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  • 1. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY By Sriranjini & Srinivasan16th September 2011 1

2. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Need for compliance Types of regulations Inherent challenges Compliance process Compliance framework implementation Applicable Laws Proof of compliance Why dont people comply Approaches to audit Audit / Reporting16th September 20112 3. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRYWhat do you do? Pay excise duty & sales taxWhere do you buy materials from?Pay sales tax / import duty Do you render any service?Pay service tax What do you get by selling?Income tax / MATWhat do you do with profits? Pay dividend distribution tax Have you accumulated wealth?Pay wealth taxPay surcharge & cess. In the case of delay pay interest / penaltyManufacture & sell goods Other state / countryYes Profits / LossDistribute dividendYes Is there anything else to pay?16th September 20113 4. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Others InvestorsEnvironmentEmployeesGovernment4 5. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY16th September 2011 5 6. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Location of the units Compliance Multiplicity of regulations Changes in legislation Fiscal /Safety Corporat e Labour Basis of disclosures & extent of reporting Delegation of responsibilities Reputation risk uncovered Not one time filing returns/ maintaining registers16th September 20116 7. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY 8 Remedial action and monitoring 1 7 Document Analysing business process gaps 2Identifying 6locations /keyReview personnelcompliances35 CapturingCommunicatingapplicablethe compliance 4 regulationsrequirementCapturing thecompliance requirements16th September 2011 7 8. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Report on compliance of the code of corporate governance to the Board On quarterly basis Includes disclosures regarding: Fatal accidents, dangerous occurrence, material effluent or pollution problems Significant labour problems and proposed solutions Significant developments in human resources / industrialrelations front Non compliance of any regulatory / statutory / listingrequirements Review of compliance reports of applicable laws & steps taken torectify non compliances16th September 2011 8 9. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Laws (Illustrative)Personnel & IndustrialOperations General / Industry- Factories Act, 1948 specificLegal & SecretarialTaxation- Industrial Disputes Act, 1947 - Air (Prevention & Control ofPollution) Act, 1981- Central Excise- Foreign Exchange- The Contract Labour (Regulation & Act- Environment (Protection)Management ActAbolition) Act, 1970Act, 1986 - Customs Act- The Employees Provident Fund & - Foreign Trade - Hazardous Wastes (Regulation & - Income Tax ActMiscellaneous Provisions Act, 1952(Management & Handling) Development) Act- The Employees State Insurance Rules, 1981Act, 1948- Public Liability - Service Tax / - Manufacture, Storage and Insurance Act, 1991 Rules- The Industrial Employment (Standing Import of Hazardous ChemicalsRules, 1989 - The Companies - The CentralOrders) Act, 1946Act, 1956 Sales Tax Act- The Minimum Wages Act, 1948 - The Indian Boilers Act, 1923- The Tamilnadu- The Indian StampGeneral Sales Tax- The Payment of Bonus Act, 1965Act, 1899- The Indian Explosives Act, 1884 Act- The Payment of Gratuity Act, 1972 - The Negotiable - Wealth Tax Act- The Payment of Wages Act, 1936- The Petroleum Act, 1934 Instruments Act, 1881- The Tamilnadu Shops and - Water (Prevention & Control ofEstablishments ActPollution) Act, 1974- The Workmen Compensation- Water (Prevention & Control ofAct, 1923 Pollution) Cess Act, 19779 10. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY 10 11. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Do You Act Based on these Acts ? Yes, ItsManagementPolicy to be a law abiding firm.11 12. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Willingness of Management Availability of Knowledgeable person(Knowledge of Law) Financial stability to comply Continuous monitoring of various compliance Intolerance for non compliance12 13. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Cost of Compliance Management Philosophy External Factors Ignorance of law 13 14. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Basic Knowledge of Applicability of Various Statute. Audit programme what / how to check the compliance? Section/Location Specific checklist. Analyzing the consequence of Non compliance. Abreast of latest legal requirements14 15. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRYStatutoryCompliance/Time Whether the Penaltyfor RelevantProof of Steps taken JustifyProvisionRelevant FrameCompany breach/ non- Authority Complia torectify action /non- Documenthas compliance ncethenon- action/Rem Compliedcompliance arksRule 4 Whether theLicenseYes / No / NA -ImprisonmentChief License Chief Inspectorvalid till upto 2 years Inspector certificatThe Tamilst hasissued31 -Fine upto Rs. or Deputy e validNadu registration and December 1,00,000 Chief till 31-Factories license to the of the year-Or both Inspector 12-2011Rules, Company in for which it -If continuing of1950 Form 4 is granted offence Rs.FactoriesRegistrati followingan 1,000/dayon and application inGrant of Form 2 in theLicenseprescribedfora manner by thefactorycompany 15 16. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Classification / prioritization of compliance to be verified. Verifying the proof of compliance. Reporting Follow up16 17. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRYHigh Imprisonment of directors / officers Closure of plant/office loss of reputationModerate Exceptions relating to renewals of licence Provision which does not attract ImprisonmentLow Exceptions relating to maintenance of records , filing of returns etc.17 18. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Physical Records Electronic Record Publications Certification from Experts 18 19. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Consequence of Noncompliance Financial /Criminal liability Loss of reputation. Statutory report 19 20. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Review of previous Non compliance Current Status of Non compliance Continuous Monitoring to ensure compliance20 21. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Compliance FrameworkCompliance Scheduling Compliance AssessmentCompliance Follow up 21 22. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY Location (Branch)Captures key Financial Year details of Applicability Process OwnerAssign(Individual) Responsibility Manager Intimation MailModel Alerts Three levels of reminders SMS (Messaging) 22 23. STATUTORY COMPLIANCE IN MANUFACTURING INDUSTRY16th September 2011 23

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