Particulars Tax position Form 15CA Form 15CB. Chargeable to Tax. Not Chargeable Tax * Chargeable to Tax. Not Chargeable Tax

Transcription

1 INCOME TAX Central Board of Direct Taxes (CBDT) amends rules relating to furnishing information regarding payments to non-residents and rationalizes forms 15CA and 15CB: The CBDT has amended the rules in relation to furnishing of information in Form 15CA (self-declaration) and obtaining of certification in Form 15CB (certificate from Chartered Accountant) regarding payments to non-residents. The forms have been rationalized and the highlights of the amended rules are: Income Tax Service Tax Central Excise Customs FTP FEMA Particulars Tax position Form 15CA Form 15CB Payments less than Rs. 50,000 & aggregate payment during a financial year is less than Rs. 2,50,000 Payments more than the specified limit Chargeable to Tax Not Chargeable Tax * Chargeable to Tax Not Chargeable Tax Specified List *Requires clarification from CBDT. We recommend that the Form 15CA be filed if the authorized dealer insists for the same. The scope of payments regarding which the information has to be furnished has been expanded to include salary, interest on external commercial borrowing, income of sportsmen/ sports associations, income from transfer of foreign currency units held by offshore funds, income from foreign currency bonds/ shares of Indian company, income of foreign institutional investors from securities and income from lottery/ crossword puzzle/ horse race. The amended Form 15CB now requires a Chartered Accountant to also certify: the taxability of the payments under the Income-tax Act, 1961 without considering relief under Double Taxation Avoidance Agreement; whether the payer has obtained a Tax Residency Certificate from the payee; and where payment is on account of capital gains, details of short term/long term capital gains and basis of arriving at the taxable income. The revised rules also provide a list of 28 payments, regarding which no information is required to be furnished. The notification is effective October 1, (Notification No: 67 dated ) Page 1 of 9

2 CBDT notifies safe harbour rules: The Income-tax Act, 1961 under Section 92CB, empowers CBDT to lay down safe harbour rules, providing for circumstances in which Indian tax authorities would accept the transfer price declared by a taxpayer. CBDT has now notified safe harbour rules for certain cross-border transactions effected by: Contract service providers in the Information Technology sector, IT enabled services, Software R&D and Pharmaceutical R&D. Auto component manufacturers (typically captive manufacturing units of multinational groups in India). Intra-group financing transactions by Indian companies having overseas investments. Refer to our Special Communique dated for a summary of these rules. (Notifn No.73 dated ) CBDT notifies application of General Anti Avoidance Rules (GAAR):The revised GAAR provisions, contained under Chapter X-A were introduced in the Income-tax Act, 1961 to be effective from April 1, CBDT has now notified the rules to effectuate the GAAR provisions from April 1, A summary of these rules are as follows: The GAAR provisions shall not apply to: 1. An arrangement where the tax benefit arising to all parties to the arrangement in the relevant assessment year does not exceed INR 30 million inaggregate. 2. A Foreign Institutional Investor (FII), subject to conditions. 3. A non-resident in relation to investment by him by way of offshore derivative instruments or otherwise directly or indirectly, in a FII. 4. Any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person from transfer of investment made before the 30 August, The GAAR provisions shall apply to any arrangement, in respect of the tax benefit obtained from an arrangement on or after the 1 April, 2015, irrespective of the date on which it has been entered into. The consequences in relation to tax where a part of an arrangement is declared to be an impermissible avoidance arrangement shall be determined with reference to such part only. The rules also prescribe the procedure and forms to be borne in mind by an Assessing Officer who proposes to make a reference to the Commissioner of Income-tax for invoking the GAAR provisions in respect of an arrangement. These include the form and manner of issuing a notice to the taxpayer to solicit his objections to the proposed action of the Assessing Officer. (Notification No.75 dated ) CBDT notifies form for application to advance ruling for arrangements governed by the provisions of GAAR: The Finance Act, 2013 had provided that an eligible taxpayer could approach the Authority for Advance Rulings (AAR) for a ruling on whether an arrangement proposed to be undertaken is an impermissible avoidance agreement under the GAAR provisions. CBDT has now notified Form 34EA by which an eligible taxpayer could approach the AAR in this regard. (Notification No.76 dated ) Page 2 of 9

3 Protocol to the India-Australia Double Taxation Avoidance Agreement (DTAA): The Protocol to the India-Australia DTAA signed in December 2011 has now been notified from The salient amendments to the India-Australia DTAA is summarized below: A higher threshold has been provided for activities of an enterprise to constitute a Service Permanent Establishment (PE). A service PE would now be constituted for an enterprise if it furnishes any services (including consultancy) through employees or other personnel for a period aggregating more than 183 days in any 12 months period. Under the extant provisions, a service PE would be constituted where such services are furnished for even a single day for associated enterprises and 90 days in all other cases. A higher time threshold has been provided for activities of an enterprise to constitute an equipment / project PE. An equipment / project PE would now be constituted if an enterprise uses substantial equipment in the other State for period exceeding in aggregate 183 days in any 12 month period or carries on activities (including operation of substantial equipment) in the other Contracting State in exploration of natural resources for a period exceeding in aggregate 90 days in any 12 month period. Hitherto, no time threshold was prescribed. The extant provisions of the India-Australia DTAA contained a limited 'Force of Attraction' rule to tax business profits of a PE of an enterprise. As per this rule, profits of an enterprise in one state would be taxed in the other state as is attributable to: (a) that PE or (b) sales within that other state of goods of the same or a similar kind as those sold, or other business activities of the same or a similar kind as those carried on, through that PE. Such limited Force of Attraction is removed and henceforth, business profits of the enterprise may be taxed in the other state but only so much of them as are attributable to that PE. An article on non-discrimination is now included in the DTAA to provide inter alia that taxpayers of a State shall not be subjected in the other State to any taxation, which is more burdensome than the taxation to which taxpayers of that other State in the same circumstances are subjected. However, a higher rate of tax on a PE would not be regarded as discriminatory. The non-discrimination article would also not be applicable to law designed to prevent the avoidance or evasion of taxes, to provide tax incentives to eligible taxpayers or any other provisions as may be mutually agreed. (Notification No.74 dated ) SERVICE TAX: Ad-hoc exemption for taxable service provided by the hotel or restaurant in the flood affected State of Uttarakhand: In light of the recent floods and landslides that have caused extensive damage in the State of Uttarakhand and adversely affected the life of the common man in the State, the Central Governmenthas exempted the following taxable services from the levy of service tax for the period to : Services by way of renting of a room in a hotel, inn, guest house, club, campsite or other commercial place meant for residential or lodging purposes; Services provided in relation to serving of food or beverages by a restaurant, eating joint or mess. (Exemption Order 01/2013-ST dated ) Page 3 of 9

4 Guidelines for Arrest and Bail under the Service Tax: The Central Board of Excise and Customs has issued guidelines for arrest and bail in relation to offences punishable under the Finance Act, The same are summarized as under: 1. The power must be exercised carefully. Arrest provision should be exercised only in respect of the following offences: where a person knowingly evades the payment of service tax; or avails and utilizes credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules; or maintains false books of accounts or fails to supply any information which he is required to supply or supplies false information, and the amount of service tax involved is more than fifty lakh rupees. where a person has collected any amount exceeding fifty lakh rupees as service tax but fails to pay the amount as collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due. 2. An officer of Central Excise not below the rank of Superintendent of Central Excise can carry out an arrest on being authorized by the Commissioner of Central Excise. The Commissioner should have reason to believe that the person proposed to be arrested has committed an offence as mentioned above. The reason to believe must be based on credible material which will stand judicial scrutiny. 3. Apart from fulfilling the legal requirements it should be ensured that proper investigation, prevention of the possibility of tampering with evidence or intimidating or influencing witnesses and large amounts of service tax evaded are relevant factors before deciding to arrest a person. The details relating to the procedure for arrest, post arrest formalities and reporting system can be accessed at (Circular 171/6/2013-ST dated: ) Specified educational services exempt from service tax: The Central Government has extended the service tax exemption with respect to educational services. Services provided in relation to (a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) Vocational Skill Development Course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation, would be wholly exempt from payment of service tax if such services are provided by any of the following: the National Skill Development Corporation set up by the Government of India; a Sector Skill Council approved by the National Skill Development Corporation; an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation; a training partner approved by the National Skill Development Corporation or the Sector Skill Council. (Notification No. 13/2013-ST dated ) Page 4 of 9

5 CENTRAL EXCISE: Duty payable on capital goods cleared as waste and scrap: The CENVAT Credit Rules, 2004 has been amended to provided that if capital goods are cleared as waste and scrap, the manufacturer shall be liable to pay an amount equal to the duty leviable on transaction value. Hitherto, even if the capital goods were cleared as waste and scrap, the manufacturer had to pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as prescribed. (Notification No. 12/ 2013 CE (NT) dated ) CUSTOMS: Imports under Duty Free Import Authorization (DFIA) Scheme are not exempted from Safeguard Duty and Anti-dumping Duty: The Central Government has withdrawn exemptions of safeguard duty and anti-dumping duty for import of goods under DFIA with effect from Hitherto, import of goods into India under DFIA was exempted from basic customs duty, additional duty, safeguard duty and anti-dumping duty. Further, the exemption of safeguard duty and anti-dumping duty will also not be available for transfer of imported materials even when such transfer is with the permission of the Regional Authority. Effective , if the imported materials are transferred with the permission of Regional Authority, and where such permission is granted on or after the 18 th April, 2013, the importer shall be liable to pay an amount equal to the safeguard duty and anti-dumping duty leviable on the material so imported and transferred, along with interest at 15% p.a. from the date of clearance on import of such materials. (Notifn No. 45/2013-Cus dated ) Option to close cases of default in Export Obligation: The DGFT has provided an option for redemption/ regularization of defaults in Export Obligation (EO) arising under Duty Exemption Schemes (viz, Advance Licence, DFIA, DEEC and EPCG Schemes). Such cases can be regularized by payment of applicable customs duty, along with interest not exceeding the amount of customs duty payable for default. An authorisation holder who chooses to avail this benefit must complete the process of payment on or before Consequential amendments have been made to the provisions under the Customs laws. (Notification No. 46/2013-Cus dated ) All Industry Rates (AIR) of Duty Drawback for the year notified: The Central Government of India has notified AIR drawback rates for various categories of goods for the year These rates are applicable to manufacturer exporters as well as merchant exporters. This notification is effective from The detailed notification can be accessed at (Notification No.98/2013-Cus (NT) and Circular No. 37/2013-Cus both dated ) Page 5 of 9

6 Speaking orders to be issued in each case of export under Duty drawback Scheme: The Board has specified that Duty Drawback orders for Re-export of goods should be a speaking order giving reasons with regard to establishing the identity or otherwise of the goods under reexport and determination of use while sanctioning Duty Drawback. It is clarified that the Orders should be detailed speaking orders irrespective of whether drawback is to be sanctioned / denied. (Circular No. 35/2013-Cus dated ) FOREIGN TRADE POLICY: Focus Market Scheme (FMS) and Incremental Exports Incentivisation Scheme (IEIS) Amendments: IECS on annual entitlement will henceforth be limited to the value not exceeding Rs. 1 Cr per IEC. IEIS (other than the annual basis) for the last quarter of will be limited to 25% of incremental growth or incremental growth of Rs. 10 Cr, whichever is less. Where the claim is in excess of the above limits, the same will be subjected to scrutiny by the Regional Authority with the following supporting documents: (i) Evidence of manufacture / purchase of export goods (i.e. excise return / sales tax returns or any other evidence) (ii) Exports of company from whom goods have been purchased (i.e. whether such company had done export in previous 2 years and quantum of exports in previous 2 years and quantum of exports in current year) (iii) Any other evidence to justify export growth and consequent entitlement of IEIS (Notification No. 43 & 44 (RE-2013)/ read with Public Notice No.28/ (RE- 2013) all dated ) Advance Authorization (AA)/ Duty Free Import Authorization (DFIA)- Non-insistence on sequencing of import followed by export of gold: It is stipulated that gold imported against AA/DFIA is to be utilized for export purposes only and diversion for domestic use shall not be permitted. The same was being interpreted that every import under AA / DFIA has to be followed by a corresponding export. In this regard, it is clarified that import of gold under AA / DFIA should have corresponding exports but not necessarily in a sequential manner, viz., import first and export later. Accordingly, import of gold under AA / DFIA would not necessarily have to be followed for export but each import has to be accounted for. (Notification No. 40(RE 2013)/ dated ) Relaxation of conditions for fulfillment of export obligation of gold articles: The DGFT has relaxed certain conditions for fulfillment of export obligation in respect of gold articles. The exporters/importers can import 20% of gold (under customs bond) against export of gold jewellery/gold article by furnishing of Export Promotion shipping bill and Customs attested invoice. Hitherto, the exporters/importers had to furnish bank certificate of realization (i.e. Appendix-22A) in addition to the Export Promotion shipping bill and customs attested invoice in order to import of gold against of export of gold jewellery/gold article. (Public Notice No. 25(RE-2013)/ dated ) Page 6 of 9

7 FEMA Liberalization of External Commercial Borrowing (ECB) Policy: As per the extant policy, ECB s are not allowed to be utilized for general corporate purposes. The policy has now been reviewed and the Reserve Bank of India ( RBI ) with immediate effect, permitted eligible borrowers to avail ECB under the approval route from their foreign equity holder company with minimum average maturity of 7 years for general corporate purpose on the following conditions: Minimum paid-up equity of 25 per cent should be held directly by the lender; Such ECBs would not be used for any purpose not permitted under the extant ECB guidelines (including on-lending to their group companies / step-down subsidiaries in India); and Repayment of the principal shall commence only after completion of minimum average maturity of 7 years.no prepayment will be allowed before maturity. (Circular No.31 dated ) Export and import of currency: Under the extant regulations, a person resident in India is allowed to take outside India or having gone out of India on a temporary visit, may bring into India (other than to and from Nepal and Bhutan) currency notes issued by the Government of India and Reserve Bank of India up to an amount of Rs.7,500 per person. As a measure of providing greater flexibility, the said limit has now been enhanced to Rs. 10,000 per person. (Circular No.39 dated ) Clarification on the Liberalised Remittance Scheme (LRS): The RBI had in August 2013 modified certain conditions under the LRS including reducing the maximum limit for remittance under the scheme to USD 75,000. On receiving representations from various stakeholders, RBI has now issued the following clarifications: LRS can be used for acquisition of both unlisted and listed shares of an overseas company. A resident individual can make remittances for purposes listed under Schedule III to the Foreign Exchange Management (Current Account Transaction) Rules 2000, such as educational and medical expenses over and above the USD 75,000 limit under the scheme subject to the limits prescribed under Schedule III. A resident individual can also carry out other permissible current account transactions (transactions which are not explicitly prohibited or restricted under the FEM (CAT) Rules, 2000) without any limits through an Authorised Dealer (AD) Bank in India subject to the AD bank verifying the bonafide nature of the transaction. Resident individuals are permitted to make remittances for acquiring immovable property within the annual limit of USD 75,000 for already contracted cases, i.e. only for those contracts which were entered into on or before the date of the circular, i.e., August 14, 2013, subject to satisfaction of the genuineness of the transactions by the AD bank. (Circular No.32 dated ) Page 7 of 9

8 Simplification and Revision of Declaration forms for Exports of Goods/Softwares: The exporters of goods or software are required to give declaration in Forms - GR/PP/SDF/SOFTEX/Bulk SOFTEX, as applicable, to the exporter and submit it for certification. In order to simply the existing form used for declaration of exports of Goods/Software, a common form called Export Declaration Form (EDF) has been prescribed to declare all types of export of goods from Non-EDI ports and a common SOFTEX Form to declare single as well as bulk software exports. The EDF form will replace the existing GR/PP form used for declaration of export of goods. The procedure relating to the exports of goods through EDI ports will remain the same and SDF form will be applicable as hitherto. Under the revised procedure, the exporters will have to declare all the export transactions, including those less than USD 25,000, in the form as applicable.(circular No.43 dated ) Facility for eligible borrowers to raise ECB at a higher all-in-cost to refinance / reschedule an existing ECB discontinued: As per the extant guidelines, eligible borrowers desirous of refinancing an existing ECB can raise fresh ECB at a higher all-in-cost / reschedule an existing ECB at a higher all-in-cost under the approval route subject to the condition that the enhanced all-in-cost does not exceed the all-in-cost ceiling prescribed as per extant guidelines. The RBI has now decided to discontinue this facility. Henceforth, the scheme of refinance of existing ECB by raising fresh ECB at lower all-in-cost, subject to the condition that the outstanding maturity of the original ECB is either maintained or extended, will continue as hitherto under the automatic route and approval route as the case may be. All other aspects of ECB policy shall remain unchanged. (Circular No.59 dated ) Definition for control and sector specific conditions for FDI in India amended: Guidelines were provided for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies vide Circular No.01 dated June 04, 2013.The said circular provided for the definition of the term ownership and control for an Indian company. The RBI has now amended the definition of the term control to include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. The RBI has also noted that the Governments of Himachal Pradesh and Karnataka have given their consent to implement the FDI policy on Multi Brand Retail Trading in Himachal Pradesh and Karnataka respectively. Accordingly, the list of States/Union Territories which have conveyed their concurrence to allow FDI policy on Multi Brand Retail Trading stands modified. (Circular No.44 dated ) Page 8 of 9

9 Bank Guarantee on behalf of person resident outside India for FDI transactions: Under the extant regulations, the RBI had permitted AD banks to open Escrow account and Special account on behalf of a non-resident acquirer for acquisition/transfer of shares/convertible debentures of an Indian company through open offers/ delisting/ exit offers, subject to compliance with the relevant SEBI [Substantial Acquisition of Shares and Takeovers (SAST)] Regulations, 1997.In order to provide operational flexibility and ease the procedures, the RBI has now permitted AD banks to issue bank guarantee, without prior approval of the RBI, on behalf of a non-resident acquiring shares or convertible debentures of an Indian company through open offers/ delisting/exit offers. However, the relaxation in the policy is subject to the following conditions: the transaction should be in compliance with the provisions of the SAST Regulations; the guarantee given by the bank is covered by a counter guarantee of a bank of international repute. Where the guarantee is invoked, bank is required to submit a report on the circumstances leading to the invocation of the guarantee. (Circular No.37 dated ) Foreign Investment in India Downstream investments by an Indian company which is not owned and/or controlled by resident entity/ties: The RBI had earlier provided that tor the purpose of downstream investment, Indian companies making downstream investments were required to bring in requisite funds from abroad and not use funds borrowed in the domestic market. However, the downstream operating companies were not precluded from raising debt in the domestic market. The regulations also permitted downstream investments through internal accruals to an Indian company engaged only in activity of investing in the capital of another Indian company. The restriction has now been relaxed and downstream investments through internal accruals are permissible by an Indian company irrespective of the nature of business, subject to prescribed conditions. (Circular No.42 dated ) CONSULTING PRIVATE LIMITED +91 (80) specialists@accretiveglobal.com Document date: The views expressed and the information provided in this newsletter are of general nature and are not intended to address the circumstances of any particular individual or entity. Further, the above content should neither be regarded as comprehensive nor sufficient for making decisions. Although we endeavour to provide accurate and timely information, there is no assurance or guarantee in this regard. No one should act on the information or views provided in this publication without appropriate professional advice. Accretive will not be responsible for any loss arising from any actions taken or to be taken or not taken by anyone based on this publication. This is meant for private circulation only. Page 9 of 9