There were concerns raised in the last report that new regulations could lead to a turf war because of jurisdictional overlaps between the NFRA, ICAI, MCA and SEBI. Has this happened?

Mandatory audit trail: The MCA had proposed to bring in the compulsory audit trail in the accounting tool for all companies. In a big relief for micro and small enterprises, the applicability is now extended until 31 March 2023.

Audit requirement for small companies: NFRA had proposed a relief from audits for small enterprises but this has not been enacted. NFRA had an objective of reducing the compliance requirements for small entities and to do away with mandatory audits. However, the risk of non-compliance was a concern from removing audit requirements, so currently this has also been put on hold, but it is not too far off. The Government may announce exemption from mandatory audits for a certain class of companies.

Income tax audit and GST audit: There are exemptions from an audit requirement under the provisions of income tax and GST in India.

Possible impact on auditors:

• Professionals performing basic audit and accounting work may face the challenge of losing assignments because of the withdrawal of audits.
• It is time for professionals to look beyond audits and get into advisory roles.

Has the regulatory environment become easier or are firms still grappling with constant changes?

The Government has improved the structure and a lot of effort has been put into simplifying the process across all the regulations. In addition to this, the Government of India has initiated to facilitate enterprises in India:

• Platform for Self-certification under labour laws for start-ups: The online system allows start-ups to submit their self-certification under the applicable labour laws to avoid any inspection until 5 years.
• New policies for aiding disruptive technologies or business models, viz. EV, cyber security, fintech, e-pharmacy.
• Secretary DPIIT said that more than 22,000 compliances have been reduced by Union Ministries, States & UTs so far under the initiative and about 13,000 compliances simplified while more than 1,200 processes have been digitized. It may be noted that during the last few years 103 offences have been decriminalized and 327 redundant provisions/laws removed.
• 46 penal provisions of the Companies Act, 2013 and 12 offences under the Limited Liability Partnership (LLP) Act, 2008 decriminalized.
• Through business process re-engineering, States/UTs have reduced time for granting approvals/licenses, eliminated physical touchpoints and brought transparency in inspections.
• Single window clearances for new investors have reduced the time to start operations across businesses.

Few of the benefits/rebates brought in by the Government of India vide Union Budget 2022 which will benefit the economy at large through:

• Capital expenditure (CAPEX) by the Government
• Additional programmes for agriculture, skill development, affordable housing, electric vehicles, solar energy, and carbon neutrality, as well as the micro, small, and medium-sized enterprise (MSME) sector
• Ease of doing business: Automation of customs national portal
• Emergency credit guarantee for Micro and Small enterprises
• Extension of timeline for concessional tax rates of 15%
• Implementation of Unified Logistics Interface Platform for improving logistics and connectivity.
• Increase in number of digital banking units across the country
• Reduction in sur-charge on long-term capital gains
• Introduction of central bank digital currency to boost digital economy
• Installation of optical network fibre across the nation
• Implementation of production-linked incentive schemes

Opportunities for Professionals:

• With the modifications and amendments in the regulations, accounting professionals with advanced technology will have an upper hand in the industry
• Professionals advising on the business model, and guiding on benefits and rebates available from Government may have higher demand over fellow professionals
• Enhanced services to micro and small enterprises with competitive prices using technology will be a game changer for professionals

Part Two of the IAB India Country Report is available to read here.