GST: Modi’s address to CAs was one of his finest
It may have been a coincidence that the Prime Minister addressed chartered accountants (CA) on the day of the launch of the new Goods and Services Tax (GST). But, his messages were far from incidental.
PM Narendra Modi was in his element and it was probably one of his finest speeches in recent months.
As a CA with over 30 years’ standing but who has not been a practising accountant, the speech resonated with me.
It was for some of the very reasons that the PM spoke of that many like me had chosen to remain outside the profession. However, as a member of the fraternity, I felt it was arguably the most inspiring valedictory session ever of the ICAI (Institute of Chartered Accountants of India), perhaps since the Institute’s inception
Modi, as is his wont, had done his homework. He came remarkably well prepared with facts and data for the more than hour-long speech. From the beginning it was clear that he was speaking not just to the over 2.72 lakh chartered accountants and over a million odd CA students, articled assistants and audit staff, but also through them to the business community, taxpayers and citizens at large.
At one stage, he heaped praise on the chartered accountants, reminding them of the nobility of the profession and the trust placed in them by businesses, investors, banks and government. He underscored their responsibility to society as conscience keepers of businesses.
He pointed out to them the new areas of professional opportunity that will open up with GST and the new Insolvency and Bankruptcy Act. At another point of the speech, he invited Indian CA firms to go global, thinking beyond the “Big Four” top international firms.
At the same time, he did not pull in his punches. Cloaked in wit and sarcasm, embellished with hard numbers, Modi delivered some strong messages gently.
The general drift of his speech was that times are changing and it cannot be business as usual anymore. This was driven home by some veiled hints and a few not-so-gentle words of caution.
The jury may still be out on the economic impact of demonetisation but the agenda of unearthing black money through it is far from over. The PM’s anecdotal account of chartered accountants having to cut short their Diwali vacation and return to India after the November 8, 2016, “noteban” to help clients convert their cash would not have been lost on the crowd.
His mention of the ongoing “data mining” to trace the trail of black money deposited in banks post demonetisation and over 3 lakh companies being under the scanner would have made many jittery.
The PM lightly rattled off statistics that were heavy on import. He cited that over 2 crore Indians holiday overseas and but only 32 lakh declare income of over Rs 10 lakh. The figure looks more paltry if we consider the crores of professionals – doctors, engineers, MBAs and accountants – in the country.
More telling was his revelation of the registration of over one lakh companies being cancelled just before the GST roll-out and another 38,000 “shell-companies” were under investigation for money laundering and round-tripping. Undeniably, demonetisation has served the purpose of driving the fear of god into those for whom dealing in cash was a way of life.
That the “rich and the famous” have started taking this government’s intent seriously is, probably, reflected in the sharp decline (a record 45 per cent) in Swiss bank deposits of Indians. The going will only get tougher in two years, when the Swiss bank authorities start sharing data on a real time basis.
It may be argued that the money has moved to other tax havens or even returned to India in the form of FDIs through usual channels. But the signal is unambiguous and unmistakable.
The PM reserved the deadliest salvo till later when he cited the very low rate of indictment in professional misconduct cases by the ICAI. Many were shocked to hear that in the last 11 years disciplinary action has been taken against only 25 CAs, while another 1,400 complaints remain pending.
However, left unsaid was the spectre of National Financial Reporting Authority (NFRA) hanging over the ICAI. This one development itself is enough to force greater diligence and professional integrity in accounting practice.
The point to be noted is that Modi is slowly but surely shifting the needle towards transparency and accountability in the economy. Demonetisation (irrespective of its economic merits) and GST rollout have demonstrated the government’s political will to push ahead with financial reforms.
After the lessons of demonetisation, the preparedness shown by trade and industry for a seamless changeover to the new “one nation, one tax” regime at the stroke of midnight on June 30 shows that the industry and trade are wary of taking chances with this government.
The fact that the government stuck to the D-Day despite opposition and scepticism has only added to the Modi administration’s credibility.
The writing on the wall is clear for all to read. The days of free rides at the cost of the exchequer are fast coming to an end. Increasingly, the tax net will be spread wider and there will be a quantum shift of the economy from black to white. Technology will play a key role in bringing financial transactions above board and businesses will have to gear up for it.
The rules of the game are changing fast and businessmen will have to earn money after paying and not by evading taxes. Reporting standards will become more stringent and with greater accountability, for which the onus will rest squarely on the auditors. Accountants, therefore, will have to shift focus to more value added services from tax engineering.
As this happens, more talented young qualified accountants will be once again drawn to the profession. Today, they prefer to join either top firms with international affiliations or go to the industry, as most bright CAs of my generation did. It is an opportunity for the ICAI to reinvent itself with the changing times and that, indeed, could make the way for Indian CA firms to join the global league.
Coming close on the heels of GST rollout, Modi’s speech was perfectly timed to drive home this warning to both poachers and gamekeepers. It is time for the nation to wake up to this new reality.