IN its Budget Memo the FIEO has urged the
Finance Minister to exempt exporters from deducting tax at source on commission
payments made to overseas agents who have no business presence in India.
It has stated that the levy of TDS simply adds to the problems
of Indian exporters as such tax needs to be absorbed by them. The cost
of service goes up by 15% to 25% because overseas agent do not absorb the
TDS. It is also difficult to obtain PAN and tax residency certificate from
overseas agent. Various High Courts have already decided in favour of assesses
in the matter. Hence, the TDS may be dropped for the overseas commission
made by the exporters where he gives declaration that foreign agent has no
business presence in India, it added.
Information
to be furnished for making remittance abroad
The
FIEO has also pointed out that as per section 195(6) of the Act read with
Rule 37BB of the Rules, a person making remittance to a non-resident is required
to submit Form 15CA electronically on the website designated by the income
tax department and is further required to get a certificate from a Chartered
Accountant in Form 15CB in respect of the particulars filled in Form 15CA.In
August 2013, the Central Board of Direct Taxes (CBDT) had amended Rule 37BB
of the Rules vide its Notification No. 58 of 2013, dated 5 August 2013, to
broaden the requirement of collecting information and reporting requirements
for all remittances outside India. Other changes were made effective from
October 2013 .
It
has suggested that a clarification be issued with respect to applicability
of the said rule and compliances required there under for exempted interest
and salary payments, import of goods/raw materials as well as payments such
as royalty/ FTS which are exempt under the tax treaty provisions/not chargeable
to tax under the Act. Further, it is recommended that payments for import
of goods/raw materials should be added in the specified list of transactions
not required to be reported under the revised rule. It is recommended that
due modification be made in the system of the department so that the data
wrongly punched in can be rectified before uploading the Form 15CA.It is
suggested that the Form 15CA should be allowed to be accessed and uploaded
to the e-filing website of the income tax department by persons duly authorized
by the managing director/director of the company. TRACES provide the facility
of multiple log-in for single TAN. Under this facility, apart from the main
users, four sub-users can be created to do a particular activity/task. The
similar mechanism can also be explored and implemented for filing of Form
15CA.The requirement for the AD to produce the signed Form 15CA before an
income tax authority for the purposes of any proceeding under the Act, without
any time limit may be removed.
The
earlier position as per CBDT Circular 4/2009 dated June 20, 2009 may be reinstated
wherein the payer may be required to submit the duly signed Form 15CA in
duplicate to the AD and AD will in turn forward a copy of the undertaking
to the assessing officer concerned.
Withholding
tax on royalty/ fees for technical services (FTS) payable to non-residents
The
memo states that the Finance Act 2013 has increased the withholding tax rate
on royalty/ fees for technical services (FTS) payable to non-residents from
10% to 25% (excluding surcharge and cess). While introducing this provision,
one of the major concerns expressed by the Government was repatriation
of profits by the Indian tax payers to their parent company by way of royalty
and FTS. However, cross-border agreements, more often than not, are a payment
of consideration to the nonresidents which is net of any taxes. This is an
additional cost for the Indian companies and adversely impacts the cost competitiveness
of the Indian companies and thereby its profitability. Further,most DTAA's
entered into by India barring a few, have a royalty/ FTS withholding tax
rate of 10% or 15%.Given the intention, it is suggested that the rate
of tax on royalty/ FTS should have been increased only towards parent-subsidiary
transactions and not on the other third party transactions.
Safe
Harbour Rule for Contract Manufacturing
The
delegates also pleaded that the Central Board of Direct Taxes has recently
notified Safe Harbour Rule covering sector like IT/ITES, KPO and Auto Component
manufacturer prescribing desirable margins so that it avoid litigation under
transfer pricing regulation. It is requested to provide similar guidelines
for other sectors including pharma companies that are manufacturing
and exporting the product as contract manufacturer.
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