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Case Studies
How we strengthened internal controls and tax compliance to give 100% audit success and long-term financial stability.
About
Our client, BCSMI Pvt. Ltd. is a fleet management company providing safe and reliable transport for schools, colleges and corporate training centers. It has steadily grown and continue to serve multiple institutions across Bangalore.
Quick glance at the challenges and solutions
Before diving into the full case study, here's a quick look at how we helped the client tackle key financial and compliance challenges.
The Challenges
- The client faced cash flow issues due to limited initial investment and also the burden of loan repayments for their fleet.
- Managing high operational costs, such as fuel, salaries and maintenance, always seemed to be a challenge.
- Tax compliance was another bothering issue, with frequent GST, income tax and service tax audits adding more pressure.
- Without proper internal controls in place, the client found it difficult to keep a track on finances, resulting in inefficiencies and delayed decision-making.
The Solutions
- We helped the client set up strong internal controls and automated accounting systems, that helped them track finances and make better decisions.
- To ease cash flow pressures, we introduced cost-saving measures such as, optimising fuel usage and reducing maintenance expenses.
- Our tax planning approach ensured that the client remained compliant with GST and income tax rules, avoiding penalties and audit risks.
- We provided regular MIS reports, giving the client clear financial insights for better planning and secure required funds when needed.
A deeper look into the case study
Client Background & Early Challenges
Our Client is a fleet management company that provides safe and reliable transportation services to educational institutions and corporate training centers. The business began with an aim to provide hassle-free mobility solutions for students and employees for a timely and safe transportation.
Right from the initial days, the client faced challenges in setting up operations with minimal initial investment. They had to manage cash flow while closely keeping an eye on loan repayments for their increasing fleet. Also, operational expenses, such as fuel, salaries and maintenance, were posing huge challenges. Despite these challenges, the company gradually grew its services year after year, serving several institutions in Bangalore.
With increasing operations came the need for a structured financial system, tax compliance and cost optimisation. That is when we stepped in - to help our client establish very strong internal controls, improve their financial management and ensure regulatory compliance, setting the foundation for sustainable growth.
Solutions That Delivered Results
To assist the client tackle financial and operational challenges, we adopted a well-planned approach with specific solutions. Here is how our approach made the difference:
1. Implementing Internal Controls and Automated Accounting
We implemented strong and robust internal controls and automated accounting systems for accurate bookkeeping, real-time financial monitoring and better decision-making. This helped the client to maintain a clear view of their finances.
2. Monthly MIS Reporting for Financial Insights
We provided regular MIS reports, giving the client clear visibility into revenue, expenses and cash flow. These reports played a very important role in planning future growth.
3. Cash Flow Management and Loan Assistance
To ease-out cash flows, we assisted in tracking outstanding payments and improve the usage of fund. We helped in securing top-up loans for financial stability during critical growth phases.
4. Cost-cutting Strategies to Reduce Expenses
We were able to identify specific high spending areas, like - fuel expenses, salaries and on-going maintenance. We introduced cost-saving measures to minimise unnecessary expenses adding to the profits.
5. Tax Compliance and Regulatory Alignment
Our timely filing and submission of GST, income tax and other statutory returns, helped the client avoid penalties and maintain a strong compliance record with tax authorities.
6. Handling GST Audits and Litigation Support
With frequent tax audits, we assisted the client in managing compliance requirements, responding to assessments and securing favourable outcomes, reducing litigation risks.
7. Vendor Negotiations for Better Pricing
We helped the client renegotiate contracts with vendors, ensuring cost-efficient procurement of fuel, vehicle maintenance and operational supplies without compromising service quality.
8. Forecasting and Budgeting for Financial Planning
We provided projections and budgeting support to help the client anticipate future costs, optimise fund allocation and make well-informed financial decisions.
9. Securing Tax Waivers and Utilising Government Schemes
We assisted in identifying and applying for tax waiver schemes, such as the Amnesty Scheme under GST, ensuring the client benefited from eligible refunds and exemptions.
Interesting Stories
It wasn't all numbers and compliance - From tax twists to unexpected challenges, here are stories that made this journey unique.
We have spent enormous time not just taking care of their compliances but also developing relevant business models for their effective functioning. The Income Tax Act, 1961, was amended in October 2009 to introduce Section 194I(a), which pertained to TDS on renting of plant and machinery at 10%.
This provision created a conflict between tax deductions under Section 194C and Section 194I(a).The nature of the transaction was always in the form of a contract, while the term 'rent a cab' was more commonly used for service tax purposes. As a result, Section 194C overrode the provisions of Section 194I(a).
By convincing the client's customers of this distinction, we successfully prevented the 10% tax deduction, which would have otherwise led to excess working capital shortages and a massive impact on cash flows. Recognising this anomaly, the government later amended Section 194I(a) to align it with the rates prescribed under Section 194C.
Being a large taxpayer, the client was subjected to multiple audits and assessments, including Income Tax Investigations, Service Tax Audits and GST Audits. However, with our strong internal controls and well-defined procedures, the audit process was smooth and the client cleared all audits with a clean chit.
Our approach of considering potential future assessments and inquiries from government authorities at the time of implementing internal controls ensured effective compliance. Additionally, the positions taken by the client under GST at the time of implementation were later reviewed and seconded by GST Authorities during their investigations.
The fall in business activities during COVID-19 had a massive impact on the rent-a-cab industry. With huge interest commitments and no bookings, thanks to the 'Work from Home' transition, the industry faced a severe crisis starting from March 2020. During this period, the focus was not on profitability but simply on staying afloat and surviving the downturn. The doctrine of 'Survival of the Fittest' was truly tested in these challenging times.
Amidst these financial hardships, our client hoped for support from their stakeholders. Recognising the gravity of the situation, we took the moral responsibility of providing all necessary financial guidance. One of the key steps we took was leading negotiations with banks to restructure the client's loans. With our well-prepared submissions, the banks recognised and approved the restructuring proposal, which substantially reduced the burden on cash flows and provided much-needed relief.
Throughout this crisis, we focused on aligning managerial decisions with operational implementation, ensuring that the client retained control over their financial operations. This structured approach helped maintain financial records, making it possible for the client to navigate the dry period caused by the pandemic despite low revenues.
Beyond financial support, we also scheduled frequent meetings with the client to keep their morale high and boost their confidence during these uncertain times. We continuously reminded them to trust the process, reinforcing the belief that 'the passage of time will bring things back to normal'. This reassurance helped instill positive thoughts and the resilience - needed to push forward.
Final Thoughts
Our journey with BCSMI Pvt. Ltd. has been all about helping them build a strong financial foundation and stay fully compliant with tax regulations. As they continue to grow, we - Mukunda Shiva & Associates are here to support them every step of the way, assisting them in navigating the ever-changing regulatory environment with confidence.
Note:
As per the advisory issued by ICAI – The Institute of Chartered Accountants of India, we follow their Website Design Guidelines (given below). Hence, we are unable to disclose our clients' full names on our website and have instead used abbreviations. If you require detailed information about our clients, please contact us.
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