Highlights of the India-Hong Kong DTAA

GST - Agenda for the second year - Part 36 - Interest - Is it a consideration for supply?Govt amends Import Policy conditions for Electronics & IT goodsPrabhu meets US Counterpart; both hail robust bilateral tiesIndia takes measures to boost trade with AfricaCBIC Member John Joseph gets addl charge of Member (IT, Legal & CV)GST - Petitioners should be called before the CBIC for a consultative meeting; deliberations to be placed along with petition before the GST council for its consideration: HCArgument that price of 'Electric Chimney' was not increased at the time of introduction of GST when tax rate was fixed at 28%, hence the question of reducing price when GST rate was brought down to 18% is legally unsustainable: NAAContention that effective tax rate during VAT period was around 18% and the GST rate w.e.f 15.11.2017 was also 18%, therefore, there was no need for revision in price when tax rate had been decreased from 28% to 18% is untenable: NAAVAT - Delivery of possession is sine qua non, for transfer of 'right to use' of goods and to invoke provisions of Sec 3-F of UP VAT Act: HCGovernment permits export of Potatoes, Onions, Rice, Wheat Flour, Sugar, Dal and Eggs to Republic of Maldives under bilateral trade agreementAmendments made in ANF 3B of Handbook of Procedures for applying for SEIS benefits under FTPAmendments in ANF 3D - number of entries of Shipping bills/Airway bills which can be filed in a single online ANF 3D application increased from 50 to 250 for claiming MEIS benefitsCus - Enhancement of redemption fine without determining market value of goods and duty payable, cannot be sustained: CESTATCus - Since replacement cost represents intrinsic value of container, agreed upon between lessor and lessee in one way lease, same is basis of value: CESTATIncome tax - Omission to consider mixed question of law & fact - Fit case for remand: HCIncome tax - Independent primary evidence and not secondry, should be basis for addition u/s 69C: HCIncome tax - Active PAN number of deceased assessee is no basis to presume that assessee is alive, more so if Revenue was intimated about demise: HCIncome tax - Unaccounted cash credit - Cash payments made without any entry in balance sheet merits addition u/s 68: ITATIncome tax - Proviso to Section 2(15) will not affect institutions involved in imparting education: ITATCX - Charge of clandestine removal is a serious charge and must be supported by evidence - as no actual stocking done by Revenue, no reason to disbelieve the statement of Internal Auditor: HCST - It is inexplicable as to how Department withdrew SCN dated 30.08.2001 and issued a fresh SCN in 2004 for very same period: CESTATCX - No penalty can be imposed on a Private Limited Company under Rule 26(1) of CER: CESTATGST - Agenda for the second year - Part 36 - Interest - Is it a consideration for supply?Govt amends Import Policy conditions for Electronics & IT goods

The India-Hong Kong DTAA enters into force from 30th November, 2018. The same would be effectively applicable from 01st April, 2019.  Accordingly, the benefit of the provisions of the DTAA can be claimed in respect of the income derived in any year starting from April 1, 2019. The companies engaged into cross-border transactions with Hong Kong were eagerly awaiting this DTAA to become effective. The articles of India-Hong Kong DTAA are aligned with BEPS and MLI in order to curb tax evasion/ avoidance, treaty shopping practices, conduit companies practices etc. Now, the companies resident in India as well as Hong Kong would be able to take shelter under the treaty, thereby, avoiding double taxation and/ or taxation at higher rates.  The key highlights of the India-Hong Kong DTAA are given below: A) Base Erosion and Profit Shifting (BEPS) AND Multi-Lateral Instrument (MLI) Articles of the India – Hong-Kong DTAA are aligned to the provisions of Multilateral Instrument to implement tax treaty related measures to prevent Base Erosion and Profit Shifting. B) Permanent Establishment (PE) – Article on Permanent Establishment (PE) includes amongst others service PE clause with a threshold of 183 days within a 12 month period. C) Shipping and Air Transport – Profits from operation of Aircraft in international traffic – Taxable only in the POEM state. – Profits from operation of ships in international traffic – Taxable in POEM state. However, it may also be taxed in other contracting states. The tax imposed on such profits shall be reduced by 50%. D) Dividends Dividend income is to be taxed at the rate of 10% subject to satisfying beneficial ownership test. E) Interest Interest income is to be taxed at the rate of 10% subject to satisfying beneficial ownership test. F) Royalty and FTS – Royalty payable to a resident of Hong Kong to be taxed at the rate of 10% subject to satisfying beneficial ownership test. – Fees for technical services payable to a resident of Hong Kong to be taxed at the rate of 10% subject to satisfying beneficial ownership test. G) Capital Gains – Capital gain arising on sale of shares of an Indian company to be chargeable to tax in India. – Capital gain arising on sale of Indian companies shares not covered under clause 1 to 4 to be chargeable to tax in India. – Residual para for taxation of property not covered above including indirect transfer cases – To be taxable as per the provisions of the domestic laws. H) Other Income Other income arising in India will be chargeable to tax in India. I) GAAR Provisions The provisions relating to GAAR has been inserted in Dividends, Interest, Royalty, FTS and Capital Gains Article. J) LOB Clause – Anti-Avoidance Rules (Tax Evasion and Tax Avoidance) Separate article inserted in order to curb tax evasion/ avoidance, treaty shopping practices, conduit companies practices etc. H) Protocol A Protocol has been annexed to the India – Hong-Kong DTAA. Protocol Contains explanation for the meaning of the certain terms like ‘Ordinarily resides’, ‘right of abode’ etc.