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Guidelines under sub-section (4) of section 194-O, sub-section (3) of section 194Q and subsection (1H) of section 206C of the Income-tax Act, 1961-reg. (CBDT Circular 20 of 2021 dated 25 Nov 2021)

Posted on by Business So Simple in Income Tax

Finance Act, 2020 inselted a new section 194-o in the Income-tax Act 1961 (hereinafter referred to as “the Act”) which mandates that with elTect from 1st day of October, 2020, an e-commerce operator shall deduct income-tax at the rate of one per cent of the gross amount of sale of goods or provision of services or both, facilitated through its digital or electronic facility or platform. However, exemption from the said deduction has been provided in case of certain individuals or Hindu undivided family subject to fulfilment of specified conditions. This deduction is required to be made at the time of credit of the amount of such sale or service or both to the account of an e-commerce participant or at the time of payment thereof to such e-COmmerce participant, whichever is earlier.

2. Finance Act, 2020 also inserted sub-section (11-1) in section 206C of the Act which mandates that with effect from I” day of October, 2020 a seller receiving an amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year shall collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax. The collection is required to be made at the time of receipt of amount of sale consideration. Seller is defined as the person whose total sales or gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of good is carried out. Central Government has been authorised to specify by notification in the Official Gazette, the person who would not be considered as seller for the purposes of this section, subject to the fulfillment of certain conditions as specified therein.

3. Finance Act, 2021 inserted a new section 194Q to the Act which took effect from 1st day of July, 2021. It applies to any buyer who is responsible for paying any sum to any resident seller for purchase of any goods orthe value or aggregate of value exceeding fifty lakh rupees in any previous year. The buyer, at the time of credit of such sum to the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1 % of such SUm exceeding fifty lakh rupees as income tax. Buyer is defined to be person whose total sales or gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out. Central Government has been authorised to specify by notification in the Official Gazette, person who would not be considered as buyer for the purposes of this section, subject to fulfillment of specified conditions.

4. Sub-section (4) of section 194-0, sub-section (3) of section 194Q and sub-section (H) of section 206C of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties.

4.1 In this regard, vide circular no. 17 of2020 dated 29.09.2020, guidelines were issued by the Board (with the approval of the Central Government) in relation to the provisions of section 194-0 and section 206C(1 H) of the Act in certain cases to remove difficulties and provide clarity for certain transactions.

4.2 Further, vide circular no. 13 of 2021 dated 30.06.2021, guidelines were issued by the Board in relation to the provisions of section 194Q of the Act through which the difficulties arising from the applicability of the provisions of section 194Q in certain cases were removed. Furthermore, guidelines with respect to the cross appl ication of the provisions of sections 194-0, 194Q and 206C (I H) of the Act were also issued through the said circular.

4.3 In continuation of the above, to further remove the difficulties, the Board, with the approval of the Central Government, hereby issues the following guidelines under sub-section (4) of section 194-0, subsection (3) of section 194Q and sub-section (I-I) of section 206C of the Act.

5. Guidelines

5.1 E-auction services carried out through electronic portal:

5.1.1 Representations have been received from various stakeholders involved in the business of carrying out e-auction services through electronic portal owned, operated or maintained by them (hereinafter referred as ‘e-auctioneer’). It has been stated that in an e-auction, the e-auctioneer involved in conducting the e-auction through its pOltal is responsible only for the price discovery for the sale/purchase of goods or services and the result of the auction report is submitted to the client. The client could be the buyer or the seller. Palticipants in the auctions are sellers (if client is buyer) or buyers (if client is seller). The transaction of sale/purchase is being carried out directly between the buyer and the seller which are not done through the electronic portal of the e-auctioneer. Further, the price so discovered can be further negotiated between the parties without the knowledge of the e-auctioneer. In such a scenario, it has been represented that provisions of section 194-0 of the Act does not apply as the transaction of sale/purchase itsel f is not taking place through the electronic portal.

5.1.2 From the representations made, the following facts have been noticed:

(a) The e-auctioneer conducts e-auction services for its clients in its electronic portal and is responsible for the price discovery only which is reported to the client.

(b) The price so discovered through e-auction process is not necessarily the price at which the transaction takes place and it is up to the discretion of the client to accept the price or to directly negotiate with the counter-party.

(c) The transaction of purchase/sale takes place directly between the buyer and the seller party outside the electronic portal maintained by the e-auctioneer and price discovery only acts as the starting point for negotiation and conclusion of purchase/sale.

(d) The e-auctioneer is not responsible for facilitating the purchase and sale of goods for which eauction was conducted on its electronic portal except to the extent of price discovery.

(e) Payments for the transactions are carried out directly between the buyer and the seller outside the electronic portal and the e-auctioneer does not have any information about the quantum and the schedule of payment which is decided mutually by the client and the counterparty.

(f) For payment made to e-auctioneer for providing e-auction services, the client deducts tax under the relevant provisions of the Act other than section 194-0 of the Act.

5.1.3 In order to remove difficulty, it is clarified that the provisions of section 194-0 of the Act shall not apply in relation to e-auction activities carried out bye-auctioneers ifall the facts listed at (a) to (f) of para 5.1.2 are satisfied. This clarification shall not apply if any of these facts are not satisfied. Further, it is clarified that the buyer and seller would still be liable to deduct/ collect tax as per the provisions of section 194Q and 206C (I H) of the Act, as the case may be.

5.2 Adjustment of various state levies and taxes other than GST

5.2.1 In Para 4.3.2 of circular no. 13 of 2021 dated 30.06.2021, it has been provided 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 in the account of the seller, then the tax is to be deducted under section 194Q of the Act on the amount credited without including such GST. It has been further provided that in case the tax is deducted on payment basis ‘as the payment is earlier than the credit, the tax is to be deducted on the whole amount as it is not possible to identify that payment with GST component of the amount to be invoiced in future. Further, adjustment of tax deducted in case of purchase return has also been provided.

5.2.2 It has been represented that in case of goods which are not within the purview of GST, such as petroleum products, various levies like VAT, Excise duty, sales tax etc. are charged. While the treatment of GST component has been clarified in the circular no. 13 of 2021, the same is silent on other non-GST levies which have otherwise been subsumed and replaced by GST.

5.2.3 In this regard, it is hereby clarified that in case of purchase of goods which are not covered within the purview of GST, when tax is deducted at the time of credit of amount in the account of seller and in terms of the agreement or contract between the buyer and the seller, the component of VAT/Sales tax/Excise duty/CST, as the case may be, has been indicated separately in the invoice, then the tax is to be deducted under section 194Q of the Act on the amount credited without including such VAT/Excise duty/Sales tax/CST, as the case may be. However, if the tax is deducted on payment basis, if it is earlier than the credit, the tax is to be deducted on the whole amount as it will not be possible to identify the payment with VAT/Excise duty/Sales tax/CST component to be invoiced in the future. Furthermore, in case of purchase returns, the clarification as provided in Para 4.3.3 of circular no. 13 of 2021 shall also apply to purchase return relating to non GST products liable to VAT/excise duty/sales taxi CST etc.

5.3 Applicability of section 194Q of the Act in cases where exemption has been provided under section 206C (1 A) of the Act

5.3.1 Sub-section (I A) of scction 206C of the Act provides that notwithstanding anything contained in sub-section (I) of the said section, no tax is to be collected in case ofa buyer, who is a resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration to the effect that the goods (as referred to in sub-section (I)) are to be utilized for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes.

5.3.2 As per the provisions of sub-section (I H) of section 206C of the Act, tax is to be collected in respect of sale of goods other than the goods which have not been covered under sub-section (I) or subsection (I F) or sub-section (I G). It has been represented that in case of goods which are covered under the provisions of sub-section (I) of the said section but exempted under sub-section (IA), tax will not be collectible under either sub-section (I) or sub-section (I H) of section 206C as the provisions of subsection (I H) categorically exclude the goods which are covered under sub-section (I) of section 206C. It has been requested to clarify if the provisions of section 194Q of the Act will be applicable in such cases.

5.3.3 The issue has been examined. It is seen that the provisions of section 194Q of the Act does not apply in respect to those transactions where tax is collectible under section 206C [except sub-section (I H) thereof of the Act. Since by virtue of sub-section (IA) of section 206C of the Act, the tax is not required to be collected for goods covered under sub-section (I) of the said section, it is hereby clarified that in such cases, the provisions of section 194Q of the Act will apply and the buyer shall be liable to deduct tax under the said section if the conditions specified therein are fulfilled.

5.4 Applicability of the provisions of section 194Q in case of department of Government not being a public sector undertaking or corporation

5.4.1 There have been representations from department of the Government (both Central Government and State Government), to enquire if such department is required to deduct tax under the provisions of section 194Q of the Act.

5.4.2 As per the provisions of section 194Q, tax is to be deducted by a person, being a buyer, whose total sales, gross receipts or turnover from business carried on by that person exceed ten crore rupees during the financial year immediately preceding the financial year in which the goods are purchased by such person. Thus, for a person to be considered as a buyer for the purposes of section 194Q of the Act, following conditions are required to be fulfilled: (a) Such person shall be carrying out a business/ commercial activity; (b) The total sales, gross receipts or turnover from such business/ commercial activity shall be more than Rs. 10 crore during the financial year immediately preceding the financial year in which goods are being purchased by such person. In case of any Department of the Government which is not carrying out any business or commercial activity, the primary requirement for being considered as a ‘buyer’ will not be fulfilled. Accordingly, such an organization will not be considered as ‘buyer’ for the purposes of section 194Q of the Act and will not be liable to deduct tax on the goods so purchased by them. However, if the said department is carrying on a business/commercial activity, the provision of section 194Q of the Act shall apply subject to the fulfillment of other conditions.

5.4.3 Issue has been raised in case where any department of the Government will be considered as a ‘seller’ for the purposes of deduction of tax under section 194Q of the Act. In this regard, it is hereby clarified that for the purposes of section 194Q, Central Government or State Government shall not be considered as ‘seller’ and no tax is to be deducted by the buyer, in cases where any Department of Central or State Government are seller of goods.

5.4.4 In connection with above, it is further clarified that any other person, such as a Public sector Undertaking or corporation established under Central or Stale Act or any other such body, authority or entity, shall be required to comply with the provisions of section 194Q and tax shall be deducted accordingly.

Search operations on Indian companies and their associate concerns, controlled by a neighbouring country (Press release 25 Nov 2021)

Posted on by Business So Simple in Income Tax

The Income Tax Department has carried out search and seizure operations on certain Indian companies and their associate concerns, controlled by a neighboring country on 16.11.2021. These companies are engaged in the business of chemicals, ball bearings, machinery parts, and Injection moulding machinery.    The search action covered around 20 premises spread over Mumbai, Ahmedabad and Gandhidham in Gujarat and also in Delhi.  

 A large number of incriminating evidence in the form of digital data showing earning of huge unaccounted income by these companies has been found and seized. It has been found that these companies are indulging in tax evasion through manipulation of books of accounts.  The analysis of evidence has revealed that these companies have indulged in transferring funds by using a network of shell companies to a neighbouring country. An estimated amount of Rs 20 crore was transferred in the last 2 years through the above modus operandi.

Investigations have revealed that a Mumbai-based professional firm not only assisted in formation of these shell companies but also provided dummy directors to these shell companies. The investigations have also shown that these dummy directors were either the employees/drivers of the professional firm or they were persons of no means. On questioning, they admitted that they were not aware of the activities of these companies and that they had been signing on documents as per the instructions of the key functionaries.  The professional firm is also instrumental in assisting the foreign nationals by providing its addresses for banking and other regulatory requirements.

One of such companies trading in chemicals was found to be routing the claim of purchases through Marshall Island, a low tax jurisdiction. The company actually purchased items worth Rs. 56 crore from a neighbouring companybut the same has been billed from Marshall Island. However, payment for such purchases has been made into thebank account of the Marshall Island-based company which is held in the neighbouring country.  It was further unearthed during the search proceedings that this Indian company was also involved in taking non-genuine purchase bills to reduce its tax liability and also paid unaccounted cash for purchase of land in India.

The search action has already resulted in the seizure of unaccounted cash of about Rs. 66 lakh. Bank accounts of some of the companies, with aggregate bank balances of about Rs. 28 crore, have been put under restraint. 

  Further investigations are under progress.

‘Online Course on Indian Constitution’ (Press release 24 Nov 2021)

Posted on by Business So Simple in Legal awareness

Shri Kiren Rijiju to launch the ‘Online Course on Indian Constitution’ on the eve of Constitution Day

Posted Date:- Nov 24, 2021

26th of November every year is declared as the ‘Constitution Day’.  On the eve of ‘Constitution Day’ celebration this year,  as a part of celebrations of ‘Azadi Ka Amrit Mahotsav’ for 75 years of India’s Independence, Department of Legal Affairs, Ministry of Law & Justice in collaboration with National Academy of Legal Studies & Research (NALSAR), University of Law is launching the ‘Online Course on Indian Constitution’ on 25th November, 2021. 

Union Minister for Law and Justice, Shri Kiren Rijiju will launch the ‘Online Course on Indian Constitution’ at Bhim Auditorium, Dr. Ambedkar International Centre (DAIC), 15, Janpath, New Delhi in the august presence of Prof. S.P.S. Baghel, Hon’ble Minister for State for Law and Justice.

The occasion will be graced by Shri Anoop Kumar Mendiratta, Secretary, Department of Legal Affairs and Secretaries of the Legislative Department,  Department of Justice along with other senior officers of the Ministry of Law & Justice and Prof. (Dr) Faizan Mustafa, Vice Chancellor, NALSAR University of Law.

Law is an instrument of social change and the objective of any State remains to promote and protect the rule of law. The same is only possible by empowering the citizens of this country with the knowledge of their rights and duties and the principles enshrined in the Constitution of India. The online course on Constitution aims to create awareness and strengthen the citizens of the country.  The course further seeks to familiarize with the text of the Constitution and leading cases, identify the fundamental policy choices incorporated in the Constitution, examine the historical evolution and understand the post-independence constitutional journey, through a series of 15 conceptual videos. The videos shall be available for viewing for a fixed period of six months after the date of registration by the applicants. A certificate of participation shall be automatically generated after any person registers and views the videos on the portal https://legalaffairs.nalsar.ac.in.

The registration for the course has been kept free for all the students, citizens and members of the society for viewing and participation.  However, any such person who wishes to obtain a Certificate of Appreciation or Certificate of Merit, is required to opt for online assessment on a token fee of Rs.100/- (Rupees One Hundred Only), which is purely optional.

Keeping in view the essence of the Online Course, the occasion shall also see widespread and enthusiastic participation of students, faculty and top functionaries of the leading Law universities of India.

Judiciary updates (Income tax & GST)- 25th Nov 2021

Posted on by Business So Simple in GST, Income Tax, Legal awareness

INCOME TAX

HC directs AO to pay ₹25000 to PM CARES for not following section 144B

Parag Kishorchandra Shah Vs The National Faceless Assessment Center & Ors. (Bombay High Court) dated 27/10/2021

Transfer Pricing Officer: Quasi-capital are treated differently than normal loan transactions

Bilakhia Holdings Pvt. Ltd. Vs ACIT (ITAT Surat) dated 11/10/2021

GST

No withholding of GST refund on account of need for verification of suppliers to supplier of ultimate exporter

Bhagyanagar Copper Private Limited Vs Central Board of Indirect Tax and Customs (Telangana High Court) dated 28/09/2021

GST Registration cancellation on Hyper-Technical grounds causes Revenue Loss: HC

CIGFIL Retail Pvt. Ltd. Vs Union of India (Calcutta High Court) dated 10/11/2021

Vires of Section 16(2) of CGST Act, 2017 challenged before HC

Unifab Engineering Project Pvt. Ltd. and anr. Vs Deputy Commissioner CGST And CEX (Bombay High Court) dated 16/11/2021

Provisional attachment after expiry of one year breaches Section 83 provisions of CGST Act

Formative Tex Fab Vs State of Gujarat (Gujarat High Court) dated 21/10/2021

Services by ‘Airbus Group India’ are ‘Intermediary service’ & liable to GST

 In re Airbus Group India Pvt. Ltd.  (GST AAAR Karnataka dated 09/11/2021

Bombay HC issues notice in challenge to Constitutional validity of 16(4) of CGST Act

Meta Tiles Pvt. Ltd. Vs Union of India (Bombay High Court) dated 29/10/2021

Regards

Bipul Kumar

CCI approves acquisition of minority stake in Delhivery byFedEx India and acquisition of certain operating assets of FedEx India and TNT India Private Limited by Delhivery (CCI Press Release 23 Nov 2021)

Posted on by Business So Simple in Competition Law

The Competition Commission of India (CCI) approves acquisition of minority stake in Delhivery Limited (Delhivery) by FedEx Express Transportation and Supply Chain Services (India) Private Limited (FedEx India) and acquisition of certain operating assets of FedEx India and TNT India Private Limited (TNT) by Delhivery.

The proposed combination relates to the i) acquisition of minority stake in Delhivery by FedEx India and, ii) acquisition of operating assets of FedEx India and TNT by Delhivery. Apart from the above, the parties also propose to enter into certain interconnected and ancillary transactions.

FedEx India

FedEx India offers end-to-end logistics solutions in India under the FedEx brand, including express parcel deliveries, full and less-than truck load freight services, and warehousing and supply chain management/third party logistics services. FedEx India caters to B2B, B2C and C2C (Retail) customers and provides wide range of shipping solutions for all business needs.

Delhivery

Delhivery is engaged in the provision of logistics services in India. As part of its logistics services, Delhivery provides transportation, warehousing, freight services and supply chain management/third party logistics services to various customers. Delhivery’s logistics services are provided to enterprises and persons who operate across different business models and are present across the value chain (individuals, big brands, small and medium enterprises, e-commerce platforms etc.).

TNT

TNT India is part of the FedEx group and also provides logistics services inter alia in the form of express parcel deliveries, special services, and freight services.

Detailed order of the CCI will follow.

CCI approves proposed combination involving (a) acquisition of stake by Veolia Environnement S.A (Veolia) in SUEZ (S.A), and (b) acquisition of stake in New Suez by Meridiam, Global Infrastructure Management, LLC, La Caisse des dépôts et consignations and CNP Assurances

Posted on by Business So Simple in Competition Law

CCI Press Release dated 23 Nov 2021

The Competition Commission of India (CCI) approves proposed combination involving (a) acquisition of stake by Veolia Environnement S.A (Veolia) in SUEZ (S.A), and (b) acquisition of stake in New Suez by Meridiam, Global Infrastructure Management, LLC, La Caisse des dépôts et consignations and CNP Assurances.

Veolia – Veolia is incorporated in France. Veolia operates through three business lines worldwide for (i) water management, (ii) waste management, and (iii) energy solutions and sources.

Suez – Suez is incorporated in France. Currently, Suez is deployed in three business segments worldwide: (i) Water, (ii) Recycling and Recovery, and (iii) Environmental Tech & Solutions.

Meridiam – Meridiam, incorporated in France is a global player, specializing in the development, financing and long-term management of infrastructure. Meridiam develops, finances, builds and manages various types of projects including, transport infrastructure (high-speed railways, motorways, tunnels, ports, tramways, etc.), social infrastructure (schools, universities, healthcare centers, stadiums, etc.), public buildings (courthouses, government offices, ministries, etc.), networks and public services (water, waste management, energy, etc.)

GIP – GIP is incorporated in USA, is an independent infrastructure fund manager investing in the transportation, energy, waste and water sectors. GIP manages approximately USD billion in assets across all sectors and its portfolio companies generate combined annual revenues of USD billion dollars.

CDC – CDC is a French public establishment with a special legal status created by the law of 28 April 1816 and governed by Articles L. 518-2 and seq of the French Monetary and Financial Code. CDC carries out public interest missions in support of public policies conducted by the State and local authorities, focusing on economic, social and sustainable development. Through its subsidiaries, CDC also has activities that are open to competition and are grouped around four divisions: (i) environment and energy, (ii) real estate, (iii) capital investment, and (iv) services.

CNP – CNP is incorporated in France and is 100% controlled by CDC. CNP is active in the insurance market in Europe and Latin America. As an insurance, coinsurance, and reinsurance provider, CNP designs innovative personal risk/protection and savings/retirement solutions.

Detailed order of the CCI will follow.

आयकर विभाग ने गुजरात में एक प्रमुख गुटखा वितरक की तलाशी लीPress Release- Nov 23, 2021

Posted on by Business So Simple in Income Tax

आयकर विभाग ने 16 नवंबर, 2021 को गुजरात के एक प्रमुख गुटखा वितरक के ठिकानों पर तलाशी और जब्ती अभियान चलाया। अहमदाबाद में विभिन्न जगहों पर स्थित 15 से अधिक परिसरों पर तलाशी अभियान चलाया गया।

तलाशी कार्रवाई के दौरान, विभिन्न आपत्तिजनक दस्तावेज और डिजिटल साक्ष्य पाए गए और उन्हें जब्त कर लिया गया है। इन साक्ष्यों का प्रारंभिक विश्लेषण स्पष्ट रूप से कर योग्य आय की चोरी को इंगित करता है और इसके लिए कई तरह के गलत कार्य किये गए, जैसे बिना हिसाब के सामग्री की खरीद करना, बिक्री को कम करके दिखाना और बिना हिसाब के नकद में व्यय करना। जब्त सामग्री के आगे के विश्लेषण से पता चलता है कि इन नकद बिक्री का एक हिस्सा हिसाब-किताब में दर्ज ही नहीं किया गया है। तलाशी लेने गयी टीम को अचल संपत्तियों में अघोषित निवेश के सबूत भी मिले हैं।

तलाशी अभियान में बिना हिसाब वाली करीब 7.50 करोड़ रुपये की नकदी और बिना हिसाब-किताब वाले लगभग 4 करोड़ रुपये के आभूषण बरामद हुए है। बैंक लॉकरों पर भी निषेधाज्ञा लगा दी गई है।

अब तक की गई तलाशी कार्रवाई में 100 करोड़ रुपये से अधिक की बेहिसाब आय का पता चला है। इसमें से, समूह ने 30 करोड़ रुपये से अधिक की अघोषित आय को स्वीकार किया है।

आगे की जांच जारी है।

India and United States Joint Statement on the Trade Policy Forum (Ministry of Commerce & Industry Press Release dated 23 Nov 2021)

Posted on by Business So Simple in Entrepreneurship, Foreign Trade

1.         India and the United States held the twelfth Ministerial-level meeting of the India-United States Trade Policy Forum (TPF) in New Delhi on November 23, 2021.  Indian Minister of Commerce and Industry, Shri Piyush Goyal and U.S. Trade Representative, Ambassador Katherine Tai co-chaired the TPF meeting. The Ministers convened the TPF with a view to advancing the goal, announced by President Biden and Prime Minister Modi at their September 24, 2021 meeting, to “develop an ambitious, shared vision for the future of the trade relationship.”   As India and the United States look ahead to define that ambitious future, the Ministers recognized the importance of engaging in collaborative discussion on the full range of existing and emerging issues affecting our trade relationship.

2.        The Ministers underlined the significance of the TPF in forging robust bilateral trade ties and enhancing the bilateral economic relationshipto benefit working people in both countries. They agreed that reconvening the TPF and regular engagement under the forum would help inaddressing outstanding bilateral trade concerns andallow the two countries to explore important, emerging trade policy issues.They agreed that the TPF Working Groups on agriculture, non-agriculture goods, services,investment, and intellectual property should be re-activated in order to address issues of mutual concern on an ongoing basis.

3.         The Ministers expressed satisfaction over the robust rebound in bilateral merchandise trade  this year 2021 (January – September 2021), which showed almost 50 percent growth over the same period in the previous year; bilateral merchandise trade in the current year is poised to surpass US$ 100 billion mark. The Ministers also appreciatedthe importance of two-way services trade and foreign direct investment (FDI) as contributors to deeper economic and trade tiesand noted buoyancy in bilateral FDI investments in recentmonths.

4.  Ambassador Tai expressed her appreciationfora number of important economic reforms recently initiated by India, such as liberalization of FDI in the insurance sector, elimination ofa retrospective provision in income tax, and launching of the “Single Window System” for facilitating investment. These reforms have enabledimprovements in the business ecosystem and Ambassador Tai encouraged the continuation of market-oriented reforms implemented through transparent means. The Ministers underlined the importance of establishing a conducive environment for further integrating the two economies to the benefit of both sides.

5.   The Ministers underlined the importance of the India-U.S. trade and economic partnership in addressing global challenges. They agreed to work collaboratively and constructively in relevant multilateral trade bodies including the WTO, the G20, and the OECD both for enhancing the bilateral trade relationship andfor achieving a shared vision of a transparent, rules-based global trading system among market economies and democracies. 

6. The Ministers acknowledged the significance of creating resilient and secure supply chains. In this context, they agreed that India and the United States could, together with like-minded partners, take a leading role in developing secure supply chains in critical sectors of trade and technology.Acknowledging the strong history of collaboration between India and United States in the field of health, the Ministers identified this sector as bearing particular importance in the context of work on resilient supply chains. India also noted its interest in partnering with the U.S. and allies in developing a secure pharmaceutical manufacturing base for augmenting global supply chains.

7. The Ministers also shared perspectives on the importance of health-related goods and services in U.S.-India trade relations andpledged to pursue constructive dialogue on a range of regulatory issues affecting trade in health-related products.In this regard, the United States acknowledged India’s concerns regarding delays, arising from the COVID-19 pandemic, in U.S. regulatory inspections of Indian pharmaceutical facilities. The U.S. Food and Drug Administration (FDA) continues to evaluate COVID-19 conditions and is conducting prioritized inspections when there is minimal risk to company and FDA officials. FDA will also continue to utilize remote evaluation techniques for regulatory decisions as appropriate.

8.  The Ministers agreed on the importance of critical and emerging technologies in delivering economic growth and achieving shared strategic priorities, and took note of the work underway on these issues within the Quad framework. They discussed the importance of regular sharing of perspectives on issues, including cyberspace, semiconductors, AI, 5G, 6G and future generation telecommunications technology. They welcomed the participation and collaboration of the private sector in both countries in building stronger linkages in these critical sectors, and supporting  resilient and secureglobal supply chains.

Progress on Bilateral Trade Concerns

9.During the course of the TPF held on November 23, 2021, the Ministers reviewed the developments across the canvass of bilateral trade issuesandagreed to highlight the following outcomes and future priorities.

10.The Ministers acknowledged the tangible benefits accruing to Indian and U.S. farmers and businesses, by mutually resolving certain outstanding market access issues through increased bilateral engagement. Both sides also agreed to continue working to expand bilateral trade in agricultural and food products through the TPF Working Group on Agricultural Goods and committed to holdingtechnical dialogues on animal health, plant health, and food safety and other technical issues in 2022.

11. The Ministers welcomed the agreement to finalize work on market access facilitation for mangoes and pomegranates, pomegranate arils from India, and cherries and alfalfa hay for animal feed from the United States.  The United States intends to finalize the transfer of the preclearance programme/regulatory oversight of irradiation for mangoes and pomegranate to Indian authorities as soon as is practicable.  The United States and India also look forward to signing the Systems Approach Operational Work Plan for the export of pomegranate arils from India to the United States. India intends to finalize phyto-sanitary work to allow the importation of U.S. cherries, and India intends to finalize the phyto-sanitary certification which will allow the importation of U.S. alfalfa hay for animal feed into India. In addition, the U.S. agreed to work to complete India’s request for table grapes access to the United States, and India agreed to work to finalize the mutually agreed export certificate to allow the importation of U.S. pork and pork products.

12.   The U.S. side welcomed the extension in time notified by India for accepting certain test results from ILAC accredited labs undertheMandatory Testing and Certification of Telecom Equipment (MTCTE) policy, and both sides agreed on the importance of providing sufficient time for industry to adapt to future testing requirements. The U.S. also appreciated the extension in time notified by India regarding implementation of Polythene Material for molding and extrusion (Quality Control) Order, 2021and to consider consultation with industry to discuss labeling arrangements that satisfy the measure’s objectives.

13.   The Ministers welcomed the enhanced engagement on intellectual property (IP)and recognized that the protection and enforcement of IP contributes to the promotion of innovation as well as bilateral trade and investment in IP-intensive industries.  They appreciated the work of the TPF IP Working Groupand reviewed its progress in copyrights, patents, trademarks, and sharing of national experiences regarding traditional knowledge and genetic resources.  The United States welcomed India’s clarifying the administration of its patent regime, including on disclosure requirements, treatment of confidential information, patent application oppositions, as well as supporting evidence for well-known trademark applications.Both the United States and India welcomed each other’s commitment to comply with the World Intellectual Property Organization Copyright Treaty and World Intellectual Property Organization Performance and Phonogram Treaty.

Areas for Future Work

14.   The Ministers expressed an intentto continue to work together on resolving outstanding trade issues as some of these require additionalengagement in order to reach convergence in the near future.  They agreed further to utilize the revitalized TPF and its Working Groups as a means of rapidly engaging on new trade concerns as they arise, and that they would take stock at quarterly intervals to evaluate progress in this regard.

15.  The Ministers reviewed their particular interests for achieving progress in the area of market access. In this regard, India highlighted its interest in restoration of itsbeneficiary status under the U.S. Generalized System of Preferences program; the United States noted that this could be considered, as warranted, in relation tothe eligibility criteria determined by the U.S. Congress.  The United States and India also exchanged views on potential targeted tariff reductions.

16.    The Ministers agreed to follow up on exploring the possibility of enhanced market access for additional identified agricultural products. They also agreed to engage on U.S. concerns regarding regulatory approvals for the Distillers’ Dried Grains with Solubles, andIndia’s concernsregarding market access for water buffalo meat  andrestoration of market access for wild caught shrimp.

17.  The US side acknowledged the work being done by the Indian side to strike a balance between access to medical devices at affordablerates and the availability of cuttingedge medical technology. In this regard, the United States welcomed the recent application of the Trade Margin Rationalization (TMR) approach for price regulation on certain medical device products and India noted that wider application of TMR for other medical devices is under consideration by the relevant authorities.

18.  The United Statesnoted its support for India’s ambitious goal of reaching 20 percent ethanol blending with petrol by 2025 and expressedan interest in supplyingethanol to Indiafor fuel purposes.The Ministers agreed to explore ways for enhancing collaboration for the implementation of their respective ethanol blending programs.

19.    The Ministers highlighted the important role of the services sector, including digital services, in India and the United States, and the significant potential for increasing bilateral services trade and investment.  They noted that the movement of professional and skilled workers, students, investors and business travelers between their countries contributes immensely to enhancingbilateral economic and technological partnership.In this respect, the Indian side welcomed the recent U.S. decision to allow travel to the United Statesby fully vaccinated Indians.  The United States and India decided to continue their engagement on visa issues, and their shared resolve to facilitate the movement of professionals, skilled workers, experts, and scientific personnel.The Ministers acknowledged the ongoing discussions on a Social Security Totalization Agreement and welcomed further engagement on pursuing such an agreement.

20.  The Ministers recognized that legal, nursingand accountancy services can facilitate growth in trade and investment, and they agreed to continue discussion on promoting engagement in these sectors. They discussed the importance of electronic payment services as a catalyst to the further expansion of the bilateral trade relationship, and both sides agreed to continue engagement in this area.

21. The Ministers exchanged views on harnessing the vast potential of digital trade to spur economic growth and innovation, and committed to work together to build common understanding, and increase engagement both bilaterally,including inthe TPF and ICT Working Group, andin relevant multilateralfora, including the G20 and WTO.  They pledged to deepen bilateral engagement to promote the digital economy, and to explore the adoption of joint principles that ensure that the internet remains open for free exchange of ideas, goods, and services.

22. The Ministers agreed to further engage to find mutually agreed solutions on outstanding WTO disputes between the two countries.

Engagement on Emerging Issues

23.   The Ministers also exchanged information on the relationship between trade and labour emphasizing the importance of trade in creating employment and opportunities for working population.  The Ministers  shared perspectives on the role of trade in improving the welfare of working people in India and the United States.The Ministers also agreed to work together on issues of child labour and forced labour in global supply chains in order to promote resilience and sustainability.

24. The Ministers shared perspectives on the relationship between trade and environment matters and exchanged views on approaches to increase the utilization of renewable energy and other clean technologies to achieve net-zero emissions, including by aiming to mobilize finance and scale innovative clean technologies as agreed in the India – US Climate and Clean Energy Agenda 2030 Partnership.

25. The Ministers agreed to exchange information on standards and conformity assessment procedures to ensure that requirements are no more trade restrictive than necessary and are in line with international agreements.   They also noted the importance of transparency in the rulemaking process and agreed to explore ways to enhance good regulatory practices.

26.  The Ministers also agreed to relaunch workshops focused on accelerating implementation of the WTO Trade Facilitation Agreement.

27. The Ministers concluded byunderlining the importance of integrating the two economies across sectors to harness the untapped potential of the relationship. They agreed that the TPF should seek to continually deliver concrete outcomes to generate mutual confidence.  Such an approach would contribute to a more ambitious future for the bilateral trade and economic relationship and take it to the next level so that both countries could benefit from the inherent complementarities in the two economies. This would lead to economic prosperity, employment generation and improvement in livelihood in both the countries.   In this connection, they directed the TPF Working Groups to develop, by March 2022, plans of action for making substantive progress.  They further directed their senior officials to remain in regular contact to review the activity of the Working Groups and identify a set of specific trade outcomes that could be finalized for an inter-sessional TPF meeting to be held by mid-2022. 

28.  The Ministers agreed to remain engaged to give greater energy to the TPF’s work and to reconvene the TPF at the Ministerial level before the end of 2022.

Removal of Inverted Tax Structure on MMF Textiles Value chain and uniformity of rates brings relief to Textiles sector (Ministry of Textiles Press Release dates 22 Nov 2021)

Posted on by Business So Simple in GST

Removal of Inverted Tax Structure on MMF Textiles Value chain and uniformity of rates brings relief to Textiles sector;


Uniform rate of 12% for entire value chain of MMF textiles sector will reduce the compliance burden of the industry players;

MMF textiles sector will be benefiting and save lot of working capital;

It will provide clarity to the industry and settle, once and for all, the issues caused by inverted tax structurePosted Date:- Nov 22, 2021

The Government has notified uniform goods and services tax rate at 12 % on MMF, MMF yarn, MMF fabrics and apparel that has addressed the inverted tax structure in the MMF textile value chain. The changed rates will come into effect from 1st January, 2022. This will help the MMF segment grow and emerge as a big job provider in the country.

The Textiles & Apparel (T&A) industry was having long pending (first under sales tax then, under VAT and finally under GST regime) demand for removal of inverted tax structure on manmade fibre (MMF) value chain. The GST on MMF, MMF Yarn and MMF Fabrics were 18%, 12% and 5% respectively. The taxation of inputs at higher rates than finished products created build up of credits and cascading costs. It further led to accumulation of taxes at various stages of MMF value chain and blockage of crucial working capital for the industry.

Though there is a provision in GST law to claim the unutilised Input Tax Credit (ITC) as a refund, but there were other complications and resulted more compliance burden. The inverted tax structure caused effective increase in rate of taxation of the sector. The world textiles trade has been moving towards MMF but India was not able to take advantage of the trend as its MMF segment was throttled by inverted tax regime.

This 12% uniform GST rate is likely to contribute positively to the growth of the sector in the following ways:

i) The uniform rate of 12% for entire value chain of MMF textiles sector will be benefiting and save lot of working capital. It will reduce the compliance burden of the industry players. This is a welcome step by the Government with no inversion.

ii) The uniformity of GST rates will be helpful to resolve the ITC residues that accumulated due to the inverted tax structure earlier.

iii) The uniformity in the GST rates shall 12% GST on job work related to dying and printing services will benefit the industry to absorb and recover unutilised ITC.

iv)The significant portion of MMF products (output) is expected to be exported, it will lend a better scope for encashing the untilised ITC. Also since tax on input will get refunded, on output (export) which will be zero rated, it would not add to cost and make exports competitive.

v) Uniform 12% GST will help the industry having huge portion of piled up opening ITC by enabling them to encash the same progressively

Differential rates for garment creates problem in compliance of tax regime. MMF garment cannot be identified easily and cannot be taxed differently, hence there is need for uniform rate. Uniform rate makes it simple and since there is so much high potential of value addition in garment segment that the increase in rate is likely to be absorbed in value addition.   It will provide clarity to the industry and settle, once and for all, the issues caused by inverted tax structure.