Monday, December 29, 2008

Compliance of CPE credit for 2008 extended

Announcement for Members holding Certificate of Practice (COP) with regard to Compliance of CPE hours requirements for the Calendar Year 2008 (27.12.2008)

Deadline of 31st December, 2008 for completion of minimum 20 CPE hours of structured learning for 2008 extended upto 31st January, 2009.

Sunday, December 28, 2008

ICSI unveils new logo for members

The Vice President of India unveiled the New LOGO of the Institute of Company Secretaries of India (ICSI) and the logo to be used by Company Secretaries. This new logo of the Institute of Company Secretaries of India (ICSI) stands for stability and integrity. The core of the new identity "Connecting for collective growth" is epitomized by four alphabets signifying a mature and multifaceted profession. The words CS in the centre of the identity integrate to form an upward arrow embodying the Institutes' Vision of growth and excellence in corporate governance. Set in a deep blue colour, the bold and elegant masthead lends it an air of authority and leadership. This corporate identity program has been designed with a view to creating a cohesive brand image for the profession of Company Secretaries.


The letters 'CS' to be used by  the members as a prefix before their names ; shares a direct and umbilical relationship with the identity of the institute. A compact unit in itself, with the central arrow of growth and excellence , it represents stability and integrity , which are hallmark of the profession.

Set in a sober deep blue colour , it represents a very confident and upright professional.


The new logo of ICSI is a strong , bold and cohesive wordmark , where four different elements(alphabets) come together to create a complete picture. The logo set in deep blue colour represents a multifaceted professional with a high degree of integrity and stability . "Connecting for a collective growth " is the core of the logo , visually depicted in the upward arrow formed by the letters "C" and "S" . The simple and elegant masthead with bold fonts lend it an air of authority and stability. The holistic perception of the identity reflects soft edges with a sharp interior.

Monday, December 22, 2008

Parliament Passes Limited Liability Partnership (LLP) Bill 2008

Parliament has passed the Limited Liability Partnership (LLP) Bill 2008. Lok Sabha today gave its assent to the Bill which was earlier passed by the Rajya Sabha. Replying to the debate on the Bill in the Lok Sabha, Shri Prem Chand Gupta, Minister for Corporate Affairs, expressed the hope that the first ever LLP in the country would be registered by the first day of the new Financial Year i.e. 1.4.2009. In this context he informed the Hose that concept LLP Rules have already been placed on the website of the Ministry. Shri Gupta also assured the House that registration of LLPs will also be a paperless affair as it will also be covered under MCA-21 e-governance program of the Ministry. Regarding taxation, Shri Gupta said that as the matter relates to the Finance Ministry, this concern will be taken care of by that Ministry, but he assured the House that Indian LLPs will in no way be put to any disadvantage and our LLPs will have a level playing field with other similar bodies outside the country.

LLP is a new corporate form that enables professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner.

For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost.

The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm. This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular. Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals.

In our country, several expert groups have examined the need for such a concept since 1972 and recommended from time to time, the enactment of a law that would enable the setting up and functioning of the LLPs. These include the Abid Hussain Committee 1997, the Naresh Chandra Committee on Private Companies and Partnerships 2003 and the Irani Committee for new Company Law, 2005.


As proposed in the Bill, LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP.

Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.

Today, the world is in the grip of an unprecedented financial crisis, which is adversely affecting economies of most of the countries, including our own. In such a situation, availability of LLP as an alternative business vehicle to our trade and industry will be an important step. Service industry has grown considerably in India and it accounts for nearly half of our GDP. We believe that the LLPs would further contribute to the growth of the service industry in the future.

An earlier version of the LLP Bill was introduced in the Rajya Sabha around 2 years ago on 15th December, 2006 and was referred to the Parliamentary Standing Committee on Finance. The Standing Committee submitted its report on 27th November, 2007. Taking into consideration the suggestions of the August Committee, the revised Bill, namely the Limited Liability Partnership Bill, 2008 was introduced in the Rajya Sabha on 21st October, 2008. The House passed it on 24th October, 2008.

The salient features of the LLP Bill, 2008 are as under:‑

(i)   The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

(ii) The proposed Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

(iii)While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.

(iv)              LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be


applicable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike a ordinary partnership firm where the maximum number of partners can not exceed 20.

(iv)     An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs shall be addressed in that Act.

(v)      Provisions have been made in the Bill for corporate actions like mergers, amalgamations etc.

(vii) While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.

Monday, December 1, 2008

Detailed info on CPA...

Becoming a CPA consists of 3 stages - Education, Exam and License.

1. See whether you satisfy the educational requirements of the state where YOU RESIDE , then look for other states' requirements.

2. Go through the licensing requirements regarding the work experience part / education in lieu of experience which you should satisfy after passing the exams.( we all fail to look into this as we give more priority to passing CPA exams).

3. Then decide whether to pursue CPA.

Note that passing the CPA exams itself is not sufficient( even though they are tough exams). After passing the CPA exams, you have to get the license, then only you can have the CPA title behind your name, otherwise it is just a resume enhancer that "you have passed the CPA exams but no license and no CPA title". GETTING THE LICENSE IS VERY IMPORTANT. So you have to satisfy both the eligibility and licensure requirements.

REMEMBER Only if you get the license in ANY state, you can work as CPA in the industry, anywhere in the US without having transferred your credit scores / license to that particular state, but practise as a Public Accountant in that state where you are licensed. (i.e if you are licensed in state X, you cannot practise as a Public accountant in state Y or Z but can work as CPA in any company / industry in state Y or Z.) . This restriction may change in future as NASBA is trying to relax the rules , Pls refer to the NASBA (National Association of State board of Accountancy) website.

If you don't have the work permit to work in US, you can pass the CPA exams and have it in your resume , which will surely help you in future .

There are about 55 State Board of Accountancies in US. Each State Board of Accountancy has its own requirements for both eligibility to appear for the exams AND for the licensure. Please note that ONE of the common requirement in ALL the states is passing the common CPA exam.

Most of the states in US have 150 semester credit hours requirements for both eligibility and licensure.

Some states have 120 hrs for eligibility but 150 hrs for the licensure (i.e get that additional 30 hrs after passing the exams).

A few states like California, Colorado, Delaware etc have 120 credit hours requirements for both eligibility and licensure. Also check whether you satisfy the residency requirements of the states.

I guess,Delaware is the only state that allows people with less than 120 credit hrs and no residency reqts. Since DE state require US federal taxation course credit ,You MUST do a online US federal taxation course for sure to apply through DE.


If you have foreign education (for example, a degree from India) , then you need to get your transcripts (degree certificates) evaluated. Each state has specified the list of evaluation agencies which it recognise and it is not the same for all states. So you must pick a state before you can have your transcripts evaluated. Pls refer to the State Board's web site for latest details.

For Indian Degrees: (3 yrs with 30 courses) = around 90 credit hrs

M.Com (2 yrs with 20 courses) = around 60 credit hrs

Foundation / PE I - possibly 8 credit hrs

CA inter / PE II -possibly 15 to 30 credit hrs( i.e. some may give just 15 whereas some may give even 30 hrs)

CA final - possibly 15 to 30 credit hrs.

No credits are given for repeated courses.

Category 1: Indian B.Com + M.Com - possibly evaluated to be 150 credits.

Category 2 : + CA(inter) -possibly 120 hrs or less than 120 hrs

Category 3: CA (irrespective of your bachelors Bcom / Bsc / BA) -ONLY Colorado board qualifies you to appear for CPA exam,based on CA membership certificate without even evaluating your credentials. Even photocopy of the membership ceritficate is sufficient. See CO web site for list of Chartered Accountants of other countries too. Michigan also recognise CA's. Check with them.

But other states require your CA credentials to be evaluated and

For Bcom+ CA ->probably 120+, but very rarely 150 & also <120.

For Bsc + CA - possibly < 120 or 120, surely not 150.

Catagory 4 : Double Bachelors like + BBA - possibly 120 hrs or even 150 hrs (if you have non-repetitive courses).

Or Bcom + MBA - possibly 120 hrs / even 150 (if you have non-repetitive courses).

Catagory 5 : For non-Bcom+ MCom - possibly 120 hrs.

For non-bcom + CA inter , it is their own never know...

If you have non-bcom degree and dont have the minimum accounting hrs and business hrs, they may even tell you that you dont have bachelors at all....anyways check with them.

PLEASE NOTE THAT EACH CASE IS DIFFERENT . My word is not final. Just giving you a rough idea.

Basic Rule: First see whether you satisfy the total 120 or 150 credit hrs ( all from a regionally accredited school/college - this includes recognised universities of other countries like India). Then see whether you have the specific accounting hrs (mostly 21 to 36 hrs) and business hrs ( mostly 20 to 36) in that total 120 or 150 cr hrs, as required by the state board. Some states may require ethics course credit also.

Most state boards specify as follows:

Accounting hrs ->hrs from courses like Intermediate Accounting (mostly NOT introductory accounting), Advanced Accounting, Auditing, Taxation etc.

Business hrs -> Business laws, Economics, Marketing, Finance etc

Each state has its own rules regarding this list of courses and number of hrs. So check with your board.

For example, if the state requires 120 credit hrs in which specific 24 accounting hrs( and within that 24 hrs, 10 taxation hrs and 3 auditing hrs) and 21 business hrs, the remaining 120-24-21= 75 hrs may be even from non-accounting courses (like English, Language etc). Also note that if they specify 'taxation' even Indian taxation would be sufficient. But if they specify US federal taxation, you need to have that credit.

So to get a full picture, you may need to get your crendentials evaluated. Then only you will know where you stand. Also note that each evaluation agency has its own way of evaluating the transcripts and same candidate may get different credit hrs from 2 different evaluation agencies.

Choosing the right evaluation agency is another big problem as each state has specified some agencies in their web sites. Facsusa is a popular one (for DE, CO etc) but of late, few have bitter experience.... Some recommend Josef silny....Check it out...These agencies may take 1 to 2 months time to evaluate your credentials. Also note that you have to send the ORIGINAL certificates/ transcripts to get them evaluated.

1. Decide the state board where you want to take CPA.

2. Apply to the evaluation agencies to get your credentials evaluated.

3. Based on the evaluation results, send in your application to the board.

Even if you fall short of few cr hrs, go ahead and finish it in an accredited college ( as specified by that board).Then apply to the board.

For those who want to pursue from India / other country,

For those who want to pursue from India / other country,

1.If you have less than 120 hrs, Delaware is the only state where you can apply,I guess ... check other states rules too as these are subject to change at any time.

If you have 120 hrs , you may have to read the Board's rules of the states like California,Colorado,Delaware, New Hampshire etc.

If you have 150 hrs, you can apply in any state ( subject to residency reqts). The following states don't require residency and citizenship. Alaska,California,Colorado,Connecticut,Delaware,Florida,Geor gia,Illinois,Kentucky,Maryland,Massachusetts,Montana,Nevada, New Hampshire,New Jersey,New York,Oregon,South Carolina,South Dakota,Texas,Utah,Virginia,Washington, Wisconsin etc. Pls check the states web sites for the latest details.

If you are a member of Institute of chartered Accountants, see the CO and MI board web site for more details as CA's are eligible for CPA thru CO and MI.

2.You can not take the U.S. CPA exam outside the U.S as it is offered only in the U.S.A. So arrange for your visa etc.Visa procedure is available at the web site:


The Content Specification Outline (syllabus) is available at

CPA exam is a computerized exam consisting of four sections/parts:

Auditing & Attestation (AUD) - Length of the exam being 4.5 hrs

Financial Accounting and Reporting (FAR) - 3 hrs

Regulation (REG) - 3 hrs

Business Environment and Concepts (BEC) - 2.5 hrs

The passing score for each of the four exam parts will be 75. Each section has Multiple Choice Questions(MCQ) and Simulations. ( But BEC has no simulation).

Normally for Indian Mcom's and CA's who have no idea about US Accounts and laws , they can pass all the 4 sections within a span of 6 to 12 months ( full-time disciplined self-study like 6 to 8 hrs a day) depending on their exposure levels . For Bcom's, more time is needed but still it's manageable. YOU CAN DO IT !

If you have knowledge about US Accounting and business and taxation laws, even 4 months full-time preparation is sufficient.

Since you can take the sections in any order of your choice, you can choose the sections which you find it easy and comfortable. Some may prefer BEC, some may prefer AUD, it all depends on your exposure level.

Just giving you an idea about the major topics covered:

BEC - Business structure (like partnerships,corporations, LLC,LLP etc), Financial Management (NPV + capital budgeting), Cost Accounting, Economic Concepts , Information technology etc - Theory + problems- All almost same as Indian Scenario.

REG - 40% of the paper- Professional Responsiblities of an Accountant and various business laws in US like SOX, Antitrust, Contract, Agency, Federal Securities, Bankruptcy etc - full theory) and

60%- U.S Income tax laws (individual,corporations etc), Gift and estate laws - Theory +problems . Though new, we know the basics.

AUD- As usual, lots of theory...somewhat similar to indian auditing....but have to read a lot like statements on auditing standards( SAS) etc.

FAR- U.S Accounting - voluminous - Financial statements Analysis, Fixed Assets, CA and CL, Investments, Stock holders Equity (EPS etc) ,Stament of cash flows, Business combination (i.e Amalgamation), Consolidated Financial Statements, Deferred taxes, Leases, Derivative instruments, Government Accounting, Not-for-profit Accounting etc...list continues.Need to work out lot of problems.

You can find more details in the content specification o


The Exam is offered 5 (and sometimes 6) days per week during two months of every quarter. (These periods are known as "testing windows.") Testing is available in January & February; April & May; July & August; and October & November. Testing is NOT available in: March, June, September, and December.

Boards permit eligible candidates to take any sections of the Examination in ANY testing window and in ANY order they wish. However, candidates may not take any single section twice in the same testing window. Once candidates pass one Exam section, most boards allow 18 months for passing the remaining three sections. Please refer to the requirements of the boards for the rules.

Note that you can take even 1 exam section at a time and just pay both the application fee/ registration fee + fee for that section(NOT for all sections).


Estimated costs for first-time candidates applying to take all four sections will be approximately $800-$900 ( Each state has its own exam application fees ranging from $150 to $250). Latest approximate fees for each section is

AUD $187.00

BEC $140.78

FAR $175.44

REG $152.33

Regarding the CPA Books / Review Materials, it all depends on your wallet.

Approximate latest prices for all 4 sections are

Wiley - CPA Review Books $120 + CD $230 ( least cost + decent coverage, so most people prefer this)

Bisk - Books + CD =$700

Gleim- Books 40*4= $160, CD 55*4=$220, Sim software $100 each

Becker - All 4 $2500 or $850 each (very expensive)

Though we hear lot of successful stories from becker students, it is not really necessary. If you can afford it, go ahead. Otherwise, start with WILEY ( First get the feel of wiley books ,then go for CD) and then, if you feel necessary, you can supplement with gleim or any other CPA review. You can check their websites for the latest prices.

You can refer to some college textbooks if you are new to any topic. Gleim and Becker offer classes to international students.(They conduct classes in India too.Costs are almost same in Indian Rupees as in $). Check their web sites for the latest details.

You can even buy used CPA Review books / CD from amazon or . You can also refer to some college textbooks, if you want more explanation as these CPA review books have consolidated all points but not very elaborative.

The overall cost for doing CPA is approx $1000 to $3500.

For international students, add up your plane fares and other visa proceesing fees as Exam is conducted in US ONLY.


1. First have your credentials evaluated by an outside agency, as specified by your board.(The processing time is like 1 to 2 months). They may send their evaluations directly to the state board and they will intimate you too.

2. And if you are confident to take the exams within 6 months, send in the initial application form to the State board specifying the exam sections which you want to take, together with the FEES for those exam section(s) which you want to take up at that time (NOT for all sections).

The processing time is like 8 weeks.

Then they will send you the Notice to Schedule (NTS) either by mail or email.(Fees may be partially refunded in case of Education Deficiency or other valid reasons..).

Some states have the option of p

1. First you have to apply (initial application) to see whether you are eligible to sit for the CPA exam. ( These states may have their own evaluators / outside evaluators).

2. Then the board will reply whether you are eligible (normally, processing time is 2 to 3 months if they need to evaluate your foreign credentials). But if you have US Bachelors+ masters in accounting, the processing time is 8 weeks.

3. Once you are eligible to sit for the CPA exam, again you have to send in the exam application form specifying the exam section / sections you want to take, together with the fees for those exam section(s) which you want to take up at that time (NOT for all sections). Then NTS will be sent to you within 15 days by the mode you have chosen.

Remember, EACH TIME you take up 1 or more sections of the exams, you should send the exam application form(or online registration form in some states)+ the fees.( The processing time is like 15 days or so to get the NTS for re-exams).

I'm giving you a rough idea about the procedure. But check with your board as these rules are subject to change and each state has its own procedure.

The major steps are:

- Decide YOUR state board.

- Evaluate your foreign credentials,if any.

- Apply for the exam.

- Receive your NTS.

The NTS may specify some time limit (normally 6 to 9 months depending on the state board's rules) within which you have to write that section(s) for which you have applied. After the expiry of that time limit, you may have to again apply for another NTS.

- Schedule your exam at any prometric center near your place in US( NEED NOT BE IN THE SAME STATE WHERE YOU APPLIED FOR CPA).

- Take your exam

- Receive your score report


Foreign credential Evaluation (by outside agency or by the state itself) + Application form - 2 to 4 months processing time

+ 4 months to 6 months (full-time study) to pass all 4 sections( Max being 18 months).

If you are applying to the states and if you are sure that you will get the relevant credit hrs, you may start studying after sending in the application form. By the time you receive your NTS, 3 or 4 months might have elapsed from the day you started the CPA process. You can then schedule your exam so that there won't be any time delay.


Once you pass all the Exams ( Hooray! Congrats!), you have to get the license to have that CPA title. For that, you may need to satisfy the work experience part.

Some states give you certificates after you pass the CPA exams, but only after satisfying the work experience part, you can get the license as CPA. These states are called as Two-tier states (i.e. first they issue CPA certificate after passing CPA exams ,then they issue license after satisfying their licensing requirements). There is a difference between certificate and license( aka 'permit to practise' in some states). Even if you have the certificate, you cannot have the CPA title behind your name.i.e you can say that you have passed CPA exams but could not use CPA title.

Pls note that DE has now changed its rule of giving the certificate after just passing the CPA exams. Most international students are taking this path of just getting the certificate and no license but use their CPA title in a restricted sense.

Excerpts of Old and New rule are reproduced below:

OLD Rule: Once a candidate successfully passes the CPA Exam, the AICPA Ethics Exam and submits an application to the Board of Accountancy, they are eligible to obtain a CPA certificate. Holders of this certificate may work in industry, education or government as a CPA and do not have a continuing education requirement under Delaware law.Should the certificate holder wish to work in public accounting, the licensing procedure mandates that the certificate holder get specific work experience and then apply to the Board of Accountancy for a permit to practice. This permit to practice then enables the holder to work in public accounting as a CPA, as long as they meet the continuing education requirement.

The new law changes this licensing procedure(effective on January 3, 2006). Under the new law, an individual must pass the CPA Exam and the AICPA Ethics Exam and get their experience before they can get their certificate and permit to practice. Once they get their certificate and permit to practice, they can work in industry, education, government or public accounting as a CPA, as long as they meet the continuing education requirement.

You can read the current and new law at age

There are few other two-tiered states like IL etc. But they may have a rule that you have to get the license within a specified period of time say 5 yrs after getting your CPA certificate, otherwise the credit for the exams goes away...So check with the board.

Some states make no distinction between certificate and license (i.e certificate alias license will be given after you satisfy their work experience reqts).

You can become a licensed CPA with NO work experience if you have a master's degree (i.e.150 hrs) in some states like Colorado, Florida etc. Pls check the Board's rules.

Also some states( say X) even recognise work experience under an actively licensed CPA in other states of US(i..e who is not licensed in that state X but in other states). For example, CO recognises work experience under any practising CPA in US (say licensed in FL). Some states recognise work experience in a company under the supervision of a licensed CPA. States like DE, CO recognise even Indian public accounting experience under a practising Chartered Accountant. (i.e. CA articleships). Pls verify this with the board.

Most of the states with 120 hrs eligibility + license reqts have a rule that if you have 120 hrs, 2 yrs of public accounting experience is required to get the license but if you have 150 hrs, then only 1 yr of public accounting experience is sufficient.

Once you get your license in any state, YOU ARE A full fledged CPA. i.e. You get that CPA title behind your name whether you work in a company or practise as CPA. (Ofcourse practising CPA can sign as CPA in that state where he is licensed).

Also to keep the license active, one has to get 80 hrs CPE(Continuing Professional Education) credit every 2 yrs.

Foreigners residing in US:

If you are residing in US AND want to work as CPA in the industry or practise as a Public Accountant( provided you have the work permit), it will be better if you first get that 150 credit hrs , then appear for CPA exams as that will be easier, later on, to transfer the exam scores / licenses to any other states.

For example, After passing CPA exams, if you want to transfer the CPA exam scores from one state (say A having 120 hrs eligibility requirement to take the CPA exam) to another (say B having 150 hrs eligibilty criteria), you can do so only if you satisfy the B state's requirements AT THE TIME OF TAKING THE CPA EXAMS. ( Few states say that educational requirements should be me

Few states say that educational requirements should be met within the specified period of time after passing the exams).Similarly, to transfer your license from one state to another, you have to satisfy the other state's licensing requirements.

CHECK WITH THE BOARD ALWAYS as the boards keep on changing the rules . Read the Board's rules CAREFULLY.

CPA info is available at following web sites:


Select the appropriate state and read all the requirements. And if you have a doubt, contact them.

ALL CPA examination info is available at

Please download the CPA Exam Candidate bulletin ( more details about the exam process) from this link:

-more about licensure tools

Job Prospects:

Normally Practising CPA (licensed in his own state and who signs with his name) makes more money than a CPA working in the industry (who is not licensed in the state where he is working). A fresh licensed CPA may start with a salary of $45k and after 2 yrs of experience, salry may rise to $60K. Just giving you a rough idea...Do a search in monster or any job search web site.(Remember full fledged CPA means that he/she has passed CPA exams AND holds a valid license of ANY state).

If you want to get an accounting job in US and you don't have the work permit, you need an employer who will sponsor for H1 visa. Looks like it is tough to get that one as it is not like IT jobs(special catagory) and also very restricted number of visas are given each year for accounting jobs. Talk to a visa consultant about it.

You can also try getting into one of the big 4 US accounting firms like PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG in your country. That might give you a entry into the US job network so that you can find a sponsor based on your experience with these firms. Also, BPOs are getting popular nowadays.

I hope I have consolidated all the points clearly without confusing anything.

After going through this mail, if you have doubts about any procedure/ requirements, ALWAYS contact your state board (as these rules MAY change at any time). Also they are the right person to give us CORRECT replies.

If I had gone wrong anywhere, pls correct me. I hope this info would be helpful to CPA Aspirants.

Also please send in more inputs useful to all.

Friday, November 28, 2008


All Candidates appearing in Common Proficiency Test (CPT) on 14th December 2008 may kindly note the revised timings of the Common Proficiency Test to be held on 14th December 2008 as under :-

Morning Session: 10.30 A.M. –- 12.30 P.M. (IST)

Afternoon Session: 02.00 P.M. -- 04.00 P.M. (IST)

It may also be mentioned that apart from the revised timings of the Test as above, there is no other change in the date schedule, cities where the Test would be held etc.

Tuesday, November 25, 2008


The Finance Minister Mr. P Chidambaram while presenting the Union Budget -2006 has given the indication that we will be in GST regime in 2010 and after successful introduction of VAT in almost all the states barring one or two and continuous increase in number of services under the service tax net, nobody should have any doubt on his declaration and seriousness about GST. Let us see what the FM has said in his Budget speech: -

155. It is my sense that there is a large consensus that the country should move towards a National Level Goods and Service Tax (GST) that should be shared between the centre and the states. I propose that we set April 1, 2010 as the date of introducing GST. World over, Goods and Services attract the same rate of Tax. This is the foundation of GST. People must get used to the idea of a GST. We must progressively converge the service tax rate and Cenvat rate. I propose to take one step this year and increase the service tax rate from 10 percent to 12 percent. Let me hasten to add that since service tax paid can be credited against service tax payable or excise duty payable, the net impact will be very small.

Goods and service tax is a tax on goods and services, which is leviable at each point of sale or provision of service, in which at the time of sell of goods or providing the services the seller or service provider can claim the input credit of tax which he has paid while purchasing the goods or procuring the service. 
On most of the goods and services the rate of tax remains the same but as per the necessity of the nation some goods or services can be declared as "exempted" or "Zero rated". The whole system is developed in such a way that it avoids the cascading effect and the final consumer bears the burden of all the tax. Generally, in such a system Exports are zero rated and all the taxes paid while purchasing and manufacturing the goods including the taxes paid on raw material and services are returned to the exporter to make the exports competitive. 
The sellers or service providers collect the Tax from their customer, who may or may not be the ultimate customer, and before depositing the same to the exchequer, they deduct the tax they have already paid.
This is simply very similar to VAT which is at present applicable in the country and can be termed as National level VAT on Goods and Services with only one difference that in this system not only goods but also the services are also involved and the rate of tax on goods and services are generally the same.
Generally, The Dealer registered under GST (Manufacturers, Wholesalers and retailers and service providers) charge GST on the price of Goods and services from their customers and claim credits for the GST included in the price of their own   purchases of Goods and services used by them. While GST is paid at each step in the supply chain of goods and services, the paying dealer don't actually bear the burden of the tax because GST is an indirect Tax and ultimate burden of the GST have to be taken by the last customer.
This is because they include GST in the price of the goods and services they sell and can claim credits for the most GST included in the price of goods and services they buy. The cost of GST is borne by the final consumer, who can't claim GST credits, i.e. input credit of the tax paid. 
The GST can be divided into following Sections to understand it better: -

The Dealer registered under GST (Manufacturers, Wholesalers and retailers and service providers) is required to charge GST at the specified rate of tax on goods and services that they supply to customers. The GST payable is included in the price paid by the recipient of the goods and services. The supplier must deposit this amount of GST to the Government.
If the recipient of goods or services is a registered dealer (Manufacturers, Wholesalers and retailers and service providers), it will normally be able to claim a credit for the amount of GST it has paid, provided it holds a proper tax invoice. This "input tax credit" is setoff against any GST (Out Put), which the business itself charges on goods and services, which it supplies, to its customers.
The net effect is that dealers charge GST but do not keep it, and pay GST but get a credit for it. This means that they act essentially as collecting agents for the Government. The ultimate burden of the tax falls on the Last and final consumer of the goods and services, as this person gets no credit for the GST paid by him to his sellers or service providers.
Dealers will have to register for GST. These dealers will include the suppliers, Manufacturers, service providers, wholesalers and retailers. If a Dealer is not registered, it normally cannot charge GST and cannot claim credit for the GST he pays and further can not issue a Tax invoice.
The tax period will have to be decided by the respective law and normally it is monthly and/or quarterly. On a particular tax period, which is applicable to the dealer concerned, the dealer have to deposit the tax if his out put credit is more than the input credit after considering the opening balance, if any, of the input credit.
If for a tax period the input credit of a dealer is more than the out put credit then he is eligible for refund subject to the provisions of law applicable in this respect. The excess may be carried forward to next period or may be refunded immediately depending upon the provision of law.
Certain goods and services may be declared as exempted goods and services and in that case the input credit can not be claimed on the GST paid for purchasing the raw material in this respect or GST paid on services used for providing such goods and services.
Generally export of goods and services are zero-rated and in that case the GST paid by the exporters of these goods and services is refunded. This is the basic difference between Zero rated goods and services and exempted goods and services.
Tax invoice is the basic and important document in the GST and a dealer registered under GST can issue a Tax invoice and on the basis of this invoice the credit (Input) can be claimed. Normally a Tax invoice must bear the name of supplying dealer, his Tax identification Nos., address and Tax invoice Nos. coupled with the name and address of the purchasing dealer, his tax identification Nos., address and description of goods sold or service provided.

The working of GST with respect to Manufacturer, dealer and consumer can be seen in the illustrations given below: -
(a). Manufacturer
The manufacturers will get the input credit of all the taxes paid by them on the raw material and also on the services. Let us assume the Rate of GST at 16% and a plastic manufacturing company has consumed the following Goods and Services while producing the goods, which they are able to sale at Rs. 100 Lakhs plus Tax: -
Raw material
Rs. 50 Lakhs
Rs. 8.00 Lakhs
Stores and spares
Rs. 10 Lakhs
Rs. 1.60 Lakhs
Rs. 15 Lakhs
Rs. 2.40 Lakhs
Total Input Tax
Rs. 12 Lakhs
Now the "Out put Tax" i.e. the tax charged from the purchaser is as under: -
Rs. 100 Lakhs
Rs.16.00 Lakhs
Rs. 16.00 Lakhs
The net tax payable by Manufacturer is as under: -
Total output tax.
Rs. 16.00 Lakhs
Total input tax.
Rs. 12.00 Lakhs
Net GST Payable
Rs. 4.00 Lakhs
If the Goods are sold to a Trader by this manufacturer and the trader also used some of the service amounting to Rs.5 Lakhs also on which he has paid service Tax amounting to Rs. 0.80 Lakhs. Now his input tax is as under: -

Rs.100 Lakhs
Rs. 16.00 Lakhs
Rs. 5 Lakhs
Rs. 0.80 Lakhs
Total Input Tax
Rs. 16.80 Lakhs

Now the dealer sold the goods to the Consumers by adding his profit of Rs. 10 Lakhs and in that case his output tax will be as under: -

 Goods Sold
Rs. 115.00 Lakhs
Add: - Tax @ 16%
Rs. 18.40 Lakhs
Rs.133.40 Lakhs

The net tax payable by the dealer is under: -

Total output tax.
Rs. 18.40 Lakhs
Total input tax.
Rs. 16.80 Lakhs
Net GST Payable
Rs. 1.60 Lakhs

Now through this system we have presumed that the goods of Rs. 115 Lakhs are sold to the customers then the Government in that case has got the tax in the following form: -

From the sellers of Raw material
Rs.8 Lakhs
From the suppliers of stores and spares
Rs. 1.60 Lakhs
From the service providers of the services consumed by the manufacturers.
Rs. 2.40 Lakhs
From the Manufacturer
Rs. 4.00 Lakhs
From the service providers of the services consumed by the dealer.
Rs. 0.80 Lakhs
From the Dealer
Rs. 1.60 Lakhs
Total GST received
Rs.18.40 Lakhs

See this is exactly equal to the amount that has to be born and ultimately paid by the last customer on Rs.115 Crores @ 16% i.e. Rs. 18.40 Lakhs.
Apparently the system is very much similar to the present system of VAT but the implementation of this system will certainly have some unique problems compared to VAT which are being discussed and explained in next paragraph.
In a very simple manner the overall system of GST can be seen as under with the help of this table: -
( Lakhs)


The Net GST payable by the Manufacturer and Trader can be seen as under with the help of this Graph: -
Fig: -1 Showing the output credit, input credit and Net tax payable by the Manufacture and the Dealer.
The Net component of Tax to the consumer can be seen as under: -
Fig.2: - Showing how the tax born by the ultimate consumer is deposited by various dealers at different stages.
Internationally, there are three systems in vogue and these three are: -
In the invoice system, the GST (Input) is claimed on the basis of invoice and it is claimed when the invoice is received, it is immaterial whether payment is made or not. Further the GST (Output) is account for when invoice is raised. Here also the time of receipt of payment is immaterial.
One may treat it as mercantile system of accounting. In India the present system of sales tax on goods is an invoice system of VAT and here it is immaterial whether the taxpayer is following the cash basis of accounting or mercantile basis of accounting.
Advantage of Invoice system
The advantage of invoice system is that the input credit can be claimed without making the payment.
The disadvantage of the invoice system is that the GST has to be paid without receiving the payment.
In the payment system of GST, the GST (Input) is claimed when the payment for purchases is made and the GST (Output) is accounted for when the payment is made. In this system, it is immaterial whether the assessee is maintaining the accounts on cash basis or not.
Advantage of Payment system
The advantage of cash invoice system is that the Tax (output) need not to be deposited until the payment for the Goods and/or services received.
Disadvantage of payment system
The disadvantage of the payment system is that the GST (input) cannot be claimed without making the payment.
The Taxes on services in India are based on this payment system since service tax is payable on receipt basis and further Cenvat credit is only allowable when payment of the service is made. 
In some countries, this system is also adopted for small traders to keep them away from the complexities of the Invoice system, which is purely a mercantile system.
In hybrid system the GST (Input) is claimed on the basis of invoice and GST (Output) is account for on the basis of payment, if allowed by the lawIn some countries the dealers have to put their option for this system or for a reversal of this system before adopting the same.
Both these three systems can be summarised as under: -

Invoice system
On receipt of invoice
On issue of Invoice
Payment system
On making the payment
On receiving the payment
Hybrid system
At the option of dealer to be declared in advance.
At the option of dealer to be declared in advance.

It always depends on the law of the country, which decides the system of GST to be followed by the Dealers.
In principle there is no difference between present tax structure under VAT and GST as far as the tax on Goods is concerned because GST is also a form of VAT on Goods and services. Here at present both the Sales tax, with an exception of CST, is a VAT system and in case of service Tax the system also has the Cenvat credit system hence both Sales Tax and Service tax are under VAT system in our country. At present the Goods and services are taxed separately but in GST the difference will be vanished.
The overall system of GST is very much similar to the VAT as it is implemented in most of the country in recent years and VAT can be considered as first step towards GST. Let us see the VAT implementation schedule of various states: -

2. Andhra Pradesh, West Bengal, Kerala, Karnataka, Orissa, NCT Delhi, Tripura, Bihar, Arunachal Pradesh, Sikkim, Punjab, Goa, Mizoram, Nagaland, Jammu and Kashmir, Manipur, Maharashtra, Himachal Pradesh, Assam and Meghalaya.  
4. Rajasthan, Gujarat, MP and Chhatisgarh, Jharkhand.
5.Uttar Pradesh and Tamil Nadu
Still not decided

All the states have their own VAT Laws comprising VAT acts and VAT rules and these acts and rules are formulated on the basis of "White paper on VAT" issued by the empowered committee of states' Finance Ministers on VAT headed by Dr. Asim Das Gupta, the Finance Minister of West Bengal.
Due to the fact that the taxpayers are already using the Vatable sales Tax and service tax system hence there may be a possibility that GST will be a matter of settlement between the centre and the states and like VAT, the possibility of any resistance from the Tax payers is somewhat less.
The goods in our country are taxable since long time but the same thing cannot be said for services. Till 1994 there was no tax on services and this tax was introduced by Present Prime minister of India Dr. Man Mohan Singh, who was holding the Finance Portfolio at that time and the logic behind it was "When goods are taxable why not service?" It is also a central taxand along with central excise it is governed on the system of VAT and the service tax suffered and paid can be claimed as Cenvat credit against central excise and service tax or vica versa.
There is no separate service tax Act and Service Tax Department in India and taxes on servicesin our country is governed by some of the provisions of Finance Act- 1994 and Service Tax Rules – 1994 and the concerned department is Central Exicise department.
In out country the whole service sector is not taken under the net of service tax and for this purpose a selective approach is taken. In 1994 only three services were taken into the net of service Tax and year-to-year this number is continuously increasing. The number of services taken into the net of service tax is touching almost 100 till 2006.
The rate of service tax at various stages of time is as under: -

1-7-1994 to 13-05-2003
14-05-2003 to 09-09-2004
10-09-2004 to 17-04-2006
10.2% (including 2% Education cess)
From 18-04-2006- 12.24%
12.24%(including 2% Education cess)

When GST will be introduced, the Service Tax provisions as contained in Finance Act – 1994 and service tax Rules-1994 will be replaced by the provision of a Central Goods and Service Tax Act and Rules.
Though GST is basically an indirect tax but since the last burden of this tax is borne by the ultimate consumer hence for a consumer it is a tax on him. If a person pays income tax of Rs. 10000.00 on his income and Rs. 2500.00 on services and goods consumed by him the total burden of tax on him is Rs. 12500.00 isborn by him during the year.
Now in some countries the GST has been made deductible from the income tax of the ultimate consumer but on experimental basis and only in the case of small income group assesses only. If this may be the scheme then the person mentioned above will get the credit of Rs.2500.00 and have to pay income tax of Rs.7500.00 only to make his total tax in tune of Rs.10000.00.
In our country this is a very remote possibility but theoretically this may be a good point of study.
The GST will work only as centralized taxation system with collection of all the Tax to the central Government and then shared by the states and this will be a very big and foremost problem when GST will be introduced in India because the country has the federal system of economy in which the states have also power to collect tax and that is the main base of their economic autonomy.
How this system will work in a centralized system can only be understood from announcement of Finance Minister, let us once again see the relevant portion of the speech: -

It is my sense that there is a large consensus that the country should move towards a National Level Goods and service Tax (GST) that should be shared between the centre and the states.

This particular peculiarity of the GST has made it totally different from the VAT and this can only be a national level tax and can be successfully managed by the central power and the total collection of the same can be shared by the states.   
VAT has also been introduced in our country without abolishing the CST (Central Sales Tax) and even lowering the CST rates have been postponed several times and the basic reason is that some of the states collecting major share of CST are not ready to compromise with their economic autonomy. VAT, principally is also a central tax but in our country it has been introduced with some compromises and states have agreed on it, though with some initial hesitation, because their economic autonomy was not touched. There is psychological difference between the collection of Tax by the states themselves and sharing the centrally collected tax.