According to tax experts' assessments of the GST implementation, the old issue of transfer pricing has the potential to shake the system in the future. The goods and services tax (GST) was implemented with the goal of creating "one nation, one tax," and it is the country's largest indirect tax reform in history.
The truth is, with the implementation of GST, several challenges are faced during the usual Transfer Pricing transaction. In this article, we’ve listed a few for you so that you can get ahead of the game!
1. Transfer pricing provisions on Related Party transaction
1.1 Specified International Transactions
- Special provisions are given under Income Tax Act to deal with Specified International transactions between related parties where either of the parties is located outside India and Specified Domestic transactions between related parties.
- Many MultiNational Companies curbs Income Tax by shifting profit from Business in the countries where higher tax is payable to the country where lower tax is payable.
- Transfer pricing provisions make sure that no income tax is avoided in India by shifting profits outside India.
- Therefore, transaction pricing provisions ensure that international transactions between related parties have been entered at Arm’s Length Price, i.e., at par with the price of unrelated party transactions.
1.2 Specified Domestic Transactions
- In case of domestic transactions, generally change in transaction price doesn't have tax liability implication unless either of the parties is incurring losses or coming under lower tax rate bracket.
- However, Certain persons in India are eligible for Tax holidays, i.e., no Income tax is payable for a certain period of time or higher deduction of expenses is allowed, i.e., 150% or 200% of actual expense incurred. Therefore, certain person tries to curb Income Tax by shifting profit to such entities.
- To avoid such practise, provision of transfer pricing is made applicable on certain domestic transactions.
- Domestic TP provisions make sure that a transaction has been entered at Arm’s Length Price.
1.3 Determination of Arm’s Length Price
- Under Income Tax, following methods are provided to compute Arm’s Length price under Section 92C of Income Tax Act:
- comparable uncontrolled price (CUP) method;
- resale price method;
- cost plus method;
- profit split method;
- transactional net margin method;
- The most appropriate method shall be selected and applied for computation of Arm’s Length Price.
2. Related party transaction under GST
- Section 15 of CGST Act, 2017 deals with provisions of Determination of value of Goods and services.
- As per section 15, where supply is made between related parties then value of supply shall be:
- Open Market Value of Such Supply
- If Open Market value is not available, value of supply of like kind and quality;
- If the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31.
- In case where the recipient is eligible for Input Tax Credit then value declared in Invoice shall be considered to be Open Market Value.
- Further, as per Schedule I of CGST Act, supply made between related persons without consideration is still considered as supply and therefore is liable to GST.
- Scope of related party is wide under GST and covers domestic transactions as well.
3. Contradiction between Provisions of Transfer pricing and GST
- Interest of both the laws is to curb the tax avoidance practises in India. However, the intertwined nature of these provisions has led to certain contradictory interpretations as well as controversies.
- Perspective of both the tax laws are different in following manner:
- For any transaction related to expenditure, the Income tax department would like to determine Arm’s Length price at the lower side as it would increase the profits of Indian Entity and therefore, would increase the Income tax liability in India.
- Whereas, the Goods and Service Authority would like to determine it at the higher side as it would increase the collection of GST on Import of Service.
- Therefore, determination of Value of any supply can move in the opposite direction under Income Tax and Goods and Service Tax.
- There are certain transactions which requires taxpayer to plan carefully.
3.1 Free Of Cost use of licence/brand name granted to Indian subsidiary by its foreign parent
- Foreign Companies generally allow their Indian Subsidiary to use Licence/Brand Name of their foreign company without any cost, i.e., on Free of cost basis.
- Therefore, such transactions are not recorded in books of accounts as no monetary value is available.
- As per Schedule I of CGST Act, 2017, supply between related parties without any consideration is considered as supply and therefore is liable to GST. For the purpose of computation of GST liability, value shall be determined as per Section 15 of CGST Act.
- Therefore, taxpayers shall be asked to determine value and pay GST accordingly.
- However, if the value of such a transaction is considered then it will lead to reduction in income chargeable to tax or shall increase the loss, therefore, as per Section 92(3) of Income Tax Act, 1961, provision of transfer pricing shall not apply.
- However, Income Tax authority may rely on valuation carried out for GST purpose as Arm’s Length price and can demand deduction of TDS.
3.2 Copyright/License fee/ Brand fee charged on Indian Subsidiary to use License/ Brand name of foreign companies
- ライセンス料やブランド使用料が発生する場合、所得税当局は利益と所得税額を最大化するために、その価格を低く見積もろうとする傾向があります。
- 一方、GST（物品サービス税）当局は、サービスの輸入に対するGST徴収額を増やすために、価格を高く設定しようとします。
3.3 みなし国際取引
- 1961年所得税法第92B条(2)に基づき、関連当事者以外の者との間で行われる国際取引であっても、その取引の価格や条件が、当該第三者と関連当事者との間で事前に締結された合意に従って決定される場合、その取引は二つの関連当事者間で行われたものとみなされます。
CBICには、登録事業者がIGST控除を誤って利用した場合のCGST法第50条(3)に基づく利息の適用について、多くの問い合わせが寄せられています。電子クレジット元帳上のIGST残高が、誤って利用されたIGST控除額を下回った場合に、当該控除が「利用された」とみなされるのかについて明確化が求められています。ただし、電子クレジット元帳上のIGST、CGST、SGSTを合計したITC残高は、誤って利用されたIGST控除が取り消されるまでの間、常に当該控除額を上回っている状態です。
- 米国に親会社を持ち、インドに子会社を持つケースを例に挙げます。
- 米国親会社は、インド子会社への物品供給条件を定める契約を、米国の独立企業と締結しました。
- この米国企業は、親会社と定めた条件に従って物品を供給する契約をインド子会社と締結しました。
- したがって、第92B条(2)に基づき、インド子会社と米国の独立企業との間の取引は、関連当事者間で行われたものとみなされます。
- しかし、このような取引はGST法上、関連当事者間の取引とはみなされません。
- この場合、Form 3CEBがGST当局に開示されると、本来その対象ではなかった取引が、GSTの観点から独立企業間価格（アームズ・レングス価格）の検証対象となるリスクが生じます。
3.4 トゥルーアップ／トゥルーダウン調整：
- 独立企業間価格を決定するために、当初の取引価格に対して様々な調整が行われます。
- これらの調整は当初の取引価格に反映されていないため、補填金（サブベンション）の支払いが発生した場合、追加のGST納税義務が生じる可能性があります。
4. GSTと移転価格税制における評価の矛盾に対する解決策
- 上述の課題を踏まえ、「これらの問題をどう解決すべきか」という疑問が生じるのは当然です。アナリストによれば、間接税制度は供給時期（Time of Supply）に縛られており、過少評価に関する規制が価格計算において重要な役割を果たしています。
- 納税者への救済措置として、税務当局は過去3年間、多国籍企業との間で事前確認制度（APA）を締結し、移転価格の問題解決に尽力しています。
4.1 事前確認制度（APA）
- OECDの移転価格ガイドラインによると、APA（または取り決め）とは、管理された取引が行われる前に、一定期間の移転価格を決定するための適切な基準をあらかじめ定めるものです。
- 言い換えれば、APAとは、国際取引における独立企業間価格（ALP）の決定方法について、当局と納税者（またはその他の者）との間で合意するものです。
- 1961年所得税法第92CC条は、国際取引におけるALPまたはその決定方法について、当局が納税者とAPAを締結することを認めています。
- 納税者の公平性を考慮すれば、所得税当局が移転価格として認めた価格は、同じ中央政府機関であるGST当局も認めるべきです。
- したがって、納税者が移転価格方針についてAPAを締結していれば、GST面でのリスクを大幅に軽減できる可能性があります。
Conclusion
コインには裏表があるように、GSTと移転価格税制にも両面があります。これらの課題に対する解決策をさらに探求することで、より簡便で実りある成果が得られるでしょう。
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