NOTES FORMING PART OF THE STANDALONE FINANCIAL STATEMENTS

1. Corporate information:

GSS Infotech (GSS) is one of the fast growing managed IT Services companies, headquartered at Hyderabad, India. GSS operates worldwide through its offices in India and USA. A pioneer in managed IT Services, GSS offers Cloud Enablement Services Remote Infrastructure and Application management services to customers across the globe. Over the years, GSS has established itself as a choice of providers with over 40 Fortune global customers covering Financial Services, Insurance, HealthCare, Education and Government industry segments.

A CMMi Level 5 company, GSS helps its customers reduce their CAPEX on infrastructure and helps convert it to manageable operational expense, leveraging its brmier partnerships with leading technology providers such as Microsoft, CISCO, HP, Symantec, VMWARE, BMC and NetApp. GSS Infotech offers consulting services to help customers choose the right cloud deployment models, migrates application portfolio to the cloud environment, ensures functional and performance equivalence of applications through its independent validation and verification services and also offers remote application & infrastructure monitoring and management services through its Global Operations Command Center in Hyderabad, India. GSS Infotech, with an ambitious inorganic growth strategy, has been very successful through a spate of acquisitions in the USA. The company has been successful in integrating all of its overseas acquisitions and creating a globally integrated Infrastructure Management Services practice. GSS is now well positioned to capitalize on the emerging technology trends in the cloud computing arena leveraging its unparalleled expertize in Infrastructure Virtualization, Remote Infrastructure Management, Cloud Consulting and Migration services. The company offers world class services propelled by over 700 consultants consisting of MCSE's, BS-25999 certified professionals, VMware VCP's, Remedy CA, CCNA, CCNP, CCSE, CCVP, CCIE, CISSP, BMC Control-M professionals with Consulting, Deployment and Management expertise. GSS Infotech provides pragmatic and unique solutions to customers looking for excellence and high-quality. Our Thought Leadership, Responsiveness, Passion and Professionalism to work as a 'Virtual Extension' to customer's business has always been acknowledged to be a great strength, by our customers.

2. Basis of Preparation:

The financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. The Company has brpared the financial statements to comply in all material respects with the Accounting Standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and also the guidelines issued by the Securities and Exchange Board of India (SEBI).

The accounting policies adopted in the brparation of Financial Statements are consistent with those of brvious year, except for the change in accounting policy relating to Debrciation which arose on account of applicability as per the provisions of Companies Act, 2013.

2.1 Summary of significant accounting policies:

Presentation and disclosure of financial statements

The brparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provision for doubtful debts, future obligations under employee retirement benefit plans, income taxes, and the useful lives of fixed assets and intangible assets

a) Use of Estimates:

The brparation of financial statements in conformity with Indian GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material judgment to the carrying amounts of assets or liabilities in future periods. Examples of such estimates include provision for doubtful debts, future obligations under employee retirement benefit plans, income taxes, and the useful lives of fixed assets and intangible assets.

b) Fixed Assets, Intangible Assets and Capital work in progress:

Fixed assets are stated at cost, net of accumulated debrciation and accumulated impairment losses, if any. All costs, directly attributable to bringing the asset to the brsent condition for its intended use of assets, are capitalized. Intangible assets are stated at the cost of acquisition /development of such assets and are carried at cost less accumulated amortization and impairment.

Capital work in progress would comprise the cost of fixed assets that are not yet ready for their intended use at the balance sheet date.

c) Debrciation and amortization:

Debrciation on fixed assets is provided to the extent of debrciable amount on the written down value (WDV) method and debrciation on assets acquired during the year is provided on pro-rata basis. Debrciation is provided based on useful life of the assets as brscribed in Schedule II to the Companies Act, 2013.

Intangible assets are amortized over their respective individual estimated useful lives on a straight line basis commencing from the date the asset is available to the Company for its use.

d) Impairment of tangible and intangible assets:

The Company assesses at each reporting date whether there is an indication that the assets are impaired. If any indication exists or when an annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Profit and Loss statement in the year in which an asset is identified as impaired. The carrying amount of assets are being tested on annual basis for impairment so as to determine the provision required for impairment loss, if any, or for reversal of the provision, if any required on account of impairment loss recognized in brvious periods.

e) Revenue recognition:

Revenue from Software Development on fixed-price, fixed time frame contracts, where there is no uncertainty as to the measurement or collectability of consideration is recognized as per the percentage of completion method. On time and material contracts, revenue is recognized as the related services are rendered. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates. Annual technical services revenue and revenue from fixed price maintenance contracts are recognized proportionately over the period in which services are rendered.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sales price and the then carrying value of the investment. Dividend income is recognised where the company's right to receive dividend is established. Interest and Other Income is recognised on accrual basis and on time proportion basis taking into account the amount outstanding and the rate applicable.

f) Expenditure and provisions:

All items of expenditure are accounted on accrual basis. Provisions are made for all known losses and liabilities, which involves substantial degree of estimation in measurement and when there is brsent obligation as a result of past events and it is probable that there will be an outflow of resources.

g) Investments

Investments are classified into current investments and non-current Investments. Current investments are carried at the lower of cost or market value. Any reduction in carrying amount and any reversals of such reduction are charged or credited to the Statement of Profit and Loss. Non-Current investments are carried at cost less provision made to recognize any decline, other than temporary, in the value of such investments.

h) Foreign Currency Transactions:

Revenue from overseas clients and collections deposited are recorded at the exchange rate as at the date of the respective transactions. Expenditure in foreign currency during the year is accounted at the exchange rate brvalent when such expenditure is incurred. The exchange differences arising on the foreign currency transactions during the year are recognized as income or expenses in the period in which they arise. Non-Monetary assets and liabilities are translated at the rate on the date of the transaction. Non Current Assets denominated in foreign currency are translated at the exchange rate brvalent at that date of the Balance Sheet. The resulting differences are shown under the Foreign Exchange Translation Reserve. Current Assets and Current Liabilities denominated in foreign currency are translated at the exchange rate brvalent at that date of the Balance Sheet. The resulting differences are also recorded in the Statement of Profit and Loss. The operations of foreign branches of the company are integral in nature and the financial statements of these branches are translated using the same principles and procedures of the Head Office. The resulting net exchange difference on translation is also recorded in the Statement of Profit and Loss.

i) Taxes on Income:

Tax expense comprises current year income tax, deferred income tax charges or credit and MAT/ credit Entitlement for the year.

i. Current year income tax charge will be calculated based on assessable profits of the company determined in accordance with the provisions of Income Tax Act, 1961. It will also includes, income tax charge provided if any, for such disallowances made on completion of assessment proceedings pending appeals, as considered appropriate depending on the merits of each case.

i i . Deferred income tax charge or credit pertaining to future tax consequences attributable to timing difference between the financial statement determination of income and their recognition for tax purposes will be recognised. The effect of a change in tax rates on deferred tax assets and liabilities is recognised in income using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

iii. Minimum Alternate Tax (MAT) credit is recognized, as an Asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified year. In the year in which the Minimum Alternate tax (MAT) credit becomes eligible to be recognised as an asset in accordance with the recommendation contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement of profit and loss and shown as MAT Credit Entitlement.Such Assets are reviewed as at each Balance Sheet and written down to reflect the amount that will not be available as a credit to be set off in future, based on the applicable taxation law then in force.

j) Employee Benefits Short Term Benefits:

Short Term Employee Benefits, at the undiscounted amount in the year in which the services have been rendered, are charged off to the Statement of Profit and Loss.

Long Term Benefits: Provident Fund:

Eligible employees receive benefit from matching contribution from the employer to Government Provident Fund Scheme, which is a defined benefit plan. Both the employee and company make monthly contributions to the Provident Fund plan equal to specified percentage of the employee's salary.

Gratuity:

In accordance with Payment of Gratuity Act 1972, the company provides for Gratuity, a defined benefit plan covering eligible employees. The Gratuity plan provides a lump sum payment to eligible employees on retirement, death, incapacitation or termination of employment, of an amount based on the respective employee salary and the tenure of the employment with company. In this regard the Company is contributing its liability to the Gratuity Fund maintained under a master policy with Life Insurance Corporation of India, as advised from time to time. The provision is made for difference if any, between the liabilities determined under actuarial valuation carried out under Projected Unit Credit Method and the value of funds at the balance sheet date, in accordance with Accounting Standard-15 "Employee Benefits", issued by ICAI.

Leave Encashment:

The company provides for unutilized encashable earned leave based on the undiscounted value of such leave balance eligible for carry forward as per the policy of the company.

Terminal Benefits:

Terminal Benefits to employees are recognized as an expense as and when incurred. k) Borrowing Costs:

Borrowing costs that are attributable to the acquisition of a qualifying asset are capitalized as part of cost of such asset till such time as the asset is ready for its intended use. Other borrowing costs are recognized as expense for the period.

l) Leases:

Lease of assets under which all the risks and rewards of ownership are effectively retained by the Lessor are classified as operating leases. Lease Payments under operating leases are recognized as an expense on a straight line basis over the period of lease.

m) Proposed Dividend:

Dividends, if any as recommended by the Board of Directors are accounted in the books of account, pending approval of the members at the Annual General Meeting.

n) Earnings Per Share

The basic earnings per share are calculated considering the weighted average number of equity shares outstanding during the year.

The diluted earnings per share is calculated considering the effects of potential equity shares on net profits after tax for the year and weighted average number of equity shares outstanding during the year.

o) Provisions, Contingent Liabilities and Contingent Assets:

Provision is recognized in the accounts when there is a brsent obligation as a result of past event(s) and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made. Contingent Liabilities, which are possible or brsent obligations that may but probably will not require outflow of resources, are not recognized but are disclosed in the Notes to Accounts to the financial statement. Contingent Assets are neither recognized not disclosed in the financial statements.

p) Measurement of EBITDA

As permitted by the Guidance note on Revised Schedule VI to the Companies Act, 1956, the company continued to brsent earnings before interest, tax, debrciation and amortization (EBITDA) as a separate line item on the face of statement of profit and loss. The Company measures EBITDA on the basis of profit/ (loss) from continuing operations. In its measurement the company does not include debrciation and amortization expense, finance cost and tax expenses.

q) Cash and Cash Equivalents

Cash and cash equivalents are short-term, highly liquid investments that are readily convertible into cash with original maturities of three months or less. Cash and cash equivalents consist principally of cash on deposits with banks.

2.2 NOTES TO ACCOUNTS:

1. In the current year, the gains on account of exchange fluctuations on advances have been credited to the exchange fluctuation reserve account, as the management feels that the gains are of temporary nature and have occurred in a magnitude disproportionate to the normal course of business. This was as a result of adopting a conservative approach to enable consistency in the reported earnings for the period.

2. Contingent Liabilities:

i ) Against Bank Guarantees issued by Banks towards financial and performance guarantees outstanding as at 31st March, 2015 amounts Rs. 2,29,97,751/- (Previous Year: Rs. 2,59,55,752/-)

ii) Appeal pending before Income Tax Administrative Tribunal for the AY 2009-10, involving Tax Amount of Rs. 28,28, 435/-

iii) Appeal pending before Income Tax Tribunal for the AY 2010-11, involving net tax payable amount of Rs. 3,85,52,400/-, including interest of Rs. 1,30,03,002/- (against which Company has MAT Credit of Rs. 2,30,19,382/-).

iv) Appeal pending before Income Tax Tribunal for the AY 2011-12, involving Net Tax payable amount of Rs. 5,84,75,130/-, including interest of Rs. 1,99,44,576/-.

v) There was a Service Tax demand amounting to Rs. 102.17 Lakhs (for the years 2010-2012, 2012-13 & 2013-14) on the Company on account of the E-Procurement contract executed in Bangladesh for the Bangladesh government, treating as 'Import of Business Support Services', against which Company filed appeal before CESTAT, Bangalore

vi) The Company had filed application for compounding before the Reserve Bank of India for obtaining permissions under the FEMA provisions in relation to transfer of funds to the Fully Owned Subsidiary Company by the Branch which was returned back on procedural aspects and the Company is in the process of re-submitting the same.

3. Advances to Subsidiaries:

a) The Company has given advances to its wholly owned subsidiary viz., GSS Infotech CT Inc (Delaware), GSS Healthcare IT Solutions Private Limited and GSS IT Solutions Private Limited with no specific repayment schedule.

b) Information pursuant to clause 32 of Listing Agreement with Stock exchanges w.r.t. Loan and Advances in the nature of loans to wholly owned subsidiaries is as given below:

4. Employee Stock Options:

An application for in - principle approval for listing of 20,00,000 shares has been made to the stock exchanges under the name & style "GSS Infotech Limited Restricted Employee Stock Option Plan 2013", which got approved by the members at AGM held on 19.7.2013 and subsequently got approved by NSE & BSE. However, there was no grant of options by the Board to the eligible employees.

5. Investments:

The Company has an investment in the form of 1500 Equity Shares (Previous year : 1,500 equity shares) in M/s GSS Infotech Inc (Delaware), which is a 100% Subsidiary Company, amounting to Rs.87,34,80,744/-(Previous Year : Rs. 222,27,79,820/-). The Company evaluates the carrying cost of Investment based on audited financials of the US Subsidiary Company, which is done by the local Auditor in US. During the year under review, there was impairment of goodwill in US step down subsidiaries which resulted in loss to the extent of Rs. 134,92,99,076/-. The value of these investments are taken on record, based on the audited financials of the US Subsidiary Company, as certified by the US local Auditor. As there was diminution in the value of investments in the Wholly Owned Subsidiary Company, the Company had made a provision to the extent of Rs. 134,92,99,076/- for the year under review.

7. Employee Benefits:

Defined Contribution Schemes:

The Contributions to Employees Provident Funds and Miscellaneous Provisions Act, 1952 made and charged off during the year is Rs. 59,51,739/- (Previous Year: Rs. 67,33,666/-)

8. Tax Expense:

i) Current Income tax rebrsents tax on income payable as per relevant statutes of the respective countries recognized and provided.

ii) Minimum Alternate Tax Credit, where there is certainty in availing the tax credit against the taxes on income paid, are recognized and shown as "MAT Credit Entitlement" under Loans and Advances in the financial statements

9. The Company had provided the amounts payable's of Rs. 9,86,617/- in the brvious years, now written off to Statement of Profit and Loss as it is not payable to the parties. Further the company also as written back the advances refundable of Rs.2,82,000/- as Income.

Considering all the facts, the Board had passed resolution confirming the write offs and written back's during the current year in the Books of Account.

10. The company has written off Accounts Receivables pertaining to UIDAI project of Setu Maharshtra to the extent of Rs. 22,12,607/-, on account of contractual clauses.

11. There are no dues to Micro and Small Enterprises specified under the Micro, Small and Medium Enterprises Development Act, 2006 as on 31st March, 2015, to the extent such parties have been identified on the basis of information available with the Company and relied on by the auditors

12. The Balances of Trade receivables, Loans and Advances and Trade payables are subject to confirmation and consequential adjustment if any required.

13. Current Assets and Loans and Advances:

In the opinion of the Board of Directors the Current assets, Loans and advances have a value realization in the ordinary course of business at least equal to the amount at which they are stated and provision for all known liabilities has been made.

14. The Ministry of Corporate Affairs, Government of India, vide General circular No.2 and 3 dated 8th February 2011 and 21st February 2011 respectively has granted a general exemption from compliance with Section 211 of the Companies Act, 2013. Subject to fulfillment of conditions stipulated in the circular, the Company has satisfied the conditions stipulated in the circular and hence entitled to exemption. Necessary information relating to subsidiaries has been included in Consolidation of Financial statements.

15. Leases:

The Company has operating lease for office brmises, which is renewable on a periodical basis and cancellable at its option. Rental expenses for operating lease recognized in Statement of Profit and Loss is Rs.1,19,65,965/-(Previous Year: Rs.1,34,59,034/-)

16. Debrcation charge for the current year came to Rs.1,24,86,332/- as compared to Rs. 1,19,91,191/- during the last year. During the year Rs. 9,94,585/- was adjusted against the Reserves and Surplus on account changes in the useful life as specified in Schedule II to the Companies Act, 2013 which came into effect from 1st April, 2014. Debrciation for the year is higher as the company was required to adopt the charging of debrciation on fixed assets according to the useful life as specified in Schedule II to the Companies Act, 2013 which came into effect from 1st April, 2014.

22. Rounding off & Regrouping:

The figures are rounded off to the nearest rupee and brvious year's figures have been regrouped where necessary to correspond with current year's figures.

23. The Notes referred to in the financial statements form an integral part of Accounts.

As Per Our Report of Even Date

For Sarath & Associates

Chartered Accountants

Firm Regn No: 005120S

For and on behalf of the Board

P. SARATH KUMAR

Partner

Membership No:21755

Bhargav Marepally

CEO & Managing Director

Ramesh Yerramsetti

Director

Sanjay Heda

Chief Financial Officer

Lalit Kumar Tiwari

Company Secretary

Place: Hyderabad

Date:30.05.2015