Government amends CGST Rules and issues further clarifications w.r.t. Amnesty scheme under GST

 This Tax Alert summarizes the recent Notification^[1] and Circular^[2] issued by Central Board of Indirect Taxes and Customs (CBIC) addressing certain issues related to availment of benefit of amnesty scheme under Section 128A of the Central Goods and Services Tax Act, 2017 (CGST Act).

Section 128A and Rule 164 were inserted in the CGST Act and Rules respectively, to provide for waiver of interest and penalty w.r.t certain tax demands pertaining to the period from 1 July 2017 to 31 March 2020.

Earlier, Circular No. 238/32/2024-GST dated 15 October 2024 was issued by CBIC to clarify various issues related to implementation of the said provisions. Based on further representations concerning applicability of amnesty scheme in cases where payments have been made through GSTR-3B instead of DRC-03, and the consolidated demand notices or adjudication orders have been issued covering period other than those specified under Section 128A. CBIC has clarified as follows:

TDS Rate Chart for Financial Year 2025-26 and Assessment Year 2026-27

Section

Particulars

TDS Rate Individual/ HUF (Indian Resident)(in %)

TDS Rate for (NRI) in India (in %)

Domestic Company (in %)

Other than domestic Company (in %)

India Tax Due Date - April 2025

 

Sr No	Due Date	Related to	Compliance to be made
1	11.04.2025	GST	Filing of GSTR1 for the month of March 2025

2

20.04.2025

GST

Payment of GST for the month of March 2025 Filing of GSTR 3B for the month of March 2025

3	30.04.2025	TDS/TCS (Income Tax)	Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of March 2025. · Deposit TDS from Salaries deducted during the month of March 2025 • Deposit TCS for collections made under section 206C including sale of scrap during the month of March 2025, if any
4	30.04.2025	Income Tax	Apply for E-Form 10F for all foreign subsidiaries

Maharashtra Government proposes amnesty scheme for PSUs with regard to arrears of erstwhile indirect taxes

 

This Tax Alert summarizes the recent “Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee (Payable by Public Sector Undertaking Companies) Bill, 2025¹ introduced pursuant to the Maharashtra State Budget 2025-2026.

Taxability of Mutual Funds under the India-Singapore DTAA

 Key Points

1. Article 13: Capital Gains Taxation
• Article 13(4): Exempts capital gains from taxation in India for residents of Singapore unless the gains pertain to immovable property, PE business property, ships/aircraft, or specific shares.
• Article 13(4A): Shares acquired after April 1, 2017, are taxable in India, with gains limited to amounts exceeding the fair market value as of April 1, 2017.
• Article 13(4B): Exempts capital gains from Indian taxation if shares are part of a Singapore PE's business property.
• Article 13(5): Gains from mutual funds are classified as "other property" and are taxable only in Singapore.

Direct Tax Case Laws Update - March 2025.

 ·       SC dismisses SLP to hold that capital reduction leads to transfer of shares and exigible to capital gains taxation

 

Determining the Date of Set-Up for Allowability of Expenses Under Section 37

 Introduction

The date a business is "set up" is crucial for determining whether expenses incurred are deductible under Section 37 of the Income-tax Act, 1961. According to Section 3 of the Act, the "previous year" starts from the date a business is set up. However, the Act does not explicitly define what constitutes a "set-up" of business.

Indian Citizen - Deemed Residency

1. Meaning of Deemed Residency

Under Section 6(1A) of the Income Tax Act, an individual will be considered a deemed resident of India if:

• Their total income (excluding foreign-sourced income) exceeds ₹15 lakh in a financial year, and

• They are not liable to tax in any other country or territory due to reasons like domicile, residence, or similar criteria.

Tax Update - March 2025

Regulatory Updates:

• Customs Regulations: The DGFT revised the Handbook of Procedures for the General Authorization for Export after Repair (GAER) for Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) items. Compliance requirements include bills of entry, proof of repair obligation, and AEO certification.
• Pet Clearance: The CBIC clarified that imported pet dogs and cats can enter only through specified airports and ports.

HC holds IGST as part of customs duty cannot be levied on reimport of goods after repairs

 This Tax Alert summarizes recent ruling of the Delhi High Court (HC) ^[1] on whether integrated tax (IGST) is payable on cost of repairs, insurance and freight in case of re-import of goods which were earlier exported for repairs.

Notification No. 45/2017–Customs provided exemption from duties of customs on re-imported goods in excess of duty which would be leviable if the value of re-imported goods were made up of the fair cost of repairs, insurance and freight charges.

The same was amended by Notification No. 36/2021 – Customs, and Circular No. 16/2021 – Customs was issued to clarify that the integrated tax and cess under Customs Tariff Act, 1975 (CTA) would also be payable on the fair cost of repairs, etc.

The key observations of the HC are:

Tax Due Date - March 2025.

 

Sr No	Due Date	Related to	Compliance to be made
1	11.03.2025	GST	Filing of GSTR 1 for the month of February, 2025

2

20.03.2025

GST

Payment of GST for the month of February, 2025 Filing of GSTR 3B for the month of February, 2025

3	07.03.2025	TDS/TCS (Income Tax)	· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of February 2025. · Deposit TDS from Salaries deducted during the month of February 2025 • Deposit TCS for collections made under section 206C including sale of scrap during the month of February 2025, if any
4	15.03.2025	Income Tax	Payment of Advance Tax
5	31.03.2025	GST LUT	Filing of LUT for the FY 24-25

Section 50D of the Income Tax Act: A Comprehensive Analysis

 1. Introduction

Section 50D of the Income Tax Act, 1961, is applicable in cases where the consideration for the transfer of a capital asset is either not ascertainable or is inadequate. This provision ensures that capital gains tax is levied even in situations where the sale consideration is indeterminate, thereby preventing potential tax avoidance.

Taxation of ESOP.

 The document explores the tax implications of compensations paid for the diminution in the value of Employee Stock Ownership Plan (ESOP) options following corporate events like disinvestment. It delves into legal precedents, judicial rulings, and tax treatments under Indian Income Tax laws.

Will Renting of Residential Flat Be Charged Only Under House Property Post the Amendment in Finance Act 2024?

 The Finance Act 2024 has introduced a significant amendment that impacts the taxation of rental income from residential properties. This amendment has effectively reclassified the income from letting out residential houses, ensuring that it is taxed under 'Income from House Property' rather than 'Profits and Gains of Business & Profession.'

Is RPM is the appropriate method for a distributor incurring AMP expenses?

 The key issue is whether the Resale Price Method (RPM) is appropriate for determining the Arm’s Length Price (ALP) for a distributor incurring Advertisement, Marketing, and Promotion (AMP) expenses. The assessee, a joint venture between a UK luxury brand and an Indian entity, imports and resells luxury goods without adding value. The Transfer Pricing Officer (TPO) and Dispute Resolution Panel (DRP) rejected RPM due to high AMP expenses.

However, authoritative guidance and judicial precedents support RPM in such cases. The UN Transfer Pricing Manual (2021) prioritizes functional comparability over product comparability for RPM. OECD guidelines state that RPM is suitable when a distributor resells goods without further processing. The Bombay High Court (L’Oréal India, 2015) and the Delhi High Court (Burberry India, 2019) upheld RPM despite AMP expenses.

Given these precedents, the TPO’s rejection of RPM appears incorrect, as AMP expenses alone do not disqualify its application when the distributor operates on a limited-risk resale basis.

New Customs Scheme for Manufacturing Sector

 The Regulations enable an Authorized Importer to clear the imported goods directly from port to its manufacturing unit (‘Authorised Premises’) and file Bill of Entry for home consumption thereof from its Authorised Premises.

 

Understanding the US SEC's Role in Digital Asset Regulation

 The article outlines the U.S. Securities and Exchange Commission’s (SEC) evolving role in regulating digital assets such as cryptocurrencies and tokens. It highlights key enforcement actions, legislative efforts, regulatory clarifications, and their impacts on various stakeholders.

Addressing the Non-Transferability of MOOWR License in Cases of Merger/Demerger/Amalgamation

 The MOOWR (Manufacturing and Other Operations in Warehouse) scheme has been a valuable tool for businesses operating within the customs framework. However, a significant challenge has emerged concerning the non-transferability of the MOOWR license in cases of corporate restructuring such as mergers, demergers, or amalgamations. This issue has become a major concern for license holders, creating legal and financial uncertainties.

Summary of Budget 2025 - Transfer Pricing (TP) Amendments

 The Union Budget 2025 introduces significant amendments to transfer pricing (TP) regulations under the Income Tax Act. These changes focus on multi-year application of arm’s length price (ALP), streamlining compliance, and reducing litigation. The key amendments affect Section 92CA (Transfer Pricing Officer’s Reference) and Section 155 (Recomputation of Income).

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1. Key Transfer Pricing Amendments

1.1. Amendments to Section 92CA – Reference to Transfer Pricing Officer (TPO)

• Existing Provision:

  • The Assessing Officer (AO) can refer international or specified domestic transactions to the Transfer Pricing Officer (TPO) for determining the Arm’s Length Price (ALP).
  • The TPO then assesses the transaction and passes an order.

• Amended Provision:

  • New Subsections (3B) and (4A) allow the ALP determined in one year to be applied to similar transactions for the next two years if the taxpayer opts for it.
  • Conditions for ALP Application for Two Additional Years:
    • The taxpayer must formally opt-in for this provision.
    • The option must be exercised in a prescribed form and manner.
    • The TPO must approve the option within one month of submission.
  • Implications:
    • Reduces Compliance Burden: Eliminates the need for annual ALP determinations.
    • Ensures Pricing Consistency: Provides tax certainty and reduces disputes.
    • Facilitates Tax Administration: Streamlines TP assessments for businesses and tax authorities.

• Effective Date:

  • These amendments will be effective from April 1, 2026, applying to Assessment Year 2026-27 and beyond.

---

1.2. Amendments to Section 155 – Recomputation of Income

• New Subsection (21) is inserted in Section 155 to mandate the recomputation of income for two consecutive years if the ALP for a transaction is applied under Section 92CA (3B).
• The Assessing Officer (AO) must adjust the income in line with the ALP determined by the TPO.
• Time Limit: Recomputation must be completed within three months from the completion of the original assessment.

---

2. Outstanding Questions & Clarifications Needed

1. Definition of "Similar Transactions":
   • The amendments rely on transactions being similar for ALP applicability, but clear criteria for similarity need to be defined.
2. Process & Forms for Claiming Multi-Year ALP Option:
   • A notification or circular is expected to outline the procedure for opting in.
3. Clarification on Filing Timelines:
   • The timeframe within which taxpayers must apply for multi-year ALP treatment needs specification.

---

3. Conclusion

• The Budget 2025 TP amendments provide greater certainty, reduce compliance costs, and streamline TP administration.
• However, businesses must await clarifications on procedural aspects before fully utilizing these changes.

Summary of the Input Service Distributor (ISD) Mandate

The Input Service Distributor (ISD) mandate, introduced in the Union Budget 2024, will take effect from April 1, 2025, as per amendments to Section 20 of the Finance Act, 2024. The mandate primarily addresses the distribution of input tax credit (ITC) through the ISD mechanism, particularly for reverse charge mechanism (RCM) payments on inter-state supplies.

 

Union Budget 2025 - Analysis of Tax Impact

 Direct Tax

·       No change in the rate of corporate tax including surcharge & cess.

 

TAX DUE DATE - FEBRUARY 2025

 

Sr No	Due Date	Related to	Compliance to be made
1	11.02.2025	GST	Filing of GSTR 1 for the month of January, 2025

2

20.02.2025

GST

Payment of GST for the month of January, 2025 Filing of GSTR 3B for the month of January, 2025

3

07.02.2025

TDS/TCS (Income Tax)

· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of January 2025. · Deposit TDS from Salaries deducted during the month of January 2025 • Deposit TCS for collections made under section 206C including sale of scrap during the month of January 2025, if any

CBDT clarification on applicability of PPT while granting treaty benefits:

 Background:

1.           MLI coming into force: On October 1st, 2019, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, otherwise referred to as the Multilateral Instrument or MLI, came into force.

CBDT notifies conditions for presumptive taxation of foreign cruise ship operators in India

 This Tax Alert explains the Notification  dated 21 January 2025 issued by the Central Board of Direct Taxes (CBDT) prescribing conditions for taxation of non-resident cruise ship operators in India under a new presumptive tax regime (new tax regime) applicable from tax year 2024-25 onwards.

TP in an Inflationary Economy: Navigating Challenges and Adjusting Strategies

 In today’s volatile economic landscape, inflationary pressures have become a significant challenge for multinational enterprises (MNEs). These pressures complicate the management of transfer pricing (TP), which governs inter-company transactions to ensure compliance with the arm’s length principle. As inflation reshapes market conditions, businesses must adapt their pricing models to mitigate risks and maintain compliance. This article explores the key challenges inflation poses to TP and outlines strategies for adjusting inter-company pricing models.

CBDT issues guidance on application of Principal Purpose Test

 This Tax Alert summarizes a recent Circular No. 01/2025 dated 21 January 2025 (Circular) issued by the Central Board of Direct Taxes (CBDT) providing guidance on application of the Principal Purpose Test (PPT) provisions in the context of Indian tax treaties.

Broadly, the Circular clarifies that PPT provisions are to be applied prospectively from (i) the date of entry into force of the treaty/amending protocol whereby PPT was introduced pursuant to bilateral negotiations; or (ii) the effective date of provisions introducing PPT into the treaty through Multilateral Instrument (MLI).

Further, it also clarifies that grandfathering benefit with reference to capital gains arising from transfer of shares of an Indian company by treaty residents of Mauritius, Singapore and Cyprus in respect of shares acquired prior to 1 April 2017 will be outside the purview of PPT and instead be governed by specific provisions of the respective tax treaty.

ITC not available on distribution of promotional items - High Court

 This is to update you about an important decision by Hon’ble Madras High Court (‘HC’/’Court’) in the case of ARS Steel and Alloy International Private Limited, WP No 31,33 & 35 of 2024. The court held that Input Tax Credit (ITC’) shall not be allowed on:

 

Scope of Direct Tax Vivad Se Vishwas Scheme, 2024 expanded

 Scope of Direct Tax Vivad Se Vishwas Scheme, 2024 expanded to cover cases where orders had been passed on or before 22 July 2024 where time to file an appeal had not expired

This Tax Alert summarizes Order No. 8/2025 dated 20 January 2025 (Order) issued by the Central Board of Direct Taxes  (CBDT) to expand the scope of Direct Tax Vivad Se Vishwas Scheme, 2024 (VSV 2.0) to include appeals filed in a timely manner after 22 July 2024, in respect of orders passed on or before 22 July 2024 for which the time to file an appeal had not expired as on 22 July 2024. In such cases, disputed tax is calculated based on such appeal.

Identifying a Drafting Error in GST Amnesty Provisions

 Provision Regarding Amnesty Scheme

Section 128A was introduced into the Central Goods and Services Tax (CGST) Act by the Finance Act, 2024, with effect from November 1, 2024. The relevant portion of the provision is as follows:

SC dismisses SLP to hold that capital reduction leads to transfer of shares and exigible to capital gains taxation

This Tax Alert summarizes a ruling of the Supreme Court (SC) in the case of Jupiter Capital Pvt. Ltd. ^[1] (Taxpayer) which dismissed the petition filed by the Tax Authority against admissibility of capital loss arising in the hands of shareholders on cancellation of equity shares held in subsidiary company pursuant to a scheme of capital reduction. In other words, the issue under consideration was whether capital reduction by a company amounts to “transfer” under the Indian Tax Laws (ITL) in the hands of the Taxpayer-shareholder and, accordingly, whether the Taxpayer can claim capital loss, if any, pursuant to the same.

Now You Have to Pay GST on Losses as Well!

Recently, a few announcements made by our Finance Minister, Nirmala Sitharaman, sparked widespread discussions, particularly in the retail and automobile sectors. Some panic ensued, driven by misunderstandings about the impact of changes in tax rates on the sale of old cars. Let’s break down the scenario for better clarity.

Bad Debts: Section 36(1)(vii) and Key Legal Precedents

 Bad debts are a critical consideration for businesses when filing tax returns, and Section 36(1)(vii) of the Income Tax Act provides the framework for claiming such deductions. However, several conditions must be satisfied to qualify for this deduction. Let’s explore the section’s key provisions and some significant legal precedents that shape its interpretation.

Reduce your capital gain tax via a housing loan.

Many of us rely on home loans to purchase residential property, but are you fully aware of how tax laws impact your financial strategy? Under the current tax regime, deductions on home loan interest for self-occupied properties are capped at ₹2 lakh annually. So, what happens to the interest paid beyond this limit? Is it a loss, or can it be leveraged in another way?

 

HSN Reporting Changes in GST Returns

 This is to update you about a recent GST Advisory issued by GST portal with respect to the changes in reporting of HSN Codes in Table 12 of Form GSTR-1, w.e.f. January 2025 returns. 

ITC is available on GST charged on advances - High Court

 This is to update you about an important decision by Bombay High Court (‘HC’ / ‘Court’) in the case of L&T IHI Consortium v. UOI, W.P. No. 2980 of 2019. The Court held that Input Tax Credit (‘ITC’) shall be allowed to the recipient on Goods and Services Tax (‘GST’) charged by the supplier on advance payments.

 

-Gujarat HC holds assignment of leasehold rights is not liable to GST

 This Tax Alert summarizes the recent ruling  of the Gujarat High Court (HC). The issue pertains to levy of goods and services tax (GST) on assignment of leasehold rights by lessee (assignor) to a third party (assignee).

Comparison of doing business between Singapore & Hong Kong

 

Particulars	Singapore	Hong Kong
Corporate Tax rate	17%	16.5%.
Number of DTAA	102 countries	40 countries.
Capital gain tax	NO	YES
WHT on Dividend	NO	YES
Local Director	Min 1.	NO
Political Stability	Stable.	China factor is there.
IP Rights	In terms of international IP treaties, Singapore holds a distinct advantage over Hong Kong by being a member of a greater number of these agreements. This includes significant treaties such as the Brussels Convention, the Singapore Treaty on the Law of Trademarks, and the Hague Agreement Concerning the International Registration of Industrial Designs, among others
Bank Account Opening	No need for personal visit to branch	Directors require to visit bank for opening bank account.

CBDT extends due date for filing declaration under VSV 2, without payment of additional amount, to 31 January 2025

 This Tax Alert summarizes Circular No. 20/2024 dated 30 December 2024 (Circular) issued by the Central Board of Direct Taxes (CBDT) providing extension in due date for filing declaration under the Direct Tax Vivad Se Vishwas Scheme, 2024 (VSV 2) from 31 December 2024 to 31 January 2025. The Circular provides that any declaration filed on or before 31 January 2025 will not require payment of additional amount under VSV 2. Consequently, declarations filed on or after 1 February 2025 till sunset date (to be notified) will require settlement under VSV 2 with payment of additional amount

TAX DUE DATE- JANUARY 2025

 

Sr No	Due Date	Related to	Compliance to be made
1	11.01.2025	GST	Filing of GSTR 1 for the month of December 2024
2	20.01.2025	GST	Payment of GST for the month of December 2024 Filing of GSTR 3B for the month of December 2024
4	07.01.2025	TDS/TCS (Income Tax)	Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of December 2024. Deposit TDS from Salaries deducted during the month of December 2024 • Deposit TCS for collections made under section 206C including sale of scrap during the month of December 2024, if any
5	31.01.2025	TDS/TCS	Filing of TDS/TCS quarterly return for Q3 (Oct to Dec-2024).