Final rules on Master file & CbCR in India - Clarity on compliance?

November 06,2017
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Chetan Rajput (Partner, Ernst & Young LLP)

Sachin Agrawal (Senior Manager, Ernst & Young LLP)

Abhishek Apte (Manager, Ernst & Young LLP)

A. Background:

Basis enactment of Finance Act, 2016, India introduced provisions for Master file (MF) & CbCR largely in line with Action 13 of Organisation of Economic Co-operation and Development (OECD) BEPS Project. Central Board of Direct Taxes (CBDT) released draft rules on 6 October 2017 for public comments. Basis public comments, CBDT released final rules on 31 October 2017.

Final rules shall come into force from date of publication in Official Gazette (i.e. 31 October 2017). Summarized below are the key revisions, for easy reference:

B. Key revisions:

  1. MF:

a. Applicability:

Draft rules

Final rules

10DA. (1) Every person, being a constituent entity of an international group shall,-

(i) if the consolidated revenue of the international group, of which such person is a constituent entity, as reflected in the consolidated financial statement of the international group for the accounting year preceding such previous year, exceeds five hundred crore rupees; and

10DA. (1) Every person, being a constituent entity of an international group shall,-

(i) if the consolidated group revenue of the international group, of which such person is a constituent entity, as reflected in the consolidated financial statement of the international group for the accounting year, exceeds five hundred crore rupees; and

Impact Analysis:

As per draft rules, MF for financial year (FY) 2016-17 for entities having consolidated turnover of more than INR 500 crores during FY 2015-16. However, basis final rules, MF for FY 2016-17 required for entities having consolidated group turnover of more than INR 500 crores during same year (i.e. FY 2016-17).

In simple terms, data for same year needs to be looked into to confirm applicability of MF for that particular year.

  1. Information & documents to be maintained/ furnished:
  • Rule 10DA(1)(ii)(B)(a) revised in final rules to include list of all entities of International Group (IG), as compared to list of only operating entities.

Impact Analysis:

This might result in inclusion of CEs even if the same are not operational, investing/ financing entities etc.

  • Rule 10DA(1)(ii)(B)(c)(VIII) revised to include details of functions performed, assets employed & risks assumed (FAR) by CEs that contribute at least 10% of either:
  1. Revenues of group; or
  2. Assets of group; or
  3. Profit of group

as compared to draft rules wherein contribution of at least 10% of total revenue, assets and profit had to be considered cumulatively.

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