Compliance Cost

Host of tax and regulatory laws are applicable for carrying on a business in India. Everyone makes a level best efforts to comply these laws. However everyone would have bitter experience with law implementing agencies for one or other reasons. 

List of tax & regulatory laws are very large. For simplicity we can categorise these laws in 3 classes:

1. Laws applicable to the form of organisation and nature of business e.g. Companies Act, LLP Act, Partnership Act, IRDA, SEBI, RBI, BRA etc.
2. Laws related to employees, environment in which organisation exists e.g. Employers Liability Act, Payment of bonus Act, Payment of Gratuity Act, Payment of Wages Act, Maharashtra Labour Welfare Act, The Bombay Shop & Establishment Act, Industrial Employment Act, PF Act, ESIC Act, Maternity Benefit Act Child Labour Act, Bonded labour Act, Equal Remuneration Act, Pollution laws, MSME Act etc. 
3. Tax laws: (i) Direct tax which includes Income-tax, Wealth-tax, Income-tax also has various sub-sets like TDS, TCS, International tax. (ii) Indirect Tax includes CST, MVAT, Excise, Customs, Service-tax, LBT, Octroi etc.

Complying with various tax and regulatory laws requires understanding of the provisions of each Acts, their implication on business and maintenance of certain records, registers, filing of regular returns etc. Business need incurred cost performing various tasks associated with complying government regulation cost may involve in-house or through employing professional or both. In-house compliance teams have limitation due to unavailability of the trained manpower and emergence of new compliance requirements. To illustrate on emergence of new compliance requirement, post filing TDS returns TDS certificates are required to be issued to the parties. Generation of TDS with respect to Salaries has two stages. Stage one generate certificate using the tax department’s portal for some aspect and for certain other aspects details to be generated using certain manual process. This certainly doubles the time and process. For the current financial year along with the filing of return online various reports are required to be filed online along with return of income.

However in order to gain comfort with respect to level of compliance of relevant laws, diligence exercise need be carried at regular interval.