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AUDITOR'S REPORT

GAIL (India) Ltd.

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Market Cap. (₹) 58928.08 Cr. P/BV 1.28 Book Value (₹) 101.18
52 Week High/Low (₹) 191/120 FV/ML 10/1 P/E(X) 9.00
Bookclosure 20/08/2019 EPS (₹) 14.39 Div Yield (%) 5.51
Year End :2019-03 

Report on the Audit of the Standalone Ind AS Financial Statements Opinion

We have audited the accompanying standalone Ind AS financial statements of GAIL (India) Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity, the Statement of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, its profit including other comprehensive income, changes in equity, and i ts cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors’ Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the standalone Ind AS financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

We draw attention to the following matters in the Notes to the financial statements:

1. Note No: 33 (c) - regarding various provisional transportation tariff orders issued by Petroleum and Natural Gas Regulatory Board (PNGRB), these orders have been contested by the Company at Appellate Tribunal for Electricity (APTEL) and also certain customers have challenged these orders of PNGRB in Court of Law. Adjustment if any will be recognized as and when matter is finally decided.

2. Note no. 56 - pending opinion of Expert Advisory Committee (EAC) of ICAI with respect to applicability of provisions of Ind-AS 109 (Financial instruments) for accounting of embedded derivative in certain contracts entered into by the Company through international competitive bidding, the Company has not considered such transaction as embedded derivatives. Any adjustment if any will be recognized as and when the EAC opinion is received.

3. Note no. 29 (I) (a) (iii) - regarding CESTAT order confirming the demand for the differential amount by the Central Excise Department in the matter pertaining to classification of ‘Naphtha’ manufactured by the Company, of Rs. 2,888.72 crore including applicable penalty and interest thereon. Considering the merits of the case, Company has filed an appeal before the Hon’ble Supreme Court. Based on the legal opinion obtained, the Company does not foresee any probable outflow in the matter and accordingly has disclosed the same under contingent liability.

4. Note No. 48 (ii) - regardiing subsequent investment of Rs. 143.01 crore in equity and Rs. 252 crore in preference shares of a joint venture Company, Konkan LNG Private Limited (‘KLPL’) as approved by Board of Directors of the Company towards construction of Breakwater and other business requirements of KLPL. Investment in KLPL of Rs. 139.75 crore stood fully impaired in view of accumulated losses and eroded net-worth upto March 31, 2018. In order to assess impact of further infusion of capital as aforesaid, the Company has during the year carried out fresh impairment study of KLPL which projects positive future cash flows after commencement of operation of breakwater and accordingly a sum of Rs. 2.18 crore has been reversed from the aforesaid Impairment provision.

Our opinion is not modified in respect of above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report

Sr. No.

Key Audit Matter

Audit Response on Key Audit Matters

1

Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 “Revenue from Contracts with Customers”

The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.

Refer notes 1.9,21 and 37.

Principal Audit Procedures

We assessed the Company’s process to identify the impact of adoption of the new revenue

accounting standard and checked the appropriateness of accounting policy. Our audit approach

consisted testing of the design and operating effectiveness of the internal controls as follows:

1. Evaluated the design of internal controls relating to implementation of the new revenue accounting standard, wherever applicable.

2. Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, re-performance and inspection of evidence in respect of operation of these controls.

3. Tested the relevant information technology systems’ access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.

Selected a sample of continuing and new contracts and performed the following substantive

procedures:

1. Read, analyzed and identified the distinct performance obligations in these contracts.

2. Compared these performance obligations with that identified and recorded by the Company.

3. Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.

2

Evaluation of uncertain tax positions and contingent liabilities

The Company has material uncertain tax positions and contingent liabilities including matters under dispute which involves significant judgment to determine the possible outcome of these disputes. It includes order of CESTAT confirming the demand for the differential amount by the Central Excise Department in the matter pertaining to classification of ‘Naphtha’ manufactured by GAIL, of Rs. 2,888.72 crore including applicable penalty and interest thereon. Considering the merits of the case, Company has filed an appeal before the Hon’ble Supreme Court. Based on the legal opinion obtained, the Company does not foresee any probable outflow in the matter and accordingly has disclosed the same under contingent liability.

Refer note 29 (I) (a) (iii)

We have applied the following audit procedures in this regard:

1. Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management.

2. We have obtained the opinion from independent expert to support the management’s judgement about the probable outcome in this regard.

3. We also obtained the opinion from legal team and representation taken from the management.

4. We assessed the appropriate disclosures in the financials.

5. We considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management’s position on these uncertainties.

6. Referring to point no 3 of Emphasis of Matter Paragraph in this audit report for disputes with Central Excise Department as it is fundamental to the users of the financial statements.

Sr. No.

Key Audit Matter

Audit Response on Key Audit Matters

3.

Derivative transaction and accounting of hedge accounting

The hedge accounting has resulted into significant impact on financial statements coupled with complexity of its accounting, calculations and complex/numerous assumptions taken for establishing hedge relationship. Mark to market gain / loss pertaining to these derivative contracts are recognized in the other comprehensive income.

Refer note 58

We have applied the following audit procedures in this regard:

1. Understanding management’s controls over the recording of derivative transactions and the application of hedge accounting,

2. Testing the accuracy and completeness of derivative transactions.

3. We have relied on the valuation report evaluating the appropriateness of the valuation methodologies applied and testing on sample basis the valuation of the derivative financial instruments.

4. Validated that the derivative financial instruments qualified for hedge accounting and tested accuracy of hedge effectiveness and ineffectiveness on sample basis.

4.

Technical parameters and voluminous transactions of Natural gas trading and transmission captured to measure Revenue and Inventory through integrated system and complexities involved therein.

Revenue from sale of Natural Gas amounted to Rs. 61,501.94 crore and Closing inventory of Rs. 843.54 crore for the year ended 31 March 2019.

The determination of the quantity of Natural Gas sold and in stock through gas-pipelines involves use of various technical aspects of the natural gas such as pressure, temperature etc. captured from the measuring devices installed on the gas pipelines. We were informed that the methodology is standard and used industry-wide. This increases the complexity around the validating of quantity of Natural Gas sold and in stock in pipeline.

Refer notes 1.8, 1.9, 10 and 21.

We have applied the following audit procedures in this regard:

1. We performed test of controls, assisted by our IT specialists, over the accuracy and completeness of the quantity captured via IT system through to the accounting software.

2. We have obtained the management representation that the IT system applies the standard methodology to capture the quantity of Natural Gas for the purpose of Revenue and inventory measurement.

3. We have carried out the audit procedures for verification of valuation of closing Inventories by applying the various aspects made available to us by the management such as conversion factors, meter reading etc.

5.

Gratuity

Pursuant to implementation of Pay Revision Directions, the Company has evaluated impact of increase in gratuity ceiling from Rs. 10 Lakh to Rs. 20 Lakh and has considered the incremental amount of Rs. 150.51 crore as recoverable from the respective fund as on March 31, 2018 by reversing the impact taken in Statement of Profit & Loss account in financial year 2016-17. During the year, vide directive of DPE dated July 10, 2018 clarified that gratuity under DPE guidelines dated August 3, 2017, is subject to affordability of the CPSE concerned effective for the period from January 1, 2017 till March 28, 2018, where pay has been revised with effect from January 1, 2017. Accordingly, the Board of Directors has approved to fund the contribution along with interest and accordingly, a sum of Rs. 182.58 crore has been charged to Statement of Profit and Loss.

Refer note 40 (b)

We have applied the following audit procedures in this regard:

1. Obtained the copy of the notifications

2. Obtained the approval of the board and management representation letter for the same.

3. We have verified the accuracy of the amount charged.

6

Impairment of Investment of Rs.173.62 crores in an overseas subsidiary.

Gail Global(USA) Inc. (GGUI): Refer to note 48 (iv) -GGUI is a wholly owned subsidiary of the Company and has during the year sold certain producting property assets which has resulted reduction in profit to the extent of Rs. 173.62 crore being impairment provision in Standalone Financial Statements of the Company consequent to the erosion of net worth of GGUI as at last reporting dated December 31, 2018. The Company has evaluated fair value through an independent valuer which has resulted in impairment of investment of Rs.173.62 crore. The impact of impairment has been affected in financial statements as at end of the year.

We have applied the following audit procedures in this regard:

1. Obtained valuation report of GGUI by the Independent Valuer considering the financial aspect as on date.

2. Obtained and verified the audited financial statements as on December 31, 2018

3. Obtained the management representation letter for the same.

7.

Accounting of corporate guarantees in line with the requirements of Ind AS 109 - ‘ ‘Financial Instruments”

Refer to note No. 38 - regarding matter pertaining to the accounting in line with the requirements of Ind AS 109 - “Financial Instruments”, of the fair value of the corporate guarantees given by the Company on behalf of its subsidiaries. In response to the opinion provided by the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India, the Company has sought further clarification. Pending clarification from the EAC, no accounting entry has been passed in respect of these corporate guarantees. Management have confirmed that impact, if any will not be material to the financial statements.

We have applied the following audit procedures in this regard:

1. Obtained the confirmation from the management that the EAC opinion is yet to be received as of date.

2. Obtained the management representation letter that the impact of the same, if any will not be material

Information Other than the Standalone Ind AS Financial Statements and Auditors’ Report Thereon

The Company’s Board of Directors is responsible for the preparation of other information. The other information comprises the Director’s report, Corporate Governance report, Business Responsibility report and Management Discussion and Analysis of Annual report, but does not include the Standalone Ind AS Financial Statements and our report thereon. The Directors report, Corporate Governance report, Business Responsibility report and Management Discussion and Analysis of Annual report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the Standalone Ind AS Financial Statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Ind AS Financial Statements, our responsibility is to read the other information identified above when it becomes available to us and, in doing so, consider whether the other information is materially inconsistent with the Standalone Ind AS Financial Statements or our knowledge obtained during the course of our audit, or otherwise appears to be materially misstated.

When we read such other information as and when made available to us and if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection anc application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are also responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone Ind AS financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone Ind AS financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the standalone Ind AS financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the standalone Ind AS financial statements, including the disclosures, and whether the standalone Ind AS financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

We draw attention to the following matters in the Notes to the financial statements:

I. Note no. 45(B)(iii)- regarding inclusion of proportionate share in Jointly Controlled Operations in the standalone financial statements of the Company. The total proportionate share includes Assets of Rs. 1567.9I crore, Liabilities of Rs. 430.75 crore, Expenditure of Rs. 365.48 crore, Income of Rs. 639.35 crore along with the elements making up the Cash Flow Statement and related disclosures. The aforesaid amounts have been included based on the unaudited statements of these entities. Management is of view that this will not have a material impact on the Company’s financial statements.

Our opinion is not modified in respect of above matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors’ Report) Orcler, 2016 (“the Order”), issued by the Central Government of India in terms of Section 143(11) of the Act, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanation given to us, we give in “Annexure A”, a statement on the matters specified in paragraphs 3 and 4 of the said Order, to the extent applicable.

2. As required by Comptroller and Auditor General of India through directions/sub-directions issued under Section 143 (5) of the Companies Act 2013, on the basis of written representation received from the management, we give our report on the matter specified in the “Annexure -B” attached.

3. As required by Section 143(3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet, the Statement of Profit and Loss (including the Other Comprehensive Income), the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 as amended.;

(e) Pursuant to the Notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, provisions of sub-section (2) of Section 164 of the Companies Act, 2013, are not applicable to the Company, being a Government Company.;

(f) We are enclosing herewith a report in “Annexure - C” for our opinion on adequacy of internal financial controls system in place in the Company and the operating effectiveness of such controls;

(g) Pursuant to the Notification No. GSR 463(E) dated 5th June 2015 issued by the Ministry of Corporate Affairs, Government of India, provisions of Section 197 of the Companies Act, 2013, are not applicable to the Company, being a Government Company; and

(h) With respect to the other matters to be included in the Auditors’ Report in accordance with Rule II of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer Note 29(l)(a) to the financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any and to the extent ascertainable, on long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Referred to in paragraph I to “Report on Other legal and regulatory requirements” of the Independent Auditors’ Report of even date to the members of GAIL (INDIA) LIMITED on the Standalone Ind AS Financial Statements forthe year ended March 31, 2019.

(i) (a) As informed to us the Company has generally maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) According to information and explanation given to us, there is a regular programme of physical verification of these fixed assets by the management which in our opinion is reasonable having regard to the size of the Company and nature of its assets. As informed to us no material discrepancies were noticed on such verification.

(c) As informed to us and as verified by us during the course of our audit the title deeds of immovable properties are held in name of the Company except for the cases as follows.

Description of Asset

No. of cases

Area in Hectares

Gross block as on 31.03.2019 (Rs. in Cr.)

Net block as on 31.03.2019 (Rs. in Cr.)

Land

- Freehold

9

5.31

10.93

10.93

- Leasehold

6

40.53

10.46

10.46

- Leasehold- stated at carrying value (classified as prepayment under non-financial assets)

I

20.96

4.59

4.59

(ii) As informed to us physical verification of inventory has been conducted at reasonable intervals by the management except the store and spares lying with the third parties. We have been explained that the stock of gas at the end of the year has been taken with reference to reading of Turbine Flow Meter/Gas Chromatograph installed at Terminals, Stock of LPG/Pentane/SBP Solvent are determined with reference to Tank Level Gauge measurement which are converted into tonnage by measurement of density and applying correction factor for temperature. LPG vapors volume is converted to tonnage by standard formulae. As informed to us no material discrepancies were noticed on physical verification of inventory.

(iii) As informed to us the Company has granted unsecured loans to companies covered in the register maintained under section 189 of the Companies Act 2013. In respect of such loans:

a) In our opinion and as informed to us the terms and conditions of the grant of such loans are not prejudicial to the Company’s interest.

b) The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations.

c) As informed to us, no amount of loan is overdue as at end of the year for a period more than ninety days.

(iv) According to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of Companies Act 2013 in respect of loans/investment/guarantee/security granted during the year.

(v) The Company has not accepted any deposits, in terms of the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act 2013 and the rules framed there under.

(vi) We have broadly reviewed the accounts and records maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost recorcls under sub-section (I) of Section 148 of the Companies Act, 2013 read with Companies (Cost Records & Audit) Rules, 2014 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view to determine whether they are accurate and complete.

(vii) (a) According to records of the Company and information and explanation given to us the Company has generally been regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess, Goods and Service Tax and any other statutory dues with the appropriate authorities. According to information and explanation given to us there are no outstanding statutory dues as referred above as at the last day of the financial year under audit for a period of more than six months from the date they became payable.

(b) As certified by the management on which we have relied upon the dues of income tax or sale tax or service tax or duty of custom or duty of excise or value added tax or cess or Goods and Service Tax which have not been deposited on account of dispute or deposited under protest and the forum where the dispute is pending are given below:

S. No.

Name of Statute

Nature of the Dues

Period to which the amount relates

Forum where the dispute is pending

Gross disputed amount

Amount deposited under protest/ appeal

Amount not deposited

I

Entry Tax Act of respective States

Entry Tax / Penalty / Interest

2002-03 to 2004-05

Hon. High Court, Allahabad

20.97

-

20.97

1999-00 to 2009-10

Commercial Tax Tribunal, UP

233.59

6.41

227.18

2008-09

Additional Commissioner (Appeals) Noida, Commercial Taxes

0.53

-

0.53

2015-16

Additional commissioner (Appeals) Gwalior, Commercial Taxes

20.83

-

20.83

2002-03 to 2005-06

Dy. Commissioner (Appeals), Commercial Tax, Ajmer

7.19

-

7.19

SUB-TOTAL

283.11

6.41

276.70

2

Central Sales Tax Act, 1956 and respective State Sales Tax / VAT Act

CST / Sales Tax / VAT/ Penalty / Interest

20II-12

Hon. Supreme Court

10.77

3.24

7.53

2003-2004

Hon. High Court, Mumbai

0.63

0.03

0.60

2003-2004

Hon. High Court, Guwahati

0.29

0.14

0.15

2006-07 to 2010-II

Sales Tax Tribunal Mumbai

55.10

20.12

34.98

2014-15

Sales Tax Tribunal, Ernakulam

0.46

0.07

0.39

Oct 20II to Dec 20II

Joint Commissioner of Commercial Taxes, Trichy

0.77

-

0.77

20II-12 to 2014-15

Joint Commissioner (Appeals), Sales Tax, Mumbai

73.27

6.81

66.46

2014-15

Joint Commissioner (Appeals), Sonepat

4.88

-

4.88

2003-04, 2008-09,

2009-10, 2012-13

Joint Commissioner (Appeals), Commercial Tax, Vadodara

93.77

82.98

10.79

SUB-TOTAL

239.94

113.39

126.55

S. No.

Name of Statute

Nature of the Dues

Period to which the amount relates

Forum where the dispute is pending

Gross disputed amount

Amount deposited under protest/ appeal

Amount not deposited

3.

Central Excise Act 1944

Central Excise Duty / Interest / Penalty

Jan 2008 to

March 2012

Hon. Supreme Court

2888.72

20 (in addition to that Bank guarantee of ‘132 crore has been submitted to the department)

2868.72

Mar 2000 to Feb 2002, April 2002 to March 2003 & Nov 2004 to Feb 2005

Hon. Supreme Court

58.16

58.16

Aug 2006 to Feb 2014

Customs, Excise and Service Tax Appellate Tribunal, Delhi

10.29

-

10.29

Jan 200I to Feb 2005

Customs, Excise and Service Tax Appellate Tribunal, Mumbai

21.06

-

21.06

April 2010 to March 20II

Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad

10.95

-

10.95

April 2008 to March 2010 & July 2010 to Nov 2010

Customs, Excise and Service Tax Appellate Tribunal, Kolkata

102.74

0.66

102.08

SUB-TOTAL

3091.92

20.66

3071.26

4

Finance Act 1994 (Service Tax)

Service Tax / Interest / Penalty

Apr 2009 to Mar 2014

Customs, Excise and Service Tax Appellate Tribunal, Delhi

6.36

0.42

5.94

Oct. 2006 to Mar 2007

Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad

0.17

-

0.17

Jan 20II to Mar 2012

Customs, Excise and Service Tax Appellate Tribunal, Allahabad

0.29

-

0.29

July 2010 to Nov 2010

Commissioner (Appeals), Delhi

0.12

-

0.12

April 2014 to March 15

Commissioner (Appeals), Noida

0.92

-

0.92

SUB-TOTAL

7.86

0.42

7.44

5

Customs Act, 1962

Customs Duty/ Interest / Penalty

March 2006

Customs, Excise and Service Tax Appellate Tribunal, Delhi

0.53

0.46

0.07

March 2013 to July 2014

Commissioner of Customs, Excise and Service Tax, (Appeals), Ahmedabad

7.78

7.78

-

SUB-TOTAL

8.31

8.24

0.07

6

Income Tax Act, 1961

Income Tax/ Penalty/ Interest

A.Y. 2008-09 to A.Y. 2018-19

Jurisdictional Assessing Officer (TDS)

I.02

-

I.02

A.Y. 2013-14 & 2016-17

Commissioner Income Tax (Appeals)-22, New Delhi

85.02

75.09

9.93

A.Y. 1996-97 to AY 2012-13 & A.Y. 2014-15

to AY 2015-16

Income Tax Appellate Tribunal, Delhi

2072.06

1350.38

721.68

1997-98 & 1998-99

Hon. Supreme Court

0.26

0.26

-

SUB-TOTAL

2158.36

1425.73

732.63

7

Gujarat Municipalities Act, 1963

Notified Area Tax / GIDC Tax / Interest

1998-99 to 2005-06 & 1985-86 to 2009-10

Hon. High Court, Ahmedabad

4.50

-

4.50

SUB- TOTAL

4.50

-

4.50

TOTAL

5,794.00

1,574.85

4,219.15

(viii) Based on our audit procedures and in accordance with the information and explanations given to us by the management the Company has not defaulted in repayment of dues to a bank or government or bonds holders.

(ix) The Company has not raised any money by way of initial public offer or further public offer or further public offer (including debt instrument). As informed to us, no term loans have been obtained during the year.

(x) According to the information and explanations given to us and as represented by the Management and based on our examination of the books and records of the Company and in accordance with generally accepted auditing practices in India, no case of frauds by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) As per notification no. GSR 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, Government of India, Section 197 is not applicable to the Government Companies. Accordingly, provisions of clause 3 (xi) of the Order are not applicable to the Company.

(xii) The Company is not a nidhi Company and therefore clause 3(xii) of the Order related to such companies is not applicable to the Company.

(xiii) In our opinion, the Company has complied with provisions of sections 177 and 188 of Companies Act, 2013 in respect of transactions with the related parties and the details have been disclosed in the Financial Statements as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review.

(xv) As informed to us, during the year the Company has not entered into any non-cash transactions with any of its directors or persons connected with the Directors.

(xvi) The Company is not required to get registered under section 45-IA of Reserve Bank of India Act’1934.

Referred to in paragraph 2 to “Report on Other legal and regulatory requirements” of the Independent Auditors’ Report of even date to the members of GAIL (INDIA) LIMITED on the financial statements for the year ended March 31, 2019.

Sl. No.

Directions / Sub Directions

Action taken

Impact on financial statement

I

Whether the Company has system in place to process all the accounting transitions through IT system? If yes the implications of processing of accounting transaction outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated?

The Company maintain its books of account on IT system, SAP, which is an ERP system. All accounting transactions are processed in accounts maintained on SAP. We did not notice any transaction which was processed outside of IT system.

Nil

2

Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/interest made by a lender due to Company inability to repay the loan? If yes, the financial impact may be stated?

There are no such case.

Nil

3

Whether funds received/ receivable for specific schemes from central state agencies were properly accounted for/utilized as per its terms and conditions? List the cases of deviation.

Refer to Note 54 regarding the grant received by the Company for the project Jagdishpur Haldia Bokaro Dhamra Pipeline Project (JHBDPL). According to the information and explanations given to us and as represented by the Management and based on our examination of the books and records of the Company, these have been used for the purposes for which these were given. We did not encounter any deviation.

Nil

4

Whether disclosure in Notes to Financial Statements/inclusion under contingent liabilities, of Corporate Guarantee issued by the parent Company to a bank for issuance of Performance Bank Guarantee on behalf of its subsidiaries/JVs/Associates etc. if any, has been made.

Refer to Note no 29 (I)(b) the Company has disclosed the Corporate Guarantee issued to a bank for issuance of Performance Bank Guarantee on behalf of its subsidiaries.

Nil

Referred to in paragraph 3(f) to “Report on Other legal and regulatory requirements” of the Independent Auditors’ Report of even date to the members of GAIL (INDIA) LIMITED on the standalone Ind AS financial statements for the year ended March 31, 2019.

Report on the Internal Financial Controls under Clause (i) of Sub section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of GAIL (INDIA) LIMITED (“the Company”) as of March 31, 2019 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit ir accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence I/we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal financial control over financial reporting includes those policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For O. P. Bagla & Co. LLP For ASA & Associates LLP

Chartered Accountants Chartered Accountants

Firm No.: 000018N/N50009I Firm No.: 009571N/N500006

Rakesh Kumar Parveen Kumar

Partner Partner

Membership No.: 087537 Membership No.: 088810

Place: New Delhi

Dated: 27th May, 2019

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