Grant Thornton India has successfully assisted one of its clients in the IT sector in inking their first unilateral Advanced Pricing Agreement (APA) with the Indian Revenue within two years of filing the application in 2014. This is a milestone achievement for Grant Thornton as the APA scheme is still in its nascent stage in India. The closure of this APA demonstrates the capability of Grant Thornton India’s transfer pricing team and further consolidates our position in the market.

Since the implementation of the scheme in FY 2013-14, only 77 APAs have been concluded on a pan India basis. This includes 74 unilateral and three bilateral APAs. 

Fatema Hunaid, Partner, Grant Thornton India LLP, who led the APA client service team, sharing her experience with the APA team said “during the entire APA process, the approach of the APA team was cooperative, responsive and more importantly negotiation oriented. All the discussions and meetings (including site visits) with the Applicant were performed with an open mind.  I believe that such a pragmatic approach of the APA team, coupled with effective representation by clients & their consultants, will go a long way in expeditiously concluding APAs. This would in turn lead to APAs being preferred increasingly over the litigation route letting our clients focus the limited time of their key executives on running their businesses than in fruitless litigation.” 

The APA concluded is valid for a block period of five covered financial years and defines the acceptable transfer pricing terms in relation to the covered international transactions entered into by the client in India with its group companies worldwide. With the conclusion of the APA, the client has reduced the cost of annual transfer pricing compliance and litigation achieving certainty and avoiding costly protracted litigation.          

“The APA program, which has been so well received, needs to keep the momentum going and it is in the interest of both tax administration and taxpayer that this program continues to deliver the promise. The increased participation of mid-market clients signifies the enhanced reach and acceptability of the program. The focus now should be to make the program administration more robust by augmenting the resources dedicated to this program,” said Arun Chhabra, Director, Grant Thornton Advisory Private Limited.

Cross border business stuck in transfer pricing litigation has soared over the years and exceeding US$ 8 bn during FY 2014-15 alone.  Consequently, since the introduction of the APA scheme in 2012, it has gradually gathered tremendous interest and momentum from taxpayers, who are keen on avoiding litigation with the Indian tax authorities over their transfer pricing. The APA scheme can potentially provide certainty for a block of nine years in a single negotiation (five prospective and four prior years). 

Assisting clients in negotiating APAs with the Indian Government provides Grant Thornton the unique opportunity of partnering with clients in getting transfer pricing certainty with the Indian Revenue. The regular compliance route is an annual activity followed by a revenue audit which does not have any space for ‘negotiation’.

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