Direct tax 

Clarification regarding application of section 194-O of Income Tax Act 1961: CBDT Circular 

Section 194O mandates E-commerce operators (ECOs) to deduct tax at 1% of the gross amount of sales of goods or provision of service or both. Below are the clarifications issued by the department on the application of section 194-O. 

i) In the case of multiple ECOs, the ECO who ultimately pays the end seller is liable to deduct TDS and fill out form 26Q.

ii) In e-commerce, sellers generally charge buyers extra fees, such as logistics, delivery, shipping, or packaging fees. Further, both buyer and seller (ECOs) may charge a commission, with sellers potentially transferring these costs to buyers during online transactions. To determine the gross amount liable to deduct tax, the gross amount shall be inclusive of all ancillary costs (like packaging, commission etc.) incurred by the seller. 

iii) Further, it has been clarified that in case the GST component has been indicated separately in the invoice and tax is deducted at the time of credit of the amount then the tax is to be deducted under section 194Q of the Act on the amount credited without including such GST.  

If the GST amount is not identifiable, then TDS is to be deducted from the whole amount.  

iv) In the case of purchase returns, the tax must have already been deducted before the purchase In that case, the lax deducted may be adjusted against the next purchase against the same seller and no adjustment is required if the purchase-return is replaced.

v) If discounts are provided by the seller itself, the net amount after the discount shall be considered for TDS. If a discount is provided by ECO, then tax shall be withheld on the gross amount of sales.

Case Laws

Exemption under section 11(2) can be claimed despite late filing of form 10B and ITR: Ahmedabad ITAT 

– The Assessee filed an original return of income on 25.09.2019 wherein an exemption of a certain amount was claimed. However, the assessee filed a revised return of income on 13.03.2020 wherein a higher exemption was claimed under section 11(2). 

Assessing Officer restricted exemption under section 11(2), on the ground that the assessee had not filed “ITR” and “Form 10” within the due date prescribed under Section 139(1). 

– The Tribunal held, that since it was only a delay in procedural part from the side of the Assessee, the Assessing Officer erred in not allowing such deduction. 

Hence the same was allowed to the Assessee. 

Claim of additional deduction of depreciation on goodwill can be claimed while filing revised return as well: Hyderabad ITAT 

– Assessee-company inadvertently did not prefer a claim of additional deduction of depreciation on goodwill at the time of filing the original return. 

– However, the assessee made such a claim by way of filing a revised computation of income. 

– The Assessing Officer did not consider the additional claim made by the assessee by filing a revised computation of income without providing any reasons. 

– The Tribunal held, irrespective of whether the fact of assessee claiming or not, depreciation would be allowed while computing the total income of an assessee, disallowance of claim for deduction of depreciation on goodwill by the Assessing Officer could not be sustained. 

– Held, the Assessing Officer erred in not allowing the Assessee any deduction of goodwill. 

GST Litigation Update

Indirect Litigation update

Bombay High Court allows rectification of GSTR-1 return post due date taking a lenient view  

In the case of M/s Star Engineers (I) Pvt. Ltd., the Bombay High Court allowed the Writ and has held that Sections 37(3) and 39(9) of the CGST Act, 2017 should be interpreted purposively. The case involved the rejection of an application for correction due to reporting of invoices in the wrong GSTIN, citing the reason that amendments in the GSTR-1 return beyond the due date is not permissible.   

Acknowledging the potential for inadvertent human errors in filing GST returns, the Court urged the department to adopt an assessee-friendly approach. It emphasized that the correction of a bona fide error, where there is no loss of revenue to the government, should be permitted. 

The Court directed the GST department to permit the petitioner to rectify/amend Form GSTR–1, either online or through manual means, in a bid to avoid unwarranted litigation and keeping in mind the GST regime’s objective of maintaining accurate data in returns.  

Customs Litigation Update

FTA benefit on import of goods – the phrase ‘third country invoicing’ includes any number of countries – Customs AAR   

In a case of M/s M/s. Boston Scientific India Pvt. Ltd., the Customs Authority for Advance Rulings (AAR) has ruled that under the ASEAN India FTA, the concept of third-country invoicing does not restrict itself to a tripartite system involving only three countries. Instead, the term ‘third country’ within this context encompasses any number of countries, as long as the imported goods adhere to the origin criteria stipulated under the Rules of Origin. According to this ruling, transaction involving four parties would fall within the scope of third-country invoicing under the ASEAN India FTA. Consequently, such transactions would be eligible for availing concessional duty benefit in India.  

Foreign Trade Policy  

Import from SEZ to DTA – Government relaxes policy condition with respect to used IT assets 

Para 2.31 of the Foreign Trade Policy has been amended vide notification number 56/2023 dated 1 January 2024 with respect to import of used IT assets (Laptops, desktops, monitors, printers) from SEZ to DTA. Earlier, import of used IT assets from SEZ to DTA was restricted subject to obtaining an import license. Under the new paragraph 2.31, the import of used IT assets from SEZ to DTA would be free subject to following conditions:

– Import is for further use in the DTA operations of the SEZ unit;

– SEZ unit has used the assets for a minimum of two years;

– Goods are not older than five years from the manufacturing date;

This relaxation extends to cases where a unit is closing down its operations in the SEZ and relocating to the DTA. 

However, this provision applies only if no exemption from regulatory requirements (such as CRO, WPC, RoHS) was availed during the import of the used IT assets into the SEZ. 

DGFT issues a Clarification regarding licensing requirement for import of IT hardware 

Director General of Foreign Trade (DGFT) has issued a Policy Circular No. 09/2023-24 dated 12 January 2024 wherein it has been clarified that the new licensing requirement which was introduced from 1 November 2023 is applicable only on import of five categories of goods viz. (1) Laptops, (2) Tablets, (3) All-in-one Personal Computers, (4) Ultra small form factor Computers, and (5) Servers falling under HSN 8471. 

The licensing requirement does not apply to any other goods such as Desktop Computers, etc. under customs tariff heading 8471. 

Singapore Updates

Monetary Authority of Singapore

1) Singapore and China Enhance Digital Finance and Capital Markets Cooperation 

On 7th December 2023, the Monetary Authority of Singapore (MAS) has announced new digital finance and capital markets initiatives to expand its financial cooperation with China. The initiatives were discussed at the 19th Joint Council for Bilateral Cooperation (JCBC) in Tianjin, which was co-chaired by Singapore Deputy Prime Minister and Minister for Finance, Mr Lawrence Wong, and the People’s Republic of China Executive Vice Premier of the State Council, Mr Ding Xuexiang. 

The initiatives are:

– Cross-border E-CNY Pilot between China and Singapore. Following the signing of a Memorandum of Understanding (MOU) on digital finance cooperation in 2020 between MAS and the Digital Currency Institute, People’s Bank of China (PBCDCI), MAS and PBCDCI are embarking on a pilot that will allow travellers from both countries to use e-CNY for tourism spending in Singapore and China. This will enhance convenience for travellers when making purchases during their overseas travel.

– Launch of the Exchange Traded Funds (ETF) Product Link between the Singapore Exchange (SGX) and Shanghai Stock Exchange (SSE). Building on the successful launch of the ETF Product Link between SGX and Shenzhen Stock Exchange (SZSE) at the 18th JCBC in 2022, SGX and SSE signed an MOU in May 2023 to establish an ETF Product Link. On 1 December 2023, CSOP [1] Huatai-Pinebridge SSE Dividend Index ETF and the CSOP iEdge Southeast Asia+ TECH Index ETF were launched on SGX and SSE respectively as the first product pairing under the new ETF Product Link. This successful launch opens up greater collaboration opportunities between fund managers in both markets, and improves investors’ access to ETF products in each other’s markets.

– Signing of MOU between SGX and Guangzhou Futures Exchange (GFEX). SGX and GFEX [2] have signed an MOU to collaborate on information exchange, mutual visits and training, and joint research on products and business areas relating to green development.

Singapore’s local banks and China’s UnionPay International have also embarked on early-stage feasibility discussions on a potential remittance linkage between Singapore’s PayNow and UnionPay pursuant to each jurisdiction’s laws and regulations. Such a linkage could facilitate secure, convenient and cost-effective cross-border payments and remittances between the two countries. https://www.mas.gov.sg/news/media-releases/2023/singapore-and-china-enhance-digital-finance-and-capital-markets-cooperation 

2) MAS Publishes Code of Conduct for Providers of Environmental, Social, and Governance (“ESG”) Rating and Data Products 

On 6th December 2023, The Monetary Authority of Singapore (MAS) has published its finalised Code of Conduct for ESG Rating and Data Product Providers (“CoC”) and an accompanying Checklist for providers to self-attest their compliance to the CoC (“Checklist”), following a public consultation conducted from June to August 2023. 

The CoC aims to establish baseline industry standards for transparency in methodologies and data sources, governance, and management of conflicts of interest that may compromise the reliability and independence of the products. It builds upon the International Organisation of Securities Commissions’ (“IOSCO”) recommendations for good practices for such providers. Respondents to the consultation have expressed strong support for the CoC. Users also agree that providers’ self-attestation on the Checklist should, where feasible, undergo third party assurance or audit. 

MAS encourages providers to disclose their adoption of the CoC and publish their completed Checklist within 12 months from publication of the CoC. To enable users to easily identify providers which have publicly adopted the CoC, MAS has worked with the International Capital Market Association to host a list of such Providers on ICMA’s website.

https://www.mas.gov.sg/news/media-releases/2023/mas-publishes-code-of-conduct-for-providers-of-esg-rating-and-data-products https://www.mas.gov.sg/-/media/mas/regulations-and-financial-stability/regulations-guidance-and-licensing/financial-advisers/consultation-paper/response-to-feedback-received-on-proposed-code-of-conduct-for-esg-rating-and-data-product-providers.pdf 

Accounting And Corporate Regulatory Authority

New trustBar verification service provides added assurance on authenticity of ACRA’s Business Profiles and Business Certificates 

From 8 December 2023, the service has been enhanced to allow users to verify if the information is up to date. This provides additional confidence in using ACRA’s business profiles and certificates. 

The enhancement is part of ACRA’s efforts to foster a trusted and vibrant business environment in Singapore. 

ACRA has launched a new verification service to give added assurance to businesses and the public using ACRA’s Business Profiles and Business Certificates (Incorporation/Registration) when conducting business and making business decisions. 

ACRA’s trustBar verification service enables quick and easy verification of the authenticity of ACRA’s Business Profiles and Business Certificates (Incorporation/Registration). The service leverages the Government Technology Agency of Singapore (GovTech)’s Open Attestation (OA) – an open-source framework for the endorsement and verification of documents.  

Read More – https://www.acra.gov.sg/announcements/trustbar 

Legal Updates

Amendments in criminal laws: 

On 25 December 2023, the Ministry of Law and Justice has published the Bharatiya Nyaya Sanhita, 2023, the Bharatiya Nagarik Suraksha Sanhita, 2023, and the Bharatiya Sakshya Adhiniyam 2023, which intend to replace the Indian Penal Code 1860, the Code of Criminal Procedure, 1973 and the Indian Evidence Act, 1872 respectively. 

The provisions of the above-mentioned legislations will come into force as and when the Central Government notifies the date of such enforcement in the Official Gazette. 

A detailed analysis of the abovesaid legislations will be circulated shortly.