India’s AAR rules offshore supply income in a composite EPC contract is taxable
31 May 2012
India’s Authority for Advance Ruling has sent a warning that taxpayers will have to be more cautious in structuring and evaluating the tax implications of engineering, procurement and construction (EPC) contracts that involve offshore supply of equipments by foreign suppliers/EPC contractors to Indian parties.
The Indian courts have, until now, been consistently taking a view that payments received for offshore supply contracts by foreign companies (EPC contractors) is not taxable in India based on the Supreme Court judgment in the case of Ishikawajima Harima Heavy Industries Ltd (Ishikawajima) as long as ownership of the goods is transferred by the contractor to the Indian party outside India and the consideration is paid outside India. However, the AAR in its latest ruling has held that payments received for a composite contract for supply, installation and commissioning cannot be split into offshore and onshore supply/services to claim tax exemption on offshore supply portion and would accordingly be taxable in India.
Facts of the case
Roxar Maximum Reservoir Performance WLL, Bahrain (applicant) entered into a composite contract with ONGC for services for a supply, installation and commissioning contract of 36 manometer gauges in India. The
The Applicant approached...
This article is available to subscribers and current trialists of International Tax Review only. Please log in or subscribe for access to the rest of the article.
Alternatively take a free trial, giving you 7 days of access.
This article is available to subscribers only. To read the rest of this article please subscrbe.
This article is available to trialists and subscribers only. Please take a free 7 day trial to read the rest of the article.