Recent Amendments in Tax affecting Pharma and FMCG companies

Maulik Doshi - Deputy Managing Director, Transfer Pricing and International Tax, Nexdigm begins the webinar by talking about the history of Section 37, which came into effect in April of 1967, along with a timeline of the amendments made to the same. After briefing the viewers about the history of Section 37, Maulik gives an in-depth explanation of the Section and the Central Board of Direct Taxes (CBDT) circular. He covers points such as the Finance (No. 2) Act, ‘98, the intent of explanation, the effect of the Judiciary, and the CBDT circular 772 of 1998.

Maulik then talks about the Indian Medical Council (IMC) Regulations which are applicable to medical practitioners and the various actions that are deemed unethical. The presentation then looks at the key judicial precedents before Apex Laboratories, the key takeaways from the Supreme Court ruling, the proposed amendment to section 37, and the way ahead.

The webinar then continues with Maulik giving a brief overview of Section 194R and sheds light on the insertion of Section 28(iv), defining the terms ‘benefit’ and ‘prerequisite’ that are used in it, and the important parameters for taxing under the Section. The slides then discuss several cases that highlight the issues in the inapplicability of Section 194R. Here, Maulik states that these are just a few cases out of the numerous possibilities and that the government is expected to release a FAQ that would help clarify the implementation of the aforementioned Section 194R to a great extent.

Furthermore, the webinar delves into the consequences of not complying with the proviso to Section 194R and what the way ahead looks like. Maulik states that there is a strong requirement for review and documentation when it comes to cases like promotion of a product, where a conference is being organized, or travel that is being sponsored, as there is a great deal of uncertainty and potential for misinterpretation.

Maulik provided clarity on one issue, which sought light on the obligation cast by the Section 194R on the payer, ensuring that taxes are paid, and who should be paying this tax, the recipient or the payer. Additionally, he helped the viewers understand:

• how gifts are to be interpreted;
• how the taxation on gifts is to be handled;
• if travel expenses for advocates come under section 194R;
• and understanding the implications of the healthcare conference being held in Switzerland.