Liquidated damages are typically levied in cases of breach of contract, failure to perform, non-delivery of supplies, etc. Does payment of liquidated damages attract GST? Indian businesses face a lot of confusion regarding charging GST on liquidated damages such as the penalty paid, compensations, etc. Accordingly, the Ministry of Finance issued a circular no.178/10/2022-GST on 3rd August 2022. In this article, we will discuss the meaning of liquidated damages, applicability of GST, the GST Circular impact and rates of GST applicable on liquidated damages.What are liquidated damages?Liquidated damages refer to an amount stipulated in a contract, to estimate the actual damages incurred by one party for a specific breach by the other party. In simple words, liquidated damages are nothing but compensation for breaching a contract.Liquidated damages are usually ascertained where the loss is intangible. A clause in the contract will specify the amount of money that needs to be paid for failure to perform under the contract.For example, in case of a delay in the supply of raw materials by a seller, thereby leading to a loss of revenue by a manufacturer, the seller is obligated to pay 0.5% of the revenue lost for each week of delay, until the delivery has been made.Applicability of GST on liquidated damagesAs per the Central Goods and Services Tax (CGST) Act, Section 7(1)(d), the Scope of Supply definition includes activities referred to in Schedule II of the Act.

In this modern phase of ecologic mindfulness and organisational civic duty, the Securities and Exchange Board of India (SEBI) has introduced the Business Responsibility and Sustainability Reporting (BRSR) guidelines for listed companies. BRSR reporting is a comprehensive framework that seeks to promote sustainable business, responsible management of the environment, and corporate governance. This blog explores the BRSR reporting directives, principles, relevance, and benefits to organisations and investors.What is the Full Form of BRSR?The full form of BRSR is Businеss Rеsponsibility and Sustainability Rеporting, which is a rеporting framеwork notified by thе SEBI for listеd companiеs in Indiа.What is Businеss Rеsponsibility and Sustainability Rеporting (BRSR)? Business Responsibility and Sustainability Reporting (BRSR) is an integrated reporting framework. Its purpose is to increase the level of reporting on environmental, social, and governance (ESG) performance. BRSR requires enterprises to report ESG performance indicators to ensure that they practise responsible business and achieve sustainable development.Objectives of BRSR ImplementationThе primary objеctivеs of BRSR implementation are:To encouragе companiеs to adopt sustainablе businеss practicеs and intеgratе ESG considеrations into thеir opеrations. To encourage the comparability and quality of non-financial information disclosed in the reports. To ensure that Indian companiеs complу with the internationаl standards and frаmeworks of sustainаbility reporting. To improve stakeholder engagement and establish trust by ensuring that comprehensive ESG disclosures arе made. BRSR ApplicabilitySEBI has requirеd the 1000 largest listеd companiеs by markеt capitalisation must mandatorily file BRSR rеports as part of the annual reports from FY 2022-23 onwards. Further, as per SEBI Circular SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated 12th July 2023, the top 1000 listed entities by market capitalisation are required to make disclosures as per the updated BRSR format (which include the disclosure and assurance requirements for BRSR Core, ESG disclosures for value chain, and assurance requirements), as follows:Financial YearApplicability of BRSR Core to top listed entities (by market capitalisation)2023-24Top 150 listed entities2024-25Top 250 listed entities2025-26Top 500 listed entities2026-27Top 1000 listed entitiesFurther, to encourage widespread adoption of sustainable practices, SEBI has called on all companies with a public listing to adopt BRSR reporting on a voluntary basis.

The Ministry of Corporate Affairs (MCA) recently released a notice (Companies (Accounts) Amendment Rules, 2021) mandating that companies using accounting software must choose platforms equipped with a feature recording an audit trail for every transaction.The updated audit trail rule in accounting software has taken effect from last year. Originally scheduled for implementation in 2021, the effective audit trail applicability date was subsequently moved to April 1, 2023.The new rule is intended to ensure that companies are open about their actions and do not manipulate data. It means that every accounting software must have an Audit Trail feature.But what exactly is an audit trail? And why is it important? Please read this article to learn more about it, from audit trail applicability examples to best practices you can follow.What is an Audit Trail?An audit trail refers to a detailed, chronological record of the adjustments, details, and other financial data related to transactions within an accounting system. Simply put, it provides a complete history of a transaction, as well as easy tracking and traceability back to the origin.Thus, it offers proof of compliance with industry standards, such as financial regulations, data protection laws, and healthcare regulatory requirements. Essential components of audit trail features include:Time stamps: Each recorded event has a time stamp showing when it happened.User identification: It captures the identity of the user or entity involved in each event, including approvals and authorisations given.Event descriptions: Detailed explanations of what happened during events are included.System information: Technical details about the event, such as its location, source, and type of activity, are also mentioned.What is the Purpose of an Audit Trail?A typical audit trail contains essential information to review past events and identify the individuals involved.

Ever wondered why big companies in India are so trusted and always in the lead? This blog explains their secret: good corporate governance. In this article, we will explore the principles of corporate governance in India and showcase why it's key for businesses to be open, responsible, and ethical.What is Corporate Governance in India?Corporate governance in India sets the guidelines for how a company operates, aiming to ensure that the company's activities are good for everyone connected, including investors, leaders, customers, suppliers, financial backers, regulators, and the community.Need for Corporate Governance in IndiaThe following summarises the need for corporate governance in India:To make companies more accountable: Corporate governance was needed to improve how responsible companies are and to reduce the risks of doing business.To fix rule-breaking: Corporate governance helps handle situations where companies are not following important financial and management rules.To protect investors: Corporate governance was necessary to prevent investors from losing a lot of money because of careless or dishonest actions by corporate leaders.To set up good management practices: Corporate governance helps put in place the right procedures for managing a company well and making sure the roles and powers of those running the company and those overseeing it are separate.To strengthen a company's finances: Corporate governance helps maintain healthy competition amongst companies, which is conducive to financial growth.To operate openly and avoid scams: Having corporate governance policies in place ensures companies operate openly, which thereby reduces the chances of fraud.Principles of Corporate Governance in IndiaThe principles of corporate governance include:Accountability: This means those in charge must take responsibility for their actions. It ensures that:The management answers to the Board of Directors.The Board of Directors answers to the shareholders.This builds shareholder trust, knowing responsible parties will be held accountable if needed.Fairness: This principle ensures shareholders can express concerns and seek remedies for any violation of rights. It involves:Protecting shareholder rights.Treating all shareholders equally.Offering solutions for violation of rights, if any.Transparency: This involves sharing clear, important information about the company’s operations and decisions affecting shareholder rights. It helps to:Build trust with stakeholders.Ensure timely disclosure of significant information, such as financial status and ownership.Independence: This means making decisions without undue influence or personal interest.

The Finance Bill 2022 introduced a new section in the Central Goods and Services Tax (CGST) Act, 2017 by way of substituting the existing Section 38. The revised Section 38 was proposed in a bid to further tighten input tax credit (ITC) claims, owing to the extent of ITC fraud that takes place by way of fake entities and fake invoices. The provisions of this section will also help avoid any matters of litigations in the court of law.Latest updatesUnion Budget 2025- 1st Feb 2025Manual validation of invoices may now be required as GSTR-2B may no longer be fully system-generated as CGST Section 38(1) is being amended to omit the expression "autogenerated".New clause (c) under CGST Section 38(2) allows the government to specify additional ITC statement details, increasing compliance requirements.Let’s decode the new Section 38 and find out how it will impact the ITC claims of a business.How does the existing Section 38 govern ITC claims?The existing Section 38 of the CGST Act is titled ‘Furnishing details of inward supplies’. It governed the furnishing of details of outward supplies (i.e. sales) by a supplier, followed by the recipient (buyer) accepting such inward supplies (i.e.

The financial year 2024-25 is coming to an end. A business owner must ensure to close the GST books with utmost precision and accuracy, because failing to do so can adversely impact the audit report. Also, it’s not just about avoiding the negative repercussions an organisation can face, it's about paving the way for a smooth transition into the next year.For this, you need to have the compliance and filing guide that will ensure you tick all the GST compliance checkboxes for FY 2024-25. Read and find out a comprehensive 43-pointers GST checklist to avoid the last-minute hassles.GST Checklist for a Seamless 2024-25 FY end ComplianceTurnover and tax liabilityReconcile the turnover (including credit notes/debit notes) reported in books vis à vis GSTR-1 vs GSTR-3BAmend and rectify any mistakes or omissions made in GSTR-1 or GSTR-3B returns for the previous financial year by March 2025 returnse-Way bill and e-invoices data to be reconciled with the Sales Register (SR)Check and report other incomes, such as fixed asset sales and miscellaneous incomeTax paid on advances received against servicesRealisation of export proceeds within one yearCompliance of supply to merchant exporters (0.1%)Input Tax Credit (ITC) availed and utilisedReconciliation of ITC General Ledgers (GLs) vis à vis balance appearing in electronic credit ledger on the GST portal.Review the expense ledgers for any expenses on which ITC is eligible but was missed claiming. For example: GST on bank charges.Reconciliation of ITC register vis à vis GSTR-2B:ITC availed during the FY 2024-25 should match GSTR-2BReverse the ITC not appearing in GSTR-2BFollow up with vendors regarding any missing invoices and adopt the Invoice Management System (IMS) available on the GST portal to streamline the communication of incorrect purchase invoices/ITC for the financial year.

Did you know that almost 50% of Indian businesses are now dealing with procurement fraud? So, it’s no surprise that businesses are adopting online vendor registration through e-procurement platforms to stay clear of muddy water. However, for enterprises and suppliers new to the digital onboarding system, there are a lot of burning questions. What is vendor registration? How to fill in vendor registration forms?In this article, we will tell you all about the process of vendor registration, forms, requirements, templates and more.What is Vendor Registration? As the name suggests, it is the process where a supplier registers itself as a vendor for a company. Large companies working with multiple suppliers find it hard to scheme through vendor applications during the selection process. Hence, in recent times, companies are accepting verified vendor profiles through their own procurement platform or through vendor portals.Suppliers register themselves on the procurement or vendor portal through a vendor registration form.

Reimbursement of expenses takes place when a supplier incurs expenditure on behalf of the recipient of supplies. This article discusses the reimbursement of expenses to a supplier and whether GST is applicable on the same.What does reimbursement of expenses mean?Reimbursement of expenses refers to the repayment of money spent by a person. In business transactions, this usually happens when a supplier incurs expenditure on behalf of the recipient who is supposed to incur the said expenditure.The nature of such reimbursements to a supplier is generally of two types, which we will discuss in the next section.Type of reimbursement of expensesThere are two types of expenses that may be reimbursed to the supplier under GST:Incidental expenses incurred by the supplier in the course of supply. This may be in the form of commission, packing, travelling expenses, etc., and forms a part of the value of supply. These expenses are usually incurred before or at the time of delivery of the goods or supply of the services.Expenses that the supplier incurs as a pure agent.

The Central Goods and Services Tax (CGST) is an important part of India’s GST system, introduced on July 1, 2017. The GST law replaced several old indirect taxes from the central and state governments with one unified system. Let’s take a closer look at CGST, its key features, benefits, and calculation. What is CGST?Beginning with the full form, CGST refers to Central Goods and Services Tax and is a type of indirect tax under Goods and Services Tax (GST) in India. CGST ApplicabilityCGST applies on intrastate transactions, i.e. on goods and services that are traded within the same state. On such transactions, the government collects both CGST and SGST (State Goods and Services Tax).

Today, organisations are increasingly relying on third-party vendors to improve their operations and increase growth. These partnerships bring multiple benefits but also several serious risks. It may cause disruption to business continuity and damage to the company’s reputation. Therefore, every large enterprise must have a strong vendor risk management programme in place to detect, measure and overcome vendor-related risks. In this article, we cover the key aspects of vendor risk management, such as audit checklists, workflows, reporting mechanisms, advantages and best practices.What is Vendor Risk Management?Vendor risk management (VRM) is a continuous due diligence process to identify, evaluate, manage and mitigate the risks resulting from third-party vendors and business partners for the duration of a business contract. The process helps an enterprise acknowledge red flags related to poor data security controls, cyber security failures, regulatory violations and supply chain disruptions that can be avoided with timely intervention. A properly structured VRM programme will make sure that the vendors are working in compliance with the company’s security policy and regulatory standards to protect sensitive business information while the business contract is active.Types of Vendor RisksVendors hold the potential to destabilise business operations with various types of risks, such as:Operational Risks: This risk stems from internal or external events with the potential to disrupt services provided by a vendor.