http://www.effitrac.com/gst-softwareThe government is planning to compare GST data filed by companies under different departments to detect if there are any discrepancies and check whether there has been any leakage in the total amount of tax collected, thus raising the prospect of even more scrutiny, said experts who are well aware of this issue. They also informed that the Goods and services tax (GST) returns along with income tax filings and transfer pricing submissions will soon be analysed and synchronised in such a manner that it is first time ever.
The Multinational companies which include banks, fast-moving consumer goods (FMCG) companies, tech firms and many other automobile manufacturers also fear that such cross-referencing of their data will lead to an increase in the scrutiny and eventually tax outgo will become higher.
Such kind of different comparisons wasnât possible earlier as the data wasnât uniform at all. The data was also not organised in such a manner, which wouldeventually allow such matching. The case with various departments is also such that they didnât ordinarily share data.
There are many companies which have been urgently asking tax advisers to advise them on how to file returns. This is because they donât end up being slapped with excessive levies. Using an ERP Software such as Effitrac will also help this situation. Some kind of transactions such as the royalty payments, CEO salaries and the valuations of Indian operations will now be under the scrutiny of not only the indirect tax department but also the direct tax and transfer pricing departments.
âIt is quite necessary for businesses to take a comprehensive view while filing their GST annual returns this year, considering their submissions in the income tax and transfer pricing filings, as these might be compared on with various parameters,â says Deloitte India partner MS Mani.
For instance, when it means to transfer pricing, the tax department makes use of Function Assessment and Risk (FAR) analysis to determine how much margin should be allowed and the extent of the transfer pricing demand that can be raised from a multinational. However, under the conditions of GST, the valuation rules that coincide with these transactions between the Indian subsidiary and its foreign parent might result in additional taxes.
Many tax experts also said there will be several implications for companies, mainly multinational companies, and that the imports by different companies would also be scrutinised. âThe focus is on the import data that are shown by various companies and we see that there could be complications going ahead as companies may struggle with one department while trying to accurately comply with others and this could also lead to litigation,â says Abhishek A Rastogi, partner at Khaitan & Co.
The situation could also rise tensions and confusions between different tax departments, says experts. One such area is predicted as the import of services from related parties.
âTransfer pricing authorities would usually press for a lower value (so that the Indian company has appropriate profits and income tax in India) whereas the GST authorities may press for a higher value so that appropriate GST is collected, in the case of sectors which are excluded or exempt from GST wherein credit of GST is not available,â said Abhishek Jain, tax partner, EY.
Beginning this year, the multinational companies will also have to submit details about their global operations to the Indian tax authorities.
Under the Base Erosion and the Profit Shifting (BEPS) framework, many multinational companies are required to submit details about their operations in every country, their revenues earned, their margins, and the total number of employees hired among other things. This is mainly to determine if companies are using any tax structures or are they escaping taxes.
With due regards to the imports, transaction actions such as reverse charges, where the money earned for those services incurred by one entity or when the company is paid by another, will also come under such scrutiny.
âOften, many companies, which includes several multinationals would intentionally or unintentionally submit different figures to different tax departments,â says a senior finance executive with a multinational. âNow that these would be tallied would mean tax demand could be emerged from anywhere, either GST, income tax or even through transfer pricing.â
Effitrac supports this decision by the government. Please do log on to effitrac.com and try out our free trial for more details. visit GST Software Details http://www.effitrac.com/gst-software
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