MoF: Meetings on GST, Corporate Tax and Transfer Pricing issues

Terms of use

Terms of Use

The use of this site and the content contained therein is governed by the Terms of Use. When you use this site you acknowledge that you have read the Terms of Use and that you accept and will be bound by the terms hereof and such terms as may be modified from time to time.

All text, graphics, audio, design and other works on the site are the copyrighted works of nasscom unless otherwise indicated. All rights reserved.
Content on the site is for personal use only and may be downloaded provided the material is kept intact and there is no violation of the copyrights, trademarks, and other proprietary rights. Any alteration of the material or use of the material contained in the site for any other purpose is a violation of the copyright of nasscom and / or its affiliates or associates or of its third-party information providers. This material cannot be copied, reproduced, republished, uploaded, posted, transmitted or distributed in any way for non-personal use without obtaining the prior permission from nasscom.
The nasscom Members login is for the reference of only registered nasscom Member Companies.
nasscom reserves the right to modify the terms of use of any service without any liability. nasscom reserves the right to take all measures necessary to prevent access to any service or termination of service if the terms of use are not complied with or are contravened or there is any violation of copyright, trademark or other proprietary right.
From time to time nasscom may supplement these terms of use with additional terms pertaining to specific content (additional terms). Such additional terms are hereby incorporated by reference into these Terms of Use.

Disclaimer

The Company information provided on the nasscom web site is as per data collected by companies. nasscom is not liable on the authenticity of such data.
nasscom has exercised due diligence in checking the correctness and authenticity of the information contained in the site, but nasscom or any of its affiliates or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this site. The information from or through this site is provided "as is" and all warranties express or implied of any kind, regarding any matter pertaining to any service or channel, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement are disclaimed. nasscom and its affiliates and associates shall not be liable, at any time, for any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information contained on the site. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness, suitability or applicability of the information to a particular situation.
nasscom or its affiliates or associates or its employees do not provide any judgments or warranty in respect of the authenticity or correctness of the content of other services or sites to which links are provided. A link to another service or site is not an endorsement of any products or services on such site or the site.
The content provided is for information purposes alone and does not substitute for specific advice whether investment, legal, taxation or otherwise. nasscom disclaims all liability for damages caused by use of content on the site.
All responsibility and liability for any damages caused by downloading of any data is disclaimed.
nasscom reserves the right to modify, suspend / cancel, or discontinue any or all sections, or service at any time without notice.

For any grievances under the Information Technology Act 2000, please get in touch with Grievance Officer, Mr. Anirban Mandal at data-query@nasscom.in.

New

See all

No notification found.

MoF: Meetings on GST, Corporate Tax and Transfer Pricing issues

Tejasvi

@tejasvi

May 3, 2024

Public Policy

We, along with the industry, held detailed discussions with the senior officials of Ministry of Finance on April 26 and 27, 2024 on key measures to improve ease of doing business under GST and corporate tax and also increase the global competitiveness of India’s transfer pricing regime.

Goods and Services Tax –

Issues specific to IT/ITeS sector

Intermediary issue – This continues to be an issue in spite of issuance a circular by the government in September 2021. We requested the government to issue an updated circular accepting the judgements given by the courts, along with additional scenarios where services are provided on a principal-to-principal basis
Treatment of bad debts, since GST law does not specifically allow for an adjustment for bad debts. This becomes a cost to the service provider. We have requested that in case of exports, taxpayers must not be required to discharge tax along with applicable interest for bad debts. This would be in line with the provisions under the erstwhile regime where the taxpayer was not required to pay tax.
Challenges w.r.t. head office – branch office operations – We explained the different types of models being followed within the industry. In case of invoicing by branch, tax officers are disregarding the “export of services” and issuing demands by treating the overseas branches as mere establishments of distinct persons. Further, in case of invoicing by Head office in India, tax officers are contending that procurements by the Branch qualifies as ‘import of services’ for a consideration.

Cross sectoral issues

Share-based payment to employees -We have requested the government to clarify that mere reimbursement of expense by Indian company for issuance of shares to its employees of foreign listed company is not an import of services under Schedule I of CGST Act.
Free of cost supply of intangibles - We discussed that demands are being raised by tax officers based on an expansive interpretation of the deeming fiction wherein a taxable supply of service from the overseas related party (even where there is no consideration) is being alleged, including cases where no such supply exists in the first place. Hence, there is a need for clarification that where there is no “commercial exploitation”, in the absence of an underlying supply, and no consideration, no GST is payable.

Issues pertaining to e-commerce sector

Review of applicable rate of tax collection at source - We discussed the need for reduction in the rate of TCS, given the working capital impact on sellers and administrative burden on revenue authorities.
Virtual place of business (VPoB) for seller of goods operating through ECOs - We discussed the need for enabling a VPoB for sellers selling through ECOs given the operational and practical challenges involved. We also covered the proposal to at least allow the VPoB model for sellers, to the extent of B2C supplies and stock transfers.

Corporate Tax: The focus of the discussion was to enable ease of doing business for the Industry. We deliberated on issues w.r.t:

Faceless assessments like voluminous information sought during assessments rather than focusing on qualitative aspects of such dataLimited turnaround time for furnishing bulky information, ad hoc/ arbitrary disallowances-unnecessary questioning of commercial expediency of transactions,
Incorrect processing of tax returns such as denial of S. 115BAB benefit despite its selection by taxpayer, mechanical adjustments done based on variations in disclosure in return vis a vis tax audit report, denial of set off and carry forward of losses/ depreciation without any basis, amongst others.
Interpretation of most favoured nation clause in tax treaties post Nestle judgement
issues related to start-ups like angel tax issue, disregarding of valuation reports by tax officers, taxation of employee stock option plans, etc.
Other issue relating to MSME and ease of doing business measures.

Transfer Pricing: We discussed the following issues:

Safe harbour regime – We highlighted that the current safe harbour markups of 17-24% are very high in comparison to the margins prescribed in other countries (5 – 12%). This makes GCC uncompetitive. Further, the threshold for applicability of the regime is very low (companies having international transaction up to INR 200 Cr), which eliminates many medium sized companies from taking benefit of this regime. Hence, there is a need to reduce the margins and increase the threshold for applicability of the regime.
Improving the effectiveness of Advance Pricing Agreement (APA) regime - Currently, no specific time-lines are prescribed for conclusion of APA. The average time taken for concluding APA is approximately 59.73 months for unilateral APAs and 58.77 months for bilateral APAs (basis all APAs signed till March 31, 2023). In some cases, APAs are concluded post the covered period. We have requested the government to look into this issue.

These topics, along with several others, formed the core agenda of the discussion, reflecting the pressing need for streamlined tax policies and resolutions to long-standing complexities in the taxation landscape. The suggestions made by us were well received by the ministry. We will be working on the making detailed submissions on some of these topics and will reach out to the Industry for inputs. In case you need more details, please write to tejasvi@nasscom.in.

Disclaimer

That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.

Tejasvi