Starting your own business might be a dream come true for you. However, most people who want to start a business are uninformed of the key terms or regulations, and failing to comply can result in fines of hundreds or thousands of dollars. In addition to fines, the firm and its officials may face prosecution and additional inquiry.
As a result, it is important to remember that a business becomes eligible and subject to numerous regulatory and procedural yearly compliances as soon as it is formed.
A corporation incorporated under Indian laws is obliged to comply with numerous yearly compliances imposed by several corporate laws, including the Companies Act of 2013, the Income Tax Act of 1961, the GST Act of 2017, the SEBI Act (if the business is a listed entity), and many more.
Due to the fact that the majority of start-ups are registered as corporations, the annual compliance of a corporation has become a more typical issue for such rapidly developing enterprises. Frequently, such firms are unable to keep track of their yearly compliance obligations and, as a result, fall under the Ministry of Corporate Affairs' inspection (MCA).
As a result, companies face various obstacles in the form of harsh penalties, and the likelihood of a startup's survival is reduced in the event of multiple infractions.
To avoid such scenarios, however, it is critical to be aware of and thoroughly grasp the applicable compliances.
Types of Compliances:
- Statutory Audit
Under the Indian Companies Act, it is mandatory for businesses to have their accounts audited by an Indian firm of chartered accountants. These audited accounts are to be filed with the Registrar of companies (‘ROC’) and, in some cases, with the Reserve Bank of India.
- Tax Audit
Businesses with an annual turnover exceeding INR 10 million (USD 150,000 approximately) need to additionally have accounts audited under specific provisions of the Indian income tax laws and certified by an Indian firm of chartered accountants.
- Corporate Tax
Businesses need to determine their annual tax payment and ensure their deposit under an instalment plan commonly referred to as Advance Tax. Delays, deferment or incorrect calculations attract penal provisions. At the year end, an annual return together with audited accounts and the tax audit report must be submitted e.g. in case of Financial Year 2018-19, advance taxes have to be deposited by June 15 (15%), September 15 (45%), December 15th (75%) and March 15 (100%). The Annual Return for this year is to be submitted by September 30, 2019 / November 30, 2019.
- Customs Duty
Businesses engaged in cross-border trading need to comply with customs duty regulations. The duty varies between products. The compliance requirement includes determination and deposit of duty prior to clearance of goods by the customs authority. While basic customs duty remains, the Counter Veiling Duty (CVD) and Special Additional Duty (SAD) of customs are subsumed into GST.
Goods and Services Tax (GST)
GST is applicable to the supply of goods and/or services. It consolidates the erstwhile excise duty, service tax, central and local VAT, amongst others. Compliances include a deposit of taxes and filing of monthly/quarterly returns.
Businesses in India need to comply with secretarial matters specified under the Indian Companies Act and report to the concerned ROC. This may include
- Office shifting
- Change in director / authorized representative
- Maintain board minutes, and statutory registers
- Annual return to ROC
LABOUR LAWS (Provident Fund/ESI)
An employer needs to consider the impact of the Provident Fund, a government-regulated Pension Plan scheme. Furthermore, an outgoing employee, who has exceeded 5 years of service, is to be paid Gratuity calculated as per specified scales.
There are certain state-specific regulations e.g. Professional Tax and the Shop and Establishment Act which prevail in Indian states like Karnataka, Maharashtra, Tamil Nadu etc.