India: GST on supplies; royalties under tax treaty | KPMG | GLOBAL
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India: GST on supplies; royalties under tax treaty with Italy

India: GST on supplies; royalties under tax treaty

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).


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  • Taxability of “free of cost” supplies for GST purposes: For purposes of valuing works contracts under the model goods and services tax (GST) law, there can be issues regarding the taxability of “free of cost” supplies.  Read an August 2016 report [PDF 319 KB]
  • Salary received by non-resident in India for services rendered outside India, not eligible for exemption under tax treaty: The Chennai Bench of the Income-tax Appellate Tribunal held that a non-resident individual is not eligible to claim any benefit under an income tax treaty. The case is: Swaminathan Ravichandran. Read an August 2016 report [PDF 341 KB]
  • Royalty income, not effectively connected with branch office in India, is taxable on a gross basis under tax treaty with Italy: The Delhi Bench of the Income-tax Appellate Tribunal held that to determine whether royalty income is effectively connected with a permanent establishment (PE), the “asset test” must be evaluated. To determine whether “fees for technical services” are effectively connect with the PE, the “activity test” or “function test” must be evaluated. Because these tests were not satisfied, the royalty income received by the taxpayer was not effectively connected with its branch office in India. Therefore, the royalty income was taxable at a rate of 20% on a gross basis under provisions of the India-Italy income tax treaty. The tribunal also found that because employees of the Indian branch office of the non-resident company were neither capable nor engaged in the performance of the contract, the activities of the contract were not effectively connected with branch office. The case is: Iveco Spa. Read an August 2016 report [PDF 351 KB]

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