Skip to main content

Centre to crack whip on firms not filing cost audits

By
Centre to crack whip on firms not filing cost audits
The Ministry of Corporate Affairs is planning to pull the plug on companies that do not file cost audits to ensure these businesses pay accurate corporation taxes and consumers know the pricing of products.

A senior official said the ministry will examine companies across 10 sectors to identify companies that do not hire cost accountants and file reports. Textiles, machinery, insecticides, milk powder, glass, tea and coffee are some of the sectors that will be monitored.

The move will ensure firms do not evade corporation tax, the official explained. Cost audit, which reflects efficiency of the company concerned, also provides the consumer an idea about the fair price of products.

The official stated the plan is being thought of in the interest of investors as well. “Filing of cost audits will tell us if companies are fudging numbers, and will also tell investors what the company’s costing plan is,” the official added.

At present, there are 5,000 firms that need to file cost audits. However, only 1,000 companies actually do so. The government intends to start surprise checks to track and trace companies that do not comply. Any company that has an annual turnover of Rs 35 crore or more has to file a cost audit.

Meanwhile, sources also said the ministry plans to ask banks to ensure that audit reports of companies are used for analysing the credibility of companies.

The ministry has identified 300,000 shell companies post demonetisation. Sources said after demonetisation, the government had conducted a 50-day special audit of account movement before tracing these shell companies. According to the Reserve Bank of India numbers, the loss incurred by banks due to fraud increased 72 per cent to Rs 16,770 crore in 2016-17, from Rs 9,750 crore in 2012-13.
The government has cracked the whip on shell companies by deregistering them, disqualifying their directors, and freezing their bank accounts. Banks have also been asked to check with the government before lending to companies not filing statutory returns. Banks need to now ensure that the firm they are lending to is not part of the disqualified list. Investigative agencies such as the Serious Fraud Investigation Office are investigating these directors. More than 100,000 directors associated with shell firms have been disqualified by the Ministry of Corporate Affairs.
Action is also being taken against chartered accountants involved with these firms. The ministry is planning an early warning system for the authorities to take action against firms that are non-compliant.

The Business Standard, New Delhi, 04th October 2017

Comments

Post a Comment

Popular posts from this blog

Data storage norm splits digital payments industry

By
Data storage norm splits digital payments industry  India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move.  In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET.  “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week.  RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...
18 comments
Read more

Sebi to finalise options in commodities today

By
The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...
17 comments
Read more

E tailers global warehouses may come under tax net

By
E tailers  global warehouses may come under tax net Warehouses of e-commerce companies based in countries such as Australia, Japan, Italy,  Spain, the Netherlands, and Russia may not be exempted from paying the income tax in India  once the multilateral instrument (MLI) to prevent base erosion and profit shifting (BEPS)  comes into force. BEPS refers to the reporting framework mooted by the Organisation for Economic  Co-operation and Development (OECD) and signed by over 100 countries, including India, to  prevent exploiting gaps and mismatches in tax rules to shift profits by multinational  companies (MNCs) artificially to low-tax regimes. The representatives of 68 countries on June 7 this year signed an agreement (MLI) in Paris  to amend their tax treaties to bring them in alignment with measures to prevent BEPS.  However, there is still time for synchronising tax treaties with the multilateral  instrument. India has submitte...
17 comments
Read more