Direct Tax
Eligible individuals can submit Form 15G, Form 15H to avoid TDS on dividend income too
[Excerpts from The Economic Times, 22 April 2020]
The finance bill 2020, has brought in changes in various provisions of the Income-tax Act. One of which is the taxability of dividend income in the hands of unitholders/shareholders. Owing to this, such income would now be liable to tax deduction at source at 10%. The tax will be deducted from the dividend at the time of payment by the company/mutual fund house if the total amount of the dividend being paid to the individual during the FY is more than INR 5,000. The shareholders or unitholders should remember to submit Form 15G or 15H to avoid such TDS if they are eligible to do so.
GST, GAAR reporting delayed till March 2021 amid coronavirus outbreak
[Excerpts from The Business Standard, 28 April 2020]
In 2018, the tax department had changed the tax audit Form-3CD, seeking details under GST as well as GAAR, which seeks to prevent firms from routing transactions through other countries to avoid taxes. The requirement for firms to include details of GST and GAAR in their tax audit report has been deferred for the third time in view of the pandemic. The same has been kept in abeyance till 31 March 2021, suggesting that audit reports need not include details on GST and GAAR till then.
Coronavirus lockdown 3.0: States up taxes on auto fuels, liquor for income
[Excerpts from Financial Express, 6 May 2020]
The State governments are increasing taxes on the two principal incomegenerating tools at their disposal – Value Added Tax on auto fuels and Excise on liquor. At least 13 states, including Maharashtra, Tamil Nadu, Karnataka, Rajasthan, and West Bengal, have increased the value added tax/ sales tax on the fuels by rates that correspond to retail price increases. Haryana, Assam, Goa, Tripura, Nagaland, Arunachal Pradesh, and Meghalaya are the other states that have recently raised fuel taxes to find resources for combating COVID-19. In a nutshell, the states were budgeted to collect INR 2.69 lakh crore from petroleum taxes in FY 2020 and INR 1.75 lakh crore from excise/other levies on alcohol.
Lockdown period not to be counted for determining the residency status of NRIs, foreign nationals: CBDT
[Excerpts from The Economic Times, 9 May 2020]
Finance Minister, Nirmala Sitharaman allowed discounting of prolonged stay period in the country for determining the residency status, to provide relief to people who may have technically become residents as per income tax rules due to travel restrictions and are forced to offer their global income to tax here. For FY 2019-20, the days would be discounted where an individual who had not been able to leave India from 22 March 2020, when international flights were suspended, up to 31 March 2020. In a case where an individual who has been quarantined in India on or after 1 March 2020, and has departed on an evacuation flight on or before 31 March 2020, or has been unable to leave India, the period of stay from the beginning of quarantine to the date of departure, or 31 March 2020, shall not be taken into account. In the case where an individual has departed on an evacuation flight on or before 31 March 2020, his period of stay in India from 22 March 2020 till the date of departure shall not be taken into account. The above is for FY 2019-20.
Equalization levy on e-commerce companies may be deferred to the second half of FY 2020-21
[Excerpts from The Business Line, 13 May 2020]
After representations made by industries and trade bodies, representing a wide range of companies, from multi-nationals to infant start-ups in India and across the globe, the Finance Ministry is considering the deferment of the ‘Google Tax’ on e-commerce companies by up to six months as against the current effective date of 1 April 2020. The representations acknowledged that the priority of the Indian government and of governments around the world must be to build the strongest possible economic and public health in response to the outbreak of COVID-19. Accordingly, the government may extend the applicability of such a tax.
Transfer Pricing
Safe Harbour Rules notified for FY 2019-2020
On 20 May 2020, the Central Board of Direct Tax (CBDT) had released a notification to provide that safe harbour rates applicable from AY 2017-18 to AY 2019-20 will continue to apply for AY 2020-21 (for a single year) as well.
The taxpayers who wish to opt for safe harbour regulation are required to furnish an application in Form No. 3CEFA for FY 2019-20.
A summary of the former Safe Harbour Rates that would be applicable for the FY 2019-20 are:
| Eligible transaction | Safe Harbour Rates |
|---|---|
| Provision of software development services or Information Technology (IT) enabled services | 17% - if the transaction does not exceed INR 1 billion 18% - if the transaction is between INR 1 to INR 2 billion |
| Provision of Knowledge Process Outsourcing (KPO) services | For a transaction that does not exceed INR 2 billion: 24% - where employee cost is at least 60% of operating expense; or 21% - where employee cost is at least 40% but less than 60% of operating expense; or 18% - where employee cost is less than 40% of operating expense. |
| Providing corporate guarantee | 1% per annum of the amount guaranteed. |
| Provision of contract Research and Development (R&D) services (relating to software development or generic pharmaceutical drugs) | 24% - if the transaction does not exceed INR 2 billion |
| Manufacture and export of auto components | For core auto components - 12%; For non-core auto components - 8.5% |
| Advancing of intra-group loans | Arm’s length rate would depend upon credit raring of taxpayer and currency of the loan |
| Receipt of low value adding intra-group services | 5% - If the transaction does not exceed a sum of INR 100 million |
Our Comments
While most of the companies were eagerly waiting for safe harbour rates to get notified before they close the books of accounts for FY 2019-20, this shall continue to help them to opt for transfer pricing certainty in this uncertain economic situation. At the same time, the industry expects that safe harbour rates for AY 2021-22 should be announced soon, keeping in mind the slowdown in the economy.
Indirect Tax
FORM GST ITC-02A activated on the GST portal
The GST portal has activated FORM GST-ITC-02A on the GST portal, which allows a taxpayer who has obtained separate registration for multiple places of business in the same state to transfer the balance of unutilized ITC lying in the electronic credit ledger to the newly obtained registration. This facility was awaited by businesses for a long time as the enabling Rule 41A had been inserted a while back vide Notification No. 3/2019-Central Tax dated 29 January 2019.
Finance Ministry denies levy of the purported calamity cess
Earlier, various news reports had suggested that in view of the declining tax collections due to the COVID-19 situation, the government is considering the imposition of a calamity cess over and above GST. However, in what is music to the ears of the industry, Finance Ministry sources have strongly denied the possibility of imposing any such cess, stating that such a levy will negatively affect the already low consumer demand.
[excerpts from The Economic Times]