Source: LiveMint.com, Jan 27, 2019
New Delhi: The income tax department has made a windfall gain of ₹10,000 crore from a scheme meant to avoid tax disputes, with multinational companies operating in India, a development that could give impetus to new schemes that will reduce litigation while adding to the government coffers.
The gain is from the advance pricing agreement (APA) programme that allows MNCs to negotiate how profit margins for India operations are to be calculated for tax purposes for five years in return for avoiding rigorous scrutiny of transaction details. Introduced in 2012, the scheme was tweaked in 2015 to allow such negotiated profit margins applicable for the past four years as well, allowing companies tax certainty for a total of nine years. Extending the agreed profit margin for past years has led to many MNCs revising their past year profit margins upwards, a government official said on condition of anonymity. Questioning the price at which MNCs transact with their units in India, called transfer price, has been an area of intense tax disputes at the beginning of this decade, which forced the government to roll out the APA scheme. Companies such as International Business Machines Corp. and Microsoft Corp. had in the past faced transfer pricing disputes in India. Read the rest of this entry »