Rituparna Kakati | 22 Jul, 2017
The Good and Services Tax (GST) regime will prove beneficial to the small and medium enterprise (SME) sector in a number of ways, but there are certain precautions they should take to avoid troubles, said Kapil Nayyar, Managing Partner â International Business Advisors, a Financial and legal advisory firm with specialization in Assurance, Risk Consulting, Legal, Direct Tax, Indirect Tax(GST) and Corporate Advisory for midsize, SMEs and startup firms.
Excerpts of the interview ...
Please tell our readers about International Business Advisors' entrepreneurial journey?
Kapil Nayyar: IBA started as a CA firm in 2003, at the time when traditional CA practice were looked down upon and working for BIG 4's was a dream of many chartered accountants. However we were intending to do something completely opposite, which was to leave our secured and comfortable job of the BIG 4 and start something completely new. With no background of business and no major financial backing, the task seemed daunting to most. When we shared our idea of starting up with our friends, colleagues and seniors, we not only got direct discouragement but also a lot of silent disapprovals. But we didn't want to give up on our zeal because of few negative comments, Infact that made us more strong and we decided to do something different from what traditional firms were doing. The initial years were tough and testing, but we kept growing gradually by focusing on basics. Few of the important factors which we focused on were:
- We focused on doing something different than what traditional chartered accountancy firms were doing. We introduced practices like financial outsourcing, pre audit services, tax heath check etc
- We started our periodic newsletter ConneKt which helped us create and maintain our knowledge bank and a connect with our prospective clients
- We focused a lot on accuracy, completeness and turn around time which seemed to be lacking at that point of time
- With our client first approach we started partnering with clients than being just consultants.
- We started visiting client's offices on a proactive basis rather than on a reactive basis, keeping us aware of any issues they might be facing and to make sure that we are the first choice for any of their queries
- We made sure that our teams are as good as us and the clients should look for a solution from the firm and not people Today 14 years into operations, we are operational in 3 cities in India, have around 100 team members and more than 200 clients from all parts of the world.
In which areas you offer your services and how can they benefit our SMEs?
Kapil Nayyar: IBA is a full service firm offering the following service lines:
- India set up services
- Accounting and financial outsourcing function
- Direct and indirect tax advisory and compliance
- Attestation and audit function
- Risk and forensic services
- Legal and regulatory compliances
The above services are required by all SME's as part of currying on operations during the year. Since our approach is more process oriented, SME's can get efficient services with limited intervention and complete control.
With the introduction of GST, do you think SME will benefit? If so, how. What precautions they should take?
Kapil Nayyar: As we all know that Small and Medium Enterprises (SMEs) have been considered as the primary growth driver of the Indian economy for decades. It is further evident from the fact that today we have around 3 million SMEs in India contributing almost 50% of the industrial output and 42% of India's total export.
Passage of GST brings up following benefits for SME's:
- All the compliance procedures under GST â Registration, Payments, Refunds and Returns will now be carried out through online portals only and thus SMEs need not worry about interacting with department officers for carrying out these compliances
- Electronic compliance will bring transparency and will also reduce the compliance cost.
- Electronic refund procedures will fast track the process and enhance liquidity for SMEs
- All returns are required to be filed electronically and input tax credit and tax liability adjustment will happen automatically on the basis of these returns
Precautionary measures to be adopted by the SME's are as follows:
- Should not enter into a transaction with unregistered dealers to avoid any GST liability under reverse charg
- Common Procurements should be at one place to avoid unnecessary compliance burden of ISDVendors/Customers contract to be amended to re-negotiate the pricing of product/services
- Location of supplier and place of supply to be determined at the time entering into an contract to avoid any hassle while depositing tax
SMEs are usually poor in risk management. Why should they focus on this area?
Kapil Nayyar: At their end, government is also focussing on risk management which is evident that it has been specifically included as part of the Directors responsibility under Section 134 of the Act. Another key steps taken is the reporting on internal financial controls over financial reporting which came about with the advent of Companies Act, 2013. SMEs which weren't specifically focusing on risk management have now also come in the fold of these reportings. SMEs will do well and will realize the importance of risk management when it starts bringing the desired efficiencies not only from the governance point of view but also the benefits it will bring about from the business standpoint.
In many SMEs we see that sometimes they try to expand recklessly, and at other times they go for cost cutting in the same manner. What is the right balance?
Kapil Nayyar: There is no perfect answer for this dilemma which every SME goes through. Best way to go is to plan the expansion and have a clear vision of factors impacting growth. One cannot foresee all the hurdles but if the overall machinery is integrated and is moving towards the vision, small hiccups don't make a dent.
We would like to hear more about your company, services and future planning.
Kapil Nayyar: IBA, a leading home grown Indian advisory firm with specialization in Accounting, Tax, Assurance, Legal and Risk Advisory focusing SMEs and startups. IBA was bootstrapped in the year 2003 by me and my colleague and friend from Deloitte days Nirav Maniar. Since then the company has witnessed immense growth from 2 members to currently a 100 members team, with its offices across Delhi, Mumbai, and Bangalore. Our Vision 2020 is to become the most preferred advisory firm for SMEs growing 4 times the current revenue size and known across the businesses for technical excellence.