E-Newsletter “Weekly Taxation Newsletter” from 13th November, 2022 to 20th November, 2022

We are delighted to share our 94th E-Newsletter “Weekly Taxation Newsletter” dated 21st November, 2022 from 13th November, 2022 to 20th November, 2022 with you. This E – Newsletter is a weekly reference / compilation of interesting and latest news related to tax including upcoming Timelines / Due Dates, Notifications / Press Information, Case Laws, International Taxation etc.                         Stay updated, Stay connected

  • Due Dates under IT Act 1961
  Sl.  Compliance Particulars  Due Dates  
1​Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA, section 194-IB, and section 194M in the month of October, 2022  30.11.2022
2.​Return of income for the assessment year 2022-23 in the case of an assessee if he/it is required to submit a report under section 92E pertaining to international or specified domestic transaction(s)  30.11.2022
3​Report in Form No. 3CEAA by a constituent entity of an international group for the accounting year 2021-2230.11.2022
4​Statement of income distribution by Venture Capital Company or venture capital fund in respect of income distributed during previous Year 2021-22 (Form No. 64)30.11.2022
5​Statement to be furnished in Form No. 64D by Alternative Investment Fund (AIF) to Principal CIT or CIT in respect of income distributed (during previous year 2021-22) to units holders30.11.2022
6​Due date to exercise option of safe harbour rules for international transaction by furnishing Form 3CEFA.30.11.2022
  7​Due date to exercise option of safe harbour rules for specified domestic transaction by furnishing Form 3CEFB30.11.2022
    8​Due date for filing of statement of income distributed by business trust to unit holders during the financial year 2021-22. This statement is required to be filed electronically to Principal CIT or CIT in form No. 64A  30.11.2022
9​Application in Form 9A for exercising the option available under Explanation to section 11(1) to apply income of previous year in the next year or in future (if the assessee is required to submit return of income on November 30, 2022).    30.11.2022
10​Statement in Form no. 10 to be furnished to accumulate income for future application under section 10(21) or section 11(1) (if the assessee is required to submit return of income on November 30, 2022).  30.11.2022
  11​Submit copy of audit of accounts to the Secretary, Department of Scientific and Industrial Research in case company is eligible for weighted deduction under section 35(2AB) [if company has any international/specified domestic transaction].  30.11.2022
12​Statement by scientific research association, university, college or other association or Indian scientific research company as required by rules 5D, 5E and 5F (if due date of submission of return of income is 30.11.2022).  30.11.2022
13​Due date for e-filing of report (in Form No. 3CEJ) by an eligible investment fund in respect of arm’s length price of the remuneration paid to the fund manager. (if the assessee is required to submit return of income on November 30, 2022).  30.11.2022
14Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194S in the month of October, 2022 Note: Applicable in case of specified person as mentioned under section 194S  30.11.2022
  15Quarterly statement of TDS deposited for the quarter ending Sept., 2022 The due date for furnishing of TDS statement for the quarter ending September, 2022 has been extended from October 31, 2022 to November 30, 2022 vide Circular no. 21/2022, dated 27-10-2022  30.11.2022

Under the GST, 2017

A. Filing of GSTR –3B / GSTR 3B QRMP

a). Taxpayers having aggregate turnover upto Rs. 5 crores in preceding FY (Group A)

Tax periodDue Date Particulars
October, 202222nd November, 2022 Due Date for filling GSTR – 3B return for the month of September, 2022 for the taxpayer with Aggregate turnover upto INR 5 crores during previous year and who has opted for Quarterly filing of GSTR-3B
Group A States: Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, Daman & Diu and Dadra & Nagar Haveli, Puducherry, Andaman and Nicobar Islands, Lakshadweep

b). Taxpayers having aggregate turnover upto Rs. 5 crores in preceding FY (Group B)

Tax periodDue Date Particulars
October, 202224th November, 2022 Annual Turnover Up to INR 5 Cr in Previous FY But Opted Quarterly Filing         
Group B States:  Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, Jammu and Kashmir, Ladakh, Chandigarh, Delhi

B. GST Refund:

Form No.Compliance ParticularsDue Date
RFD -10Refund of Tax to Certain Persons18 Months after the end of quarter for which refund is to be claimed

C. Monthly Payment of GST – PMT-06:

Compliance Particular  Due Date
Due Date of payment of GST for a taxpayer with Aggregate turnover up to INR 5 crores during the previous year and who has opted for Quarterly filing of return under QRMP.  25.10.2022

D. GST CMP-08

Compliance Particular  Due Date
Form GST CMP-08 is used to declare the details or summary of self-assessed tax payable by taxpayers who have opted for a composition levy. Period: Jul-Sep, 2022     18.11.2022
  • GST Department Advisory:

Please refer to the advisory on TRAN-1/2 forms in the news and updates section before filing TRAN Forms. The Hon’ble Supreme Court of India has provided a one-time opportunity to all the aggrieved taxpayers to file Form TRAN-1/TRAN-2 and claim their transitional input tax credit in GST system. The facility have been made available by GSTN from 01.10.2022, and as per the court’s instruction shall be available to all aggrieved taxpayers till 30.11.2022.

Weekly Departmental Updates: Income Tax

New Delhi, The ‘local committees’ formed to deal with taxpayers’ grievances arising out of ‘high-pitched’ scrutiny assessments shall submit their report within about two months, the CBDT has reiterated in a public communication. A set of “revised” guidelines were issued by the Board in this context in April and these were applicable for cases being scrutinised under both the faceless and non-faceless assessment system.

The local committees have been created in each region of the income tax department, that are headed by a principal chief commissioner rank officer (Pr. CCIT), and will comprise three officials of the I-T department in the rank of principal commissioner or commissioner.

The grievances, by taxpayers who feel their scrutiny assessment has been unfair or high-pitched, can be submitted through the designated email id notified by the Central Board of Direct Taxes (CBDT) samadhan.faceless.assessment@incometax.gov.in.

The revised guidelines for the functioning of these committees were issued in April this year keeping in mind the changes in the organisational setup of the department following the launch of the faceless assessment regime in 2019-20 where taxpayers, whose cases fall under scrutiny, were given the option to contest their cases with the taxman over the Internet and without going to the tax office.

A high-pitched scrutiny assessment case is one where it is found that the addition of income was made on frivolous grounds, non-observance of principles of natural justice, or non-application of mind and gross negligence by the assessing officer in deciding a case.

2. Income-tax experts and CAs hail common tax filing form proposal

Every year the Central Board of Direct Taxes (CBDT) issues updated Income Tax Return (ITR) forms around the start of the new assessment year i.e., in the month of April. The updated forms are used for the filing of returns on income earned in the previous year or the relevant financial year.

However, on November 1, the CBDT issued a draft common Income-tax Return form to replace the multiple ITR forms currently in use. As many as four ITR Forms (ITR 2, ITR3, ITR5 and ITR6) will be replaced by this form. ITR1 (for salaried persons) and ITR4 (for a presumptive taxation scheme, read here) will coexist as optional forms, while ITR7 (which is usually used by taxpayers classified as public/charitable trusts) will remain unchanged.

The CBDT has requested inputs from stakeholders and the general public on the draft common form, before making it a reality.

“We have already seen the process of automatic cross checking of third-party data in the Annual Information Statement (AIS), which started recently. The proposed common form also contains suitable reconciliation of third-party data available with the Income-tax Department vis-à-vis data to be reported in the ITR. This would be especially important for businesses, which will have to now reconcile all third-party data, including GST Data, Bank Data, Suppliers data, etc and then file their ITR. In case there is any difference, autogenerated notices may be received by the taxpayers.”

3. Income Tax: 6.85 crore ITRs filed so far; number expected to go up further, says CBDT Chairman Nitin Gupta

Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta has confirmed that over 6.85 crore income tax returns have been filed so far for fiscal 2021-22. Moreover, the CBDT chairman said that the number is expected to go up further by December 31.

The last date for filing income tax returns (ITRs) for 2021-22 fiscal for individuals was July 31, while for corporates and others who need to get their accounts audited was November 7, 2022. If the deadline is missed, taxpayers can also file a belated return by paying penalty, the last date for which is December 31.

So far this fiscal, refund worth around Rs 2 lakh crore has been disbursed. Till November 10, the government’s gross direct tax kitty grew 31 per cent to Rs 10.54 lakh crore. Net collections, after adjusting refunds, stood at Rs 8.71 lakh crore, which is 61.31 per cent of the Budget estimates (BE) for the full year tax collection target.

4. Here’s step-by-step process for paying income tax through e-pay tax option

The e-pay tax provision has been enabled on the income tax e-filing portal for taxpayers. The income tax payment can be done with the help of debit/credit cards, pay-at-bank counters, net banking facilities, UPI, and RTGS /NEFT. Currently, there are a few authorised banks available for the choice of e-pay tax, like Federal Bank, Bank of India, and Kotak Mahindra Bank. It should be noted that only Kotak Mahindra Bank Payment Gateway offers the choice of tax payment via apps like Gpay and Amazon. The Income Tax Department has taken several steps in the past several years towards making sure that the filing process of Income Tax Return (ITR) becomes simpler.

Here are the steps for paying advance tax via various payment modes through e-pay tax option on the income tax e-filing portal:

Step 1: Visit the income tax e-filing portal and log in using your password.

Step 2: Select the option of “e-pay tax” from the “e-file” menu and click on the option which reads as “New payment”.

Step 3: After this, click on the link which says “Proceed”.

Step 4: Choose the assessment year, and select the tax payment you have to make, that is AY 2023-24 and Advance Tax. Then, choose “continue”.

Step 5: Provide the tax break up you need to pay, that is surcharge, cess, tax, etc., and click on “continue”.

Step 6: A total of five options will appear for paying the taxes, namely debit cards, net banking, RTGS/ NEFT, pay-at-bank counters, and payment gateways. Now, choose the option of your desire.

Debit Card

This option hasn’t been enabled by the authorised banks yet. But it is expected that it will work the same way as it does on the website of NSDL.

NEFT/RTGS

Step 1: One can use any bank with the facility of RTGS/NEFT to pay tax by paying offline at the branches. Choose the option RTGS /NEFT and click on “Continue”.

Step 2: Click on “Pay now” or “continue” if the details given in the preview are correct.

Step 3: Challan Form’s signed copy is required to be presented before the bank’s branch within 15 days for payment.

5. Benefits You Will Get on Filing A Nil Income Tax Return

There are numerous instances where a proven track record of filing ITR has helped people, such as in scholarship as well as visa applications. Besides, filing ITR is also necessary if one needs to claim any deduction

July 31, 2022 was the last date for individuals to file their income tax return (ITR). But if you haven’t yet filed yours, you can still file a belated return till December 31, 2022 by paying the penalty and forgoing certain specified adjustments. 

An ITR is considered a proof of income by various authorities (both government and private). For instance, certain institute and/or university scholarships can be claimed by furnishing an ITR. The ITR helps in establishing the income proof of the prospective student, and insurance companies, too, consider them as a valid proof.

Loan Applications: Whenever someone applies for a loan, the lending institution will first ask for the PAN details, then the credit bureau score, and then ITR (if available). This is because if ITR is available and one furnishes that, then the institutions can easily judge the borrower’s creditworthiness, and accordingly, the proper loan amount and interest rate can be sanctioned.

Source: Read full at Click Here

Important Circulars and Notifications:

Sl.Particulars of the Notification(s)File No. / Circular No.Notification Link(s)
1Amendments in the notification of the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes No.60/2022 dated the 10th June, 2022Notification  123 of 2022  Click Here
  2Amendments in the notification of the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes No.50/2014Notification  No. 124/2022  Click Here
3The Central Government hereby specifies the sovereign wealth fund, namely, Public Investment Fund (PAN: AAAJP1787D),Notification  No. 125/2022  Click Here

Weekly Departmental updates:

GST Updates

1. Decriminalise GST law, slash personal income tax rates in Budget: CII to government

Industry body CII has pitched for a reduction in personal income tax rates, decriminalisation of the goods and services tax and a relook at the capital gains tax rates as part of its agenda presented to the government for the forthcoming Budget.

Arguing that the GST law already contains adequate penal provisions for deterrence against evasion of taxes, CII has suggested decriminalisation of GST law.

Also, the applicability of prosecution provisions should not be based on the absolute amount of tax evasion but should be based on real intent to evade the taxes and a certain percentage of the tax payable, it stated.

For reviving investment, the pre-Budget memorandum presented to the finance ministry also recommended raising capital spending to 3.3-3.4 per cent of GDP in FY24 from 2.9 per cent currently, with an aim to increase it further to 3.8-3.9 per cent by FY25.

It also suggested increasing outlays on green infrastructure like renewables along with traditional infrastructures, such as roads, railways, ports etc. In addition, full implementation of Gati Shakti and NIP should be expedited to bring efficiency to infrastructure creation.

For financing infrastructure, the industry body has recommended deepening corporate bond markets (including infrastructure bonds), prioritising a package for large play of urban municipal bonds and launching a Blended Finance Star Multiplier programme for sustainability projects with an allocation of Rs 10,000 crore, among others.

“Private sector investment also needs a boost as a public investment alone is not enough to energise growth in the economy. Private Sector Participation in PPPs should also be revived through timely payments, Swift Dispute Resolution Mechanism and expediting the land acquisition process,” CII stated. (Read more at: Click Here)

2. GST payers get communication to first show irreversible ITC and then reverse, experts advise caution in filing Nov GSTR-3B

Form GSTR-3B shows summarised figures of sales, ITC claimed, and net tax payable

States GST authorities have asked assessees to furnish correct and proper information of ineligible Input Tax Credit (ITC) and reversal. This is critical as last chance to avail missed ITC for fiscal year 2021-22 through filing of GST return form ‘3B’ is November 20. Experts say non-compliance could result in penalty of ₹20,000 or more per return.

Form GSTR-3B shows summarised figures of sales, ITC claimed, and net tax payable. In August 2022 , Central Board of Indirect Taxes & Custom (CBIC) issued a detailed clarification on reporting of information about reversal of ITC as well as ineligible ITC. Now, total ITC (eligible as well as ineligible), is being auto-populated from statement in Form GSTR-2B in different fields of Table 4A of Form GSTR-3B. (Read more at: Click Here)

3. Govt may remove penal offences covered under IPC from GST law

The government is considering to remove the penal offences which are already covered under the Indian Penal Code (IPC) from the GST Act to make it more taxpayer-friendly, an official said. The proposal, part of the exercise to decriminalise GST law, is likely to be taken up in the next meeting of the GST Council. Once approved by the GST Council, the Finance Ministry will propose amendments to the GST law, which could be taken up in the upcoming winter session of Parliament next month.

The amendments would be placed before the GST Council for approval. Thereafter, it would go to Parliament for effecting changes in the GST Act. Once approved by Parliament, states would be required to amend their state GST laws.

Tax experts said primarily fake billing offences could be part of the decriminalisation exercise. They may also include supplies of goods or services or both without proper invoices and issues of invoices or bills without a supply of goods.

“Maximum sentence under section 420 of IPC for cheating cases is 7 years, whereas the same is ring-fenced to 5 years in GST code. With this change, deceitful taxpayers could be charged for up to 7 years of imprisonment under section 420 of IPC, irrespective of the tax evaded,” Mohan said.

This would be a massive departure from current GST provisions, whereby punishment under Section 132 of GST law depends on the quantum of tax evaded, Mohan added.

4. Violation of GST rules: Insurers ask govt to sort ‘GST evasion lapses’

Under pressure in the ‘GST evasion’ issue, the insurance industry has approached the government to sort out the issue without burning its fingers. While a top representative team consisting of some of the CEOs of leading private sector general insurers have already met Tarun Bajaj, retiring Revenue Secretary, Ministry of Finance (MoF), the representatives of life insurers are planning to meet Bajaj’s successor Sanjay Malhotra shortly after he takes over his new job in December.

While a section of insurance officials claimed it was due to oversight on their part, the evasion issue has thrown light into the murky dealings in the sector. These insurance companies have availed input tax credit on the basis of invoices issued by several intermediaries for providing services like advertising, marketing and brand activation whereas no such services had actually been provided.

Earlier, the government had said Directorate General of GST Intelligence, Mumbai Zonal Unit initiated investigations against 16 insurance companies on the issue of availment of ineligible input tax credit. Investigations by the unit revealed that input tax credit of Rs 824 crore has been availed, out of which an amount of Rs 217 crore has been paid voluntarily by these 16 insurance companies so far, a statement from the government said.

According to IRDA regulations, only nominal commission is permitted to corporate agents. “In order to circumvent these regulations, the insurance companies have resorted to obtaining invoices from intermediaries, in order to transfer commission (over and above the permissible limit) to NBFCs, for supply of services of advertising, web marketing etc., whereas there has been no underlying supply of services. In turn, these intermediaries have received invoices from NBFCs for such supplies,” the government said.

5. Centre ready to bring fuel under GST: Petroleum Minister Puri

The Centre is ready for bringing petrol and diesel under the GST regime but it is unlikely that the states will agree to such a move, Petroleum and Natural Gas Minister Hardeep Singh Puri said on November 14.

“For bringing the petrol and diesel under the GST, the States have to agree. If the States make the move, we are ready. We have been ready all along. That’s my understanding. It is another issue how to implement it. That question should be addressed to the finance minister,” Mr. Puri told reporters here.

“It is not difficult to understand, they (States) get revenue out of this. One who is getting revenue, why would he leave it? Liquor and energy are two things that generate revenue. It is only the Central government which is worried about inflation and other things,” he added.

 “During Covid in March 2020, the price of an oil barrel had come down to $19. 56 which is now $96. I don’t answer hypothetical questions but the efforts of the Central government will be that prices remain stable,” he said.

  • Important Notifications under

Excise / Custom/ GST:

GST Updates

Sl. No.  Particulars of the Notification(s)File No. / Circular No.Notification Link(s)
1Seeks to make amendments (Third Amendment, 2022) to the CGST Rules, 2017.22/2022-Central TaxClick Here
2Clarification on refund related issues181/13/2022-GSTClick Here
    3Guidelines for verifying the Transitional Credit in light of the order of the Hon’ble Supreme Court in the Union of India vs. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018, order dated 22.07.2022 & 02.09.2022    182/14/2022-GST    Click Here

Custom / Excise Updates

LinksNotification Particulars
Click HereSeeks to amend Notification 11/2021-Customs, dated the 1st February, 2021 in order to withdrawal AIDC exemption on Anthracite ,PCI Coal and Coking Coal.
  Click HereSeeks to amend Notification No. 50/2017-Customs, dated the 30th June, 2017 in order to withdrawal BCD exemption on Anthracite and PCI Coal, Coke & Semi coke and ferronickel.
  Click HereSeeks to amend Notification No. 27/2011- Customs, dated the 1st March, 2011 in order to withdrawal export duty on iron ore & steel products.
  Click HereSeeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022 , to reduce the Special Additional Excise Duty on Diesel.
  Click HereSeeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to increase the Special Additional Excise Duty on production of Petroleum Crude.

Important Case-laws

Income Tax

1. CBDT considering modification in faceless appeal scheme, 2020

  • Case Details: Central Board Of Direct Taxes v. Lakshya Budhiraja
  • Citation: [2021] 131 taxmann.com 51 (SC)

The assessee challenged the Faceless Appeal Scheme, 2020, alleging that the scheme was discriminatory, arbitrary, and illegal to the extent it provided a virtual hearing as per circumstances to be approved by administrative authorities under Income-tax Act, 1961.

The instant petition was filed to transfer cases challenging Faceless Appeal Scheme, 2020, from High Courts to the instant Supreme Court.

The Additional Solicitor General submitted before the Supreme Court that the department is having a second look at the matter on the issue of Faceless Appeal Scheme, 2020. He may be granted a period of three months as it may require changing the law.

Considering the submission, the Supreme Court has deferred the matter for three months as sought by the learned Additional Solicitor General.

Editor’s Note: The Central Board of Direct Taxes (CBDT) has notified the Faceless Appeal Scheme 2021, effective from 28-12-2021. The new scheme is notified in supersession of the earlier Faceless Appeal Scheme, 2020. The new scheme has replaced the word ‘may’ with ‘shall’ with respect to allowing requests for a personal hearing. Thus, it would be mandatory for the Commissioner (Appeals) to allow a personal hearing if the taxpayer requests it during e-proceedings.

2. Furnishing of written submissions cannot be interpreted that assessee has waived off his right to be hear

  • Case Details: Sukhvinder Pal Singh v. ITO
  • Citation: [2021] 131 taxmann.com 203 (Delhi – Trib.)

The Delhi Tribunal has quashed the argument of revenue that it should be treated that assessee had waived off right to be heard if he has made available written submissions to First Appellate Authority. The Delhi Tribunal held that if an adjudicating authority finds the written submissions are not sufficient and complete, it should put this deficiency to the notice of the assessee. Without any specific communication to this effect, it cannot be said that an adequate opportunity of being heard has been granted to the assessee.

Once it is seen that the submissions were without supporting documentary evidence, then in an adequate representation, such an opportunity necessarily needs to be provided.

In the instant case, no such effort appeared to have been made. It is well settled that mere making available of the written submissions by an assessee cannot be unitedly so interpreted to mean that right to be heard has been waived off.

The onus to ensure that the waiver was made with full and conscious knowledge of the existence of this sacrosanct right rests on the shoulders of the adjudicating authority to ensure that the assessee stays informed of his rights and consequent duties. There is nothing on record to show that the First Appellate Authority can be justifiably held to form the view in the facts of the present case that the assessee was so informed of its rights and still chose to waive them.

Important Case-laws

GST Cases:

1. Works under SBM to attract GST if not done for govts, authorities: AAR Even if supplies are made under a government scheme, these may not be exempt from Goods and Services Tax (GST) if these are not directly supplied to governments or local authorities. Work done for State Urban Development Agency (SUDA) under the Swachh Bharat Mission

(SBM) and Mission Nirmal Bangla would not be exempt from GST, according to the state Authority for Advance Rulings (AAR).

The work will attract 18 per cent GST, broken into 9 per cent each for central and state GSTs, it ruled. The case pertains to a contract received by Simoco Telecommunications (South Asia) Ltd from SUDA for sewage and waste collection treatment and disposal and other environmental protection services in a number of municipalities in West Bengal.

AAR held that while pure supplies to governments and local authorities are exempt from GST, composite supplies are also exempt if goods are up to 25 per cent of the total supply.

AAR observed that SUDA is a registered society that was formed in the year 1991 under the aegis of the erstwhile Municipal Affairs Department, West Bengal, with the objective to ensure the effective implementation of different development programmes in urban areas of the state.

AAR said that SUDA, being a registered society, was not a panchayat or a municipality, or any board or cantonment. Besides, no documents had been produced wherefrom it could be established that SUDA was an authority that is legally entitled to and entrusted by the government with the control or management of a local fund.

2. GST on works under government schemes like Swachh Bharat Mission: Here’s what West Bengal AAR ruled

Supplies made under a government scheme may not be out of the purview of Goods and Services Tax (GST) if they are not directly made to governments or local authorities. The West Bengal Authority for Advance Rulings (AAR) has clarified that any projects done for State Urban Development Agency (SUDA) under the Swachh Bharat Mission (SBM) and Mission Nirmal Bangla will not be exempt from GST.

GST on such works will be applicable at the rate of 18 per cent, comprised of 9 per cent each for central and state GSTs, it ruled. The AAR made this ruling in a case concerning a contract given to Simoco Telecommunications (South Asia) Ltd by SUDA for sewage and waste collection treatment and disposal and other environmental protection services in a number of municipalities in West Bengal.

The ruling body also took into account whether the supply to SUDA constituted supply to governments or local authorities and noted that SUDA is a registered society formed in 1991 under the aegis of the erstwhile Municipal Affairs Department, West Bengal. It was created with an aim to ensure the effective implementation of different development programmes in urban areas of the state.

Hence, the AAR ruling clarified that where the services are not provided directly to a local authority, they shall not be eligible for exemption, even if it is a project for public welfare, since the immediate recipient of service is not any arm of the government.

International Taxation  Corner (ITC)

1. What is withholding tax and its proposed application in the UAE
Usually, WHT applies to cross-border payments as well. WHT rates vary based on the nature of goods and services received and the relationship status with the non-resident supplier

The term ‘withholding tax’ refers to the tax withheld at source. In some jurisdictions, this is called pay-as-you-go. In the withholding tax (WHT), the party paying the amount against the goods and services withholds the tax at the source at the pre-given rates and pays the remaining amount to the party providing the goods and services. The amount of withholding tax is paid directly to the government by the party that deducts the tax at source. Like the jurisdictions where the personal income tax is applicable, tax is deducted at source by the employer on salary, and the employer pays the tax directly to the government.

Usually, WHT applies to cross-border payments as well. Moreover, WHT rates vary based on the nature of goods and services received and the relationship status with the nonresident supplier. Like in Saudi Arabia, while making payments to non-resident unrelated parties 20 per cent WHT applies to the management fee, 15 per cent to the royalties, and five per cent to rent, return on loans, technical & consulting services and, international telecommunication Services etc. If the payment is being made to the non-resident related parties, 15 per cent WHT applies to technical and consulting services and international telecommunication services.

Mainland UAE sourced income earned by a free zone person that benefits from the zero per cent CT regime unless the income is attributable to a mainland branch of that Free Zone Person. This means that if the free zone person earns any income from the UAE mainland, it will be subject to zero per cent WHT. However, if the free zone person has a branch on the mainland and earns any income from that branch, then zero per cent WHT will not apply; instead, the mainland branch will be considered a resident of the UAE, and a standard nine per cent corporate tax will apply on the taxable profits of the branch. Like Jafza company has a branch on the mainland with the name LMN, the LMN will be assumed a resident of the UAE, and its taxable profits will be subject nine per cent tax.

Dividends and other profit distributions made by a free zone person that benefits from the zero per cent CT regime to a mainland UAE shareholder in the free zone person. It means if the dividend will be paid and the profit will be distributed by the free zone person (who enjoys a zero per cent CT regime) to a free zone person, then it will be zero per cent. If the free zone person is not enjoying a zero per cent CT regime or dividend is being paid and/or profit is being distributed not to a free zone person, then zero per cent will not apply. Like a DMCC company which enjoys zero per cent CT regime is paying dividends to a JAFZA free zone person, then zero per cent WHT will apply. Read more at: Click Here

2. UAE major tax overhaul: Everything you need to know

Changes to the UAE’s VAT rules will come into effect on January 1, 2023. In addition, the nation will also launch a new platform on December 5 to ensure seamless transactions for taxpayers.

Gulf nations have long been known for low-taxes, a situation that makes the region more attractive than many other places in the world to live and work. The UAE is no different, but has already introduced several tax measures in a bid to increase government income and help diversify the economy away from oil.

In 2018, the UAE Ministry of Finance introduced Value Added Tax (VAT) of 5 percent, which is a tax imposed on most goods and services.

However, late last month, the Ministry announced it would be making some amendments to VAT, all of which will be coming into effect on January 1, 2023. No changes were announced to the VAT rate, which remains unchanged at 5 percent.

The changes are as follows:

  • Those persons who are registered and make taxable supplies are permitted to apply for an exception from VAT registration. However, all of their supplies must be zero-rated and/or if they no longer make any supplies other than zero-rated supplies.
  • A 14-day period to issue a tax credit note will be set to settle output tax, in line with the time frame set for issuing tax invoices.
  • The Federal Tax Authority can forcibly deregister registered persons in certain cases, if necessary.

For businesses in the UAE, the rules are as follows:

  • If the taxable supplies and imports of a business exceed the mandatory registration limit of AED 375,000, the business must register for VAT.
  • Businesses can also choose to register for VAT voluntarily if their supplies and imports exceed AED 187,500.
  • Similarly, a business may register voluntarily if its expenses exceed the voluntary registration threshold. This is designed to enable start-up businesses with no turnover to register for VAT.
  • Businesses in the UAE are required to record their financial transactions and maintain up-to-date records.

Residential properties, bare land, public transport and the supply of certain financial services are exempt from VAT in the UAE. Supplies from government entities are typically subject to VAT; however, this ensures that government entities are not unfairly advantaged as compared to private businesses.

The ministry added that the Federal Tax Authority (FTA) may forcibly deregister persons in specific cases if necessary.

3. Rishi Sunak urged to crack down on UK-based firms using overseas tax havens

Rishi Sunak is being urged to act “immediately” to crack down on UK-based firms stashing their profits in overseas tax havens, in a move Labour claims would raise as much as £7bn a year. Sir Keir Starmer’s party wants the prime minister to implement a “multinational top-up tax” in line with reforms agreed by the G20 in 2021.

Under the plans, big companies with their headquarters in the UK would have to pay an effective rate of 15% on any profits they make in other jurisdictions around the world.

Draft legislation to bring in the change was published in July 2022, but the proposals are yet to be laid in parliament.

Shadow chancellor Rachel Reeves is also calling on ministers to make “fairer choices” on tax and spending, and set out how they will grow the economy and improve living standards.

A Treasury spokesperson said: “It was the prime minister, under the UK’s G7 presidency, who laid the foundations for the historic international tax reforms now supported by more than 130 countries.

“Since then we have been at the forefront of global efforts to implement those reforms including consulting on the implementation of global minimum corporate tax rules in the UK and publishing draft legislation in the summer.”

Knowledge Bucket for NRI’s

  1. A citizen of India who stays abroad will end up paying income tax in both the countries unless they apply for an exemption. Read further to know how the NRIs can avoid paying double tax.
  • An NRI is meant to pay tax in India for the income accrued here but he can seek exemption and may be eligible for a lower tax rate if there is a double taxation avoidance treaty between India and the other country. The underlying idea is to prevent taxpayers from paying income tax two times on the same income.
  • Non-Resident Indians (NRIs) can open fixed deposit accounts in India in various foreign currencies, such as the US dollar, UK Pound, Euro, etc., tax-free.
  • Non-resident Indians (NRIs) who rent or sell real estate in India should understand the rules that govern taxation of rental income and capital gains. In most cases, the rules are similar to those that apply to resident Indians, but there are a few differences.
  • NRIs should familiarise themselves with the rules that govern remittance of money earned from property transactions in India

Do you know ??

  1. India scrapped export taxes on low-grade iron ore and on some intermediate steel products beginning Saturday, after months of complaints from miners and steel makers about loss of foreign sales opportunities.
  • For a resident individual, receiving fees electronically, 6 per cent of the gross receipt or actual profit is applicable.
  • UK Chancellor Jeremy Hunt, in his Autumn Statement, has announced that electric car owners will have to pay taxes from 2025. Vehicle Excise Duty is a type of tax charged on all vehicles driven on UK roads. Until now, electric car owners have been exempted from VED, but it is going to change in April 2025.
  • British finance minister Jeremy Hunt announced a string of tax increases and tighter public spending in a tough budget plan on Thursday that he said was needed after the blow dealt to the country’s fiscal reputation by former prime minister Liz Truss.
  • There are no specific provisions in the Income-tax Act, 1961, governing the taxation of withdrawal from NPS Tier II account.
  •    Disclaimer:

Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information. *(We consider various sources including ET, BS, HT, Taxmann etc.)

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