The outbreak of the global pandemic COVID-19 has not only taken its toll on the people but has triggered a deep economic crisis. Who would have thought that something will hit us so hard that regular life will come to a halt? It has been almost sixty days of the nationwide lockdown. We have now entered into the fourth phase of lockdown and so much has changed in the past few days. From our daily routine to our business policies to various announcements from the government, all aiming to soften the impact of the coronavirus.
To understand the implications of these policies announced by the government and forsee the path ahead. We did an exclusive conversation with Mr. Rakesh Nanagia Ji, Chairman- Nangia Andersen Consulting Pvt. Ltd. Mr. Nangia is one of the leading thought leaders of the Finance and Tax Industry. You must have seen him many times before in various Tax Conferences, Budget Discussions, etc. Debating and discussing various issues related to Finance and Tax. He is also the Co-chairman at ASSOCHAM- International Tax Council and is notably known as a corporate international tax specialist. He has significant experience in advising Fortune 500 multinationals and large Indian business houses on a wide range of matters relating to FDI policy, business reorganizations, cross-border tax structuring, and tax controversy across a range of sectors.
Here is what Mr.Nangia had to say about the various changes introduced amidst the COVID-19 Outbreak
Ques 1. India recently amended its FDI policy to protect domestic companies from opportunistic investments from China. The Chinese embassy retaliated by saying that the revised policies were harshly protectionist, going as far as to accuse India of violating WTO's principle.What are your thoughts on India's revised FDI policies and China's verbal and economic response?
Ans. This decision of the Government is in line and consonance with the global sentiments and concerns raised globally on possible acquisition/ take-over attempt by Chinese companies. Similar steps have been taken by few other Counties also. It may be noted that the Indian Government has not prohibited such investments, but it only seeks to regulate such investments/ acquisitions, whether directly or indirectly. In all genuine cases of investment or acquisition, the approval may be granted by the Government. It may also be noted that the approval may be sought from the Government either by the foreign investor or by Indian investee company.
Further, the decision of Indian government does not create any hindrance in cross-border movement/ trade of goods or services. It only seeks to regulate the foreign direct investments into Indian companies and such regulation is well within policy jurisdiction of Indian Government and thus not may not have any impact on India's WTO obligations.
Ques 2. The post COVID economic scenario is going to be very challenging for the businesses. Due to decrease in cash inflow the businesses would need an optimum flow of ITC rather than prolonged ITC adjustments. In such a scenario the various provisions of the GST which leads to credit loss for the suppliers will make ITC reconciliation a difficult task. Considering all this would it be ideal if the statutory date for credit claim itself be deferred?
Ans. The lock down on account of COVID 19 situation started from started on 23/ 24 March 2020 (FY 2019-20) and the after effects of the same are likely to continue for many months to come, due to which businesses would not function normally. For the FY 2019-20, credit can be availed upto filing of returns for periodic September 2020. As GST taxpayers (including their vendors) are not likely to function normally in the months to come due to COVID 19 situation, it is imperative for the greater good of the taxpayers (and further to the other reliefs granted), that the last date for availing credit for the FY 2019-20 is deferred. Also in line with the said intent, all provisions that prescribe limitation on availment of credit should be harmoniously amended.
Ques 3. After the government announced the lockdown. Companies across the country took to work from home. You are running one of the leading tax firms in India. Please let us know how your organization is coping with work from home. What advice would you like to give to tax practitioners across the nation?
Ans. Honestly, being a tax consultancy firm, working from home is a new concept for us, since we have traditionally been used to personal meetings, discussions, etc. with the clients or with tax authorities at the time of advising and assisting our clients on various issues being faced by them. However, we have evolved ourselves for the new situation and have been using new-age technology for doing virtual client meetings, internal discussions, etc. We have also utilized the spare time to invest in knowledge and organized trainings on various topics, to keep our people agile and motivated and at the same time investing in their knowledge.
Some work is still of such nature, which requires ground work, be it visits to tax offices, Tribunals, other Government departments, etc. for various representations on behalf of our clients and thus difficult to be conducted from home. There also, we have been communicating with the tax authorities and other government authorities over e-mail and phone. Due to the e-proceedings and other initiatives taken by the Government to automate the processes and limit the personal interaction between tax officers and taxpayers, some of such work is also happening using technology even without making physical visits to offices. Even the Courts and Tribunals have started taking up urgent hearings through video-conferencing. Lot of interactions and knowledge sharing sessions are taking place between tax professionals and clients online using webinars.
In short, there is a lot of change in the way businesses (in general) and tax professionals (in specific) used to function pre COVID19 era and the way they are functioning now or will be functioning going forward. COVID 19 being one of the largest disruptions, is surely going the change the mindsets and ways of doing business for all of us and technology would have a significant role to play. An advice to all the businesses and fellow professionals would be to invest in technology and to invest in knowledge to adapt with the changing times.
Ques 4. How has the future of consulting services changed post COVID?
Ans. COVID19 would change a lot of things going forward. Some of the successful traditional businesses may not flourish the way they used to do earlier. Some new areas of opportunity and business models would evolve. There will be a lot of stress on liquidity of businesses in short to medium term. The clients would also become very sensitive to the overall cost and fees for professional services.
Thus, the consulting firms would need to be sensitive to the changing times and changing client's requirements with these times. The service offerings of the consulting firms would also need to change to match and cope with the changing requirements.
Ques 5. As the co- chairman of ASSOCHAM what would you suggest should be the government's approach to aid the opening of businesses post the lockdown period?
Ans. Presently, the biggest challenge before the Government to kickstart the wheels of economy, almost on halt these days due to this pandemic outbreak and subsequent lockdown. The businesses and individuals both are severely stressed and virtually cash strapped. Thus, the Government would need to take multiple steps to provide relief and stimulus to the economy, viz.
a) Taking steps to improve liquidity in the economy and micro markets, making finances available to businesses and also to individuals on easier terms and low cost;
b) Allowing restructuring of existing loans as per present market scenarios, so that debt obligations may be serviced even though reduced cash flows and lesser margins available with businesses;
c) Increasing the public expenditure substantially on health, infrastructure, technical education, skill development and to increase the social security of citizens;
d) Making policies for single window approval and easy land availability to businesses to set up manufacturing facilities, especially since Government wishes to attract companies moving out of China to set up their facilities in India;
e) Making and implementing long term security to labourers and workers and making easy movement to migrant labourers to the manufacturing hubs and assuring to take care of them in case of any emergency like this;
f) Making tax structure more friendly with less compliances and reduced tax rates, in order to increase liquidity in hands of individuals, especially in situation like this when they are facing salary cuts and reduced cash flow.
g) Providing tax incentives for new manufacturing units and new companies generating new employment.
This is a time, where keeping aside the worries of fiscal deficit and prudence, the Government should focus entirely on increasing the liquidity in hands of people and businesses, encouraging them to spend and to boost consumption demand and encouraging the businesses to speed up the production and economic activity.
This interview was taken by Ms. Vaishali Dhek, Assistant Editor, CAclubindia