In part IV of our series on key legal consideration for establishing global capability centres (“GCCs”) in India,[1] we discuss the key taxation issues that foreign companies must be aware of ahead of setting up its operations in India.Continue Reading Taxation landscape of Global Capability Centres (GCCs) in India
English language and technical proficiency, coupled with the highly skilled workforce that India has to offer, has made the country a darling of most multinational companies (MNCs). For a while now, these MNCs have been outsourcing their routine as well as technical and complex business processes to their subsidiaries or third-party service providers in low-cost and efficient jurisdictions, including India. Indian entities, in turn, offer their expertise in customer care, follow ups for regular payables like credit card, life and healthcare insurance premiums, routine troubleshooting services, assisting internal departments like finance, accounting, human resources departments, etc., as well as supporting various complicated and complex issues like sophisticated high-end research and technology services, analytical and computational support services, etc. The Government has taken several steps to encourage the service sector and has come up with many benefits and incentives. However, there appears to be a new set of challenges that this sector must deal with, arising in the context of Goods and Service Tax (“GST”).Continue Reading Refund of Unutilised ITC cannot be Denied to Supplier of Subcontracted Services
The concessionaire or contractors/ sub-contractors of the national/ state highways face a possible levy of Goods and Services Tax (“GST”) on their supplies. However, GST is exempted for services when toll is paid to access the roads or bridges.[1] The exemption is also applicable on payment of annuity for access to roads.[2] A contract in relation to highways may deal with several aspects such as construction of a highway, shops, operation of highways, maintenance of highways, collection of toll or separate charges like overhead charges, etc. Further, with different models of highway projects, it becomes essential to analyse the nature of supply, party rendering such supply to determine if any exemption or concessional rate is available.Continue Reading Karnataka High Court’s decision on GST levy provides a comfort to highway projects
India witnessed tax revolution in 2017 when Goods and Services Tax (“GST“) was implemented to subsume existing indirect taxes on production, provision of services, sale of goods, entry, etc. The intent clearly has been to provide seamless flow of credit and avoid multiple levies on same transaction. Unfortunately, due to Integrated GST (“IGST“) payable on import of good at the transaction value, (including transport value), as well as on the procurement of transportation services as a separate supply of service, there have been instances of GST being levied twice.Continue Reading SC Decision on Levy of GST on Ocean Freight May Act as Gamechanger
In a recent decision involving Canon India, the Hon’ble Supreme Court (“SC”) had adjudicated about the authority of the officers of Directorate of Revenue Intelligence (“DRI”) to issue a show cause notice (“SCN”) under Section 28 of the Customs Act, 1962 (“Customs Act”) for the recovery of short payment of customs duty.[1] The Hon’ble SC held that a DRI officer does not have the authority to initiate proceedings through SCN issuances, since such an officer was not the person to clear the goods initially.Continue Reading Who is proper officer for customs? The argument continues!
A recent social media post by an Indian actor depicting an invoice issued by a prominent hotel where he was charged INR 442 for two bananas created widespread furor among the public, industry players and the tax authorities, with certain quarters challenging the legality of levy of Goods and Service Tax (“GST”) itself on the supplies made. The invoice indicated the description of the sale item as a ‘fruit platter’ and the cumulative rate of GST as 18%. The Central Excise & Taxation Department also swung into action, served a show cause notice to the hotel and imposed a penalty of INR 25,000 for levying GST on sale of bananas. According to the department, serving bananas to the customer in a hotel room was an exempt supply of goods, not involving any element of service.
The banana row brings to light the classic conundrum of classification of composite supplies and consequent rate of GST applicable to such supplies. Composite supplies refers to supplies of two or more taxable supplies of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply (for example, supply of an air-conditioner coupled with delivery and installation at the customer’s premises would be a composite supply with supply of air-conditioner being the principal supply). The rate of tax in case of a composite supply is the rate applicable to the principal supply.
Continue Reading Banana Bytes: A Classification Conundrum under GST
Since its implementation on July 01, 2017, the Goods and Services Tax (GST) regime continues to evolve on various fronts by way of rationalisation of tax rates, availability of exemptions, procedural amendments, etc. While the Government has been relentless in its efforts to iron out every crease, bottlenecks continue to persist. With the benefit of hindsight, here is a critical look at some of the significant triumphs and misses on completion of its first anniversary.
Continue Reading GST – First Report Card
In the first concrete step towards implementing the much awaited Goods and Services Tax (“GST”) regime, the Model GST Law was released on June 14, 2016 (“Model”), even as the Government strives to pass the enabling Constitutional Amendments. Under the Model, Central/State GST shall be leviable on all intra-state supplies of goods and/or services and Integrated GST shall be leviable on all inter-state supplies of goods and/or services.
As the GST regime is meant to subsume existing indirect taxes, concepts such as manufacture, provision of service, sale of goods, etc. shall be replaced by a single taxable event: supply of goods and/or services. The term “supply” has been defined to include all forms of supply of goods and/or services made or agreed to be made for a consideration by a person in the course or furtherance of business, importation of service, and supplies made or agreed to be made without consideration such as permanent transfer of business assets, etc. Interestingly, the definition also deems the supply of any branded service by an aggregator under a brand name owned by him to be a supply by the aggregator. This all pervasive definition of “supply” has to be complemented by seamless availability of input tax credit, which has been largely addressed by the Model.
However, note that the supply of goods by a registered person to a job-worker shall not be treated as supply of goods. A negative list has also been prescribed for transactions (e.g. transactions by Government, etc.) on which GST shall not apply.Continue Reading A Step towards Belling the GST Cat