The Indian government is unlikely to introduce an advance pricing agreement (APA) programme for the next two years. This is despite a campaign by industry and professions in the run-up to the recent Budget. Representatives of major industrial sectors had lobbied the federal finance ministry for an early date for the introduction of an APA programme. Several told TP Week that they were confident in the pre-Budget period that they secured a commitment from the government.
However, the Budget focused mainly on tax relief for the poor and assisting impoverished farmers. There was no announcement – either in the Budget or in the documents issued subsequently.
As recently as this week, at a meeting organised by the American Chamber of Commerce in New Delhi, the revenue minister PV Bhide (pictured) said there were issues still be resolved on both sides. Subsequently, the finance ministry issued a statement, saying that there would be no APA programme in the near future.
KR Girish, KPMG’s head of taxes in South India, said: “The government is much more concerned about the forthcoming general election. It has taken steps in the Budget to help significant numbers of poorer people in India in the Budget and its attention is not focused on benefits for larger companies.
“KPMG has argued, along with other professional firms and organisations such as NASSCOM (the software alliance), for work to start on the APA programme now. But in practical terms, it will be two years at the earliest before it is introduced. There will be a general election either this autumn or next spring. The government will focus on winning votes. It will only be after the dust has settled after a general election that the process to setting up an APA programme will begin.”
In a statement, K N Memani, chairman of the American chamber, said: “We do need a long term road map for tax reforms in India...what really is desired is a consistent effort towards improving the tax systems of the country so that it achieves its objective of raising adequate revenues in an efficient and equitable manner.”
Memani said that existing alternate dispute resolution processes in India had inherent limitations. He argued the case for a pre-filing such as an APA process. The finance ministry said that an APA programme “could not be implemented in the absence of an institutional mechanism that could ensure that such agreements are not questioned in the court of law or by the authorities like Comptroller and Auditor General of India (CAG) and the Central Vigilance Commission”. It added that the ministry is still awaiting the feedback from industry bodies.
