Transfer pricing norms to be announced by July-end
New Delhi-- According to GC Srivastava, joint secretary (TPL) in the Central Board of Direct Taxes, the government will announce the rules on transfer pricing by the end of July.
Srivastava said that the rules would be finalised after discussion with OECD experts, who are expected this week, and analysis of the response to the draft rules, which had come from various quarters.
The draft rules on transfer pricing formulated by the Central Board of Direct Taxes (CBDT) has outlined five methods for determining arm’s length price in relation to an international transaction.
According to the draft rules, the most appropriate method for this purpose will be selected from the comparable uncontrolled price method, the resale price method, the cost plus method; the profit split method and the transactional net margin method.
Though he said that the transfer pricing legislation was liberal, chief executive officer, Global Transfer Pricing Services of Ernst & Young, John Hobster, said that the norms were stringent and might affect foreign investment in the country, adversely.
Under the new transfer pricing norms in India, a penalty of 2 per cent of the international transaction value will be imposed, if a person fails to maintain documents.
The penalty will be Rs 100,000 if the person fails to furnish the certificate as prescribed by the Central Board of Direct Taxes.
Hobster said that the Indian government should consider advance rulings to companies and advance pricing agreements with other countries to facilitate international transactions.
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