CBDT’s draft Master File and CbCR Rules – some journey still to be covered

October 09,2017
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Rahul Mitra (Partner National Head, Transfer Pricing & BEPS, KPMG India)

The Indian Revenue Board, i.e. the Central Board of Direct Taxes (CBDT) had issued draft rules relating to Master File and country by country (CbC) reporting, last Friday, i.e. on 6th October, 2017. The CBDT has invited comments & suggestions from the public on such draft rules, to be submitted by 16th October, 2017. Following are some of the basic thoughts & observations on the draft rules :

  1. The contents of the reports in the form of Master File & CbC, are absolutely in line with the guidelines & prescriptions contained in OECD/ G-20 BEPS Action Plan 13. The monetary threshold of filing CbC reporting has been prescribed by the CBDT to be the consolidated group revenue of INR 55 billion, i.e. the approximate rupee equivalent of Euro 750 million, as provided in BEPS Action Plan 13.
  1. The draft rules provide that Master File is normally required to be filed with the Indian Tax Administration by the due date of furnishing tax return, i.e. 30thNovember, however, for FY 2016-17 (i.e. financial year ended on 31stMarch, 2017), the date of compliance has been deferred to 31st March, 2018, understandably in view of the significant delay on the part of the CBDT in releasing the necessary rules; and that too at draft stage, even as of today.
  1. Though the date of compliance of CbC reporting, namely the due date of furnishing of tax return, as provided u/s 286(2) of the I T Act, has still not been extended, it is most likely, if not surely, that the same would also be deferred beyond such statutory deadline of filing for FY 2016-17, to a later date, perhaps 31stMarch, 2018, to make it sync with the filing of Master File. The logic is as follows : The CBDT, vide rules, has the mandate of only prescribing the due date of furnishing the Master File, as per section 92D(4) of the I T Act.
  • The I T Act has itself specified the due date for furnishing the CbC report, as mentioned above; and not delegated the responsibility to the CBDT to specify the same vide rules.
  • However, the CBDT can extend the due date of filing of CbC report through a circular issued u/s 119 of the IT Act, in order to avoid hardship on taxpayers, which may arise interalia due to delay on its part in framing rules for proper administering of the I T Act, as it has happened in the instant case.
  • Draft rule 10DB(2) proposes that every constituent entity resident in India, belonging to a non-resident international group, would need to notify the Indian Tax Administration, by filing Form No 3CEBB, of whether it is the alternate reporting entity for the purposes of filing CbC report in India; or whether the said obligation shall be fulfilled in another country, either by the non-resident parent entity or any other alternate constituent entity, on or before 60 days prior to the due date of furnishing the CbC report.
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