CBDT Signs 125 Advance Pricing Agreements
Context:
Recently, the Central Board of Direct Taxes (CBDT) recorded a milestone by signing 125 Advance Pricing Agreements (APAs) in FY 2023-24, the highest ever in any financial year.
Relevance:
GS-02 (Polity)
Highlights:
- This includes 86 Unilateral APAs (UAPAs) and 39 Bilateral APAs (BAPAs), marking a 31% increase from the previous year’s 95 signings.
- The Bilateral APAs were established through Mutual Agreements with India’s treaty partners, including Australia, Canada, Denmark, Japan, Singapore, the UK, and the US.
The APA Programme:
- It is introduced by the Indian government which aims to offer tax certainty to multinational enterprises (MNEs) operating in India.
- It specifies pricing methods and determines the arm’s length price of international transactions for up to five future years.
- Taxpayers have the option to roll back the APA for the preceding four years, providing certainty for nine years.
- Bilateral APAs also prevent double taxation, making them a model for dispute prevention and enhancing India’s ease of doing business, especially for MNEs with numerous cross-border transactions.
Central Board of Direct Taxes (CBDT):
- The CBDT operates as a statutory authority, functioning under the Central Board of Revenue Act, 1963.
- It operates within the Department of Revenue under the Ministry of Finance.
- Functions: The CBDT formulates policies, oversees the levy and collection of direct taxes, and supervises the entire Income Tax Department’s operations. It also suggests legislative changes in direct tax laws and adjustments in tax rates and structures to align with government policies.
- Historical Background: Originating from the Central Board of Revenue established by the Central Board of Revenue Act, 1924, it initially managed both direct and indirect taxes. However, to manage the growing complexity of tax administration, the board was split into two entities – the Central Board of Direct Taxes and the Central Board of Excise and Customs – effective from January 1, 1964.
- Structure: The CBDT is led by a Chairman and includes six members, all holding ex-officio positions as Special Secretaries to the Government of India. Each member is assigned a specialized function, covering areas such as income tax, legislation, revenue, personnel & vigilance, investigation, and audit & judicial. The Chairman and Members are selected from the Indian Revenue Service (IRS).
