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Digital Tax on MNCs: India seeks changes in OECD math

Nov 19, 2019 | Blog, Direct Taxation

India has sought changes in the Organisation for Economic Cooperation and Development (OECD) proposal on digital taxation, saying it would deny the country its proper share of taxes from multinationals such as Google, Facebook, Uber and Netflix, which generate substantial revenues locally.
The government has proposed a more balanced principle for the taxation of such companies based on place of revenue generation.
“We want a fair share in revenues that accrue to the company from the country,” said a government official aware of the development. India has submitted its concerns to the body. The OECD had on October 9 released a draft on taxing digital companies for public comment. Discussions on the proposal are to be held on November 21-22. All countries have to agree for the rules to be enforced.

No GST on CXO Salaries: Govt Set to Clarify
The government is looking to clarify that goods and services tax (GST) should not be applicable on salaries of chief executives sitting in head offices, two people in the know said.
This comes after the tax department started raising queries on how companies have dealt with this issue. ET had first written on November 14 that some of the top companies headquartered in Pune, Mumbai and New Delhi have started receiving queries from the tax department on cross-charging of CEO and CFO salaries.
According to a person close to the development, the Central Board of Excise and Customs (CBEC) is set to clarify that common function like Human Resources should be out of the GST gamut.

MAT removal for SEZs on the cards
To raise investments and boost exports from the Special Economic Zones (SEZs) across the country, the government is considering removing minimum alternate tax (MAT), reduction of duties on domestic sales and allowing job work.
At an inter-ministerial meeting last month, the Piyush Goyal-led commerce department has asked the revenue department to consider whether MAT can be removed from the export turnover from SEZs, sources said.
The government last month cut MAT to 15 per cent from 18.5 per cent, while also slashing the corporation tax rate to 22 per cent from 30 per cent. However, the Central Board of Direct Taxes also issued a detailed circular that MAT credit will not be available to a company that opts for lower corporation tax rate.

High-Level Advisory Group’s recommendations on foreign investment and taxation laws
The Government is focusing on making India a USD 5 trillion economy by improving its trade policies and tax structure. To achieve the same, a High Level Advisory Group (HLAG) was constituted by the Minister of Commerce in September, 2018. The committee consisted of 12 members who have been asked to provide suggestions on ways to promote the country’s trade, investments and other economic activities. Various recommendations have been made by the committee to boost India’s share and importance in global merchandise and service trade, managing bilateral trade relations and mainstreaming new age policy making. The major recommendations made to boost foreign investment and to bring black money back in India are as under:-

  • Elephant Bonds
  • Round Tripping
  • Offshore Funds
  • Foreign Individual Investment into India

Key Highlights of Simplified Form GSTR-9 and Form GSTR-9C
The taxpayers and tax practitioners were facing difficulties in filing annual return in Form GSTR-9 and reconciliation statement in Form GSTR-9C. Now, the Government has extended the due dates of filing annual return in Form GSTR-9 & reconciliation statement in Form GSTR-9C for F.Y. 2017-18 to December 31, 2019 and for F.Y. 2018-19 to March 31, 2020. Moreover, it has been decided to make certain changes in two aforementioned GST forms.

Sebi Tightens Rules on Participatory Notes
India’s capital markets regulator on Tuesday tightened rules on participatory notes (p-notes), or offshore derivative instruments issued by brokers to foreign investors not registered locally, while easing some operational norms for select overseas funds.
Sebi said late Tuesday that foreign portfolio investors (FPI) would have to make separate registrations for issuing p-notes for underlying derivatives. However, this requirement is waived for p-notes against underlying cash equities.
Based on the new guidelines, some of the existing FPIs will have to get separate registrations if they want to issue p-notes based on derivatives.

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