TAX UPDATE - DEC 2023.

 Direct Tax

·       CBDT notifies new valuation rules for equity and compulsorily convertible preference shares for angel tax provisions.

 

·       CBDT vide Notification No.2/2023 dated 27 September 2023 provided the procedure for granting of Lower/ Nil witholding certificate under section 197 through TRACES portal.
Rule 28 deals with application of Form 13 for lower/Nil witholding certificate and proviso to Rule 28AA(4) provides for issuance of certificate for lower deduction certificate in case number of deductors exceed 100 in number and details of such deductors are not available at the time of making the application. In this regard the procedure applicable from 01 October 2023 is provided in the above notification. It even mentions that due to the fact that the deductors are not identifiable at the time of making the application, therefore the certificate limit is not prescribed for each deductor, in this regard, the certificate shall be utilised on FIFO basis and the deductors shall verify the consumption status before furnishing the certificate in the TDS Return.

 

·       CBDT notified Form 6D for furnishing of ‘Inventory Valuation Report’ u/s 142(2A) of the IT Act

 

Indirect Tax

·       CBIC issues notification pertaining to valuation of Corporate Guarantee provided to related persons. The rules governing valuation of services by a supplier to a recipient who is a related person, by way of providing corporate guarantee shall be deemed to be 1% of the amount of such guarantee offered, or the actual consideration, whichever is higher. The above rule will mandate entities offering corporate guarantees to their affiliates to consider 1% of the guaranteed value as taxable value and discharge GST at 18% on the taxable value.

 

·       CBIC issues Instruction w.r.t. applicability of SC ruling on secondment of employees under GST which state that only in cases where the investigation indicates that there is material evidence of fraud or wilful mis-statement or suppression of facts to evade tax on the part of the taxpayer, provisions of section 74(1) of the Central Goods and Services Tax Act, 2017 may be invoked for issuance of show cause notice, and such evidence should also be made a part of the show cause notice

Trade

·       MCA notifies mandatory dematerialisation for securities of private companies

 

·       The Ministry of Commerce and Industry has inserted a new Rule 11B in the SEZ Rules, 2006 - ‘Non-processing areas for IT/ITeS SEZ’ allowing co-existence of SEZ units and non-SEZ IT/ITeS business in the same SEZ premises. This amendment will enable SEZ developers to optimally utilize the vacant space in existing SEZs.

 

·       The RBI recently barred banks, NBFCs and all-India financial institutions from investing in Alternative investment funds (AIFs) if the AIF has an investment in a borrower/investee of the lender. This prohibition applies immediately. While done with the explicit intent of curbing evergreening (lender investing money in the AIF which in turns invests in a borrower, and that helps the borrower to pay the lender), the bar has been cast in a very wide manner, and will affect the flow of funds into AIFs and hedge funds.