Direct Tax
SEZs seek an extension of Tax Holiday for new units beyond 30 June 2020
[Excerpts from The Hindu Business Line, 22 June 2020]
Special Economic Zones (SEZ) are notified zones, wherein the companies are offered tax holidays for certain years. Currently, many such zones are given a three-month extension on their tax holidays due to the coronavirus outbreak, for the new units. The Export Promotion Council for EOUs and SEZs (EPCES), have appealed to the commerce ministry to extend this tax holiday period by one year or more to attract investment and to increase proposed employment in the zones. It was also mentioned that the 111 SEZs, which are not yet functional, would also benefit from this move.
Good news for taxpayers! CBDT exempts certain allowances in New Tax Regime
[Excerpts from Financial Express, 29 June 2020]
The finance budget of 2020, introduced a new regime of lower tax rates for individuals and HUFs according to section 115BAC, most the deductions and exemptions allowed under the old regime, would now be disallowed. But, the provision also enables the CBDT with the power to certain exemptions under section 10, which can be availed by employees. Exercising such powers, the CBDT has revised Rule 2BB allowing exemption on allowances paid on tour, transfer, daily travel, conveyance, and transport allowance for handicapped.
New Stamp Duty turns out to be a Double Tax on Fund Houses
[Excerpts from The Hindu Business Line, 30 June 2020]
The government had introduced changes to the Stamp Duty Act last year by introducing a uniform rate of stamp duty on the trading of shares and commodities, which were earlier being charged at different rates in each State. The tax will have a major impact on short-term mutual fund schemes, such as overnight and liquid funds, and the SIP investors, as their monthly installments, would now be dutiable. However, this will turn out to be a double tax on the investor, as it would be levied while the fund collects the amounts and also when it actually invests it in various instruments.
Broad-based criteria for the Safe Harbour to apply to Category-II FPIs
[Excerpts from Business Standard, 2 July 2020]
The government has recently notified, that the requirement to meet the broad-based conditions to qualify for a safe harbour under Indian tax laws, will also apply to Category-II FPIs, even though the Category-I investors remain exempt. Less than 20% of FPIs fall in Category-II, and they were already at a disadvantage for abiding by indirect transfer provisions, which apply to funds that have deployed over 50% of their portfolio investments in India. This notification may further discourage Category-II FPIs, especially funds from the Cayman Islands, British Virgin Islands, and West Asia, from delegating fund management responsibilities to Indian fund managers.
CBDT notifies amendment on Tax Exemption for Sovereign Wealth Funds for Investment in Infrastructure
[Excerpts from The Economic Times, 7 July 2020]
Income from dividend, interest, and long term capital gains of sovereign wealth funds, the Abu Dhabi Investment Authority, and pension funds, through the investments made in infrastructure companies via debt or equity in India, will be exempt from income tax. The notification would incentivize foreign investors to invest in thirty-four defined infrastructure sectors directly or through vehicles such as Alternate investment funds or Infrastructure Investment Trusts. The notification shall come into force from 1 April 2021, and shall be applicable for AY 2021-22 and subsequent assessment years.
Central Board of Direct Taxes restarts proceedings under the Faceless Scheme
[Excerpts from The Economic Times, 13 July 2020]
In the wake of the pandemic and its detrimental effect on the economy, the CBDT, in a circular dated 8 May 2020, had asked its officers not to have any adverse communication with the assesses. By issuing a circular, the CBDT has now asked its officers to reach out to assessees and start proceedings in all pending cases. It has set a target of completing 5,000 assessments a week. According to the circular issued by the office of the National e-Assessment Centre, Delhi, the cases where a partial response is on record may be prioritized.
Indirect Tax
CBDT and CBIC sign a MoU for facilitating an Exchange of Information on automatic and regular basis
The Ministry of Finance (MoF) has announced that the two principal tax authorities in the country, namely Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) have signed a MoU, to facilitate the sharing of data and information between the authorities.
This MoU supersedes the MoU signed between the CBDT and the erstwhile CBEC in 2015; this MoU takes into account the significant developments that have taken place since then, such as the introduction of GST, incorporation of GSTN and change of CBEC to CBIC.
In addition to regular exchange of data, CBDT and CBIC will also exchange with each other, on request and spontaneous basis, any information available in their respective databases, which may have utility for the other organization.
[Excerpts from the Business Standard]
Higher turnover threshold notified for e-invoicing
The annual turnover limit for applicability of e-invoicing has been increased to INR 500 crores (from earlier limit of INR 100 crores). Also, units in Special Economic Zone have been excluded from the applicability of e-invoicing.
[Notification No. 61/2020-Central Tax dated 30 July 2020]
New GST return filing mechanism may be shelved
As per news reports, the plans for implementation of the new GST return filing mechanism, which was one of the most important reforms announced since the inception of GST more than 3 years ago, have been shelved.
It appears that the government has instead turned its attention to an advanced version of the existing returns with a phased implementation from October 2020 to January 2021. The advanced version is expected to contain feature such as:
- GSTR-2B feature - Auto drafted Input Tax Credit (ITC) statement to guide on the ITC to be availed or reversed (similar to earlier envisaged GSTR-2);
- A more detailed GSTR-1
- GSTR-3B to be auto-populated based on data furnished in GSTR-1 (similar to earlier envisaged GSTR-3)
- GSTR-2A to populate return filing status of both GSTR-1 and GSTR-3B;
- Linking GSTR-1 and GSTR-2A with GSTR-3B;
- A matching tool for comparison of GSTR-2A with purchase register;
- A communication channel between the supplier and the recipient;
- Improved comparison table for tax liability and ITC.
[Excerpts from The Economic Times, Business Today and Financial Express]