25th GST Meeting- Making GST Business-compliant

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By Mayank Agarwal (finserv@vinodkothari.com)

The 25th meeting of the GST Council held on 18th January, 2018 has shown that the Government has not turned a blind eye to the pleas of the industry and is willing to cooperate with them to make GST a more simplified and business-compliant structure of the Indirect Taxation System.

The amount of GST revenue for the month of December reflected a reversal in trend for the first time since its inception, recording an increase in the revenue generated. However, there were still widespread concerns about the alarmingly low collection under the Composition Scheme. Hence, amendments to the Composition Scheme structure and the guidelines relating to the implementation of E-Way Bill took the centre stage during the meeting.

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GST Council brings down the rate of GST on used cars, besides others

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By Abhirup Ghosh, (abhirup@vinodkothari.com, finserv@vinodkothari.com)

The GST Council met for the 25th time on 18th January, 2018 to modify the GST law in order to tackle the difficulties being faced in the market. The Council recommended several changes to the law among and one of the change that has can cause a significant impact on the vehicle industry is reduction of rate of tax on sale or purchase of used motor vehicles. Read more →

IMPLEMENTATION OF IFRS-16 IN VARIOUS COUNTRIES

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By Aakanksha Banthia, (finserv@vinodkothari.com)

Introduction

The International Accounting Standards Board (IASB) issued International Financial Reporting Standard 16 (IFRS 16) on ‘Leases’ in January 2016 replacing the previous accounting standard on leases, IAS 17 Leases, and related Interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). The said standard is effective from 1st January 2019. An entity can choose to apply IFRS 16 before that date provided that it also applies IFRS 15 ‘Revenue from Contracts with Customers’. IFRS 16 was another step towards completing IASB’s project to improve the financial reporting in case of leases.

While IASB has proposed to implement IFRS 16 with effect from 1st January, 2019, several countries which uses IFRS as a benchmark for preparing standards of accounting have not yet converged the existing leasing standards with IFRS 16. In this article we intend to capture the extent of implementation of IFRS 16 in various jurisdictions.

1. New Zealand

New Zealand Equivalent to International Financial Reporting Standard 16 Leases (NZ IFRS 16) was issued on 11 February 2016 by the New Zealand Accounting Standards Board of the External Reporting Board. The standard becomes effective for annual reporting periods beginning on or after 1st January, 2019 with early adoption possibility. These are applicable in ‘For Profit Entities’ which includes both Public Entities and SME’s[1].

2. South Africa

In South Africa IFRS-16 is being adopted and the same will become effective from 1st January, 2019. Here, IFRS-16 becomes applicable to both domestic public companies as well as SME’s[2].

3. Singapore

The Accounting Standards Council (ASC) issued FRS 116 Leases as the Singapore equivalent of IFRS 16. The new Singapore leases standard will be effective from 1st January 2019 and all companies are required to get ready for the adoption and implementation of FRS 116[3]     .

4. Australia

Australian Accounting Standards Board (AASB) issued AASB 16 in February, 2016 which is equivalent to IFRS 16 with extra paragraphs on Leasing Treatment for Non Profit Entities. This Standard is applicable to annual reporting periods beginning on or after 1 January 2019[4].

5. Indonesia

The Financial Accounting Standards Board of the Indonesian Institute of Accountants (DSAK IAI) has approved the Exposure Draft (DE) PSAK 73: Leases which are the result of the adoption of IFRS 16 Leases effective as of January 1, 2019. ‘DE PSAK 73: The lease’ is proposed to become effective from January 1, 2020 with an early adoption option permitted for the entity which has also applied ‘DE PSAK 72: Revenue from Contract to Customer’[5].

6. United Kingdom

The Financial Reporting Council (FRC) of United Kingdom published a feedback statement summarising respondents’ comments to its Consultation Document on updating FRS 102 for changes in IFRS. The statement also sets out the FRC’s revised approach. The FRC agrees that further evidence-gathering and analysis needs to be undertaken before any proposals to reflect the principles of IFRS 16 in FRS 102 could be made.  Therefore, the FRC will not be issuing a triennial review phase 2 exposure draft later this year. Thus, IFRS 16 is not being implemented in UK from the effective date stated by IASB.[6]

7.  Japan

The Accounting Standards Board of Japan (ASBJ) undertakes the endorsement process on the Standards and Interpretations (collectively referred to as ‘Standards’) issued by the International Accounting Standards Board (IASB) and issues Japan’s Modified International Standards (JMIS). ASBJ undertakes to endorse amendments in IFRS in JMIS Exposure Drafts. According to Exposure Draft 5, ASBJ wants to endorse the amendments in IFRS 16 individually. However, no other Exposure Draft has been drawn to take in effect the changes implemented in IFRS-16 and no timeline has been stated as to when they will they make IFRS 16 effective.[7]

8. Canada

The Accounting Standards Board’s (AcSB) due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on IFRS 16, subject to the responses to the AcSB’s exposure draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRSs for publicly accountable enterprises. Draft Exposure states the effective period of implementation will be for annual periods beginning on or after January 1, 2019. However, it is still in exposure draft and final standard has not been made effective[8].

9. United States

Financial Accounting Standard Boards (FASB) which issues US GAAP is not convergent with IFRS 16. USA equivalent Standard to IFRS 16 is Topic 842, which though amended in February 2016, does not incorporate the major changes which IFRS 16 has got in the books of the lessee. Thus, FASB is not complying with IFRS.[9]

10. India

Accounting Standard Board ICAI has issued IND AS which substantially converges with IFRS. IFRS 16 has been adopted in exposure draft of IND AS 116 Leases which has not been implemented till now. Ind AS 116 is proposed to be effective from annual periods beginning on or after 1st April, 2019[10].

Conclusion

IFRS 16 is being implemented by some developed countries, but major countries like USA is not converging with IFRS 16 and UK is also not implementing the standard on the effective date of 1st January, 2019 and it is in draft format for most of the countries mentioned above and implementation on the effective date seems difficult. Below is a table showing the effective dates of implementation of IFRS 16 for the above mentioned Jurisdictions.

Country Effective Date of Implementation of IFRS 16 Comments
New Zealand Ist January, 2019
South Africa Ist January, 2019
Singapore Ist January, 2019
Australia Ist January, 2019 AASB 16 includes paragraph on treatment for Non Profit Entities which is not mentioned in IFRS 16
Indonesia Ist January, 2020 Standard is still in exposure draft form
United Kingdom — No exposure draft has been prepared by FRC
Japan — No exposure draft has been prepared by ASBJ
Canada Ist January, 2019 Standard is still in exposure draft form
United States — FASB is not implementing IFRS 16
India Ist January, 2019 Standard is still in exposure draft form

 

[1]https://www.xrb.govt.nz/accounting-standards/for-profit-entities/nz-ifrs-16/

[2]https://www.saica.co.za/Technical/FinancialReporting/TheNewLeasesStandard/tabid/3893/language/en-ZA/Default.aspx

http://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/south-africa/

[3] https://isca.org.sg/media/779571/isca_lease-accounting-report.pdf

[4] http://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf

 

[5]https://translate.google.co.in/translate?hl=en&sl=id&u=http://www.iaiglobal.or.id/v03/berita-kegiatan/detailberita-990%3Dpengesahan-draf-eksposur-de-psak-73-sewa&prev=search

https://assets.kpmg.com/content/dam/kpmg/id/pdf/2017/05/id-anf-may17-ed-psak73-lease.pdf

[6]https://www.frc.org.uk/getattachment/3dc51dc2-56db-4dfc-8f8c-28396ee95b8d/Feedback-consultation-triennial-review-June-2017.pdf

[7]https://www.asb.or.jp/en/ifrs/exposure_drafts/2017-1031.html

https://www.asb.or.jp/en/wp-content/uploads/exposure_20171031_01_e.pdf

[8]http://www.frascanada.ca/international-financial-reporting-standards/projects/completed/item55632.aspx

[9]http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176167901010&acceptedDisclaimer=true

http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220137102

 

[10] https://resource.cdn.icai.org/45885asb36137.pdf

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Major rejig in the GST law with respect to car leasing/ renting business

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GST Division, (gst@vinodkothari.com)

 

Introduction

Vehicle leasing business in India has been gaining popularity ever since its inception in the year 2005. In the past few years, the industry has picked up pace and become the preferred mode of procuring a vehicle given its temporary and simplistic structure. The vehicle leasing market in India is estimated to be worth around Rs. 1500 crores, with a Compounded Annual Growth Rate (CAGR) of about 15-20%.[1] Although the market is scattered in nature, with around 30 companies in India carrying out the business of vehicle leasing, companies such as LeasePlan, Tranzlease, Orix India are some of the established players in this market. With a high percentage of working age population of around 925 million by 2020, and 70% of compact car owners belonging to an age group of below 35 years, the Indian vehicle leasing market has the potential to double its value in the coming 3 to 5 years.[2] While the core business of leasing companies in India involves leasing to corporations who provide the vehicles to their employees, the booming cab sector is also another area forms a chunk of their portfolio. Read more →

GST and CSR Expenditure

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Vallari Dubey

finserv@vinodkothari.com

 

Introduction

Indian companies, especially public and listed companies are actively engaged in Corporate Social Responsibility (“CSR”) activities. Moreover, since the introduction of Companies Act, 2013, the law has mandated compulsory CSR expenditure for a specific class of companies. In the recent months, with the advent of GST, life of corporates has experienced all sorts of challenges in terms of operational flexibility and cost. One such aspect that has not been shed much light on, is the impact of GST on CSR activities and expenditure thereon by the companies. To understand this better, we take a scenario of donating water purifiers as part of a Company’s CSR policy. In this article, we try to detail out the analysis of such scenario by studying the provisions of GST and Companies Act, 2013. Read more →

GST Rates on services relating to Motor Vehicles

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By GST Division (gst@vinodkothari.com)

 

The GST rates assigned for transaction in relation to motor vehicle is summarized in the below table:

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FAQs on GST on Directors’ Remuneration

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By Ankit Bhalotia ,gst@vinodkothari.com

The GST law, introduced with effect from 1st July, 2017, makes a major rejig in the indirect tax system in the country. With its introduction, several concepts have been brought up, playing with the minds of the people. One such concept that has created havoc is the reverse charge mechanism and its viding applicability. Services of director i.e. sitting fees, commission has been covered under the Government notified services on which the tax would be payable on reverse charge.

Following are the some of the pertaining questions answered in respect of GST on Director Services Read more →

MCA Clarification on IFC Reporting in Auditor’s Report for Private Companies

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MCA vide its General Circular No. 08/2017 dated July 25, 2017[1] has issued a clarification regarding applicability of exemptions provided to private companies. Till now MCA has issued two notifications viz., Notification No. GSR 464(E) dated June 05, 2015[2]and Notification No. GSR 583(E) dated June 13, 2017[3] providing various exemptions to the private companies. Some of the major exemptions are as follows: Read more →

CBDT clarifies its stand on section 269ST – NBFCs will breathe a sigh of relief

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By Abhirup Ghosh (abhirup@vinodkothari.com)

One of the major highlights of the Finance Budget 2017 was the introduction of section 269ST of the Income Tax Act, 1961. The section was introduced with an intention to curb black money by reducing the scope of large ticket size cash transactions in the economy. As per the provisions of the section, no person can accept an amount of Rs. 2 lakhs or more: Read more →