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.

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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.

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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.

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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.