Central Board of Direct Taxes (CBDT’s) APA Program crosses the 150 Milestone

The Central Board of Direct Taxes (CBDT) has entered into 9 Advance Pricing Agreements (APAs) during the last two days of the current financial year. All the 9 Agreements entered into are Unilateral APAs. With this, the total number of APAs entered into by the CBDT has reached 152. This includes 11 Bilateral APAs and 141 Unilateral APAs. In Financial Year 2016-17, a total of 88 APAs (8 Bilateral APAs and 80 Unilateral APAs) were entered into. The APAs signed in financial year 2016-17 include Agreements with some technological behemoths having major operations in India in the IT sector.

Advance Pricing Agreement

The 9 APAs entered into during the last two days of the current Financial Year pertain to various sectors of the economy like Information Technology, Aviation, Oil & Gas, Automobiles, Electricals & Electronics, etc. The international transactions covered in these agreements include Receipt of Intra-Group Services, Provision of IT Enabled Services, Provision of Software Development Services, Provision of Engineering Design Services, Provision of Marketing Support Services, Import of Traded Goods, Payment of Interest on ECB, Receipt of Interest, Receipt of Guarantee Fee, Receipt of License Fee, Export of Goods, Receipt of Technical Support Services, Provision of Business Support Services, etc.

The APA Scheme was introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Since its inception, the APA scheme has been well-accepted by taxpayers and that has resulted in more than 800 applications (both Unilateral and Bilateral) being filed so far in five years.

The signing of 88 APAs in a single year (F.Y 2016-17) is a significant achievement of the CBDT and its Officers. The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

No. of Advance Pricing Agreements signed by CBDT
S. No Financial Year Unilateral APAs Bilateral APAs Total
1 2013-14 5 0 5
2 2014-15 3 1 4
3 2015-16 53 2 55
4 2016-17 80 8 88
Total 141 11

152

Vikas Vasal, Partner & National Tax Leader, Grant Thornton India LLP aid that “In line with India’s approach to provide certainty and clarity to the tax payers and usher in a non-adversarial tax regime, the APA scheme is gaining traction.  In the last financial year (FY 2016-17) 88 APA’s have been finalized, with total tally being over 150.  At present, a large number of the APA’s being finalized are Unilateral ones.  As the number of Bi-lateral APA’s increases, it would attract more tax payers to opt for this scheme.”

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