Book Review

Title: Indian Taxation Decoded – An MNC
perspective

Author: Ketan Dalal, Chartered Accountant

Of late, newer business models have been
transforming conventional ones and increasing industry competitiveness, while
digital economy has taken over traditional brick and mortar enterprises. India,
along with the other emerging markets, is at the centre stage of this
disruption.

With the Indian government’s focus on
reforms through schemes such as ‘Ease of Doing Business’ and ‘Make in India’,
and FDI liberalisation (including in retail), the country is becoming an even
more important investment destination for global MNCs.The traditional image of
India is changing from that of a cost saving location (cheap processing and
outsourcing work) to that of a digital technology hub.

The government’s efforts to convert the
informal sector into formal, through regulatory and tax reforms have been noted
and recognised by the international business community and various fora.

In such a scenario, it is important for tax
professionals dealing with MNCs to be well versed with various tax and
regulatory issues in India. A lot of material is available on the said topic,
but it is spread out and not inter-linked. This book, titled “Indian Taxation
Decoded – An MNC perspective” by Ketan Dalal, is a welcome guide on the topic
providing a comprehensive framework of tax and regulatory aspects, laid out
briefly and yet methodically.

The book covers tax and regulatory aspects
for MNCs operating in India under the following chapters:

1.   Chapters I to IV – Introduction,
Residential Status, Taxation of foreign companies, India’s Treaty Network &
Key issues

The chapters cover
the basics of taxation (encompassing residential status, various heads of
income, India’s tax landscape, determining the residential status, presumptive
tax regimes, GAAR etc.) which could be a helpful read for an individual with
limited understanding of MNC taxation issues. These chapters contain the key
issues, setting the tone to what follows in the book.

2.   Chapters V & VI – Business Connection,
Permanent Establishment, Business income, Royalty and FTS

The key issues for an MNC operating in India
revolve around the aforesaid topics. The chapters discuss the concepts in
detail covering the relevant landmark and recent judgements, the tax
implications, quantum of taxability (i.e. attribution of income) etc. The
impact of changing business models on taxability as Royalty and FTS, has also
been touched upon.

3.   Chapter VII – Transfer Pricing – The India
Landscape

While some
parts of Transfer Pricing implications are covered in other chapters, this
portion covers the basics of Transfer Pricing regulations in India, spanning
from adoption of the regulations in India, definition of ‘international
transaction’ and ‘associated enterprises’, the various methods prescribed for a
benchmarking analysis and determination of the most appropriate method. The
chapter goes on to throw light on the concept of Specified Domestic
Transactions, Dispute Resolution Mechanism. The chapter endeavours to also
cover the more recent topic of OECD Base Erosion and Profit Shifting (BEPS)
Action Plan (AP) 13. The chapter also covers some landmark rulings and judicial
precedents, which are good to have in hand for any new reader.

The chapter starts at the very basic and
gradually builds up to give the reader an all-encompassing synopsis of the
Transfer Pricing environment in India.

4.   Chapters VIII & IX – Taxation of
Expatriates and Foreign-Held Domestic Entities

With a significant increase in movement of
human capital in and out of India, the topic has greater significance in
today’s times. The chapter provides a detailed commentary on various tax
provisions impacting the inbound and outbound expatriates as well as the
employer.

The chapter on foreign held entities deals
with tax and regulatory issues impacting corporates and LLPs of foreign MNCs in
India. The chapter is broadly divided into (i) Tax regime for domestic entities
(ii) Computation of taxable income (including general and specific deductions
available, thin capitalisation rules, ICDS, etc.) and (iii) Tax rates.

5.   Chapter X – Mergers and Acquisitions

With an increase in
M&A activity, this chapter covers the key tax and regulatory provisions
impacting the said activity (encapsulating Mergers, Demergers, Share
acquisitions, Business acquisitions) of MNCs in India. The fact that this
covers cross border MnA as also by the Indian arms of MNCs makes it
particularly useful.

6.   Chapter XI – Sectoral Issues

In this chapter,
the author has discussed direct tax aspects involving certain nuances and
peculiarities relevant for sectors such as Shipping, Aviation, Media and
Entertainment, BPOs and KPOs, E-commerce, Infrastructure and Financial
services.

7.   Chapters XII & XIII – Procedures and
Compliances, Non-tax Regulations

The chapters
encapsulate the procedures and compliances as laid down in income-tax law and
cover certain relevant non-tax laws (such as Companies Act, LLP Act, SEBI Act,
Stamp duty regulations, FEMA and the Competition Act) which may be relevant for
a preliminary understanding by the personnel of an MNC operating/ looking to
setting up operations in India.

8.   Chapter XIV – Tax Management in India

The chapter covers
the practical aspects from a tax and regulatory perspective that an MNC should
take cognisance of, while operating in India. This chapter throws light on
certain softer nuances of business, such as practical issues of facing tax
litigation in India, beefing up an in-house tax team and the considerations to
be paid heed to, while choosing a tax advisor for the MNC.

9.   Chapter XV – Goods and Services Tax

The chapter covers
the basic provisions of the newly introduced GST law from the perspective of
MNCs and their India presence, at a broad and conceptual level.

Holistically, the book helps provide an
understanding of all tax and related laws from a bird’s eye view. By
interlinking the various tax and regulatory provisions impacting an MNC in
India, the book offers a fresh perspective of tax and regulatory issues in
India from an MNC standpoint.

The summary provided at the beginning of
each chapter and the key takeaways at the end of each chapter explain the
content of the topic in brief. The Appendices provided by the author are
reader-friendly and helpful for references at any point of time. What makes the
book truly unique from what otherwise is available in the market, is the
summary coverage of pertinent rulings, relevant to the topics covered. However,
certain repetitions of topics / judgements could have been avoided by the
author or covered in a focused manner. Having said this, the book serves as a
one-stop reference guide for anyone, whether with a well-read tax background or
not, who would like to get an understanding of dealing with MNCs’ tax and
regulatory issues in India. The book would serve as a ready reckoner to
students as well.

The author, who has vast and long experience
in this field, has dedicated the book to his father, thanking the latter for
“giving me the wings to fly”. The book probably just does the same, to someone
who wants to understand the complex world of the Indian tax regimen in a
simplified and lucid manner.