During an event held on June 8-9, 2019 at Fukuoka, Japan, the Finance Ministers of the G20 member nations called for the creation of common Digital Tax Rules for multinational technology companies.
Big Tech Giants such as Facebook, Google, Amazon, etc., face criticism for cutting their tax bills by booking profits in low-tax countries regardless of the location of the end customer. G20 members have agreed to implement common rules to plug in the loopholes that multinationals use to book profits at off-shore locations where the tax rate is low.
A work plan has been endorsed which provides for reaching global consensus on revised rules for taxing multinational groups by 2020. The G20 Ministers in a Communique released have said that we welcome the recent progress on addressing the tax challenges arising from digitalization and endorse the ambitious work program that consists of a two pillar approach, developed by the inclusive framework on BEPS. We will redouble our efforts for a consensus-based solution with a final report by 2020.
GSTN Move to Give Leg-up to Software Product Firms
A government bid to democratise access to accounting software by making it free for small companies and ensure compliance with the indirect tax regime will give a leg-up to Indian software product companies, helping them scale their user base and strengthen business.The Goods and Services Tax Network (GSTN) last week allowed small businesses, with a turnover of Rs. 1.5 crore or lower, to download a software that would help create invoices and account statements, manage inventory and prepare GST returns.
Six firms are listed on the GSTN website which will offer software free of cost to the targeted 8 million small businesses, or nearly a seventh of India’s estimated 55 million SME base.
Roll out of simple GST returns now deferred to October
Giving the industry a breathing time, the government has deferred implementation of the simplified returns to October from earlier deadline of July and came out with clear-cut phase-wise time lines for a transition. Trial of parts of new returns will start from next month and the whole process would replace the existing returns by January 2020. Currently, there are two forms that every registered unit has to file either monthly depending on their sales— GSTR 1 for sale in voices and GSTR 3B which is summary of purchases and sales.
E-invoicing system on the anvil
The Goods and Services Tax (GST) Council in its first meeting under new chairperson, Union Finance Minister Nirmala Sitharaman, on June 20 will consider the introduction of an electronic invoicing mechanism for large companies on a voluntary basis, with an aim to capture transactions on a realtime basis.
According to the interim report filed by a high-level panel on “Generation for E-invoice through GST network portal”, the system will be first brought in for the firms with an annual turnover of over ~500 crore for easier compliance. The companies will be given an option to opt for this initially.
“The new system will cause disruption, but we do not want a complete disruption in the system, hence will start with large firms, based on their readiness. Small companies may not be ready for a big information technology change at this point as it will cause them huge discomfort. Hence, we are leaving them out” said a government official.
CBDT Tightens Framework for Compounding of Offences
India’s direct taxes body has tightened framework for compounding of offences almost shutting the window for money laundering, non-disclosure of foreign assets or possession of a benami asset.
The latest guidelines from the Central Board of Direct Taxes (CBDT), which come into effect from June 17, clearly state offences in this category cannot “normally be compounded. However, finance minister can relax restrictions on consideration of a report from CBDT.
The latest guidelines, superceding the ones issued in December, 2014, classify offences into three categories. The first category of offences open to compounding include defaults under tax deducted or collected at source, failure to file return. The second category of offences, for which compounding will not be allowed, deal with wilful evasion of tax, removal or concealment or transfer or delivery of property to thwart tax recovery in a search operation.
Cross border insolvency: New provisions on cards
The ministry of corporate affairs is learnt to have prepared a Cabinet note on cross border insolvency that talks of bringing in a separate chapter in the Insolvency and Bankruptcy Code (IBC) against the current provisions under Sections 234 and 235 of the Code.
Rules under the current provisions have not been notified and, hence, cross border insolvency has not yet become effective.
The note is expected to be taken to the Cabinet soon. The proposed cross border provision will empower foreign creditors to claim assets on insolvent Indian companies and vice versa.