The first thought in mind on hearing the profession of chartered accountant creates an image of an auditor, tax consultant, accounting, shared services etc. The traditional practice started and followed for years together has seen changing trends in recent times. The challenge for chartered accountant does not gets confined only to audit or tax at this juncture of time and period. It is well said that ‘change is inevitable’ so is the way a chartered accountant shoulders its practice has to change. The traditional method of practice will soon wash out the opportunities and business for a potential chartered accountant in practice. Apart from traditional practice and growing divisions of the practice in recent times there are further innovative, novel, and additional opportunities created by recent changes in economy by startup India scheme, block chain and cloud computing.
Hon’ble Prime Minister Shri Narendra Modi during his speech on 15 August 2015 at New Delhi had first announced regarding Start Up India. From then till date there are 1,70,993 registrations for learning and development module; 2,39,026 registrations for Start Up India hub. 11,841 of entities have been recognized as Startups and out of these 75 Startups entities has been funded under government scheme1. The scheme announced by government does not only help budding entrepreneurs but also Chartered Accountants who can support, guide, advise and consult these entrepreneurs right from the inception of their idea and during the progress of the venture. Following areas can be assisted by the Chartered Accountants to Start up entities:
1. Economic feasibility of the idea
Feasibility study is important to analyse and assess the sustainability of the business idea in terms of its economic and monetary success. Professionals have to assess the cost and benefits on implementing the startup idea and the timeframe that will take to monetize the innovative idea. A detailed report is to be prepared and advise has to be given regarding next steps to the businesspersons for them to evaluate before they proceed with the huge investments.
2. Provide advise on selection and incorporation of entity model after recognition under the scheme
In Startup scheme the business persons can either form a private limited company, partnership firm or an LLP. The consultant can advise on best model to set up the business considering the resources, investment size and futuristic needs of the business. To provide assistance in incorporation with ROC or registering the firm with registrar as the case may be. To provide assistance in drafting Memorandum and Articles of association in case of company and drafting of partnership or LLP deed as the case may be. At initial stage the consultant can establish an incubator company and once the idea sails through and gets recognized then the operating company can be formed.
3. Registering the idea under the Startup India scheme and applying for recognition by Department of Industrial Policy and Promotion (DIPP)
A Chartered Accountant has to assess whether the startup business idea is appropriate and apt as per the notification eligible for the recognition under the program. Assist in making an application to DIPP for recognition of startup. Timely follow ups and assist in replying to queries of the government authorities. Assist and educate the entities regarding the parameters for getting recognized with the DIPP.
4. Application with Inter Ministerial Board (IMB) such that tax exemption benefits can be availed
Assist in making application to IMB for recognition of start up and hence make the client eligible under the start up scheme. Assist in attending the meetings before IMB and give proper explanation of cost model, registration for application of patent/trademark, the entire business idea and plan such that the initial stage of getting approval from the board is met so as to have maximum tax benefits to the company or the partnership firm.
5. Assist in self certification under labour and environmental norms
The self-certification in laws like payment of gratuity, Employee Provident fund act, other labour laws, water and air pollution acts can be done by the business person himself, however, a professional can ensure and advise on what implications an entity would have under the income tax act and other allied laws by registering in the labour laws. For instance, while making contribution to the gratuity fund it is always suggested to make an application for registering gratuity fund with commissioner of income tax to get deduction under the income tax act. Likewise, the professional have to give an holistic view by advising on implications under various fiscal laws on self certification under labour and environmental norms.
6. Valuation of business
Chartered Accountants can provide valuation services which is an important step before the funds are invited from the venture capitalists or the banks. Chartered Accountants are specialist in this field and can assist in valuing the business or the idea of startup in monetary terms extrapolating the future years growth and business opportunity in a startup venture. The valuation can be done keeping in mind various factors like what could be the market value of the product prototype, its demand, return of investment to the venture capitalist etc.
7. Identifying investors and liaising with venture capitalists
Assist in identifying and meeting the venture capitalist who will be interested to invest by either providing funds in the best form which is cost effective to startup ventures that wish to establish and expand but do not have access to stock market. Professionals can assist by their expertise knowledge on the subject showcasing the business model and value for money which interests venture capitalists and become willing to invest in such companies because they can earn massive returns on their investments if these companies are a success. Professionals can also identify banking sectors and other angel networks who can fund the startups looking at cost benefit of the selected course of the funding options.
8. Legal support for patent and trademark creation and registration
9. Advise and update on notifications, circulars and scheme of government from time to time, Tax advisor on tax exemptions available
A chartered accountant is a tax expert and can educate and identify the tax benefits and tax planning for the new entrepreneurs such that their interest in the business does not get burdened with tax agony and can concentrate on the growth and expansion of the business at initial stage.
10. Winding up of company
In any case if the startup idea does not get picked up and the promoters wish to wind up the company or dissolve the firm then the Chartered Accountant can assist in advising and implementing best cost effective and less time consuming method to wind up. As per the startup scheme there is fastrack exit method for the startup units to get closed.
The startup scheme announced by Hon’ble Prime Minister is a bundle of opportunities for the practicing chartered accountants who can provide array of services right from the conceptualization of the idea. Chartered Accountants have to build confidence within the entrepreneurs so that they can concentrate on their businesses and the legal and tax issues can be left on the experts.
The next big thing on the block in recent times is Blockchain technology. Blockchain as the name suggests is a technology where the transactions made in any cryptocurrency is recorded chronologically and made available publicly.
There are number of companies emerging in the blockchain field at the global level. Even in India many blockchain developers have emerged under the startup India scheme. There is great opportunity for the Chartered Accountants as many startups are registered to develop the blockchain technology for accounting and auditing with utmost accuracy. In voluminous transactions entered between the various parties involving middlemen at several levels make it tedious for the audit compliance and difficult to detect the fraud or mistakes. The blockchain technology helps in keeping real time audit and provide reports to the promoters, companies and businessmen for their analysis and understanding. The audit compliance procedure becomes foolproof and less cumbersome process.
A chartered accountant being an accounting and audit expert plays an important role in developing the software for blockchain technology which can be used by specific industry to manage their transactions and operations. For this the Chartered Accountant is not required to know how to develop a software but he has to be a conduit between the software engineer and the businessman / promoter of the company such that together they can develop a blockchain technology. Chartered Accountant has to understand the nitty gritty of an industry and the requirements like control checks, reporting requirements and audit trails required from the promoters or businessman and instruct the same to the software engineer or developer.
Blockchain technology is used by many financial institutions, stock exchanges, insurance companies, e-commerce service providers, e-commerce retailers. In this growing trend of global business and decentralized business model; blockchain helps in accurate accounting and auditing tool which can be developed with the help of chartered accountants.
With growing technology professionals are required to gear up themselves by being familiar and gradually become expert in providing services to make money by early tapping of the opportunities. Everybody are familiar with keeping databases, servers, files and documents on cloud i.e., on internet either in dropbox or google drive saving the cost of having hardware or storage devices. Cloud computing is a decade old concept but have gained momentum in recent times wherein most of the companies, individuals and businessmen are becoming cost effective by storing their details on cloud. Cloud computing is method for delivering information through web based tools or applications. Cloud computing offers big businesses some serious cost saving potential and holding them back from spending huge amount of sums in the hardware infrastructure and software for storing the databases of their companies. It helps them access files and databases from any location through internet access.
Cloud computing being much technology driven gives rise to the question in everybody’s mind that how a chartered accountant can be of any help in cloud computing. The company who look forward to opt for cloud computing can be targeted to advise on whether they should actually opt for the cloud computing services or they should invest in the infrastructure i.e., give them a cost benefit analysis report giving details about pros and cons before taking recourse of cloud computing. Chartered Accountant can help in decision making by giving a detailed report and presenting before the promoters, explaining the need and benefits of cloud computing vis a vis the cost involved.
Chartered Accountants can give training to their client companies’ staff on how to use the cloud computing facilities. Cloud computing being a technology used globally gives rise to issues in taxation both in direct tax and indirect tax fields. The transaction with a company outside India for availing services of cloud computing will give rise to international taxation like transfer pricing, withholding of tax aspect on payments to non-resident and permanent establishment issues of the non-resident in India depending on the extent of the services availed and the location of the server and its presence in India. Apart from direct tax, the indirect tax provisions under GST laws will also have to be assessed considering the aspects of import or export of services and its taxability. The compliance under both the laws has to be in accordance with the respective act and rules; further there is also opportunity for providing advisory on the matters having contradicting or ambiguous views.
A chartered accountant also has to provide audit of systems to track the audit trail and detect any frauds or incorrectness in the databases maintained at cloud servers. Whether the cloud computing generates enough reports and analysis which are required to conduct an audit. A Chartered Accountant has to liaison with the software engineer or software developer to develop the cloud computing for large business houses in order to customize the cloud computing as per their requirements. For this purpose, a Chartered Accountant will need basic and initial knowledge of the information technology.
Looking at the growing software technology driven world and new schemes coming up under the revolutionizing government a Chartered Accountant has to equip or prepare himself, take necessary steps to imbibe with the knowledge about the upcoming technologies and opportunities attached with the said technology. A Chartered Accountant has to get familiar with the schemes announced by the government and also consider on how the professional could be of best help to the businessmen and promoters. Since the traditional practice has been known to one and all, what is required is to stand out in the crowd and provide services where there are myriad of opportunities and tap them at early stage. In a world that is changing really quick; the only strategy to survive is to adapt and accept the changes.
(Ms. Dipika Shah is Partner with Mohan C Shah & Associates, Ahmedabad. The views expressed are strictly personal.)
1 Source: www.startupindiahub.org.in