Mazars Tax Update | Edition 01.19

Direct Tax News

India finalizes Bilateral Competent Authority Agreement for exchange of Country by Country Report with USA
India has finalized bilateral competent authority arrangement for exchange of CbC reports with USA. Press release states that “This would enable both the countries to exchange CbC Reports filed by the ultimate parent entities of International Groups in the respective jurisdictions,pertaining to the financial years commencing on or after 1st January, 2016”. As a result, Indian arms of US MNCs will not have to file country by country or CbC report here in India, who have already filed CbC Reports in the USA. They will now need to merely intimate of such CbC  reports having been filed by their respective parent entities in the USA.

Indirect Tax News

Key Decisions taken in connection with real estate sector in 34th GST Council Meeting:

• Builders can exercise any of the below mentioned options to levy GST in respect of ongoing projects as on 1st April, 2019:

1. Option 1: Charge GST @ 12% with ITC
2. Option 2:  Charge GST @5%/1% with no ITC (Refer Note)

Note: Accumulated ITC on closing stock of under construction properties to be reversed in case second option is exercised as per rules to be notified. 

• Builders exercising option of paying tax as per new rates whether on ongoing or new projects shall comply with the following conditions :

1. 80% of inputs and input services should be purchased from registered suppliers failing which the builder shall be liable to pay GST under reverse charge mechanism.
2. No ITC available.

• New GST rates effective from 1st April, 2019;
• Approval of transition plan for continuing projects;
• Exemption available in case of TDR/FSI and long term projects commencing after 1st April, 2019 and subsequent withdrawal of exemptions in case of non-compliance with conditions prescribed.
• Time of supply in case of construction services provided by developer to landowner has been modified to be “date of completion” as compared with earlier notified date to be “date of transfer of possession or  right”.

For more information, Click here.

Maharashtra AAR held that support services provided to foreign group entities qualifies as Export of Service- In NES Global Specialist Engineering Services Pvt. Ltd.

Order of AAR stated that transaction undertaken between domestic entity (applicant) and foreign entity i.e. supply of support services(including accounting, sales invoicing, purchase invoicing, cash receipt posting, bank payment entries, payroll assistance, etc.) to foreign entity as per Master Service Agreement satisfies the conditions of export of service eventually resulting in the transaction to fall within the ambit of zero rated supply as per IGST Act, 2017.
For more information,  Click here.
Kerala AAAR held that capital goods used for providing output service will not be eligible for availment of transitional credit - In M/s Geojit Financial Services Limited  
Order of AAAR stated that computers, laptops capitalised in books of account satisfying the condition of “capital goods” fall out of the ambit of “inputs”, and such capital goods were not eligible for Credit under pre GST regime. Therefore, authority denied transitional credit basis the non-applicability of Section 140(2) of KSGST Act, 2017 which says that credit of capital goods can be carried forward if such credit was eligible under existing regime.
For more information, Click here.