Cross-Border Transactions under Tax Laws & FEMA

This book is a comprehensive guide for managing tax and compliance issues in cross-border business transactions. It focuses on critical laws such as the Income Tax Act, Customs Act, IGST Act, and FEMA, providing practical insights into international taxation, transfer pricing, and the valuation of goods in cross-border trade. The book also covers important areas like withholding tax obligations, customs duty exemptions, and the application of Double Taxation Avoidance Agreements (DTAAs).

With a focus on real-world challenges, the book goes beyond basic concepts to address practical issues faced by businesses involved in cross-border operations. Its commentary is enriched with case laws, judicial interpretations, and departmental clarifications, providing a deep understanding of statutory provisions and their practical applications. Including cross-references across chapters ensures that readers gain a holistic view of the subject matter, making it a reliable tool for technical analysis and informed decision-making.

This guide benefits exporters, importers, judicial members, legal practitioners, tax professionals, and government authorities. It assists these stakeholders in understanding the complexities of cross-border taxation, customs valuation, GST compliance, and FEMA regulations, helping them achieve tax efficiency and regulatory compliance.

The Present Publication is the 4th Edition, amended by the Finance (No. 2) Act, 2024. This book is authored by Dr G. Gokul Kishore & R. Subhashree, with the following key highlights:

[Comprehensive Coverage of Multiple Laws] The book is unique in covering four key laws at once ? the Income Tax Act, the Customs Act, the Integrated Goods and Services Tax (IGST) Act, and FEMA ? making it an essential resource for understanding cross-border tax implications. It addresses areas such as arm’s length pricing, Permanent Establishment (PE), intermediary services, and the role of customs authorities in regulating valuation
[Up-to-date Content] The fourth Edition is fully updated with the latest amendments as per the Finance (No. 2) Act, 2024, and includes relevant judgments and orders to ensure readers are informed of the most current legal landscape
[International Taxation & Transfer Pricing] The book thoroughly examines international taxation, covering essential topics such as transfer pricing and arm’s length price (ALP) under the Income Tax Act. It analyses the complexities of associated enterprises, transfer pricing methods and judicial rulings. Additionally, the book explores the concept of marketing intangibles and AMP expenses, key challenges in Transfer Pricing (TP) assessments, and practical remedies for TP adjustments. A comprehensive analysis of the creation of Permanent Establishment (PE) is provided, with reference to relevant Double Taxation Avoidance Agreements (DTAAs) and tax treaty provisions concerning royalty, Fees for Technical Services (FTS), and tax residency
[Focus on Avoiding Profit Shifting] A key concern for tax authorities is shifting profits between jurisdictions. The book examines the Income Tax Department’s focus on preventing profit shifting, especially in cross-border transactions involving payments to overseas parties, and provides strategies for businesses to remain compliant
[Customs Valuation & Compliance] The book provides valuable guidance on the valuation of imported goods under the Customs Valuation Rules, addressing challenges faced by importers and exporters when defending declared transaction values. It examines the Customs Department’s concerns regarding under-valuation, especially where importers and exporters are related parties, and covers the Customs Valuation Agreement under GATT, along with judicial rulings on valuation
[GST and Cross-border Services] A crucial section is dedicated to analysing cross-border services under GST law, focusing on provisions of the IGST Act related to place of supply, export benefits, and intermediary services. The book also delves into specific challenges faced by online service providers operating across jurisdictions and how businesses can optimise compliance while leveraging export benefits under GST
[FEMA Compliance] The role of FEMA in regulating payments and receipts related to imports and exports is thoroughly discussed. It examines the intersection of FEMA with other tax laws, particularly regarding establishing branch or liaison offices of foreign companies in India. The interplay of FEMA with tax laws becomes especially significant when dealing with transactions between the establishments of the same legal entity in different jurisdictions
[Withholding Obligations & Compliance] The book provides insights into withholding obligations under the Income Tax Act, often dependent on DTAA provisions. Companies dealing with cross-border incomes like royalty and FTS must comply with these obligations, and the book provides practical guidance on how to handle such transactions effectively
[Export Promotion and Incentives] A chapter is devoted to explaining the various customs duty exemptions and export incentives available under the Foreign Trade Policy 2023, offering practical insights for companies aiming to maximise benefits through export promotion schemes
[Case Laws & Judicial Interpretations] The book stands out for its comprehensive analysis of relevant case laws and judicial interpretations. It is essential for practitioners, legal advisors, and departmental officers dealing with cross-border tax disputes. These judicial precedents help in understanding the finer nuances of the laws and their application in real-world scenarios
The structure and chapter overview of the book is as follows:

Customs Valuation
This chapter explores Article VII of GATT, the Customs Valuation Agreement, and Section 14 of the Customs Act, 1962. It provides insights into customs valuation for imported goods, transfer pricing issues, and relevant judicial rulings
Transfer Pricing
A deep dive into transfer pricing rules, including international transactions, associated enterprises, and methods for determining ALP. The chapter also addresses challenges related to marketing intangibles, AMP expenses, and other TP-related issues. It also discusses secondary adjustment, Country-by-Country Reporting (CbCr), thin capitalisation, and cost-sharing arrangements
Permanent Establishment & DTAAs
This chapter covers the concept of Permanent Establishment (PE) and its treatment under various DTAAs. It discusses the attribution of profits to PE and includes judicial interpretations and ITAT rulings on the subject
Tax Residency & Withholding Obligations
Practical guidance is provided on residency, taxation of interest, dividends, royalties, Fees for Technical Services (FTS), and foreign tax credit (FTC), along with a discussion on withholding obligations under the Income Tax Act
GST & Cross-Border Services
The fifth chapter focuses on GST provisions relevant to the import and export of goods and services, with an emphasis on the place of supply and the refund mechanism under the IGST Act
Customs Duty Exemptions & Export Schemes
This chapter elaborates on customs duty exemptions and export promotion schemes available under the Foreign Trade Policy 2023
FEMA Compliance
A concise commentary on FEMA provisions applicable to cross-border transactions, including regulations for payments and receipts in the context of imports and exports
Dispute Resolution Mechanisms
The final chapter discusses the dispute resolution mechanisms available under the IGST Act, the Customs Act, and alternative dispute resolution processes under the Income Tax Act