Transfer pricing in India

Introduction
Transfer Pricing (“TP”) regulations have been at the forefront of corporate headlines over the last few years due to the increasing number of controversies resulting out of tax structuring by multinational companies in India. What makes the topic both contentious and interesting is that regulators view the various techniques applied to inter-corporate transactions as purportedly planned with the intent of achieving benefits of comparable labor cost and tax advantage at the cost of a countries tax revenues.
Hence, there was a need to introduce a uniform and internationally accepted mechanism of determining reasonable, fair and equitable profits and tax in India in the case of such multinational enterprises.

Statutory rules and regulations
A separate code on transfer pricing under Sections 92 to 92F of the Indian Income TaxAct, 1961 (“the Act”) covers intra-group cross-border transactions and specified domestic transactions. Since the introduction of the code, transfer pricing has become the most important international tax issue affecting multinational enterprises operating in India. The regulations are broadly based on the Organisation for Economic Co-operation and Development (“OECD”) Guidelines and describe the various transfer pricing methods, impose extensive annual transfer pricing documentation requirements and containharsh penal provisions for noncompliance.

The Indian Transfer Pricing Code prescribes that income arising from international transactions or specified domestic transactions between associated enterprises should be computed having regard to the arm’s length price. It has been clarified that any allowance for an expenditure or interest or allocation of any cost or expense arising from an international transaction or specified domestic transaction also shall be determined having regard to the arm’s-length price. The Act defines the terms international transactions, specified domestic transactions, associated enterprises and arm’s length price.

Advance pricing agreement (APA)
An APA is an agreement between the taxpayer and tax authority determining the pricing of intercompany transactions for future years. In case of a roll-back, it would also include past years. The taxpayer and tax authority mutually agree on the transfer pricing methodology (TPM) to be applied for a certain period of time (generally five years) based on the fulfillment of certain terms and conditions. APA is an effective tool used in several countries with established transfer pricing regimes to avoid future disputes in a cooperative manner.

Documentation requirements
Taxpayers are required to maintain, on an annual basis, a set of extensive information and documents relating to international transactions undertaken with AEs or specified domestic transactions. Rule 10D of the Income Tax Rules, 1962 prescribes detailed information and documentation that has to be maintained by the taxpayer.

Further, it is mandatory for all taxpayers, without exception, to obtain an independent accountant’s report in respect of all international transactions between associated enterprises or specified domestic transactions. The report has to be furnished by the due date of the tax return filing (i.e. on or before 30 November) to avoid stringent penalties prescribed for noncompliance with the provisions of the transfer pricing code.

Transfer pricing disputes
While the initial years of transfer pricing regulations saw a slow rise of TP adjustments being proposed by the tax officers, soon the adjustment volumes increased considerably and reached an epic proportion of Rs. 70,000 crores by FY 2013. After a huge pushback from foreign investors, this number has come down but continues to generate a lot of heat for the taxpayers.

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Procedure for New company Registration in India

Company registration in India is not tough when you have the best consultants by your side. with our guided expertise and you will see that you do not need to worry about a thing. So, go ahead and set up Private Company in India without having to worry about a thing.

Persons desirous of forming a company must adhere to the step by step procedure as discussed below:-

1. Apply for Directors Identification Number and Digital Signatures.
2. Selection of type of the company.
3. Selection of name for the proposed company.
4. Drafting of Memorandum and Articles of Association.
5. Stamping, digitally signing and e-filing of various documents with the Registrar.
6. Payment of Fees.
7. Obtaining Certificate of Incorporation.
8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in case of public companies) for obtaining the certificate of commencement of business.
9. Obtaining Certificate of Commencement of business (in case of public limited companies).
10. Obtain Digital Signatures
11. Selection of the type of company
12. Selection of name Six names are requ1ired to be selected in order of preference after taking notes of numerous provisions, clarifications, circulars and rules made by the Ministry of Corporate Affairs, etc. In case key word is required, significance of each key word should be given in the e-Form 1A. a) Applying for ascertaining the availability of the selected name The promoters are required to make an application to the concerned Registrar of Companies to be submitted electronically to the Ministry of Corporate Affairs on the portal of MCA. An application shall be in e-Form INC-1 as per sec 4(4) read with Rule 9 of Companies (Incorporation) Rules, 2014, duly digitally signed by any one promoter or managing director or director or manager or secretary of the company along with the required fee for ascertaining whether the selected name is available for adoption by the promoters of the proposed company. MCA has prescribed certain rules for name availability so it is advisable to check guidelines for the same before applying for name. Refer Rule-8 of Companies (Incorporation) Rules, 2014./p> b) Approval of the name After receipt of completed application in e-Form INC-1, the Registrar shall intimate whether the proposed name is available for adoption or not. As per section 4(5), maximum time for which name will be available has been prescribed in the law itself under section 4(5). The name will be valid for a period of 60 Days from the date on which the application for Reservation was made.
    Note: The applicant cannot start business or enter into any agreement, contract, etc. in the name of the proposed company until and unless a certificate of registration is issued by the registrar of companies as per the provisions of the Companies Act, 2013 and the rules made there under.
13. Requirement for having DIN
14. Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA)
15. Application for incorporation of a private company

Advantages of private limited company?

Introduction
Private Limited Company can be formed with a minimum of two members; this number can be extended up to two hundred members. A minimum of two directors is needed which can go up to fifteen. This form of business shares many similar traits with partnership firm. A total of two hundred shareholders is acceptable in a private limited company. A properly formulated registration procedure has been mentioned in companies Act. You may ask that why you should opt for Private Limited Company when there is LLP and One Person Company. There are some advantages of Private Limited Company below:

Advantages of Private Limited Company

1. Separate character: A private restricted organization is viewed as a different legitimate substance. It has its very own personality and particularly perceived as a different organization under the law. Additionally, the organization can possess property because of this component under its name. The organization can sue and furthermore it tends to be sued under its own name because of this exceptionally same component.

2. Steadiness because of Limited Liability: Private Limited Company has this element of constrained money related obligation of the considerable number of investors. The liabilities are restricted to their offers as it were. This component secures the individual resources and wage of investors now and again of any money related emergency looked by the organization. Additionally, it gives the organization more freedom of going for broke.

3. Long and congruity of Existence: Private Limited organizations are not influenced by the status of their own with regards to their reality. Demise or powerlessness to proceed if the proprietor does not upset the procedures of the organization.

4. Least necessity of investors and individuals: Only two individuals and two investors are required to fuse a private restricted organization. This gives numerous Entrepreneurs a chance to set up their own organization.

5. Simplicity of Raising Funds: Shareholders permitted are up to two hundred and another two hundred individuals are permitted, this numerous numbers and the notoriety of the private restricted organization makes it simpler to bring capital assets up in contrast with different types of organizations. Subsequently, we can state the extent of development is more prominent when a private constrained organization is fused. Taking obligations from banks and other money related endeavors are very simple as well.

6. Duty Advantages: They cover government obligation on assessable benefits and are exempted from higher individual pay impose rates.

7. Adaptable Relations: A man can go about as an investor, an executive and a representative in the meantime when the private restricted organization is mulled over. They are viewed as dependable as well.wner does not hinder the proceedings of the company.

8. Minimum requirement of shareholders and members: Only two members and two shareholders are required to incorporate a private limited company. This gives many Entrepreneurs an opportunity to set up their own company.

9. Ease of Raising Funds: Shareholders allowed are up to two hundred and another two hundred members are allowed, this many numbers and the reputation of the private limited company makes it easier to raise capital funds in comparison to other forms of companies. Therefore, we can say the scope of expansion is greater when a private limited company is incorporated. Taking debts from banks and other financial ventures are quite easy too.

10. Tax Advantages: They pay tax on taxable profits and are exempted from higher personal income tax rates.

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Why should you start a private limited company?

There are various elements a business person ought to consider before picking the kind of business one intends to enlist. The size and nature of business, gathering pledges, scale and so on ought to be considered before picking the sort of business element. Here are a portion of the reasons why you should enlist your business as a private restricted organization.

Constrained Liability
One of the principle favorable circumstances of beginning a private constrained organization is restricted risk. Constrained obligation implies restricted introduction to monetary hazard by financial specialists of an organization. Restricted obligation implies the investors risk in the organization is constrained to the capital sum put resources into the organization. For instance, if Sam contributed Rs 100,000 to begin a private constrained organization. The risk is his speculation of Rs 100,000. At the end of the day, his can potential misfortune can't be past Rs 100,000. He won't be subject for any obligation past this underlying Rs 100,000.

Business Continuity
Privately owned businesses appreciate ceaseless progression. What does never-ending progression mean? Investors may travel every which way, yet the organization still keeps on being in presence. The organization is unaffected by the demise of any of its investors or the exchange of its offers to someone else. For instance, in an organization firm, an adjustment in the participation prompts disintegration of the current association while in a private constrained organization, one investor may exchange his offers to another, however the organization still keeps on working.

Raising money
Money related establishments, for example, banks, investment reserves, private value reserves loan their assets all the more readily to private constrained organizations that to different types of business associations. Banks will probably loan to constrained organizations since they can utilize the advantages of the organization as security for the credit. Funding firms put resources into a private restricted organization in return of value shares; this can't be accomplished in an association firm.

Exchange and Exits
Restricted organizations are simpler to offer when contrasted with association firms. Possession is spoken to by value or inclination shares and these can be effortlessly sold without influencing the exercises of the organization.

Compensations to chiefs
There is no greatest point of confinement on the pay being paid to chiefs; while there is a roof restrain on the pay paid to accomplices of an organization firm according to Income Tax Act, 1961.


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MCA eases process for incorporation of LLPs

Ministry of Corporate Affairs (MCA) has notified amendment to the Limited Liability Partnership Rules, 2009 wherein process of incorporation of LLPs and reservation of their name have been amended in order to ease of doing business. Under revised norms, a new web based form ‘RUN-LLP’ has been introduced through which names of a LLP can be reserved without digital signature and Designated Partner Identification Number (DPIN). This form is very much similar to RUN web service reservation of name in case of companies. In this form, only two name can be proposed at single point of time and one resubmission is also allowed for reservation of name. In total, 4 names can be proposed.

On the other hand, to make the incorporation process form LLPs easier, a new form named ‘Form for Incorporation of Limited Liability Partnership (FiLLiP)’ has been introduced through which LLPs can be incorporated with up to 2 individuals as designated partners who do not have DIN. This new improvised process for applying for DPIN is similar to spice form for Company Incorporation.

Sebi allows NRIs, resident Indians to take FPI route
The Securities and Exchange Board of India (Sebi) on Friday diluted its controversial circular issued on April 10, which laid down the know-your-client (KYC) and ownership norms for foreign portfolio investors (FPIs).

In a reversal of stance, the market regulator has allowed both resident and non-resident Indians (NRIs), along with overseas citizens of India (OCIs), to invest in Indian markets through the FPI route, subject to certain conditions. The earlier circular virtually barred individuals with India connection from investing or managing a foreign fund.
The regulator, however, reiterated that the KYC requirements for FPIs would have to be in line with the rules under the Prevention of Money Laundering Act (PMLA).

Revised KYC norms for Foreign Portfolio Investors: SEBI
The Securities and Exchange Board of India has issued the revised guidelines for know your client (KYC) requirement for foreign portfolio investors wherein provision related to KYC documentations, Exempted documents, data security, timelines for compliance have been discussed.

Govt. constitutes high level committee on Corporate Social Responsibility
A high level committee has been constituted under MCA to review the existing framework and guide and formulate the roadmap for a coherent policy on CSR. The Committee is expected to review the existing CSR framework as per Act, Rules and Circulars issued from time to time and recommend guidelines for better enforcement of CSR provisions. It will analyse outcomes of CSR activities/programmes/projects and suggest measures for effective monitoring and evaluation of CSR by companies.

Ordinance Likely to Fast-Track Dispute Resolution
The government is mulling an ordinance which provides for time-bound settlement of commercial disputes and make arbitrators accountable, a senior government functionary has said. The ordinance is based on a bill cleared by Lok Sabha during the monsoon session. The bill is pending in Rajya Sabha and may get cleared only in November or December. The government feels an early measure to settle commercial disputes at a faster pace will help improve India’s ranking on ease of doing business index, the functionary explained.The bill seeks to help India become a hub for domestic and global arbitration for settling commercial disputes. The draft law provides for a timebound settlement of disputes as well as accountability of the arbitrator. The government feels that there is a need for robust mechanism to deal with institutional disputes.

Ecommerce Cos may Not Need Office in Each State
Amazon, Flipkart and a host of other ecommerce service providers may not require offices in each state to comply with the withholding tax provision under the goods and services tax (GST). They are required to collect this tax when they make payments to suppliers from October 1.
Ecommerce platforms have represented to the government that the provision be deferred. They said it would create compliance issues for them because they would need presence in every state. The vendors will face working capital issues, they added.

State and central government officials, who met a day before the GST Council meeting, have backed implementation of the provision in wake of revenue concerns but agreed for relief on presence in every state

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Registering a wholly owned subsidiary company in India

MNC's who choose to operate in more than single country can operate its business through a wholly owned subsidiary. Wholly owned subsidiaries can be called as those companies in which Parent Company owns all the shares of the subsidiary which gives access to the parent company to select a board of directors of the subsidiary or control the subsidiary.Wholly owned subsidiaries can also be a part of a different industry.

The subsidiary company is a company which can be incorporated by accessing the most of shares of the company (more than half) or either by way of controlling the composition of a board of India.
These type of companies can be called as a private limited company in India. They are recognised as Indian companies under the Income Tax Act, and they are also eligible for the deduction and exemption benefits like other Indian companies.

Following requirements to set up Wholly Owned Indian Subsidiary registration:
1. There must be minimum 2 shareholders.
2. There must be 2 directors, one must be an Indian resident.
3. All the directors must have DIN (Director Identification Number).
4. All the directors must have DSC (Digital Signature Certificate).
5. Less than a month of the incorporation , it is necessary to introduce a minimum paid-up share capital of rupees one lakh.


Advantages of Incorporating Wholly Owned Subsidiary or Indian Subsidiary
Brand Name
It provides the benefits to both parent company and as well as to the subsidiary company.

Control
Benefit to a parent company who can execute strategic control over its subsidiary company.

Common financial system
It provides a benefit of cost synergies by using a common financial system, sharing the administrative cost and other expenses between parent & subsidiaries.

Limited Liability
There is a limited liability for both the companies.

Global Stratergy
It provides protection and security to the company’s trade secrets, expertise and technical knowledge along with the control over the operations.

A foreign company can incorporate a wholly owned subsidiary in India after considering all the benefits tied with it.

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Highlights of 29th GST Council Meeting

The 29th GST Council meeting was held on August 04, 2018 at New Delhi. The GST Council meeting has been held to address the concerns of Micro, Small and Medium Enterprises (MSME’s) and to affirm the proposal of cashback on digital transactions. The key recommendations of meeting are as follows:

1. Cashback on Digital Transactions
The GST Council has recommended cashback of 20% of GST paid on B2C transactions subject to the maximum amount of Rs. 100 per transaction. The payment of GST shall be made through BHIM Application and RuPay cards. This decision will boost digital transactions and cashless economy.

2. Sub-Committee for MSME’s issues
The GST Council has decided to constitute a sub-committee to review the concerns of MSMEs on various tax and compliance related issues. The West Bengal Finance Minister said that the group of ministers will look into all proposals to give relief to MSMEs with turnover of upto Rs. 1.5 crores from the central GST (CGST). This would restore the excise duty exemption available to small businesses in the pre-GST regime.

An insight into the GST Amendments as passed by the Lok Sabha
On August 9, 2018 the Lok Sabha has passed the GST Amendment Bill, 2018. The Bill provides for more than 40 amendments to the GST Act. These amendments aim to simplify the GST law and to ensure administrative convenience for the Small and Medium Enterprises. These amendments shall come into force form such date as the Central Govt. may announce those through notification in the Official Gazette. Here is an insight into all significant amendments as passed by the Lok Sabha.

1. RCM shall be applicable only on notified registered persons for supplies made by unregistered persons
2. Threshold limit for Composition Scheme increased to Rs. 1.50 crores
3. Composition Scheme is available if small portion of service is also provided by trader or manufacturer
4. No ITC of GST paid on repair and maintenance of motor vehicles
5. Scope of ITC in respect of motor vehicles expanded
6. ITC allowed for food and beverages provided to employees under any law
7. Changes made in the GST Act for new returns approved by GST Council
8. Registration limit increased to Rs. 20 lakhs for 6 specified States
9. Exemption from compulsory GST registration for e-commerce operators who are not required to collect TCS
10. No GST on processes done on goods temporarily imported into India which are exported
11. Payment for export of services can be received in Indian rupees if permitted by RBI
12. Concept of business vertical has been removed from GST

Govt. permits use of stickers for revising price of pre-packaged commodities due to reduction of GST rate
Government has granted permission to affix an additional sticker for declaring the reduced MRP on the pre-packaged commodities. However, the earlier labeling/ sticker of MRP will continue to be visible. This relaxation will be applicable  in the case of unsold stocks manufactured/ packed/ imported where the MRP would reduce due to reduction in the rate of GST w.e.f. 27th July, 2018.
This order shall be applicable upto 31st December, 2018.

Due date for filing GSTR-3B and GSTR-1 for each month from July to Mar., 2019
The return in FORM GSTR-3B of the said rules for each of the months from July, 2018 to March, 2019 shall be furnished electronically through the common portal, on or before the twentieth day of the month succeeding such month.Payment of taxes for discharge of tax liability as per FORM GSTR-3B.– Every registered person furnishing the return in FORM GSTR-3B of the said rules shall, subject to the provisions of section 49 of the said Act, discharge his liability towards tax, interest, penalty, fees or any other amount payable under the said Act by debiting the electronic cash ledger or electronic credit ledger, as the case may be, not later than the last date, as specified in the first paragraph, on which he is required to furnish the said return.Further, the Govt. has extended the due date of filing GSTR-1 for the months of July, 2018 to March, 2019 to 11th day of the next month for taxpayers having turnover above Rs. 1.5 crore.

Foreign Funds Reluctant to Disclose Ultimate Beneficial Owners
Foreign funds are reluctant to disclose their ultimate beneficial owners (UBOs) to the Indian regulator.
A large number of foreign portfolio investors (FPIs) have voiced reservations to capital market regulator Sebi about naming the UBOs — a new disclosure rule for offshore investors — as it may be onerous, unnecessary, and in many cases amount to a breach of privacy.
While Sebi probably believes that persons handling drug or terror money, indulging in sharp practices and violating anti-money laundering rules cannot be allowed to hide behind institutions, the offshore funds think that identifying the ‘last natural person’ or pinpointing ‘control’ can be virtually impossible in many funds.

FPIs raise red flag on KYC rules over privacy woes
Custodians of foreign portfolio investors (FPIs) as well as industry lobby groups have written to the Securities and Exchange Board of India (Sebi), raising privacy concerns arising out of the regulator’s April 10 circular mandating disclosure of additional information to identify the beneficial owners (BOs).
As part of Sebi’s know-your-client (KYC) requirement, FPIs have to disclose BOs’ details such as address, date of birth, tax residency number, social security number and passport number, and they have six months to comply with the directive.
“India’s new KYC norms may clash with global data privacy laws. Investment firms globally, too, are not comfortable with sharing personal information of their employees,” said a source. “Data security is another area of concern. No one is quite sure if India has the right infrastructure in place to ensure adequate security.”

Auto components industry seeks uniform 18% GST on all products
Auto component industry today sought uniform 18 per cent GST across the sector stating that low taxation would lead to better compliance and and larger tax base.
The industry, which reported a growth of 18.3 per cent to Rs 3.45 lakh crore in 2017-18, said the lower tax levy would also help in curtailing flourishing of grey operations in the aftermarket.
“One of the key demands of the industry has been a uniform 18 per cent GST rate across the auto component sector. Currently 60 per cent of the components attract 18 per cent GST rate, while the rest 40 per cent, majority of which are two-wheelers, and tractor components attract 28 per cent,” ACMA President Nirmal Minda told reporters here.