Prabhakar K S [Ilaya Azwan]
The Central Board Of Direct Taxes (CBDT) Vide Notification No. 46/2017 Date 7th June, 2017 Notifies Revised List Of ‘Eligible International Transactions’ For Transfer Pricing Safe Harbour Rules.
| Sl. No. | Eligible International Transactions | Circumstances
|
| 01 | Software Development Services | Operating Profit Margin declared by the eligible assessee from the EIT in relation to Operating
Expense incurred is – 1. Not less than 17%, where the value of International Transaction does not exceed Rs. 100 Cr. 2. Not less than 18 %, where the value of international transaction exceed Rs. 100 Cr. but does not exceed Rs. 200 Cr. |
| 02 | Information Technology Enabled Services | Operating Profit Margin declared by the eligible assessee from the EIT in relation to Operating
Expense incurred is – 1. Not less than 17%, where the value of International Transaction does not exceed Rs. 100 Cr. 2. Not less than 18 %, where the value of international transaction exceed Rs. 100 Cr. but does not exceed Rs. 200 Cr. |
| 03 | Knowledge process outsourcing services | The value of international transaction does not exceed Rs. 200 cr. & Operating Profit Margin declared by the eligible assessee from the EIT in relation to Operating is –
1. Not less than 24% & Employee Cost in relation to the Operating Expense is at least 60%; 2. Not less than 21% & Employee Cost in relation to the Operating Expense is 40% or more but less than 60%; or 3. Not less than 18% & Employee Cost in relation to the Operating Expense does not exceed 40%. |
| 04 | Advancing of intra-group loans – in Indian Rupees (INR). | The interest rate declared in relation to the EIT is not less than the 1 Year marginal cost of funds lending rate of SBI as on 1st April of the relevant previous year plus, –
1. 175 basis points, AEs CRISIL credit rating between AAA to A; 2. 325 basis points, AEs CRISIL credit rating of BBB-, BBB or BBB+; 3. 475 basis points, AEs CRISIL credit rating between BB to B; 4. 625 basis points, AEs CRISIL credit rating between C to D; 5. 425 basis points, where credit rating of the AE is not available & amount of loan advanced to the AEs including loans to all AEs does not exceed Rs. 100 crore in the aggregate as on 31st March of the relevant previous year. |
| 05 | Advancing of intra-group loans – in foreign currency | The interest rate declared in relation to the EIT is not less than the 1 Year marginal cost of funds lending rate of SBI as on 1st April of the relevant previous year plus, –
1. 150 basis points, AEs CRISIL credit rating between AAA to A; 2. 300 basis points, AEs CRISIL credit rating of BBB-, BBB or BBB+; 3. 450 basis points, AEs CRISIL credit rating between BB to B; 4. 600 basis points, AEs CRISIL credit rating between C to D; 5. 400 basis points, where credit rating of the AE is not available & amount of loan advanced to the AEs including loans to all AEs does not exceed Rs. 100 cr. in the aggregate as on 31st March of the relevant previous year. |
| 06 | Corporate Guarantee | The commission or fee declared in relation to the EIT is @ not less than 1% pa on the amount guaranteed. |
| 07 | Contract R & D services wholly or partly – Software Development | The operating profit margin declared by the eligible assessee from the EIT in relation to operating expense incurred is not less than 24%, where the value of the international transaction does not exceed a Rs. 100 cr. |
| 08 | Contract R & D services wholly or partly – Generic Pharmaceutical Drugs | The operating profit margin declared by the eligible assessee from the EIT in relation to operating expense incurred is not less than 24%, where the value of the international transaction does not exceed a Rs. 100 cr. |
| 09 | Manufacture and export – Core auto components | The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 12 %. |
| 10 | Manufacture and export – Non- core auto components | The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 8.5 %. |
| 11 | Receipt of low value-adding intra-group services | The entire value of the international transaction, including a mark-up not exceeding 5%, does not exceed Rs. 10 cr.
A certificate by Chartered Accountant pertain to ü The Method of cost pooling, ü The exclusion of shareholder costs ü Duplicate costs from the cost pool and ü The reasonableness of the allocation keys used for allocation of costs to the assessee by the overseas AE. |
Source – CBDT’S Notification No. 46/2017/ F. No. 370142/6/2017-TPL dated 7th June, 2017
Author is a budding tax law professional and may reached at ‘ shreetaxchambers@bsnl.in’.
Author Bio
In which form we have to apply for safe harbour