[Excerpts from Business Standard, 31 March 2020]
COVID-19 has transformed into a catastrophe for the world economy and has severely affected the Indian economy. The tax revenue estimates were low even before the pandemic struck, and now the experts have predicted a steep decline in the direct tax collections. The shortfall is said to a 20 year high, totaling up to a large sum of INR 1.5 trillion. Other than the pandemic, this shortfall can also be attributed to the fact that businesses and corporates witnessed a significant decline in demand, leading to investment cut-downs and even job losses.
[Excerpts from Economic Times, 31 March 2020]
The CBDT, on 13 April 2020, issued a circular regarding the TDS implications for the FY 2020-21. The Finance Ministry has clarified that an employer will have to deduct tax for FY 2020- 21, from an employee’s salary on the basis of the new lower tax regime if the employee opts for it and informs the employer of the same. The circular also clarified that once the regime is opted by an individual at the start of the FY, then such an option cannot be changed during the financial year as far as TDS by the employer is concerned. However, the option can be changed at the time of filing the income tax return.
[Excerpts from The Economic Times, 2 April 2020]
Private Indian companies paid INR 360,000 million as dividends between 1 February 2020 and 31 March 2020 to avoid extra tax following the change in dividend tax treatment. About 480 companies, including PSUs, have declared a total dividend of INR 760,000 million after the budget. The urgency to pay such dividends to shareholders before the commencement of the new budget helped several promoters of smaller companies as well as some of the affluent investors to increase their stake or to give additional margin for their pledged shares.
CBDT issues clarification on short TDS deduction owing to enhanced surcharge rates vide Finance (No.2) Act, 2019
[Excerpts from Taxsutra, 13 April 2020]
CBDT issues clarification regarding the short deduction of TDS/TCS due to an increase in surcharge rates (a highest of 37%), which received Presidential assent on August 1, 2019. It acknowledges few genuine instances wherein deductors/collectors were held to be assessees in default for short TDS/TCS deduction in cases where final transactions were done before the Bill was tabled. Thus, to mitigate genuine hardships, CBDT now lays down 4-point conditions, upon fulfillment of which the deductor shall not be held as an assessee in default. Further, it also provides for interest waiver subject to conditions. The 4 conditions are given below:
- The transaction should have been completed, and entire payment should be made to the deductee/ payee on or before 5 July 2019, there should be no subsequent transaction between both parties in FY 2019-20 to adjust such shortfall
- The TDS/TCS should be deducted/ collected as per rates in force
- Such TDS/TCS should be deposited in the account of the Central Government by adhering to the applicable due date
- The TDS/TCS statement should have been furnished on or before the due date
[Excerpts from Economic Times, 9 April 2020]
The Income Tax Department announced that it will issue all pending income tax refunds up to INR 0.5 million immediately to individuals and business entities to help out due to hardships caused by the coronavirus lockdown in the country. According to the Press Note of the department, this decision would benefit around 1.4 million taxpayers. In the context of the COVID-19 pandemic scenario, the Government of India has decided to issue all pending income tax refunds and GST custom refunds with immediate effect.
The Safe Harbor rules in place in India provided protection to small taxpayers from the litigative transfer pricing environment for covered transactions. It is now proposed to extend the benefit of APA and safe harbor to profit attribution to PE of non-residents in India.
On 27 March 2020, the Finance Bill, 2020, has been approved by the parliament and has received the President's assent to be in effect in the Income-tax Act,1961, from 1 April 2020. One of the provisions approved pertains to expansion in the scope of Safe Harbor regulations.
|Section 92CB of the Incometax Act, 1961||The Finance Bill, 2020 proposed substitution of section 92CB(1) with effect from the AY 2020-21 to provide that apart from the determination of arm's length price, the determination of the income referred to in section 9(1)(i), shall also be subject to Safe Harbour Rules.||The definition of the safe harbor has been amended to include the income, deemed to accrue or arise to a business connection under section 9(1)(i) of the Act.|
This is a welcome move that is likely to provide much-needed tax certainty to non-residents having a PE and had to face litigation on the attribution of profits in India. This amendment is effective from April 2020. It is important to note that the existing Safe Harbor rules are applicable only until FY 2018-19. Therefore, the new rules for the period FY 2019-20 and onwards are yet to be prescribed by the authority.
Presently, the transfer pricing compliance in India (Furnishing accountants report in Form 3CEB and maintaining contemporaneous transfer pricing documentation, etc.) are due on the same day as the day for filing the tax returns viz. 30 November of the Assessment Year.
It is now proposed to prepone the due date from 30 November to 31 October. This amendment is effective from FY 19-20, which implies that the due date for transfer pricing compliances for March 2020 would be 31 October 2020.
It would be worthwhile to wait for additional guidance from the CBDT in light of the unprecedented COVID-19 situation, for any extension to these timelines.
In the 35th GST Council meeting held on 21 June 2019, it was decided to provide a facility to registered persons to transfer any amount available under any head of the electronic cash ledger to other heads viz. integrated tax, central tax, State tax or Union territory tax or cess through form GST PMT-09. This facility has now been notified by the government with effect from 21 April 2020 and has also been made available on the GST portal.
[Notification No. 37/2020-Central Tax dated 28 April 2020]
With businesses facing cash crunch due to the COVID-19 pandemic, the government has eased the restriction requiring businesses to limit their claim of input tax credit (ITC) to 110% of that appearing in GSTR-2A for the respective period. The businesses are now free to claim ITC as per their records for the period from February 2020 to August 2020, and reconcile the same with ITC as per GSTR-2A on a cumulative basis at the time of filing GSTR-3B for the month of September 2020.
[Notification No. 30/2020-Central Tax dated 3 April 2020]
The government has rejected the demands made for granting GST exemption on the sale of ventilators, personal protective equipment (PPE), and other medical equipment required to fight the COVID-19 pandemic. The government officials have stated such an exemption will put the local manufacturers at a disadvantage against foreign suppliers due to accumulation of GST credit, resulting in an increase in costs.
[Excerpts from livemint]
To ease the compliance burden during the nation-wide lockdown, the Central Board of Indirect Taxes (CBIC), has relaxed the requirements to furnish following bonds at the time of import/ export till 15 May 2020, and instead decided to accept an undertaking in lieu of the same:
- Bond for provisional duty assessment (Section 18 of the Customs Act, 1962)
- Warehousing Bond (Section 59 of the Customs Act, 1962)
- Bonds required to be furnished under Section 143 of the Customs Act 1962
- Bonds required to be furnished for availing exemptions under notifications issued under Section 25 of the Customs Act, 1962
[Circular No. 17/2020-Customs dated 3 April 2020 read with Circular No. 21/2020-Customs dated 21 April 2020]