CA Students' Conference

Home , Mahatma Gandhi Series

15th - 16th December, 2018

“Knowledge & Training with Ethical Quotient –

Pathway to Professional Excellence.”

Organized by the Board of Studies, ICAI Hosted by Rajkot Branch of WIRC & WICASA of ICAI

ICAI Bhawan, Girirajnagar Main Road, Rajkot Website: www.rajkot-icai.org E-mail: [email protected]

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

ORGANISING COMMITTEE

CA. Dhinal Ashvinbhai Shah Conference Chairman &

Chairman, BoS, ICAI CA. Vijay Kumar Gupta Vice - Chairman, BoS, ICAI CA. Ankit Chotaliya Conference Co-ordinator & Chairman, Rajkot Branch of WIRC CA. Bhavin Mehta Conference Co-ordinator & Chairman, Rajkot Branch of WICASA & Vice-Chairman, Rajkot Branch of WIRC

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Day 1 9:30 am to Inaugural Session & Interaction with Board of Studies 10:15 am Chief Guest: Shri Ketan Marwadi - MD & Chairman, Marwadi Stock Exchange Ltd. CA Dhinal Shah - Chairman, Board of Studies, ICAI.

10:15 am to Special Session I – CA Dhinal Shah - Chairman, Board of Studies, 11:30 am ICAI.

11:30 am to Technical Session : I – CA Nipun Singhvi- Famous Speaker, 01:30 pm Ahmedabad Topic: LAW - RERA – Salient Features - Class Action Suit – A remedy for Investors - Overview of Insolvency and Bankruptcy Code

02:00 pm to Special Session : II – CA M. Sathya Kumar - Youth Icon, Chennai. 03:30 pm

03:30 pm to Technical Session : II – CA Punit Prajapati – Famous Speaker, 05:00 pm Ahmedabad Topic: GST - GST Audit -Input Tax Credit under GST Regime -GST Annual Return

05:00 pm to Special Session :III – Shri Devangg Karia, Motivational Speaker, 06:30 pm Mumbai.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Day 2 10:00 am to Technical Session : III – CA Premnath D. - Famous Speaker, 11:45 pm Hyderabad Topic: ACCOUNTS & AUDITS - Effective Internal Control Systems – An Aid to Audit - Accounting aspects of Forex & Derivative Transactions - Convergence from AS to Ind AS

11:45 am to Special Session: IV- Shri Snehal Desai - Visiting Faculty, IIM, 1:15 pm Ahmedabad

02:00 pm to Technical Session : IV – CA Sunil Talati - Past President, ICAI. 04:00 pm Topic: Direct Taxes - Income Computation and Disclosure Standards – Impact Analysis - Crypto currency – Meaning, Transactions and its taxability - Regulations to curb Black Money & Benami Transactions

04:00 pm to Technical Session : V – CA Vikram Pandya - Speaker, ICAI, 05:45 pm Topic: Information Technology - Recent Developments in Forensic Audit - Artificial Intelligence in new era for Accounting and Auditing Profession - Data Security and Its Importance in Recent Era

05:45 pm to Valedictory Session 06:15 pm

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” PRESIDENT’S MESSAGE Dear Students, Chartered Accountancy has always been regarded as one of the most respectable and noble professions. With a progressive shift in economy in the last two decades, the role of Chartered Accountants has significantly enhanced in all spheres of economy, be it business, industry, financial services, banking, insurance, Government, NGOs, and especially in the corporate sector. In present times, Chartered Accountants are perceived as advisors to the management in specialized areas like Mergers and Acquisitions, Business Diversification, Risk Assessment, Costing, Valuation, International Taxation, Fraud Detection and Reporting. Perhaps Chartered Accountancy is one of the very few courses offering a balanced approach in education by providing a perfect blend of theoretical knowledge and practical training. The articleship training an integral part of the Chartered Accountancy curriculum, gives you extensive practical exposure that helps to cultivate professional skill and expertise to apply theoretical concepts prudently in real situations. ICAI is committed to guide you to become outstanding and well-rounded professionals. Apart from bringing out academic inputs like Study Material, Revision Test Papers, e-lectures, webcasts, mentoring sessions and conducting Mock Tests, the Board of Studies (BoS) of ICAI also organizes various programs for your holistic development including National Students’ Conferences and contests like the Talent Search besides various other activities for students. I am pleased to know that the Board of Studies of the Institute of Chartered Accountants of India (ICAI) along with Rajkot Branch of Western India Regional Council and Rajkot Branch of WICASA is organizing CA Students’ Conference during December 15-16, 2018 in Rajkot. The theme for the conference is aptly titled “Knowledge & Training with Ethical Quotient - Pathway to Professional Excellence”. Knowledge: The Divine Light Knowledge facilitates firm foundation in academics as well as profession and gives us strength and confidence to strive for success in all walks of life. As students, you must enhance your knowledge beyond curricula by making time to read economic journals and dailies to update yourself. This will develop a scientific acumen to analyze and resolve complex financial problems threadbare, and also inculcate a keen

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” understanding of economic, industrial and financial situations from diverse perspectives, thus enabling you to develop your creative and research faculties as well as expression helping you to perform exceedingly well in interviews and group discussions. Ethics: The Guiding Principles Along with knowledge, ethical values are the fundamental principles, the guiding tenets to be followed by accounting professionals to demonstrate trust, honesty and fairness while rendering services to clients and stakeholders. As budding professionals, you must learn, understand and diligently exercise the ethical code of conduct during articleship. You must judiciously follow concepts of Integrity, confidentiality, transparency, objectivity and independence in your day-to-day dealings. To achieve your dreams, you will have to train yourself to demonstrate a strong work ethic to give your best and deliver consistent quality work, creating value. Strive for Excellence Setting a high standard for yourself in whatever you attempt and focusing on getting better by the day to achieve the ultimate goal of your life leads you to excellence. Be self-motivated, embrace challenges as learning opportunities, pushing the envelope each day, and seek guidance from people who have excelled in their areas, creating a habit and habitat for success. I am sure that the sessions at the conference would give you comprehensive exposure, helping you to understand and appreciate the diverse points of view. My compliments to the Chairman Managing Committee members and all the organizers for hosting the Conference. All the best for your future pursuits, CA. Naveen N. D. Gupta President, ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” MESSAGE FROM CHAIRMAN, BOARD OF STUDIES, ICAI It is our proud privilege to pen down a few words on the occasion of the two- day CA Students’ Conference for CA students being organized under the joint auspices of the Board of Studies of the Institute of Chartered Accountants of India and Rajkot Branch of Western India Regional Council at Rajkot on 15th & 16th December, 2018. The theme of the Conference “KNOWLEDGE & TRAINING WITH ETHICAL QUOTIENT- PATHWAY TO PROFESSIONAL EXCELLENCE” is aptly chosen and we appreciate the organizers for selecting such a contemporary theme.

Conferences like this are the perfect platform to expand your knowledge and passion for accountancy profession while connecting with like-minded people from across the country. Such conferences also enable you to meet and interact with eminent professionals who are passionate about the future of accountancy profession and are incredibly receptive to the needs and desires of students.

Our profession is constantly changing. So it is important to attend Students’ Conferences to surround yourself with people who are just as excited and passionate about CA profession.

We hope you’ll join us at the Conference in Rajkot so we can use our voice to influence the progression of our coveted profession.

We wish the Conference all the success.

CA. Dhinal A. Shah Chairman, Board of Studies, ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” MESSAGE FROM RAJKOT WIRC CHAIRMAN Dearest Students, Its my utmost pleasure to welcome all the student delegates to this CA Students Conference – 2018 organised by the BOS ICAI and hosted by the Rajkot Branch of WICASA. There have been numerous changes in taxation and other laws in recent days due to which it is extremely required for students to be updated and sharpen their skill and knowledge to succeed in their carrier. Though along with every challenge there is an opportunity to shine out as a specialized professional and reach pinnacle in the profession, it also requires detailed continuous study for students. Rajkot branch of WICASA is always proactive in catering the knowledge based programs requirement and thereby enlightening and educating the students. We at Rajkot Branch, organize various seminars and lectures for students of Rajkot as well as nearby centers. To upgrade the skills of the students, BOS has organized and we have hosted CA Students Conference – 2018. As per the tradition, the conference is every year held in the month of December. Considering the major and important changes in the form of GST, RERA, Insolvency and ICDS, it is also planned to organize this year with varieties of topics. With this perspective we have endeavored to do a fruitful job in designing a tailor made programme structure wherein there will be meticulous content, rich presentations and thought provoking discussions and deliberations on the various topics selected for conference. I am sure all the student delegates will get optimum benefit from the deliberations of the expert speakers invited from various cities of India. I am confident that at the end of the Conference all the students would get the takeaway. The networking outcomes that would accrue during this conference will be an added advantage to the participants. I wish all the delegates a great learning experience and hope that this conference shall enable all to strive for excellence to enrich their competence.

CA. Ankit Chotaliya Chairman Rajkot Branch of WIRC of ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” MESSAGE FROM RAJKOT WICASA CHAIRMAN My Dear Students, Prospective Chartered Accountants and my future colleagues, it is a matter of extreme inclination and pride for me to welcome you all to this historic event of CA Students’ Conference.

First of all, I congratulate all of you for participation in this knowledge gaining process. Chartered Accountancy has always been regarded as one of the most respectable and sacrosanct professions. We all have opted for this coveted profession not by chance but by choice. I sincerely cherish and wish that all my students establish their own identity and uniqueness in their profession. There’s belief that the growth of an individual stops only when he stops learning and coping up with the changes in the society. Here A wonderful event lies ahead of you with the greatest speakers in the history of Rajkot and back to back sessions on various topics that ensure overall development of the individuals.

Being a Chairman of WICASA, I have always focused on overall development of the students. We have been constantly organizing events to upgrade the level of students of Rajkot. We have planned this event as a perfect combination of academic growth and personality development of the participants. We have invited speakers from across the country that have led the profession and took it to great heights. I hope you all have a memorable experience.

I am confident that at the end of the Conference all the students would get the takeaway. The networking outcomes that would accrue during this conference will

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” be an added advantage to the participants. And would like to end with one of my most favorite movies’ most effective dialogue…

CA. Bhavin Mehta Chairman Rajkot Branch of WICASA of ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA NAVEEN D. GUPTA PRESIDENT, ICAI (2018-19)

A man of professional wisdom, vision and strong organisational skills with a firm belief in inclusive growth of Indian accountancy profession, CA. Naveen ND Gupta has been elected as the new President of The Institute of Chartered Accountants of India (ICAI) on 12th February 2018. A seasoned professional of 22 years of standing, CA. Naveen N D Gupta is widely commended for his role in making the Income Disclosure Scheme, 2016 a success, which was acknowledged by the Finance Minister.

He is now Chairman of Board of Directors of ICAI-ARF (Accounting Research Foundation) and XBRL India. ICAI-ARF is instrumental in driving governmental accounting reforms in various bodies such as Indian Railways, MCD and KMC. He is also Director Indian Institute of Insolvency Professionals of ICAI, which is the first Indian IPA. Internationally, he is technical Advisor to member SMP Committee of IFAC.

His association as Central Council Member at ICAI, now running in 9th year since 2010, with position as Vice President in 2017-2018; has made him traverse regimen of standard setting, quality assurance framework, and disciplinary mechanism. He has earlier been Chairman of ICAI’s Committee (s) on Direct Taxes, Economic, Commercial Laws & WTO, Peer Review Board, Capacity Building of CA Firms and Small & Medium Practitioners and Public Relations. He has been appreciated for his distinguished contribution as Vice-Chairman of Audit & Assurance Standard Board, Professional Development Committee, Internal Audit Standards Board, Continuing Professional Education Committee, and Board of Studies.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Known for his prowess in many areas, he steered the drafting of IFRS compliant Schedule III to the Companies Act, 2013, Ind-AS compliant Schedule III for NBFC, Ind-AS -114 on Regulatory Deferral Accounts and Guidance Note on Accounting for Rate Regulated Activities as Convener. He is also credited for initiating and starting two Certificate Courses on ‘Intellectual Property Rights’ and ‘Anti Money Laundering Laws’ for ICAI.

He is representing ICAI in many important committees constituted by the Government Ministries/ Regulators such as Government Accounting Standards Advisory Board (GASAB) and Audit Advisory Board both constituted by C&AG of India, Board of Insurance Regulatory & Development Authority (IRDA), National Advisory Committee on Accounting Standards (NACAS) and SEBI’s Primary Market Advisory Committee.

With focus on innovation and niche enablement, he intends to position CA profession as aiding and upholding public interest by enhanced focus on Quality Assurance framework, calibrating Regulation with development and leveraging digital technology to turn disruptions arising out of changing paradigm of businesses to niche empowerment. His vision is to work for Global mobility of CA professionals through enhanced focus on recognition overseas, capacity building through exposure to jurisdiction specific skill building programs and exploring newer industrial training opportunities domestically and overseas as also international placements of Indian CAs.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA DHINAL A. SHAH CHAIRMAN, BOARD OF STUDIES ICAI 2018-19

Dhinal is a partner of Ernst & Young, Tax & Regulatory Services practice. He is a Chartered Accountant and Lawyer by qualification and has more than 25 years of experience in advising clients on taxation, exchange control and regulatory issues.

Dhinal has been extensively involved in advising Indian corporate and multinationals on issues relating to double tax treaties (PE exposures, optimizing tax credits etc), due diligence, transfer pricing, foreign tax systems implications, corporate tax and accounting standards including IFRS, Insolvency Professional.

Dhinal is a Central Council Member of The Institute of Chartered Accountants of India, Executive Committee Member of International Fiscal Association, Director of IPA formed by ICAI and Chairman of Direct Tax committee of Gujarat Chamber of Commerce & Industries.

He is also a member of different technical committees of the Institute. He has also addressed and presented papers at various seminars and conferences on international taxation, non resident taxation, transfer pricing, domestic taxation, Accounting Standards etc. He is also a regular contributor of articles to Institute and other professional journals. He has also co authored book.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

SPECIAL SESSION – 1

“Importance of Article training, BOS Presentation and Interaction with students and Activities of BOS.”

BY CA DHINAL SHAH, AHMEDABAD CHAIRMAN, BOARD OF STUDIES

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA Dhinal A. Shah, Ahmedabad Chairman, BOS, ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

TECHNICAL SESSION – 1

“LAW”

:SESSION CHAIRMAN: CA NIPUN SINGHVI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

CA Nipun Singhvi Qualification : • Bachelor in Commerce (Accounting Honors) • Fellow Member of ICAI • Licentiate Company Secretary (ICSI) • Bachelor in Law, LL.B • Masters in Law, LL.M(Corporate Laws) • BSE Certification on Depository(BCCD) • Completed Certification in International Financial Reporting Standards (ICAI) • Completed Certification on Forensic Accounting and Fraud Detection(ICAI) • Completed Certification on Concurrent Audit of Banks(ICAI)

Work Experience : Cleared CA final examination in Nov. 2009 and CS Professional in June 2010. • In the early time of profession, had handled audit assignments for Corporate vis Public, Private and Listed Companies. Had been working as auditor for various types of bank audits including Central Statutory Audit, Concurrent, Revenue/Credit, Stock, System and Risk Based Audits. • Expert Advisor on transaction structuring and advises on various central and state laws. Expert on banking laws and handles cases relating to default and recovery from banks as well as borrowers. • Has been Legal advisor to various Initial Public Offers(IPO’s) and appears before SEBI and SAT. • Appears before High Court of Gujarat and Supreme Court in addition to Income Tax Settlement Commission, NCLT, Competition Appellate Tribunal, Debt Recovery Tribunal, BIFR/AAIFR(now dissolved), Trademark Registry etc. • Has been regularly advising on Insolvency and Bankruptcy related issues both to bankers and Corporates. • Advising on Commercial Arbitration and related issues.

Designation : • Head of Corporate Law Practices of Cogito Legal, Ahmedabad-Mumbai-Delhi-Jodhpur. • Director in M/s P Singhvi Financial Services Pvt. Ltd., a Management Consultancy Company approved by ICAI. • Advisory Board of www.treefreebooks.in venture of US based professionals (2017). • Had been partner with P.Singhvi & Associates, Chartered Accountants, Ahmedabad- Jodhpur. • Member of Committee of Accounting Standard for Local Bodies(ASLB) of CIRC (2015)

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • Member of Corporate Law Committee of Ahmedabad branch of ICAI.(2016-17-18) Achievements • Have delivered more than 150 Conferences on Various Commercial Laws across India. • Have been writing regularly for tax journals and web media. • Have been social activist and filed various PIL before High Court and Supreme Court. o Significant about them relate to ▪ Demonetization, 2016 ▪ Budget - Finance Act,2017 ▪ NCLT technical member appointment ▪ GST provisions related to AAR ▪ GST on Advocate Services • Training legal officers and credit officers of Nationalized banks like Bank of Baroda and State Bank of India(2015-16-17-18) • Has been training officers of Comptroller and Audit General of India[C&AG] (2014-15- 16-17). • Youngest faculty member in Bank Audit Certification Faculty Panel of ICAI(2013). • Has been Key note speaker for Intellectual Property National Workshop conducted by MBM Engineering College under aegis of UGC and chaired by NLU,Jodhpur(2016) • Visiting faculty at various MBA institutes, professional forums and industry associations. • Have been regularly delivering lectures at various professional for at places including Ahmedabad, Surat, Vadodara, Jamnagar, Anand, Jaipur, Jodhpur , Mumbai and Delhi to name a few.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. Nency Thakrar WRO0568048

Article Assistant at KSD and associates RAJKOT

“RERA – Salient Features”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Hello, I’m Nancy Thakrar. I’m here to present a paper on one of the most popular topic in the world of real estate i.e. RERA. – Real Estate Regulatory Authority governed under the Real Estate Regulation and Development Act, 2016. After hearing the name ‘RERA’ there are numerous questions that arises in your mind…. • What is RERA? • Why there is need for RERA? • What is the applicability for the same? • How it is working? And many more. Let’s take an overview about the RERA and solve these questions through an imagination… Imagine… you all are married and well settled. But, you are living in rented flat.. “Apna Ghar to sirf ek sapna hi tha.” But on one fine day you came across an advertisement of XYZ Construction, which promise you to give your own home within 2 years, with all exclusive facilities by investing an economic amount. After thinking day and night finally you decide to invest in the project of XYZ construction. Gradually 2 years were completed. You and your family started packing and ready to shift from a rented flat to your own flat. But when you reached to the XYZ construction, you got a very good answer, “I’m sorry Sir, your home is still under construction” your mind is blank, you are full of anger, but with patience you chose to wait till the completion of the construction. After completion when you shifted there, you found that there is a drastic change in the facility provided by them and listed in the advertisement. You don’t get even proper electricity and water supply. Now you don’t have any option other than to accept that unwanted home as your dreamed home. Thus to solve these problems, • Imposing responsibility on promoter • To protect the interest of prospective customers • Timely completion of project • Establish symmetry of information between the promoter and allottee • Infuse transparency, fair play and reduce fraud • Good governance and increase investor confidence

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • Establish fast – track dispute resolution • Uniform regulatory environment Central Government and State government introduced the Real Estate Regulation and Development Act as on 1st May, 2016 and in Gujarat online website was launched in the month of July, 2016. Website: www.gujrera.gov.in The basic understanding about RERA is now fit in your mind that for what the RERA is necessary and what are the objectives of the same. So let’s see the legal applicability and general provisions of the Act. Some important points that should be in your mind before starting the topic: • RERA covers all residential and commercial projects, including shops, offices and buildings. • The term ‘promoter’ includes both private and public real estate promoters. The Act covers all the bodies which develop real estate projects for sale to the general public. • An allottee includes a person who acquires the said ‘apartment / plot’ through transfer or sale, but does not include a person to whom such plot, apartment is given on rent. • Renovation or repair or redevelopment projects not involving marketing, advertising, selling & new allotment need not be registered with RERA. Applicability: BUILDERS: Who construct any commercial or residential building, which covers land area more than 500 square meters OR Inclusive of all phases, number of units / apartments more than 8. AGENTS: Real estate agents (brokers), who facilitate the sale or purchase of realty projects will have to register themselves with the RERA also. Examples: ➢ If the project is for 10 apartments and the land area is of 400 square meters then the registration is compulsory.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ➢ If the land area is of 550 square meters and you are constructing only 5 apartments then also you are required to register. ➢ Hence the only possibility where the RERA registration is not applicable is you are constructing less than 8 apartments on the land area of less than 500 square meters.

• In simple terms, builders / developers will not be able to sell or even book or advertise any new project without first registering their project with the RERA. • The validity of registration is based on builders’ own estimates. No time limit for the completion of project mentioned in the Act. Thus, accountability lies with them to adhere to the timelines drawn by themselves otherwise they risk suffering losses / penalties. • Registration can be extended only in the case of natural calamities like, floods, drought, fire etc. or in the case of a war. Such extensions, if applied for by the builder / developer, will be for a period of one year. • Registration with RERA can be revoked by RERA, if it receives a complaint against the developer and is satisfied that the Developer has not complied with the rules under the Act, or has violated the terms and conditions of approval, or is involved in unfair practices to sell, market or advertise his projects.

How to get registered? For the purpose of registration under RERA one has to upload all the documents mentioned in the website of RERA. There is list of approx 42 documents in the website including Form 1, 2 and 3. Form 1 Certificate of Architect: Form 2 Certificate of Engineers: Form 3 Certificate of Chartered Accountant: For the whole process of registration Promoter or Broker are advised to take assistance of Chartered Accountants.

• Application for registration must be either approved or rejected within a period of 30 days from the date of application by the RERA. • On successful registration, the promoter of the project will be provided with a registration number, a login id, and password for the applicants to fill up essential details on the website of the RERA.

Salient Features of RERA: • RULE OF 70-30:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

➢ One of the biggest pain points for consumers has been project delays. Amongst other reasons for delay, the use of collections from one project into business expansion or construction of other project or siphoning of funds by real estate developers have also been primary causes. ➢ Thereby to protect consumer of a project the Act mandates that of all collections 70% funds be deposited in an Escrow account maintained with a scheduled commercial bank. ➢ An escrow account is under the purview of a third party essentially a bank or a recognised lender. ➢ This provision thereby results in further oversight of the bank account and signing authority is with the escrow account manager say a trustee or a bank or a lender. ➢ These funds can be accessed by a real estate developer solely for purpose incurring expenditures towards the said project. ➢ The real estate developer can withdraw funds from this account in proportion to stage of work. ➢ The request for withdrawal of funds is to be certified by an engineer, architect and a chartered accountant in practice that real estate developer’s claims are justified. ➢ These costs include the costs of land, construction, finance, and other project costs. ➢ Due to this there is benefit to the allotee as his amount is now under the safe zone and it puts limitation on the promoter as 70% amount of the total amount is blocked for him.

• NO CHANGE:

➢ The Act takes changes into account 2 scenarios: ❖ Minor changes – ✓ Minor changes can be made to a unit plan (which includes plans, fixtures, fittings etc) after proper declaration and intimation to the customer and certification by an architect or an engineer that such changes are required for architectural and structural reasons. ✓ Such minor changes are also allowed which are requested by a consumer.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ✓ But these do not include changes in area or height, or removal of part of a building or any such change which the authority feels materially deviates from the product offering. ❖ Any other change- ✓ Change to sanctioned plans, layout plans, and specifications of buildings or common areas cannot be brought about without consent of at least 2/3rd of consumers of the project. ✓ The consenting consumers do not include real estate developer who might still own units in the project. ✓ In fact for the purposes of this clause the Act counts all such consumers who might own several units in a project through direct and indirect ownership (company, HUF and family) as one irrespective of the number of units held. ➢ Thus, the developer is not allowed to increase the cost of their project or to make any major addition, deletion or alteration in the terms of project without the written consent of the 2/3rd allotees after considering the above points. ➢ Can a real estate developer exit the project mid-way by selling to another developer or party? While a developer is allowed to sell the project to another investor he can do so only by taking written approval of 2/3rd of project’s consumers and also the prior approval of the RERA.

• SEPARATE REGISTRATION:

➢ As per the act, every phase of apartment will be considered a standalone real estate project, and separate registration needs to be obtained for each project. ➢ Meaning thereby if you want to carry out two separate projects on same land then you need to register for the both separately.

• WARRANTY: ➢ The Act provides the warranty of 5 years, contractor has to provide the warranty for five years for the repairing if it is due to default of the contractor.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • PENAL PROVISIONS: ➢ For any default there are penalty provisions made under the Act which is listed in the following table:

Non-registration of Up to 10% of the estimated project/agent with RERA and - project cost continue to do so

False information while Up to 5% of the making an application to - estimated project cost RERA

Contravention of any Up to 5% of the provisions of the Act (other - estimated project cost than stated above)

Non-compliance with the order Daily penalty up to 5% of Daily penalty up to of RERA the estimated project cost 5% of property cost

Non-compliance with the order Up to 10% of Up to 10% of project cost of the Appellate Tribunal property cost

There is also provision of a maximum jail term of three years with or without a fine, for a developer who violates the order of the appellate tribunal of the RERA. • ESTABLISHMENT OF RERA AND REAT: RERA - Real Estate Regulatory Authority REAT - Real Estate Appellate Tribunal

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ➢ It is compulsory for a state to establish a State Real Estate Regulatory Authority as per the new act. Buyers could approach this body for redressal of their grievances. ➢ In Gujarat also RERA is established through which any aggrieved person can file complaint suo-moto.

To redress the dispute, In Real Estate Regulation and Development Act, 2016 Central and state government must establish RERA which will consist of a Chairman and at least two whole time members to be appointed by state government. RERA can hear complaints filed by aggrieved persons for contravention or violation of provisions of the Act by any promoter, allottee or real estate agent. RERA’s broad objectives and functions includes inter alia, ➢ Ensuring transparency by registering and maintaining a database of real estate projects and publishing it on its website for public viewing, ➢ Development of environmentally sustainable and affordable housing, ➢ Rendering advice to the government and ➢ Ensuring compliance with its Regulations and the Act in general.

Those aggrieved by the decision of RERA can approach REAT within 60 days of former’s order. REAT must dispose of the appeal within 60 days and will have all powers of a civil court. Conclusion: ➢ The Act is a positive change in terms of increasing transparency in the realestate sector, increasing accountability of the promoters and developers and establishing efficient forums for redressal of grievance. ➢ This will consequently lead to lower litigation due to stringent rules and regulations in the highly corrupt sector. ➢ Time bound approvals and transparency will also lead to greater flow of investment both domestic and foreign, lead to reduction in cost of borrowing in the real-estate sector. ➢ Though it is a win-win situation for both the developers and the buyers and will help the sector grow in the long-run, the discrepancies in the Act needs to be urgently addressed. ➢ Further, the Act cannot be implemented effectively till the political reluctance in implementing the Act is removed which is a major roadblock.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ➢ Hence, the Act needs legislative amendments by consulting the stakeholders involved as there is a huge scope of improvement coupled with removing any conflict of interest that the political class might have in the implementation of the Act.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

MS. Hetvi Chhagani WRO0571361

Pursuing IPCC RAJKOT

“Class Action Suit – A Remedy for Investors”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” MEANING: Class action suit, as it goes by name is for a group of people filing a suit against a defendant who has caused common harm to the entire group or class. The concept of Class Action is not new but in Indian context it has found recognition and enforceability now only by means of Companies Act, 2013. The conception of Class Action Suits is one of the many improvement introduced in the Companies Act, 2013 vide Section 245. ORIGIN: it is said that "der aaye durust aaye" and india is really working as according to this norm.many countries has made provisions for class action suit but india woke up after the great scam of satyam computers happened. satyam scam, we all know about it. one day in morning of 7th january 2009 chairman of the company b ramalinga raju resigned and confessed that he had manipulated the accounts of Rs 14,162 crore in several forms. many of the investors of company wanted to file a class action suit against the satyam computers bt because of the lack of provision in our law for class action suits in india they were denied.But on the other hand the US investors,holding american depository shares(ADS), filed the class action suit against the company as US had provisions for class action suit. However when the provisions were inserted by the compnies act 2013, indian investors also filed class action lawsuit claiming rs.5000 corer from the company. from this we can say that The benefit of these type of suits is that if several people have been injured by one defendant, each one of the injured people need not file a case separately but all of the people can file one single case together against the common defendant, known as class action suit. NOW SOME QUESTIONS WILL BE THERE IN YOUR MIND:- WHO CAN FILE CLASS ACTION SUITS? WHO MAY BE SUED THROUGH CLASS ACTION SUITS? WHAT ACTION WILL BE TAKEN BY NCLT ON A CLASS ACTION SUIT APPLICATION? PENALTY FOR NON-COMPLIANCE OF ORDER PASSED BY TRIBUNAL?

WHO CAN FILE CLASS ACTION SUITS? As per Section 245(1) r/w Section 245(3), the suit may be filed:- a) In case of a company having share capital, member or members: not less than 100 members of the company or not less than 10% of the total number of its members, whichever is less or Any member or members singly or jointly holding not less than 10% of the issued share capital of the company. Provided that the applicants have paid all calls and other sums due on their shares. b) In case of a company not having a share capital, member or members:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Not less than 1/5th of the total number of its members.

WHO MAY BE SUED THROUGH CLASS ACTION SUITS? A class action suit may be filed against the following Authorities A company or its directors for any fraudulent, unlawful or wrongful act or omission; An auditor including audit firm of a company for any improper or misleading statement of particulars made in the audit report or for any unlawful or fraudulent conduct. An expert or advisor or consultant for an incorrect or misleading statement made to the company.

WHAT ACTION WILL BE TAKEN BY NCLT ON A CLASS ACTION SUIT APPLICATION? 1. On receipt of a class action suit application, the Tribunal will look into the following before admitting it: whether the member or depositor is acting in good faith in making the application for seeking an order; any evidence before it as to the involvement of any person other than directors or officers of the company on any of the matters on which an order can be passed; whether the cause of action is one which the member or depositor could pursue in his own right rather than through an order under this section; any evidence before it as to the views of the members or depositors of the company who have no personal interest, direct or indirect, in the matter being proceeded under this section; where the cause of action is an act or omission that is yet to occur, whether the act or omission could be, and in the circumstances would likely to be— authorized by the company before it occurs; or ratified by the company after it occurs; Where the cause of action is an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company. 2. If an application filed under sub-section (1) is admitted, then the Tribunal shall have regard to the following, namely:— (a). Issue Public notice shall be served on admission of the application to all the members or depositors of the class in such manner as may be prescribed; (b) All similar applications prevalent in any jurisdiction should be consolidated into a single application and the class members or depositors should be allowed to choose the lead applicant and in the event the members or depositors of the class are unable to come to a consensus, the Tribunal

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” shall have the power to appoint a lead applicant, who shall be in charge of the proceedings from the applicant's side; (c) Consolidate all similar applications prevalent in any jurisdiction into a single application and the class members or depositors shall be allowed to choose the lead applicant and in the event the members or depositors of the class are unable to come to a consensus, the Tribunal shall have the power to appoint a lead applicant, who shall be in charge of the proceedings from the applicant's side Not allow two class action applications for the same cause of action. 1. A copy of every application made under this section shall be served on the Regional Director and Registrar of Companies. 4. The Tribunal shall give notice of every application made to it under this section to the Central Government and shall take into consideration the representations, if any, made to it by that Government before passing a final order under those sections. 1. Where any application filed before the Tribunal is found to be frivolous or vexatious, it shall, for reasons to be recorded in writing, reject the application and make an order that the applicant shall pay to the opposite party such cost, not exceeding Rs. 1 Lakh, as may be specified in the order.

REMEDIES OF CLASS ACTION SUIT: • Lower litigation costs. Litigation costs will be divided among class members. Thus, the very number of class members in the plaintiff group can provide a shared expense benefit to each individual class member. • The opportunity for plaintiffs to seek relief for small amounts of money. The lower litigation costs will allow plaintiffs to seek relief who would not have found it financially prudent to do so in a traditional lawsuit. • Greater judicial efficiency. A class action lawsuit is decided by one judge in one court. Thus, the litigation will take up less cumulative court time and involve fewer judges. • Greater uniformity of recoveries among similar plaintiffs. Since only one decision by one judge, or one settlement, will be made, plaintiffs’ recoveries should be consistent. • Greater uniformity for defendants. The one decision or one settlement benefit also creates greater certainty for defendants. A defendant and others in situations similar to the defendant’s situation are not left wondering about how to follow the law because only one decision was issued. • The opportunity for all plaintiffs to receive damages. If a defendant is facing multiple lawsuits then the defendant may not have the ability to pay all of the plaintiffs. That means that earlier filing plaintiffs generally receive greater compensation for similar injuries than do later filing plaintiffs. A class action lawsuit erases this risk and allows injured parties to recover damages at the same time and in proportion to their injurie.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • It will also successfully reduce the number of lawsuits since it has allowed the group of people to file the case against one defendant on common grounds. This has also helped in increasing the efficiency of the legal process in India. some cases i would like to add because as an individual we feel that we can not fight against a huge big company so we start adjusting with the disadvantages and damages that comes with the product and we keep silence.. so i just want you to know that now we have this special provision of class action suit, we can fight together.. and already there are many succesfull cases of class action suit.. “Solano-Rodriguez v. Amazon Studios LLC Newyork” Amazon Studios parking production assistants may have some unpaid wages coming to them, thanks to a class action settlement worth more than $517,000. The Amazon Studios class action settlement resulted from allegations raised by plaintiff Marvelous Solano-Rodriguez, who used to work as a parking production assistant. Other former parking production assistants filed similar claims in separate class action lawsuits. Solano-Rodriguez says defendant Amazon Studios and several of its affiliated companies failed to pay proper overtime wages to its parking production assistants in New York. He alleges Amazon Studios and the other defendants are in violation of the federal Fair Labor Standards Act and New York labor laws. Amazon Studios continues to deny the plaintiffs’ claims. The company says it agreed to the settlement solely to avoid prolonging the litigation. The court has made no determination on liability. Under terms of the Amazon Studios class action settlement, the defendants have agreed to create a settlement fund worth $517,595. This fund will be used to pay distributions to Class Members, named plaintiffs’ service payments, and class counsel’s costs, expenses and attorney fees. “Norton, et al. v. Niantic Inc.,” Niantic Inc. has agreed to pay nearly $1.6 million to settle a class action lawsuit alleging consumers who attended the Pokemon GO Fest in Chicago, Illinois in July 2017 were unable to play Pokemon GO at the festival. According to the Pokemon GO Fest class action lawsuit, Niantic advertised the Pokemon GO Fest in Chicago as the one-year anniversary celebration of one of the most popular mobile games. The company advertised that attendees would be able to play Pokemon GO with thousands of other players from around the world. They would also reportedly be able to attend special events and win prizes that were unavailable to those who did not attend the festival. The plaintiffs claim that technical issues and other factors prevented them from being able to play Pokemon GO during the Pokemon GO Fest. The Pokemon GO Fest class action lawsuit brought claims for violations of the Illinois Consumer Fraud and Deceptive Practices Act, the California Unfair Competition Law, the California False Advertising Law, the California Consumer Legal Remedies Act, the Washington Consumer Protection Act, and negligent misrepresentation.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Niantic denies any wrongdoing but agreed to settle the Pokemon GO Fest class action lawsuit to avoid the risk, uncertainty and expense of ongoing litigation. “Michaely v. Browning-Ferris Industries of California Inc” Those residing near the Sunshine Canyon Landfill in Sylmar, Calif. could get cash from a $3.5 million Browning-Ferris Industries odor class action settlement. The California Browning-Ferris Industries odor class action settlement was reached after plaintiffs alleged that a local landfill was emitting noxious odors, along with pollutants, into the surrounding area. According to the landfill class action lawsuit, the problem dates back to 2009 and thousands of residents of the city of Sylmar have submitted complaints about the fumes coming from the dump. The plaintiffs said that the odor from the Sunshine Canyon Landfill was so bad that they not only avoided inviting people over to their homes, they often had to leave to avoid the stench. Under the terms of the class action settlement, the company that runs the Sunshine Canyon Landfill will pay $3.5 million into a settlement fund. Though Browning-Ferris Industries admits no wrongdoing, it has agreed to make improvements to the landfill to help with gas flare capacity, gas collection measures, odor and dust control. It will also plant vegetation to help screen the area between the landfill and the Mission Tierra neighborhood in Sylmar, Calif.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. Vidhi Kariya WRO0597720

Article Assistant at Dodiya Mehta & Co.

RAJKOT

“Overview of Insolvency and Bankruptcy Code”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

START UP INDIA , STAND UP INDIA. START UP INDIA , STAND UP INDIA. Well, these were the words which we kept on hearing for many many times during the speech of our honourable P.M. Narendra Modi. I was so much inspired by Modiji that I decided to start up my own practice after completing CA. Once I had a dream in which I saw that I became Chartered Accountant . I was so so happy but at the same point of time there was something in my dream which disturbed me a lot. Let me tell you, what was that? The most important thing that was required for starting up my own office was finance. But the bank denied me to give the loan for the same because bank was not having sufficient money as they could not recover the money from the borrowers to whom they have lended. Aab paise recovere karne ke liye bank AK-57 leke companies ko thok to nahi sakti na??!!! So, there are some legal regulations required which enable banks to recover their money easily. This is the reason, why, Insolvency & Bankruptcy Code,2016 came into the picture. It does not mean at all that before introduction of IBC , there were no legal regulations related to it. There were laws & that was the only problem. Because each & every s ingle law was overlapping the another law & plus to recover money under all these previous insolvency laws was nothing less than a disaster as that entire process was very time consuming. IBC,2016 has been came to remove all these limitations as it overrides all the previous insolvency laws .. At present, IBC,2016 is applicable only to corporates who have made default of Rs.100000 or more & theprovisions on individuals & firms are not applicable as they are not yet notified. But as soon as it would get notified, then it would be a single insolvency law for each & every person. Now, a very important question, what is the main objective of IBC,2016 ?Now, a very common thought that comes to our mind is that its objective is just to recover creditors money from corporate debtor. But friends , the main objective of IBC,2016 is not just to recover money but to recover money with the help of resolution plan of the company & to save the company from the liquidation. To fulfill this objective , there is a process called CIRP. Another important question, who can apply for CIRP? There are three persons who can apply for CIRP under IBC. 1. OPERATING CREDITORS –if creditors for goods , government taxes , employees salary are not paid then they can also file an application. Operational Creditor has to first send notice demanding payment to corporate debtor. After expiry of 10 days from date of delivery of notice , if operating creditor does not receive payment from corporate debtor or notice of dispute then they can file application for CIRP to Adjudicating Authority 2. FINANCIAL CREDITORS – if banks , financial institutions & such other parties cannot recover their loan , they can apply for CIRP. There is no need to send notice to company. 3. CORPORATE DEBTOR HIMSELF – Jaise CA student exams se haar ke CA chodne ki baat karta hain waise hi company khud ki financial problems se haar ke CIRP ke liye apply kar sakti hain.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Now, a very important point to note here is that if the defaulting party is a corporate then application for CIRP is made to Adjudicating Authority of NCLT & if the defaulting party is individual or firm then the application for CIRP is made to Adjudicating Authority of DRT.In both the cases if the applicant is not satisfied with the decision of Adjudicating authority then the applicant can go to Appellate Authority. Ok chalo , apply to kar diya, ab kya hoga? Now, Adjudicating Authority would admit or reject the application within 14 days of receipt of the application and inform the same to creditor & corporate debtor within 7 days. EK BAAR NCLT NE CASE ADMIT KAR LIYA , MATLAB ACCHE DIN AA GAYE .As per section 14 of the Code, NCLT would declare moratorium period from the date the case gets admitted till the insolvency completion date. Now, what is this moratorium period ? Right ? During this moratorium period , no further case would be admitted against the company & if any case is pending then it would not be continued uptill moratorium period. Not only this , but there would be no recovery or transfer of the assets of the company. It would also prohibit any foreclose , recover , or enforce any security interest createdby corporate debtor in respect of including any action under SARFAESI ,2002. AUR TO AUR SAAS KO APNE GHAR KI CHABI CHODNI HOGI OR BAHU KO DENI HOGI. ,MATLAB AAJ TAK COMPANIES KE KOI BHI DECISIONS SHAREHOLDERS MEETING ME LIYA KARTE THE WO SARE HI DECISIONS AB COMMITTEE OF CREDITORS COC MEETING MEPAAS CHALE JAYENGENow , Committee of Creditors would be made up of only financial creditors excluding related parties.But if there are no financial creditors , it may be made up of operating creditors. Aab hoti hai picture main asli hero ki entry . Hero ka naam hai Intereim Resolution Professional Aab iss hero ka kaam kya hai? As per Sec. 17 of the Code, IRP shall verify the claims of all creditors. IRP shall constitute COC. All the powers of the Board shall stand suspended &be excercized by IRP. & the term of IRP shall not exceed than 30 days. Now , there is another hero in our picture namedResolution Professional . If COC is not satisfied with IRP , then it may appoint RP. RP shall exercise all the powers of IRP & shall conduct entire CIRP & manage the operations of corporate debtor.. RP shall also prepare Information Memorandum which shall contain the relevant information of the company & on the basis of which the applicant shall prepare resolution plan. This plan has to be approved in committee of creditors by atleast 66% voting within 180 days of case gets admitted by NCLT. Further , 90 days extension would be given for making of the revival plan provided that at least 66% of votes of committee of creditors favour the same. Once this plan is approved by COC , it has to be approved by NCLT. Once the revival plan is approved by NCLT , Resolution Professional will start working on the same plan in order to revive the company & recover the money of all creditors. But , But , But , 1. What if the resolution plan is not made within 180 days or 270 days , as the case may be or 2. What if resolution plan is made but not submitted to NCLT or

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” 3. What if resolution plan is made but not approved by required majority , i.e. 66% 4. What if COC itself decides to liquidate the company. 5. What if Resolution plan is approved by NCLT also but the company is unable to work according to the plan. Jab Hero hi apni company ko khud nahi bacha saka to hum kya kar sakte hain? So now , there is no option left other than liquidation. In these circumstances only , liquidation order would be passed by NCLT. Liquidation would be done by Resolution Professional or any other liquidator appointed by NCLT. It is important to note here that under earlier liquidation regimes, government dues were given a high priority & under IBC , the priority for payment of gov. dues is shifted to the bottom. Now , there is a process called FAST TRACK INSOLVENCY RESOLUTION PROCESS which is completed within 90 days of admission of case and further 45 days extension if allowed by NCLT. This process can be applied on only those persons as may be specified by CG. There is a very important recent amendment which said that now home buyers also would be treated as financial creditors & they would also be entitled to sit on committee of creditors & they would be also able to decide the future of defaulting builders. But, have you ever thought about the other side of the coin? It always says something different. No doubt , IBC, 2016 has many advantages but it has some challenges ini ts practical implementation too like lack of availability of intereim finance , lack of availability of IP , creditors may misuse this Code & there are many other challenges too. In order to cope up with these challenges , IBC has to evolve with time. Now, lets move on to the first case of IBC,2016, where Tata Steel acquired Bhushan Steel for Rs. 35200 crore where the total debt of Bhushan Steel was rs.57000 crore. So, almost two-third of the total debt was recovered by creditors which obviously could not have been recovered through previous other insolvency laws. So, at present , there is no doubt in saying that IBC,2016 is far far better than all the previous laws related to same.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

SPECIAL SESSION – 2

“How CA Profession help the student to reach on Self-Actualization stage”

BY CA M. SATHYA KUMAR, CHENNAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

CA M SATHYA KUMAR, CHENNAI

M. Sathya Kumar LLB, ACA, ACMA, CS - (‘Sathya’) - National Youth Icon Award winner & Change Maker Award Winner of UNESCO Association in India. He is a CEO and Founder of Tycoon+ Advisors and visions to provide employment to 5000+ people of India in another 5 years by 2022. He is advisor to Navkar Consultancy Services (NCS). He is faculty for NACEN - National Academy of Customs, Excise & Narcotics accredited Insitutions (Government of India). He is Certified Advisor to Zoho Books - Innovative Solution for GST in India. He is renowned faculty of Confederation of Indian Industry (CII). He is a faculty at Supreme Audit Institution of India - Comptroller & Auditor General Of India (C&AG of India). He is a faculty for GST Revenue Audit Division of Government of India. He is product of KPMG, Big 4 Consultancy Firm and incubated with nearly a decade’s experience with in the Audit, Tax and Advisory. In the recent times, he is a sought after advisor/consultant, faculty & speaker on Goods & Services Tax (GST) for the Industry people to make them understand the Implication of the same. Sathya has completed 120+ Sessions on GST. As a consultant of GST, Sathya Kumar has been advising various clients on Business process Reinengineering, Impact Analysis, Training for Channel Partners viz., vendors, suppliers, inhouse team, Comprehensive Tax Implication, Tax planning and Compliance aspects concerning the business operations in India. He is also advising clients on suitable GST enabled ERP, ASP, GSP and also evaluating available product in the market. He has worked with clients across sectors such as SME , MSME, Traders, Pharma, FMCG, Real Estate, Media, Financial Services, Logistics, Power, IT/ITES etc., He is extensively involved in GST Initiative in India with Government Officials.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

TECHNICAL SESSION – 2

“GST”

:SESSION CHAIRMAN: CA PUNIT PRAJAPATI AHMEDABAD

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA PUNIT PRAJAPATI, AHMEDABAD Founder Partner of Punit Prajapati & Co. Chartered Accountants since 2005, a firm in Indirect Taxes with 4 CAs at present.

Assisted Dr. Nilesh Suchak for around 7 years.

Practicing in the field of Indirect Taxes particularly in Service Tax and Excise for more than 13 years.

Co-chairman of IDT Committee of Ahmedabad Branch of ICAI

Chairman of IDT Legal Representation Committee of CA Association Ahmedabad

Member of IDT Committee of Gujarat Chamber of Commerce & Industry

Appeared on News Channels for discussion on GST and other topics.

Appearing before Adjudicating Authority, First Appellate Authority and Customs Excise and Service Tax Appellate Tribunal (CESTAT) for Service Tax Matters. Successfully represented before Custom Excise & Service Tax Appellate Tribunal (CESTAT) for cases which are reported in authentic judgment reporting journals like Service Tax Review (STR) & Tax India Online (TIOL). Co-chairman of Indirect Tax Committee of Ahmedabad Branch of WIRC of ICAI

Delivered Lectures/Presented Papers on Indirect Taxes to CAs, Excise Officers, Trade, Industry etc. at more than 150 forums.

Is also providing services to corporates and multinationals.

Co-Authored Book “FAQs on GST – A Hand Book” published by CA Association, Ahmedabad

Written articles which are published in reputed journals.

Best Article Award for “Reverse Charge Mechanism Under Service Tax - Emerging Issues” Published in Ahmedabad Chartered Accountants Journal, April, 2013 issue.

Trophy for Best Led Study Circle Meeting from Chartered Accountants Association for the year 2014-15.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. Gopal Sonika ERO022055

Article Assistant at Adarsh Malpani & Associates KOLKATA

“Overview of Insolvency and Bankruptcy Code”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

SYNOPSIS

➢ Introduction & Legal Background. ➢ Types of Audit under GST & Interpretation. ➢ Preparation at the End of Taxpayer & Auditor for Audit. ➢ Brief Discussion on Form GSTR - 9C ➢ Conclusion.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

GST Audit – What Does the Law Say? Introduction

Introduction – It is needless to mention that the implementation of GST has brought a drastic change in the indirect tax structure of India. Since, GST laws require various compliances at the end of the taxpayers, auditing is necessary to keep a bird eye on the taxpayers and ensuring the compliances with various provisions of GST. For the taxpayers, it acts as an internal checks on their errors and help them rectify them. For the government, audit is s a great tool to identify the tax evaders. Through this article, it has been tried to highlight on different provisions of GST laws related to audit. Legal Background: - Audit under Goods and Service Tax has been defined under sec 2(13) of CGST Act. Under the provisions of the ACT, “audit” means – • The examination of records, returns and other documents maintained or furnished by the registered person under this Act or rules made thereunder or under any other law for the time being in force. • To verify the correctness of o turnover declared, o taxes paid, o refund claimed and o input tax credit availed. • To assess his compliance with the provisions of this Act or the rules made thereunder.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

GST Audit – What Does the Law Say? Types of Audit

With GST implementation, India has entered into a new era of tax reform. In GST, to maintain a check and examine whether proper details are furnished by the taxpayer, correct GST is being paid, no ineligible or excess input tax credit is being availed etc., certain taxable persons will be subject to audit under GST. Audit under GST is governed CGST Act 2017, CGST Rules 2017 and notifications issued in respect of it. There can be of three types of audit under GST – 1) Annual Audit Based On Turnover [Sec 35(5) of CGST Act 2017]

2) Audit by Tax Authorities [Sec 65 of CGST Act 2017]

3) Special Audit [Sec 66 of CGST Act 2017]

We will discuss about audit focusing mainly on audit u/s 35(5) of CGST Act 2017. As per to Sec 35(5) of the CGST Act, every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by - a) a Chartered Accountant or b) a Cost Accountant. And shall submit a copy of the audited annual accounts, the reconciliation statement under sub – section (2) of section 44 and such other documents in such form and manner as may be prescribed. As per Rule 80(3) of CGST Rules 2017, “every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” audited as specified under sub-section (5) of section 35 and he shall furnish a copy of the audited annual accounts and a reconciliation statement, duly certified, in GSTR 9C, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner”

Interpretation:

Q) Who is required to get his accounts audited under GST?

Every registered person, whose aggregate 2 Crores turnover during the Rupees financial year

Turnover –

It is to note that sec 35(5) of CGST Act 2017 talks about the “turnover” limit, whereas Rule 80(3) of CGST Rules 2017 says about the limit of “aggregate turnover” to determine whether GST Audit will be applicable or not.

Since there is no specific definition of “turnover”, while “aggregate turnover” and “turnover in a state” is specified. “Aggregate Turnover” is PAN based while “turnover in a state” depicts the “turnover” within the state /Union Territory. It is suggested to interpret that the word turnover used in section 35(5) should be understood as aggregate turnover.

Q) Who can do the audit under GST with reference to Sec 35(5) of CGST Act 2017?

1. Chartered Accountant in Practice, or 2. Cost Accountant in Practice.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” However, as per the announcement made by “The Institute of Chartered Accountants of India”, an internal auditor of an entity cannot be appointed as the auditor under GST laws.

Q) What are the documents required to be submitted?

➢ Copy of Audited Annual Accounts ➢ Reconciliation statement, reconciling the value of supplies declared in the ➢ return with the audited annual financial statement, in duly certified form GSTR – 9C ➢ Annual Return in form GSTR – 9 by 31st December of next financial year. ➢ Others, as may be prescribed.

Audit by Tax Authorities – In accordance with sec 65 of the Act the commissioner or any officer authorized by him by way of a general or specific order, may undertake audit of any registered person.

Special Audit – If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner.

GST Audit – What Does the Law Say? Preparation from Taxpayer’s End and Auditor’s End

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Auditing under GST would be a critical and significant task. It would demand a high preparation from auditor as well as taxpayer.

Preparation from Taxpayer’s End - As per sec 35(1) of the Act, read with rule 56 of CGST rules, every registered person is required to keep and maintain, at his principal place of business, a true & correct account of –

▪ production or manufacture of goods; ▪ inward and outward supply of goods or services or both; ▪ stock of goods; ▪ input tax credit availed; ▪ output tax payable and paid ▪ goods or services imported or exported or of supplies attracting payment of tax on reverse charge along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers. ▪ such other particulars as may be prescribed

Further the taxpayer shall ensure before the finalization of accounts –

a. Reconciliation of electronic cash ledger, credit ledger and liability ledger with the books of accounts. Also, the credit note, debit note, issued or received, discount etc. should also be reconciled. b. The Input Tax Credit availed by the taxpayer in his monthly return shall also be reconciled with the details furnished by the counter – party, which will be reflected in his GSTR – 2A.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” c. The outward supplies made by the taxpayer should reconcile with those disclosed in its GSTR – 1 and GSTR – 3B and accounts as well. d. Reversal of Input Tax Credit taken for purchase, payment of which is not done within 180 days.

Preparation from Auditor’s End – Following are the relevant areas which the auditor is required to review carefully:

o Books of account and other related records and registers are to be maintained as discussed already. o Reconciliation of outward supplies/taxes are to be declared in the annual return and the books (including undeclared). o Reconciliation of inward supplies/taxes are to be declared in the annual return and the books (including undeclared). o Adjustments of inward/outward supplies and taxes based on entries in books of account. o Ineligible credit. Reversal of such credit, if it is claimed by the taxpayer. o Classification of outward & inward supplies, rate of tax applicable and computation of tax liability and deductions of input tax credit available.

GST Audit – What Does the Law Say? Brief Discussion on Form GSTR – 9C

Every registered person who is liable to audit u/s 35(5) of CGST Act 2017, read with Rule 80(3) of CGST Rules 2017 shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR – 9C, electronically. Government vide Notification No. 49/2018 – Central Tax dated 13th September

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” 2018 has notified Form GSTR 9C for submitting the reconciliation statement along with auditor’s certification.

FORM GSTR 9C broadly consists of 2 PARTS. PART A is for Reconciliation Statement and PART B is for certification from auditor.

Part A is again divided into various sub - parts

Part – I: Basic Details. –

This part of the form displays the basic details about the taxpayer like –

o Relevant Financial Year. o GSTIN of the entity. o Legal Name of the business. This field is auto – populated based on the GSTIN filled above. o Trade Name (If any). This is also auto – populated).

Part – II: Reconciliation of Turnover Declared in Audited Annual Financial Statement with Turnover Declared In Annual Return (Gstr9)

In this part, the turnover for the State/UT declared in the Audited Annual Financial Statements needs to reconciled with those declared in GSTR – 9. It broadly asks for the reconciliation of

o Annual Gross Turnover. o Annual Taxable Turnover.

In case of any discrepancy, the reasons for un – reconciled difference in any of the above needs to be mentioned therein.

Part – III: Reconciliation of Taxes Paid

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” This table asks for reconciliation of rate – wise tax liability and amount payable thereon, where the taxable value following under different rates and taxes paid on them under each head (CGST, SGST/UTGST, IGST or CESS) needs to be disclosed separately. Further, taxes liability under reverse charge shall also be disclosed in same manner. The pro – forma of Form GSTR 9C has been attached at the end for convenience. Further, reasons for unreconciled payment shall be given.

It must be noted that there can be additional liability for taxes due to unreconciled differences of Gross Turnover, Taxable Turnover and Taxes Paid on consolidated basis. In table 11 of PART III, such additional amount payable under each head (but not paid yet) by the taxpayer should be disclosed for taxable values taxed at different rates separately. Such additional liability should be discharged through cash and not credit.

Part – IV: Reconciliation of Input Tax Credit (ITC)

Firstly, this table requires the reconciliation of ITC availed as per Audited Annual Financial Statements after certain adjustment of “previous year(s) ITC claimed in this year” and “ITC booked in current year but to be claimed in subsequent years” with the ITC claimed in Annual Return (GSTR – 9).

Further, it also requires the reconciliation of ITC declared in Annual Return (GSTR9) with ITC availed on expenses as per audited Annual Financial Statement or books of account, where the ITC available on different expenses and ITC eligible as per GST law needs to be disclosed separately for each item.

In case of discrepancies, reasons for unreconciled differences shall be mentioned.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” The tax payable on account of unreconciled difference in ITC in any of the above part of the form, shall be disclosed under each head along with interest / penalty (if any thereon).

Part – V: Auditor's recommendation on additional Liability due to non- reconciliation.

In addition to any of the above discussed cases, if auditor is of the opinion that there exists any liability due to non – reconciliation, same shall be disclosed rate – wise and which shall be paid through cash only.

PART B – Certification

Form 9C can be filled by the person conducting the audit or persons other than those who have conducted the audited. Accordingly, it shall be certified that whether the auditee is properly is maintaining required documents or not. In the latter case, all the required documents which are not maintained, shall be listed out by the auditor.

GST Audit – Conclusion

Auditing under GST, especially for the year ending on 31st march 2018 is going to be a crucial task, as it would require deeper analysis and greater efforts from both auditor and taxpayers. Unlike Statutory audit under Companies Act 2013 or Tax Audit under Income Tax Act 1961, auditing under GST would not be focusing merely on financial accounts. GST being an anti – black money measure by the government, an auditor would have

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” greater responsibility in GST audit. Further, a taxpayer would also be required to maintain sufficient documents and records for the smooth conduct of audit.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. VISHAL JAIN NRO0365140

Article Assistant at M/s. Basant B Gupta & Associates DELHI

“Input Tax Credit under GST Regime”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Introduction:

GST can be understood as a system of value added tax on goods and / or services. It is these provisions of Input Tax Credit that make GST a value-added tax i.e., collection of tax at all points in the supply chain after allowing for credit of taxes paid on inputs / input services and capital goods.

Input Tax Credit can be said to be one of the key element of the entire Goods and Service Tax (GST) framework with one of the major USPs i.e. seamless flow of credit in the entire GST chain. The present indirect taxation system suffers with cascading tax effect due to non- availability of credit at various points in the supply chain. However, under the GST regime, credit of GST is expected to be available at every stage in the entire supply chain.

This paper focuses on basic concepts and framework of Input Tax Credit under GST regime and discusses whether GST allows ‘endless’ credit or is there any catch in it.

Important Definitions:

• Input –Any goods other than capital goods used/intended to be used by a supplier for business purpose • Input Service – Any service used/intended to be used by a supplier for business purpose • Input Tax – IGST/CGST/SGST/UGST charged on supply of goods/services to a person and includes tax payable on imports and under reverse charge mechanism but excludes tax paid under composition scheme • Capital Goods – capital goods mean goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used/intended to be used for business purpose • Input tax credit (ITC)- means the credit of input tax; • Taxable person-means a person who is registered or liable to be registered under section 22 or section 24; • Registered person- means a person who is registered under section 25 but does not include a person having a Unique Identity Number

Whether GST allows ‘endless’ credit or is there any catch in it.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Section 17(5) restricts the area of input tax credit by providing a negative list of supplies of goods and/ or services for credit. Apart from that, there are other provisions also in the CGST Act, which breaks the idea of endless credit chain in GST. I. Conditions for Credit allowability- Section 16

First of all we need to understand that under GST the ITC is allowed only to ‘registered persons’ but on the contrary the ‘taxable person’ is liable to pay GST.

Further, Input Tax Credit (ITC) can be availed only if:

• Such person possesses Tax Invoice, Debit note, Bill of Entry, ISD Invoice, or Invoice issued by service recipient under Reverse charge mechanism • Prescribed particulars are mentioned on the Invoice and the recipient furnishes relevant information in Form GSTR-2 • Goods/Services have been received by such person • Tax charged in respect to such supply has been actually paid to the Government • Return has been furnished

II. Credit Disallowance on non-payment- Proviso to section 16(2) r/w rule 37

If a recipient fails to pay to the supplier of goods/services (other than supplies taxable under reverse charge mechanism), the amount towards value of supply along tax payable thereon within a period of 180 days from the date of issue of invoice, the availed input tax credit shall be added to the output tax liability of such recipient. Interest shall be liable to be paid from the date of availing credit till the reversal. Such credit can be availed on payment made later towards the value of supply of goods/services and tax thereon.

III. Time Limit of availing Credit

Input tax credit in respect of any invoice/debit note for supply of goods/services, shall not be available after the due date of filing of the return for the month of September following the end of financial year to which such invoice pertains or relevant annual return, whichever is earlier.

IV. Burden of Proof

Section 155 provides that if any person claims that he is eligible for input tax credit the burden of proving such claim or claims shall lie on him. This is in fact against the basic principle of self-assessment.

V. Goods Not Leviable to Tax Under GST

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Some products like electricity, specified petroleum products including HSD oil, tobacco, alcoholic liquor for human consumption and realestate are for the time being expected to be outside the ambit of GST. Therefore, while inward supplies of power and fuel, eg. Electricity and diesel oil would be received by a manufacturer, or even by a service provider or re-seller to some extent, on payment of tax, no credit shall be allowed in respect of such tax paid thereon. This would lead to significant cascading effect. VI. Composition Levy

Tax paid under section 10, i.e. the composition levy is not included in the “input tax”, and is therefore outside the credit chain.

VII. Supplier Below Threshold Limit of Turnover

Supplies received by an unregistered person having an aggregate turnover below the threshold limit of twenty lakh rupees, are not eligible for credit. The credit chain therefore breaks and the credit of tax paid on such supplies is not passed on to the buyers receiving inward supply of goods and/ or services from such unregistered persons.

VIII. Blocked Credits- Section 17(5)

Under the GST law the terms ‘input’s, ‘input services’ and ‘capital goods’ have been defined in a simplified manner without any exclusion clause. However Section 17(4) of the CGST Act provides a negative list of goods / services on which no input tax credit will be allowed. The basic purpose of providing exclusion clauses or negative lists is to restrict the scope of input tax credit, which certainly results in proportionate cascading effect.

Why Credit cannot be allowed on all inward supplies?

Section 16 provides that every registered taxable person shall be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. The scope of the term “business” is very wide, which covers all types of commercial activities. Going by the concept of supply as contemplated in GST, the object of taxation is very wide. Therefore, the scope of input tax credit under GST should also be wider enough to cover all kinds of inward supplies, which are used for effecting an outward supply which is taxable, irrespective of the purpose or specific end use. Moreover, one of the basic objectives of GST has been stated to be elimination of cascading effect, or to facilitate

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” seamless flow of credit, ideally the credit should have been allowed in respect of all inward supplies, having a direct or indirect nexus with the taxable outward supplies.

All the supplies of goods and services included in the negative list in section 17(5) undisputedly contribute to the value of the final product or outward supply of services. All such activities are integral part of any business effecting supply of some goods/ services or the other. Acquisition or hiring of motor vehicles, catering services, health club or fitness centres, travel benefits to employees on leave, works contract services for various purposes, construction and/ or repairs of immovable properties etc. are very often necessary and essential for smooth running of the business.

Moreover, while it may be an economically and socially desirable proposition to allow composition levy to small assessees, it does not seem to be very logical to disallow credit of tax paid and charged by a supplier of inward supplies, or even for that matter the credit of tax paid on the inward supplies used by the assessee under the composition levy.

Therefore, there may not be sufficient justification in restricting the credit in respect of such supplies. This would invariably lead to cascading effect, which is against the prime objective of GST.

Apportionment of Credit - Section 17

Provisions relating to apportionment of credit are applicable to the cases where goods or services are partly used for business purpose and partly for other purposes. In such cases, credit is available only to the extent they are used for business purposes. Similarly, wherever the goods or services have been used partly for effecting taxable supplies and partly for exempted supplies, the amount of credit shall be restricted to so much of credit as is attributable to the taxable supplies.

For this purpose, taxable supplies would include zero rated supply also. As per section 16 of IGST Act, zero rated supply relates to supply of goods and services for export or supply to a Special Economic Zone developer or a Special Economic zone unit

The procedure for apportionment of credit are contained in rule 42 and 43 of CGST Rules, 2017.

Credit on Capital Goods

• Input Tax Credit on capital goods used exclusively for effecting taxable/zero rated supplies shall be available

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • Credit on common capital goods used partly for business and partly for other purposes or partly for effecting taxable supplies and partly for non- taxable/exempt supplies shall be calculated as specified in Rule 43 of CGST Rules

• A banking company/financial institution shall have option to comply with aforesaid provisions or to avail 50% of eligible input tax credit in that month, with the balance being lapsed. This option once exercised cannot be withdrawn during the same financial year.

• Where depreciation is claimed on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961, the input tax credit shall not be allowed on the said tax component

Credit of input tax in stocks/capital goods on new registrations, etc.- Section 18 S.No. Eligible persons Credit entitled As on Restriction/conditions Inputs held in stock The day 1. Cannot avail 1 Person applied for immediately and inputs credit of goods registration within contained preceding the date and / or services 30 days from the in semi-finished or from which he after 1 year from date of liability to finished goods held becomes liable to in pay tax invoice date pay tax and stock tax 2. No ITC on Capital registered goods.

Person applied for 2 Nil NA registration after 30 days from the date of

liability to pay tax

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Person who is not The day Inputs held in stock 1. Cannot avail 3 immediately required to and inputs credit of goods register, contained preceding the date of and / or services but obtains in semi-finished or voluntary grant of registration after 1 year from

finished goods registration tax invoice date

2. No ITC on Capital

goods.

Switching over Inputs held in stock The day Credit on capital from 4 immediately and inputs goods shall be composition contained preceding the date scheme reduced by five of in semi-finished or to regular taxation percent per switchover or when or finished goods and quarter or part on supplies become where exempt thereof from the date of the capital goods taxable supply becomes invoice or other document. taxable

Credit Reversal under Special Circumstances- 18

In specified cases where Input Tax Credit is required to be reversed, the same shall be calculated as below:

• For inputs in stock, the input tax credit reversal amount shall be calculated proportionately on the basis of corresponding invoices on which credit had been availed • Where aforesaid tax invoices are not available, credit reversal amount shall be based on the prevailing market price of the goods on the date of relevant event, based on which reversal is required. • For capital goods, the input tax credit involved in the remaining residual life in months shall be computed on pro-rata basis, taking the residual life as five years

Illustration - Capital goods have been in use for 4 years, 6 month and 15 days. The residual remaining life in months= 5 months (60 – 55 months) ignoring a part of the month

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Input tax credit taken on such capital goods = 12000

Input tax credit attributable to remaining residual life= 12000 X 5/60 = 1000

ITC in case of Job Worker- Sec. 143 r/w Sec. 19

S.No. Description Conditions of Allowing Input Tax Credit to Principal Supplier

1 Goods Transferred to Job-worker for The goods after the completion of work some activity and received back by should be received back by the principal Principal Supplier. supplier within one year of sending such goods.

2 Goods Transferred directly to Job- The goods after the completion of work worker without being first received should have been received by the by Principal Supplier. principal supplier within one year of receipt of goods by the job worker.

3 Capital Goods (except moulds, jigs, The capital goods after the completion of tools, dies) Transferred to Job-worker work should be received back by the for some activity and received back principal supplier within 3 years of by Principal Supplier. sending such goods.

4 Transferred directly to Job-worker The capital goods after the completion of without being first received by work should be received back by the

Principal Supplier principal supplier within 3 years of such capital goods received by job worker.

5 Where the goods/capital goods Shall be deemed as supply in the hands of removed to job worker has not been principal on the day they were sent out.

received back within 1/3 years.

Conclusion

Input tax credit is the backbone of the GST regime. GST is nothing but a value added tax on goods and services combined. It is these provisions of Input Tax Credit that make GST a value added tax i.e., collection of tax at all points after allowing credit for the inputs. The procedures and restrictions laid down in these provisions are important to make sure that there is seamless flow of credit in the whole scheme of transition without any misuse.

One of the biggest advantages expected from the implementation of GST is that it would remove cascading effect by facilitating seamless flow of credit. This would be given effect by removing the

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” restrictions placed in the erstwhile CENVAT credit rules on availment of credit which lead to break in the credit chain and consequent cascading effect which further leads to increase in cost of goods and services However, the carry forward / presence of blocked credits goes against the principle of having a seamless GST credit scenario.

Thanks & Regards

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. APARNA DAGA CRO0574869

Article Assistant at Deloitte Haskins and Sells LLP, Ahmedabad

“GST Annual Return”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” PREFACE

“To excel, you must evolve, To evolve, you must practice, To practice, you must learn! To learn, you must be dynamic!”

India adopted the global system of indirect taxes in the form of Goods and Services Tax with the dawn of July, 2017. Change is the only constant in the world. Trade and industry required a significant change of guard to make themselves accustom to the new levy. Today, i.e. a year and half post the introduction of the biggest tax reform, India has successfully smoothened its road towards a novel and a more concrete taxation system. With compliance being a major aspect of the new legislation, in addition to regular monthly / quarterly returns, there is also a requirement of filing an annual return. In this background, I would like to present this paper on the topic “GST Annual return” beginning with a brief introduction of the topic, then addressing the fields in the return and the practical challenges faced.

1. INTRODUCTION

1.1. Compliance Mechanism in GST Regime The Goods and Services Tax Regime, as is currently operational in the country, is based on principles of trust and reliance. Credit of input tax is availed on provisional basis and tax liability is also computed by the taxpayer himself by way of self- assessment. In a self-assessment regime, it becomes necessary to put in place counter-checks and audit mechanisms to facilitate full disclosures from the taxpayer’s end, accordingly, protecting the interest of the revenue. Hence, compliance is a major aspect of the new levy requiring every registered person to file two returns each month, i.e. GSTR-1 and GSTR-3B (with an option of quarterly filing of GSTR-1 to small taxpayers). Additionally, the registered person is also required to furnish an annual return in FORM GSTR-9. The GST Law has specified the due date for this return to be December 31 of the subsequent financial year. Accordingly, for FY 2017- 18, the due date is December 31, 2018. However, recently, the CBIC has issued a press release according to which it has been decided to extend the said due date to March 31, 2019. The official notification in respect of such extension is awaited.

1.2. Legislative Framework Section 44 of the CGST Act, 2017 prescribes the provisions in relation to an annual return. It mandates every registered person, other than those mentioned hereunder, to file an annual return in FORM GSTR-9 for every financial year: a) An Input Service Distributor (ISD) b) A Tax Deductor at source c) A Tax Collector at Source d) A casual taxable person e) A non-resident taxable person

A composition taxpayer is also required to furnish his annual return in FORM GSTR- 9A. Similarly, an e-commerce operator would file the said return in FORM GSTR-9B.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

2. FORMAT OF FORM GSTR-9 GST Annual Return has been highly discussed and deliberated at several platforms. It is important to note that a similar requirement of filing annual return existed in the VAT regime as well and it allowed amendments to details furnished in the entire year. Post the implementation of GST, till the time the format was not issued by the CBIC, it was anticipated that just like VAT, annual return under GST would also entail fields which would allow the assesse to rectify errors committed in the returns filed during the financial year. However, on September 04, 2018, vide notification # 39/2018 – Central Tax, the CBIC released the format of annual return to be furnished in FORM GSTR-9. From an analysis of the format, it can be concluded that GSTR-9 is a report of the information already furnished and not of what should have been furnished in the ideal case. Majorly, it is a consolidation of all the monthly returns, and hence, there remains no scope to compensate any inadvertent error that might have crept in earlier. The major headings are discussed hereunder:

2.1 Pt. I of Form GSTR-9

This is the first part of the annual return requiring basic details i.e. the FY to which the annual return pertains, the GSTIN (i.e. Goods and Services Tax Identification Number) of the registered person and his legal and trade name.

• Taking into account the effective date of GST implementation, for the purpose of the first year post GST implementation, all the details in the subsequent fields would pertain to a period of 9 months commencing from July 01, 2017 to March 31, 2018. • The legal name and trade name should be verified with the certificate of registration under GST. 2.2 Pt. II of FORM GSTR-9

This section involves fields for reporting outward supplies, including domestic supplies made to registered persons as well as unregistered persons, exports, inward supplies liable to reverse charge mechanism etc. It is important to understand that the details entered here should be in line with those entered in returns filed during the year, especially GSTR-1. A detailed analysis of the various fields has been done hereunder:

4 Details of advances, inward and outward supplies on which tax is payable as declared in returns filed during the financial year

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

4A Supplies made to un-registered persons (B2C)

Details required:

• Inter and intra state taxable outward supplies made to unregistered persons, irrespective of the invoice value • Credit / debit notes issued in respect of such supplies • Amendments to such supplies declared in returns filed for the months up to March, 2018

4B Supplies made to registered persons (B2B)

Details required:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

• Outward taxable supplies (excluding supplies to SEZ units)made to registered persons • Credit / debit notes and amendments in respect of such supplies are NOT to be adjusted for deriving the final figure

4C Zero rated supply (Export) on payment of tax (except supplies to SEZs)

Details required:

• Export of goods and services executed with payment of tax • Credit / debit notes and amendments in respect of such supplies is NOT to be adjusted for deriving the figure to be reported

4D Supply to SEZs on payment of tax

Details required:

• Supplies made to Special Economic Zones with payment of tax • Credit / debit notes and amendments in respect of such supplies is NOT to be adjusted for deriving the figure to be reported

4E Deemed Exports

Notification No. 48/2017-Central Tax notified a few supplies to be treated as deemed exports. These are transactions where even though the goods supplied do not leave India, the transactions have been given a status equivalent to that of exports, i.e. the supplier is entitled to several tax benefits. It includes supply against advance authorization or supply to an EOU. The notified supplies will be considered as deemed exports only from 18.10.17. Before this date the said supplies were not categorized as deemed export.

4F Advances on which tax has been paid but invoice has not been issued

The GST Law requires that upon receipt of advances, a receipt voucher is to be issued. It is only when the supply is made that the tax invoice is issued. Accordingly, advances in respect of which no invoice has been issued but tax has been paid in the relevant FY are required to be reported here.

4G Inward supplies on which tax is to be paid on reverse charge basis

Details required:

• Import of services • Inward supplies from registered / unregistered persons liable to RCM • Adjustment of advances and credit / debit notes issued in respect of such supplies

4I and 4J capture information pertaining to credit / debit notes issued in respect of B2B supplies, exports, deemed exports and supplies to SEZ. Information pertaining to amendments in such supplies is entered in 4K and 4L.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

5 Details of Outward supplies on which tax is not payable as declared in returns filed during the year

Table # 5 of GSTR-9 deals with transactions on which no tax liability arises. These include exports and supplies to SEZs without payment of tax. Outward supplies on which the recipient is liable to pay tax under reverse charge will also be entered here. Additionally, exempted, nil-rated and non-GST supplies and value of “no supply” are also required to be reported at gross figures, i.e. before giving the effect of credit / debit notes and amendments. Such credit / debit notes and amendments are required to be disclosed separately.

2.3 Pt. III of FORM GSTR-9

6 Details of ITC availed as declared in returns filed during the financial year

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

The entire table 6 of the annual return requires information pertaining to ITC availed during the concerned financial year. The fields, in general, are similar to the ones in the monthly return in FORM GSTR-3B. However, unlike the monthly return, GSTR-9 requires the registered person to break the amount of ITC into ITC on inputs, input services and capital goods. This additional detail can be obtained from the input tax credit register maintained by the said person. In addition to these details, the person is then required to feed the amount of transitional credit availed by way of TRAN-I and TRAN-II. Further, there is a separate field for disclosing ITC availed through FORM ITC-01 and ITC-02 on account of sale, merger, demerger, and other special cases.

7 Details of ITC reversed and ineligible ITC as declared in returns filed during the financial year

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

This section requires information pertaining to reversals of ITC made in the returns filed during the financial year. Considering the formulae and methodology as prescribed in the format, it is interesting to note that to derive the correct figure of net ITC, the person would be first required to add the amount of ineligible ITC (Section 17(5)) to the total ITC availed and then reverse the same in 7E. This is contradictory to the disclosure mechanism in the monthly return i.e. FORM GSTR-3B wherein the amount of ineligible ITC is never availed but rather directly disclosed as ineligible.

8 Other ITC related information

Table # 8 of the Annual Return reconciles ITC as per GSTR-2A with the provisional credit availed in returns. The taxpayer is also required to classify the differential figure into amount of ITC available but not availed and ITC available but ineligible. It is important to note that the ITC which was available but not availed or was available

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

but ineligible shall lapse and will have to be booked as an expense resulting in loss of credit and profitability at the same time.

2.4 Pt. IV Details of tax paid as declared in returns filed during the financial year

Table # 9 requires details of tax paid in cash or by utilizing the balance of the electronic credit ledger along with the payment towards interest, late fee and penalty.

2.5 Pt V Particulars of transactions for the previous FY declared in returns of April to September of current FY or up to date of filing of annual return of previous FY whichever is earlier

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Where any supplies / tax pertaining to the relevant FY have been declared or reduced in the returns filed for the months beginning April to September of the subsequent FY or up to the date of filing the annual return, whichever is earlier, the details thereof are to be provided in Table #10 and #11. In cases wherein the amendments made do not affect tax or give rise to a new supply transaction, for example change in supplier’s GSTIN, changes in invoice number, etc., such amendments are not required to be disclosed in Table #10 and #11. The additional tax liability is dealt with in Table #14.

Similarly, where any ITC previously availed is reversed in the said period, the details thereof is required to be fed in #12. Further, in cases where the registered person misses out any credit pertaining to FY 17-18 in the returns for the FY and the same has been availed subsequently, detail thereof is required to be provided in #13.

2.6 Pt. VI Other Information

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

• Details of demands i.e. total demand, amount paid and demand pending, and refunds i.e. refund claimed, sanctioned, rejected and the amount of refund pending • Details of supplies received from composition taxpayers • Deemed supply, i.e. where inputs (capital goods) sent for job work are not received back by principal within 1 year (3years) • Goods sent on approval not returned • HSN wise summary of both outwards and inward supplies

It is pertinent to note that the HSN wise summary of outward supplies was required to be stated in GSTR-1, but rate-wise segregation was not done by the taxpayers. Further, HSN Summary for inward supplies was not required to be reported in the monthly return.

3. LATE FEE, PENALTY AND INTEREST In case of failure to furnish the annual return in FROM GSTR-9 by the specified due date,

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

• Late fee equivalent to `100 per day under CGST and SGST each shall be levied subject to a maximum amount calculated at 0.25% of the turnover in the respective State or Union Territory.

• Further, interest shall also be levied on the outstanding tax amount to be paid @ 18% per annum.

• A general penalty extending up to `25,000 may be levied

4. POINTS TO PONDER

• No revision possibilities The annual return does not come with an option to revise. Therefore, it is required to be dealt with utmost skepticism for the very reason that the same will be cited by various stakeholders including auditors, tax authorities, etc. for taking reference in their dealings in matters relating to tax governance. • Nil annual return In case of a registered person who has not made any supply during the entire FY, a nil annual return is required to be filed. • Cancellation of registration during the FY In case of a person whose registration has been cancelled during the financial year, is required to file a final return. Only a registered person is required to file an Annual return.

5. ISSUES It is apparent that GSTR-9 format i.e. Annual Return has new and vivid details which are not reasonably maintained by a common taxpayer and thus the compilation of the same is a time- consuming exercise. There are also a few interpretational issues which require an overall insight. A few of these are: a) Disclosure of credit notes issued in subsequent FY in respect of supplies made in previous FY: One view to this is that the issuance of credit / debit note should be considered as a separate transaction taking place in 2018-19 and accordingly, should not be reported in Annual Return of 2017-18. On the other hand, another view is that the same should be reported in Table #10 or #11. This is because in the Annual return for the subsequent FY, there is no separate field dedicated to this. However, clarity in this respect is required. b) Practical Difficulties in collating data The format of annual return requires certain data which has not been entered in the monthly returns filed during FY 2017-18. These include: • Supplies from composition taxpayers • Bifurcation of ITC availed into ITC of inputs, input services and capital goods c) Reconciliation of credit availed with GSTR-2A A taxpayer may have availed the correct amount of credit based on the invoice but the invoice may not appear in his GSTR-2A. Accordingly, in the section requiring reconciliation of credit availed with GSTR-2A, a negative differential figure would arise. Clarity is required with respect to the treatment of such credit. d) Differences in GSTR-1 and GSTR-3B In cases where incorrect reporting has been done in GSTR-1 for any particular month and the same has not been amended, there is lack of clarity as to whether

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

the taxpayer should disclose the correct figure as per GSTR-3B or stick to the presentation made in GSTR-1. e) “No Supply” transactions As per the instructions issued by CBIC in respect of the annual return, value of “no supply” is also required to be disclosed in Table #5D to 5F. It is important to understand that the term “no supply” generally refers to activities which are not considered as supply and are specified under Schedule III of the CGST Act, 2018. Apparently, it is incorrect to disclose such transactions as exempted, nil-rated or non-GST. Therefore, ambiguity arises which needs to be addressed. f) Issues faced by service providers In the erstwhile regime, since manufacturers were liable to comply with the excise law, they prepared and maintained CENVAT registers. In general, the format of CENVAT registers included details pertaining to HSN. Accordingly, many manufacturers have continued the practice of maintaining details pertaining to HSN for inward supplies even in the GST Regime. However, since there was no such requirement for service providers in the erstwhile regime and the current format of monthly returns also did not require such a detail, there is a remote possibility of maintaining such details.

6. OPPORTUNITIES FOR CAs With an extensive effect on major aspects of business operations, the rollout of GST has been a game-changer for the Indian economy. As has been wisely said, an individual either adapts to change or gets left behind. Accordingly, keeping abreast with the new law is must for any CA who wishes to grab this opportunity of increasing their client base. Since the current GST practice centres around compliance and ensuring minimum credit leakages, accordingly, there is a need for assistance from a professional being an expert in accounting and statutory provisions. Further, unlike the VAT regime wherein the annual report and audit assignments were usually taken up by sales tax practitioners, in GST there is a specific requirement of getting the certification done only by a Chartered Accountant or a Cost Accountant. With the ongoing amendments in GST and the requirement of filing the annual return with all its new and vivid details, CAs have an opportunity as well as a responsibility towards their clients to assist them.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

SPECIAL SESSION – 3

“Be an Effective Entrepreneur”

BY SHRI. DEVANGG KARIA, MUMBAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” SHRI DEVANGG KARIA, MUMBAI Mr. Devangg Karia is founder of “Di CUBE”. The Core Purpose of his company is to Bring Happiness in the lives of everyone. The organization is known as “Hub for Infinite Growth”. With his belief of setting high standards, personal enthusiasm and achieving set goals Mr. Karia is a coveted trainer, Self Help Motivator, educator, high performance coach, realist, philosopher, entrepreneur & an innovator. Mr. Karia’s expertise lies in the areas of behavioural as well as functional skills training. He has immense knowledge of Sales and Marketing. He has acquired his management education in Marketing after completing his graduation in Commerce. He has 14 years of working experience with well -known companies like Smart Training & Consulting Pvt. Ltd; Monstor.com India Pvt. Ltd; Mak Media & Creations Pvt Ltd; Astrum Consulting and Granton Advertising Pvt. Ltd. A business motivational speaker and a riveting storyteller, Devangg Karia leads audiences to a deep state of listening. This allows them to relax and enjoy but also experience and process the content of his message within their own professional environments. Thus, they are able to immediately integrate the learning’s into their working lives. In a world where coaches, educators and motivators are hell-bent on convincing you that creating your best life is all about buying into their philosophy, their program and their products, Devangg Karia is an anomaly. Mr. Karia is not about convincing people that he’s the answer to their problems; in fact, he knows he’s not. He teaches that you’re the solution (and the problem). He teaches that forever change is a process which works from the inside out… and that too many people try and fix the internal stuff with external solutions…He’s kind of blunt, challenging, honest, silly, amusing and confronting (periodically offensive) but he knows what works and if you’re genuinely ready to change then perhaps you will connect with him. His Training Workshops have helped in transforming teams and individuals that have led organizations to achieve superior results. His recent programs for Entrepreneurs at Delhi, Banglore, Hyderabad, Pune, Raipur, Rajkot, Surat, Ahmedabad, Nagpur and Mumbai were highly appreciated. The audience was enthralled and energized. They are looking forward to many more training sessions with Mr. Devangg Karia. Mr. Devangg Karia is associated with few of the companies as a Sales Coach where he is accountable for the entire Sales Team’s performance & productivity. He not only trains them on selling skills but fire up the Sales Force by monitoring their daily, weekly, monthly, quarterly & yearly performance. He is more of a coach than a trainer to those companies. He believes that Sales people are not born. They are made and groomed. Everybody can develop, sharpen and hone the selling skills. Selling is a craft and just like any other craft, it can be learnt, practiced and mastered.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” His captivating personality and powerful message of "I am a Champion" resonates with audiences long after his presentations end. “It doesn’t matter how hard we look for a solution, when we’re looking in the wrong place” Devangg believes that anyone can create amazing change and incredible results in any area of their life in a relatively short period of time, if they are prepared to get a little uncomfortable, see old things in a new way, and open their mind and their heart to a different way of thinking and being. “The biggest obstacle to our success is not our life situation, environment, education, genetics, time availability, parental support, bank balance or God-given talent… It’s US; our attitude, our thinking, our destructive habits, our excuses, our procrastination, our inability to make significant decisions, our amazing ability to blame, our fear, our pride, our ego, our apathy and our laziness. It’s not about what’s going on around us; it’s about what’s going on within us. Once we start to change how we see ourselves… we start to change our reality.” He believes that success doesn’t ‘happen to us’ or fall on our head; we create it also success has nothing to do with fate, destiny or chance and everything to do with attitude, passion and action. If you want to be like everyone else; then do what everyone else does. “If you want to be exceptional, then do exceptional things”. He has also conducted many open programs where the delegates from Financial Institutes, Directors, Partners, Proprietors, SMEs & many Sales Heads, Vice Presidents have taken the part. He is also coaching Businessmen from SME segment in the city of Mumbai, Pune, Surat, Delhi, Banglore, Ahmedabad, Raipur, Hyderabad & Rajkot. His passion for training has made him the most accepted trainer in his past organizations. He is lovingly known as a “Sales Guru” by his followers and in Entrepreneur Segment many of his Entrepreneur clients refer him Mentor of Entrepreneurs.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

TECHNICAL SESSION – 3

“ACCOUNTS & AUDITS”

:SESSION CHAIRMAN: CA PREMNATH D HYDERABAD

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA PREMNATH D, HYDERABAD

CA. Premnath D. has over 22 years (15years Post qualification) of professional & functional experience in Accounting/ Costing/Direct & indirect taxes (Income tax, Excise Duty, Customs Duty, and Sales Tax)/Inventory Systems including extensively in the computerized environment. Sir has IT Skills in applications like SAP, Tally, Profit, Tata-Ex, Wings, Focus, Quick Books & other customized packages, Good working knowledge in Ms Oce tools. Sir is Presently Partner, M/s C. Ramachandram & Co., Chartered Accountants, Hyderabad. Sir had also handled internal audit, direct and indirect Tax compliance, Company Law compliance, FEMA compliance for the following Group of Companies: 1. Penna Group of Companies (Around Rs. 4000 Cr of Group Turnover) Reporting as a Retainer to Mr. Petluru Venugopal Reddy Director Finance on following matters a) Penna Cement Industries Limited Reporting as a Retainer to Mr. Petluru Venugopal Reddy Director Finance on following matters i) Monthly Budgets and actual ii) Review of Daily Production Reports iii) Direct and Indirect Tax compliances iv) Company Law Matters v) FEMA Matters vi) Review of Working capital requirements and projections vii) Finalilsation of accounts and dealing with Statutory Auditor viii) Review of Post implementation of SAP b) Power Companies (5 Hydel and thermal power) i) Review of Daily cash flows ii) Capitalization of Capital work in progress 2. Rain Group of companies - Review of Taxation related to merger, demerger etc.,

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Sir has also worked as a Team Leader for 45 members performing Risk Containment Unit (RCU) for ICICI Bank, Hyderabad for All loan products of ICICI Bank. RCU is responsible for preventing frauds in the loan and liability portfolio of ICICI Bank, Hyderabad and setting up systems for preventing fraud and mitigating risk. Sir is a regular visiting faculty on “Audit under Computerized Environment & Excel as On Audit Tool” -- at Commercial Taxes Dept. Staff College, Hyderabad -- At National Academy of Customs, Excise, & Narcotics Regional Training Institute, Hyderabad.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. DHERYA PATHAK WRO

Pursuing Intermediate, RAJKOT

“Effective Internal Control System – An Aid to Audit”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Introduction

• The internal control system of a company consists of the polices and procedures established to provide reasonable assurance that specific entity objectives will be achieved. • In small business organizations, generally, the owner-manager controls the total activities of his business by his personal supervision and direct participation.

• For example; • The owner generally purchases required business materials and other properties. • He himself gives the appointment of employees, completes the contract with them through discussion and also keeps, constant watch over their activities. • He himself signs cheques for payments in different heads. • Since the signs all the cheques, he can easily have an idea what commodities, assets, and services he is signing for. • But with the expansion of business, the appointment of additional employees and officers is needed and the scope of business also widens. • Under such condition, it becomes almost impossible on the part of the manager to perform all the activities of the business alone for which he is to delegate authority and so his overall control tends to decrease. • In such circumstances introduction of internal control becomes essential.

MEANING

Internal control – The process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity's objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, safeguarding of assets, and compliance with applicable laws and regulations. The term "controls" refers to any aspects of one or more of the components of internal control.

AIMS OF INTERNAL CONTROL SYSTEM ✓ Breaking the chain of the work in a manner so that no single person can handle transaction from the beginning to end. ✓ Segregation of accounting and custodial functions. ✓ Securing proper documentation at each stage.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ✓ Safeguarding of assets. ✓ Making errors and frauds difficult. ✓ Fixing responsibilities for the work and responsibility for deviants. ✓ Building up a system to locate the deviations and departures from the prescribed procedures and to detect frauds and errors automatically without much loss of time. ✓ Elimination of conflicting responsibilities. ✓ Minimising loss and wastage. ✓ Encouraging employees to do willing and good work. ✓ Discouraging employees from noncompliance with the prescribed procedures. ✓ Appraisal of the operations. ✓ Formulating a cut off procedure to separate transactions of two consecutive years.

Effect On Audit Procedure

Audit Procedure 1. Risk Assessment Procedure 2. Other Audit Procedure I. Compliance Procedure II. Substantive Procedure a. Test Of Details and A/C Balances (Vouching and Verification) b. Substantive Analytical Procedure

Characteristics of a Proper Internal Control System

An effective internal control system includes organizational planning of a business and adopts all work-system and process to fulfil the following targets:

1. Safeguarding business assets from stealing and wastage. 2. Ensuring compliance with business policies and the law of the land. 3. Evaluating functions of each employee and officer to increase efficiency in operation. 4. Ensuring true and reliable operating data and financial statements.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” It is to be kept in mind, a business organization, be it’s small or large, can enjoy the benefits of adopting an internal control system. Prevention of stealing-plundering and wastage of assets are a part of the internal control system.

EXAMPLES

1. Segregating the duties of the employees Segregation of the duties of the employees means that each employee is assigned with specific tasks. The person in charge of assets is not allowed to maintain accounts of the assets. Some other person maintains the accounts of these assets. Since different employees perform the same nature of transactions, the work of each is automatically checked. Segregation of the duties of the employees of an organization reduces the possibility of stealing assets and if stolen, detection becomes easier. For example, there is no scope for stealing cash by a cash-receiving employee where cash receipts accounts are maintained by a different employee.

2. Assigning specific duties to each employee

The employee assigned with a specific duty is held responsible for his assigned activities. If and when any problem arises the manager can immediately .identify the person concerned and holds him liable. Lost documents can easily be detected if the task of maintaining records is assigned to a particular employee and it becomes possible to know the recording process of transactions. An employee assigned with a particular job can easily provide necessary information regarding that job. Moreover, an employee feels proud if he is assigned with a particular job and tries to complete the job using die best of his skill.

3. Rotating job assignments of the employees

Some organizations rotate job assignments of employees at intervals to avoid fraud- forgery by the employees concerned. Under this policy, the employee concerned can easily understand that on the placement of somebody else in his place his dishonesty if it is done, will be detected. This ensures the honesty of an employee.

4. Using mechanical devices

Business concerns adopt various mechanical devices to avoid stealing, destruction,

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” and wastage of assets. Under the mechanical system, cash register, cheque- protectors, time-clock, mechanical-counters etc. are used as control methods. Since a cash-register contains locking-tape, each cash sale is recorded here. The amount of cheque is written on the cheque by the cheque-protector machine to avoid any sort of alteration. Arrival and departure of employees are recorded properly with the help of time- clock.

How is the effectiveness of the internal control system helpful to the auditor?

(i) Ascertain the reliability of the financial statements of the company:

The effectiveness of the internal control system of the company helps a lot to determine the extent to which the financial statements of the company are reliable. Where the internal control system of an organization is strong and effective, the financial statements of such an organization are reliable to a considerable extent, as there remain less chances of any misstatement or any error or fraud. On the other hand, if the internal control system is not that much effective, the financial statements of such organization may be less reliable. (ii) Decide the Nature, Timing and Extent of audit:

The effectiveness of the internal control system of an organization also helps the auditor to determine and decide the nature, timing and extent of the audit that is to be conducted by the auditor. If the internal control system is effective enough, then the extent of audit can be less and the can also be completed in a shorter period of time. On the other hand, if the internal control system is not much effective, audit may be stretched up to unnecessarily large extent and may also take more time to complete.

(iii) Decide the audit procedures to be performed:

The effectiveness of internal control system of the organization proves to be of great help to the auditor to decide what audit procedures are needed to be performed during the conduct of audit. Desired effectiveness of internal control system relieves the auditor as he doesn’t need to perform more audit procedures, and he can conduct his audit with much ease. Other way round, when the internal control system is not effective enough, the auditor may have to perform more audit procedures which may make the audit work lengthy and difficult.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

(iv) Helps to form an opinion on the financial statements of the company:

Internal control system of the company assists the auditor to form an opinion on the financial statements of the company, that whether the financial statements of the company give a true and fair picture of the company or not.

When the controls are effective, the auditor may be driven to give an unmodified opinion on financial statements. But in case the controls are less effective, the auditor may have to rely more on the audit procedures performed by him, and it may not be necessary that the auditor shall give an unmodified opinion. (v) Ascertain the possibility of occurrence of Fraud and Error in the entity:

The internal control system of the company plays a very important role in determining the extent and possibility of fraud and error that occur in (vi) Ascertain the extent of truth and fairness of financial statements: Effective internal control system implies that the activities carried on in the organization are under check and there are less chances of frauds and error. On the other hand, if the controls are less effective, then there are more chances of frauds and errors in an organization.

Effectiveness of internal control system aids the auditor to determine the extent of truth and fairness represented by the financial statements of the company. The more the internal control system is effective, the more it ensures the higher extent of truth and fairness of the financial statements. On the other hand, where the internal control system is less effective, the auditor may be of the view that the financial statements do not give a desirable level of true and fair view.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Inherent Limitations in Internal Control over Financial Reporting

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

1. Collusion Your internal control systems can be overcome if multiple employees work together to perform fraud. Although each employee may face internal controls that limit what they can do by themselves, they can go around this limit by pairing with someone who can. One of your employees may be authorized to enter a voucher into your accounting system but isn’t allowed to print cheques. Another employee may be authorized to print cheques but can’t set up to enter vouchers. If these two employees work together, they can overcome the limits each one faces individually to produce a fake cheque. There’s no way to overcome collusion other than having trustworthy employees.

2. Incorrect Judgment A lot of your internal controls are set up based on your professional judgment. You put cash in your vault because you judge cash to be something someone would want to steal. You hire staff based on how you evaluate their character. You judge what responsibilities to give each of your workers based on how well you believe they can do their jobs. Because setting up internal controls isn’t an exact science, you have to rely on the information you have and try to set up the best rules and processes. Sometimes, your professional judgment is wrong, you fail to set up an internal control, or you don’t assign the right task to the right employee. Continually research and learn the best internal control practices to overcome this limitation.

3. Failure to Train Employees Your internal controls are only as strong as your employees’ understanding about what’s going on. Training your employees on what they’re supposed to do is a critical function of making internal controls work. This training should also tell your workers what they are not allowed to do.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Although your employees don’t need to know the reasons why you’re setting up each internal control, you must let them know what their duty is, the purpose of the limits put on them, and the consequences if they overcome these limits. Employees should also know general practices on how to uphold internal controls. For example, everyone in your business should know their passwords, how to set strong passwords, and that they shouldn’t keep written trails of their login information.

4. Management Override A common practice of internal controls is to override the control. Although you may have policies and procedures in place, there may be exceptions to the rule where people are allowed to skip certain steps. For example, imagine that you have an employee with the authorization to approve invoices up to $5,000. If you’re on vacation and an important invoice arrives for $6,000, the employee may decide to override the company’s internal control policy to approve the invoice and get it paid. Although these situations may not produce bad results, an auditor will want to see you using controls consistently. Having an internal auditor can help you understand where your controls are falling short or being misused. The first step is to understand that your internal controls can be overcome. Although it’s great to have internal controls, there are limits in all controls, and you must continually evaluate whether they’re working correctly.

Conclusion

➢ Thus, for every small and big enterprise existence of internal control system is must in order to safeguard business assets against frauds.

➢ If this system is built effectively then chances of any material misstatement can be reduced to negligibly low level which aids the working of auditor to the great extent.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. SEJUL DOSHI WRO0566008

Article Assistant at H. Jamnadas & Co., RAJKOT

“Accounting Aspects of Forex and Derivative Transactions”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” FOREX TRANSACTIONS

Ind AS 21 “The effects of changes in foreign exchange rates” addresses the accounting for:

(1) Transactions in Foreign Currencies (2) Foreign Operations FOREIGN CURRENCY TRANSACTIONS

A foreign currency transaction is a transaction which is denominated in or requires settlement in a foreign currency. INITIAL RECOGNITION

On initial recognition, it should be recorded in the reporting currency by applying the exchange rate at the date of the transaction. REPORTING AT EACH BALANCE SHEET DATE

The treatment at each balance sheet date depends on whether the item is:

(1) Monetary or Non-Monetary (2) If Non-Monetary, then carried at Historical Cost or Fair Value • Monetary items should be reported at the closing rate • Non-Monetary items, which are carried at historical cost should be reported using the exchange rate at the date of transaction • Non-Monetary items, which are carried at fair value should be reported at the exchange rate that existed when the values were determined • Contingent Liability should be disclosed by using the closing rate RECOGNITION OF EXCHANGE RATE DIFFERENCES

The exchange differences arising on the settlement or reporting of monetary transactions should be recognized as income or expense in the period in which they arise. When the transaction is settled within the same accounting period as that in which it occurred, all the exchange difference is recognized in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognized in each intervening period up to the period of settlement is determined by the change in exchange rates during that period.

For Example – A Ltd. Borrowed US$ 1,00,000 on 01/01/2018, which will be repaid as on 31/07/2018. The financial year ends on 31/03/2018. Exchange Rate between INR and US$ on different dates are as under:

01/01/2018 – 1 US$ = Rs. 48

31/03/2018 – 1 US$ = Rs. 50

31/07/2018 – 1 US$ = Rs. 49.5

Journal Entries in the books of A Ltd.

Date Particulars Debit (Rs.) Credit (Rs.)

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

01/01/2018 Bank A/c Dr. 48,00,000 (1,00,000 x 48) To Foreign Loan A/c 48,00,000 31/03/2018 Foreign Exchange Difference A/c Dr. 2,00,000 [1,00,000 x (50-48)] To Foreign Loan A/c 2,00,000 31/07/2018 Foreign Loan A/c Dr. 50,000 To Foreign Exchange Difference A/c 50,000 [1,00,000 x (50-49.5)] 31/07/2018 Foreign Loan A/c Dr. 49,50,000 To Bank A/c 49,50,000 TRANSLATION OF FINANCIAL STATEMENTS OF FOREIGN OPERATIONS

Ind AS 21 defines foreign operation as an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are generally based or conducted in a country or currency other than those of the reporting currency.

Foreign Currency is the currency other than the functional currency of the entity.

Functional Currency is the currency of the primary economic environment in which the entity operates.

Presentation Currency is the currency in which the financial statements are prepared.

There maybe 2 cases for translation of foreign operations:

(1) Foreign Operation’s Functional Currency is the Functional Currency of the Reporting Enterprise

a) If Foreign Operations maintain books and financial statements as per functional currency, then no need for additional adjustments b) If Foreign Operations maintain books and financial statements as per currency other than functional currency, then translate the financial statements in the functional currency using exchange rates: • Income/Expenses – Average Rate • Assets/Liabilities: Monetary – Closing Rate Non-Monetary – If carried at cost – Spot Rate on the actual date of purchase If carried at fair value – Spot Rate on the date of valuation • The foreign exchange gain/loss to be transferred to Statement of Profit and Loss

(2) Foreign Operation’s Functional Currency is not the Functional Currency of the Reporting Enterprise

Translate the financial statements in the functional currency using exchange rates:

a) Income/Expenses – Average Rate b) Assets/Liabilities: • Monetary – Closing Rate • Non-Monetary – If carried at cost – Closing Rate

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

If carried at fair value – Closing Rate The foreign exchange gain/loss is transferred to ‘Foreign Currency Translation Reserve’.

DERIVATIVE TRANSACTIONS

Ind AS 109 “Accounting and Reporting of Financial Instruments” defines a Derivative as a contract with the following three characteristics:

(1) Derives its value from an “underlying” (2) No or Nominal Initial Net Investment (3) Future Settlement

• The buyer agrees to buy/sell an underlying on a specific date at a specific price. • Derivatives can be used either for risk management or for speculation • Derivatives can be exchanged in two ways: (1) Over the Counter (OTC) (2) Exchange Traded Derivative (ETD) DERIVATIVES CONTRACTS AND ITS ACCOUNTING ASPECTS

(1) Forwards (2) Futures (3) Options (4) Financial Swaps

1) FORWARD CONTRACTS

Forward Exchange Contract means an agreement to exchange different currencies at a Forward Rate. In a forward contract, which is not intended for trading or speculation purposes, the premium or discount arising at the inception should amortized as expense or income over the life of the contract. But if such contract is intended for trading or speculation purposes, the premium or discount on the contract is ignored and at each balance sheet date, the value of contract is marked to its current market value and the gain or loss on the contract is recognized.

For Example – Mr. A bought a forward contract for 3 months of US$ 1,00,000 on 01/02/2018 at Rs. 49.15 per dollar. Exchange Rate per dollar on 01/02/2018 was Rs. 48.85.

Recognition of Profit

Forward Rate - Rs. 49.15 Less: Spot Rate - (Rs. 48.85) Premium on Contract - Rs. 0.30 Contract Amount - US$ 1,00,000 Total Loss (1,00,000 x 0.30) - Rs. 30,000

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Contract Period – 3 months 2 months falling in the year 2017-18 Therefore, Loss to be recognized (30,000/3) = Rs. 20,000 Rest Rs. 10,000 loss will be recognized in the following year.

The exchange rate differences on such a contract should be recognized in the statement of profit and loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such contract should be recognized as income or expense for the period.

2) FUTURE CONTRACTS

A future contracts is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. If the investor feels that the price will rise in the future, theN he goes Long (to buy) and if he feels that the price will fall in the future, then he goes Short (to sell). Futures are standardized contracts traded on a centralized exchange. They are less risky as they have clearing houses that guarantee the transactions. Futures Contract are marked-to-market daily which means their value is determined day-by-day until the contract ends. Future contracts can settle over a range of dates.

(i) Accounting at the inception of a contract: There will be no accounting at the inception of a contract as there is no initial margin payable.

(ii) Accounting at the time of daily settlement: In case of Gain In case of Loss Bank A/c Dr. Mark-to-market margin – Equity Index Futures To Mark-to-market margin – Equity Index A/c Dr. Futures A/c To Bank A/c Debit/credit balance in the “mark-to-market margin -Equity index futures account”, represents the net amount paid/received.

(iii) Accounting for open positions as on Balance Sheet dates: Provision for anticipated loss, equivalent to the net payment made, should be created but anticipated profit should be ignored and no credit for the same should be taken in the profit and loss account. Provision for Anticipated Loss Profit and Loss A/c Dr. To Provision for Loss on Futures A/c (iv) Accounting at the time of final settlement:

The profit/loss, on final settlement, should be recognized in the profit and loss account by corresponding debit/credit to “mark-to-market margin -Equity index futures account”. However, where a balance exists in the provision account created for anticipated loss, any loss arising on such settlement should be first charged to such provision account, to the extent of the balance available in the provision account, and the balance of loss, if any, should be charged to the profit and loss account.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

In case of Gain In case of Loss Mark-to-market margin – Equity Index Provision for Loss on Options A/c Dr. Futures A/c Dr. To Mark-to-market margin – Equity Index To Profit and Loss A/c Futures A/c • EXAMPLE:

On 01/02/2018, Mr. S purchased a future contract (long position) of 1000 equity shares to be settled on 30/04/2018 at Rs. 500. The price determined on various dates are as follows:

28/02/2018 – 510

31/03/2018 – 480

30/04/2018 – 520

Journal Entries in the books of S Ltd.

Date Particulars Debit (Rs.) Credit (Rs.) 28/02/2018 Bank A/c Dr. 10,000 To Mark-to-market margin A/c 10,000 31/03/2018 Mark-to-market margin A/c Dr. 30,000 To Bank A/c 30,000 31/03/2018 Profit and Loss A/c Dr. 20,000 To Provision for Loss on Futures A/c 20,000 30/04/2018 Bank A/c Dr. 40,000 To Mark-to-market margin A/c 40,000 30/04/2018 Mark-to-market margin Dr. 20,000 To Profit and Loss A/c 20,000 30/04/2018 Provision for Loss On Futures A/c Dr. 20,000 To Profit and Loss A/c 20,000

3) OPTIONS CONTRACT

Options Contracts grants the holder the right to buy/sell specified quantity of the underlying asset in the future at a particular price. The word ‘Option’ means that the holder has the right but not an obligation. Calls and Puts are the most common options contract.

(1) Call Option

It gives the buyer the right to buy a security in the future by paying a premium.

(2) Put Option

It gives the buyer the right to sell a security in the future by paying a premium.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

(i) Accounting at the inception of a contract: Call Option In the books of buyer Option Premium A/c Dr. To Bank A/c Put Option In the books of seller Option Premium A/c Dr. To Bank A/c In the balance sheet, such account should be shown separately under the head ‘Current Assets’. (ii) Accounting for open positions as on balance sheet dates:

Call Option In the books of buyer, if Profit and Loss A/c Dr. Premium Paid > Premium To Provision for Loss on Options A/c prevailing on the balance sheet date. Put Option In the books of seller, Profit and Loss A/c Dr. If Premium Paid < To Provision for Loss on Options A/c Premium prevailing on the balance sheet date. (iii) Accounting at the time of final settlement: Call In the books of buyer: Profit and Loss A/c Dr. Option To recognize premium as expense To Option Premium A/c Final settlement income, if any Bank A/c Dr. To Profit and Loss A/c Put In the books of seller: Profit and Loss A/c Dr. Option To recognize premium as expense To Option Premiu m A/c Final settlement income, if any Bank A/c Dr. To Profit and Loss A/c

• EXAMPLE:

On 01/03/2018, Mr. D purchased call option for 1000 equity shares at Rs. 100 per share to be settled on 30/04/2018 by paying a premium of Rs. 10 per share. On 31/03/2018, the premium on call option was Rs. 6 per share. On 30/04/2018, the spot market price was Rs. 120.

Journal entries in the books of Mr. A

Date Particulars Debit (Rs.) Credit (Rs.) 01/03/2018 Option Premium A/c Dr. 10,000 To Bank A/c 10,000 31/03/2018 Profit and Loss A/c Dr. 4,000 To Provision for Loss on Options A/c 4,000 30/04/2018 Profit and Loss A/c Dr. 10,000 To Option Premium A/c 10,000 30/04/2018 Bank A/c Dr. 20,000 To Profit & Loss A/c 20,000 30/04/2018 Provision for Loss on OptionsA/c Dr. 4,000 To Profit and Loss A/c 4,000

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CONCLUSION

Thus, Indian AS 21 and 109 clearly states the accounting aspects of foreign exchange and derivative transactions.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. RIYA HUDA WRO0657629

Pursuing Intermediate, RAJKOT

“Convergence from AS to Ind AS”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Explanation of topics - 1) AS - 2) IAS & Convergence - 3) IND AS

1) AS A) Reason For the Birth Of Accounting standard (AS) ➢ There were different accounting alternatives available for the preparation of financial statements. ➢ Therefore Accounting Standards were introduced which reduced the available alternatives and ensuring comparability of financial statements of different enterprise.

B) Standard Setting Process ➢ The ICAI (Indian Institute Of Chartered Accountant) has constituted Accounting Standard Board (ASB) in 1977. ➢ The ASB considered the international Accounting Standards (IASs) / International Financial Reporting Standards (IFRS) while framing Indian Accounting Standards (ASs) and tried to integrate them according to business environment in our country and laws applicable. ➢ Council of the ICAI is not empowered to make any modifications in the draft Accounting Standards formulated by ASB without consulting with the ASB. ➢ ASB committee formed under ICAI consists of representative from government departments, academician, other professional institution like ICAI, ICSI. ➢ National Financial Reporting Authority (NFRA) recommends standards to Ministry of Corporate Affairs. ➢ MCA has to spell out accounting standards applicable for companies in India.

C) STANDARDIZING DIVERSE ACCOUNTING POLICIES

➢ As to eliminate the non comparability of financial statements and thereby improving the reliability of financial statements to the maximum possible extent. ➢ Provide a set of standards accounting policies, valuation norms and disclosures requirement. ➢ As to eliminate the non comparability of financial statements and thereby improving the reliability of financial statements to the maximum possible extent. ➢ Provide a set of standards accounting policies, valuation norms and disclosures requirement. ➢ Another advantage of standardization is reduction of scope for creative accounting. MEANING (To twisting of accounting policies to produce financial statements favorable to a particular interest group.) ➢ In brief the accounting standards aim at improving the quality of financial reporting by promoting comparability, consistency and transparency in the interest of users of financial statements.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” D) BENEFITS OF ACCOUNTING STANDARD (in brief) ➢ Standardization of alternative accounting treatments. ➢ Comparability of financial statements. ➢ Requirements of additional disclosures.

2) INTERNATIONAL STANDARDS A) INTERNATIONAL FINANCIAL REPORTING STANDARDS AS GLOBAL STANDARDS ➢ International Financial Reporting Standards (IFRS) comprises IFRS issued by IASB. ➢ IFRS are considered a “principles based” set of standards. ➢ Every nation is moving towards adopting them to some extent.

B) Need for convergence towards global standards ➢ There was need for globe to have standard accounting system. ➢ For e.g., the foreign investor cannot invest their capital in India as the reason behind it is that to invest in India they need to know the Indian accounting system which was totally different from their own system of accounting, therefore they resists to invest in India. ➢ Not only for India but for whole world it became a need to standardize accounts for international market and for international investor to invest.

C) Ways for standardizing ➢ There are two ways for all country to comply with IFRS: • To adopt IFRS • To converge to IFRS Meaning of to adopt IFRS:- Completely adopting Meaning to converge to IFRS:- Preparing own standard but in line with IFRS prepared by IASB.

D) India's need to convergence towards global std. and why not adopting? ➢ Each country has it own set of rules and regulations for accounting and financial reporting. Therefore enterprise decides to raise capital from market other than their country in which they are located, the rules and regulations of that other country will apply and this in turn will require that the enterprise to understand the difference between the rules governing the financial reporting in foreign country as compared to its own country.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ➢ Therefore translation and re-instatements are of utmost importance in a world that is rapidly globalizing in all ways. ➢ The harmonization of financial reporting around the world will help to raise confidence of investors generally in the information they are using to make their decisions and assess their risks. ➢ A strong need was felt by legislation to bring about uniformity, rationalization, comparability, transparency and adoptability in financial statements. ➢ The convergence of financial reporting and accounting standards is a valuable process that contributes to the free flow of global investment and achieves substantial benefits for all capital market stakeholders. ➢ It reduces the operational challenges for accounting firms and focuses their value and expertise around an increasingly unified set of standards. ➢ There are more disclosure requirement in IFRS and many other points that are not possible for us to adopt the same as it is so we have converged to IFRS rather than adopting it. E) Convergence to IFRS in India ➢ In India, ICAI has worked towards convergence by considering the application of IFRS in Indian corporate environment of Indian Accounting Standards with Global Standards. ➢ Full convergence involves adoption of IFRS in the same form as that issued by the IASB. While formulating the Accounting Standards, ICAI recognizes the legal and other conditions prevailing in India and makes deviations from the corresponding IFRS. ➢ For convergence of Indian Accounting Standards with IFRS, the Accounting Standards Board in consultation with Ministry of Corporate Affairs(MCA), has decided that there will be two separate sets of Accounting Standards i.e. 1) Indian Accounting Standards converged with the IFRS – standards which are being converged by eliminating the differences of the Indian Accounting Standards i.e. IFRS (known as IND AS) 2) Existing Notified Accounting Standards. F) Meaning: Carve outs/ins in IND AS • Care out : A different treatment in IND AS as compare to IFRS. • Carve ins: An additional guidance is inserted IND AS which is not there in IFRS. • Removal of options: This means that for some IFRS, the choices for accounting treatment are available but for some standards in IND AS as those choices have been removed. G) Carve outs 1) IND AS 1 / IFRS 1

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” o Related to long term loan breach of contract before balance sheet date but rectified before completion of audit. IND AS- done rectification then continues to show loan as long term. IFRS- show this as current liability 2) IND AS 17 / IAS 17 o Related to leases specifically operating leases exclamation clause IND AS - to compensate inflation IFRS - no compensation related to inflation. 3) IND AS 28/ IAS 28 o Related with investments in associates and JV o There should be same accounting policy being followed by the associated company and our company. IND AS – same accounting policy should be formulated but if not feasible then the company can follow its own. IFRS – compulsory to follow the same accounting policy. 4) IND AS 32/ IAS 32 o Related to financial instruments FCCB (Foreign Currency Convertible Bonds) IAS 32 – even if it is FCCB and fixed no. of equity then we have to dhow it as Financial Liability. IND AS 32 – Says that we have to follow equity method only, not to show in P&L A/C have to show shares in equity. 5) IND AS 101/ IFRS 1 o Related to the Property Plant And Equipment. IND AS 101 – Deemed cost concept exception because if we will give the resprospective effect than it will cause a problem. IFRS 1 – no such exception is available. 6) IND AS 101 / IFRS 1 o Related to FCMITDA a/c ( Foreign Currency Monetary Item Transaction Difference a/c) IND AS 101 - FCMITDA a/c method exist IFRS – no such method exists of FCMITDA a/c 7) IND AS 103 / IFRS 3

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” o Related to business combinations IND AS – the profit under the business connection is shown as other comprehensive income IFRS – such profit is shown under P&L a/c H) Applicability of IND AS For voluntary adoption the date of applicability was 1-04-2015, and for mandatory adoption the date of applicability was as per: a) Phase 1 : 01-04-2016 b) Phase 2 :01-04-2017

VOULANTARY ADOPTION ➢ IND AS can be voluntary adopted by any company with effect from 01-04-2015 i.e. Fy.2015-16. ➢ Once company has opts in IND AS, it can opt out, Means Company will have to follow IND AS in all subsequent years. ➢ Companies have to prepare comparative Financial Statements. ➢ IND AS shall be applied to comparative figures of Fy2014-15, if IND AS is applied for 2015-16. ➢ If a company opts for IND AS with effect from 1-04-2015 its holding company, subsidiary company, associate company and J.V. will have to mandatory follow IND AS.

MANDATOTARY ADOPTION PHASE 1 (from 1-04-2016): ➢ All companies (whether listed in India/outside India or unlisted) having net worth of rs.500 corers or more. ➢ The financial statements prepared for the first year of applicability should be comparative. ➢ If IND AS is applied on any company then, its holding, subsidiary, associated company and J.V. shall have to mandatory adopt IND AS irrespective of net worth. PHASE 2 (from- 1-04-2017): ➢ Is applicable on all listed company (listed company having net worth below 500 corers). ➢ On unlisted company having net worth more than 250 corers but less than 500 corers. ➢ If IND AS is applied on any company then, its holding, subsidiary, associated company and J.V. shall have to mandatory adopt IND AS irrespective of net worth.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

SPECIAL SESSION – 4

“Attitude is Everything!”

BY SHRI. SNEHAL DESAI, AHMEDABAD

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” SHRI SNEHAL DESAI, AHMEDABAD

Snehal B Desai is a B Tech and MBA (Fin). He did his BTECH from CEPT (Center for environment, planning and technology), Ahmedabad and than MBA from Gujarat University. Mr Desai is the first person from CEPT who opted for MBA. He started his career with Venture Capital Company Promoted by World bank and Asian Development bank named Gujarat Venture Finance Limited. While working with VC he was involved Due diligence, Structuring the deal and subsequently building the business through value addition. This is where he learnt the basis of entrepreneurship. Subsequently Mr Desai Joined Adani Group. Initially he was involved in laying down PNG CNG Network in Gujarat. Subsequently was involved in port development where he had run through a business life cycle in different capacity including feasibility, Funding , Project execution,business operation and strategic planning. His functional area includes financial closure , project report and bplan, debt syndication , Private equity placement. He also worked in energy sector with focus on renewable and on Oil and Gas exploration business as Techno commercial head, responsible for all techno commercial activitirs. With his Vast corporate experience, he is also a visiting faculty at IIM, Indian Institute of Foreign Trade (IIFT) ,S P Jain Mumbai, PDPU Gandhinagar, Entrepreneurship Development Institute of India, NIrma Institute of Managemen, London School of Business and other institutes. By now he has trained more than 40000 professionals including MBA, chartered Accountants and Company Secreatris. Mr. Desai is also a freelance writer for National English Daily. He has trained more than 2000 Faculties of MBAs. He is also a corporate trainer for BOB, IFFCO, Welspun Group, ONGC, NTPC, IOC ,ICICI and other organisation. With a Corporate and Academic Mindset, Mr desai is also a consultant to Number of SMEs where he adds value in terms of Building Sustainable organisation, Increasing sales and profitability, Bringing fund and VC investment, identifying new business for organisation, reducing working capital, Doing Financial restructuring and Cost Optimization. He is also a free lance writer for national daily and authoring a book.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

TECHNICAL SESSION – 4

“DIRECT TAX”

:SESSION CHAIRMAN: CA SUNIL TALATI HON’BLE PAST PRESIDENT, ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA SUNIL TALATI HON’BLE PAST PRESIDENT, ICAI MR. SUNIL TALATI, well known Chartered Accountant, has been elected as President of The Institute of Chartered Accountants of India for the year 2007-08. ICAI is an Institute, which governs the profession of Chartered Accountancy having 2,60,000 members and also the entire training and examinations of more than 8,00,000 students in the country, set up by an Act of Parliament. He was elected as Vice President of the Institute for the year 2006-07.It is for the first time in the 60 years history of the ICAI, a CA from Gujarat, Mr. Sunil Talati has been elected as the President. Mr. Sunil Talati is M.Com., LL.B., F.C.A. graduated from H.L. College of Commerce, had held various posts of office bearers like Secretary, Treasurer, Vice President etc. in Rotract Club, Junior Jayces and Junior Chamber. He was elected as First Rotract Governor in India and then was appointed as National Chairman of the Council of Rotract Governors. Doing practice under the name Talati & Talati having Office at Ahmedabad, Anand, Baroda, Surat, Mumbai, Cochin and Delhi. He had been Executive Member of Income-tax Bar Association in 1980 and Chartered Accountants Association, Ahmedabad and Sports Club of Gujarat Ltd. and in Board of Karnavati Club Ltd. since inception. In 1982 he was elected by securing highest votes in the entire Western Region of W.I.R.C. of Institute of Chartered Accountants of India and was appointed as Vice Chairman in the same year. He was appointed as Public Representative in the governing body of Ahmedabad Stock Exchange by Government of India, Ministry of Finance in 1985 & 1986. He was elected as president of Chartered Accountants Association, Ahmedabad for the year 1988-1989 and also selected as Member of Executive Committee of Gujarat Chamber of Commerce and Industry, Ahmedabad for the year 1988 and 1989. He has written several papers on Tax Laws and has given talks in various Seminars, Conferences and meetings all over Gujarat as well as all over the Country. For almost 20 years he was a Co-Author of the Ready Reckoner which is published in Gujarati. He was regularly contributing Article in Financial Express and was regularly writing as a Contributor and Editor in monthly Gujarati book called “Tax Reporter”. He was elected as a President of All Gujarat Federation of Tax Consultants for the Year 2013-14. He has been elected as a Member of Governing Council (Accounting / Auditing and Book Keeping Services Sector) governed by SEPC, set up by the Ministry of Commerce & Industry, Government of India for the years 2015 – 2017 and again for the term 2017-2019. It is first time in the history of Gujarat that a Chartered Accountant has been elected from the state of Gujarat as a member in of such a reputed Institution. In 2017 he has been appointed by Govt. of Gujarat as a member in the Fee Regulatory Committee for All Medical Colleges in Gujarat.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. CHIRAG KALAVADIYA WRO0508897

Article Assistant at A J Kansagra & Associates, RAJKOT

“Income Computation and Disclosure Standards – Impact Analysis”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” INCOME COMPUTATION & DISCOLSER STANDARDS IMPACT ANALYSIS • CONTANT 1. What is ICDS ? 2. Objective of ICDS. 3. Main Features of ICDS. 4. Applicability of ICDS. 5. Non Compliance of ICDS. 6. List of notified ICDS. 7. Brief Understanding of the all ICDS & It’s Impact analysis. 8. General Impact of ICDS

1. What is ICDS ?

a. Section145(1)–Income chargeable under the heads “Profits and Gains from Business or Profession ” or “ Income from other Sources ”– subject to 145 (2) –as per method of accounting regularly followed b. Section145(2)–the Central Government has power to notify “ICDS” c. CBDT vide notification dated March 31 ,2015 introduced 10 ICDS to be effective from April 1 , 2015 and shall accordingly apply for AY 2016-17 onwards. d. However , the said notification was withdrawn by a press release and vide Notification No.S.O.3079(E) dated September 29, 2016, the new notification was introduced with effect from AY 2017 -18 and onwards.

2. Objective of ICDS.

a. ICDS were developed with a view to minimising tax related disputes by bringing greater consistency in the application of accounting principles governing the computation of income. These standards were developed using the old Indian General Audit and Accounting Practices (GAAP).

3. Feature of ICDS.

a. ICDS is not meant for maintenance of books of account, but for the computation of income. b. Non-compliance to the standards may place the authority in a position of assessing the income on ‘best judgment’ basis. c. ICDS doesn’t have any criterion of income or turnover. d. Every ICDS, except on securities, provide for transitional provisions to facilitate first time adoption and consideration of the resultant impact.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” e. In the event of a conflict between the provisions of the Act and ICDS, the provisions of the Act will be given preference ahead of the latter. f. ICDS do not have prudence as a fundamental assumption except if it is specifically stated so in the respective ICDS. It may lead to an earlier recognition of income or gains or later recognition of expenses in comparison with the Accounts formulated under the existing Accounting Standards (AS). g. The Income Tax Act allows the Assessing Officer to conduct an assessment in accordance with Section 144 on the event of a failure to compute income according to ICDS. h. Form 3CD has been revised for making mandatory disclosures in compliance with ICDS.

4 Applicability of ICDS.

a. CDS is applicable to the taxpayers who are recipients of income under the head “Profits and gains of business or profession” or “Income from other sources”, irrespective of the accounting standards followed by a company. The provisions of ICDS will also be applicable to the persons computing income under the relevant presumptive taxation scheme.

b. The standards specified in ICDS is applicable to revenues which are liable to tax on gross basis such as internet, royalty and fees for technical services for non-residents u/s 11A of the Act.

c. Provisions of ICDS are generally applicable to all taxpayers irrespective of their turnover or quantum of income, except for individuals or Hindu Undivided Family as they are not covered under the provisions of Tax Audit. ICDS will not be considered for the computation of Minimum Alternate Tax (MAT).

5 Non Compliance of ICDS.

▪ Every assesse is required to implement ICDS and potential impact will be considered by companies while estimating advance tax liability for FY 15-16, due on 15 June 2015. Noncompliance of ICDS will result in best judgement assessment by tax authorities, which may lead to protracted litigations. 6 List of Notified ICDS.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

7 Brief Understanding of ICDS & It’s Impact Analysis.

ICDS I ACCOUNTING POLICIES

ICDS 1 is inclusive of standards for accounting policies. THE ICDS, in contrast to Accounting Standards (AS) does not consider the aspects of prudence and materiality in selection and application of accounting policies.

ICDS only permits change in accounting policies on the existence of solid grounds for the same. If there is a change in accounting policy which doesn’t have any material implications for the current previous year but which is expected to have a reasonable impact in the years to come, ICDS requires disclosures of such change in the previous year in which the change is adopted, as well as in the previous year in which such change have resulted in material implications for the first time.

Significant Issues

a) AS-1 refers to prudence as a consideration for selection for accounting policies but the ICDS does not recognize it as criteria for the selection and eliminates the concept of prudence. Based on the concept of prudence, AS-1 precludes recognition of anticipated profit and requires recognition of expected losses. Since this amounts to differential treatment for recognition of income and losses, the ICDS provides that expected losses or mark-to-market losses shall not be recognised unless permitted by any other TAS. ICDS is

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” however silent on the treatment of mark to market gains. This shall result in higher taxable income.

b) AS-1 read with AS-5 provides that accounting policies may be changed if it is considered that the change would result in a more appropriate presentation. ICDS provides that accounting policies shall not be changed without a reasonable cause. Nothing has been stated as to what constitutes reasonable cause.

c) AS-1 recognises the concept of materiality for selection of accounting policies. Since the Act does not recognise the concept of materiality for the purpose of computation of taxable income, the same has not been incorporated in the ICDS. Therefore, any unadjusted audit differences (considered immaterial) may have to be considered in the computation of taxable income. Again capitalisation of items which are immaterial and have been charged to profit and loss in books of accounts will have to be taken in account for computing taxable income.

ICDS II VALUACTION OF INVENTORIES

ICDS 2 contains provisions pertaining to valuation of inventories. With respect to ICDS on valuation of securities, the allocation of fixed production overheads for the purpose of their inclusion in the cost of conversion is based on the normal capacity of the production facilities.

ICDS states that the value of the opening inventory will be the value of the inventory as it was on the close of the immediately preceding year.

In the event of dissolution of a partnership firm or association of body of individuals, the inventory shall be valued at the net realizable value, whether or not the business is discontinued.

ICDS does not permit any changes in the method of valuating inventory without reasonable grounds for the same.

Significant issue a) ICDS stipulates inventories valuation in the case of Service Providers. AS-2 has not prescribed any method of valuation of inventories in the case of a service provider. b) The option of Retail method as a technique for the measurement of cost as per paragraph 19 of AS 2 has been permitted subject to the conditions that it is to be used only when it is impracticable to use the other prescribed methods. The option of department-wise average percentage is not permitted. c) AS-2 is silent on change of method of valuation of inventories. The ICDS is not clear on what could constitute to be a change in the method, in the absence of any alternative method available whether this could include a change in the Cost Formula.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” d) ICDS does not recommend Standard cost method as a cost formula for measurement of cost unlike AS-2.

ICDS III CONSTRUCTION CONTRACT

ICDS 3 deals with construction contracts. It is applicable for the determination of income for a construction contract of a contractor. It uses the percentage completion method for determining the contract revenue and contact costs of a construction project.

ICDS prohibits adjustment of incidental income in the nature of interest, dividends or capital gains from contract cost or recognition of foreseeable or expected loss as contract cost until such costs are actually incurred.

ICDS IV REVENUE RECOGNITION ICDS 4 is connected with the recognition of revenue. IDSS, in this case, deals with the basis for recognition of revenue which results from the sale of goods, royalties, dividend, etc.

According to ICDS, revenue will be recognized as specified below:

• Revenue from sale of goods is recognized if there is a reasonable certainty of its collection. • Revenue from providing services is recognized in accordance with the principles laid down in ICDS 3 on Construction Contract. “Completed contract method” is not recognized. • Interest income shall accrue on time basis determined by the amount outstanding and the rate applicable. Discount or premium on debt securities is recognized over the period to maturity. • Income on royalties will accrue as per the terms of the pertinent agreement. • Dividend income is recognized as per the provisions of the Act.

Significant issue a) AS-9 recognises both the proportionate completion method and completed service contract method for recognition of revenue from service transactions. ICDS provides that revenue from service transactions shall only be recognised by following the percentage completion method. This may significantly impact taxable income of service providers. b) As per AS-9, Interest accrues, in most circumstances, on the time basis determined by the amount outstanding and the rate applicable. Usually, discount or premium on debt securities held is treated as though it were accruing over the period to maturity. Under the ICDS, interest and discount or premium on debt securities will be taxed annually in the hands of the holder before maturity. ICDS V TENGIBLE FIXED ASSETS

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ICDS 5 is associated with the specified tangible fixed assets such as land, building, machinery, etc. An item is considered as tangible fixed asset if it is held for the purpose of producing or providing goods or services and is not held for sale in the normal course of business.

Exchange of assets will incur the equal fair market value of the acquired asset. If several assets are purchased for a consolidated price, the total consideration remitted shall be ascertained to various assets in a fair manner.

Significant issue a) AS-10 provides guidance for revaluation of assets. As the Act does not recognise the concept of revaluation of assets, the portion of AS-10 relating to revaluation of assets is omitted in the ICDS. b) AS -10 provides guidance on retirement and disposal of assets. As the Act contains specific provisions relating to retirement and disposal of tangible fixed assets, the same are not incorporated in the ICDS.

ICDS VI EFFECT OF CHANGE IN FOREIGN EXCHANGE RATE ICDS 6 is connected with:

• Treatment of transactions in foreign currencies. • Translating the financial statements of foreign operation. • Treatment of foreign currency transactions in the nature of forward exchange contracts.

ICDS VII GOVERMENT GRANTS

ICDS 7 deals with Government Grants. It contains provisions with respect to subsidies, cash incentives, duty drawbacks, waiver, concessions, and reimbursements.

Significant issue

• Grants related to non depreciable assets (without requiring fulfillment of obligations) are credited to capital reserve. The ICDS does not recognize this principle. • Government Grants of the nature of promoters contribution are credited to capital reserve and treated as part of shareholders fund. The ICDS is silent on this.

ICDS VIII SECURITIES

• ICDS 8 specifically deals with securities held as stock-in-trade. It is recognized as follows: • A security on acquisition is recognized at actual cost which consists of purchase price and acquisition charges. • With respect to security acquired in exchange for other security or another asset, the cost of acquisition is the fair value of the security or asset acquired.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

• In case of cum-interest securities, the accrued interest is deducted from the actual cost of securities.

Significant issue

• Unlike the ICDS, AS-13 states that if an investment is acquired in exchange, or part exchange, • for another asset, it may be appropriate to determine the acquisition cost of the investment by • reference the fair value of the investment acquired/given up, whichever is more clearly evident.

ICDS IX BORROWING COST

• ICDS 9 deals with the concept of borrowed costs. ICDS considers all assets as qualifying assets. Borrowing costs are attributable to the acquisition, construction or production of qualifying asset. ICDS has specified the formula for capitalization of borrowing costs which involves allocating the total general borrowing cost incurred in the ratio of average cost of qualifying assets on the first day and last day of the previous year. • As stated by ICDS, capitalization of borrowing costs should begin with the date of borrowing (If it is a specific borrowing), and the date of utilization of funds (if it is a general borrowing). It should conclude when all the requisite activities to prepare the inventory for its intended sale are complete (in case of inventories), and when the asset is first put to use (in case of other assets).

Significant issue

• Unlike AS-16 on borrowing cost, the ICDS on borrowing cost does not provide any minimum period criteria for classification as a qualifying asset except for Inventories. Thus, capitalization of borrowing cost under ICDS would increase as larger number of assets would now come under the ambit of a qualifying asset, thereby reducing current year charge to the Statement of Profit & Loss.

ICDS X PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

ICDS 10 is connected with provisions, contingent liabilities and contingent assets; other than the ones:

o Arising out of financial instruments, whether the same is carried at fair value or not. o Arising out of executory contracts. o Arising in insurance business from contracts with policy holders. o Covered by other ICDS.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Significant issue

AS-29 inter-alia stipulates recognition of a provision when it is probable that an outflow of economic resources will be required to settle an obligation. ICDS replaces the condition of probable with reasonably certain. The term reasonably certain has not been defined in the ICDSs, the Act or the Rules. Revenue authorities may contend that =reasonably certain‘ is a lower threshold than virtually certain. Further, provision for warranty is allowed as an expenditure upholding the test of probable warranty obligation. Provisions made on obligations recognized out of customary business practices or voluntary obligations may not be allowed

8. General Impact of ICDS

a) Taxes will be levied on income which may not have been actually earned. b) ICDS applies to a person and not necessarily an assessee c) Deduction for expenses/losses to be denied contrary to the age old accounting principles of prudence. d) Increased gap between book profits and taxable profits may cause deferred tax assets or reduce deferred tax liabilities e) Though ICDS does not mandate separate books of account, detailed reconciliations between the book profit and taxable income will have to be maintained increasing the compliance cost and at times leakage of revenue for the tax department f) The concept of MAT is based on book profits. Therefore, MAT liability will not be affected directly but the MAT credit will be impacted. g) ICDS provides standards in various areas for computation of taxable income. In case of conflicts between the provisions of the Act and ICDS, Act would prevail. However, in case the Act is silent or ambiguous, the interplay between ICDS and existing jurisprudence needs to be evaluated. Also, while ICDS applies to prospective income computation for tax purposes, it is not clear whether ICDS impacts even existing litigation. h) All the ICDS, except ICDS on Securities, have incorporated transitional provisions according to which the provisions of ICDS may apply retrospectively in certain cases and prospectively in some other cases. i) The ICDS should also entail appropriate modifications in the return of income and Form No. 3CD. j) The ICDS seem to be based on the current AS issued by ICAI. However, listed companies are required to adopt IND AS from 1st April, 2016. Thus, the accounting policies for these companies under IND AS could be significantly different from ICDS. Thus, providing clarity on the tax position in ICDS in alignment with the IND AS is also essential.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. KIRIT KOSHTI WRO0457761

Article Assistant at, SURAT

“Crypto currency – Meaning, Transactions and its taxability”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Index

1. Abstracts 2. Meaning 3. Evaluation of crypto currencies 4. Legal status 5. Benefits 6. Drawbacks 7. Transaction 8. Wallet 9. Tax implication in India 10. Conclusion

Abstracts

Recently, crypto currencies and Bitcoin have become the main topics in the financial segment. A crypto currency is a digital or virtual currency that uses cryptography for security. A crypto currency is difficult to counterfeit because of this security feature. A defining feature of a crypto currency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. Crypto currencies have their benefits and drawbacks. The paper elaborates different aspects of crypto currencies, starting with their early development, challenges and risks, opportunities, advantages and disadvantages, Tax implication, legal status. In addition, the paper covered issues related to the practical and technical function of crypto currencies. It was concluded that is not easy to predict the future of crypto currencies, since there is a lot to be done especially in the field of formal regulations. However, the banks and other financial institutions should see and consider crypto currencies as an alternative for the financial transactions in the future.

Meaning

A decentralized digital medium of exchange which is created, regulated, and exchanged by using cryptography and (usually) open-source software.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” A crypto currency is a digital or virtual currency that uses cryptography for security. A crypto currency is difficult to counterfeit because of this security feature. Many crypto currencies are decentralized systems based on block chain technology.

Evolution of Crypto Currency

There are no literal or vast records available on the history of crypto currency. The history on crypto currency is really short. Before the introduction of crypto currency, Digital currencies were there. But, both are not the same. The digital currencies are centralized but crypto currencies are not. Crypto currencies were never intended to be invented as they are known as today. This actually all started with the now infamous bitcoin and a man named Satoshi Nakamoto. Nakamoto’s goal in the beginning was to create nothing more than an electronic peer to peer cash system. People had for a long time been trying to create some kind of online digital cash system, but had always failed due to the issues with centralization. Bitcoin was invented by Satoshi Nakamoto in the year 2008, the very first decentralized form of digital cash that had no central governing or controlling body. Bitcoin was invented by satoshi Nakamoto back in the year 2008 and the value of bitcoin was just a little over cent. However, the value quickly grew and in the late 2009, it had already reached $27 for a single bitcoin. Now in 2017, a single bitcoin has a value of over $7500. Since Nakamoto revealed his amazing innovation there have been dozens of other decentralized crypto currencies released by several parties. Some of the most popular and highly valued crypto currencies at this time include Bitcoin, Ethereum, Bitcoin Cash, Ripple, Litecoin, Dash, NEO, NEM, Monero, and many others. It is certainly an interesting and eventful history. Now that crypto currencies like Bitcoin have proven their value, their ability to operate in the real world, and have shown that they possess real purchasing power, more and more banks, investment firms, and trading organizations, as well as retailers, have begun to accept them as legit forms of currency and payment. In the world of Crypto currency, Bitcoin is not the world’s first Crypto currency, but it is the most successful. Many have come before it but all have failed. Virtual currency had an inherent problem and it was easy to double spend. With the increasing popularity of Bitcoin and the idea of decentralized and encrypted currencies catch on, the first alternative crypto currencies appear. These are sometimes known as altcoin and generally try to improve on the original Bitcoin design by offering greater speed, anonymity or some other advantage. Among the first to emerge were Namecoin and Litecoin. Currently there are over 1,000 crypto currencies in circulation with new ones frequently appearing.

Status of crypto currencies

Country to country the legal status of crypto currency varies and still there is no defined rule or the rules are changing in different countries, whereas most of the country has not given legal status to the usage of Crypto currency. The status of crypto currency as money or commodity varies, with different regulatory implications. While some of the countries has explicitly allowed its uses and trade under certain circumstances whereas others have banned it or restricted its uses.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Different status has been given by different government agencies, departments and courts have classified this currency differently. There are certain countries which have given legal status to Crypto currency and are as below 1. The united states 2. Canada 3. Australia 4. The European union 5. Germany 6. France

Following countries strictly prohibited transaction of crypto currencies. 1. Vietnam 2. Kyrgyzstan 3. Ecuador 4. Russia 5. China 6. South Africa 7. Japan 8. India

Benefits and drawback of crypto currencies

It’s easier to transfer funds between two parties in a transaction. 2. The processing fee is minimal, which allows users to avoid the high fees charged by most of the banks and other financial institutions. 3. The settlement is immediate in the transaction of crypto currencies. 4. Push mechanism is used during the process of crypto currency transaction, that allows the crypto currency holder to send exactly, what he or she wants to send to the merchant or recipient without further information. 5. The transactions are most secured transactions, as it uses NSA created cryptography. It is most impossible task for anyone other the owner of the wallet to make any payment from the wallet, unless they were hacked.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” 6. There is no involvement of any third party. 7. The transactions are Decentralized which means the network operates on a user to user (or peer to peer) basis.

Drawbacks:

. Crypto currencies are virtual and do not have a central repository, a digital crypto currency balance can be wiped out by a computer crash, if back up copy of the holdings does not exists. 2. The prices are based on supply and demand; the rate of exchange of a crypto currency with another currency can fluctuate widely. 3. Crypto currency are not immune to the threat of hacking. 4. Crypto currencies are very difficult to understand. People, who don’t have clear knowledge about crypto currency, end up investing and lose money to something they didn’t learn about. 5. Acceptance is a major issue worldwide. Some of the country of territory accepts where as some of not. Even there are several online stores, who do not accept Crypto currency. 6. Once the payment is made, reversal of the payment is not possible

How Crypto currency works:

When a transaction is being entered in the world of crypto currency, the most critical thing in this processing is that the confirmation of the transaction. Crypto currency transaction is all about confirmation. The transaction can be Crypto currency: Its Risks And Gains And The Way Ahead forged till confirmation is not received or it’s in the pending status. Whenever a transaction is initiated, its information is received by the whole network. As soon as the confirmation of a particular transaction is being received, it gets set in stone. Once transaction is being made and confirmation received of that transaction, it can’t be reversed at any cost and it becomes non forgeable. It becomes a part of an irretrievable record of historical transaction of the so called block chain. Here, in the world of crypto currency, miners are of vital aspect and importance, their job is all about to confirm the transactions. In the network of crypto currency, transactions are received by miners; to confirm legality of the transaction and to spread the

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

TAX COVERAGE

There is no separate statute in the law book detailing tax norms for crypto currencies, but the law is clear on taxing income irrespective of the form in which it is received. Recently government of India has been taken strict action against crypto currencies. Income is classified on the basis of its source and point of arisen. Transaction in crypto currencies is taxable under three heads of Income Tax India based on its nature. 1. Income under the heads of salary 2. Income from business of profession 3. Income under the head of capital gain

Scenario 1: Bitcoin Mining Bitcoins created by mining are self-generated capital assets. Subsequent sale of such bitcoins would, in the ordinary course, give rise to capital gains. However, one may note that the cost of acquisition of a bitcoin cannot be determined as it is a self-generated asset. Further, it also not fall under the provisions of Section 55 of the Income-tax Act, 1961 which specifically defines the cost of acquisition of certain self-generated assets. Therefore, the capital gains computation mechanism fails following the Supreme Court decision in the case of B.C. Srinivasa Shetty. Hence, no capital gains tax would arise on mining of bitcoins.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” This position would hold till such time the government thinks of coming up with an amendment to Section 55 of the Act. At this juncture, given that the Indian tax laws are silent on the taxability of bitcoins completely, we thought it right to comment on a probable contrary view by the income tax authorities. There is a possibility that the department may not consider bitcoins as capital assets at all. Hence, the provisions of capital gains would not apply at all. Accordingly, the income tax authorities may choose to tax the value of bitcoins received from mining under the head “Income from other sources” Scenario 2: Bitcoins held as an investment If bitcoins, which are capital assets, have been held as an investment and are transferred in exchange for real currency, the appreciation in value would give rise to a long term capital gain or a short term capital gain depending on the period of holding of the bitcoin. Further, long term gains would be taxed at a flat rate of 20% while short term gains would be taxed at the individual slab rate. The cost of acquisition for arriving at long term capital gains will be determined after giving the benefit of indexation. A simple example given below to understand this

Value in INR (Only Particulars hypothetical)

10 No. of bitcoins purchased

32.72 INR equivalent of 1 bitcoin at the time of purchase

327.2 Value of bitcoins (A)

38.72 INR equivalent of 1 bitcoin on the date of transfer

387.2 Value of bitcoins (B)

60 Capital gains (B - A)

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Reiterating the probable contrary view of the income tax authorities discussed under Point 1 above, the IT authorities may not consider Bitcoins as a capital asset and hence the provisions of capital gains would not apply. Accordingly, the income tax authorities may choose to tax the gains from bitcoins under the head “Income from other sources”. Further, if the income gets taxed under “Income from other sources”, the taxpayer would have to pay taxes at a rate as applicable to the tax slab he falls under. For eg., if his taxable income exceeds Rs 10 lakh, he would be liable to a tax @ 30% as against the flat rate of tax of 20% he would be liable to pay, if charged to tax under long-term capital gains. The benefit of indexation as would be available if taxed under capital gains , would also not be available if taxed under Income from other sources.

Scenario 3: Bitcoins held as stock-in-trade being transferred in exchange for real currency The income arising out of bitcoins trading activity would give rise to income from business and accordingly, the profits arising out of such business would be subject to tax as per the individual slab rates. Scenario D : Bitcoins being received as consideration on sale of goods and services Bitcoins being received so shall be treated on par with receipt of money. It would constitute income in the hands of the recipient. Further, since the recipient received this income out of a business or profession, he would be taxed, normally, under the head profits or gains from business or profession. As regards the disclosure requirement of bitcoins in the income tax return forms, there continues to be a lack of clarity. Very recently, our Finance Minister, Mr. Arun Jaitley, on being asked to comment on any decision proposed to be taken as regards crypto currency in general, has commented that, “Recommendations are being worked at. The government’s position is clear, we don’t recognize this as legal currency as of now,” Further, the Central Bank also has chosen to reinforce its earlier message to “users, holders and traders of Virtual Currencies (“VCs”) including bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs.” Therefore, considering that bitcoin transactions are gradually picking up in India,while, laws regulating them are significantly absent, we are hopeful that the government will come up with a notification soon to dispel the ambiguity around the legality of bitcoins, their taxability and disclosure requirement of bitcoins. While this article aims at discussing the taxability of Bitcoins only, the tax treatment on transacting with other crypto currencies would also be similar to that in the case of Bitcoins.

GST ON BITCOIN GST or goods and services tax is applicable on the supply of goods and/or services. The sale of bitcoins therefore would attract GST if it falls within the domain of either goods or services. Definition of Goods under GST “Goods’’ from a GST perspective means every kind of movable property other than money and securities but includes actionable claims ,growing crops, grass and things attached to or forming

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” part of the land which are agreed to be severed before supply or under a contract of supply. Since money and securities are excluded, it is relevant to explore what they are with respect to this definition.

Money has been defined in section 2(75) of the GST act as Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, travellers cheque, money order, postal or electronic remittance or any other instrument recognized by the Reserve Bank of India when used as consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value. Since the RBI has not granted any regulatory approval to bitcoin it should be given that Bitcoin is not money for purposes of taxation under GST. But then, are bitcoins securities? Securities have been defined as per the GST act as having the same meaning as assigned under sub- section h of section 2 of the Securities Contracts (Regulation) Act, 1956. Which defines securities as : 1) Shares, scripts, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate 2) Derivative 3) Units or any other instrument issued by any collective investment scheme to the investors in such schemes 4) Security receipt as defined in clause (zg) of section 2 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; 5) units or any other such instrument issued to the investors under any mutual fund scheme 6) Government securities; 7) such other instruments as may be declared by the Central Government to be securities; and 8) rights or interest in securities.

Conclusion

Crypto currency is still, into its nascent stage but it is gaining popularity on daily basis. Most of the countries still don’t have any clear regulation or system which can check, curb, regulate or ban the use of crypto currency. Decentralized and anonymity are the two main characteristics of crypto currency, which has become a challenge for the governments to curb its uses use in criminal activity or transactions and how to allow a legal status to it. Most countries are still analyzing ways to properly regulate the crypto currency. Crypto currency is in a grey area as the technological leap has left the lawmakers far behind. However, crypto currencies have a long way to go before they can replace credit cards and traditional currencies in use, which is being used as

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” a tool for commerce across the globe. In the world of Crypto currency for a savvy investor- Patience, decisiveness and skepticism are the most important tools in their toolkit.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. KRUPANG PUROHIT WRO0527557

Article Assistant at RUSHI UPADHYAY & CO., RAJKOT

“Regulations to curb Black Money & Benami Transactions”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Regulations to curb BLACK MONEY & BENAMI TRANSACTIONS What is BLACK MONEY?

“In India, black money is funds earned on the black market, on which income and other taxes have not been paid. Also, the unaccounted money that is concealed from the tax administrator is called black money. The black money is accumulated by the criminals, smugglers, hoarders, tax-evaders and other anti-social elements of the society.”

In March 2018, it was revealed that the amount of Indian black money currently present in Swiss and other offshore banks is estimated to be:

Rupees 90 lakh crores i.e. 9,00,00,00,00,00,000 What is Benami Transaction?

Benami word is originated from Persia which means “No Name” or “Without Name”. According to the Benami Property Transactions Act, 1988 A transaction or an arrangement where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration; then such a transaction is known as Benami transaction.

The government of India has taken various steps to curb down The Black Money and The Benami Transactions, let us have a look on them.

Regulations to curb black money and benami transactions:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” 1. Benami Transaction (Prohibition) (Amendment) Act 2016:

In 2016, the comprehensive Benami Transaction (Prohibition) Amendment Act was passed to amend the Benami Transactions Act, 1988. The new act seeks to: a. Amend the definition of benami transactions, b. Establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and c. Specify the penalty for entering into benami transactions.

A. Definitions amended The new act increases the scope of transactions which qualify as benami and includes property transactions where: i. The transaction is made in a fictitious name, ii. The owner is not aware of or denies knowledge of the ownership of the property, or iii. The person providing the consideration for the property is not traceable or is fictitious.

The new act specifies the following cases which will not fall within the scope of the definition of a benami transaction. When a property is held by:

i. a member of a Hindu undivided family, and is being held for his or another family member's benefit, and has been provided for or paid from known sources of income of that family;

ii. a person in a fiduciary capacity (such as a trustee, executor, partner, director of a company, depository or participant);

iii. a person in the name of his spouse or child, and the property has been paid from the person's known sources of income; and iv. A person in the name of his brother or sister or lineal ascendant or descendant (where their respective names appear as joint-owners in any document), and the property has been paid from the person's known sources of income.

The new act also adds to the definition of the word "property". It was defined in the old Act as "property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property". The

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” new act adds that property includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form, and also includes the proceeds from the property. B. Adjudicating authorities and an Appellate Tribunal established

The new act establishes four authorities who will be able to conduct inquiries regarding benami transactions: a. The Initiating Officer, b. The Approving Authority, c. The Adjudicating Authority d. The Administrator e. The Appellate Tribunal.

If an Initiating Officer believes that a person is a benamidar (the person in whose name the benami property is held or transferred), he may issue a notice to that person to show cause why that property should not be considered benami.

The property may be attached for 90 days from the date of issue of the notice. The Investigating Officer will make enquiries, collect evidence and then pass an order (within 90 days from the date of issue of the notice) attaching, continuing to attach, revoking the attachment or deciding not to attach the property (in all cases with prior approval of the Approving Authority).

If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority. The Adjudicating Authority will issue notices, call for and consider evidence and, after providing an opportunity to be heard to the relevant people, pass an order on whether or not to hold the property as benami.

If an order is made to hold the property as benami, a confiscation order shall be made, all rights and title in such property shall vest absolutely in the Central Government free of all encumbrances and the Administrator shall receive and manage the property.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” The new act also establishes an Appellate Tribunal to hear appeals against orders passed by the Adjudicating Authority.

Appeals against orders of the Appellate Tribunal will be to the respective High Court with jurisdiction.

C. Revised penalties

Under the old Act, the penalty for entering into benami transactions is imprisonment up to 3 years or a fine or both. The new act increases this penalty to rigorous imprisonment from 1 to 7 years and a fine which may extend to 25% of the fair market value of the benami property.

The New act also provides a penalty (of rigorous imprisonment from 6 months to 5 years and a fine which may extend to 10% of the fair market value of the benami property) for providing false information in a proceeding under the Act.

2. Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 is an Act of the Parliament of India. It came into effect from 1 July 2015. Black money in the form of undisclosed foreign income and assets comes under the purview of this law. The goal of this law is to bring back the income and assets held abroad back to the country.

‘Undisclosed foreign income and asset’ is defined as the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India.

Features of the Act:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” 1. The Act will be applicable to a person: i. Who is a tax resident of India as per the tests of the Income Tax Act, 1961 (ITA); ii. Who is not a person who is a ‘resident but not ordinarily resident’; and iii. By whom tax is payable under the act on undisclosed foreign income and assets or any other sum of money. The term ‘person’ is not defined in the act so its definition under the ITA must be adopted.

2. One – time compliance window: A one-time compliance opportunity to persons who discloses their foreign income and assets will be provided. This compliance period was available from July 1 to September 30. Persons who use this compliance window will be permitted to file a declaration before a tax authority, and pay a tax rate of 30% and a penalty at the rate of 100% (of the tax); implying a total tax of 60%. No exemption, deduction or set off of any carried forward losses (as provided under the IT Act) would apply. After this time, black income holders will come under severe penal and prosecution measures prescribed under the law. Around 650 persons made declarations of the undisclosed money worth Rs 4,100 Crore deposited in foreign banks.

3. Income and assets that qualify the disclosure: The total undisclosed foreign income and asset of an individual would include: i. Income, from a source located outside India, which has not been disclosed in the tax returns filed; ii. Income, from a source outside India, for which no tax returns have been filed; and iii. Value of an undisclosed asset, located outside India.

The valuation of undisclosed assets to calculate tax on will be done at Fair Market Price. While computing, if the assets/income are movable then value computed will be used to calculate the tax but if it is taxed prior then that value would be subtracted from the undisclosed income/asset. In case of immovable object, computation keeps in mind the value at the first day of financial year.

4. Non-disclosure, penalties, prosecution and the criminal procedures: Not furnishing income tax returns for foreign income and assets or providing misleading information for such foreign income and assets attracts a penalty of Rs 10 lakh under the new legislation. Criminal punishment for such tax evasion practices could attract rigorous imprisonment from 3 to 10 years and a discretionary fine. However, it is important to note that the Foreign Assets Act

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” provides that persons who have foreign accounts with minor balances, which may not have been reported out of oversight or ignorance, are protected from penalty and prosecution. Different types of penalties and punishment are envisaged under the law depending upon the seriousness of the offence.

5. Administering authority: The Central Board of Direct Taxes and the existing hierarchy of tax authorities under the provisions of the Income Tax Act, including the appeals machinery prescribed thereunder, have been tasked with implementation of the new legislation. 3. Section 269 ST: Central Government has introduced provisions of Section 269ST and 271DA in the Income Tax Act, 1961, with effect from 1st April, 2017. According to section 269ST no person shall receive an amount of Rs. 2.00 Lakhs or more otherwise than by an account payee cheque or account payee bank draft or electronic clearing transfer system through bank accounts. These provisions will be applicable, whether the person is seller or service provider or transfer of capital assets. The limit of Rs. 2.00 Lakhs will be calculated as follows; a) The aggregate amount received (other than by account payee cheque/bank draft/electronic transfer) from the same person in a day should not be more than 2.00 Lakh or more; b) Amount received (other than by account payee cheque/bank draft/electronic transfer) in a single transaction should not be more than 2.00 Lakhs or more; c) Amount received (other than by account payee cheque/bank draft/electronic transfer) in respect of a transaction relating to one event /occasion from a single person should not be more than 2.00 Lakhs or more;

Note: above restriction is not applicable when recipient is Central Government, Local Authorities, Bank, Financial Institutions, Post Offices, Co- operative banks and other person notified by the Government.

PENALTY [SECTION 271DA]: Any person who has received any sum in contravention of the provisions of Section 269ST shall be levied penalty equal to the amount of the sum received,

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” provided that the penalty shall not be levied if he proves that he has not contravened the provisions. 4. Amendments made in Prevention of Money-laundering Act, 2002, vide Finance Act, 2015

The amendments in PMLA will enable the enforcement agencies to attach and confiscate unaccounted assets held abroad and launch prosecution against persons indulging in laundering of black money. This also enabled the attachment and confiscation of equivalent asset in India where the asset located abroad cannot be forfeited.

5. Amendments made in Foreign Exchange Management Act (FEMA), 1999 vide Finance Act, 2015

FEMA is being amended to the effect that if any foreign exchange, foreign security or any immovable property situated outside India is held in contravention of the provisions of this Act, then action may be taken for seizure and eventual confiscation of assets of equivalent value situated in India. These contraventions are also being made liable for levy of penalty and prosecution with punishment of imprisonment up to 5 years.

6. Income Declaration Scheme 2016:

Income Declaration Scheme, 2016 is launched by Income Tax Department, Govt. of India. The Scheme provides an opportunity to citizen who has not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totaling in all to forty-five per cent of such undisclosed income declared. One time opportunity to all the citizen who have not declare income correctly in the earlier years to come forward and declared such undeclared income. Declaration had to be made from 1st June, 2016 to 30th September, 2016. All citizen including individuals; HUFs, companies, firms, association of person etc. are eligible to make declaration under this scheme.

What is the amount payable by declarant? • Tax @ 30% of undisclosed income

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • Surcharge @ 7.5% of undisclosed income • Penalty @ 7.5% of undisclosed income • TOTAL: 45% OF UNDISCLOSED INCOME DECLARED

In the largest-ever declaration of black money, Rs. 65,250 Crore was declared as unaccounted income and assets under the government’s four-month-long Income Declaration Scheme (IDS) 2016. A total of 64,275 persons declared their unaccounted wealth under the window, translating into an average of Rs.1 Crore of declaration per person.

7. Promoting Cashless Economy

There is a direct relationship between cash transactions and black money. If the number of cash transactions is decreased then it will surely result in decrease of Black Money. In order to promote cashless transactions the government has taken various steps, such as:

• In order to achieve the Government’s mission of moving towards a less cash economy and to incentivize small traders / businesses to proactively accept payments by digital means, it has been decided to reduce the existing rate of deemed profit of 8% under section 44AD of the Act to 6% in respect of the amount of total turnover or gross receipts received through banking channel / digital means for the financial year 2016-17.

• Section 40A(3)(a) of the Income Tax Act provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs. 10,000/- in a single day otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft or through use of electronic clearing system, shall not be allowed as a deduction.

• Unified Payment Interface (UPI) based Bharat Interface for Money (BHIM) App which supports remittance transactions both push and collect was launched.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • In order to attract general public and facilitate digital transactions, Government had launched two major schemes – Lucky Grahak Yojana for

consumers and Digi-Dhan Vyapar Yojana for merchants. 12,72,290 consumers and 70,000 merchants have won prizes for digital payments made through AEPS, USSD, UPI and RuPay cards as on 22nd March 2017.

• To incentivize the States/UTs for promotion of digital transactions, it was decided that Central assistance of Rs. 50 Crore would be provided to the districts for undertaking activities to bring 5 Crore Jan Dhan accounts to digital platform. The fund allocation is based on proportion of Jan Dhan accounts of all States/UTs. Under the scheme, an incentive @ Rs 10 is provided for every individual who has transited to digital payment mode and undertaken at least two successful transactions by any of the five digital payments modes viz: UPI, RuPay / Debit / Credit / Prepaid Cards, AEPS, USSD and E-Wallets.

8. Double Tax Avoidance Agreement (DTAA):

Tax evaders used weak laws to stash black money in foreign accounts. Govt. has lost tax revenues of thousands of crores of rupees on earnings by Indians on foreign soil. With sustained efforts, Government made a treaty with Tax havens like Switzerland, Singapore, Mauritius and Panama, which have agreed to share suspicious banking transactions of Indians on real time basis.

9. Demonetisation:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • On 8th November 2016, the Government of India announced the Demonetisation of all Rs. 500 and Rs. 1000 banknotes of the Mahatma Gandhi Series. It also announced the issuance of new Rs. 500 and Rs. 2000 banknotes in exchange for the demonetised banknotes. • The government estimated that Rs. 3 lakh Crore, or approximately 20%, of the demonetised banknotes would be permanently removed from circulation. However, according to a 2018 report from the RBI, approximately 99.3% of the demonetised banknotes, or Rs. 15.30 lakh Crore of the Rs. 15.41 lakh Crore that had been demonetised, were deposited with the banking system. The banknotes that were not deposited were only worth Rs. 10,720 Crore.

End Note:

With the constant efforts Government, has put in place a system to block corruption and black money but black money can be cleaned from its roots only if each and every individual stops contributing directly or indirectly to it. Giving bribe of Rs. 100 to a traffic police officer in order to avoid a fine of Rs. 1000 is also a contribution to black money. Though this amount is small and negligible but such small negligence have resulted into many big scams in this country. So let us take small steps and some make big changes.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

TECHNICAL SESSION – 5

“INFORMATION TECHNOLOGY”

:SESSION CHAIRMAN: CA VIKRAM PANDYA SPEAKER, ICAI

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” CA VIKRAM PANDYA, MUMBAI

Vikram Pandya is Director FinTech at SP Jain School of Global Management where he has designed Asia’s first interactive classroom led FinTech program featuring Blockchain, API Banking, AI/ML and lot labs. He has authored several white papers and articles on FinTech domain. He has an extensive experience in banking, financial services, FinTech, consultancy and training domain. He is also associated as a mentor with various FinTech startups across the globe. He has been associated with YES Bank for more than a decade where he has made key contributions to Financial & Investor Strategy, Business Intelligence, and Business Development & Technology Solutions unit. He has been a visiting faculty at the Institute of Chartered Accountants of India (ICAI).

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Ms. KESHA SUBA WRO0527759

Article Assistant at Kotak & Associates, RAJKOT

“Recent Developments in Forensic Audit”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” RECENT DEVELOPMENTS IN FORENSIC AUDIT INTRODUCTION

▪ Reading the current headlines such as SEBI has directed the Exchange to appoint an Independent forensic auditor to verify any misrepresentation of financials and business of Venmax Drugs and Pharmaceuticals (VDCL) as well as any misuse of the funds or books of account and SEBI has directed the NSE to conduct forensic audit on two companies – ARSS Infrastructure Projects and Nu Tek India makes us question that what Forensic Audit is all about.

WHAT FORENSIC AUDIT IS?

▪ The word Forensic means which is Suitable for use in court of law like investigation report, examination report etc.

▪ Forensic Audit refers to –

Examination and Evaluation of firm’s or individual’s financial information for using as an Evidence in Court of Law.

▪ It is carried out by applying Special skills in – Accounting, Auditing, Finance, Law and Investigation.

▪ A forensic audit can be conducted in order to prosecute a party for fraud, embezzlement or other financial claims.

Why Forensic Audit is needed? In this Digital World the main difference between Fiction & Reality is that... ‘’Today’s vilan are using mouse and keyboard instead of mask and guns’’

▪ It was estimated that the typical organizations losses upto 5% of its annual revenue to fraud

▪ To fight against Cybercrime threats mainly from business espionage in ever changing digital world

▪ Unveil Economic crimes in every segments of business community

▪ Major concerns of companies, regulators, shareholders, etc. relating to fraud detection Statutory Auditor v/s Forensic Auditor

▪ Section 143 (12) –

If any auditor of a company, in course of the performance of his duties as an auditor, has a reason to believe that an offence of fraud involving such amount is being or has been committed in the company by its officers or employees, the auditor shall COMMUNICATE to Those charged with Governance & REPORT the matter to Central Government within prescribed time.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

▪ Suspect & Detection of fraud was not the Responsibility of Statutory Auditor. Hence it is said that –

▪ ‘’Statutory Auditor is a Watchdog and not blood hound’’

Forensic Auditor- A Blood Hound

▪ Forensic Accountants are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within company.

▪ Its objective is to reduce ‘’Fraud Risk’’

▪ He possesses knowledge in various areas like bankruptcy, insurance claim, fraudulent claims, royalty audits, tracking terrorism by investigating financial records.

▪ Rights & Duties:

✓ Checking Principles and Practice of Accounting

✓ Fraud Auditing and Forensic Accounting

✓ Studies on Fraud and Corruption

✓ Investigation law

✓ Asset tracing in Divorce, Bankruptcy and Money Laundering cases etc.

➢ KNOWLEDGE

✓ Accounting standards / IFRS

✓ Financial data analysis

✓ Embezzlement

✓ Asset misappropriation

✓ Tax and related regulations

➢ SKILLS

✓ Writing reports to legal authority

✓ Interview techniques

➢ ABILITIES

✓ Interpersonal communication

✓ Integrity

Detection Techniques:

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Off balance sheet items:

✓ OBS Items are represents items which does not appear on the balance sheet of a company’s financial statement. This form of financing is nearly always debt financing, so the debt does not appear as a liability on balance sheet.

✓ For instance: Operating lease, lessor keeps the asset on the balance sheet & company leasing the asset only reports the Rental Expense.

Critical point auditing:

✓ Critical point auditing technique aims at filtering out the symptoms of fraud from regular and normal transactions in which they are mixed or concealed

Proprietary audit:

✓ Proprietary audit is conducted by Supreme Audit Institution (SAI) to report on Govt. accounts. It focuses on Value for Money.

Analysis Techniques • Proactive Methods

✓ Effective internal controls

✓ Financial and operational audits

✓ Intelligence gathering

✓ Logging of exceptions

• Reactive Methods

✓ Investigating complaints and allegations

✓ Intuition

✓ Suspicion

Recent developments ▪ Insurance claims:

Insurance company – Victim

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

➢ Insurance fraud can pose a serious risk for insurance companies and may result in additional costs for their policy holders ➢ Consumers are directly affected by insurance fraud even when it’s not committed by them, as higher premium is charged to compensate for funds they lose due to fraudulent activity ➢ Forensic auditor can proactively identify suspicious claims or surrender By applying Data Analysis & various Forensic tools.

Insurance company – offender

➢ Insurance companies often use the unique circumstances of a disaster to reduce their financial responsibility to the policyholder. Often they are in a position where if the policyholder cannot prove a loss they will not pay. Too many victims of a disaster throw up and give up. An experienced forensic accountant can be critical to resolving the matter.

▪ Divorce proceedings & Matrimonial disputes (Amalgamation & De-mergers)

➢ When it comes to Mergers and Acquisitions, the role of Forensic Auditor will be Proactive and Advisory in nature.

➢ Recently, forensic specialist have been engaged in an advisory capacity to anticipate, prevent or mitigate issues at much earlier stage.

➢ There are two main areas where Forensic specialist can add value in

Pre-acquisition due diligence:

a) Managing integrity risk b) Managing corruption risk

➢ Integrity due diligence (IDD) and Corruption due diligence (CDD) can identify risk, which can be mitigated through combination of Pre-completion negotiation and Post- completion remediation.

▪ White collar crime investigation

White collar crime is a non-violent crime committed for financial gain.

➢ Class interest is protecting white collar criminals. It’s a relationship among individuals to adopt Unethical Practices

➢ Securities fraud, embezzlement, corporate fraud etc. are the examples of this crime.

➢ B Ramalinga Raju: Founder of Satyam Computer Services in 2009 admitted overstating company’s asset & under-reporting its Liabilities.

➢ To control white collar crime, a multifaceted approach is needed from-

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

o Economic (money supply) o Legal (new Provisions) o Political (government vigilance) o Social (class bias control)

▪ Shareholders & Management Disputes

➢ Conflict among shareholders often lead to legal actions and it’s a place where firm relies upon the knowledge and expertise of Forensic auditors. ➢ Matters like- Disagreement over value of shareholder’s shares, requires Business Valuation, where Forensic Audit is needed. ➢ Others matters where Partner feeling excluded from important decisions, presence of deceptive practices, not paying distributions etc. requires consultancy.

▪ Business valuation & Forensic consulting

Business valuation

➢ Business valuations methods are commonly used by practitioners for- o Assessing damages in litigation o Mergers & Acquisitions o Estate planning ➢ These requires deeper analysis behind numbers that count. Hence forensic audit is undertaken.

Forensic consulting

Prevention

➢ Risk assessment procedures review

➢ Internal control review

➢ Whistle blower program review

Investigation:

➢ Bribery and corruption investigation

➢ Forensic audits and fraud investigation

➢ Corporate Intelligence

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Remediation:

➢ Recommendations for enhancement to control environment

➢ Enhancement to corporate policies and standard

Compliance:

➢ Continuous dialogue with clients on updates/changes to applicable regulations and legislation

➢ Annual reviews of code of conduct, whistle-blower

▪ Serious Fraud Investigation Office

➢ The SFIO is a statutory corporate fraud investigating agency in India ➢ It is involved in major fraud probes and is co-ordinating with the Income-Tax & CBI ➢ Section 211 of the Companies Act, 2013, accorded the statutory status to the SFIO ➢ Section 212 of the Companies Act, 2013, deals with the Investigation into the affairs of the company by SFIO. ➢ There are totally 878 cases filled in SFIO. In that 796 are company law related and 82 are IPC related

▪ RBI’s Lookout

➢ The Reserve Bank of India wants to create a common pool of Forensic Audit firms.

➢ Hence, any one of them can be picked up whenever a High-Value Fraud needs to be investigated.

➢ RBI Demands from Bank:-

✓ Letter of Understanding (LoU) Reconciliations: examining and reconciling data for last 7-10 years w.r.t LoU's issued, settled and outstanding

✓ Data Analysis: performing appropriate LoU and Fund movements

✓ Evaluation of Control environment: by inquiring bank staff, customers etc.

✓ Documentary checks: verifying all relevant documentary evidence.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ▪ Forensic auditing: Three trends to watch

➢ Artificial Intelligence (AI) Will Come to Force

• The technological muscle of AI is great news for auditor because parsing out key details in an investigation no longer has to be done by hand • The proverbial trail has gone electronic.

➢ Client Demand for Current Digital Technologies Will Grow

• More than one in four of executives surveyed (27%) listed ‘’ real-time insights into areas of heightened risk and in internal control’’ as one of the most important benefits of technology.

➢ Preparation Will Matter More Than Ever

• Why it’s important to care for details in advance? In the event of breaking case of fraud, business can move on an action plan immediately.

▪ Conclusion

➢ The kind of steady leadership Forensic auditors provide can’t be replaced by any algorithm, even the most capable Artificial Intelligence needs skilled human to guide.

Get in Early... Stay Longer!

▪ In this Digital World the main difference between Fiction & Reality is that...

‘’Today’s vilan are using mouse and keyboard instead of mask and guns’’

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. SANDEEP KOTHAPETA SRO0424434

Article Assistant at Ravi & Co., HYDERABAD

“Artificial Intelligence in new era for Accounting and Auditing Profession”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” ARTIFICIAL INTELLIGENCE(AI) A NEW ERA FOR ACCOUNTING AND AUDITING PROFESSION

INTRODUCTION Artificial intelligence systems can be very powerful and are improving quickly. However, they do not replicate human intelligence. We need to recognise the strengths and limits of this different form of intelligence and build understanding of the best ways for humans and computers to work together. To build a positive vision of the future, we need to develop a deep understanding of how artificial intelligence can solve accounting and business problems, the practical challenges and the skills accountants need to work alongside intelligent systems. THE MOST FREQUENT QUESTIONS THAT ARISE IN OUR MIND: -

1. Will AI replace accounting & auditing jobs? 2. What would our role be at that point of time? 3. Will there be any jobs or not? 4. Will the value of accounting professional decrease in future?

All the above questions have their answers by the end of this Presentation.

WHAT IS THE LONG-TERM VISION? THINK RADICALLY In the process of thinking radically, the profession needs to be open to more profound change and avoid just defending or incrementally improving the status quo. Where AI enables greater insight from data, it helps human experts make better decisions and provide better advice However, there are few unique human characteristics, such as Leadership, Empathy and Creativity, which will never be replaced by computers. And we should not underestimate the adaptability and ingenuity of humans. BE ADAPTABLE The technology of the future will also be very different to what we see today. As a result, a flexible approach is essential when thinking about the future. Most would agree that accountants will need more hard skills in areas such as technology and data, as well as a greater emphasis on things like soft skills, critical thinking and adaptability. There also needs to be greater emphasis on life-long learning. HOW DO ‘AI’ AND HUMAN INTELLIGENCE WORK TOGETHER?

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” To understand that we need to know Strengths & Limitations of AI

STRENGTHS

1. LARGE DATA VOLUMES They can process huge amounts of data (structured and unstructured) much more than humans ever could; for example, the results of every piece of medical research carried out on a topic, or every piece of financial regulation. This provides a stronger and more powerful basis for learning.

2. COMPLEX AND CHANGING PATTERNS They can pick up weaker or more complex patterns in data than we can. Therefore, machines may be better in environments that we find less predictable. Where feedback loops can be built into the models, they can also be highly adaptive and learn from errors or new cases

3. CONSISTENCY They can be far more consistent decision-makers. They do not suffer from tiredness or boredom. They also do not exhibit human biases and therefore provide opportunities to eliminate cognitive biases – such as availability or confirmation bias – as well as socially-based biases, such as racism.

LIMITATIONS NOT FLEXIBLE Machine learning is not a general AI and models are not particularly flexible. Models learn to carry out very specific tasks based on a given set of data DATA INADEQUACY Data quantity and quality is fundamental, and not all problems have the right data to enable the machine to learn. HACKING & LARGE-SCALE FRAUDS

As a single system is involved in managing whole operations, it is easy to commit frauds. Beyond that hacking is also a threat , being faced by most organizations right now. OTHER CONSIDERATIONS The outputs of machine learning models are predictions or suggestions based on mathematical calculations, and not all problems can be resolved in this way. Other considerations may need to be factored into decisions, such as ethical questions, or the problem may require deeper root cause analysis.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” PROBLEMS OF APPLICATION OF AI IN THE AUDITING AND ACCOUNTING FIELD Lack of experience in the initial stage When artificial intelligence is put into accounting work, it must replace every work step of traditional accounting, including the input of original documents, the formation of accounting information, the generation of financial reports, and appropriate decision-making suggestions. Therefore, whether it is the depth or breadth of artificial intelligence, the application of artificial intelligence in the accounting industry is still in its infancy High investment with slow return Due to the personalized features of intelligent systems, enterprises need a large amount of resources in the initial application and later operation, which poses great challenges to the cost control of enterprises The Quality of professional talents needs to be improved Accounting personnel not only need professional knowledge in accounting field, but also need to master information technology, acquire the skilful use of accounting software and data management, to adapt the changes of new work situation.

SUGGESTIONS ON IMPROVING THE EFFECTIVENESS OF AI APPLICATION IN AUDITING AND ACCOUNTING FIELD: - The Government should support AI Relevant policies and regulations are needed to encourage and guide the application of artificial intelligence in the accounting industry. For example, enterprises that actively apply artificial intelligence technology should be given appropriate subsidies or tax reduction. Enterprise Management Attaches Great Importance Applying artificial intelligence at the accounting level will increase the cost of the enterprise in the short term, but looking forward to the future, it will enable the company to have more sustainable development capabilities and will occupy a place in the future of artificial intelligence. Accounting Talents Should Establish the Idea of Life-Long Learning Accountants should pay attention to the improvement of personal professional skills and the cultivation of professional ethics and establish the idea of life- long learning to adapt to the rapid changes and development requirements of the accounting industry in the future.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” PRESENT DAY APPLICATIONS OF BIG FOURS WITH REGARD TO AI & ACCOUNTANCY

Lease Transactions

The companies claim that the use of AI has made it easier to capture relevant information from contracts such as lease commencement date, amount to be paid, and renewal or termination options.

Visual inspection of assets

AI proof-of-concept, using computer vision to enable airborne drones to monitor inventory during the auditing process. For example, this drone can count the number of vehicles in a production plant under audit, and communicate this data

Call Center Analytics Engine

Utilizes NLP to design a model to predict future events and even convert customer calls to unstructured text, which is then streamlined to identify keywords, customer sentiment and predict future trends.

Document Compliance Assessment Engine

Uses AI to read a documentation- contract, leasing and investment agreement- in its entirety and yield relevant information.

What Role does we have in Future ?

Advising

Problem Solving

Decision Making

Strategy Development

Relationship Building and Leadership

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

WHAT ARE THE MAJOR TAKEAWAYS OF AI’S IMPACT ON AUDITING AND ACCOUNTING PROFESSION?

AI and the cloud work together to compute massive amounts of data in a very short period of time. This service streamlines operations by saving time, cutting costs, increasing productivity and providing more accurate results. Perhaps the greatest impact, however, is the change in mind-set that AI brings.

Accountants are becoming very tech-savvy and are embracing the AI tools that do the tedious work for them so they can spend their time analysing reports, speculating on future outcomes, managing the machinery and intervening if something goes awry.

CONCLUSION

Survival has its challenges, and accounting job is no exception. To remain a productive asset in the industry that’s all set to undergo some rapid changes, professionals will have to tone up their skill set. There is enough number of opportunities that accounting sector will have; it is the type of opportunity that’s going to change.

Refining their potential: Accounting professionals can adopt automation for redundant and repeatable tasks (such as data- entry) to save time and assist more clients. This process will reduce the billable hours and help you to be more productive.

Be the innovator: Accounting industry has always been solution-oriented. New technologies may show new problems and thus ask for new solutions. Moreover, someone with relevant education and professional experience in the industry can innovate these solutions.

Driving the decisions: AI may simplify the operations, but the understanding of data will remain a forte of accounting professionals. Making decisions based on data will create demand for accounting professionals, and that means the role of business consultancy can be the right fit for you

REFERENCES https://www.icaew.com/technical/technology/artificial-intelligence/artificial-intelligence-the- future-of-accountancy

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” https://www.cpaaustralia.com.au/podcast/53 https://mticollege.edu/artificial-intelligence-accounting/ https://www.palettesoftware.com/us/63913/ http://file.scirp.org/pdf/OJBM_2018083015105372.pdf

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. NIRPAM AGARWAL WRO0586833

Article Assistant at NRA & Co., SURAT

“Data Security and Its Importance in Recent Era”

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” DATA SECURITY AND ITS IMPORTANCE IN RECENT ERA Index S NO. Title

01 What is Data Security?

02 Important Aspects to Deal with Cyber Attacks

03 Who is Responsible for your Data Breach!?

04 What kind of data is Stolen?

05 How That Becomes Possible?

06 Privacy Policies…!!

07 Importance of Data Security..!

08 CASE LAWS.- Practical Examples

09 How Data is Stolen..

10 Loop Holes in the System..

11 What Solutions We have to Protect Our Business Data.

What is Data Security? As per the definition of Techopedia; • Data security refers to protective digital privacy measures that are applied to prevent unauthorized access to computers, databases and websites.

• Data security also protects data from corruption. Data security is an essential aspect of IT for organizations of every size and type.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Two Important Aspects to Deal with Data Attacks – Specially for Accountants.

• Awareness

• Data Protection. Who is Responsible for your Data Breach!? Basically every service provider of IT industry is responsible for the breach of our Private and Business Information. They stole our data for various purposes which we will discuss in the later part. Some of these service providers are your • Internet Service Providers, • Search Engines, • Websites, • Social Networking Sites, • Mobile Applications, • Smart Phone, • GPS, • Cookies- tracking and maintaining specific information of the user, • WI-FI service providers, • Spyware programs, • Web bug, • Social engineering, • Malicious proxy servers. • Ect..

What kind of data is Stolen?

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Now it becomes important for us to realize that these Service providers collect a lot of Personal and business Information each Hour, each Minute and each Moment. These information includes your: • Identity, • Name, • Address, • SSN, • Credit card info, • Annual Income, • Bank Details, • Location, • Personal Images, • Web history, • Contact history, • Online purchases, • Health records, • Personal Messages, • Profiles, • Usernames and Passwords, • Call logs, • Contact Numbers, • Email IDs, • IP Address, • Likes, • Dislikes, • Cookies, • Hobbies, • Schedules, • Professional and other Qualifications. • Your Past, Your Present, everything… • How That Becomes Possible?

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • All these become possible because lack of awareness among the users. We all agree to the terms and conditions of the service provider, but we never make an attempt to read and understand the agreement to which we have agreed. To some extent, information is provided to the users about the data collection process by these service providers through their ‘Privacy Policies’ and other such agreements. But practically these agreements are too lengthy and complex to understand for a layman. Therefore, in my opinion different awareness seminars should be conducted to make general public aware about the threat. • In this section we will understand how these Privacy Policies helps the service providers to collect our crucial information. • So let’s start with the giant called Internet Service Provider!!

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • As you can see in its URL, it’s an example of the privacy policy of a random website and it states that • This website receives information that is automatically generated by a user's Internet Service Provider (ISP) "cookies". This information may include the IP address (a number automatically assigned to a computer by the ISP), the associated URLs, domain types, the browser type used to access our system, the country, state and telephone area code, the location of the ISP's servers, the pages of our system that the user views, any search terms entered on this system, and the user's website address and email address. • Hereby it becomes clear that our internet service providers share some crucial information with all the websites that we visit in our day to day life. • Next, let us see how a search engine collects our Data. Let’s Say: GOOGLE -the biggest data dealer.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

As we can see in the URL it’s the privacy policy of Google, and as explained by them, while we use their services they collect our information such as • Terms we search for • Videos we watch • Views and interactions with content and ads • Voice and audio information when you use audio features • Purchase activity • People with whom you communicate or share content • Activity on third-party sites and apps that use our services • Chrome browsing history you’ve synced with your Google Account

Our location can be determined with varying degrees of accuracy by:

• GPS

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” • IP address • Sensor data from our device • Information about things near our device, such as Wi-Fi access points, cell towers, and Bluetooth-enabled devices

No doubt these information can be used for better user experience but practically they sell it in the open market and this future causes harm to the users in the form of Cyber Attacks. There is also a high risk of these data getting stolen through their servers and get misused. It has happened in the past and history keeps repeating itself as no steps have been taken for the betterment of the users.

Let us take an example of the GOOGLE DATA BREACH CASE:

As per the media of UK, Google may be forced to pay out compensation to more than 5 million Brits if a class action lawsuit in the UK is successful. A group, labelling itself “Google You Owe Us,” is taking Google to court, claiming it unlawfully collected personal information by bypassing privacy settings on Apple’s iPhone Safari browser. Google, Facebook, and several other online advertising networks were caught in 2012 using a workaround to bypass restrictions, allowing the companies to deposit cookies on an iPhone even if the device was set to block them. Our Next Example is of the Social Networking Giant Called ‘FACEBOOK’,

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

This graph shows the growth of Facebook in the last some years. But at the same time the number of Data Breach Offences has also increased.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

As per the privacy policy of Facebook they Collects: • the content, communications and other information we provide when we use their Products, • Sign up information of an account, • The content we Create or share and • The Message we communicate with others. • Payment information, such as our credit or debit card number and other card information, • Other account and authentication information, and • Billing, delivery and contact details.

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Hereby it is proven that these sites also collect sensitive information such as Credit and Debit card information.

Also Facebook collects information about our activities off Facebook by its Partners –

• Including information about our device, • Websites we visit, • Purchases we make, • The ads we see and • How we use their services – whether or not you have a Facebook account or are logged in to Facebook. For example, a game developer could use their API to tell them what games we play, or a business could tell us about a purchase we made in its shop.

Therefore, Facebook collects data even of those who don’t have a Facebook account through its partners and create their shadow accounts.

Facebook is also responsible for most Data Breaches in the world; one recent example is of Cambridge Analytica,

As per the Report of BLOOMBERG April 10, 2018, ‘No stranger to public discontent, Facebook Inc. is digging out of one of its biggest crises yet. The personal data of up to 87 million users, mostly in the U.S., was obtained by an analytics firm that, among its other work, helped elect President Donald Trump. In response to that revelation, lawmakers and regulators in the U.S. and U.K. increased their scrutiny of the social media giant, and at least some Facebook users cancelled their accounts. The uproar has only added to the pressure on Facebook and Chief Executive Mark Zuckerberg over how the company was used during the 2016 presidential campaign to spread Russian propaganda and phony headlines.’

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Its not just these Search Engine or Social Networking Sites or E-Commerce Sites that collets our Sensitive Information, but the fact is each and every IT Product is doing so.

Gaming Steals your DATA: Sony's PlayStation Network

Date: April 20, 2011 Impact: 77 million PlayStation Network accounts hacked; estimated losses of $171 million while the site was down for a month. Details: This is viewed as the worst gaming community data breach of all-time. Of more than 77 million accounts affected, 12 million had unencrypted credit card numbers. Hackers gained access to full names, passwords, e-mails, home addresses, purchase history, credit card numbers and PSN/Qriocity logins and passwords. "It's enough to make every good security person wonder, 'If this is what it's like at Sony, what's it like at every other multi-national company that's sitting on millions of user data records?'" said eIQnetworks' John Linkous. He says it should remind those in IT security to identify and apply security controls consistently across their organizations. For customers, "Be careful whom you give your data to. It may not be worth the price to get access to online games or other virtual assets." In 2014, Sony agreed to a preliminary $15 million settlement in a class action lawsuit over the breach.

Are Banks Secure for doing online transactions?? Our Example: One of Most Reliable Banks on this Planet- J.P Morgan

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Date: July 2014 Impact: 76 million households and 7 million small businesses Details: The largest bank in the United States was the victim of a hack during the summer of 2014 that compromised the data of more than half of all US households – 76 million – plus 7 million small businesses. The data included contact information – names, addresses, phone numbers and email addresses – as well as internal information about the users, according to a filing with the Securities and Exchange Commission. The hackers were reportedly able to gain “root" privileges on more than 90 of the bank’s servers, which meant they could take actions including transferring funds and closing accounts. According to the SANS Institute, JP Morgan spends $250 million on security every year. HOW A CYBER ATTACK TAKES PLACE..!

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” We in our daily life just use the Surface Web, which is a small proportion of the entire internet. All these market giants such as Google, Facebook, Amazon, ect. Offer us their services on the surface web but they store the huge amount of data in the ‘Deep Web’. Firstly, these Giants share these data with their Partner entities for business purposes and here they can be misused. Secondly, they also sell this data to various business entities and it’s also one of the major sources of revenue for them. Thirdly, Hackers and other Stakeholders steal these Data from the servers where they are stored by these giants and misuse it. All this Illegal Practice is done in ‘Dark Web’ which is the last and the biggest proportion of the Internet. AND THIS RESULTS INTO CYBER ATTACKS IN VARIOUS FORMS. STEPS TO PREVENT CYBER ATTACKS INTERNET SECURITY

Install a firewall router with gateway antivirus, gateway anti-malware, and intrusion protection to stop the virus before it gets into your private network. Routers provided by your Internet Service Provider do not have this type of security. While these might be adequate for your home, you should not have these for your business. A better utility to protect you is a “sandboxing” application that allows your browser to access internet, yet prevents any permanent changes to your computer or network. For example, if you accidentally download malware, any changes that it attempts to make will be contained in a virtual sandbox, which is easily emptied. We use a product called Sandboxie.

REMOTE ACCESS

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.” Remote access to your computers should be done with a secure virtual private network, or VPN, connection. Never use Microsoft Remote Desktop without a VPN. This will almost guarantee hackers access to your data. If it is not practical to setup a VPN, use one of a handful remote access services that offer two-factor authentication. Logmein is a good choice. Laptops are another security problem. Laptop hard drives should be encrypted. Microsoft has a built-in encryption utility call BitLocker that comes with the Professional versions of Windows 10. Disposal of computer equipment also needs to be handled properly. Removal and destruction of the drives is a good way to prevent unauthorized access to data. The Federal Trade Commission provides guides on proper disposal of digital data.

EMAIL SECURITY

Your email needs to be protected from unauthorized access. One way to do this is to turn on two-part authentication, which major email services—such as Gmail, Microsoft Office 365, AOL, and Yahoo—offer. If your current email provider does not offer two-part authentication, I advise you to change to one that does.

THANK YOU

CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

CA Bhavin Mehta Chairman

CA Vishal Rachchh Ex-officio

Mr. Kaushal Bhupta Ms. Tabassum Bharmal Ms. Krita Bhimani Vice-Chairman Secretary Treasurer

C C C CA Students Conference – 2018 “Knowledge & Training with Ethical Quotient –Pathway to Professional Excellence.”

Mr. Bhargav Makkar Mr. Bhavik Avlani Ms. Bhoomi Joshi Committee Member Committee Member Committee Member

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Ms. Mansi Lathiya Ms. Nidhi Ganatra Ms. Namarata Bhateliya Committee Member Committee Member Committee Member

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Ms. Shivani Kansagra Mr. Uday Chavda Mr. Vatsal Kamdar Committee Member Committee Member Committee Member

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