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Direct Tax

Open to reviewing INR 0.25 million cap on tax-free EPF contribution: Finance Minister

[Excerpts from Businessline, 22 February 2021]

The finance minister (FM) Nirmala Sitharaman indicated that there is no plan to discourage higher income earners from saving with the Employees’ Provident Fund (EPF). The FM also confirmed the possibility of reviewing the contribution limit of INR 0.25 million a year for tax-free interest, which was imposed in the recent Union Budget. It was clarified that EPF shall not be merged with the already existing National Pension Scheme (NPS).

Government extends deadline for filing declarations and payments under Vivad Se Vishwas Scheme

[Excerpts from Business world, 27 February 2021]

Recently, the income tax department extended the deadline under the Vivad Se Vishwas Scheme for filing declarations till 31 March 2021 and making payment till 30 April 2021.

Rationalization of tax norms for foreign nationals living in India urged by Foreign Investors Forum

[Excerpts from The Economic Times, 2 March 2021]

For attracting investment and encouraging fund managers and highflying corporate executives having overseas incomes to stay in the country, the foreign investors’ forum has been requesting the government to align the tax provisions with that of Singapore and China. Individuals with foreign domicile residing in India can avail the treaty benefits in case of double taxation on non-Indian incomes. However, challenges like paying higher taxes, availing tax credit benefits, subjectivity in tax assessments and risk arising due to reporting requirements still exist.

NRIs and foreign nationals with forced overstay in India required to submit double taxation details by 31 March

[Excerpts from Business Standard, 3 March 2021]

As per a recent circular from the Central Board of Direct Taxes (CBDT), a person would become resident in India for the year 2020-21 only if he/ she stayed in India for 182 days or more and thus, a short stay will not result in Indian tax residency. CBDT in the Circular required the non-resident individuals facing double taxation in FY 2020-21 because of forced overstay in India due to COVID-19 to furnish the specific information by 31 March 2021. CBDT may consider providing either a general relaxation or specific relaxation in individual cases, depending on the information it gets from people.

Foreign Portfolio Investors (FPIs) request for a common platform to avail dividend tax benefits

[Excerpts from Business Standard, 4 March 2021]

Many foreign custodians have reached out to the depositories to allow (FPIs) to upload details for availing lower withholding tax on dividends received at the depository account level. With an aim to enable companies to download the requisite information directly from the depositories or from their registrars, making it easier for them to withhold tax after taking into account the applicable treaty benefits.

India files appeal against Cairn Energy USD 1.4 billion arbitration award

[Excerpts from Economic Times, 23 March 2021]

As per the sources, India has challenged the arbitration tribunal’s ruling overturning its demand for INR 102.47 billion in back taxes from Cairn Energy Plc at The Hague. As per the Finance Ministry, taxation is not a subject of the UK-India Bilateral Investment Treaty under which Cairn had sought rescinding of the tax demand raised, and so the award should be dismissed. It is of the opinion that Cairn set up a tax abusive structure in 2006 when it reorganized its India business to list the local unit, and did not pay taxes anywhere in the world on the gains that it made in India. The Arbitration Tribunal had observed that the issue at stake is not a matter of domestic tax law, it is rather whether the fiscal measures taken by the state, valid or not under its own tax laws, violate international law.

Indirect Tax

Widening the ambit of e-invoicing requirements

[Notification No. 5/2021 - Central Tax dated 8 March 2021]

Earlier, the registered persons whose aggregate turnover in any preceding financial year exceeds INR 1 billion were required to comply with e-invoicing requirements regarding B2B supplies, including exports. With effect from 1 April 2021, the registered persons with aggregate turnover exceeding INR 0.5 billion in any preceding financial year are also liable to comply with the e-invoicing requirement.

Changes to HSN declaration on tax invoice

[Notification No. 78/2020 - Central Tax dated 15 October 2020]

With effect from 1 April 2021, taxpayers having aggregate turnover up to INR 50 million in the preceding financial year are required to mention HSN code at 4-digit level (instead of 2-digit level). However, for such taxpayers, the said requirement is optional in the case of B2C supplies. Further, taxpayers having an aggregate turnover of more than INR 50 million in the preceding financial year are required to mention the HSN code at a 6-digit level (instead of a 4-digit level) for both B2B and B2C supplies.

Clarification on refund related issues

[Circular No. 147/03/2021 dated 12 March 2021]

  • Extension of relaxation for filing refund claim in case of wrongdisclosure of zero-rated supplies in GSTR-3B

    Certain taxpayers had inadvertently entered the details of export of services or zero-rated supplies to a Special Economic Zone Unit/ Developer in table 3.1(a) instead of table 3.1(b) of GSTR-3B, resulting in failure to claim a refund of the IGST paid on the same. Earlier, a Circular was issued to clarify that for the tax periods from 1 July 2017 to 30 June 2019, such registered persons shall be allowed to file the refund application on the common portal subject to the condition that the amount of refund of IGST claimed shall not be more than the aggregate amount of IGST mentioned in tables 3.1(a), 3.1(b) and 3.1(c) of GSTR-3B filed for the corresponding tax period. Now, the present Circular extends this relaxation for all tax periods till 31 March 2021.

  • Clarification in respect of refund claim by the recipient of deemed exports

    Earlier, vide Circular No. 125/44/2019- GST dated 18 November 2019, the recipient of deemed export supplies for obtaining the refund of tax paid on such supplies was required to submit an undertaking that he has not availed ITC on invoices for which refund has been claimed. However, from a practical standpoint, when such taxpayer proceeds to file a refund claim on the portal, the system requires them to debit the corresponding ITC amount so claimed from their electronic credit ledger.

    Accordingly, the present Circular has now corrected this anomaly, and the restriction placed by the earlier Circular on the recipient of deemed exports in relation to non-availment of ITC and submitting an undertaking in that regard has been removed.

  • Clarification on manner of calculating refund of adjusted total turnover

    It has been clarified, for the purpose of Rule 89(4) of CGST Rules, 2017, that the value of export/ zero-rated supply of goods to be included while calculating ‘adjusted total turnover’ will be the same as being determined as per the amended definition of ‘Turnover of zero-rated supply of goods’ in the said sub-rule viz. it cannot exceed 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier.