Equalisation levy imposed by India on supply of services by multinational enterprises a ‘sovereign right’: FM Nirmala Sitharaman

Source: Financial Express, 08 March 2022

Justifying the 2% equalisation levy (EL) imposed by India on the supply of services by multinational enterprises, finance minister Nirmala Sitharaman on Monday said it is a sovereign right to tax revenues earned from operations in the country.

“Equalisation levy is not a unilateral measure… we are not an exception as many countries have done so,” Sitharaman said in a post-Budget conference in Bengaluru.

Companies like Netflix and Facebook get their consumers in a large country like India. “It’s important for the industry to stand up and tell their international sellers that India deserves to tax this,” she said.

In October 2021, G20 countries approved a global deal to adopt a 15% minimum corporate tax and reallocate taxing rights for large profitable multinational enterprises (MNEs) to countries where they sell products and services.

India will continue with an equalisation levy, also known as ‘Google tax’, which fetched about Rs 2,200 crore in FY21 and is projected to generate revenue of over Rs 3,000 crore in FY22, till the OECD framework is implemented.

According to the latest OECD framework agreement, Pillar One will apply to MNEs with profitability above 10% and global turnover above €20 billion. The profit to be reallocated to markets will be calculated as 25% of the profit before tax in excess of 10% of revenue.

To a question on the goods & service tax (GST), revenue secretary Tarun Bajaj said the GST Council has to decide whether there is a need to reduce GST rate on cement from 28% to 18%. “We need to rationalise tax duties so that both the Centre and states get revenues. GST revenue-neutral rate (RNR) has already fallen. I am appealing to the rich people to kindly pay the taxes,” Bajaj said.

As against the intended GTS RNR rate of 15.5%, it is now hovering around 11%, due to large scale tinkering with rates after the new tax regime was rolled out in July 2017.

On anti-dumping duties, Bajaj said the government has been analysing the matter for some time.

“We are analysing anti-dumping duties not just steel but other products as well. India is the largest implementor of anti-dumping duties. It creates issues for MSMEs. This year, we have been very cautious in our evaluation of anti-dumping duties and have removed them wherever necessary. This year, the steel industry has made huge profits, capacity utilisation has gone up, revenues are up so we don’t see the need,” Bajaj said.

Sitharaman said the Budget for 2022-23 stands for continuity to provide a tax predictable regime and a vision for the next 25 years.

GST Council may consider proposal to raise lowest slab to 8 pc, rationalise tax slabs

Source: Financial Express, 06 March 2022

The GST Council in its next meeting may look at raising the lowest tax slab to 8 per cent, from 5 per cent, and prune the exemption list in the Goods and Services Tax regime as it looks to increase revenues and do away with states’ dependence on Centre for compensation, sources said on Sunday.

A panel of state finance ministers is likely to submit its report by this month end to the Council suggesting various steps to raise revenue, including hiking the lowest slab and rationalising the slab.

Currently, GST is a four-tier structure attracting a tax rate of 5, 12, 18 and 28 per cent.

Essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury and sin goods attract cess on top of the highest 28 per cent slab. This cess collection is used to compensate states for the revenue loss due to GST rollout.

According to sources, the GoM is likely to propose raising the 5 per cent slab to 8 per cent, which may yield an additional Rs 1.50 lakh crore annual revenues. As per calculations, 1 per cent increase in the lowest slab, which mainly include packaged food items, results in a revenue gain of Rs 50,000 crore annually.

As part of rationalisation, the GoM is also looking at a 3-tier GST structure, with rates at 8, 18 and 28 per cent.

If the proposal comes through, all the goods and services which are currently taxed at 12 per cent, will move to 18 per cent slab.

Besides, the GoM would also propose reducing the number of items which are exempted from GST. Currently, unpackaged and unbranded food and dairy items are exempted from GST.

Sources said the GST Council is expected to meet later this month or early next month and discuss the report of the GoM and take a view on the revenue position of the states.

With the GST compensation regime coming to an end in June, it is imperative that states become self-sufficient and not depend on the Centre for bridging the revenue gap in GST collection.

At the time of GST implementation on July 1, 2017, the Centre had agreed to compensate states for 5 years till June 2022, and protect their revenue at 14 per cent per annum over the base year revenue of 2015-16.

However, over this 5-year period due to reduction in GST on several items, the revenue neutral rate has come down from 15.3 per cent to 11.6 per cent.

“As the revenue neutral rate has come down and the states stare at a shortfall of about Rs 1 lakh crore, efforts have to be made to make GST revenue neutral and the only way to do it, is rationalise the tax slab and check evasion,” a source said.

The GST Council over the years has often succumbed to the demands of the trade and industry and lowered tax rates. For example, the number of goods attracting the highest 28 per cent tax came down from 228 to less than 35.

The Council, chaired by the Union Finance Minister and comprising state counterparts, had last year set up a panel of state ministers, headed by Karnataka Chief Minister Basavaraj Bommai, to suggest ways to augment revenue by rationalising tax rates and correcting anomalies in tax rates.

Net direct tax revenue rises 68% to Rs 6.92 lakh cr till Nov 23

Source: Financial Express, 29 November 2021

The net direct tax collection grew nearly 68 per cent during April 1 to November 23 to more than Rs 6.92 lakh crore, Minister of State for Finance Pankaj Chaudhary said on Monday.

“The Net Direct Tax Collection figures for the FY- 2021-22 as on 23.11.2021 are at Rs 6,92,833.6 crores showing a growth of 67.93 per cent and 27.29 per cent over the net collection figures for the corresponding period FY2020-21 and FY 2019-20,” he said in a written reply in the Lok Sabha.

The net collection between April 1 – November 23 in 2020-21 and 2019-20 fiscals was over Rs 4.12 lakh crore and over Rs 5.44 lakh crore respectively.

The gross direct tax collection (before adjusting refunds) as of November 23 stood at over Rs 8.15 lakh crore, a 48.11 growth over the collections in the corresponding period in last fiscal.

Chaudhary further said that the gross GST collection in the current fiscal (April 2021-March’22) post Covid-19 outbreak is showing an increasing trend.

The gross GST collection for full 2020-21 ended March 2021 was over Rs 11.36 lakh crore, while the same in the current fiscal till October stood at Rs 8.10 lakh crore.

In reply to a separate question on whether incidents of tax evasion are increasing in Delhi and other parts of the country, Chaudhary said there is no evidence to suggest that incidents of income tax evasion are increasing in Delhi and other parts of the country.

“In terms of cases detected under Goods & Service Tax (GST) and Customs, there is no increasing trend in such evasion noticed in Delhi, although, there is overall increase in detection of GST and Customs evasion cases in the country,” he added.

OECD global tax deal: Large Indian companies rethink overseas investment plans

Source: Economic Times, 25 October 2021

Several large Indian companies exploring outbound investments have put their plans on hold following a global tax deal over concerns of additional taxes and compliance challenges related to the new framework adopted by the world’s leading industrial bloc.

Large companies, especially in the information technology (IT) and information technology-enabled services (ITeS) sectors, were looking to expand in the Middle East, Africa and other Asian countries. To route these investments, the companies were looking to set up entities in tax havens and countries such as Dubai, Singapore, Ireland, Mauritius and the UK, as part of their global structuring and tax and compliance planning.

The Organisation for Economic Cooperation and Development’s (OECD) global tax deal now means that the Indian companies could see their tax liability go up in the near future.

Earlier this month, the OECD had announced that 136 countries had agreed to join an accord to impose a two-pillar global tax reform plan.

As per the deal, large multinationals have to pay a minimum tax of 15% on their global incomes from 2023 and those with profits above a threshold will now have to pay taxes in the markets where they conduct business.

Indian multinationals have now reached out to their legal and tax experts to figure out whether they can still go ahead with the investments or they need additional ring fencing of their entities in the tax havens.

“Under OECD deals, currently only large companies are covered but for several Indian companies that are planning to use certain jurisdictions to make investments in the Middle East, Africa or Asia, this could cause complications in the future,” said Uday Ved, partner at tax advisory firm KNAV. “Most Indian companies want to hold certain entities in countries such as Singapore or UAE to ring fence holding entities here and the tax savings are incidental, but the global tax deal means that they might have to tweak some of these structures.”

Take a large multinational that is looking to invest in Australia, for instance.

The company was looking to set up an entity in Singapore or Mauritius through which the investment would have been made. “The main purpose was to create a buffer between the Australian entity and the Indian holding company, and tax advantage was incidental,” a tax lawyer advising the company told ET.

The company has now reached out to legal advisors to figure out if such a structuring could result in additional taxes or any other compliance issues.

“The biggest problem is whether there could be additional taxes even on the entities based in Singapore or Mauritius. While tax treaties with India would come into play in this regard, the company doesn’t want to let go of control (in Australia) and still wants to limit the risks to its Indian holding company,” the legal expert said.

Traditionally, large Indian groups tend to set up entities in Europe or Singapore to invest outside India. These entities practically work as a pass through vehicles and attract no taxes. However, the OECD deal would mean that in the years to come, if the global taxes are less than 15% additional taxes could apply.

While the OECD deal, as of now, is only applicable to around 100 multinationals that have a particular size, this is set to create tax complications for other companies and entities that are present in tax havens, say tax experts.

The new OECD framework would mean that large companies will have to disclose their global revenues and pay taxes on them.

Faceless assessment: Finance Ministry eases rules for authentication of e-records submission

Source: Economic Times, 07 September 2021

The 􀀀nance ministry on Tuesday said electronic records submitted through registered account of taxpayers in the income tax portal shall be deemed to have been authenticated by the taxpayer by electronic veri􀀀cation code (EVC). The Central Board of Direct Ta􀀁es (CBDT) amended income tax rules on Monday to ease authentication of records submitted in faceless assessment proceeding.

The ministry said the amended rule provides that electronic records submitted through registered account of the taxpayers in the income tax department’s portal shall be deemed to have been authenticated by the taxpayer by electronic veri􀀀cation code (EVC).

“Therefore, where a person submits an electronic record by logging into his registered account in designated portal of the income tax department, it shall be deemed that the electronic record has been authenticated by EVC…,” it said.

The ministry said this simplified process would also be available to companies, or tax audit cases and they are mandatorily required to authenticate the electronic records by digital signature.

“In order to provide the benefit of the simplified process of authentication by EVC to these persons (such as companies, tax audit cases, etc.) , it has been decided to extend the simplified process of authentication by EVC to these persons also,” the ministry added.

Hence, assessees who are mandatorily required to authenticate electronic records by digital signature shall be deemed to have authenticated the electronic records when they submit the record through their registered account in the Income tax department’s portal.

Legislative amendments in this regard would be brought in due course.

Income tax refunds worth Rs 2.13 lakh crore issued to 2.24 crore taxpayers

Source: The Economic Times, Mar 24, 2021

The Income Tax Department on Wednesday said it has issued refunds worth over Rs 2.13 lakh crore to 2.24 crore taxpayers so far this fiscal. This include Personal income tax (PIT) refunds amounting to Rs 79,483 crore and corporate tax refunds amounting to Rs 1.34 lakh crore during the period between April 1, 2020 and March 22, 2021.

“CBDT issues refunds of over Rs 2,13,823 crore to more than 2.24 crore taxpayers between 1st April 2020 to 22nd March 2021. Income tax refunds of Rs 79,483 crore have been issued in 2,21,92,812 cases & corporate tax refunds of Rs 1,34,340 crore have been issued in 2,22,188 cases,” the I-T Department tweeted.

Central govt’s tax collection on petrol, diesel jumps 300% in six years

Source: Business Standard, Mar 22, 2021

New Delhi: Central government’s tax collections on petrol and diesel have jumped over 300 per cent in the last six years as excise duty on the two fuels was hiked, the Lok Sabha was informed on Monday.

The central government collected Rs 29,279 crore from excise duty on petrol and Rs 42,881 crore on diesel in 2014-15 — the first year of office of the Modi government.

The collections on petrol and diesel rose to Rs 2.94 lakh crore in the first 10 months of the current fiscal (2020-21), according to information furnished by Minister of State Anurag Singh Thakur in a written reply to a question in the Lok Sabha.

Together with excise duty on natural gas, the central government in 2014-15 collected Rs 74,158 crore which has gone up to Rs 2.95 lakh crore in April 2020 to January 2021 period.

He said taxes collected on petrol, diesel and natural gas as a percentage of total revenue have gone up from 5.4 per cent in 2014-15 to 12.2 per cent this fiscal.

Excise duty on petrol has been raised from Rs 9.48 per litre in 2014 to Rs 32.90 a litre now while the same on diesel has gone up from Rs 3.56 a litre to Rs 31.80.

Taxes make up for 60 per cent of the present retail price of petrol of Rs 91.17 a litre in Delhi. Excise duty makes up for 36 per cent of the retail price.

Over 53 per cent of the retail selling price of Rs 81.47 a litre of diesel in Delhi is made up of taxes. As much as 39 per cent of the retail price comprises of central excise.

“The total central excise duty (including basic excise duty, cesses and surcharge) was increased by Rs 3 per litre on petrol and diesel with effect from March 14, 2020. It was further revised upwards by Rs 10 per litre on petrol and Rs 13 per litre on diesel with effect from May 6, 2020,” Thakur said.

These increases took away the gain that would have accrued to consumers from a sharp drop in international oil prices.

The hike in excise duty is similar to the increase in taxes the government did between November 2014 and January 2016.

Over nine instalments, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months.

The government had cut excise duty by Rs 2 in October 2017, and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019. “The excise duty rates have been calibrated to generate resources for infrastructure and other developmental items of expenditure keeping in view the present fiscal position,” he added.

Excise duty collection jump 48 pc this fiscal on record hike in taxes on petrol, diesel

Source: Financial Express, Jan 17, 2021

While the pandemic pummelled tax collection across the board, excise duty mop-up jumped 48 per cent in the current fiscal on the back of a record increase in taxes on petrol and diesel, that more than made up for the below normal fuel sales.

Excise duty collection during April-November 2020, was at Rs 1,96,342 crore, up from Rs 1,32,899 crore mop-up during the same period in 2019, according to data from the Controller General of Accounts (CGA). This despite the fact that over 10 million tonnes less diesel – the most used fuel in the country – was sold during the eight months period.

Diesel sales during April-November 2020, stood at 44.9 million tonnes as compared to 55.4 million tonnes a year back, according to data from the oil ministry’s Petroleum Planning and Analysis Cell (PPAC).

Petrol consumption too was lower at 17.4 million tonnes, compared to 20.4 million tonnes during April-November 2019. While Goods and Services Tax (GST) apply on most products since its introduction in 2017, oil products and natural gas has been kept out of its preview.

Excise duty, which accrues to the centre, and VAT that goes to the state government, are levied on their sale.

Industry sources said the jump in excise duty was primarily because of a record increase in taxes on petrol and diesel during March and May last year.

The government had raised excise duty on petrol by Rs 13 per litre and that on diesel by Rs 16 a litre in two tranches to mop up gains arising from international crude oil prices falling to a two-decade low. With this, the total incidence of excise duty on petrol rose to Rs 32.98 per litre and that on diesel to Rs 31.83 a litre. Petrol costs Rs 84.70 a litre in Delhi and a litre of diesel comes for Rs 74.88.

In full 2019-20 fiscal (April 2019 to March 2020), excise collection totalled Rs 2,39,599 crore, according to CGA. Central excise duty makes up for 39 per cent of petrol and 42.5 per cent of diesel. After considering local sales tax or VAT, the total tax incidence in the price is about two-third of the retail rate.

The excise tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014, and that on diesel was Rs 3.56 a litre. The government had between November 2014 and January 2016, raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices.

In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17, from Rs 99,000 crore in 2014-15.

The government had cut excise duty by Rs 2 in October 2017, and by Rs 1.50 a year later.

But it raised excise duty by Rs 2 per litre in July 2019. It again raised excise duty on March 2020, by Rs 3 per litre each. In May that year, the government hiked excise duty on petrol by Rs 10 per litre and that on diesel by Rs 13 a litre. While basic excise duty on crude is not so significant, it is ad valorem (a certain percentage of value) on ATF at 11 per cent and on natural gas-compressed 14 per cent. In case of an ad valorem system, earnings happen only if the product price goes up.

According to CGA, over tax revenue of the government is down 45.5 per cent at Rs 688,430 crore during April-November. For the full 2020-21 fiscal (April 2020 to March 2021), the government had budgeted Rs 16.35 lakh crore tax revenue. Corporation tax mop-up is down 35 per cent at Rs 185,699 crore and income tax collection is 12 per cent lower at Rs 235,038 crore, the CGA data showed.

CBDT relaxes requirement of remunerating fund managers of offshore funds

Source: Business Standard, Jan 16, 2021

Mumbai: The Central Board of Direct Taxes (CBDT) has relaxed the requirement of remunerating fund managers of certain offshore funds because of the amended Rule 10V for availing the special taxation regime under Section 9A.

The Section provides for a special taxation regime in respect of certain offshore funds in the context of their fund managers being located in India.

The CBDT has stated that for financial years 2019-20 and 2020-21 in cases where the remuneration paid to the fund manager is lower than the amount of remuneration prescribed under sub-rule (12) of Rule 10V, but is at arm’s length, there is no need to take CBDT nod for that lower amount to be the amount of remuneration.

However, the board’s permission will be required from FY21-22 if fees paid to the manager are lower than the prescribed amount.

The Finance Act 2019 had replaced one of the conditions requiring an arm’s length remuneration to be paid to the eligible fund manager for performing fund management activities, with a minimum remuneration to be paid under a prescribed methodology, which became effective from April 1, 2019.

The notification provided a window for applicants to seek approval from the board when the amount of remuneration is lower than prescribed. “Since it was not possible to comply with the provisions for FY19-20 and FY20-21, the CBDT has issued a notification stating that the remuneration paid by the fund manager, if lower than the amount prescribed shall be sufficient if it is at arm’s length for FY19-20 and FY20-21,” said Sunil Gidwani, Partner, Nangia Andersen.

5% more income tax returns filed this year

Source: The Economic Times, Jan 12, 2021

NEW DELHI: Income tax returns filed this year have risen by about 5 per cent to nearly 6 crore as more businesses and entities filed annual income statements.

Over 5.95 crore income tax returns (ITRs) for the fiscal year ended March 31, 2020 (2019-20) were filed by January 10, the Income Tax Department said.

The ITR filing deadline for individuals ended on January 10 while for companies it is till February 15.

The tax department in a tweet said 5.95 crore ITRs for Assessment Year 2020-21 were filed till January 10, 2021, as compared to 5.67 crore ITRs filed for the previous Assessment Year by September 10, 2019.

The total returns for 2019-20 are 33.35 lakh higher than the previous year as total ITRs filed stood at 5.61 crore on the last date which was August 31, 2019.

“We gratefully acknowledge the efforts of our taxpayers & tax professionals,” it said sharing the data of ITRs filed for AY2020-21 up to January 10, 2021.
An analysis of the data showed that filing of tax returns by individuals for 2019-20 has slowed in the current year, while filing by businesses and trusts has increased.

Over 2.99 crore ITR-1 were filed till January 10 this year, lower than the 3.11 crore filed till September 10, 2019.

ITR-1 form is filed by resident individuals having income less than Rs 50 lakh in a year.

Over 1.49 crore ITR-4 were filed till January 10, as compared to 1.29 crore filed till September 10, 2019.

Returns in ITR-1 Sahaj are filed by individuals whose total income does not exceed Rs 50 lakh, while form ITR-4 Sugam is meant for individuals, Hindu Undivided Families (HUFs) and firms (other than Limited Liability Partnership) having a total income of up to Rs 50 lakh and having presumptive income from business and profession.

Over 46.12 lakh ITR-2 (filed by people having income from residential property, capital gains and foreign assets) were filed till January 10. ITR-5 (filed by LLP and Association of Persons) filings stood at 10.50 lakh, while ITR-6 (by businesses) filings were at 4.72 lakh.

Last year, ITR-6 filings till September 10, 2019, were 49,398. ITR-5 filings were 5.89 lakh.

ITR-7 (filed by persons having income derived from property held under trust) filings stood at 1.46 lakh till January 10, 2021, as compared to 65,298 last year.

Due to difficulties faced by taxpayers owing to the pandemic, the government pushed the deadline for filing ITR thrice — first from the normal deadline of July 31 to November 30, 2020, and then to December 31, 2020.

On December 30 last year, the government extended the deadline to file ITR for individuals by 10 days to January 10 and for businesses till February 15.

The Income Tax Department on Monday rejected demand for further extension of the deadline for filing returns where audit is required beyond February 15.

“CBDT passes order u/s 119 of Income-tax Act, 1961 in F No. 370153/39/2020-TPL dt 11th January, 2021, disposing off the representations for extension of due date for filing of Audit Report u/s 44AB, in compliance with the order of hon’ble Gujarat High Court dt 8th January, 2021,” the department had said in a tweet.

This was in response to the Gujarat High Court order dated January 8 in the case of the All India Gujarat Federation of Tax Consultants versus Union of India directing the finance ministry to look into the issue of extension of due dates for filing of audit report under Section 44AB of the Income Tax Act.

As per the provisions of the Act, the due date for filing of the audit report under Section 44AB is one month prior to the due date of filing of ITR which is January 15, 2021.