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Tax Refunds – An Uphill Climb

Byte on while staying informed about the latest tax updates.


Hey,

Apple plans to shift a major chunk of it’s manufacturing from China to countries like India and Ireland instead of the US. Trump threatens to slap new taxes on Apple and other such companies. Will this hold back the American giants from venturing out and prove to be a major setback for India’s plan to woo multinational companies from China?

This is not it. India is already at her wits end trying to solve tax related problems within her own boundaries.



This Week’s Dose-

  • Companies demanding a Tax Certificate?
  • 25 Years of Direct Tax Collection
  • Tax on e-commerce firms CREATING A STIR

Companies demanding a Tax Certificate?

The proposal.

“Give us Tax Certificates instead of Tax Refunds if money is a problem,” companies tell the Government. Government has not been able to give refunds probably because of the cash crunch in these difficult times. Many companies are also struggling with the working capital. There has been a lot of the financial stress.

They want the government to allow loans on these certificates. The loans could be provided by banks that are flush with funds and at a very low interest rate of 1-2%. The Tax Certificate could be kept as collateral to give these loans and be treated as cheque discounting during repayment.

As the cash crunch starts hitting the operations hard, this could surely help businesses get access to liquidity.

The problem.

The government is open to that idea, since CBDT might be struggling to issue refunds (especially above INR 1 crore). This might put companies in a tough spot that have pending refunds amounting up to a few crores. Now, since the revenue cycle is hit, pedling its way to the working capital cycle, salaries of employees might take a hit.


25 Years of Direct Tax Collection


The Indian Tax system has seen endless changes. With the change in tax slabs and laws, the Tax Revenue collection has seen a steady rise. 

Here is a look at 25 years of Direct Tax collection in India. Corporate Tax is the largest contributor to Direct Tax.



Tax on e-commerce firms CREATING A STIR

A little bit of background

FinMin decided to charge an additional 2% equalisation levy on e-commerce activities based abroad starting from April 1, 2020. This was done keeping in mind to charge the more profitable economy. Thereby, increasing the Government’s revenue.

But this received a major push back from e-commerce big weights like Amazon, Google, Flipkart and Netflix which aren’t headquartered in India. They demanded a deferment from the Indian Government.

The crux of the matter

The e-commerce firms are of the view that this would only make matters worse. The businesses would require to make complicated changes to their internal systems, accounting and billing mechanisms in a very short notice.

The impact on multinationals will be wider than imagined. The definition of e-commerce operator and supplier varies from nation to nation. It has been unclear as to what kind of business model of a non-resident will qualify as an e-commerce operator.

The companies certainly need more ‘clarity’ about the new levy.

What are we looking at

Ever wondered why some companies are sending you invoices that originate offshore?

India wanted to ensure that multinationals conducting significant business be taxed. The heads behind this ‘new tax levy’ would have known that it was not going to be a smooth sailing. The 36-member OECD forum might affect India’s right to tax these companies.

The Finance Ministry is looking at deferring payments till September. That would be the 2nd quarter of this financial year.


A ‘Window Tax’ Darkened European Homes – Crazy Tax Story



In 1696, a window tax was introduced in England and Wales. It was assessed as a flat property tax plus a tax based on the number of windows a home had. As a result, some people bricked up their windows and new buildings were designed with fewer windows.

Looking at England, Scotland and France imposed similar taxes in the 1700s.

Talk about taxes’ ability to darken a day!


Byte of the Day

“It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates.”

–John F. Kennedy
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