Tag: Tax

carbon taxes

Proactive Pathways to Navigate Emerging Carbon Taxes

Insights | December 11, 2024 | Practice Area: , ,

The global focus on mitigating climate change has spurred the swift development and implementation of policies aimed at curbing greenhouse gas emissions. Among these measures, carbon taxes and mechanisms such as the European Union’s Carbon Border Adjustment Mechanism (“EU CBAM”) have emerged as pivotal tools for integrating environmental accountability into global economic activities. These policies are poised to bring substantial changes to the dynamics of international trade.

For Indian exporters, particularly those in carbon-intensive sectors like iron and steel, cement, fertilizers, aluminum, electricity, and hydrogen, the EU CBAM represents both a challenge and an opportunity. While the regulation primarily imposes compliance obligations on EU importers, Indian businesses must act swiftly. The need to monitor evolving CBAM regulations, forecast financial impacts, optimize supply chains, and establish robust governance frameworks has never been more critical.

This note delves into the framework of the EU CBAM, examines its implications for Indian exporters, and highlights practical strategies businesses can adopt to navigate this shift towards a carbon-conscious trade landscape.

share swaps

Cross-Border Share Swaps: Amendments to Regulatory Framework

Insights | September 12, 2024 | Practice Area: , ,

In order to simplify cross-border share swaps and address certain challenges under the existing regulatory framework, the Government of India has recently amended the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. The amendment became effective on August 16, 2024. Previously, permissible share swaps were restricted to issue of equity instruments by an Indian entity to foreign residents in exchange for equity instruments of another Indian company. The amendment now allows secondary share swaps and exchanges of equity instruments for equity capital of foreign companies. However, certain ambiguities persist, such as limitations on swaps involving Indian resident individuals and lack of guidance on downstream investments by Foreign Owned Controlled Companies (“FOCCs”) using share swaps. Further, Indian tax laws do not grant tax neutrality to swap structures unless conducted via merger or demerger, making such transactions taxable unless covered by a tax treaty benefit.

Direct Tax Vivad se Vishwas Scheme

Direct Tax Vivad se Vishwas Scheme, 2024

Insights | August 9, 2024 | Practice Area:

The pendency of litigation under the Income-tax Act, 1961 has been rising due to two key factors: increasing number of appeals and slow disposal of such appeals. To address this growing backlog and to build on the success of the previous Vivad se Vishwas Scheme, 2020, the government has proposed the Direct Tax Vivad se Vishwas Scheme, 2024 (“VSV Scheme, 2024”). This note provides an overview of the VSV Scheme 2024.

slump sale

Smooth Transitions: Navigating Succession in Business Transfers on Slump Sale Basis!

Insights | July 11, 2024 | Practice Area: ,

Succession of a business, in simple words, implies a change in ownership of a business from one person (“the predecessor”) to another (“the successor”). Section 170 of the Act deals with the provisions relating to income tax liability in the case of succession of business pursuant to any business restructuring – transfer of business, amalgamation, demerger, etc. This note discusses the tax implications that may arise pursuant to succession of a business by way of slump sale.

Indo-Pacific Economic Framework

The Indo-Pacific Economic Framework for Prosperity: Opportunities for Indian Companies

Insights | June 25, 2024 | Practice Area: , , , , ,

Along with 13 other countries (including the US, Japan, Singapore, South Korea and Australia), India has joined the Indo-Pacific Economic Framework for Prosperity (“IPEF”). Representing 40% of global GDP and almost 30% of international trade in goods and services, the IPEF is expected to promote economic activity, investment, and sustainable growth in the Indo-Pacific region. It also aims to address emerging economic challenges – such as those related to trade, supply chains, clean energy (including green infrastructure), taxation and anti-corruption.
While agreements in respect of a clean economy and a fair economy, respectively, were reached in June 2024 at the IPEF Ministerial meeting held in Singapore, the IPEF agreement on supply chains, signed in November 2023, came into force earlier this year (February 2024).
The IPEF presents a unique opportunity for Indian companies to enhance competitiveness and expand their markets. By actively engaging with the framework, businesses in India can position themselves as key players in the dynamic Indo-Pacific landscape. Further, the IPEF presents an opportunity for India to strengthen economic cooperation with the US – which relationship, in turn, is likely to prove valuable for both Indian and American companies.

Payments to Micro and Small Enterprises

Payments to Micro and Small Enterprises (MSEs): Implications under Section 43B(h) of Income-tax Act, 1961

Insights | March 27, 2024 | Practice Area: , ,

To encourage prompt payment of dues to micro and small enterprises (“MSEs”), the Government of India introduced clause (h) in Section 43B of the Income Tax Act, 1961 with effect from financial year 2023-24. As per clause (h) of Section 43B, if an assessee makes payment to MSE after the time specified under the Micro, Small and Medium Enterprises Development Act, 2006, then deduction for such payment will be allowed in the year of actual payment. In this note we examine the stipulations outlined in Section 43B(h) of the IT Act and delve into its implications on the taxpayers.

India's Satellite Communication

Regulatory Shifts in India’s Satellite Communication Landscape

Insights | March 11, 2024 | Practice Area: , , , ,

There is a rising interest in satellite-based connectivity in the Indian market among internet service providers. Eutelsat OneWeb India, Jio Satellite Communications, Elon Musk’s Starlink and Amazon’s Kuiper are in the process of obtaining the requisite licenses to provide satellite communication services in India. Satellite communications represent an inevitable technological development in response to a continued demand for better network quality and higher capacity.
In this background, the Telecommunications Act, 2023 (“Telecommunications Act”) which received the President’s assent on December 24, 2023 and provides for administrative allocation of satellite spectrum as well as liberalization of the FDI policy applicable to the space sector further spurs the gaining momentum in satellite-based communication technology in India. This note explores the regulatory shifts in the Indian satellite communications landscape.

Capital Gains and Beneficial Ownership Test

Indian Tax Treaties: Capital Gains and Beneficial Ownership Test

Insights | March 5, 2024 | Practice Area: , , , ,

India’s double tax avoidance agreements (“DTAAs”) with certain countries (for e.g. Singapore, Mauritius and the Netherlands) provide that the capital gains on sale of shares is taxable only in the resident country of transferor and no tax is payable in India. However, the tax authorities have disputed the benefit available under the DTAAs by applying the “beneficial ownership” test. Further, they have also argued the sufficiency of tax residency certificate (“TRC”) to claim such benefit. In this note we analyze these aspects in light of the decision of Delhi High Court in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd., appeal against which has been recently admitted by the Supreme Court.

Capital Reduction

Capital Reduction: Tax Conundrums!

Insights | September 21, 2023 | Practice Area: ,

Capital Reduction, simply put, refers to the technique of reducing a company’s share capital in any form. It is a usually adopted mechanism by the companies for re-modelling their capital structure, amongst other means (viz., buy-back of shares and redemption of the preference share capital). Depending upon the objectives and attendant circumstances, a company can undertake capital reduction either with or without making any payment to its shareholders. This note discusses the tax implications that may arise in the hands of the company undertaking such capital reduction and its shareholders under different situations.