The government will issue a new set of rules with effect from July 1 which allow tax authorities to strike deals with companies engaging in cross-border transactions to avoid disputes over valuation and thereby reduce transfer pricing cases,finance secretary RS Gujral said.
Cases related to transfer pricing where an organisation transfers goods from one arm to the other are often seen by authorities as transferring funds across borders in the guise of trade. Globally,transfer pricing accounts for 60 per cent of all tax disputes. As India integrates more with the global economy,transfer pricing disputes are rising as well.
The new norms will lay down how the CBDT and a non-resident tax payer can arrive at arms length pricing on cross-border deals before they are executed. If the taxpayer follows this agreement,authorities will not question the valuation for up to five years,reducing the possibility of disputes.
Advance pricing agreement rules will be notified in a day or two because it has to be effective from July 1, Gujral said on the sidelines of a conference.