GST refunds denied to MNC back offices

Source: The Economic Times, Oct 09, 2019

New Delhi: A host of back offices of multinational companies in the financial sector face a tax whammy, with Goods and Services Tax authorities denying them refunds of amounts paid on inputs, saying the work done for parent companies can’t be considered as exports and will be counted as a service for the same entity.

GST authorities have rejected refunds on these grounds across states, including Haryana, Maharashtra, Tamil Nadu and Karnataka. The denial of refunds running into hundreds of crores of rupees to these outfits can derail their business model and may impact India’s attractiveness as the world’s back-office hub, especially with the emergence of low-cost sites in the Philippines and East Europe.

“Rejection orders are based on the premise that the services are provided by the local entity to its overseas affiliate company, which is the ‘same entity’ and therefore, the said services do not qualify as exports,” said an industry official privy to the development. Industry has approached the government for expeditious resolution of the issue. Individual companies will approach appellate bodies to seek relief.

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E-assessment scheme for taxpayers comes with exceptions

Source: The Hindu Business Line, Oct 04, 2019

Come October 8, the scrutiny assessment process under section 143(3) is all set for a makeover. To avoid hassles for the taxpayer as well as to reduce room for malpractices on the side of the department, the manual interface between the tax department and the taxpayer during the scrutiny assessment process is being made online or faceless now. In this regard, the tax department has recently notified the E-Assessment Scheme, 2019. E-assessment may be applicable only for select scrutiny cases though, to begin with.

The scheme introduces team-based assessment as well as dynamic jurisdiction, under which cases from one part of the country can be handled anywhere else. Every notice or order will be delivered to the assessee electronically either by uploading it in the assessee’s e-filing account, sending it by email or by uploading it on the assessee’s mobile app (Aaykar Setu), followed by an alert in each of the cases. The assessee needs to then file his/her response through his/her e-filing account within fifteen days.

On receiving the response, a national e-assessment centre (NC) will assign the case to an ‘assessment unit’ (AU) in any part of the country through an automated allocation system.

After going through the details and taking help from technical or verification units created for this purpose, the AU will pass the draft assessment order either accepting taxpayer’s returned income or modifying the returned income. This will then be looked into by the NC.

A final assessment order will be made by the NC after giving the assessee an opportunity to be heard, if necessary.

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New contract manufacturing units eligible for 15 per cent tax benefit

Source: The Economic Times, Sept 30, 2019

NEW DELHI: New contract manufacturing outfits can avail of the 15% corporate tax scheme but companies that opt for the 22% tax regime won’t be eligible for accumulated minimum alternate tax (MAT) credit, a senior government official said.

The finance ministry will clearly specify what constitutes reorganisation or reconstruction of an entity and new manufacturing eligible for the 15% rate as part of detailed clarifications on the new corporate tax framework to clear the air on a number of issues that have been raised by industry. Companies that opt for the reduced corporate tax rate of 22% cannot claim any exemption or incentives, including accumulated MAT credit. Read the rest of this entry »

400,000 taxpayers to face scrutiny under new e-assessment system

Source: Business Standard, Sept 26, 2019

New Delhi: The income-tax (I-T) department has identified about 400,000 taxpayers who will face scrutiny under the new faceless assessment scheme. Notices were being served to a little over 100,000 assesses, seeking explanation on the returns filed within 15 days, said an official privy to the development. However, about 10,000 such letters were undelivered and, in some cases, bounced back. The deadline of sending scrutiny letters ends on September 30.

The tax department is learnt to have finalised computer-assisted scrutiny selection (CASS) cycle for the current year and has selected about 100 parameters to scrutinise returns under the new system. Sources said some of the parameters, based on which notices were served, included undisclosed foreign income and immovable properties, high-value transactions, misreporting of long-term capital gains, TDS claimed not matching with the tax forms, non-disclosure of investments made in the name of spouse, relatives, filing defective return, tax evasion in earlier years, and so on. Read the rest of this entry »

Tax incentive for new firms could spark ‘make in India’ for EV parts

Source:, Sep 23, 2019

MUMBAI : India’s fledgling electric vehicle (EV) industry is likely to receive a shot in the arm with the slashing of corporate tax on new manufacturing companies.

With most makers of electric vehicles and their components planning their investments for India, they would be encouraged to accelerate their plans for local manufacturing with the announcements made by finance minister Nirmala Sitharaman. The steps are expected to propel domestic production, specifically in producing lithium-ion batteries, charging equipment, electrical and electronic parts. Producers of hybrids and even conventional internal combustion vehicles will also benefit.

“With falling rupee, imports have become expensive. Logically, the manufacturing companies will look at increasing localization of components in India under the newly announced tax regime for new units. This will boost overall manufacturing activities,” said Vinnie Mehta, director general of Automotive Component Manufacturers Association of India (Acma).

The auto industry, along with its vast auto ancillary supply chain, accounts for 49% of India’s manufacturing GDP. Read the rest of this entry »

Banking, FMCG to gain from tax cut; pharma, IT to remain untouched: Report

Source: Business Standard, Sep 22, 2019

New Delhi: The government’s big announcement of a cut in corporate tax will benefit sectors such as banking and FMGC but IT and pharma may not see any tangible benefits as their current effective tax rate is lower, ICICI Direct Research said in a report.

“Like a bolt from the blue, the government (on Friday) announced a reduction in the corporate tax rate from close to 35 per cent to 25.17 per cent thereby fulfilling its key agenda of implementing the Direct tax Code (DTC). This is a massive trigger for revving up growth and, more importantly, resurrecting sentiments that were down in the dumps,” the report said.

The immediate benefit is increased cash flows to corporate India that will be either channelised into debt reduction or incremental investments in increasing capacity.

Also, taxing new production facilities (that come up by 2023) at 15 per cent will enable attraction of global capital and spur a beleaguered investment cycle, it said.

“From a granular perspective, sectors like banking and FMCG are expected to grow at a CAGR of 48.2 per cent and 18 per cent, respectively vs. earlier CAGR of 42.2 per cent and 12.2 per cent. On the flip side, sectors like IT and pharma are not expected to see any upgrades on account of existing lower tax rates,” it said.

A new provision has been inserted in the Income-Tax Act with effect from FY20 which allows any domestic company the option to pay income tax at 22 per cent subject to the condition that they will not avail any exemption/incentive.

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CBDT launches one-time facility for compounding of income tax offences

Source: The Economic Times, Sept 12, 2019

New Delhi: A one-time facility to apply for compounding of income tax offences has been launched and taxpayers can avail this opportunity by December 31, a latest CBDT directive said. It said this “one-time measure” is being undertaken to mitigate unintended hardship to taxpayers in deserving cases and to reduce the pendency of existing prosecution cases before the courts.”

“Cases have been brought to the notice of CBDT where the taxpayers could not apply for compounding of the offence as the compounding application was filed beyond 12 months,” the directive accessed by said. Read the rest of this entry »