The Institute of Chartered Accountants of India - Dhanbad
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The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
CA. Devendra Kr.
Somani
Chairman, ICAI
ICAI BHAWAN, Room No.405, 4th Floor, New Market, Bank More, Dhanbad, Jharkhand
Phone: (+91-9852176644), (0326-2306336) Email: Dhanbad@icai.org.
SL NO. CONTENTS PAGE NO.
01 Past Committee Members List 03-05
02 E-Newsletter Committee 2020-21 06
03 Managing Committee Members 2020-21 07
04 Message Form Ex-Officio 08-09
05 Message From Branch Chairman Desk 10
06 Message From E-Newsletter Chief Editor 11-12
07 Article on Income Tax rules FY 2020-21 13-15
08 Article on Interest under GST 16-22
09 Article on Impact of COVID-19 on Financial Reporting 23-36
10 Students Announcements 37-41
11 Understanding E-Learning 42
12 Article 43-46
13 Members Announcements 47
14 Photo Gallery 48
15 Creative Section 49
16 Request for Members Participation 50
Disclaimer:
The views and opinions expressed or implied in this e-Newsletter are those of
the authors and do not necessarily reflect those of Dhanbad Branch of CIRC of
ICAI.
Past Committee Members of Dhanbad
Branch of CIRC of ICAI
Past Committee Members of Dhanbad
Branch of CIRC of ICAI
Past Committee Members of Dhanbad
Branch of CIRC of ICAI
E-Newsletter Committee, 2020-2021
Dhanbad Branch of Central India Regional Council of
The Institute of Chartered Accountants of India
New Committee for E-Newsletter
CA. Sunil Kumar Das
M. No. 7209620461
Chief Editor
CA. Manish Kumar CA. Sidharth Jain CA. Sunny Katesaria
M. No. 7004579671 M. No. 9204814350 M. No. 7856056709
Editor Editor Editor
Volume II | MAY 2020
Managing Committee, 2020-2021
Dhanbad Branch of Central India Regional Council of
The Institute of Chartered Accountants of India
CA. Charanjeet S. Chawla
M. No. 7739567189
Chairman
CA. Pratik Ganeriwal CA. Shiwam Agarwal CA. Rahul Kr. Singhania
M. No. 9905064076 M. No. 7044071440 M. No. 8986892111
Vice-Chairman Secretary Treasurer
CA. Rahul Kr. Agarwal CA. Shashikant Chandraker
M. No. 9973916610 M. No 9425213218
CICASA Chairman Ex-Officio
Volume II | MAY 2020
Message from Ex-Officio
CA. Shashikant Chandraker
My dear professional brethren, seniors and all the professional colleagues from Dhanbad Branch of CIRC,
Now days the situation in world including our nation is very troubling due to Covid-19 pandemic situation all
around. We are stuck at our home, workings are stopped and our work places are also not an exception to
this. But this situation will not run for a long time, our patience and measures taken by authorities at our
country and states will surely pull us from this critical situation. It is rightly said that each hurdle came with
many solutions too, but its upto us that to which solution we prefer and choose. As our offices are closed, we
are using the work from home or working virtually through the use of technology. Our CA fraternity and our
leaders are came up with new means of education and training via webinars, virtual meetings etc.
While we are working we have many excuses for some important things of our life i.e. may be for studies, for
updations, for adoption of new technologies etc. But the current scenario has taught us that we must upgrade
and update ourselves to survive in long run. As you all know that 10 years before the videography from sky
side was done through the use of helicopter and cameraman, but now this work is being done through the use
of DRONE Cameras, the result is that the helicopter pilot and tha cameraman are not useful and outdated,
they lost their jobs. By this story I just want to appeal all of you that use this Lockdown period wisely and come
up with a new talent and idea so that our value as well as the value of profession will touch the sky. Friends,
life is a series of comma and semi comma and there is no full stop, so face the situations smoothly and try to
be happy.
The Chartered Accountancy profession since inception is regarded as the Trustee of Public Interest. In the last
decade or so of the financial turbulences, the role of Chartered Accountancy profession has became
increasingly relevant and has become critical for sustenance of businesses.
In fact there is no end to education. It is not that you read a book, pass an examination, and finish
with education. “True education must correspond to the surrounding circumstances or it is not a
healthy growth- Mahatma Gandhi”. The whole of life, from the moment you are born is a process of
learning. Also the most important factor in survival is neither intelligence nor strength but
adaptability. The key to success is often the ability to adapt. Acceleration now illuminates reality
whereas light once gave objects of the world their shape.
Volume II | MAY 2020
Message from Ex-Officio
All of us have great responsibility towards the society where we live in. Let us realise the position of
our profession and understand that we should better displease others and do what we know is right
than we make others happy by doing what we realise is unjust. It is time to display courage and speak
the truth, and acknowledge with zeal what the English playwright George Bernard Shaw had once
said: No man, who is occupied in doing a very difficult thing and doing it very well, ever loses his self-
respect. We should respect our efforts, and, above that, ourselves. All practitioners of accountancy
profession in India must respect their root, i.e. the Institute. We must always identify with our
Institute which has given all of us reasons to smile and live with respect in our life. We must add life
to the Institute’s standing by respecting and valuing it. We must be aware the latest technologies and
manners to discharge our duties very well within the parameters of Law.
Dear friends, having a sharp memory is a good quality of the brain but the ability to forget the
unwanted thing is far better quality of the heart. We should live with peace and not in pieces.
Anything hurts only if we think more. Forget and move on, life has many other interesting things for
us.
In the words of Grenville Kleiser- "You were intended not only to work, but to rest, laugh, play, and have
proper leisure and enjoyment. To develop an all-around personality, you must have interest outside of your
regular vocation that will serve to balance your responsibilities.”
With best wishes,
CA. Shashikant Chandraker
Treasurer,
Central India Regional Council,
The Institute of Chartered Accountants of India
skantca@hotmail.com
Volume II | MAY 2020
Message from Branch Chairman’s Desk
Respected Professional Colleagues,
Warm Greetings
I hope you and your family members are safe and in good health and adhering
to the directives of the Centre/State Government issued from time to time to
deal with the current Covid 19 pandemic situation. Covid 19, apart from being
a world health emergency, has badly affected the world economy. Hope the
almighty would be kind enough to pull us out of this situation at the earliest.
In the current situation we are witnessing sea changes in the business
environment that too at a pace which no one anticipated. Further, it has led a number of innovations
too.
We, Chartered Accountants are not aloof of this changing environment and challenges. Obtaining
and assessing audit evidence will be much harder with remote auditing. Technology is going to aid
everyone including auditors but it should not be forgotten that they are only supplement to human
functions and not a substitute.
The Institute of Chartered Accountants of India has always been a partner in nation building.
Following this vision and mission of the Institute, Dhanbad branch has set up a GST helpdesk to help
the business/service community to clarify their queries relating to GST. Queries in this regard may be
forwarded to dhnicaigsthelpdesk@gmail.com which shall be duly replied by our expert members in a
time bound manner.
I would like to inform you all that Dhanbad Public School, near Bhuiphore Mandir shall be the new
ICAI examinations centre at Dhanbad. Accordingly, upcoming examinations from 29.07.2020 to
16.08.2020 and subsequent exams shall be conducted at Dhanbad Public School.
I congratulate each and every member of the newly constituted e-newsletter and CPE subcommittee,
who have come forward to join hand in hand with the managing committee of the branch, in the
interest of members and students at large.
I hope this e-Newsletter would be immensely useful to the members and other stakeholders in their
professional endeavors and in disseminating information about the branch activities.
Be vigilant. Stay safe.
Yours in professional service
CA Charanjeet Singh Chawla
Chairman, Dhanbad Branch of CIRC of ICAI
Volume II | MAY 2020Message from E-Newsletter Chief Editor Desk
My Dear “Recent Challenges of Life”
Black may be the clouds about you,
And your future may seem grim,
But don’t let your nerve desert you;
Keep yourself in fighting trim.
If the worst is bound to happen,
Spite of all that you can do,
Running from it will not save you,
See it through! CA. Sunil Kumar Das
Even hope may seem but futile,
When with troubles you’re beset,
But remember you are facing
Just what other men have met.
You may fail, but fall still fighting;
Don’t give up, whatever you do;
Eyes front, head high to the finish,
See it through!
-Edgar Guest
Dear Professional Colleagues,
In these hard times of global Covid-19 pandemic it would not be fair to address with immense
pleasure about our present commitment of publishing the June 2020 edition of e-newsletter. Rather, it
gives me an opportunity to share my thoughts and to develop connectivity with you all via this e-
newsletter. The aim of this e-newsletter is to provide an overview layer of recent professional updates
through inviting the opinions and views from our professional colleagues regarding the hardcore
avenues of our Chartered Accountancy profession. The communication between our members from
Chartered Accountants fraternity may prove an effective tool of knowledge sharing aspect in our
profession. Sharing of knowledge enhances our capabilities to work with determination and with
better ideas. As we all know there is a famous proverb, “United we stand, Divided we fall”, we often
adopt the aforesaid piece of truth in our ideological thought process to judge better decisions
revolving around life. Hence we have to adopt the same for enhancing our professional competency
and to strengthen the bond amongst our professional members.
Volume II | MAY 2020Message from E-Newsletter Chief Editor Desk
As we all know, recently an initiative has already been taken by Dhanbad Branch of ICAI towards
knowledge sharing amongst society by introducing a GST Helpline centre offering resolution of
doubts and queries regarding GST provisions and that too with positive responses and reviews with
very little span of time. This shows the enthusiasm and hard work devotees by our members towards
the commitment for society even though there are challenges and hurdles globally caused, the
members are putting the negativity at bay.
Let me conclude my Chairman’s message by expressing my gratitude to managing committee for
giving me this opportunity to chair the Editorial Committee. My sincere thanks to all the Sub-
Committee members of Editorial Committee for their support and hard work that has made possible
to publish this e-newsletter on time. Hope members are going to participate in this e-newsletter by
expressing their views and opinion in form of articles, professional updates, and the ideas of
knowledge sharing.
STAY SAFE, STAY HEALTHY
Thanks
CA. Sunil Kumar Das
Volume II | MAY 2020CA. UMA KUMARI
Major Changes in Income Tax Rules FY 2020-21 (AY 2021-22)
Income Tax Rules for the new financial year 2020-21 has been introduced with some major changes
in it. From 1st April 2020, these changes are being followed.
IT Slabs Rate for FY 2020-21 Under the New Regime:-
Up to Rs 2.5 lakh – Nil
From 2,50,001 to Rs 5 lakh – 5 per cent.
From 5,00,001 to Rs 7.5 lakh – 10 per cent.
From 7,50,001 to Rs 10 lakh -15 per cent.
From 10,00,001 to Rs 12.5 lakh – 20 per cent.
From 12,50,001 to Rs 15 lakh – 25 per cent.
Above Rs 15 lakh – 30 per cent.
FM Niramala Sitharaman proposed a new optional personal income tax system, those who
opt for such a regime will have to forego certain deductions and exemptions.
Without claiming the exemption, deductions and incentive available under specified
section of the IT Act, namely section 10AA, 32AD, 33ABA, 35(1)(ii), 35(1)(iia) ,
35(1)(iii), section 35(2AA), 35AD, 35CCC, and chapter VI A deductions (except
Leave Travel Allowance under clause 5 of Section 10(5).
House Rent Allowance under Section 10(13A).
Allowances to MPs/MLAs under section 10(17).
Allowances for income of minor u/s 10(32) etc.
Standard deduction of Rs 50,000 u/s 16.
Deductions from House Property Income of interest paid on house loan (Self-
occupied/Vacant) u/s 24.
Entertainment allowance and employment/ professional tax will not be available.
Deduction of Rs 15,000 for family pension u/s 57.
Set off of carry forward loss and depreciation from earlier assessment years is not
allowed.
Without setting off loss under the head income from house property.
Volume II | MAY 2020Major Changes in Income Tax Rules
FM Nirmala Sitharaman has made some changes in the old regime as well.
Some of the changes are as follows:-
Dividend Distribution Tax is not applicable to companies from 1st April 2020. The dividend
is now taxable in the hands of recipients.
New Direct Tax Dispute Scheme i.e. Vivad se Vishwas Scheme has been launched. Interest
ad penalty will be waived for those who will pay the amount by 31st March 2020. However,
the date of 31st March 202 0 has been extended to 30th June 2020 due to COVID-19 Effect.
Tax Audit threshold limit u/s 44AB has been increased from 1 crore to 5 crores provided
that turnover/gross receipts in cash during the previous year does not exceed 5%. Also, the
payment made in cash during the previous year does not exceed 5%.
For new manufacturing and power Sector Company concessional corporate tax rate of 15%
has been introduced.
Section 234G (insertion of the new section) relating to the payment of a fee of Rs. 200 per
day for default in furnishing statement or certificate under section 35 by research
association, university, college, company or any other institution.
Under the Head TDS some major Changes are as follows:
Section 194:- TDS @ 10% will be deducted by Indian companies on dividend paid to a
shareholder who is resident in India if the amount exceeds Rs 5000.
Section 194O:- If the annual amount paid or credit by the e-commerce operator to its
participants during the financial year exceeds Rs 5 Lakh then the operator will have to
deduct TDS @ 1%.
Section 194K: – TDS @ 10% on dividend paid by Mutual Fund if the amount of Dividend
exceeds Rs 5000.
Section 194J:- TDS has been reduced to 2% from 10% on fees for technical services.
Section 206AA:- If PAN Number is not available in case of section 194O then TDS @ 5%
will be charged instead of 20%.
Volume II | MAY 2020CA. SUNNY KATESARIA
“INTEREST UNDER GST”
GOODS AND SERVICES TAX (GST) WAS INTRODUCED IN INDIA FROM 1ST JULY, 2017. IT IS
ONE OF THE MAJOR TAX REFORMS SINCE INDEPENDENCE IN THE AREA OF INDIRECT
TAXATION. IT WAS INTRODUCED WITH THE OBJECTIVE TO MITIGATE THE CASCADING
EFFECT OF TAXES BY ALLOWING SEAMLESS CREDIT ACROSS GOODS AND SERVICES,
FACILITATE FREE FLOW OF GOODS AND SERVICES ACROSS INDIA AND BOOSTING TAX
REVENUE FROM BETTER COMPLIANCE AND WIDENING THE TAX BASE. A REMARKABLE
FEATURE OF GST IMPLEMENTATION IS THAT ALL THE STATES IN INDIA CAME TOGETHER
WITH THE CENTRE TO FORM A UNIQUE FEDERAL BODY CALLED GST COUNCIL, WHICH IS
ENTRUSTED WITH THE OBJECTIVE OF RECOMMENDING POLICIES AND PROCEDURAL
MATTER IN THE FORMATION AND IMPLEMENTATION OF GST LEGISLATION. THE SPIRIT OF
CO-OPERATIVE FEDERALISM TOOK DEEP ROOTS THERE BY ENSURING THAT LARGE
FEDERAL COUNTRIES LIKE INDIA IMPLEMENT THE -GST LAW. AN ATTEMPT HAS BEEN
MADE TO COVER ASPECTS RELATED TO INTEREST TO GIVE GENERAL GUIDANCE TO ALL
STAKEHOLDERS AND ALSO HELP THEM IN RESOLVING ISSUE THAT THEY MAY FACE
DURING THE COURSE OF THEIR COMPLIANCE ASPECT IN GST.
i. INTEREST ON DELAYED PAYMENT OF TAX: SECTION 50 OF THE
CENTRAL GOODS AND SERVICES TAX ACT, 2017 („THE CGST ACT‟ OR
“THE ACT”)
1. EVERY PERSON WHO IS LIABLE TO PAY TAX IN ACCORDANCE WITH THE PROVISIONS
OF THIS ACT OR THE RULES MADE THEREUNDER, BUT FAILS TO PAY THE TAX OR ANY PART
THEREOF TO THE GOVERNMENT WITHIN THE PERIOD PRESCRIBED, SHALL FOR THE PERIOD
FOR WHICH THE TAX OR ANY PART THEREOF REMAINS UNPAID, PAY, ON HIS OWN,
INTEREST AT SUCH RATE, NOT EXCEEDING EIGHTEEN PER CENT, AS MAY BE NOTIFIED BY
THE GOVERNMENT ON THE RECOMMENDATIONS OF THE COUNCIL.
[18% RATE OF INTEREST WAS NOTIFIED VIDE NOTIFICATION NO. 13/2017-C.T., DATED 28-6-
2017, FOR PAYMENT OF INTEREST UNDER SECTION 50(1) OF THE CGST ACT]
AS PER THE GENERAL PROVISIONS RELATING TO DETERMINATION OF TAX, SECTION 75(12)
OF THE ACT INTERALIA PROVIDES THAT NON-PAYMENT OR SHORT PAYMENT OF ANY
INTEREST WHOLLY OR IN PART SHALL BE RECOVERED UNDER SECTION 79 OF THE ACT.
2. THE INTEREST UNDER SUB-SECTION (1) SHALL BE CALCULATED, IN SUCH MANNER
AS MAY BE PRESCRIBED, FROM THE DAY SUCCEEDING THE DAY ON WHICH SUCH TAX WAS
DUE TO BE PAID.
Volume II | MAY 2020INTEREST UNDER GST
ALTHOUGH NO SEPARATE METHOD HAS BEEN PRESCRIBED FOR CALCULATING INTEREST,
THE RELEVANT RULES MAKE IT ABUNDANTLY CLEAR THAT INTEREST IS TO BE PAID ON PER
DAY BASIS, FOR THE PERIOD OF DELAY FROM THE DUE DATE OF PAYMENT OF TAX.
3. A TAXABLE PERSON WHO MAKES AN UNDUE OR EXCESS CLAIM OF INPUT TAX
CREDIT UNDER SUB-SECTION (10) OF SECTION 42 OR UNDUE OR EXCESS REDUCTION IN
OUTPUT TAX LIABILITY UNDER SUB-SECTION (10) OF SECTION 43, SHALL PAY INTEREST ON
SUCH UNDUE OR EXCESS CLAIM OR ON SUCH UNDUE OR EXCESS REDUCTION, AS THE CASE
MAY BE, AT SUCH RATE NOT EXCEEDING TWENTY-FOUR PER CENT., AS MAY BE NOTIFIED BY
THE GOVERNMENT ON THE RECOMMENDATIONS OF THE COUNCIL.
[24% RATE OF INTEREST WAS NOTIFIED VIDE NOTIFICATION NO. 13/2017-C.T., DATED 28-6-
2017, FOR PAYMENT OF INTEREST UNDER SECTION 50(3)]
UNDUE- IN CONTEXT OF GST LAW, ANYTHING DONE WITH RESPECT TO CLAIMING OF INPUT
TAX CREDIT (“ITC”) OR/AND WHILE CALCULATING OUTPUT TAX LIABILITY WHICH IS NOT
ACCEPTABLE OR REASONABLE AS PER PROVISION(S) OF LAW WOULD BE TERMED AS
“UNDUE”.
EXCESS- ANY CLAIM OF ITC OR/AND ANY REDUCTION IN OUTPUT TAX LIABILITY WHICH IS IN
EXCESS OF THE PERMITTED LIMITS AS PER THE PROVISION(S) OF GST LAW WOULD BE
TERMED AS „EXCESS‟.
SECTIONS 42 AND 43 OF THE ACT CLEARLY INDICATE THAT IF, THE UNDUE/ EXCESS CLAIM
OF ITC OR REDUCTION IN OUTPUT TAX LIABILITY IS NOT FIXED WITHIN THE TIME LIMIT
PRESCRIBED UNDER SECTION 39 (9) OF THE ACT, THEN INTEREST UNDER SECTION 50(3) @
24% WILL BE APPLICABLE.
FURTHER, THE TIME LIMIT PROVIDED IN SECTION 39(9) OF THE ACT IS THE EARLIEST OF:
— THE DUE DATE FOR FURNISHING OF RETURN FOR THE MONTH OF SEPTEMBER, OR DUE
DATE FOR FURNISHING OF RETURN FOR THE SECOND QUARTER FOLLOWING THE END OF
THE FINANCIAL YEAR TO WHICH SUCH DETAILS PERTAIN
— ACTUAL DATE OF FURNISHING OF RELEVANT RETURN.
IN ALL OTHER CASES MENTIONED UNDER SECTIONS 42 AND 43 OF THE ACT, INTEREST
UNDER SECTION 50(1) @ 18% WOULD BE FIRST PAYABLE BY THE RECIPIENT UNDER SECTION
42 AND SUPPLIER UNDER SECTION 43 AND LATER REFUNDED TO THE ELECTRONIC CASH
LEDGER UPON THE OTHER PARTY ACCEPTING THE SAME IN THE VALID RETURNS WITHIN
THE TIME LIMIT SPECIFIED UNDER SECTION 39(9) OF THE ACT.
IT IS IMPORTANT TO NOTE THAT, SECTION 50(3) REFERS TO SECTIONS 42(10) AND 43(10)
WHICH DEAL WITH MATCHING, REVERSAL AND RECLAIM OF ITC AND OUTPUT TAX LIABILITY
Volume II | MAY 2020INTEREST UNDER GST
THROUGH FORM GSTR-1, 2 AND 3, AND SINCE THE FORM GSTR-2 AND 3 RETURNS HAVE
BEEN DEFERRED, THE MATCHING SYSTEM OF FORM GSTR-1, 2 AND 3 NEVER SAW THE
LIGHT OF DAY. CAN WE THUS SAY THAT SECTION 50(3) IS MAJORLY INAPPLICABLE?
WITH THAT UNDERSTANDING IT WOULD BE SAFE TO INTERPRET THAT THE APPLICATION OF
24% RATE OF INTEREST ON ANY DEFAULT IS NOT IN PLACE. AT THE SAME TIME, SOME
EXPERTS ARE OF THE VIEW THAT IN CASES LIKE EXCESS CLAIM OF CREDIT, WHERE THE
RECTIFICATION HAS NOT BEEN DONE WITHIN THE DUE DATE, AS STATED IN SECTION 39(9)
OF THE ACT, INTEREST WOULD BE APPLICABLE @24%.
LAW VS. GST PORTAL
THOUGH SECTION 50 OF THE CGST ACT 2017 IMPOSES INTEREST ONLY ON THE PORTION OF
THE UNPAID TAX, THE GST PORTAL IS DESIGNED IN SUCH A MANNER THAT IT WILL NOT
ACCEPT THE RETURN IN FORM GSTR-3B, UNLESS THE ENTIRE TAX LIABILITY IS MET (PAID)
BY THE TAXPAYER. SO, EVEN IF THE TAXPAYER HAS ITC TO THE EXTENT OF 95% OF THE
TOTAL LIABILITY, HE CANNOT FILE THE RETURN UNLESS THE REMAINING 5% IS ALSO PAID,
THOUGH THIS RESTRICTION IS NOT IMPOSED BY LAW.
GROSS OR NET
THE LEGISLATION EFFECTIVE FROM 1ST JULY 2017 DID NOT PROVIDE THE NEEDED CLARITY ON
WHETHER THE LEVY OF INTEREST IS ON GROSS LIABILITY OR NET LIABILITY REMAINING
AFTER SETTING OFF THE ITC. AFTER A LONG WAIT,
GST COUNCIL IN ITS 39TH MEETING HELD ON 14TH MARCH 2020 IN NEW DELHI HELD THAT
INTEREST IS PAYABLE RETROSPECTIVELY ON NET CASH LIABILITY I.E. W.E.F. 1ST JULY, 2017
AS “HAPPY ENDINGS COME AFTER A STORY WITH LOTS OF UPS AND DOWNS” THE STORY OF
INTEREST HAS CONCLUDED WITH A HAPPY ENDING THAT INTEREST IS APPLICABLE ONLY
ON NET LIABILITY FROM THE DATE OF INTRODUCTION OF THE GST.
QUESTIONS & ANSWERS
Q1. IF A REGISTERED PERSON MISSES TWO INVOICES AND THUS UNDER REPORTS ITS
OUTWARD SUPPLY, BUT REALISES IT LATER AND ADDS IT TO THE OUTWARD SUPPLY OF
THE NEXT TAX PERIOD, WILL HE BE REQUIRED TO PAY INTEREST ON THE DELAYED DEPOSIT
OF OUTPUT TAX? IF YES, AT WHAT RATE?
ANS. YES, THE REGISTERED PERSON IS REQUIRED TO PAY INTEREST UNDER SECTION 50(1)
@ 18% P.A.
Volume II | MAY 2020INTEREST UNDER GST
Q2. IF A REGISTERED PERSON INADVERTENTLY CLAIMS ITC OF RS 1,00,000 INSTEAD OF RS
10,000 AND UPON REALIZING THE MISTAKE, REVERSES THAT CREDIT IN THE NEXT TAX
PERIOD, WILL
HE BE REQUIRED TO PAY INTEREST? IF YES, AT WHAT RATE?
ANS. YES. INTEREST IS TO BE PAID @ 18% P. A. UNDER SECTION 50(1), AS THIS WOULD BE
EXCESS CLAIM OF THE ITC.
Q3. IF A REGISTERED PERSON ISSUES INVOICES @ 18%, BUT WHILE FILING FORM GSTR-3B
SHOWS ALL OUTWARD SUPPLIES @ 5%. LATER ON, WHEN HE REALISES THE MISTAKES HE
PAYS THE DIFFERENTIAL AMOUNT OF TAX, WILL HE BE REQUIRED TO PAY INTEREST ON
THIS DIFFERENTIAL AMOUNT? IF YES, AT WHAT RATE?
ANS. YES. HE IS REQUIRED TO PAY INTEREST ON THE DIFFERENTIAL AMOUNT OF TAX,
UNDER SECTION 50 (1), @ 18% P.A.
ii. INTEREST ON DELAYED DEPOSIT OF TAX DEDUCTED AT SOURCE:
SECTION 51(6) OF THE CGST ACT
1. IF ANY DEDUCTOR FAILS TO PAY TO THE GOVERNMENT THE AMOUNT DEDUCTED AS
TAX UNDER SUB-SECTION (1), HE SHALL PAY INTEREST IN ACCORDANCE WITH THE
PROVISIONS OF SUB-SECTION (1) OF SECTION 50, IN ADDITION TO THE AMOUNT OF TAX
DEDUCTED.
UNDER SECTION 51 ALL NOTIFIED DEDUCTOR ARE REQUIRED TO DEDUCT 1% TDS FOR
SPECIFIC INWARD SUPPLIES AGAINST CONTRACTS EXCEEDING ` 2,50,000/-, AND THE
AMOUNT SO DEDUCTED IS TO BE DEPOSITED WITH THE GOVERNMENT WITHIN 10 DAYS FROM
THE END OF THE MONTH IN WHICH SUCH DEDUCTION IS MADE. IN CASE OF FAILURE TO
DEPOSIT WITHIN 10 DAYS OF THE FOLLOWING MONTH, INTEREST @ 18% PER ANNUM WILL BE
PAYABLE FROM THE DATE OF DEFAULT TILL THE DATE OF ACTUAL PAYMENT.
QUESTIONS & ANSWERS
Q1. IS INTEREST APPLICABLE ON THE NON-PAYMENT OF TDS?
ANS. YES. THE DEDUCTOR SHALL BE LIABLE TO PAY INTEREST @ 18% P.A. FOR FAILURE TO
PAY THE AMOUNT DEDUCTED AS TAX.
Volume II | MAY 2020INTEREST UNDER GST
Q2. CAN TDS AND INTEREST ON TDS BE PAID THROUGH ECL?
ANS. NO. AS PER RULE 85(4), THE AMOUNT DEDUCTED UNDER SECTION 51, OR THE AMOUNT
COLLECTED UNDER SECTION 52, OR THE AMOUNT PAYABLE ON REVERSE CHARGE BASIS,
OR THE AMOUNT PAYABLE UNDER SECTION 10, ANY AMOUNT PAYABLE TOWARDS
INTEREST,
PENALTY, FEE OR ANY OTHER AMOUNT UNDER THE ACT SHALL BE PAID BY DEBITING
THE ELECTRONIC CASH LEDGER MAINTAINED AS PER RULE 87 AND THE ELECTRONIC
LIABILITY REGISTER SHALL BE CREDITED ACCORDINGLY.
Q3. A GOVERNMENT ENTERPRISE RECEIVED A SUPPLY AMOUNTING TO ` 5, 00,000/- IN THE
MONTH OF NOVEMBER 2019, AGAINST WHICH THE PAYMENT WAS MADE IN THE MONTH OF
JANUARY 2020. THE ENTERPRISE DEPOSITED TDS ON THIS SUPPLY BEFORE 10 FEBRUARY
2020. DOES IT ENTAIL ANY INTEREST PAYMENT? IF YES, AT WHAT RATE?
ANS. NO. IN THIS CASE THE GOVERNMENT ENTERPRISE WAS SUPPOSED TO DEDUCT TDS IN
THE MONTH OF JANUARY 2020 WHEN THE PAYMENT WAS MADE, AND THE DEDUCTED
AMOUNT WAS TO BE DEPOSITED BY 10TH FEBRUARY 2020. THEREFORE, AS THERE IS NO
DELAY, NO INTEREST IS TO BE PAID.
Q4. A GOVERNMENT UNDERTAKING HAS GIVEN A PURCHASE ORDER WORTH ` 4,00,000/- IN
THE MONTH OF NOVEMBER 2019, ALONG WITH 100% ADVANCE TO M/S ABC ENTERPRISES,
TO SUPPLY STATIONERY IN TWO LOTS/INVOICES OF ` 2,00,000/- EACH, ONE EACH IN THE
MONTH OF DECEMBER 2019 AND JANUARY 2020. IS TDS TO BE DEDUCTED? IF YES, WHEN?
ANS. YES. THIS CASE REQUIRES DEDUCTION OF TDS AS THE TOTAL CONTRACT VALUE
EXCEEDS ` 2,50,000/- TDS SHOULD HAVE BEEN DEDUCTED AT THE TIME OF MAKING THE
ADVANCE PAYMENT (IN THE MONTH OF NOVEMBER 2019), AND SHOULD HAVE BEEN
DEPOSITED BY 10 DECEMBER 2019.
iii. INTEREST ON DELAYED DEPOSIT OF TAX COLLECTED AT SOURCE:
SECTION 52(6) OF THE CGST ACT
IF ANY OPERATOR AFTER FURNISHING A STATEMENT UNDER SUB-SECTION (4) DISCOVERS
ANY OMISSION OR INCORRECT PARTICULARS THEREIN, OTHER THAN AS A RESULT OF
SCRUTINY, AUDIT, INSPECTION OR ENFORCEMENT ACTIVITY BY THE TAX AUTHORITIES, HE
SHALL RECTIFY SUCH OMISSION OR INCORRECT PARTICULARS IN THE STATEMENT TO BE
FURNISHED FOR THE MONTH DURING WHICH SUCH OMISSION OR INCORRECT
PARTICULARS ARE NOTICED, SUBJECT TO PAYMENT OF INTEREST, AS SPECIFIED IN SUB-
SECTION (1) OF SECTION 50 ( IE @ 18%):
Volume II | MAY 2020INTEREST UNDER GST
PROVIDED THAT NO SUCH RECTIFICATION OF ANY OMISSION OR INCORRECT PARTICULARS
SHALL BE ALLOWED AFTER THE DUE DATE FOR FURNISHING OF STATEMENT FOR THE
MONTH OF SEPTEMBER FOLLOWING THE END OF THE FINANCIAL YEAR OR THE ACTUAL
DATE OF FURNISHING OF THE RELEVANT ANNUAL STATEMENT, WHICHEVER IS EARLIER.
IF THERE IS ANY OMISSION OR RECTIFICATION ON PART OF THE OPERATOR WHICH
RESULTS IN DELAY IN DEPOSITING THE COLLECTED AMOUNT, HE SHALL PAY THE AMOUNT
ALONG WITH INTEREST UNDER SECTION 50(1) WHILE FILING THE RETURN OF THE MONTH
IN WHICH SUCH OMISSION/RECTIFICATION IS NOTICED AND CORRECTED.
WHAT IS TCS?
UNDER SECTION 52, EVERY ELECTRONIC COMMERCE OPERATOR (HEREAFTER IN THIS
SECTION REFERRED TO AS THE “OPERATOR”), NOT BEING AN AGENT, SHALL COLLECT AN
AMOUNT CALCULATED AT SUCH RATE NOT EXCEEDING ONE PER CENT., AS MAY BE NOTIFIED
BY THE GOVERNMENT ON THE RECOMMENDATIONS OF THE COUNCIL, OF THE NET VALUE OF
TAXABLE SUPPLIES MADE THROUGH IT BY OTHER SUPPLIERS WHERE THE CONSIDERATION
WITH RESPECT TO SUCH SUPPLIES IS TO BE COLLECTED BY THE OPERATOR. THE AMOUNT
SO COLLECTED IS CALLED AS TAX COLLECTION AT SOURCE (TCS).
FURTHER, THE CENTRAL GOVERNMENT VIDE NOTIFICATION NO. 52/2018-C.T., DATED 20-9-
2018 PRESCRIBE SUCH RATE AS HALF PER CENT OF THE NET VALUE OF INTRA-STATE
TAXABLE SUPPLIES WHILE NOTIFICATION NO. 2/2018-I.T., DATED 20-9-2018 STIPULATES RATE
OF ONE PER CENT. OF THE NET VALUE OF INTER-STATE TAXABLE SUPPLIES
D. INTEREST ON DELAY IN ISSUE OF REFUNDS: SECTION 54(12) OF THE
CGST ACT
WHERE A REFUND IS WITHHELD UNDER SUB-SECTION (11), THE TAXABLE PERSON SHALL,
NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 56, BE ENTITLED TO INTEREST AT
SUCH RATE NOT EXCEEDING SIX PER CENT. AS MAY BE NOTIFIED ON THE
RECOMMENDATIONS OF THE COUNCIL, IF AS A RESULT OF THE APPEAL OR FURTHER
PROCEEDINGS HE BECOMES ENTITLED TO REFUND
6% RATE OF INTEREST WAS NOTIFIED VIDE NOTIFICATION NO. 13/2017-C.T., DATED 28-6-2017,
FOR PAYMENT OF INTEREST UNDER SECTION 54(12).
QUESTIONS & ANSWERS
Q1. IS PAYMENT OF INTEREST MANDATORY?
Volume II | MAY 2020INTEREST UNDER GST
ANS. YES. IT IS MANDATORY TO PAY INTEREST, BECAUSE INTEREST IS COMPENSATORY IN
NATURE. FURTHER, SECTION 50 USES THE WORD „SHALL‟ WHICH INDICATES THAT
INTEREST IS MANDATORY.
Q2. IN CASE OF LATE PAYMENT OF TAX, CAN I FILE MY FORM GSTR-3B (REGULAR DEALERS)
WITHOUT PAYMENT OF INTEREST ON SUCH LATE PAYMENT OF TAX?
ANS. THE SYSTEM ALLOWS A REGULAR DEALER TO FILE THE RETURN EVEN IF INTEREST IS
NOT PAID. ANY INTEREST NOT PAID DURING THE FINANCIAL YEAR SHOULD BE PAID AT THE
TIME OF FILING THE ANNUAL RETURN.
Q3. IS THERE ANY INTEREST ON INTEREST?
ANS. NO. THERE IS NO INTEREST ON INTEREST.
THIS COMPILATION CONTAINS INFORMATION FOR GENERAL GUIDANCE ONLY. IT IS NOT
INTENDED TO ADDRESS THE CIRCUMSTANCES OF ANY PARTICULAR INDIVIDUAL OR
ENTITY. ALTHOUGH THE BEST OF ENDEAVOUR HAS BEEN MADE TO PROVIDE THE
PROVISIONS IN A SIMPLER AND ACCURATE FORM, THERE IS NO SUBSTITUTE TO
DETAILED RESEARCH WITH REGARD TO THE SPECIFIC SITUATION OF A PARTICULAR
INDIVIDUAL OR ENTITY.
AUTHOR DO NOT ACCEPT ANY RESPONSIBILITY FOR LOSS INCURRED BY ANY PERSON
FOR ACTING OR REFRAINING TO ACT AS A RESULT OF ANY MATTER IN THIS
PUBLICATION
Volume II | MAY 2020CA. LALIT JHUNJHUNWALA
We all are well aware that the disruptions due to Pandemic disease COVID-19 are extremely
impacting businesses in a significant manner and brings with it several issues and challenges to
preparers of financial statements on various aspects concerning preparation of financial statements.
CAs are always committed as professionals to ensure that reporting in financial statements
continues to be of high quality and reliable based on applicable accounting framework.
Apart from the health and safety of mankind, COVID-19 has unfavorably affected the economic
environment which in turn has consequential impact on the results in the financial statements and
reporting.
While the outbreak has had an impact on almost all entities either directly or indirectly, some of the
worst-hit sectors are aviation, hospitality and retail with more and more sectors coming under its
radar with widespread lockdowns being enforced across the world. Other affected sectors are
pharmaceuticals, automobiles, leather goods, apparel, consumer durables and electronics etc. where
the supply chain is dependent on countries worst hit by Corona Virus. Financial services have also
been affected with the inability of borrowers to keep up with repayment schedules.
Now, for preparing and reporting the financial statements for the year ended March 31, 2020, it has
become essential for the preparers of financial statements to ensure that the potential impact of
COVID-19 is suitably considered in the same.
The Accounting Standards Board (ASB) and Auditing & Assurance Standards Board (AASB) of
ICAI, has developed an Advisory on “Impact of Coronavirus on Financial Reporting and the
Auditors Consideration” highlighting few important areas which require particular attention in
respect of financial statements for the year 2019-20 for the guidance to the preparers of financial
statements and auditors .
Specific requirements of a few accounting standards that may need special attention have been
briefly indicated in this Article which is based on “Advisory by ICAI”.
The presentation has been made on the basis of entities to whom either Ind AS or AS is applicable:
Entities to whom Ind AS is applicable
The Ministry of Corporate Affairs (MCA), in 2015, had notified the Companies (Indian Accounting
Standards (IND AS)) Rules 2015, which stipulated the adoption and applicability of IND AS in a
phased manner beginning from the Accounting period 2016-17. The MCA has since issued three
Amendment Rules, one each in year 2016, 2017, and 2018 to amend the 2015 rules.
The IND AS are basically standards that have been harmonized with the IFRS to make reporting by
Indian companies more globally accessible. Since Indian companies have a far wider global reach
now as compared to earlier, the need to converge reporting standards with international standards
was felt, which has led to the introduction of IND AS
Volume II | MAY 2020Phase wise adoption of IND AS
MCA has notified a phase-wise convergence to IND AS from current accounting standards.
IND AS shall be adopted by specific classes of companies based on their Net worth and listing
status. Let’s see the each of the phases in detail below:
Phase I
Mandatory applicability of IND AS to all companies from 1st April 2016, provided:
It is a listed or unlisted company
Its Net worth is greater than or equal to Rs. 500 crore*
*Net worth shall be checked for the previous three Financial Years (2013-14, 2014-15,
and 2015-16).
Phase II
Mandatory applicability of IND AS to all companies from 1st April 2017, provided:
It is a listed company or is in the process of being listed (as on 31.03.2016)
Its Net worth is greater than or equal to Rs. 250 crore but less than Rs. 500
crore (for any of the below mentioned periods).
Net worth shall be checked for the previous four Financial Years (2014-14, 2014-15, 2015-
16, and 2016-17)
Phase III
Mandatory applicability of IND AS to all Banks, NBFCs, and Insurance companies from 1st
April 2018, whose:
Net worth is more than or equal to INR 500 crore with effect from 1st April 2018.
IRDA (Insurance Regulatory and Development Authority) of India shall notify the
separate set of IND AS for Banks & Insurance Companies with effect from 1st April
2018. NBFCs include core investment companies, stock brokers, venture capitalists, etc.
Net Worth shall be checked for the past 3 financial years (2015-16, 2016-17, and 2017-
18)
Phase IV
All NBFCs whose Net worth is more than or equal to INR 250 crore but less than INR 500
crore shall have IND AS mandatorily applicable to them with effect from 1st April 2019.
Volume II | MAY 2020Important Note:
If IND AS become applicable to any company, then IND AS shall automatically be made
applicable to all the subsidiaries, holding companies, associated companies, and joint ventures of
that company, irrespective of individual qualification of such companies.
In case of foreign operations of an Indian Company, the preparation of stand-alone financial
statements may continue with its jurisdictional requirements and need not be prepared as per the
IND AS.
However, these entities will still have to report their IND AS adjusted numbers for their
Indianparent company to prepare consolidated IND AS accounts.
and
i. Entities to whom AS is applicable, viz,
a. Companies to whom Companies, Accounting
Standards Rules, 2006 is applicable and
b. Non-corporate entities to whom AS issued by ICAI is applicable.
IND AS and AS AREAS TO BE CONSIDERED
1. Inventory Measurement
In accordance with Ind AS 2 and AS 2 , it might be necessary to write down inventories to
net realisable value due to reduced movement in inventory, decline in selling prices, or
inventory obsolescence due to lower than expected sales.
Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale. The
management may consider written down of inventories to net realisable value item by
item.
Ind AS 2 and AS 2 also provide that the allocation of fixed production overheads to the
costs of conversion is based on the normal production capacity. The amount of fixed
overhead allocated to each unit of production is not increased as a consequence of low
production or idle plant. Unallocated overheads are recognised as an expense in the period
in which they are incurred.
The significance of any write-downs should be assessed by the Entities and if required,
disclosure in accordance with various Accounting Standards to be made.
Volume II | MAY 20202. Impairment of Non-Financial Assets
a) Ind AS 36 and AS 28 , require an entity to assess, at the end of each reporting
period, whether there is any indication that non-financial assets may be impaired.
The impairment test only has to be carried out if there are such indications. If any
such indication exists, the entity shall estimate the recoverable amount of the asset.
Due to COVID-19, there might be temporary ceasing of operations or an
immediate decline in demand or prices resulting in lowering of revenues and
profitability and reduced economic activity. These are the factors that the
management may consider as the indicators that may require impairment testing for
the purpose of Ind AS 36 and AS 28. For indefinite useful life intangible asset or an
intangible asset not yet available for use and goodwill, Ind AS 36 requires an
annual impairment testing. There could be an indicator that impairment testing of
goodwill and indefinite useful life intangible assets are tested as of reporting date
even if the entity follows other annual testing cycle as per Ind AS 36.
b) An entity needs to estimate the recoverable amount of the asset for impairment
testing. Recoverable amount is the higher of the fair value less costs of disposal and
the value in use. In cases where the recoverable amount is estimated based on value
in use, the considerations on accounting estimates apply.
Goodwill impairment
Due to COVID-19, there might be significant changes with an adverse effect in operations
of a cash generating unit to which goodwill is allocated and therefore requiring additional
focus and attention while testing of impairment of goodwill as at March 31, 2020.
The disclosure requirements in Ind AS 36 and AS 28 are extensive. Depending on specific
facts and circumstances, entities need to consider providing detailed disclosures on the
assumptions and sensitivities considered for effects of the COVID-19.
3. Financial Instruments
-Impairment Losses
(Entities to whom Ind AS is applicable)
Volume II | MAY 2020Financial Instruments within the scope of Ind AS 109 such as Loans, Trade Receivables,
Other Receivables, Investment in Debt instruments, Financial Guarantees and Loan
Commitments not measured at fair value through profit or loss, Contract Assets and Lease
Receivables are subject to impairment loss recognition and measurement based on an
approach called Expected Credit Loss (ECL).
ECL approach is expected to consider forward looking information and it is measured based
on probability weighted amount that is determined by evaluating a range of possible
outcomes. The widespread contraction in economic activity across the globe due to the rapid
spread of COVID-19 is likely to have an impact on the quantification of ECL.
In respect of Ind AS 107, Financial Instruments Disclosures, entities may need to disclose
the impact of COVID-19 on various credit related aspects such as methods, assumptions
and information used in estimating ECL, policies and procedures for valuingcollaterals etc.
If the entity is unable to assess the impact of COVID-19 in estimating the impairment loss
due to the inadequacy of information, the same should be disclosed appropriately.
Entities to whom AS is applicable
In case of financial assets such as Loans, Trade Receivables etc., entities shall be guided by
the requirements of AS 4, Contingencies and Events Occurring after the Balance Sheet
Date.
In respect of financial assets within the scope of AS 13, Accounting for Investments,
entities may have to carefully consider the requirements of making provisions for decline in
the value of investments, which is other than temporary.
In respect of Banks and Insurance Entities, preparers need to consider impact of COVID-19
on classification of Loans and Advances into Standard, Sub- standard, Doubtful and Loss
categories in addition to the Prudential Regulatory requirements of RBI and The
Insurance Regulatory and Development Authority of India (IRDAI).
-Fair Value Measurement
Entities to whom Ind AS is applicable
Volume II | MAY 2020Individual Ind ASs such as Ind AS 109, Ind AS 16 etc. prescribe when to measure an asset or
liability at fair value and how to recognize the resultant fair value gains and losses
i.e. in profit or loss section or other comprehensive income section of Statement of Profit
and Loss. Equally, important is Ind AS 113 Fair Value Measurement, which lays down
certain fundamental principles in respect of Fair value, its definition and how to determine
it?
The current financial and capital market environment across the globe has got affected by
the rapid spread of COVID-19 and may have developed the following features.
Significant volatility or indications of the significant decline in market prices of financial
instruments like Equity, bonds and derivatives.
Significant decrease in volume or level of activity
The above features may need adequate management consideration and professional
judgment to determine whether the quoted prices are based on transactions in an orderly
market.
It may not be always appropriate to conclude that all transactions in such a market are
not orderly. Preparers should be guided by the application guidance in Ind AS 113
that indicates circumstances in which the transaction is not considered an
orderly transaction.
Preparers using valuation techniques may have to consider the impact of COVID- 19 on
various assumptions including discount rates, credit-spread/counter-party credit risk etc.
Entities to whom AS is applicable
In respect of financial assets within the scope of AS 113, entities have to carefully consider
the impact of COVID-19 on determination of fair value for valuation of investments
classifiedas Current Investments.
-Hedge Accounting
Entities to whom Ind AS is applicable
Ind AS 109 has elaborate requirements on the application of hedge accounting, which is an
accounting choice for the entities. The requirements, among others, include the qualifying
criteria for hedge accounting, how to assess hedge effectiveness and accounting for its
impact in the financial statements.
Volume II | MAY 2020The standard permits a highly probable forecast transaction to be a qualifying hedged item.
If entities have adopted cash-flow hedge accounting for certain forecasted transactions,
they should assess whether the transaction still qualifies as a highly probable forecast
transaction considering their business environment.
Entities will need to assess any hedge in effectiveness and record the impact of that in profit
and loss.
Estimate the fair value of derivatives, including paying special attention to underlying
assumptions of derivatives, e.g., forward curve of interest rate, foreign currency,
commodity etc.
Entities to whom AS is applicable
• In respect of recognition and measurement of derivatives, entities may need to
consider the impact on key inputs/assumptions such as foreign currency rate, interest
rate, etc. used in their valuation techniques, including the potential impact on hedge
accounting.
4. Leases
Entities to whom Ind AS is applicable
• Due to COVID-19, there may be changes in the terms of lease arrangements or lessor
may give some concession to the lessee with respect to lease payments, rent free
holidays etc. Such revised terms or concessions shall be considered while accounting
for leases, which may lead to the application of accounting relating to the
modification of leases. However, anticipated revisions should not be taken into
account.
• Variable lease payments may be significantly impacted, especially those linked to
revenues from the use of underlying asses due to contracted business activity.
• Discount rate used to determine the present value of new lease liabilities may need to
incorporate any risk associated with COVID-19.
• If any compensation is given/declared by the Government to the lessor for providing
concession to the lessee, it should be considered whether the same needs to be
accounted for as lease modification as per Ind AS 116 or whether assistance received
from Government is to be accounted as government grants under Ind AS 20.
• Entities will need to determine whether as a result of COVID-19, any lease
arrangement has become onerous.
Volume II | MAY 2020Entities to whom AS is applicable
• Due to COVID-19 there can be changes in the terms of lease arrangements or lessor
may give some concession to the lessee with regard to lease payments. Such revised
terms or concessions shall be considered while accounting for leases. However,
anticipated revision should not be taken into account.
• Discount rate used to determine present value of minimum lease payments of new
leases may need to incorporate any risk associated with COVID-19. If any
compensation is given/declared by the Government to the lessor for providing
concession to the lessee, it should be considered whether the same needs to be
accounted for appropriately as per AS 19. Whether any assistance received from
government are government grants under AS 12.
• Entities will need to determine whether as a result of COVID -19, any lease
arrangement has become onerous. The same should be accounted for as per AS 29.
5. Revenue
Due to COVID-19, there could be likely increase in sales returns, decrease in volume
discounts, higher price discounts etc. Under Ind AS 115, these factors need to be
considered in estimating the amount of revenue to be recognised, i.e., measurement of
variable consideration.
Ind AS 115 also requires disclosure of information that allows users to understand the
nature, amount, timing and uncertainty of cash flows arising from revenue. Therefore,
entities may have to consider disclosure about the impact of COVID-19 on entities
revenue.
Entities to whom AS is applicable, may have postponed recognition of revenue due to
significant uncertainty of collection in view of the impact of COVID-19. AS 9, Revenue
Recognition requires entities to disclose the circumstances in which revenue recognition
has been postponed pending the resolution of significant uncertainties.
6. Provisions, Contingent Liabilities and Contingent Assets Entities to
whom Ind AS is applicable
I. As a result of COVID -19, some contracts may become onerous for reasons such as
increase in cost of material/labour, etc. Management should consider whether any
of its contracts have become onerous. The same should be accounted for as per Ind
AS37. Ind AS 37 also requires assets dedicated to a contract to be tested for
impairment before a liability for an onerous contract is recognised. Additionally,
there could be losses from imposition of penalty
Volume II | MAY 2020due to delay in supply of goods, which may need to be considered under the
guidance of Ind AS 115, Revenue from Contracts with Customers.
If the management is unable to assess whether some of the executory contracts are
onerous due to inadequacy of information, the same should be disclosed.
Management should disclose that it has assessed whether executory contracts are
onerous due to the adverse impact of COVID -19. If, the management is unable to
assess whether some of the executory contracts have become onerous due to
inadequacy of information, thes should be disclosed.
(ii) Restructuring costs - The Standard provides that a provision for restructuring costs is
recognised only when the general recognition criteria for provisions are met and when
there is a detailed formal plan for the restructuring and there is evidence that the entity has
started to implement a restructuring plan, for example, by dismantling plant or selling
assets or by the public announcement of the main features of the plan.
(iii)Insurance claims - Entities may have insurance policies that cover loss of profits due to
business disruptions due to events like COVID-19. Entities claims on insurance companies
can be recognised in accordance with Ind AS 37 only if the recovery is virtually certain i.e.
the insurance entities have accepted the claims and the insurance entity will meet its
obligations.
Iv) Ind AS 37 requires a provision to be recognised only
• Where an entity has a present obligation
• it is probable that an outflow of resources is required to settle the obligation; and
• are liable estimate can be made.
Due to COVID-19, there is a need for exercising judgment in making provisions for losses and
claims.
Entities to whom AS is applicable
As a result of COVID -19, some contracts may become onerous for reasons such as the
imposition of penalty due to delay in supply of goods or increase in cost of material, labour,
etc. Management should consider whether any of its contracts have become
Volume II | MAY 2020Onerous. The same should be accounted for as per AS 29. Management should disclose that it
has assessed whether executory contracts are onerous due to adverse impact of COVID -19. If,
the management is unable to assess whether some of the executor contracts have become
onerous due to the
Inadequacy of information, the same should be disclosed.
7. Modifications or Termination of Contracts or Arrangements
The entities may modify or terminate certain contracts which may be within the scope of
Ind ASs 19 (Employee benefits), 102(Share based payments), 104(Insurance contracts for
insurance companies), 109(Financial Instruments) and 115(Revenue from contracts with
Customers) or
ASs 7(Construction Contracts), 9 (Revenue recognition) and 15(Employee benefits)or
Guidance notes ( GN on Accounting for Employee Shared payments , GN on
Accounting for Derivative Contracts and GN on Accounting for Real Estate
Transactions .
Entities are advised to consider the specific requirements of these standards and guidance
note to account for these modifications or terminations.
8. Going Concern Assessment Entities to whom Ind AS is applicable
The Financial statements are normally prepared on the assumption that an entity is a going
concern and will continue in operation for the foreseeable future. In assessing whether the
going concern assumption is appropriate, management considers all available information
about the future, which is at least, but is not limited to, twelve months from the end of the
reporting period.
Management of the entity should assess the impact of COVID-19 and the measures taken on
its ability to continue as a going concern. The impact of COVID- 19 after the reporting date
should also be considered and if, management after the reporting date either intends to
liquidate the entity or to cease trading, or has no realistic alternative but to do so, the
financial statements should not be prepared on going concern basis.
Necessary disclosures as per Ind AS 1 shall also be made, such as material uncertainties
that might cast significant doubt upon an entity's ability to continue as a going concern.
Entities to whom AS is applicable
Volume II | MAY 2020Management of the entity should assess the impact of COVID-19 and the measures taken on
its ability to continue as a going concern. The impact of COVID- 19 after the balance sheet
date should also be considered in assessing whether going concern assumption is
appropriate or not. Events occurring after the balance sheet date may indicate that the
enterprise ceases be a going concern.
9. Income Taxes
Entities to whom Ind AS is applicable
COVID-19 could affect future profits and/or may also reduce the amount of deferred tax
liabilities and/or create additional deductible temporary differences due to various factors (e.g.,
asset impairment). Entities with deferred tax assets should reassess forecasted profits and the
recoverability of deferred tax assets in accordance with Ind AS 12 considering the additional
uncertainty arising from the COVID-19 and the steps being taken by the management to
control it.
Management might also consider whether the impact of the COVID-19 affects its plans to
distribute profits from subsidiaries and whether it needs to reconsider the recognition of any
deferred tax liability in connection with undistributed profit.
Management should disclose any significant judgements and estimates made in assessing
the recoverability of deferred tax assets, in accordance with Ind AS 1.
Entities to whom AS is applicable
COVID-19 could affect future profits and/or may also reduce the amount of deferred tax
liabilities and/or create additional timing differences due to various factors. Entities with
deferred tax assets should reassess forecast profits and the recoverability of deferred tax
assets in accordance with AS 22, Accounting for Taxes on Income, considering the
additional uncertainty arising from the COVID- 19 and the steps being taken by the
management to control it.
10. Consolidated Financial Statements Entities to whom Ind AS is applicable
Ind AS 110 prescribes that the financial statements of parent and subsidiaries used
in the preparation of the consolidated financial statements are usually drawn upto the same
date. It may be noted that in any case, the difference between the reporting dates should not
be more than three months.
Entities to whom AS is applicable
AS 21 prescribes that the financial statements of parent and subsidiaries used in preparation of
the consolidated financial statements are usually drawn upto the same date. It may be noted
that in any case, difference between the reporting dates should not be more than six months.
Volume II | MAY 202011. Property Plant and Equipment (PPE)
Ind AS 16 and AS 10 require that useful life and residual life of PPE needs revision in
annual basis. Due to COVID-19, PPE can remain under-utilized or not utilized for a period
of time. It may be noted that the standards require depreciation charge even if the PPE
remains idle. Further, COVID-19 impact may have affected the expected useful life and
residual life of PPE.
The management may review the residual value and the useful life of an asset due to
COVID-19 and, if expectations differ from previous estimates, it is appropriate to account
for the change(s) as an accounting estimate in accordance with Ind AS 8, Accounting
Policies, Changes in Accounting Estimates and Errors and AS 5, Net Profit or Loss for the
Period, Prior Period Items and Changes in Accounting Policies.
12. Presentation of Financial Statements
Due to COVID-19 there may be instances of breach of loan covenants which may trigger
the liability becoming due for payment and liability becoming current. However, as per
paragraph 74 of Ind AS 1, such a liability shall not be classified as current, if the lender
agreed, after the reporting period and before the approval of the financial statements for
issue, not to demand payment as a consequence of the breach.
COVID-19 may have created many uncertainties about the likely future scenarios which
may affect the estimations of amounts recognised in the balance sheet as of reporting date.
The users must be able to compare the financial statements of an entity through time in
order to identify trends in its financial position and performance and also compare it with
financial statements of other entities.
COVID-19 may have affected the financial performance and financial position of entities.
Therefore, preparers may consider making adequate disclosures and explanatory notes
regarding the impact of COVID-19 on its financial position, performance and cash flows.
13. Borrowing Costs
Above standards require that the capitalization of interest is suspended when development
of an asset is suspended. The management may consider this aspect while evaluating the
impact of COVID-19.
14. Post Balance Events
COVID-19 outbreak incidence emerged in December 2019 and the condition has
continued to evolve throughout after 31 December 2019. According to Ind AS 10,
events occurring after the reporting period are categorised into two viz.
Volume II | MAY 2020(i) Adjusting events i.e. those require adjustments to the amounts recognised in its
financial statements for the reporting period and
(ii) Non-adjusting events i.e. those do not require adjustments to the amounts
recognised in its financial statements for the reporting period. In certain cases,
Management judgement may be required to categorise the events into one of the
above categories.
Similarly, in accordance with AS 4, Contingencies and Events Occurring after Balance
Sheet Date, adjustments to assets and liabilities are required to be made for events
occurring after the balance sheet date that provide additional information materially
affecting the determination of the amounts relating to conditions existing at the balance
sheet date.
Disclosure should be made in the report of the approving authority of those events
occurring after the balance sheet date that represent material changes and commitments
affecting the financial position of the enterprise.
Entities must disclose significant recognition and measurement uncertainties that might
have been created by the outbreak of the COVID -19 in measuring various assets and
liabilities. They should also disclose how they have dealt with the impact of COVID -19
on the financial position and financial performance of the entity.
15.Interim Financial Reporting
The recognition and measurement guidance applicable to annual financial statements
equally applies to interim financial statements. There are typically no recognition or
measurement exceptions for interim reporting, although management might have to
consider whether the impact of the COVID-19 is a discrete event for the purposes of
calculating the expected effective tax rate.
Ind AS 34/AS 25 requires that an entity shall include in its interim financial report an
explanation of events and transactions that are significant to an understanding of the
changes in financial position and performance of the entity since the end of the last annual
reporting period. This implies that additional disclosure should be given to reflect the
financial impact of the COVID-19 and the measures taken to contain it. This disclosure
should be entity specific and should reflect each entity's circumstances. Where significant,
the disclosures required by paragraph 15B in Ind AS 34 should be included.
Volume II | MAY 2020Further, the preparers may consider making suitable disclosures in the Management
Discussion and Analysis section of the Annual Report about the effect of Coronavirus
(COVID-19) on the overall risks to the businesses in which the entity is engaged.
It is important to remember that this Covid-19 pandemic is constantly
becoming serious day by day for the whole world. Assessments need to
be kept up to date, for example, those carried out one month before the
financial statements are due to be signed will likely be out of date one
month later.
So, it is crucial to ensure all judgements made are current and based on
the information available at the latest date on which the financial
statements are authorized and approved.
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