2025

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Transfer Pricing (TP) Compliance Developments in Mauritius – Finance Act 2025

Transfer Pricing (TP) Compliance Developments in Mauritius - Finance Act 2025

Home > Transfer Pricing (TP) Compliance Developments in Mauritius – Finance Act 2025

Transfer Pricing (TP) Compliance Developments in Mauritius - Finance Act 2025

The Finance Act 2025 marks a major shift in Mauritius’s tax and transfer pricing (TP) landscape. Section 75 of the Income Tax Act, which has long required related-party transactions to meet the arm’s length principle, will now be reinforced with mandatory TP documentation effective 8 August 2025. This aligns Mauritius with OECD BEPS standards, requiring companies to maintain detailed records of intercompany dealings. Multinational enterprises, Global Business Companies, and local groups must prepare Local and Master Files, ensure fair pricing, and demonstrate real economic substance.

The Act also introduces the Qualified Domestic Minimum Top-Up Tax (QDMTT), a Fair Share Contribution for high-income individuals, a 10% Alternative Minimum Tax for certain industries, and VAT on digital services from January 2026. These changes highlight Mauritius’s commitment to transparency, global tax alignment, and stricter compliance. Businesses should act now to strengthen governance, mitigate risks, and prepare robust documentation. Click below to download

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360° Fixed Asset Management

360° Fixed Asset Management

Home > 360° Fixed Asset Management

360° Fixed Asset Management

Comprehensive Enterprise Solutions with SBC – FixTag

From initial procurement to final disposal, including physical verification, precise tagging, reconciliation, capitalization, and robust compliance reporting— SBC + FixTag ensures your organization remains audit- ready and operates with maximum cost-efficiency.

360° Fixed Asset Management

Capitalization: Ensuring assets are correctly capitalized on books.

Asset Tagging:  Applying unique identifiers to each asset.

Physical Verification:  Conducting physical checks of asset existence.

Compliance Reporting: Generating reports for regulatory compliance.

Financial Reporting:  Reporting on financial compliance and trends.

Why Organizations Choose SBC – FixTag

 

Centralized Control & Visibility

Gain complete oversight of IT assets, facilities, and fleets with real-time dashboards, offering unparalleled visibility across all your operational locations.

Seamless Audit Compliance

Ensure perpetual audit readiness with automated reporting, proactive AMC alerts, and comprehensive audit trails, simplifying regulatory inspections.

Industries & Use Cases We Serve

 

Physical Verification & Tagging

On-site asset verification and precise QR/Barcode/RFID tagging implemented across all your locations with professional accuracy.

FAR Creation & Reconciliation

Establish a reliable Fixed Asset Register (FAR) with clean, standardized data and fields, serving as your singular, authoritative source of truth.

Capitalization & Regulatory Compliance

Ensure correct asset classification, appropriate SLM/WDV depreciation methodologies, and timely statutory reporting to satisfy all regulatory obligations.

Audit Support & Disposal Validation

Facilitate seamless compliance verification with robust audit support, including thorough disposal verification and meticulous maintenance of audit trails.

Optimized Stock Verification

Conduct precise consumables and store checks, alongside non- moving item identification, to significantly optimize your inventory management strategies.

Data Cleansing & Standardization

Eliminate data duplicates, align nomenclature, and perfect ERP mapping to ensure consistent, reliable, and actionable asset data.

Core Platform Features

 

Intuitive Real-time Dashboard

Monitor all assets with live updates and comprehensive analytics, empowering informed and strategic decision-making.

End-to-End Asset Lifecycle

Management Gain complete visibility and control over assets from acquisition through their entire lifecycle to final disposal.

Automated Depreciation (SLM/WDV)

Execute precise depreciation calculations automatically, utilizing both the Straight Line Method (SLM) and Written Down Value (WDV) methods.

Proactive Warranty & AMC Tracking

Never overlook critical warranty expiry dates or Annual Maintenance Contract (AMC) renewals with automated alerts and timely reminders

Robust Secure User Management

Implement role-zbased access control, ensuring paramount data security while facilitating seamless team collaboration.

Seamless ERP & SAP Integration

Achieve effortless data synchronization and workflow automation through robust integration with leading ERP systems like SAP, Oracle, and other enterprise platforms.

Expert Services Portfolio

Hotels & Resorts

Optimize FF&E, IT, and kitchen asset management with room-specific QR codes for precise audits. Receive proactive AMC reminders for critical equipment like chillers and elevators, ensuring uninterrupted operations.

Manufacturing

Accurately track machinery and tools across shop floors, meticulously monitor plant-code depreciation, and maintain comprehensive audit trails for stringent regulatory compliance and enhanced operational efficiency.

Healthcare

Implement advanced RFID/QR systems for OT/ICU equipment, configure essential warranty and calibration alerts, and achieve rapid NABH/NABL audit compliance through impeccably organized asset documentation.

Information Technology

Streamline the management of servers, networking equipment, software licenses, and hardware infrastructure. Ensure compliance, track depreciation, and optimize IT asset lifecycle from procurement to disposal, enhancing operational efficiency and data security.

Ready to Revolutionize Your Asset Management Strategy?

Connect with our expert team today to schedule a personalized demonstration and explore how SBC + FixTag can profoundly transform your asset management processes.

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Implications of Secondary Adjustment u/s 92CE

Implications of Secondary Adjustment u/s 92CE

Home > Implications of Secondary Adjustment u/s 92CE

Implications of Secondary Adjustment u/s 92CE

Implications of Secondary Adjustment

Foresight for Taxpayers

Taxpayers must adopt a forward-looking approach to manage secondary adjustment risks under Section 92CE. Any primary adjustment—whether voluntary, audit-driven, or arising from APA, Safe Harbour, or MAP—must be closely reviewed to identify “excess money” retained by foreign AEs. This amount must be repatriated to India within prescribed time to avoid it being treated as a deemed loan, triggering notional interest under Rule 10CB. Where repatriation is not feasible, opting to pay a one-time additional tax at 20.9664% offers a clean exit from continued compliance and interest exposure. A proactive year-end transfer pricing review is critical to ensure alignment, minimize tax risks, and safeguard against future disputes.

Primary Adjustment

A Primary Adjustment refers to modifying the transfer price of an international transaction to align with the arm’s length principle. It arises when there is a need to correct the reported income of the taxpayer due to non-compliance with the arm’s length principle. 

Statutory Triggers for Primary Adjustment u/s 92CE(1)

Statutory Triggers for Primary Adjustment u/s 92CE(1)

Implications of Secondary Adjustment

Secondary Adjustment

A Secondary Adjustment refers to an adjustment in the books of accounts of the taxpayer and its Associated Enterprise (AE) to reflect the actual allocation of profits consistent with the transfer price determined as a result of a primary adjustment.

• Secondary Adjustment Provisions u/s 92CE are attracted in the following cases:

– The amount of Primary Adjustment is exceeding Rs. 1 Crore.

– The Primary Adjustment is made not relate to AY 2016-17 (FY 2015-16) or earlier.

• Where applicable, the primary adjustment amount must be repatriated to India within prescribed time. If not, the excess money is deemed to be an advance by the taxpayer to the AE.

• In such cases, the taxpayer must compute and offer to tax the notional interest on the deemed advance, following the methodology prescribed under Rule 10CB(2) of the Income-tax Rules.

• Repatriation is the transfer of funds or assets from a foreign country back to the home country. In taxation, it usually involves bringing back profits, dividends, or capital earned overseas.

• Countries may adopt different approaches to secondary adjustments:

1. Deemed Dividend: 

Excess profits treated as dividends distributed to the parent entity, possibly subject to withholding tax.

2. Deemed Loan:

Excess profits treated as a loan from one AE to another; interest imputed accordingly.

3. Capital Contribution:

Recognizes excess profits as equity infusion.

India has adopted the Deemed Loan Approach under Section 92CE to address cases of non-repatriation.

Implications of Secondary Adjustment

Time limit for repatriation of excess money and Computation of 90 days – Rule 10CB (1)

time limit

Interest Rate on Excess Money – Rule 10CB(2)

(i) Where the international transaction is denominated in Indian rupee – One-year MCLR of SBI On 1st April of PY +3.25%(325 BPS).

(ii) where the international transaction is denominated in foreign currency – 6 Months LIBOR on 30th September of PY + 3%(300 BPS).

Alternative to Secondary Adjustment

• Section 92CE permits the assessee to pay a final additional tax of 18% (effective 20.97% including surcharge 12% and cess 4%) on unrepatriated excess money to avoid secondary adjustments and interest beyond the tax payment date.

• This tax is final, with no further deductions or credits permitted under the Income-tax Act.

 

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Transfer Pricing Assessment Procedure

Transfer Pricing Assessment Procedure

Home > Transfer Pricing Assessment Procedure

Transfer Pricing Assessment Procedure

Transfer Pricing Assessment Procedure

Foresight for Taxpayers

It’s crucial for taxpayers to effectively manage domestic litigation through proactive foresight at every stage—from pre-litigation assessment to final resolution and enforcement. Taxpayers should maintain robust documentation, assess litigation risks early, and align their positions with judicial precedents and departmental guidance.

Knowing the litigation procedure is not optional—it’s essential. A single misstep in procedural compliance, such as missing a timeline or filing the wrong form, can lead to dismissal or weaken the case. Awareness and preparedness are as important as the technical position itself. Timely responses to notices, strategic decision-making on appeals, and readiness for alternative dispute resolution mechanisms such as the DRP or settlement schemes can significantly reduce prolonged litigation.

A well-structured litigation strategy not only mitigates potential exposure but also ensures consistency in legal positions across assessment years, ultimately contributing to efficient dispute resolution and improved outcomes. The CBDT’s Instruction No. 3/2016 lays out clear parameters for risk-based scrutiny—providing taxpayers with visibility into what triggers an assessment.

CBDT Instruction No. 3/2016: Framework for Risk-Based Selection and Referral of TP Cases

• CBDT Instruction No. 3/2016 marks a significant transition from the earlier monetary threshold- based approach (as per Instruction No. 15/2015) to a risk-based selection mechanism for Transfer Pricing (TP) audits.

• If a case is selected for scrutiny under TP risk parameters (either via CASS or manual selection), the Assessing Officer (AO) must mandatorily refer the matter to the Transfer Pricing Officer (TPO).

• The AO is barred from conducting TP analysis independently in such cases.

• The AO must also refer the case to the TPO even if selected on non-TP parameters, if any of the following is observed:

– Non-filing of Form 3CEB (Accountant’s Report)

– Non-disclosure of international transactions or Specified Domestic Transactions (SDTs) in the report

– Prior TP adjustment of INR 10 crore or more in earlier years, upheld or under appeal

– Findings from search/seizure/survey indicating TP issues

• This instruction prioritizes complex and high-impact TP cases instead of just high transaction value.

• Reduces subjective referrals and avoids unnecessary TP litigation.

• Acknowledges that TP is a specialized function—to be handled by trained TPOs only.

• Targets multi-jurisdictional transactions, especially those involving intangible assets or group synergies, as high-risk.

Transfer Pricing Assessment Procedure

Domestic Litigation Cycle

Domestic Litigation Cycle

• Referral to TPO: In case of international transactions, the AO refers the matter to the TPO under Section 92CA(1).

• TPO Order: TPO examines the arm’s length nature of international transactions and issues a TPO order with proposed adjustments, if any.

• Draft Assessment Order: Based on the TPO’s findings, the AO issues a draft assessment order u/s 144C(1) for eligible assessee.

• Filing of Objections with DRP u/s 144C(2): The assessee has 30 days to accept the draft order or file objections with the DRP u/s 144C(2). If DRP objections are filed, the AO cannot pass the final order until DRP directions are received. DRP issues directions within 9 months, after which the AO passes the final order in line with those directions.

• Final Assessment Order: If no objections are filed, the AO passes the final order as per the draft order.

Transfer Pricing Assessment Procedure

• Appeal before CIT(A): After the final order is passed, if the assessee is aggrieved, an appeal can be filed before the CIT (A) within 30 days of receipt of the final order. CIT(A) reviews and disposes of the appeal, typically within 1 to 2 years.

• Appeal before ITAT: If still dissatisfied, the assessee may file a appeal to the ITAT within 60 days of the CIT(A) order.

• Appeal to High Court and Supreme Court: Further appeals can be made to the High Court within 120 days and Supreme Court within 90 days on substantial questions of law.

• Litigation Timeline: The entire litigation cycle, if pursued fully, can span 8 to 15 years depending on the complexity and jurisdiction.

Emerging TP Litigation Issues 

Emerging TP Litigation Issues

Transfer Pricing Assessment Procedure

Steps to Avoid TP Litigation

Steps to Avoid TP Litigation

How can SBC assist you?

With a strong hold on Indian transfer pricing controversy management and emerging TP disputes, SBC has a proven track record of litigation wins and supporting TP clientele with a result-oriented approach and cost-benefit analysis. We can support your business with the following aspects:

  • Representation before various forums, including drafting appeals and submissions.
  • Strategizing the approach before tax authorities, considering facts and judicial precedents.
  • Case Law Compilations for specific TP disputes, leveraging our TP knowledge database and research repositories.
  • Transfer Pricing Health Check-Up to avoid or mitigate risks.
  • TP Due Diligence and Risk Assessment.
  • Evaluation of alternative dispute resolution and prevention mechanisms for repeated or evolving TP disputes.

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ITAT Delhi Ruling on Treaty Abuse Allegation and DTAA Benefits

ITAT Delhi Ruling on Treaty Abuse Allegation and DTAA Benefits

Home > ITAT Delhi Ruling on Treaty Abuse Allegation and DTAA Benefits

ITAT Delhi Ruling on Treaty Abuse Allegation and DTAA Benefits

Executive Summary:

• The Delhi Tribunal, in a recent ruling, has decided in favour of Gagil FDI Ltd., a Cyprus-based investment holding company, granting exemption on capital gains and dividend income under the India-Cyprus Double Tax Avoidance Agreement (DTAA).

• The Tribunal categorically rejected the Revenue’s allegations of treaty abuse, noting the existence of a valid Tax Residency Certificate (TRC) and the company’s operational control in Cyprus. The decision reinforces the legal sanctity of TRC(s) and the significance of regulatory approvals granted by RBI, SEBI, and FIPB.

Revenue’s Contentions:

• Conduit Structure Allegation: AO alleged that the assessee routed investments through Cyprus only to exploit DTAA provisions.

• Beneficial Ownership in US: Claimed the real beneficiaries and directors were US- based.

• Control from USA: Asserted decision-making was managed from the US. Link to Panama Papers: Claimed the use of a service provider named in the Panama Leaks.

Assessee’s Submissions:

• Valid TRC & Economic Substance: TRC from Cyprus, with independent functioning.

• Operational Management in Cyprus: Demonstrated control via board records.

• Multi-jurisdictional Funds: Funding from Bermuda, Germany, Delaware.

• Regulatory Scrutiny: Approvals from SEBI, RBI, and FIPB were substantive.

• No Link to Panama Entity: Differentiated ABACUS Ltd. from Panama-named firm.

ITAT Delhi Ruling:

• Rejects Treaty Abuse Allegation: Found no substantial merit in Revenues claim.

• Valid TRC Holds Ground: TRC and bona fide operations suffice for DTAA.

• No Control from USA: Confirmed Cyprus-based governance.

• Approvals Are Material: Criticized DRPs view on SEBI/RBI scrutiny.

• Differentiates ABACUS Entities: Found no linkage to Panama leaks.

Key Takeaways

• Substance over Form

It is important to check where the company is effectively managed and controlled.

• TRC Remains Vital

A valid TRC is a crucial piece of documentary evidence to establish eligibility for benefits of Tax Treaty.

• Regulatory Vetting Is Not Cosmetic

Approvals from regulatory bodies like RBI, SEBI, or FIPB are substantive and lend credibility to the legitimacy and genuineness of cross-border structures.

• Avoid Over-reliance on Panama Leaks

Allegations drawn solely from data leaks like the Panama Papers require corroborating evidence to hold weight in legal or tax proceedings.

• Case Law Reinforced

The ruling is in line with previous judicial decisions such as in the Saif II-Se Investments Mauritius Ltd. vs. ACIT, 154 taxmann.com 617 (Delhi-Trib) and Tiger Global International III Holdings vs. The Authority for Advance Rulings (Income Tax & Ors.), reaffirming similar legal interpretations.

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PAS-6 Reconciliation of Share Capital Audit Report (Half-Yearly)

PAS-6 Reconciliation of Share Capital Audit Report (Half-Yearly)

Home > PAS-6 Reconciliation of Share Capital Audit Report (Half-Yearly)

PAS-6 Reconciliation of Share Capital Audit Report (Half-Yearly)

Introduction to Form PAS-6

What is Form PAS-6?

• A half-yearly audit report filed with the Registrar of Companies (ROC).

• Introduced under Rule 9A(8) of Companies (Prospectus and Allotment of Securities) Rules, 2014 in 10th September 2018.

• Certified by a practicing Company Secretary (CS) or Chartered Accountant (CA).

Purpose

• Verify issued capital against shares in Demat (NSDL/CDSL) and physical form.

• Report discrepancies and changes in share capital (e.g., bonus issues, ESOPs, buybacks).

• Ensure compliance with mandatory dematerialization for applicable companies.

• Ensures transparency in share capital by reconciling issued capital with Demat and physical shares.

Applicability Non-Applicability
Unlisted Public Limited Companies w.e.f. 02nd October 2018. Notification (MCA vide General Circular G.S.R. 376(E). dated 22nd May 2019)
• Nidhi Company
• Government Company
• Wholly Owned Subsidiary Company of Public Company
• Small Private Limited Companies

Timelines for Filing

Companies having ISIN Period for which Form PAS-6 is to be filed Due Date
Before 31st March 2025
April 1 – September 30
29th November
Before 31st March 2025
October 1 – March 31
30th May
After 1st April 2025 and before 30th June 2025
Private Limited Companies (other than small companies) not having ISIN & dematerialize their shares on or before 30th June 2025 must file for the half-year within 60 days ending 30th September 2025.
29th November 2025

Penalties for Non-Compliance

As per Section 450 of the Companies Act, 2013: Company and every officer in default:

• ₹10,000 and

• ₹1,000 per day for continuing default (Maximum: ₹2,00,000 for company and ₹50,000 for officer)

What is Dematerialization of Shares?

Dematerialization of shares is the process of converting physical share certificates into electronic form, stored in a digital account with a depository, such as the National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) in India

Aspect Listed Public Companies Unlisted Public Companies Private Companies
Applicability
Mandatory for all listed public companies under SEBI guidelines.
Mandatory for Unlisted public companies under MCA notification G.S.R. 853(E)
Mandatory for certain classes of private companies under MCA notification G.S.R. 802(E).
Regulatory Authority
Securities and Exchange Board of India (SEBI)
Ministry of Corporate Affairs (MCA)
Ministry of Corporate Affairs (MCA)
Threshold Criteria
Not applicable
Not applicable
Private companies (excluding small companies) with: • Share capital ≥ ₹4 crore and
• Turnover ≥ ₹40 crore
Applicability of PAS-6
Mandatory to file PAS-6
Mandatory to file PAS-6
Mandatory to file PAS-6 refer timelines for filing table
Verification & Process Oversight
Done by RTA (Registrar and Transfer Agent) under SEBI supervision
Done by RTA, but under MCA oversight if demat is mandated
Done by RTA, but under MCA oversight if demat is mandated

Important Note:

The deadline for dematerialization of shares by non-small private limited companies has been extended i.e., 30 June 2025. As per MCA General Circular G.S.R. 131(E) dated 12th February 2025, it is now mandatory for all non-small private limited companies to convert their physical share certificates into dematerialized form.

FAQ’s

Q1. What is the ISIN code?

ISIN (International Securities Identification Number) is a unique 12-digit alphanumeric code used to identify securities. Each country’s National Numbering Agency (NNA) issues ISINs. In India,

• NSDL issues ISINs for most securities, under SEBI’s direction.

• RBI handles ISIN allotment for government securities.

Q2. What is a Small Company?

A Small Company in India, as per the Companies Act, 2013 (Section 2(85)), is a private company with a

• Paid-up Share Capital of up to ₹4 crore and Turnover of up to ₹40 crore,

Q3. What is a not a Small Company?

1. A public company.

2. A holding or subsidiary company.

3. A Section 8 (charitable) company.

4, A company governed by a special Act (e.g., banking or insurance).

Q4. Is PAS-6 now applicable to private limited companies?

Yes, w.e.f. 1st July 2025, Non-Small Private Companies are required to file Form PAS-6. Therefore, they need to file for the half year ending September 2025 first time. i.e., before November 2025

Q5. Can a company file PAS-6 without having dematerialized its shares?

Obtaining an ISIN is mandatory as you must mention the ISIN number in the Form PAS-6,but shares can be in physical form.

Q6. Should a company file form PAS-6 for various securities separately?

Yes, as only one ISIN can be inserted in the form PAS-6. Thus, for various types and classes of securities different forms are needed to be furnished. A company must furnish the form PAS-6 for every ISIN issued to it.

Q7. Should PAS-6 be filed if there is no change in shareholding?

Yes, it must be filed for every applicable half-year regardless of changes.

Q8. Can a company issue shares in physical form?

No. As per Rule 9A(1)(a) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, a company is under obligation to issue fresh securities only in the Demat form.

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Complying with MSME Vendor Regulations in India

Complying with MSME Vendor Regulations in India

Home > Complying with MSME Vendor Regulations in India

Complying with MSME Vendor Regulations in India

MSME Vendor Compliance Overview

 

Timely Payment (Section 15, MSMED Act)

  • Pay within 45 days from acceptance of goods/services or agreed date.
  • Delayed payments attract 3x RBI bank rate interest (compound, monthly rests).
  • Non-deductible interest under Income Tax Act.

MSME Form I Filing (MCA Order, 2019)

 

What is it?

A form that companies must file if they haven’t paid MSMEs within 45 days.

Who needs to file?

Any company that buys from MSMEs and delays payment.

When to file?

For April–September → by October 31

For October–March → by April 30

What information is needed?
  • Supplier Name and PAN details
  • To which suppliers the payment was made within 45 days, paid after 45 days
  • To which supplier the payment is outstanding for 45 days or less, outstanding for 45 days or more.
  • Reason for the delay.

MSME Form-1 Filing Process

 

MSME Form-1 Filing Process

Verify MSME Status

  • Check Udyam Registration Number to confirm Micro/Small/Medium status. (Generally
  • mentioned in the invoice of the Vendor)
  • Maintain vendor database for
  • compliance tracking.

Penalties for Not Filing

 
What happens if you don’t file?
  • Fine up to ₹20,000, applicable to company and every officer in default
  • In case of ongoing non-compliance, an additional fine of ₹1,000 per day is imposed on both the company and every officer in default subject to a maximum limit of ₹3L.

MSME Vendor Compliance Overview

 
Annual Disclosures (Section 22, MSMED Act)
  • Report unpaid MSME dues, interest, and delay reasons in Board’s Report/Financial Statements.
  • Ensure accurate records for audit compliance.

Dispute Resolution (MSEFC)

  • Refer payment disputes to Micro and Small Enterprises Facilitation Council (MSEFC).
  • Resolution within 90 days; appeals require 75% deposit of awarded amount.

Other Compliances

  • TDS: Deduct applicable TDS as per Income Tax Act.
  • GST: Ensure proper invoicing and timely returns for MSME vendors.
  • RBI: Report MSME dues to banks for credit monitoring.

Best Practices

  • Track payments to clear dues within 45 days.
  • File MSME Form I on time via MCA portal.
  • Engage professionals (CA/CS) for compliance.
  • Build strong vendor relationships through timely payments.

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Year-end GST Checklist Steps to Smooth Transition

Year-end GST Checklist Steps to Smooth Transition

Home > Year-end GST Checklist Steps to Smooth Transition

Year-end GST Checklist Steps to Smooth Transition

As FY 2024-25 ends, ensure a seamless transition to FY 2025-26 with these essential GST tasks.

I. Outward Supplies: Get Your Records in Order

  • Reconcile GSTR 1 with GSTR 3B & GST Returns with Books of accounts and rectify any mismatches between books and filed returns.
  • Reconciliation of “E-Invoice and E-way bills” generated with actual sales
  • Check applicability of E-Invoice
  • From February 2025, reporting 6-digit HSN codes via dropdown is mandatory, as manual entry is disabled. The HSN master description will auto-fill the “Description as per HSN Code” field.
  • Ensure shipping bill details for the export of goods with payment of tax are correctly entered in GSTR-1 and transmitted to the ICEGATE portal for IGST refund claims.
  • Ensure all credit/debit notes are issued and reported in GSTR-1
  • Ensure tax liability against receipt of advances (services) and adjustment thereof to derive at unadjusted advances
  • Ensure correct bifurcation of B2B and B2C transactions in GSTR-1
  • In case of the export of goods/services without payment of tax, make sure to file application for LUT for FY 2025-26 on or before 31st March 2025.
  • Check tax compliance on branch/stock transfers
  • Ensure correct reporting of Taxable, Exempt, Non-GST and Nil-rated supplies
  • Verify if any corrections/amendments in invoices or details are required

II. Input Tax Credit (ITC) & RCM

1.Reconciliation of Input Tax Credit (ITC) as per Books and GSTR 3B:

While filing GSTR-3B as per Circular 170 of CGST Act and claiming ITC recorded in books and matched with GSTR-2B, it is essential to verify any discrepancies at the year end, such as:

  • ITC matched with GSTR 2B but missed to claim in GSTR-3B
  • ITC reversed in Table of Permanent Reversal [4(B)(2)] instead of Temporary Reversal [4(B)(1)] in GSTR 3B
  • RCM ITC wrongly reported in Regular ITC
  • Interchange claims of SGST /CGST as IGST and vice versa, etc

Note: Any such correction/ claim shall be made up to the October month return filed by 30th November of the subsequent Financial Year or filing of annual return, whichever is earlier.

2. Other Important points to check under ITC are:

Other Important points to check under ITC

Note: Rule 37 – Check for ITC reversal required on account of non-payment to vendors within 180 days or reclaim of any ITC in respect of supplies for which payment has been made.

3. Reverse Charge Mechanism (RCM):

• Reconcile expenses attracting RCM with amounts reported in GSTR-3B and books.

• Ensure GST is paid on RCM basis for imports of goods/services.

• Claim eligible ITC in GSTR-3B by November 30th of the following financial year or before filing of the annual return, whichever is earlier.

• Ensure correct reporting, payment and claiming of RCM in GSTR-3B.

III. Rule 96A Compliance (Exports under LUT/Bond)

1. Goods must be exported within 3 months from the invoice date.

2. Payment for export of services must be received in convertible foreign exchange/INR (as per RBI) within 1 year [or the period allowed under FEMA (9 months), including extensions] from the invoice date.

3. Regularly review compliance for each invoice; ensure no defaults before Financial Year ends.

4. Refund Timeline-

• Refund applications must be filed within 2 years from the relevant date as per the act.

• It may be noted that it is a regular activity to ensure that the refund is claimed periodically.

However, we shall check the same at the end of FY to plug any gap and apply for refund without any default.

IV. Other Compliances

  • If the conditions of Rule 86B are met, ensure that at least 1% of the total tax liability is paid in cash.
  • Obtain declarations from vendors exceeding the prescribed aggregate turnover threshold but exempt from e-invoicing under clause (s) of Rule 46.
  • Check for any GST TDS/TCS credit available on our GST Portal and claim the same after checking its authenticity from the books of accounts
  • Ensure registered persons with turnover up to ₹5 Cr opt in/out of the QRMP Scheme on time for seamless tax compliance
  • If opted for the Composition Scheme for FY 2025-26, ensure Form CMP-02 is filed by March 31, 2025.

Note:

1. Check whether the material sent for job work has been returned within the prescribed time limit (i.e. for Inputs – 1 year and for Capital goods – 3 years) and whether the same has been duly reported in ITC 04.

2. Ensure that goods sent on an approval basis are either returned within six months or sold with the issuance of a tax invoice to comply with regulations.

V. Credit Note Declaration Compliance

As per reference vide Circular No.-212/6/2024-GST-

Ensure that if the discount given by the supplier to a recipient through tax credit notes in a Financial Year exceeds ₹5,00,000/-, then the supplier must obtain a CA/CMA certificate from the recipient confirming ITC reversal.

If the discount given by the supplier to a recipient through tax credit notes in a Financial Year is up to ₹5,00,000, a self-declaration from the recipient is sufficient.

Note: To avoid a last-minute rush during assessments, it is advisable to maintain these documents for scrutiny, audit, or investigation.

VI. Input Service Distributor (ISD) Registration Requirement

(Effective from 01 April 2025)

Applicability

  • Any office of a supplier of goods or services or both that receives tax invoices for input services on behalf of distinct persons under Section 25.
  • It also includes invoices subject to reverse charge tax.

Mandatory Registration

  • Entities meeting the above criteria must register as an ISD under GST.
  • The ISD will distribute Input Tax Credit (ITC) in respect of such invoices to the respective recipients.

Action Required

  • Identify such offices/ entities on or before 31st March 2025.
  • Apply for ISD registration to comply with the new mandate.
  • This ensures proper ITC distribution and compliance with GST laws.

VII. The Hotel Industry!

Two major notifications were issued on 16th January 2025, impacting GST compliance for hotels and restaurants from 1st April 2025. Key changes as per notification no. are as follows-

Notification No. 05/2025 – CT (Rate)

Introduction of the “Specified Premises” concept (Hotels with high-value accommodations).

Removal of the “Declared Tariff” concept (Earlier tariff-based taxation is removed).

Mandatory Opt-In/Opt-Out Declaration before 31st March 2025.

Notification No. 08/2025 – CT (Rate)

E-Commerce Operators (like Swiggy, Zomato) will no longer be liable to pay GST on restaurant services provided in “Specified Premises”.

GST liability will now shift to restaurant owners, and they must pay 18% GST with Input Tax Credit (ITC) benefits.

Note-

What are “Specified Premises”?

1. Any hotel or restaurant where room rent exceeded ₹7500 per day in the previous financial year.

2. Any new hotel registering as a Specified Premises must file an Opt-In form (Annexure VII, VIII, IX).

Revised GST Rates from 1st April 2025

  • Standalone Restaurants (Not attached to any hotel) – 5% GST (No ITC)
  • Restaurants in Specified Premises (₹7500+ per day hotel rooms – 18% GST (ITC allowed)
  • Restaurants in hotels with room rent below ₹7500 per day – 5% GST (No ITC)

Important Notes:

  • Hotels falling under “Specified Premises” must file Opt-In Declaration (Annexure VII) before 31st March 2025.
  • New GST registrations must file Annexure VIII within 15 days of ARN generation.
  • For opting out, hotels/restaurants must file Annexure IX
  • Once an option is selected, it cannot be changed for the financial year unless an Opt-Out Declaration is filed.

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US Reciprocal Tariffs 2025

US Reciprocal Tariffs 2025

Home > US Reciprocal Tariffs 2025

US Reciprocal Tariffs 2025

1. Background

On April 2, 2025, the United States government introduced sweeping reciprocal tariffs on global imports. Effective April 5, a 10% blanket duty came into effect, followed by country- specific rates from April 9. India now faces a 27% tariff, while countries like China (34%) and Vietnam (46%) are subject to even steeper rates. This aggressive tariff regime marks a strategic shift in US trade policy, aimed at protecting domestic industry and correcting perceived trade imbalances.

2. Rationale Behind the US Tariffs

The US government justifies the move based on long-standing trade asymmetries:

• India’s high tariff rates on key US exports (e.g., autos, agricultural products, digital hardware).

• Non-tariff barriers including complex regulations, product approvals, and customs procedures.

Key Comparisons Highlighted by the US:

• Passenger Vehicles: US duty = 2.5%, India = 70%

• Apples: US = 0%, India = 50%

• Rice in Husk: US <3%, India = 80%

• Routers & Switches: US = 0%, India = 10–20%

These disparities have led the US to argue that if trade barriers are reduced, its exports to India could increase by over USD 5 billion annually.

3. Structure and Scope of Tariffs

The US Executive Order splits tariff implementation into two stages: Stage 1 (from April 5, 2025):

• A general 10% ad valorem tariff on all imports.

• Goods already in transit are exempt.

Summary of tariffs imposed on different countries
Country Tariffs Charged to the USA (%) U.S.A. Discounted Reciprocal Tariffs (%)
China
67
34
European Union
39
20
Vietnam
90
46
Taiwan
64
32
Japan
46
24
India
52
26
South Korea
50
25
Thailand
72
36
Switzerland
61
31
Indonesia
47
24
Malaysia
47
24
Cambodia
97
49
United Kingdom
10
10
South Africa
60
30
Brazil
10
10
Bangladesh
74
37
Singapore
10
10
Israel
33
17
Philippines
34
17
Chile
10
10
Australia
10
10
Pakistan
58
29
Turkey
10
10
Sri Lanka
88
44
Colombia
10
10

Stage 2 (from April 9, 2025):

• Country-specific reciprocal tariffs (India: 27%).

• Exemptions for goods with minimum 20% US-origin value.

• Overrides WTO and bilateral trade commitments.

4. Sectoral Exemptions: Industries That Escaped the Tariff Impact

HS Chapter Category Reason for Exemption
27
Mineral fuels and oils
Critical energy security
28-29
Chemicals
Industrial and pharma inputs
30
Pharmaceuticals
Public health considerations
44
Wood and wood articles
Construction materials
74
Copper and related products
Industrial relevance
85
Semiconductors
Tech supply chain dependency

These exemptions offer significant relief to Indian Exporters in pharmaceutical, energy and electronics sectors.

5. India’s Export Exposure: Sector-wise Tariff Impact

Sector India’s Exports to US Previous Tariff New Tariff Assessment Summary
Pharmaceuticals
USD 8.73B
0%
0%
Largely unaffected; under exemption list.
Auto Components
USD 2.1B
2.5%
25%
Tariffs increased significantly; global competitiveness affected.
Passenger Cars and Light Trucks (8702, 8703, 8704)
USD 10M
2.5%
25%
India’s exports to the US are negligible, hence this sector is not in focus from the tariff perspective as of now.
Textiles & Apparel
USD 9.5B
6–9%
33–36%
Heavily impacted; price sensitivity may hurt US-bound exports.
Telecom Equipment
USD 6B
0%
27%
Cost increase could reduce margin; relatively better than peers.
Gems & Jewellery
USD 9.2B
5.5– 13.5%
32.5– 40.5 %
High-value exports impacted; competition with USMCA members.
Agriculture & Food
USD 5.5B
4-5%
31-32%
Sectoral pressure expected; strong competition from Americas.
Oil & Gas
USD 5.8B
5.2%
5.2%
No change; listed in exempt categories.

US trade deficits and surpluses

US trade deficits and surpluses

Transfer Pricing Overhaul: Responding to Tariffs, Risk, and Regulation

 
1.Transfer Pricing in Transition: Adapting to Global Tariff Pressures

The reintroduction of reciprocal tariffs by the United States—now at 27% for Indian

imports—has amplified the intersection of trade policy and transfer pricing.

• These tariffs increase the landed cost of goods, affecting both related and unrelated party imports.

• For multinational enterprises (MNEs), this introduces a new layer of complexity: existing TP models may no longer reflect commercial reality.

• Higher costs absorbed by US importers or distributors without intercompany pricing adjustments can distort profitability and disrupt the arm’s length standard.

• When intercompany agreements are static, but trade realities shift, the compliance and audit risks rise significantly.

2.Commercial Impact: Pricing Models at a Crossroads

As tariffs inflate COGS, tested party margins often fall below benchmark ranges. Common TP methods like TNMM or RPM become harder to defend when tariff-loaded costs are not mirrored in comparable data. Businesses must consider:

Revisiting intercompany pricing to reflect new cost realities.

Adjusting TP documentation to explain short-term margin fluctuations.

Assessing if functions and risks have shifted due to supply chain restructuring.

Additionally, changes in procurement strategies (e.g., shifting from import-heavy to local sourcing) and currency fluctuations further challenge comparability. For companies using multi-year data, the year-on-year impact of tariffs can create volatility in TP analysis.

Transfer Pricing Overhaul: Responding to Tariffs, Risk, and Regulation

 

3.The APA Landscape: Need for Revalidation

Advance Pricing Agreements (APAs), previously seen as instruments of certainty, now face renewed scrutiny. Key APA-related implications include:

• Existing APAs: These may not account for sharp cost escalations due to tariffs. The critical assumptions underpinning them—such as market stability or cost structures—could be breached, calling for revision or renegotiation.

• New APA Applications: Companies must factor in tariff-inclusive cost modeling. This includes adjustments to tested party profitability, selection of comparables, and setting realistic benchmarks.

• Bilateral APAs (BAPAs): Especially for US-India transactions, BAPAs offer a coordinated approach between tax authorities. However, the negotiation process may become more complex due to divergent views on tariff impacts.

• Rollback Requests: Tariff shifts may render rollback years incomparable unless the impact can be normalized and documented.

4.Growing Role of MAP in Dispute Resolution

As tax authorities reassess profitability outcomes influenced by trade policy, Mutual Agreement Procedures (MAP) will become an essential tool. Key considerations:

• MAP may be invoked when unilateral adjustments by one tax authority (e.g., disallowing a TP loss) conflict with positions in the counterparty jurisdiction.

• Double taxation is more likely in cases where US importers report lower profits due to tariffs but Indian exporters are expected to maintain fixed returns.

• MAP discussions will need to include robust economic justifications and evidence that tariff-related margin erosion is commercially driven—not tax motivated.

Transfer Pricing Overhaul: Responding to Tariffs, Risk, and Regulation

 

5.Customs Valuation and TP: A Tightrope Walk

Tariff increases intensify the challenge of aligning customs valuation with transfer pricing:

• Post-import price adjustments may be rejected by customs if seen as duty avoidance.

• Discrepancies between customs filings and TP documentation heighten audit and penalty risks.

• Closer coordination between tax and trade teams is critical to ensure consistency and mitigate risk.

6. Strategic Realignment in a Shifting Trade Landscape

With trade and tax rules evolving rapidly, transfer pricing must shift from static compliance to agile strategy. Key actions for MNEs include:

• Reviewing intercompany agreements, tested party selection, and pricing models.

• Updating FAR profiles to reflect revised supply chains and functional roles.

• Considering APAs for prospective certainty and MAPs for existing disputes.

• Strengthening documentation with tariff-aware benchmarking and scenario analyses.

Rising tariffs, regulatory scrutiny, and global risks are driving a shift in transfer pricing strategies. Multinationals must enhance transparency, align with value creation, and ensure compliance to manage risk and adapt to evolving global tax demands.

Conclusion:

Conclusion

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Indian Transfer Pricing Update: CBDT Amends Safe Harbour Rules

Indian Transfer Pricing Update: CBDT Amends Safe Harbour Rules

Home > Indian Transfer Pricing Update: CBDT Amends Safe Harbour Rules

SBC TP Update on CBDT Amendments to Indian Safe Harbour Rules-3 1 (1).pdf (1024 x 576 px)

Key Changes in Safe Harbour Rules as per the CBDT Notification

Executive Summary

 

SBC TP Update on the CBDT Amendments to Safe Harbour Rules vide Notification No. 21/2025 dated March 25, 2025.

  1. The definition of core auto components under Rule 10TA has been expanded to encompass lithium-ion batteries for use in electric and hybrid electric vehicles.
  2. The threshold limits under Rule 10TD for software development services, IT-enabled services (ITeS), Knowledge Process Outsourcing (KPO), Contract R&D in software development, and Contract R&D in generic pharmaceutical drugs have been increased from ₹200 crores to ₹300 crores.

The aforementioned amendments shall be applicable for the assessment years 2025-26 and 2026-27.

Summary of changes pre and post amendment

Before Amendment After Amendment
1. Definition of core auto components

As per Rule 10TA, Clause (b) of the Income-tax Rules, 1962

(i) engine and engine parts, including piston and piston rings, engine valves and parts cooling systems and parts and power train components;

(ii) transmission and steering parts, including gears, wheels, steering systems, axles and clutches;

(iii) suspension and braking parts, including brake and brake assemblies, brake linings, shock absorbers and leaf springs;
1. Definition of core auto components

As per Rule 10TA, Clause (b) of the Income-tax Rules, 1962

(i) engine and engine parts, including piston and piston rings, engine valves and parts cooling systems and parts and power train components;

(ii) transmission and steering parts, including gears, wheels, steering systems, axles and clutches;

(iii) suspension and braking parts, including brake and brake assemblies, brake linings, shock absorbers and leaf springs;

(iv) lithium-ion batteries for electric/hybrid vehicles.

Changes in Threshold Limits

Changes in Threshold Limits

India’s Transfer Pricing Safe Harbour Regime: An Overview

Overview of the Indian Safe Harbour Regime

• The Indian Safe Harbour Regime was established in response to escalating instances of transfer pricing audits and disputes. Introduced under the Finance (No.2) Act of 2009, effective from April 1, 2009, this regime was introduced vide Section 92CB of the Income Tax Act, 1961.

• Under section 92CB, the determination of an arm’s length price, as defined by section 92C or Section 92CA, is required to adhere to safe harbour rules. These rules provide predefined acceptable ranges of profits or prices, enhancing certainty for transactions.

• To provide greater advantages to taxpayers, the Central Board of Direct Taxes (CBDT) broadened the scope of Safe Harbour Rules through Rule 10TD of the Income-tax Rules. This expansion aims to streamline compliance procedures, encourage timely approvals, and reduce complexities associated with transfer pricing.

• On March 25, 2025, CBDT issued a notification, extending the applicability of Safe Harbour Rules to the Assessment Year 2025-26 & 2026-27, which pertains to the Financial Year 2024-25 & FY 2025-26.

• The Indian Safe Harbour Regime offers a structured and predictable framework that promotes compliance, minimizes disputes, and fosters a more harmonious business environment, ultimately contributing to a more efficient and effective transfer pricing ecosystem. 

Eligible Assessee

A person who has validly opted for safe harbour rules under Rule 10TE of the Income Tax Rules, 1962.

Eligible Transactions

These eligible transactions qualify for safe harbour treatment under Rule 10TB, providing a simplified and predictable transfer pricing framework.

India's Transfer Pricing Safe Harbour Regime

The Rational Choice: Selecting the Safe Harbour Option

Advantages of Choosing the Safe Harbour Approach

 

Advantages of Choosing the Safe Harbour Approach
Enhanced Certainty
By providing advance insight into the acceptable range of profits or prices that meet Safe Harbour criteria, transactions gain a heightened level of certainty, offering stakeholders a clearer financial landscape.
Conflict Mitigation
Safe Harbour serves as an effective dispute avoidance mechanism, significantly curbing the potential for conflicts between taxpayers and revenue authorities. This fosters a more harmonious business environment, particularly significant given the high incidence of Indian Transfer Pricing litigation.
Streamlined Approvals & Assessment
Safe Harbour Rules offer a structured mechanism for application and approvals procedures, facilitating a smoother and time-bound process. This stands in stark contrast to the prolonged timelines associated with Domestic Litigation or Advance Pricing Agreements (APAs).
Comparative Compliance
In contrast to the complexities involved in Advance Pricing Agreements (APAs) and the Domestic Transfer Pricing Litigation Route, Safe Harbour Rules present a more favorable choice in terms of TP/ALP rates/margins, timelines, and associated costs. This streamlined approach can alleviate compliance burdens.
Resource Efficiency
The adoption of Safe Harbour Rules translates into substantial savings in terms of time, costs, and efforts, especially in potential litigation scenarios. This strategic choice can lead to optimized resource allocation and more efficient business operations.
Stakeholder Confidence
Safe Harbour instills confidence in taxpayers through its predictable framework, enhancing investor confidence and fostering robust business growth.
Safeguarding Reputational Capital
Choosing the Safe Harbour route mitigates the risk of reputational damage that could arise from contentious transfer pricing disputes. A clean record in compliance can enhance a company’s standing within its Group and among stakeholders.
Incentive for Voluntary Compliance
The transparent and predictable nature of Safe Harbour can incentivize voluntary compliance, enabling companies to proactively meet their transfer pricing obligations and contribute positively to the overall tax ecosystem.

Core Features of the Safe Harbour Rules in India

Safe Harbour Rules in India: Key Points for Taxpayers

For those seeking to opt for safe harbour rules for AY 2025-26 & 2026-27 and who have undertaken in eligible international transactions, adherence to specific guidelines is imperative. Here’s a concise breakdown of the crucial aspects:

Key Points for Taxpayers
Filing Requirement
Taxpayers opting for safe harbour need to file an income return and safe harbour application (Form No 3CEFA) to the Assessing Officer, both before the stipulated deadline i.e., 30 November 2025 for AY 2025-26 and 30 November 2026 for AY 2026-27.
Compliance Commitment
Even if opting for safe harbour, taxpayers must fulfill the prescribed transfer pricing documentation and maintain/Form 3CEB filing compliances (Rule 10TD(5) of the Rules).
Geographical Limitations
Safe harbour doesn’t apply to transactions with Associated Enterprises/Related Parties location in low or no tax countries.
Mutual Agreement Procedure (MAP)
If approved, the transfer price by the tax authorities for an eligible international transaction bars the assessee from invoking the Mutual Agreement Procedure in a double taxation avoidance agreement with a foreign entity.
Adjustment Constraints
When opting for safe harbour, comparability adjustments and prescribed variation/range benefits (tolerance band) aren’t accessible (Rule 10TD(4) of the Rules).
Duration of Choice
The option exercised remains in effect for a period of one year.
Transaction Scope
Safe harbour applies solely to specified transactions, while TP scrutiny exposure remains open to other transactions not eligible under safe harbour.
Deemed Acceptance
If the Assessing Officer, Transfer Pricing Officer, or the Commissioner, as the case may be, does not make a reference or pass an order within the specified time, then the option for safe harbor exercised by the assessee shall be treated as valid.
Scope of definitions
The scope of Operating Revenue and Operating Expense to be used in the computation of the Operating Margin has been clearly defined in the Safe Harbour Rules.

Safe Harbour Rates

Safe Harbour Rates

Safe Harbour Procedure

Safe Harbour Procedure

How can SBC assist you?

Navigating the Safe Harbour Application process doesn’t have to be overwhelming. We’re here to provide discreet and effective assistance every step of the way.

SBC support:

• We provide assistance in filing Form No. 3CEFA (Safe Harbour Application), ensuring a smooth process.

• Our experts evaluate your eligibility for Safe Harbour Rules (SHR) by undertaking functional analysis and review of inter-company transactions and underlying agreements to guide your decision-making.

• We conduct a comprehensive cost-benefit analysis to help you assess your options effectively.

• If needed, we calculate year-end transfer pricing adjustments to align with safe harbour rates.

• Our support extends to year-end compliance, including Form No. 3CEB and transfer pricing documentation.

• We offer representation support before tax authorities (AO & TPO) for safe harbour proceedings.

For TP assistance, reach us at +91 9553111131 /+91 9491933365.

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