Kitty Miv, Editor
15 July, 2019
Last week we focused on Europe and indirect taxes, and it's tempting to do so again; VAT is a perennial subject of interest to both governments and businesses.
However, other topics must have their turn, and this week's country of the week is India, where things are many things, but never dull.
First of all, the Indian authorities confirmed on July 2 that the BEPS multilateral instrument would enter into force for the nation's tax treaties with effect from October 1, 2019.
The first changes to its network of tax treaties will apparently apply from the 2020-21 fiscal year onwards. Alongside depositing the instrument of ratification with the OECD at the end of June, they notified the OECD of which of India's treaties they intend the MLI to modify, along with its reservations and options chosen.
India has said that 93 of its agreements will be "covered agreements" for the purposes of the BEPS MLI.
Of these 93 treaty partners, 22 of these countries have already ratified the BEPS MLI, meaning that the treaties with these states can be modified immediately from FY2020-21, subject to those countries also including their treaty with India as a covered tax agreement.
Then somewhat more excitingly (for Indian businesses, at any rate) on July 5, the Indian Government announced in the Budget that the scope of the lower 25 percent corporate income tax rate would be expanded to cover 99.3 percent of Indian businesses.
Currently the lower 25 percent rate is levied on those businesses with turnover not exceeding INR2.5bn (USD36.5m), and on manufacturing firms. This threshold will be raised to INR4bn.
Other salient tax measures in the Budget include an enhanced interest deduction of up to INR350,000 for the purchase of an "affordable house"; the launch of a new dispute resolution service to resolve legacy service tax and excise duty-related disputes; confirmation there will be a single monthly GST return along with other administrative simplifications; and confirmation that India will roll out an electronic invoice system, to eventually replace the e-way bill system and enable returns to be pre-filled.
The Budget also announces a new income tax deduction for those purchasing electric vehicles with loans. This follows on from the GST Council's approval of a reduced five percent rate of GST on electric vehicle purchases, down from 12 percent.
The Budget also proposes to extend, until March 31, 2021, the exemption from capital gains tax on gains arising from the sale of a residential house where the capital is used to invest in a start-up. The Government said it would also relax the eligibility conditions.
Finally, the Budget includes changes to the Securities Transaction Tax in relation to options, to restrict the tax basis for options to the difference between the settlement and strike price.
So there you go for this week, and as it is every year around the Budget, interesting times for the Indians!
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