The Government of India ("GoI") has decided to give a
breather to various multinational companies having business in
India, from the aggressive tax administration in transfer pricing
matters. The GoI has confirmed that it will soon notify guidelines
for Advance Pricing Arrangements ("APAs").
In common parlance, APAs are agreements executed in advance
between tax payers and the tax authorities with respect to pricing
of transactions between the foreign and local entities of the same
group, operative for a specific period. Transfer pricing norms seek
to prevent manipulation of prices in transactions between related
parties, which manipulation may lead to transfer of income from
high tax jurisdictions to lower tax jurisdictions. In the process,
the high tax jurisdiction tends to lose on tax collections.
Administration of transfer pricing norms leads to tax disputes and
transfer pricing adjustments.
By virtue of the APAs, the multinational companies will be in a
position to negotiate their potential tax liability in related
party transactions with the tax authorities in advance. APAs
therefore reduce possibility of post transaction pricing related
disputes. In addition, the APAs, being for a specified duration,
accord a certain level of protection to the multinational parties
against retroactive tax, a practice Indian tax authorities have
been much criticized for in the recent past.
The GoI would however need to prescribe time bound
determinations and stringent confidentiality norms for the
mechanism to be frequently used by the multinational
Free Medicines for All
The GoI is planning to distribute free medicines across India
through Government hospitals as also making such medicines
available through Government stores at a nominal price.
The GoI model is inspired by the "Medicines Supply
Corporation' established in the State of Tamil Nadu in India,
which procures generic medicines in bulk at almost 1/20th of the
market price, and supplies them to the in-house patients in the
Government hospitals. The Central Government is planning to set-up
a similar 'Central Procurement Agency' ("CAP") to
procure generic medicines in bulk and at cheaper rates, to be
distributed across India in cooperation with the state governments.
The CPA will also be responsible for specifying uniform standards
for procurement of the medicines, and to monitor the procurement
This ambitious initiative of the GoI is expected to take a
couple of years of pre-implementation planning.
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