The changes carried out to the ICDS regime are appreciated and would assist in easing the compliance burden to a certain extent. However, the changes made are restricted to select cases while other cumbersome areas for the implementation of ICDS still remain. These areas include the absence of the concept of Prudence and Materiality, the Percentage Completion method for recognising revenue from service contracts, the ‘reasonable certainty’ criteria for recognising provisions of expenses, the bucket approach for the valuation of securities, etc.
Business enterprises will have to consider the effect of ICDS for the calculation of advance tax for the third quarter which is due on 15 December 2016. If there is a shortfall in the payment of advance tax for the first and second quarter on account of ICDS, the taxpayer would be exposed to interest liability though the text of the revised ICDS. The government may make the necessary legislative changes to provide relief from interest liability in such cases.
Currently, a further extension of ICDS is not likely. Business enterprises should gear up for ICDS impact analyses and its implementation.