FM clears advance pricing scheme

Last Updated: Fri, Jun 22, 2012 19:51 hrs

Finance minister Pranab Mukherjee has cleared the Advance Pricing Agreement (APA) scheme, pertaining to transfer pricing regulations before filing his nomination for the presidential election.

The APA scheme, proposed in Budget 2012-13, is seen as one of the major industry-friendly measures. The industry has been keenly waiting for the notification of its provisions. APA is an ahead-of-time agreement between a taxpayer and the taxing authority on an appropriate transfer pricing methodology.

A senior finance ministry official told Business Standard the finance minister’s approval to the provisions formulated by the Central Board of Direct Taxes (CBDT) would facilitate implementation of the APA scheme from July 1. CBDT will notify the scheme shortly, after taking approval of the law ministry, he added.

Mukherjee would be in Kolkata over the weekend and then he is slated to file his nomination some time next week. The official earlier quoted said the scheme would cover the norms for coverage of cases under APA and also forms for availing the facilities provided. He added as demanded by industry fees for availing the scheme had been kept reasonable. “The applicant has to pay a fee of Rs 10 lakh for international transactions not exceeding Rs 100 crore, Rs 15 lakh for transactions up to Rs 200 crore and Rs 20 lakh for transactions above Rs 200 crore,” said the official.

The Budget inserted new sections in the I-T Act to provide a framework for APA. It empowers CBDT to enter into an advance pricing agreement with any person undertaking an international transaction.

What is APA?
Advance Pricing Agreement is signed between a taxpayer and a taxing authority on an appropriate transfer pricing methodology for a set of transactions over a fixed period of time in future. The APAs offer better assurance on transfer pricing methods and are conducive in providing certainty and unanimity of approach.

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