This EY Tax Alert summarizes the key recommendations in the final report issued in August 2012 by the Accounting Standards Committee constituted by the Central Government (CG) in December 2010. The CG published the report on 26 October 2012.
Section 145 of the Indian Tax Laws (ITL) gave the power, effective from tax year 1996-97, to the CG to notify Tax Accounting Standards to be followed by any class of taxpayers or in respect of any class of income. In view of significant developments in convergence to International Financial Reporting Standards (IFRS), the CG constituted the Committee in December 2010, comprising officials of the Tax Authority and professionals. The terms of reference of the Committee were to study harmonization of accounting standards issued by the Institute of Chartered Accountants of India (ICAI AS) with the ITL and to suggest accounting standards for tax compliance under the ITL and also to deal with the issue of the tax impact of convergence to IFRS.
The Committee has recommended notification of 18 Tax AS for compliance with the ITL on the issue of harmonization of ICAI AS with the ITL and has also provided drafts of 14 Tax AS. The CG has invited comments/suggestions on the recommendations of the Committee and draft Tax AS by 26 November 2012.