Corporate Taxes

Report
Corporate Taxes - An Overview
5th MSOP :ICSI-Hyderabad Chapter
Ankem Sri Prasad
Chief Tax Officer - Deloitte U.S. India Offices
March 26, 2012
The best things in life are free, but soon,
the government will find a way to tax them.
2
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Index
I.
Corporate Taxes
Introduction – Some Facts, Business & Taxes, Your role with Taxes
A. Overview of taxes – Compliance Management
II.
8
B. Direct Taxes
9 - 15
C. Individual Taxation
16 - 18
D. International Taxation – Evolution, Objective, Treaty & Transfer pricing
19 - 43
E. In-Direct Taxation
44 - 49
Practical Challenges
A. Practical challenges and mitigating strategies
3
4-7
50 - 54
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A. Introduction
Introduction – Some facts
In Rs. Lakh Crores
Actual
2010-11
Rev Estimate
2011-12
Budget
2012-13
Net Tax
5.74
6.46
7.76
Non Tax
3.59
2.77
3.35
32.29
41.14
43.98
41.62
50.37
55.09
General, Social, Economic Services,
Grants & Payments to Union
Territories
11.86
13.18
14.62
Capital Expense – Gen, Social & Eco
Services
1.40
1.36
2.25
32.29
41.14
43.98
Total Consolidated Disbursements
44.15
54.32
58.59
DEFICIT
2.53
3.95
3.50
Revenue
Capital, Public Debt, Loans/Advances
recovery, Misc cap receipts
Total Consolidated Revenue
Expenditure
Government Public Debt,
Loans/Advances
5
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Business and Taxes - Nexus
Competition
Cost
Management
Profits
Affect
Business
Cash flow
Management
Decision
making
Tax planning/
Management
6
Tax
Savings
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Where you play a role
Expatriate
Transactions
Investments
Contracts /
Agreements
7
Tax Planning /
Structuring /
Due Diligence
YOUR
ROLE
Mergers &
Acquisitions
Share Capital
Issue
Dividend
Taxation
Capital Gains
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A. Overview - Corporate Taxes – Compliance Management
Corporate Taxes
Direct Taxes (CBDT)
Entity Level Taxes
Individual Taxes
Indirect Taxes (CBEC)
Customs duty on Imports
International Taxes
Excise Duty on Domestic
Manufacturing
Advance Tax (210 & 211) /
Minimum Alternate Tax
Tax deduction at source
Contractors (194 C)
Rent (194 I)
Professionals (194J)
Foreign payments
withholding (195)
8
Salary TDS
(192)
Double Taxation
Avoidance Agreements
(Treaty)
Services Tax
Bonding (Central Excise)
Profession Tax
Transfer Pricing Rules
/ Arms Length Price
Local Sales Tax
Expatriate Taxation
Central Sales Tax
Software Technology Park of India (STPI), SEZ and RBI are
regulatory authorities
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B. Direct Taxes
B. Direct Taxes – Entity Level Taxes (Advance Tax)
Advance Tax
(Sec 210)
• Payment of advance tax by the assessee of his own accord or in pursuance of order of
Assessing Officer.
• 210. (1) Every person who is liable to pay advance tax under section 208 (whether or not he has
been previously assessed by way of regular assessment) shall, of his own accord, pay, on or
before each of the due dates specified in section 211, the appropriate percentage, specified in
that section, of the advance tax on his current income, calculated in the manner laid down in
section 209.
• …
• Installments of advance tax and due dates
• 211. 95[(1) Advance tax on the current income calculated in the manner laid down in section 209
shall be payable by (a) all the companies…
Advance Tax
(Sec 211)
10
Amount of Tax Payable
Due date of installment
Not < 15% of advance tax.
On or before the 15th Jun
Not < 45% of advance tax, less paid earlier.
On or before the 15th Sept
Not < 75% of advance tax, less paid earlier.
On or before the 15th Dec
100% of advance tax, less paid earlier.
On or before the 15th Mar
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B. Direct Taxes – Minimum Alternate Tax (MAT)
• Special provision for payment of tax by certain companies
• 115JB. (1) Notwithstanding anything contained in any other provision
of this Act, where in the case of an assessee, being a company, the
income-tax, payable on the total income as computed under this Act in
MAT
respect of any previous year relevant to the assessment year
on or after the 1.4.2011, is less than 18% of its book
(Sec 115JB) commencing
profit, [such book profit shall be deemed to be the total income of the
assessee and the tax payable by the assessee on such total income
shall be the amount of income-tax at the rate of 18%
• ..
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
39.55
35.7
36.75
35.88
36.59
33.66
33.99
33.99
33.99
33.22
32.45
MAT & Corporate Tax Rate - A Glance
17.00
8.48
7.65
7.88
7.69
7.84
MAT rate
11
33.66
8.42
11.22
11.33
19.93
20.01
11.33
Corp. tax rate
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B. Direct Taxes – Tax Deduction at Source (TDS -194C)
TDS on
Contractors
(Sec 194C)
• Payments to contractors.
• 15194C. (1) Any person responsible for paying any sum to any resident
(contractor) for carrying out any work (including supply of labor for carrying
out any work) in pursuance of a contract between the contractor and a
specified person shall, at the time of credit of such sum to the account
of the contractor or at the time of payment thereof in cash or by issue
of a cheque or draft or by any other mode, whichever is earlier, deduct
an amount equal to
•…
Payment is being made or credit is given to
TDS on
Contractors
(Sec194 C)
12
% of TDS
Individual or a Hindu undivided family
1%
a person other than an individual or a HUF
2%
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B. Direct Taxes – Tax Deduction at Source (TDS 194 J)
TDS on
Professional
or Technical
Services
(Sec 194J)
• Fees for professional or technical services.
• 194J. (1) Any person, not being an individual or a Hindu
undivided family, who is responsible for paying to a
resident any sum by way of—
• (a) fees for professional services, or
• (b) fees for technical services, [or]
• (c) royalty, or
• (d) any sum referred to in clause (va) of section 28,
• shall, at the time of credit to the payee or at payment
thereof in cash or cheque or any other mode, whichever
is earlier, deduct an amount equal to ..
• Provided …
Payment is being made or credit is given to
Individual or a Hindu undivided family
% of TDS
10%
Where payment for services in a tax year to such person does not exceed Rs
30,000/- no tax shall be deducted
13
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B. Direct Taxes – Tax Deduction at Source (TDS -194-I)
• Rent
• 194-I. Any person, not being an individual or a Hindu
undivided family, who is responsible for paying to [a resident]
any income by way of rent, shall, at the time of credit of such
TDS on Rent income to the account of the payee or at the time of payment
thereof in cash or by cheque or any other mode, whichever is
(Sec 194-I)
earlier, [deduct income-tax thereon at the rate of—
• …
Payment is being made or credit is given
TDS on Rent
(Sec194-I)
14
% of TDS
for use of any machinery or plant or equipment
2%
for use of any land / building (including factory
building) / land appurtenant to a building (including
factory building)/ furniture or fittings
10%
Where payment for rent in a tax year to such person does
not exceed Rs 180,000/- no tax shall be deducted
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B. Direct Taxes – Tax Deduction at Source (TDS -195)
TDS on Foreign
payment
(Sec 195)
TDS on Foreign
payment
(Sec 195)
15
• Other sums.
• 195. (1) Any person responsible for paying to a non-resident, not
being a company, or to a foreign company, any interest / any other
sum chargeable under the Income Tax Act (not being income
chargeable under “Salaries” ) shall, at the time of credit or payment of
such income in cash or cheque or any other mode, whichever is
earlier, deduct income-tax thereon at the rates in force :
• Provided…
Payment is being made to a foreign recipient
% of
TDS
Where the Foreign Party does not have a PAN
20 %
Where the Foreign Party does not have a PAN
10%
Where such Income / such payment is not taxable in India,
no tax shall be deducted, however it has to be certified by a
qualified chartered accountant in prescribed format
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C. Individuals Taxes
C. Individual Taxes - TDS on Salaries (Sec 192)
• Salary.
• 192 (1) Any person responsible for paying any income chargeable under the head
“Salaries” shall, at the time of payment, deduct income-tax on the amount payable
at the average rate of income-tax computed on the basis of the [rates in force] for
TDS on Salaries the financial year in which the payment is made, on the estimated income of the
assessee under this head for that financial year.
(Sec 192)
•…
Apr 11 to Mar 12 (Prior Yr) Apr 12 to Mar 13 (Budget)
TDS on Salaries
(Sec 192)
17
Income Slabs
Tax Rate
Income Slabs
Tax Rate
Up to Rs. 1.8 L
Nil
Up to Rs. 2 L
Nil
Rs. 1.8 L to 5 L
10%
Rs. 2 L to 5 L
10%
Rs. 5 L to 8 L
20%
RS. 5 L to 10 L
20%
Rs. > 8 Lakhs
30%
Rs. > 10 Lakhs
30%
Cess % on Tax
3%
Cess % on Tax
3%
Max Marginal Rate
30.9%
Max Marginal Rate
30.9%
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C. Individual Taxes - Professional Taxes
Professional
Tax
• ANDHRA PRADESH - TAX ON PROFESSIONS, TRADES, CALLINGS AND
EMPLOYMENTS ACT, 1987
• The AP State Legislature empowered the local authorities to levy tax on
professions, trades, callings and employments by incorporating that power in the
statutes relating to local authorities i.e. the Municipal Corporations, the
Municipalities and the Gram Panchayats. Thus, the levy and collection of the tax
was administered by the local authorities
• Website: apvat.in
Professional Tax Slabs in AP, Maharastra & Karnataka
Gross Income Rs
AP Tax in Rs
Maharashtra Tax in Rs.
Karnataka Tax in
Rs.
Professional
Tax)
Up to 5 K
Nil
5K to 6K
60
6K to 10K
80
10K to 15K
100
15K to 20K
150
>20K
200
Nil
Nil
175
150
200
* 300 for February
18
200
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D. International Taxation
D. International Taxes - Evolution
International Law evolved
1.
Out of needs in fields like: Shipping, E-commerce, etc
2.
resulting to certain accepted codes of conduct in Domestic Law
3.
though the transactions are between 2 different countries
International Tax can be considered as:
1.
The body of legal provisions of different countries, covering tax
aspects of cross border transactions (Direct and Indirect Taxes)
OECD – Organisation for Economic Co-operation &
Development
To facilitate cross border transactions with ease, without barriers of any
kind & to eliminate double taxation of one’s single income, The OECD
prepared a draft called as “Model Convention” in 1977.
20
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D. International Taxes - Objectives
National Wealth Maximisation
1.
Country ensures fair share of revenue in cross border transactions
2.
For the well being of its citizens,
3.
And maintains domestic tax base
Tax Equity or fairness :
1.
is all about imposing equal taxes on tax payers with equal income or
2.
equal ability to pay
3.
Without reference to legality or source or type of Income
Economic Efficiency:
21
1.
Developing a competitive domestic economy,
2.
The pretax return should not distort the after tax return thereby
affecting investment decisions
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D. International Taxes - Treaty Aspects
Treaty :
is a formally concluded and ratified agreement between independent
nations.
Tax Treaties between nations:
1.
Is generally a matter of bargain between 2 countries,
2.
Keeping in view the economic interests of the countries involved
How Treaty becomes a Law?
1.
Only when it has the sanction of the constitution of the participating
nations.
2.
Part IV of Indian Constitution setting out the “Directive Principles of
State Policy”
includes specific provision, covering International Law and treaty
obligations in Article 51.
22
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D. International Taxes - Double Taxation
Double Taxation : It is possible that Tax payers engaged in cross
border transactions are taxed more than one (twice) on the same amount
of Income, this phenomenon is known as Double Taxation.
This led to 2 fundamental methods of Taxation under International Law:
1.
Source based taxation
2.
Residence based taxation
23
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D. International Taxes - Concept of Nexus
Subject
Connecting Factor
1. Assessee
Residential Status
2. Income
Source
Connecting Factors: Income
Assessee
Taxable
Connecting Factors:
Income
Taxable
Indian Resident (R)
World Income
Indian sourced Income
(irrespective of
in India
Assessee status)
Non residents
/NOR’s
Only Income sourced
in India is Taxable
Foreign Sourced
Income
Only if earned by
an Indian resident
Foreign sourced Income earned by Non residents is not taxable
in India – As there is no nexus with India
24
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D. International Taxes - Nexus with Income Tax Act *
Section 4 – Charging section
Sec 4 (1)

Income Tax shall be charged,

at that rate or those rates, for that year,

in accordance with the provisions of this act,

In respect of the Total Income, of the previous year,

of every person
Sec 4 (2)
25

In respect of income chargeable under clause (1),

Income Tax shall be deducted at source or paid in advance,

Where it is so deductible under the Act.
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D. International Taxes - Nexus with Income Tax Act ***
Sec 5 (1)

The Total income of any previous year, of a

Sub sec (1) Resident person ; Sub sec (2) Non Resident person

Includes all incomes from whatever source is derived
a)
Is received or deemed to be received in India in such year,
b)
Accrues or arises or is deemed to accrue or arise in India during such
year,
c)
Accrues or arises to him outside India during such year (For Resident
Only)
Provided that, in case of a person NOR in India, under Sec 6 (6), income
accruing or arising to him outside India shall not be included unless it is
derived from a Business controlled or profession set up in India.
Explanation 1. Income shall not be deemed to be received by reason of the fact
that it is taken into account in the Balance sheet prepared in India.
Explanation 2. Income which has been included in the total income on the basis
that it is deemed to have accrued or arisen to him shall not again be so included
on the basis that it is received or deemed to be received by him in India.
26
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D. International Taxes - Income deemed to Accrue/Arise*
Sec 9 (1) The following Income shall be deemed to accrue or arise in India
Sec 9 (I) (i) Income accruing or arising thru

From a business connection in India,

Income from any property in India,

Income from any asset or any source in India ,

Transfer of capital asset situated in India
Sec 9 (I) (ii) Income under head Salaries earned in India
Sec 9 (I) (iii) Income under head Salaries paid by Govt. of India to a citizen outside
India
Sec 9 (I) (iv) Dividends by Indian company outside India
Sec 9 (I) (v) Income by way of Interest
Sec 9 (I) (vi) Income by way of Royalty
Sec 9 (I) (vii) Income by way of Fees for technical Services
27
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D. International Taxes - Business Connection
Sec 9 (1) Explanation 2. It is declared that “business connection” shall include
any business activity carried out thru a person acting on behalf of a NR
a) ..Trader of goods
b) ..Stockist c) authorized representative
Provided that such “business connection” shall not include any business with

Dependant agent

Independent agent acting in the ordinary course of his business
Sec 9 (1) Explanation 3. Attribution Rule (only so much of income attributable
to operations carried out in India shall be deemed to accrue or arise in India).
Business connection

Requires continuity of action between a R in India and a NR who receives
profit ,

Transaction must be of a commercial nature intimately linked with the
business of a NR, contributing to an NR’s Profit

Isolated transactions between a R and NR will not constitute a business
connection.
28
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D. International Taxes - Model Treaty
Article 1 – Persons Covered :
Article 2 – Taxes Covered
Article 3 – General Definitions : Person, Company, Enterprise of a contracting
state, International Traffic, Competent Authority, National
Article 4 – Resident
Article 5 – Permanent Establishment
1.
Basic rule PE – Criteria is : “Fixed place of Business”
2.
Construction PE - Criteria is : “Time and activities carried on”
3.
Agency PE - Criteria is : “legal and economic dependence”
4.
Service PE – Most India treaties have this clause
Article 6 – Income from Immovable property
Article 7 – Business Profits
Article 8 – Shipping, Inland waterways, Transport and Air Transport
Article 9 – Associated Enterprises
-29
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D. International Taxes - Model Treaty
Article 10 – Dividends :
Article 11 – Interest
Article 12 – Royalties
Article 13 – Capital Gains
Article 14 – Independent Professional Services (IPS)
Article 15 – Income from Employment
Article 16 – Directors Fee’s
Article 17 – Artists & Sportsmen
Article 18 – Pensions
Article 19 – Government Service
Article 20 – Students
Article 21 – Other Income
Article 22 – Capital
30
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D. International Taxes - Model Treaty
Article 23 – Methods for elimination of Double Taxation:
Article 24 – Non Discrimination
Article 25 – Mutual Agreement Procedure
Article 26 – Exchange of Information
Article 27 – Assistance in collection of Taxes
Article 28 – Members of Diplomatic Mission
Article 29 – Territorial Extension
Article 30 – Entry into force
Article 31 – Termination
31
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D. International Taxes - Article 4 (Tie Breaker Test)
Resident
Art 4 (1) & (2)
Individual
Resident in both
states
Permanent home in
both states
No
Domicile, Residence,
Place of management
No
a) State in which individual
has a Permanent Home
No
b) State in which individual
has a Centre of Vital
Interest
Corporate
Corporate Resident in
both states
No
Corporate is resident of State
in which it is registered
Corporate is the resident of that
state in which it has its place of
effective management
Centre of vital
interest in both
states
National in both
states
32
No
c) State in which individual is
a national
No
Competent Authorities of
the contracting states will
settle.
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D. International Taxes - Transfer Pricing
Basics:
• Transfer Pricing is
intra-group transactions
the
process
of
setting
prices
for
• All stakeholders of a business may question intra-group / inter-unit
prices
• Commonly questioned by Government as a stakeholder and therefore
need for specific legislation
• OECD recommends the Arm's length principle for setting Transfer
Prices
33
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D. International Taxes - Transfer Pricing
Definition and objective:
• Transfer pricing refers to the pricing of cross-border transactions
between two associated entities
• When two related entities enter into any cross-border transaction, the
price at which they undertake the transaction is ‘transfer price’
• Due to the special relationship between related companies, the
transfer price may be different than the price that would have been
agreed between unrelated companies
• Price between unrelated parties in uncontrolled conditions is known as
the “arm’s length”
price (ALP)
To prevent
shifting of profits from India
Company A
India
34
Company B
Overseas
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D. International Taxes - Transfer Pricing in India
International Transactions
between
Associated Enterprises
at
Arms Length Price
supported by
Extensive contemporaneous documentation
35
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D. International Taxes - Transfer Pricing in India
International Transaction:
• Between non-resident and non-resident
• Between non-resident and resident
• Normally not between resident and resident
36
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D. International Taxes - Transfer Pricing in India
Arms Length Price:
• Law requires an “Arms Length Price” (‘ALP’) to be
established
• ALP means price applied in uncontrolled conditions (open
market price)
• Determined as an Arithmetic Mean of uncontrolled prices
(or margins)
• Flexibility accorded to taxpayer to adopt any price within
(+/-) 5% of the arithmetic mean
(Budget 2012 clarified, cannot be considered a standard deduction)
37
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Arm’s length price
•
As per Section 92F, “Arm’s length price” means a price which is
applied or proposed to be applied in a transaction between
persons other than associated enterprises, in uncontrolled
conditions
Uncontrolled Transaction
(ALP)
Unrelated Enterprise B
Enterprise A
Controlled Transaction
Related Enterprise C
• “Arm’s length price” would be similar price charged to Unrelated
Enterprise in an uncontrolled Transaction
• The ALP can vary by 5% of the Arithmetic Mean of more than
one price (Budget 2012 clarified, cannot be considered a standard deduction)
38
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Associated Enterprise
Equity / Debt
Management
• >= 26% direct
/indirect holding
by enterprise
• Appointment >
50% of Directors
/ one or more
Executive
Director by an
enterprise
• OR
• By same person
in each
enterprise
• Loan >= 51% of
Total Assets
• Guarantees > =
10% of debt
• > 10% interest in
Firm / AOP /
BOI
39
• OR
• Appointment by
same person in
each enterprise
Activities
Control
• 100%
dependence on
use of
intangibles for
manufacture /
processing /
business
• One enterprise
controlled by an
individual and
the other by
himself or his
relative or jointly
• Direct / indirect
supply of >=
90% Raw
Materials under
influenced prices
and conditions
• One enterprise
controlled by
HUF and the
other by itself, a
member or his
relative or jointly
• Sale under
influenced prices
and conditions
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Methods for Arm’s length price determination
Indian law provides for application of following methods:
 Comparable Uncontrolled Price method (CUP): Comparison of
actual price
 Resale Price Method (RPM): Comparison of gross margin for a
distributor
 Cost Plus Method (CPM): Comparison of gross margin for a
manufacturer / service provider
 Profit Split Method (PSM): Sharing of profits among entities
sharing proportionately in risks in a highly integrated operation
 Transaction Net Margin Method (TNMM): Comparison on a net
(operating) profit basis
No priority of methods; flexibility granted to tax-payer for selection of Most Appropriate
Method
40
Transfer Pricing Rules
Rule 10A - Defines certain expressions
Rule 10B Arms’
Length Price
41
Rule 10C
Most Appropriate
Method
Rule 10E
Accountants
Report
Rule 10D
Documentation
• Sets out
General
Applicability of
all five transfer
pricing methods
• Flexibility of
choice
depending on
facts and
circumstances
• Mandatory /
Supplementary
Documentation
requirements
prescribed
• Comparability
criteria defined
• Sets out the
factors to be
considered in
selecting the
‘most
appropriate’
method
• If aggregate
value of the
transactions
does not
exceed Rs. 10
million documentation
requirements
are relaxed
• Accountant's
Report required
as prescribed
• To assist the
Assessing
officer in
selecting cases
for scrutiny
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Contemporaneous Documentation
Group Overview:
Step wise process
This section of the TP Report discusses
the following:
Group Overview and
Industry Analysis
 Multinational
group profile of which
assessee enterprise is a part;
 Ownership structure and share holding
pattern of the assessee enterprise with
details of shares or other ownership
interest
Determination
Industry Analysis:
of ALP
Functional Analysis
Economic Analysis
The Industry analysis of the company
covers the following
 A broad description of the business of
the client and the industry in which the
client operates, and of the business of
the associated enterprises with whom
the client has transacted
42
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Contemporaneous Documentation
Step wise process
Functional Analysis:
• A functional analysis enables mapping of the economically relevant facts and
characteristics of transactions between associated enterprises with regard to their
functions, assets and risks. Hence a functional analysis facilitates characterization of the
associated enterprises and assists in establishing a degree of comparability with similar
transactions in uncontrolled conditions.
Economic Analysis:
•
This section provides the following details:
Value of
international
transactions
Selection of
MAM (Most
Appropriate
method
Bench
marking
Process
Adjustments
Determination
of ALP
Result:
•
Maintain Documentation to comply with the Transfer Pricing Regulations in India
•
43
To establish that the international transactions of the Company are at arm’s length as
prescribed in the Indian Regulations
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D. Indirect Taxes
D. Indirect Taxes – Overview
VAT
Service Tax
Customs
duty
Central
Excise Duty
45
• Tax on commodities/ Goods
• Tax on services
• Tax on imports / exports
• Tax on locally manufactured goods
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D. Indirect Taxes – Customs duty on Imports / Exports
Customs
duty
• Customs duty is applicable on Import transactions
• Refer to customs tariff act 1975 Part II for rates of duty applicable
• Part II of the Import tariff act is categorized into 98 chapters
• Part II of the Import tariff act also has a list of Generally exempted items
• Part III The second schedule covers Export Tariff & corresponding exemption
notifications
Customs
duty
46
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D. Indirect Taxes – Central Excise – Manufactured goods
Central
excise
duty
• Central Excise Act 1944,
• The Levy of Duty on manufactured goods is
covered under SECTION 3. of the Central Excise
• a duty of excise to be called the Central Value Added
Tax (CENVAT)] on all excisable goods (excluding
goods produced or manufactured in special economic
zones) which are produced or manufactured in India
as, and at the rates, set forth in the First Schedule to
the Central Excise Tariff Act, 1985 (5 of 1986.
• …
• Refer to the Central excise Tariff act 1985 for rates of
duty
• Rate of duty at present is 10% basic duty (Budget
recommends 12%)
• Depending on the item manufactured, Additional
duties are applied (CVD, Special Duty, etc)
• Note: Central excise duty is based on valuation
rules and the classification of the item
manufactured. (Example : Tobacco attracts
highest rate of duty while note books attract lower
rate of duty)
47
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D. Indirect Taxes – Services Tax
Service
Tax
48
• Service Tax is administered under chapter
V of the Finance Act and governed by rules
of Central Excise Act
• Sec 65 covers the definition of services,
• 121 services are covered, more services are
being added in the Budget 2012
• Budget 2012 introduced the a negative list of
17 services not taxable
• There are more exempted services covered by
various notifications from time to time
• Rate applicable for the services is specified in
Sec 66 of Finance Act currently specified at
12% w.e.f 1st Apr 2012
• Service Tax Returns to be filed half yearly in
prescribed format (ST 3 return)
• Service Tax payments have to be made online
Copyright © 2012 Deloitte Development LLC. All rights reserved.
D. Indirect Taxes – VAT (Local Sales Tax)
Local
Sales Tax
• AP VAT Act 2005
• An act to provide for and consolidate the law relating to levy of
value added tax on sale or purchase of goods in the state of
Andhra Pradesh and for matters connected therewith and
incidental thereto..
• Charging sec is Sec 4..
• Sale is taxed..
Local
Sales tax
49
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II. Knowledge management,
Appellate Hierarchy and
Practical challenges
Knowledge Management
Respective Acts
Income Tax Rules, Central Excise Rules, Customs rules
Circulars and notifications
Advance rulings
Case laws (SC, HC, Tribunal)
Concept Papers
Committee reports
Clarifications & FAQ’s
Press Information Bureau releases
51
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Appellate Hierarchy
Income Tax Hierarchy
ITAT
If selected for
audit
Tax filing
AO
High Court
CIT (A)
Supreme Court
MAP
AO — Assessing officer; CIT(A) — Commissioner Income Tax (Appeals); ITAT — Income Tax Appellate Tribunal (Highest Fact
finding Authority)
MAP — Mutual Agreement Procedure (USA and India Government level negotiation); NA — Not Applicable
Service Tax Hierarchy
CENVAT Refund Procedure
Remand
Refund
Application
by
Assessee
Notice/PH
CCE(A)
DC
CESTAT
High Court
Supreme
Court
Refund can be sanctioned by any of the authorities
CENVAT Audit Procedure
DC(A)
EA 2000
Audit
CCE(A)
CESTAT
Notice/PH
High Court
Supreme
Court
Comm.
DC — Deputy Commissioner; CCE(A) — Commissioner Customs & Central Excise(Appeals); Comm. – Jurisdictional
Commissioner, CESTAT — Customs, Excise & Service Tax Appellate Tribunal (Highest Fact finding Authority)
52
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Practical Challenges
Specifics
Generic Challenges

Manage EGO’s of Revenue officials,

PAN not available of service provider

Systems automation by Revenue wings,

Service Tax Registration #

Typographical errors, 95% PAN rule, TAN
not fully automated

Software related challenges

Frequent changes in forms / formats

Statutory due dates / conflicting holidays

Internal revenue targets – How realistic?

Availability of authorized signatories

Teams knowledge, application of correct
mismatch

amount deducted vs paid

Right and appropriate documentation

New notifications, clarifications, advance

53
Retrospective amendments to law
Lower deduction certificate (with amount
& period limitation)– Interpretation issues

E-TDS filings center's working hours

Online filing requirements, not all banks
notified to collect taxes
rulings & court judgments

Correctly filling the forms (assessment
year, Section, range, lower rates etc)
rates, classification / chapter issues

Application of correct TDS sections, rates,

Revisions / Revised filing requirements

Digital signature requirements
Copyright © 2012 Deloitte Development LLC. All rights reserved.
Questions
About Deloitte
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Member of Deloitte Touche Tohmatsu Limited

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