In this illuminating interview, we delve into the distinguished career of CA Rajesh Agrawal, Chairman of the Institute of Chartered Accountants of India (ICAI), Pune Branch. With over eighteen years of expertise in Indirect Taxation, CA Agrawal has navigated the intricacies of Central Excise, Customs, Service Tax, and the transformative Goods and Services Tax (GST). Hailing from the Parbhani District of Maharashtra, his journey began with enrolling in the CA course in 2001, leading to a dynamic career encompassing consultancy, audits, investigations, and representation before departmental authorities.
Beyond his professional prowess, CA Agrawal is socially engaged and fosters connections within the chartered accountant community. The interview explores his role as Chairman, challenges encountered, perspectives on GST litigations, involvement in crucial GST audit sessions, and anticipations for the evolving landscape of Indirect Tax in 2024.
Embarking on an insightful journey into the realm of financial expertise, we had the privilege of sitting down with CA Rajesh Agrawal, the distinguished Chairman of the Institute of Chartered Accountants of India (ICAI), Pune Branch. A Chartered Accountant who is working as a consultant in the area of Indirect Taxes since 2005, which includes Central Excise, Customs and Service Tax now GST. His work encompasses a broad spectrum, including consultancy, retainer-ship work, litigation up to the tribunal level, conducting Audits and Investigations, and representing clients before departmental authorities. It all began in Parbhani District of Maharashtra from where he belongs to. He enrolled in the CA course during 2001 and completed it in 2005 after which he decided to practice in the field of Indirect Taxation in Pune. When taxes like MVAT (Maharashtra Value Added Tax), and service tax were in place, he began his career in Pune working with indirect taxes. He discontinued practising in order to concentrate on Customs duties and Central Excise taxes. Since the implementation of GST on July 1, 2017, throughout India, he has been experimenting with the tax. He has over eighteen years of expertise in Indirect Tax.
Apart from your CA profession, what are your points of interest in other activities?
Apart from his career endeavours, CA Rajesh Agrawal is socially involved and exhibits a strong interest in a range of social events. Interestingly, he also keeps up close ties with other CAs, cultivating friendships within the community of chartered accountants. His passion of engaging with people, adds a personal touch to not only his professional commitments but also those outside of work.
As a chairperson, you undoubtedly encounter numerous challenges. Could you describe the challenging aspects of your role?
Chairperson duties can be demanding. The largest obstacle was establishing and preserving relationships with everyone while respectfully disagreeing with their opinions. I needed to focus on preserving my work-life balance because this was a new experience for me. Since my area of expertise has always been indirect taxes, it did occasionally prove challenging to learn about other taxes and provide recommendations on them.
Chartered accountants are widely recognized for their integrity and contribution to good governance within society. This acknowledgement highlights the tremendous obstacles that come with their responsibilities, and challenges that our respected members meet with resiliency and expertise. For both seasoned professionals and prospective students, the constantly changing regulatory environment and the rapidly growing technological landscape create a number of obstacles. Despite these obstacles, our members’ remarkable ability to skillfully navigate and handle such situations speaks volumes about their abilities and dedication to greatness.
What is your opinion on handling GST litigations nowadays?
There are several different kinds of GST-related lawsuits. Due to its recent introduction, there are several obstacles and legal conflicts for both industries and practitioners. Litigation management involves handling organized difficulties with comparatively fewer class and valuation-related concerns. However, because the Supreme Court and numerous high courts are debating a large number of cases, certain organized litigations are still ongoing.
The fact that there are a significant number of GST-related cases in every state adds to the issue. As a result, several questions remain unresolved, which contributes to the continuous state of legal uncertainty.
As we see in your post recently you attended the session organized by GST audit Pune Commissionerate on a very important and unique topic “Nudge in tax administration. How it will take effect on tax administration?
The topic aimed to guide departmental officers on effectively resolving issues they encounter. Specifically organized by the Pune GST Audit Commissioner, the session emphasized the department’s role in auditing documents. At that time, there was a prevalent misconception that assesses were not interested, possibly due to untimely document submissions. The challenge was to communicate the message more effectively, emphasizing the benefits of completing the audit for future compliance. Getting an audit is good for people because it helps make sure they follow the rules correctly in the future. Unlike external auditors who charge money for their work, the government department does it for free. If there are mistakes in the documents, they tell people about it so that the same mistakes don’t happen again. This is why audits are done – to keep everything in order and avoid problems later on.
What are your expectations regarding the upcoming ICAI election.
The ongoing elections mark a positive shift from the traditional ballot paper system to a more modern approach using EVM machines, showcasing the progressive development of ICAI.
Anticipating further advancements, CA Rajesh Agrawal believes ICAI might implement a voting system designed to streamline the counting process and reduce errors, ultimately saving time for both the counting team and the voters themselves. Members have recognized the importance of having competent leaders in our profession, and this awareness has the potential to boost voter turnout. Moreover, newer members are expressing a keen interest in participating in the voting process, which could significantly impact overall engagement.
From a leadership perspective, it seems that the preferential voting system in ICAI is gaining traction. Technical and knowledgeable individuals tend to garner more support. Analyzing past voting patterns, it becomes apparent that people are inclined to choose candidates with expertise in their respective fields, particularly those who contribute significantly to education and subject matters. This preference aligns with a thoughtful and strategic approach by the voters.
What is your prediction for 2024 for the Indirect Tax?
In previous budget sessions, amendments related to indirect tax were primarily confined to customs, with occasional nominal adjustments. However, a significant transformation has unfolded, particularly in the realm of GST, during the recent GST council meeting.
To streamline the filing process, sequential filing of GSTR-1 and GSTR-3B has been mandated, promoting timely returns and smooth availability of input tax credits. This change is an admirable effort on the part of the government to simplify the tax system and adjust to the evolving nature of the financial environment.
Future projections for indirect tax indicate a shift toward virtual digital assets. Changes that are anticipated will better address the issues raised by the gaming industry and other virtual environments. These adjustments highlight the government’s proactive approach in addressing new trends and making sure the tax system is resilient and flexible as the tax environment continues to change.
What are your observations about the tax compliances in 2023? Did the sector see changes in rules, regulations, etc.?
The introduction of admirable adjustments to laws and regulations, which took effect in January 2022, is a big step forward. Additionally, the filing procedure is covered by the amendment. The subsequent submission of GSTR-3B (or vice versa) is difficult if GSTR-1 is not filed. It is significant that although these modifications present obstacles for entrepreneurs, the overall effect is a decrease in fraudulent activity as a result of strict compliance with regulations.
What should be the ideal cost of compliance for startups and MSMEs?
The value represents the cost of compliance. I’m not allowed to tell you about it because it will vary depending on who you ask. Although the cost of a Chartered Accountant’s services varies from person to person. In terms of GST, the first cost is generally lower because there were formerly various compliances, such as service tax, VAT, central excise, local body tax, and so forth, now there is only GST. Due to worries about having enough competent personnel, the cost of compliance for startups and MSMEs increased. Previously, compliance was managed on a yearly and quarterly basis now it is done on a monthly basis as well. Since everything is now done online, you need qualified personnel on a timely basis. The cost of compliance went up slightly, but it also increased the accuracy, completeness, and integrity of the Books of Accounts, making implementation of GST one of the best decisions of the Central Government.
What challenges exist in the current GST framework that may be explained by fraudsters and how can these loopholes be effectively addressed?
There are challenges with respect to the fraud. In the past, fraudsters could easily register themselves and carry out their fraudulent activities with just a few documents. However, these days, obtaining a registration requires more paperwork. The GST Department is now taking its time and analyzing all the documentation before granting registrations, this is making it more difficult for startups and MSMEs to get registered. It is now incredibly difficult to register under GST. The government is doing a great job of combating fraud by enacting new laws and employing appropriate technologies to identify these individuals and take further strict actions against them.
What challenges do businesses face in complying with diverse Indirect tax regulations across different regions or countries?
Every nation has its own indirect taxes. Concerns about classification pose challenges on a worldwide scale. There are issues with input tax credits and state revenue distribution everywhere in the world, but at the Indian level, I have to say that the concept of IGST is excellent, making it a very positive development in terms of indirect tax issues. While other nations are performing well, India is leading the world in the federal economy when it comes to indirect tax collection and the implementation of the Goods and Services Tax (GST).
“When the tax authority presents its case, it focuses on recoveries, and their interpretation leans towards a recovery-oriented perspective. On the contrary, our interpretation consistently aligns with a taxpayer-friendly approach. If the authority finds no issues with their submission, that is acceptable. However, if there is a discrepancy, a notice is issued, and we respond accordingly. I believe there is a pressing need for ongoing training for department officers to ensure continuous improvement.”
Can you discuss a complex scenario where you have provided strategic advice to the client regarding indirect tax compliance?
There are many situations like these that we encounter every day. Tax matters can get quite intricate, especially when it comes to advance rulings. Strategic advice plays a crucial role in navigating through such complexities.
Let’s take, for example, ocean freight during the initial stages of GST implementation. In my understanding, it shouldn’t be taxed in India when importing goods on a CI basis. However, the government, through a notification, deemed it taxable. It was a puzzling situation because, in my interpretation, the government shouldn’t tax ocean freight under certain circumstances. Fortunately, after five years, the government reversed its decision through another notification, declaring it non-taxable. This strategic decision has proven beneficial for our clients.”
How technology has been employed to enhance the detection and prevention of GST fraud and what challenges persist in staying ahead of fraudulent activities?
In this context, the Technology department shares data with the authority, leading to a reduction in fraudulent activities. The department now utilizes machine learning and data analytics services comprehensively to detect any fraudulent activity. This analysis enables the department to stay two steps ahead of potential fraud.
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