The entire domestic business world is now amidst the GST whirl. While this unified tax regime appears as a boon to some of the industries, a portion of them are oppressed by the top-heavy tax burden of this biggest tax reform. ‘Transfer pricing’ (TP) could be another existing cause which would be turning troublesome for the companies in the coming days as per the tax experts.
Transfer price is a price charged by a subsidiary or a division or a company to another. According to the rules that there has to be an ‘arm’s length’ while fixing this price so that it’s neither too low nor too high than the active open market price. So, in case companies are under speculation of tax evasion tax officers have legal right to go over and question them.
Unlike the previous tax regime, Goods and Service Tax offers something called as open market pricing for correlated party transactions. Many of the tax experts feel that at present, the valuation ruled of GST and those for calculating transfer pricing are not integrated and this could advance upcoming tax demands.
For open market pricing for the related party transactions, goods and service, whether global or domestic would now be calculated under specific valuation rules. There is still disorientation regarding the open market pricing, whether the open market pricing will be done on the basis of active TP mechanism or there will be revised, oncoming valuation rules, say tax experts.
There is so definite description of this open market pricing. It needs to be condensed at first place. Much as the current GST rules provide that where recipient unit is entitled for full credit, the value established in the in the invoice will be accounted to be open market value. Now the confusion is how to take in time-based delicacies of the transaction specific indirect taxes with the annualized pricing income tax decisions?
Transfer pricing disputes deal with the annual profit calculation of the MNCs and how they have been reconstructed their parent companies. Meanwhile many firms are dead against of this revised transfer pricing rule and have challenged this calculation in the courts as well.
Tax experts indicate that indirect taxes are greatly time-based. Thus, the time of supply is really crucial for the entire calculation and the input figures have similar importance too. On the other hand direct taxes are based on principle of aggregation. The calculation of which is mainly figured out on the due date of the annual tax return. Many of the experts suggest that this is basically heading towards the same focal point through two different set of rules. The bold points of GST is apparent, the fine clauses are yet to be revealed.
During the last three years tax department has been working on resolving this transfer pricing matter. To avoid future transfer pricing glitch the tax department has been signing Advance Pricing Agreements (APA) with several MNCs. An APA is basically a contract between the taxpayer (mostly MNCs) and the tax authority CBDT in India, where the transfer pricing process is established. The methodology of tax calculation could be then used for an agreed time period on the taxpayer’s upcoming global transactions. However, the transfer pricing is limited in MNCs dealings as of now, in future domestic transactions might attract indirect taxes as well.
-LNN (Liyans News Network)- Invest in affordable flats in Kolkata. No GST burden. Avail the PMAY subsidies. Explore on-hand and upcoming projects around north and south Kolkata area.
Transfer price is a price charged by a subsidiary or a division or a company to another. According to the rules that there has to be an ‘arm’s length’ while fixing this price so that it’s neither too low nor too high than the active open market price. So, in case companies are under speculation of tax evasion tax officers have legal right to go over and question them.
Unlike the previous tax regime, Goods and Service Tax offers something called as open market pricing for correlated party transactions. Many of the tax experts feel that at present, the valuation ruled of GST and those for calculating transfer pricing are not integrated and this could advance upcoming tax demands.
For open market pricing for the related party transactions, goods and service, whether global or domestic would now be calculated under specific valuation rules. There is still disorientation regarding the open market pricing, whether the open market pricing will be done on the basis of active TP mechanism or there will be revised, oncoming valuation rules, say tax experts.
There is so definite description of this open market pricing. It needs to be condensed at first place. Much as the current GST rules provide that where recipient unit is entitled for full credit, the value established in the in the invoice will be accounted to be open market value. Now the confusion is how to take in time-based delicacies of the transaction specific indirect taxes with the annualized pricing income tax decisions?
Transfer pricing disputes deal with the annual profit calculation of the MNCs and how they have been reconstructed their parent companies. Meanwhile many firms are dead against of this revised transfer pricing rule and have challenged this calculation in the courts as well.
Tax experts indicate that indirect taxes are greatly time-based. Thus, the time of supply is really crucial for the entire calculation and the input figures have similar importance too. On the other hand direct taxes are based on principle of aggregation. The calculation of which is mainly figured out on the due date of the annual tax return. Many of the experts suggest that this is basically heading towards the same focal point through two different set of rules. The bold points of GST is apparent, the fine clauses are yet to be revealed.
During the last three years tax department has been working on resolving this transfer pricing matter. To avoid future transfer pricing glitch the tax department has been signing Advance Pricing Agreements (APA) with several MNCs. An APA is basically a contract between the taxpayer (mostly MNCs) and the tax authority CBDT in India, where the transfer pricing process is established. The methodology of tax calculation could be then used for an agreed time period on the taxpayer’s upcoming global transactions. However, the transfer pricing is limited in MNCs dealings as of now, in future domestic transactions might attract indirect taxes as well.
-LNN (Liyans News Network)- Invest in affordable flats in Kolkata. No GST burden. Avail the PMAY subsidies. Explore on-hand and upcoming projects around north and south Kolkata area.
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