Demonetization Impact – Companies Taking Compliance More Seriously
Before the decision to demonetize the currency, Government of India gave ample opportunities to the individuals to come clean and declare their assets. GOI also gave amnesty and legal provisions to convert their cash into legitimate money. With this move the GOI has sent out a strong signal that it is ready to take tough decisions.
Another such instance has been the GST initiative. With the launch of GST the tax code will be simplified and tax evasion will become easy to track. Once GST is launched, the companies will scramble to get their systems and processes in line with the new tax code. Compliance will become a much higher priority and the cost of compliance (given the rise in demand ) will increase exponentially.
Next in line are the much awaited labour reforms. In all likelyhood, after the assembly elections there is no reason for GOI to defer that any further. Some back door negotiations with the trade unions have already started to address their concerns related to the reforms. Once the labour reforms are in place, compliance will become number one priority for the companies.
Given the way GOI has come hard on the black money issue, non-compliance is another major issue that will become a headline soon. Stakes for companies are too high as companies cannot get compliance backdated and the penalties can be compounded from the date of non-compliance. Even the Companies Act 2013, mandate that the directors must ensure that a proper system is in place to track and manage compliance.
It is therefore very critical for companies to get compliant. It is a smart thing to do as it will increase their competitiveness as it will prepare them better than their competitors to handle the impact of incoming compliance regulations.
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