TAX POLICY - AUGUST 2019

GREETINGS FROM US INDIA STRATEGIC PARTNERSHIP FORUM!

We present you our next edition of the Tax policy news letter sharing insights of the Forum’s key areas of engagement in the tax policy space. Our areas of engagement now spread across direct and indirect taxes coverings all aspects of international taxation, GST and Custom laws. We look forward to your ideas, suggestions and views and also encourage you to participate in our efforts. Happy reading and hope you find this an interesting read. For any queries, please contact Ms Shweta Kathuria at [email protected]

A- ADVOCACY AND GOVERNMENT ENGAGEMENT BY USISPF

  1. Forum submits recommendations to reinstate Zero basic customs duty on routers Budget 2019 had deleted the entry pertaining to ‘Routers’ from the First Schedule to the Customs Tariff Act 1975 which allowed a zero duty on routers. The implication of such deletion was an imposition of customs duty on import of routers in India. USISPF on behalf of its members companies have submitted a detailed recommendation to reinstate Zero duty highlighting the impact of such tariffs on cost of imports and exports thereof.
  2. Forum submits a note on the impact of higher surcharge on Foreign Portfolio investments Budget 2019 imposes a high surcharge on non- corporate FPIs impacting the overall investment climate. On behalf of our members USISPF has submitted a detailed note highlighting the impact of this provision and how can this be a dampener to the economic objective of driving investments in the country. We look forward to a positive resolution soon.
  3. Forum shares issues and recommendations on the Buyback tax introduced in Budget 2019 Union budget 2019 introduced the levy of tax on buyback of shares by listed companies. The move is primarily initiated to discourage the practice of avoiding Dividend Distribution Tax, however there are significant concerns emerging from the industry on this provision. USISPF on behalf of its members have written a details note highlighting some of these concerns along with the recommendations.
  4. Forum to share comments on draft E-Invoice standard released for comments by GSTN Government of India is looking at implementing the electronic invoicing under the Goods and Services Tax w.e.f January 2020. As a part of the next steps, GSTN has released a consultation paper and a draft template for the E-invoicing system for comments. USISPF on behalf of its members will be sharing a detailed note.

B- NEWS ALERTS / UPDATES

  1. New export incentive scheme to be launched by the Ministry of Commerce
    The Ministry of Commerce proposed before the Cabinet for replacement of existing export incentive schemes (including MEIS) with a new duty reimbursement scheme called “Rebate of State and Central Taxes and Levies”. Refund under the new scheme proposed to be granted through freely transferable scrips and implemented in a phased manner. We await the details of the scheme and will keep you updated.

  2. CBDT exempts foreign investors earning income from investment fund set-up in IFSC, from return filing
    Central Board of Direct Taxes has provided an exemption to non-resident unitholders/ investors of Category I and Category II Alternative Investment Funds (AIFs) which are set-up in International Financial Services Centre (IFSC) from filing tax returns in India. This decision of CBDT removes one of the impediments to set up AIFs in IFSC and might provide further momentum to activities in the IFSC.

  3. GST boost for electronic mobility in India
    The 36th GST Council meeting decided to reduce the tax rate on Electric Vehicles (EV) and EV chargers from 12% and 18% respectively to 5%. Also exemption proposed on hiring of electric buses by local authorities. The amendment is proposed to be made effective from August 01, 2019.

  4. CBIC circular in respect of characterization of ITeS services provided to overseas entities
    CBIC has in a recent circular clarified provisions in respect of characterization of ITeS services provided to overseas entities. The Circular borrows the definition of ITeS services from Rule 10TA(e) of the Income Tax Rules, 1962 (‘IT Rules’) and provides clarifications on the taxability of ITeS services when a supplier of ITeS services located in India supplies services for and on behalf of a client located abroad. The Circular also states that a supplier of ITeS services, who is not an intermediary in terms of GST Law, can avail benefits of export of services if conditions prescribed under Section 2(6) of the IGST Act, i.e., definition of export of services are satisfied.

    Snapshot of the scenarios described in the Circular have been captured below. Please feel free to share your feedback.  
Scenario Particulars Clarification
I
Supplier of ITeS services supplies back end services as defined in the IT Rules on his own account.
Supplier supplying ITeS services (listed in para 4 of the Circular), on his own account to his client or to the customer of his client would not be intermediary in terms of the GST Law
II

Supplier of backend services located in India arranges or facilitates the supply of goods or services or both by the client located abroad to the customers of client.

Such backend services may include support services, during pre-delivery, delivery and post-delivery of supply (such as order placement and delivery and logistical support, obtaining relevant Government clearances, transportation of goods, post-sales support and other services, etc.)

Supplier supplying backend services as mentioned in this scenario to the customer of his client would be intermediary in terms of the GST Law
III

Supplier of ITeS services supplies back end services (listed in para 4 of the Circular), on his own account along with arranging or facilitating the supply of various support services during pre-delivery, delivery and post-delivery of supply for and on behalf of the client located abroad

Taxability will depend upon the facts and circumstances of each case which will be essential for determining the 'principal/main supply' (i.e. ITeS services or various support services in the instant case)

C- AN UPDATE ON MEMBER ENGAGEMENTS

  1. Past engagements
    • Forum Participated at the 11th All India Customs Consultative Group Meeting | August 9
     
  2. Upcoming engagements
    • Webinar/ session on draft Direct tax Code report to be released in Mid August : TBD
    • Webinar on Sabka Vishwas Legacy Dispute Resolution Scheme : TBD

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