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    The movement from existing regime to GST regime is gaining certainty with passing of each day. The recent council meetings give a sense of hope that the law shall be made effective from April, 2017. With GST around the corner, we would like to dwell upon on one of the transitional provisions under the revised model GST law made available in November, 2016. Among the set of transitional provisions, the section which is the subject matter of this article assumes highest significance since it is applicable to majority of the assessees and deals with the transition of credit from existing regimes to the GST regime. 

    Section 167 of the revised model GST law deals with ‘Amount of Cenvat Credit carried forward in a return to be allowed as input tax credit’. The salient features of Section 167 are discussed as under. 

    As per Section 167, every person other than who has opted for composition under GST, shall be entitled to take the credit in his electronic credit ledger, the amount of cenvat credit/VAT/Entry Tax carried forward in the returns relating to the period ending with the day immediately preceding the appointed day, furnished, by him under the earlier laws in such manner as may be prescribed. The section has a proviso which states that the credit shall be allowed only if such credit which is being carried forward is eligible also under GST laws.

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    The Bill was introduced to amend the Income-tax Act, 1961 and the Finance Act, 2016. The below are the changes proposed vide the amendment bill:

     

    1. Amendment to provisions of Section 115BBE (W E F 01-04-2017); 
    1. Proposed to amend the applicable tax rate in relation to income referred to in section 68/69/69A,B,C,D(Undisclosed Income-UI); 
    1. Voluntary disclosure and Income determined by the AO of UI shall be subject to tax @60%.( Existing position- No Voluntary Disclosure). Surcharge @25%. Effective Rate 77.25% including cess. The payment of tax has to be made before 31st March of the relevant previous year. 
    1. Amendment to Provisions of Section 271AAB1 :- by insertion of (1A) to the section

     

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    Today the scope of compliance is much broader and its impact on business far greater than ever before. Despite greater regulation and the risk of noncompliance, some companies may not be taking their responsibility for identifying and managing compliance risk particularly seriously. Organisations should Identify, prioritize, and assign accountability for managing existing or potential threats related to legal or policy noncompliance—or ethical misconduct—that could lead to fines or penalties, reputational damage, or the inability to operate in key markets. 

    A survey conducted in 2014 by Compliance week indicates 40 percent of companies did not perform an annual compliance risk assessment. Further a study conducted by IIA indicates 38 percent of chief audit executives (CAEs) did not use compliance or regulatory requirements as a resource to establish the audit plan. 

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    Post budget 2012 and after introduction of part C in form 3CEB, ICAI had revised the guidance Note on Sec 92E (August 2013) and since then there have been various developments in TP Provisions like notification of safe harbour rules, notification of provisions/rules for Advance Pricing Agreement (APA) roll back mechanism, range concept and use of multiple year data for determination of arm’s length price, Deemed International Transactions, increased threshold limit for the applicability of the specified domestic transaction provisions, CBCR requirements etc. 

    Thus ICAI has come up with the revised Guidance Note (Fifth Edition), 2016 which contains guidance on all these important changes. In this article we have summarised the key changes or revisions made in the Guidance Note on Report u/s 92E.

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    Introduction

    The auditor is responsible to obtain reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether due to fraud or error. However, due to inherent limitations of an audit, there will be an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the standards. 

    The potential effects of inherent limitations are particularly significant in the case of misstatements resulting from fraud. The risk of not detecting a material misstatement resulting from fraud is higher than risk of not detecting one resulting from error, because fraud may involve sophisticated and carefully organized schemes designed to conceal it, such as forgery, deliberate failure to record transactions or intentional misrepresentations made to auditor. 

    SA 240 along with SA 315 are designed to assist the auditor in identifying and assessing the risks of material misstatement due to fraud and in designing procedures to detect such misstatement. 

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