Compliance is an action or fact of complying with a wish or obligation. TheseObligation can be anything like Social Obligation, Economic obligation, government regulations etc.
Business doesn’t exist in isolation but in a society where it create an impact upon other stakeholders of society. Businesses exploit resources from the environment where it exists and thus generate resources too for the society where it exists. The impact of business processes and operations should be favourable and thus there are standards, regulations, norms etc which need to be adhered for accomplishment of those objectives.
Compliance can be categorised into 02 types viz Voluntary compliance as well as compulsory compliance.
Compulsory compliances are those which are casted through legislation under which the entity operates and government pronouncements for social security, tax collection, workers welfare etc.
Similarly voluntary compliance are those which adherence is required for better functioning and comprehensive growth of the organisation like Accounting Compliance, Compliance with internal control systems etc.
The example to government casted compulsory compliances are
a) Tax compliance :
Taxes in India is levied both by union government as well as state government. There are 02 type of taxation levy viz Direct tax & Indirect Tax.
Direct tax as its name suggests is levied directly on the person paying tax whereas indirect tax is although paid by person paying it but actual burden is borne by end user. The classic example of indirect taxes is taxes on sale of goods or services known as GST (Goods & Services Tax). In GST context although tax is paid by the person making sales of goods or services but actual burden of total taxes paid through entire supply chain is borne by end consumer who is purchasing or availing the goods or services.
On the contrary direct tax i.e. income tax is levied directly on income of person earning it and paid by him too.
As like every other person businesses are also supposed to pay income taxes on their earnings. And for true and correct computation of income liable to tax, there are certain requirements for maintenance of books of accounts, statutory records etc. besides
In the context of direct taxes business are entrusted with statutory obligation for collection and payment of advance tax (i.e. TDS) from other stakeholders.
Apart from businesses, other category of person are equally and severally liable for payment of income taxes once they are liable for that. It can be anyone despite not having business activities like Individuals, Charitable organizations, Political Parties, Resident welfare associations, Religious Institutions etc.
The compliance in the era of Income Tax Compliance are as under;
- Issue and allotment of PAN/TAN
- TDS Compliance
- Foreign Remittance
- Tax relief & planning
- Tax assessment & appeals
SO far as businessesareconcerned They are entrusted with a statutory obligation for collection and payment of indirect taxes and hence the related compliance burden is there.
The Compliance in the era of Goods & Services Tax are as under;
- GST Registrations
- GST Returns
- GST Audit
- GST Consultancy
b) Labour law compliance:
Once business starts operation obviously it has to deploy workers for processing of business operations. The welfare of there workers is to be thus assured by the business employing them.
To make it happen government frames some rule which are required to be adhered for achievement of that assurance by the business houses. Common Labour law legislations are Employee Provident fund Law, Employee Insurance Scheme Law, Gratuity Law, Contract Labour Law etc.
The Compliance in the era of Labour law compliance are as under;
- Employee Provident Fund Registration
- Electronic Challan Cum Return
- UAN Linking and Claims
- PF Litigations
- Employee Insurance Scheme Registration
- Electronic Challan Cum Return
- ESI Litigations
- Contract Labour Licence
- Annual Return at Shram Suvidha Porta
c) Social security compliances
Social security compliances are adherence to the norms which makes an assurance that the impact of business process as well as products will not be harmful and favourable to the society at large. The common social security compliances are as under;
- FSSAI Licence
- Drug Licence
- Consent from Pollution Board
- Fire Department Permit
d) Legislative compliances
The legislation under which an entity operates also prescribes some compliances to be done so that the intent of that legislation can be preserved and the purpose for which it was enacted can be fulfilled.
The legislative compliances are as under
• Annual Return
• Minutes of Meeting & Resolutions
• MCA Form Filings
• Secretarial Audit
• MOA/AOA Amendments
• Share Transfer
• Transfer of Registered Office
• Form Filing with RBI
• Foreign Investments Advisory FDI/ODI
• Treaty Interpretation
• RERA Registration
• RERA Advisory
The example to Voluntary compliances are;
a) Accounting compliance :
Accounting can be defined as recording and summarizing business transaction in a well defined format and producing thereby final results of the business operations. Business will survive only and only if it earns profit and it can be analysed through correct accounting procedures itself. Even if the business is incurring losses, having information about it on time is important so that loss can be mitigated or minimised through appropriate corrective and preventive measures. Besides statue also require maintenance and preservance of accounting records so from both view point accounting compliance is of equal importance
The compliances in the era of Accounting Compliances are
- Design and Implementation of Accounting System
- Accounting Standards & IFRS
- Compilation of Accounts
b) Compliance with Internal Control System.
Internal Control System can be understood as
A system which is in place to ensure that business operations are carried out in such manner that it is efficient effective and ensures not only desired end results but also prevent improper use and loss of organisations assets and properties.
Internal control system can be established and maintained through framing of internal control policies and proper implementation of that
The compliances in the era of Internal Control System Compliances are as under
- Design and implementation of Internal Control System
- Internal Audit