would not be available resulting in cascading.

The Finance Ministry also said that electricity duty, purchase tax, octroi and taxes levied by local bodies should also be subsumed under GST. The Centre does not want the compensation package, if agreed, to have any link to any particular tax being subsumed.

--
Best Wishes

CA. V.M.V.SUBBA RAO
Chartered Accountant
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26 January 2010

All set for the Annual Corporate Conclave and Glamorous Award Function

Goregaon Sports club at Mumbai is all set to host yet another mega event of ICAI. The glamourous event studded with bollywood celebrity and musical event by famous singer Shreya Gosal. This is third year consecutively, Mumabi is hosting this event. The beginning seem so slow and two weeks back, it looked like the program would be a flop show. But in the last two weeks, it has picked up and things came back to track, thanks Dhiraj Khandelwal who took this task to ensure elder brother President's prestige is not doomed, who was the founder of this mega multi starrer annual event.

Stage is all set for

1. Conclave on Cyber Threats & Information Systems Security and XBRL
29^th January, 2010 | Goregaon Sports Club, Mumbai

2. Conclave on Benchmarking Corporate Governance
30^th January, 2010 | Goregaon Sports Club, Mumbai

3. Conclave on Inspiring Today, For Tomorrow
30^th January, 2010 | Goregaon Sports Club, Mumbai

4. Conclave on Challenges & Roadmap to IFRS
31st January, 2010 | Goregaon Sports Club, Mumbai

And off course the Award Function for chartered accountants. How many bollywood celebrity walks into your program has really become now a parameter for success of program. And I trust Dhiraj Khandelwal is putting his best to make the count increased.

Some Management Lessons from "3 Idiots" Movie...

1. Never Try To Be Successful

Success is the bye-product. Excellence always creates success. So, never run after the success, let it happen automatically in the life.

2. Freedom To Life
Don’t die before actual death. Live every moment to the fullest as you are going todie today night. Life is gifted to humankind to live, live & live @ happiness.

3. Passion Leads To Excellence

When your hobby becomes your profession and passion becomes your profession. You will be able to lead up to excellence in the life. Satisfaction, pleasure, joy and love will be the outcome of following passion. Following your passion for years, you will surely become something one day.

4. Learning Is Very Simple

Teachers do fail. Learners never fail. Learning is never complicated or difficult. Learning is always possible whatever rule you apply.

5. Pressure At Head

Current education system is developing pressures on students’ head. University intelligence is useful and making some impact in the life but it cannot be at the cost of the life.

6. Life Is Emotion Management

Not Intelligence OptimizationMemory and regular study have definite value and it always helps you in leading a life. You are able to survive even if you can make some mark in the path of the life. With artificial intelligence, you can survive and win but you cannot prove yourself genius. Therefore, in this process genius dies in you.

7. Necessity Is The Mother Of Invention

Necessity creates pressure and forces you to invent something or to make it happen or to use your potentiality. Aamir Khan in this film, 3 idiots, is able to prove in the film by using aqua guard pump at the last moment.

8. Simplicity is Life

Life is need base never want base. Desires have no ends. Simplicity is way of life and Indian culture highly stresses on simple living and high thinking, and this is the way of life: ‘Legs down to earth and eyes looking beyond the sky’

9. Industrial Leadership

Dean of the institute in 3 idiots is showing very typical leadership. He has his own principles, values and ideology, and he leads the whole institute accordingly. This is an example of current institutional leadership. In the present scenario, most of the institutes are fixed in a block or Squarish thinking.

10. Importance Of One Word In Communication

If communication dies, everything dies. Each word has impact and value in communication. One word if used wrongly or emphasized wrongly or paused at a wrong place in communication what effect it creates and how is it affected is demonstrated very well in this movie.

11. Mediocrity Is Penalized

Middle class family or average talent or average institute is going to suffer and has to pay maximum price in the life if they do not upgrade their living standards. To be born poor or as an average person is not a crime but to die as an average person with middle class talent is miserable and if you are unable to optimize your potentiality and die with unused potentiality then that is your shameful truth. One should not die as a mediocre. He/she has to bring out genius inside him/her and has to use his/her potentiality to the optimum level.

Lets create a learning environment…..

23 January 2010

IndianCAs: TWO SEPARATE SETS OF ACCOUNTING STANDARDS (AS) U/S 211(3C) OF COMPANIES ACT AGREED UPON BY CORE GROUP FOR CONVERGENCE OF INDIAN AS WITH IFRS

Hello,

The Core Group, constituted by the Ministry of Corporate Affairs for convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRS) from April, 2011, that held its meeting on 11th January 2010 agreed that in view of the roadmap for achieving convergence, there will be two separate sets of Accounting Standards u/s Section 211(3C) of the Companies Act, 1956.

TWO SEPARATE SETS OF ACCOUNTING STANDARDS (AS) U/S 211(3C) OF COMPANIES ACT AGREED UPON BY CORE GROUP FOR CONVERGENCE OF INDIAN AS WITH IFRS

PIB Press Release, dated 22-1-2010

First set would comprise of the Indian Accounting Standards which are converged with the IFRSs which shall be applicable to the specified class of companies. The second set would comprise of the existing Indian Accounting Standards and would be applicable to other companies, including Small and Medium Companies (SMCs).

The first set of Accounting Standards (i.e. converged accounting standards) will be applied to specified class of companies in phases:

(a) Phase-I:- The following categories of companies will convert their opening balance sheets as at 1st April, 2011, if the financial year commences on or after 1st April, 2011 in compliance with the notified accounting standards which are convergent with IFRS. These companies are:-

a. Companies which are part of NSE â€" Nifty 50

b. Companies which are part of BSE - Sensex 30

c. Companies whose shares or other securities are listed on stock exchanges outside India

d. Companies, whether listed or not, which have a net worth in excess of Rs.1,000 crores.

(b) Phase-II :- The companies, whether listed or not, having a net worth exceeding Rs. 500 crores but not exceeding Rs. 1,000 crores will convert their opening balance sheet as at 1st April, 2013, if the financial year commences on or after 1st April, 2013 in compliance with the notified accounting standards which are convergent with IFRS.

(c) Phase-III :- Listed companies which have a net worth of Rs. 500 crores or less will convert their opening balance sheet as at 1st April, 2014, if the financial year commences on or after 1st April, 2014, whichever is later, in compliance with the notified accounting standards which are convergent with IFRS.

When the accounting year ends on a date other than 31st March, the conversion of the opening Balance Sheet will be made in relation to the first Balance Sheet which is made on a date after 31st March.

Companies which fall in the following categories will not be required to follow the notified accounting standards which are converged with the IFRS (though they may voluntarily opt to do so) but need to follow only the notified accounting standards which are not converged with the IFRS. These companies are: -

(a) Non-listed companies which have a net worth of Rs. 500 crores or less and whose shares or other securities are not listed on Stock Exchanges outside India.

(b) Small and Medium Companies (SMCs).

Separate roadmap for banking and insurance companies will be submitted by the Sub-Group I in consultation with the concerned regulators by 28th February, 2010.

The draft of the Companies (Amendment) Bill, proposing for changes to the Companies Act, 1956 will be prepared by February, 2010 incorporating the recommendation of Sub-Group 1 Report.

Revised Schedule VI to the Companies Act, 1956 according to the converged Accounting Standards has been submitted by the ICAI to NACAS which, after review, will submit to the Ministry by 31st January, 2010. Amendments to Schedule XIV will also be made in a time bound manner.

In respect of the converged Accounting Standards, the Chairman of the Accounting Standards Board of ICAI will submit the converged version of Accounting Standards to NACAS from time to time for recommendations and onward submission to Ministry. However, convergence of all the accounting standards will be completed by ICAI by 31st March, 2010 and NACAS will submit its recommendations to the Ministry by 30th April 2010.

20 January 2010

Registration on for the Certificate Course on Valuation

The Corporate Laws Committee of the Institute of Chartered Accountants of India has taken up pragmatic programs and proactive initiatives to equip the members of the Institute to sharpen their competitive edge and professional dynamism. The Committee has successfully launched a Certificate Course on Valuation in 2008 for the members and the students who have cleared the final examination of Chartered Accountancy course.

Two batches have successfully been completed generating remarkable interest in the subject by the members and the industry as well. The issue of Valuation is very crucial for the corporate world and an ingredient of Good Governance. Acquisition, Merger or Amalgamation of Corporates indigenous or multinationals require professionals who can provide service with excellence, professionalism and objectivity.

The overwhelming responses received for the first and second batch of the course exhibit the futuristic outlook and perception of the members. We are glad to see an inner urge among our members to enhance their capabilities for superior professional services.

While the third batch is starting on 23rd January, 2010 at Parle Tilak Vidyalaya Association . Institute of Management, Chitra Lekha Ketkar Marg, Behind Dhanukar College, Ville Parle(East), Mumbai-400057, a few seats are still available for the members and final passed students for enrolment.

Appreciating the responses received, we are pleased to inform that the registration for the next batch of the Course at other places viz., Mumbai, Kolkata and Chennai Centres is also on. The details of the registration for the next batch are available at http://www.icai.org/post.html?post_id=3895.

The prime objective of this Course is to develop excellence and improve quality and confidence of the members in carrying out Valuation assignments germinating from different business situations. This Course provides a sound framework for business valuation and gives practical advice on using the framework to value a business or part thereof. The Course is balanced between lectures, presentations, cases, and dissertations.

The focus is on integrating key approaches as well as best global practices and methods from each area and applying them to real world problems. Starting with the basic understanding about the term Value, the Course runs through the key approaches of valuation discovering the underlying assumptions of various models, as well as best practices and their applications in live cases.

Once the operational knowledge is gained, in the wide range of valuations tools, the same is applied to case studies. This is an intensive and comprehensive package of face-to-face sessions facilitated by experienced and renowned faculties who are leaders in the Profession, Industry and academics including IITs, IIMs. Indeed, this Course seeks to empower our members as leaders in the global service market including the skills required to implement Fair Value concept under emerging shift in accounting through IFRS.

The scheme of the Course is that the participants registered for the Course have to pursue the classes during alternative weekends at the designated centre. They are also expected to devote major time for self-study and for preparation of group case studies for appearing in the Evaluation Test. On successful completion of the Course, a certificate will be awarded. This course would definitely impart a new direction to the members in their search for professional growth & career development.

Rush your registration form to the Corporate Laws Committee of the Institute at New Delhi. Registration is open on first come first serve basis. Seats are limited.

Corporate Laws Committee

19 January 2010

ANNOUNCEMENT FOR THE ATTENTION OF THE MEMBERS

The Council of the Institute of Chartered Accountants of India (ICAI), at its 292nd meeting held on January 13, 2010 has decided to require the members of the Institute of Chartered Accountants of India to:

Include, in addition to the other requirements relating to signature on the audit report, as prescribed under the relevant Standard on Auditing, the registration number of the firm as allotted by ICAI, in the audit reports signed by them ; and
Ensure that the resolution passed by the company regarding appointment of the statutory auditor of the company under section 224 of the Companies Act, 1956, also contain the registration number of the firm of the auditor(s) with the ICAI

Highlights of LLP Rules Amendment

Amendment in LLP Rules & Applicability of Provisions of Companies Act 1956

The Ministry of Corporate Affairs has amended the LLP Rules 2009 by LLP (Amendment) Rules 2010 and has also made certain provisions of the Companies Act, 1956 applicable on the LLP, under section 67 of the LLP Act 2008.

Highlights:

Provisions related to sections 441, 443, 445, 446, 448, 450, 451, 453, 454, 455, 456, 457, 458, 458A, 460, 463, 464, 465, 466, 467, 468, 471, 474, 476, 477, 478, 479, 481, 482, 483, 484, 486, 487, 488, 494, 497, 511, 511A, 512, 514, 515, 517, 518, 519, 528, 529, 529A, 530, 531, 531A, 532, 533, 534, 535, 536, 537, 538, 539, 540, 541, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, 552, 553, 554, 555, 556, 558, 559, 560 and 584 of the Companies Act, 1956 related to company winding up, declaration of company as defunct & winding up of foreign companies , are made applicable to a Limited Liability Partnership, except where the context otherwise requires, with certain modifications.

Application for Designated Partners Identification Number shall now be submitted electronically instead of physical filling and scanned copy of duly notarized ID & Residential Proofs will be filed along with application.

Every Designated Partner is now required to have Digital Signatures.

Form 1(Application for name approval.), 2 (Incorporation Document), 3 (information relating to LLP Agreement or any change there in), 4 (notice of admission or cessation of partners), 5 (notice of change of name), 6 (intimation of change in particulars by partner to LLP) & 7 (application for DPIN) has been modified.

Form 3 for information related to LLP Agreement, has now been made simpler, as compared to earlier form.

Body Corporates intending to become partner in LLP, are required to file a resolution signifying their intention to become a partner, along with incorporation document to Registrar of LLP.
LLP (Amendment) Rules 2010 shall come into force w.e.f 15th January 2010.

Provisions of Companies Act 1956 shall be applicable on LLP w.e.f 6th January 2010

Courtesy:CA. V.M.V.SUBBA RAO

IndianCAs by Ashwin Nagar