Direct Tax
CBDT guidelines on loans and borrowings taken by sovereign wealth funds/pension funds for making tax-free investments in India
[Circular No. 19/2021 dated 26 October 2021]
Section 10(23FE) provides for exemption to sovereign wealth funds and pension funds on their income in the nature of dividend, interest and long-term capital gains arising from investment in infrastructure in India made between 1 April 2020 and 31 March 2024 subject to fulfillment of certain conditions. The said Section also provides that such funds having loans or borrowings, directly or indirectly, for making investments in India shall not be eligible for such exemption.
In order to provide further clarity to the term ‘indirectly,’ the CBDT, through this Circular has clarified that where loans and borrowings have been taken by the entities eligible for exemption under Section 10(23FE) as well as their holding entity or any entity in the chain of holding or an associate concern, with the purpose of making an investment in India, such entities shall not be eligible for exemption under the aforementioned Section.
However, it is further clarified that where such loans and borrowings have not been specifically taken for making an investment in India, it shall not be presumed that the investment in India has been made out of such loans and borrowings and such fund shall be eligible for exemption under the aforementioned Section.
Introduction of new Annual Information Statement (AIS)
[Press Release dated 1 November 2021]
Income Tax Department has rolled out the new Annual Information Statement (AIS) on the Compliance Portal. The new AIS includes additional information relating to interest, dividend, securities transactions, mutual fund transactions, foreign remittance information, etc.
A simplified Taxpayer Information Summary (TIS) has also been generated for each taxpayer, which shows the aggregated value for the taxpayer for ease of filing returns. The information in TIS will be used for pre-filling of return (pre-filling will be enabled in a phased manner). In case the ITR has already been filed and some information has not been included in the ITR, the return may be revised to reflect the correct information.
In case there is a variation between the TDS/TCS information or the details of tax paid as displayed in Form26AS on the TRACES portal and the TDS/TCS information or the information relating to tax payment as displayed in AIS on Compliance Portal, the taxpayer may rely on the information displayed on TRACES portal for the purpose of filing of ITR and for other tax compliance purposes.
Indirect Tax
Clarification on applicability of Dynamic Quick Response (QR) Code on B2C invoices
[Circular No. 165/21/2021-GST dated 17 November 2021]
The CBIC has clarified that wherever an invoice is issued to a recipient located outside India towards the supply of services, whose place of supply falls in India, and the payment is received by such supplier in convertible foreign exchange or in Indian Rupees (as permitted by the RBI), such invoice may be issued without a Dynamic QR Code. This is so because such a Code cannot be used by the recipient outside India to make payment to the supplier.
Clarification on certain refund related issues
[Circular No. 166/22/2021-GST dated 17 November 2021]
The following clarifications have been issued regarding certain refund-related issues:
- The time limit of two years, within which an application for refund should be filed, would not be applicable in cases of refund of excess balance in electronic cash ledger.
- There is no requirement of furnishing a certificate/declaration of not passing the incidence of tax to any other person (unjust enrichment) in cases of refund of excess balance in electronic cash ledger.
- The TDS/TCS amount, which remains unutilized in the electronic cash ledger after discharge of tax dues, can be refunded to the registered person as an excess balance in the electronic cash ledger.
- The relevant date for filing a refund claim for refund of tax paid on supplies regarded as deemed exports would be the date of filing of return related to such supplies by the supplier.
Guidelines for disallowing debit of electronic credit ledger
[CBEC-20/16/05/2021-GST/1552 dated 2 November 2021]
Rule 86A of the CGST Act, 2017 provides for conditions of use of amount available in electronic credit ledger (ECrL). In certain circumstances, if the Commissioner or an officer authorized by him, not below the rank of Assistant Commissioner, has “reasons to believe” that credit of input tax available in the ECrL has been fraudulently availed or is ineligible, he may disallow debit of an amount equivalent to such credit in the ECrL. The government has issued certain guidelines for implementation of the Rule as under:
- “Reasons to believe" shall be duly recorded by the concerned officer in writing on file before he proceeds to disallow debit of amount from ECrL of the said person.
- Such power of disallowing debit of amount must not be exercised in a mechanical manner and all the facts of the case must be carefully examined.
- Monetary limits have been issued for exercise of power under this rule by the officers.
- Amount disallowed should not be more than the amount of input tax credit that is believed to have been fraudulently availed or is ineligible.
- Since the action of restricting the debit of the electronic ledger has a bearing on the working capital of the registered person, the investigation and adjudication should be completed at the earliest.