Tax & Accounting
India’s government is keen to roll out its Goods and Services Tax (GST) from July 1 and is speedily laying the groundwork for immediate implementation.
On March 4, two bills (federal GST law and integrated GST law) were finalized by federal and state finance ministers in the GST council, the federal agency regulating the GST. Two more bills now need to be approved by the 36 state and union territory legislatures by March 16 when the council meets again.
After November 2016’s surprise demonetization, businesses in India looked to the Union Budget 2017 to gauge the government’s economic outlook.
While this year’s budget retained a development-oriented focus, key tax and regulatory provisions declare the government’s intent to encourage business, create jobs, promote entrepreneurship in a digitally empowered economy, and spur GDP growth.
In this context, startups and micro, small, and medium enterprises (MSMEs) should pay attention to the following provisions and amendments stated in the latest budget:
By Koushan Das
India will adopt the General Anti-Avoidance Rules (GAAR) with effect from April 1, 2017. GAAR is an anti-avoidance regulation that allows tax authorities to deny tax benefits on transactions conducted with the purpose of avoiding taxes.
While tax avoidance regulation in India is currently governed by the Specific Anti-Avoidance Rules (SAAR), it was not considered comprehensive enough by the government, leading to the formulation of GAAR. However, SAAR regulations will continue to be applicable in addition to GAAR provisions: GAAR will cover those avoidance cases which fall short of SAAR regulations.
By Dezan Shira & Associates
The Central Board of Direct Taxes (CBDT) recently finalized the guidelines for Place of Effective Management (POEM) regulations in India, which will come into effect from April 1.
POEM is an internationally recognized test for determining the residence of a company incorporated in a foreign jurisdiction. Intended to curb corporate tax evasion, the new norms will apply to the assessment year 2017-2018 and subsequent assessment years. There will be no retrospective assessment.
By Dezan Shira & Associates
The government-appointed Shankar Acharya committee has recommended that India shift from the current April to March financial year to a January to December financial year. If the government agrees to go ahead with the recommendation, it can confine this year’s fiscal year to nine months up to December 2017 or make the change in the 2018 fiscal year.
The government will discuss this plan further during the Union Budget on February 1. Many expect the government to make an announcement in the near term.
By Koushan Das
Overseas companies providing online information and database access (‘OIDAR’) services will have to pay service tax from December 1, 2016, making electronic services potentially costlier for consumers. The Central Board of Excise and Customs (CBEC) defines OIDAR to include services delivered via information technology (over the internet or an electronic network), which is essentially automated involving minimal human intervention.
By Melissa Cyrill
Responding to the challenges arising from the demonetization of high value currency, the government has been keenly promoting digital financial literacy across the country. In fact, a new mantra has emerged towards the development of a cashless economy. Towards this, several new initiatives have been unveiled including widespread campaigns to spread the adoption of digital payment mechanisms, such as the ‘Digi Dhan Abhiyan’ by the Ministry of Electronics and IT (MeitY). Through the Digi Dhan Abhiyan over 55,000 merchants have begun offering digital payment options to rural customers, and more than 2.5 million people in rural areas (districts and blocks) have started using digital modes of payments. Moreover, upon new RBI regulations, Paytm has begun allowing its “registered” merchant customers to transfer US$ 737 (Rs 50,000) to their bank accounts; the maximum limit was US$ 368 (Rs 25,000) earlier.
By Tracie Sloop Frost
Editor’s Note: This article was first published on July 29, 2015 and has been updated to accommodate regulations.
The decision to return permanently to India is a serious matter for many Indians living abroad. Not only does this decision involve questions of familial and social benefits, health considerations, and nostalgia for home, it also requires careful financial planning and preparation. In this article, we examine some of the most common areas of financial planning for returning Non-Resident Indians (NRIs).
In general, investment and tax provisions relating to NRIs returning to live in India are fairly generous. However, NRIs should carefully plan their return to India to ensure there are no surprises with respect to managing their overseas income and investments.