CA Manoj Fadnis
(President of ICAI of India)

     

Good morning and a very warm welcome to all the viewers of CAclubindia. Today, we have a very special guest with us- CA Manoj Fadnis, the President of ICAI, India.

Thank you, Mr. Anjani. It is also my privilege and honour to join in this chat with you and through you meet and interact with all the viewers of CAclubindia. I know, you have been doing a great job for the profession and for all the professionals and I am very happy to be with you today morning.

Well, the council has already set in a vision for the professionals and the institute and which is a long term vision so it is to ensure that collectively on a year-to-year basis, we see how we improve the quality of services which we render to the society, how we can improve the various teaching methodologies for our CA students. These are the long term objectives so that as a profession, we should remain relevant for the country as a whole.

And in that larger vision, we draw out an action-plan and then we have the priorities on a year-to-year basis which are aligned at the national priorities. This year as the IND AS i.e. Indian Accounting Standards converged with IFRS, became applicable from 1st of April as per the roadmap set out by the Hon’ble FM, so these become our priorities in that context. But, we have so many other things like education and training, new system which we are bringing out for students. So, they come within the larger vision which the Council has set.

Well, you will be happy to know that the institute has already completed its due process- the Indian standards converged with IFRS has been already hosted by the Ministry of Corporate Affairs on its website so the detailed process has been completed. And, what is really important is that when the Hon’ble FM in his budget speech on 10th of July mentioned that the Indian corporates will adopt the international standards w.e.f 1st of April, 2015. Now, from 10th of July to 18th of February, when these standards were notified by the ministry in less than around 6 month’s time, we finished a lot of work in the institute. Our AS board completed the entire convergence with the international standards as they existed on 1st of January, 2014 and they brought out the exposure drafts, they had lot of comments on it. Each comment was carefully considered. And, thereafter, they were placed before the council, the council placed it before the national committee on accounting standards in a class and then finally the NCAS gave it to the Central Govt. So, from 10th July to 18th February, a lot of work was done by the institute through its various bodies and we got enormous corporation from our members at large, in terms of those who came forward, formed study groups and gave comments to the institute. I think as a profession, we have done a job which I am really proud about and we have today given these standards to the Govt. and the Govt. is making them applicable from 1st of April so that the Indian corporates can have the same set of principles for the purpose of preparation, presentation of financial statements as are accepted world-wide. So, this is a contribution of our profession and the institute to the country as a whole.

I take that last part- not perhaps the best in the world, I believe our institute is the best in the world. Besides that, as each one of us has expectations from the budget, well, we are all justified in our own expectations from the budget but as I see the budget, it is a budget which is a growth-oriented. It is a budget which will give a long term direction to the way the economy is to grow and I am very happy that the Hon’ble FM has put up a target of 8.5% for the growth of GDP for the times to come. We are a 1 billion+ country, we are more than 1.25 billion and we have lot of challenges in the country, we have a lot of infrastructure requirements which is required to be developed. We have a lot of people who need primary education and basic health facilities. In such an environment to plan a growth of 8.5% in GDP is a big challenge. So, what the Govt. has done is- it has put its resources for infrastructure development and once you have a good infrastructure then it kick starts the economy and when the economy grows, you have more jobs being created, more employment being generated so these are some very positive aspects of this budget. Even on the tax side, if you will see indirect taxes, you will find that a lot of long-term reforms have been brought in by the Govt.

Yes, as the Hon’ble Finance Minister in December when he placed the Constitution Amendment Bill before the Parliament and he remarked that GST is going to be the single largest tax reform in the country since independence, so you can gauge from the fact that once you have a law or uniform law w.r.t goods and services being implemented all across the country, it will bring a lot of developments and a lot of good features along with it. While the cost of the tax to the end consumer would not be high, at the same time the revenues for the state and central govt. will increase and in that scenario, the institute is playing a very pro-active role with the finance ministry to ensure that the GST is properly implemented. That way, the Hon’ble Finance Minister and the Govt. and the parliamentarians have in mind and we are also in the process of approaching all state governments to assist the state governments in the proper uniform implementation of the GST. So, we are offering our services to the individual state government also and I am sure we will be able to succeed in our endeavour w.r.t the state governments so that we have a GST law which is uniform in the country and there are a lot of procedures to be decided, lot of rules required to be made. So our endeavour would be to help the state governments in this direction.

Well, if you look at the Direct Taxes, what the Hon’ble Finance Minister mentioned is that the tax rate will be reduced from 30% to 25% in a phased manner over a period of 4 years. Certain exemptions which are being given will also be withdrawn over a period of time. So, this is a very important message which the Finance Minister has given w.r.t having tax system which is consistent and he has given a long term direction to the corporates as to what kind of tax reforms they can expect. So, while he said that the tax rate will be reduced from 30% to 25% to bring it in line with what is there in the Asian region and make the Indian corporates competitive by having a lesser tax regime. At the same time, selective exemptions being given also need to be withdrawn so you can’t have both the things. Also, the fact that he has mentioned - a period of 4 years gives a certainty to the tax structure so it is not that the corporates know what they should expect in a period of 4 years which is a mid-term and a very useful time horizon. Your second question w.r.t ST- Yes the rate of ST has increased from 12% to 14%, now that we are heading towards GST and in the GST, the tax rate is estimated to be around 16%. So, it is a step in that direction. If you are going to have GST, being implemented in the country from 1st of April 2016 and in 2014, you add 12%, then in 2015 you add 14% and then in 2016, you go to 16%. So, I think that is also a gradual increase in the tax rate from 12% to 16%. It is not suddenly increased from 12% to 16% but you have one year, i.e. the current year where you made it 14 and then from 14% to 16%. I think we need to look at it from that angle.

Yes, I fully agree with you. It was really a matter of delight, pride and honour when the Hon’ble PM on his own took the institute as one of the partners in a very large vision which the Hon’ble PM has for a Swacch Bharat Abhiyaan. And, we have been working in that even before the announcement when the govt. came out with the 3 schemes- Swacch Bharat, Jan-Dan and Make in India. Right from that point of time, we had prepared our internal documents on these schemes and we had circulated that to our branches and we have started the move. And, when the Hon’ble PM took us with him, we felt very delighted and motivated and today we have a special committee for corporate social responsibilities which is being headed by my immediate Past President - Shri K. Raghu who is chairing this committee. So, the idea is that we bring out our CSR initiatives in line with what the Govt. has and carry out all these activities in a proper manner and implement them through our 147 branches and 5 regional councils. As you know we have 26 chapters across the world so we would like the foreign chapters of the institute also to spread the good message which the Govt. is carrying out and where the institute is partnering with the Central Govt. So, lot of things we have planned up under the CSR activities for the current year.

Well, you are quite right. We are a large body and as the CA’s are highly respected in the society and therefore it becomes important that as a profession, we give back to the society what we have earned and received the kind of fame and the kind of respect which the profession has earned from the society. So it becomes our duty to see that we contribute back to the society and you have very rightly pointed out that we have very eminent personalities from our profession who are occupying very key positions and as a profession, we are proud of them. We are proud of the fact that one of the members of our profession presented the Union Rail Budget and we have Shri Piyush Goyal ji heading a very important industry ministry portfolio w.r.t power and energy. So, we are partnering with the Govt. as the Hon’ble minister of power Piyush ji mentioned, that there is a lot of CSR activities being carried out by his ministry in terms of construction of toilets to give a clean India. So, he has appealed to the profession that we should come forward and pro bono provide our services for the purpose of verification of the funds so that the funds go in the right place and right objectives are achieved out of this large spending. Now, what we have done is, we have put up an announcement on our website requesting our professional firms to come forward and empanel themselves for this activity and I am very happy that we are getting a very fast and a very good response from our memberships. A lot of firms are coming forward from all over the country to empanel themselves for this activity and which then they will be carrying out pro bono as I said, free of cost for the society and render their services to the society. So, this we are doing at individual level, at a larger level, at branch levels, we have more social activities being carried out and we are creating more awareness even amongst the students so that they should also have this message clear in their mind that they also have to contribute to the society.

I agree, the CA exams are tough and they have always been tough. When I appeared for exams, my principal used to tell me that even in his good old days the exams were tough and I qualified around 28 years ago. So, even at that point of time, the exams were tough and even today the exams remain tough. But the point is, a student who has a passion to study and who is hard-working student and who puts in his mind and energy in the course curriculum, I am sure he will pass the exams. So, when we say at the final level what we have is an expert degree of knowledge, so he must really have that expert degree of knowledge. If he has that expert degree of knowledge, he will become a Chartered Accountant. So far as the course curriculum is concerned, every around 10 years the Council has been revamping the entire course so that the course becomes relevant for the next period of 10 years. We had this activity carried out in a big way around 2004-2005 and in 2006 we launched the new course curriculum which starts with CPT and the present courses, you all have been aware of. Now, in 2014-15, again the Council has started this activity. Infact, it started in 2013. It got the momentum last year- 2014 and we carried out an online survey, we had meetings with stakeholders, we had meetings with our professional colleagues to see what are the changes (if any) required in some courses. And where we need to align our course again with international best practices which are happening. Just to share one or two quick things- today we talk about open book exam system. Now, we don’t have that kind of an open book exam system in our current course curriculum. Now, we are planning to move towards that. When we have an open book exam system, a final CA student can carry the bare tax act of (say) IT Act or corporate laws or any other laws or may be the Accounting Standards, Auditing Standards. We will allow him to carry the bare act or the bare standards and we will put questions to him so that he can refer to the standards but the questions will be on the application of those provisions, on the analytical understanding of those questions, on his conceptual understanding of those subjects so that we are in a better position to test the students. Now, I must also say that we are conducting exams for more than 1 lakh students for Finals and we are doing it at around 350 centres within the country and we have few centres outside the country. So, to carry out this kind of a reform is going to be a major challenge even for the institute and for our examination system. But, that is where we are heading for, so that we can have better testing methodologies for the students. So, we don’t want to ask a simple question- what are these provisions. He has a handset; he has an I-pad; he has a laptop, he has internet connectivity and he can always go and find out the relevant provisions. So, what is important is- his understanding of those provisions. So, we are trying to bring in such structural changes and reforms in our education system. There will be no major changes- so the curriculum; the articleship period will be of 3 years as it was in the past but our examination system will improve. Some of the subjects which are more relevant may be introduced; something which are less relevant will be removed. We have announced on our website- the draft scheme and I would request all the viewers to kindly send their comments till 31st of March to us. We will be very happy to receive your comments and I can assure you every comment that we receive- we have a system where each comment is properly analyzed and then the final decision is taken. So, this process is on today. We expect to complete the entire process in 2015. It’s a long process- we have to go to the Govt., again put out a final scheme for public comments and then finally get Govt. approvals, Council approvals. It takes time so we have targeted for 2016 for the launch of the new course curriculum.

Well, as the economy actually grows, we find that more people will go from practice to industry. So, if you take a scenario 50 years back, when the Indian industry was not so well developed so people were coming more in practice as compared to the no. of people who would get jobs in good industries. But over a period of time as you see the economy growing; the industrialization taking place- there is a good growth in the corporate sector, there is more professionalism in the corporate sector and the pay scales have also been considerably enhanced. Worldwide there is a trend that when the economy grows, more people will come out of public practice and go into industries. Even those who go in public practice, they have to ensure because today is a trend of specialization. Now, there are different subjects which we have- we have (say) Direct taxes, Indirect Taxes, within direct taxes again there are different areas of specialization- Business Taxation, International Taxation, Appellate work, Original work, Compliance work, so people are specializing in each niche areas. When you start specializing in each area, then it is not possible for one person to render so many services, so what we have is- people coming together, practicing in groups, people taking up jobs in professional firms so that is the kind of paradigm shift as you have rightly mentioned, which is also taking place in our profession. So far, as the young members are concerned, this is a new committee which we came out with last year. Our objective was that- if a person who has just joined the profession and he needs some degree of mentorship; he would like to know whether he should take up a job, he should go for a public practice or should he go for a job in civil services or should he lookout for overseas career? These are normal challenges which young member is bound to face and there are so many opportunities and options available to him that he needs guidance w.r.t what career path he should choose. That is one of the objectives of this committee to provide the right kind of mentorship to the young members.
Second is, young members who come into public practice- Now, we can’t have a system that we give him some work or we tell the Govt. or we tell the regulators he is a young member, please give him this work or please empanel him because it’s a free market, it’s a capital economy, it is where the best has to survive. In that sense, there will always be a tendency in each of us, even when we utilize the services of other professionals we might like to go to a doctor who has some experience. If I have to get myself operated, I will go to a surgeon who has done such surgeries in the past. This is what all of us do. So, what we have thought is- the young members have their own challenges & we should help them, handhold them, give them the knowledge, give them the expertise, give them the experience and make them strong enough to fight these challenges and to overcome these challenges. This committee is more of a mentorship committee to help the young members- be it in the public practice or be it in the service or whatever they wish to do, but for the first 5 years of their membership of the institute upto age of years (say) 30 is what we are thinking about. So we would like to hand-hold them, guide them, help them in whatever way they wish to and see that they have their own strengths. Young member is more techno-savvy, he can be a better presenter, he has communication skills which will be better but he lacks experience so we help him with those areas where he is lacking so that he can compete in the profession.

Well, as the President of the institute my earnest appeal to each member of the institute is that whatever service he is rendering- be it consultancy, be it tax, be it an attest function, it is important that we render our professional services in the best qualitative manner and as all of you would agree with me - there is no end to excellence. Excellence is not a destination; it is something which has to be improvised upon so even whatever best you are doing, there is also scope to do even something further better than that. As a profession, each one of us individually must work hard to improve the quality of our services. It is generally felt that if I get some big audits or some extraordinary work, I will do it in a very nice way and I will get good results but friends believe me – it is an ordinary work done in an extraordinary manner which brings the extraordinary results. This is the message I need to communicate that whatever work we are doing; if I am filing IT returns, I am carrying out an audit of an educational institution, I am carrying out an audit of a religious trust or I am carrying out an audit of a bank or NBFC or any complex institution, the quality of the services are important and we must as a profession endeavour to improve the quality of our services. Once the quality keeps on improving, friends, there is no end to professional opportunities which will be available to us and the profession will continue to become more and more glorious in times to come.

Thank you so much, Mr. Anjani. It has been my pleasure to interact with all viewers. Thank you so much!!