Understanding Tax Circular Updates

👥 Today the Federal Tax Authority (FTA) released VAT Public Clarification VATP040 on Amendments to the VAT Executive Regulations. 🔗 https://lnkd.in/dYSFjhWV 🔍 Some Key Highlights of VATP040: - Additional information on the new financial services exemptions that were introduced with the Executive Regulations updates that took effect from 15 November 2024. - Digital representations of fiat currency (e.g. UAE Dirhams) or financial securities are now explicitly excluded from the definition of virtual assets. - Clarity that for the standard partial exemption method, the “sum of input tax for the tax period”, the simplified calculation in the Input Tax Apportionment VAT Guide (“VATGIT1”) should still be used. - Clarifications and examples on when supplies are to be regarded as mixed or composite for VAT purposes. - Only the VAT in excess of AED2k per annum on deemed supplies of gifts and commercial samples in excess of AED500 per person needs to be reported as output VAT. - Clarifications on the formal and commercial evidence permitted for the purposes of demonstrating exports of goods. - Detailed explanation and examples regarding the VAT treatment of international transportation services. 📈 What This Means for You:  Understanding the application of these changes to your business is crucial for maintaining compliance. Our VAT team at Deloitte is here to help you navigate these developments, so please drop me a line if you’d like to discuss! #VAT #TaxUpdate #FTA #TaxCompliance #VATP040 #TaxAmendments #DeloitteTax #ExportDocumentation #InputTaxApportionment #FinancialServicesExemptions

🎭 GST 2.0 & ITC Blockage: The Great Credit Vanishing Act You bought goods at 28% or 18% or 12% GST, stocked them like a squirrel prepping for winter. GST 2.0 arrives, and those goods are now taxed at 5% or exempt. You expect a refund of ITC. But the government says: “Nice try. No refund for you.” Why? Because Circular No. 135/05/2020-GST says: “Same goods, lower rate? Not inverted duty. No ITC refund.” Even if your ledger is sobbing with unused credit, the law says: “Absorb it. Or reverse it. Or cry softly into your GSTR-3B.” 🧾 What the Circular Says It clarifies that rate reduction on the same goods doesn’t qualify as an inverted duty structure under Section 54(3) of the CGST Act. So, no refund of accumulated ITC. 🧠 Legal Experts: “Wait a Minute…” Section 54(3)(ii) allows refund when input tax > output tax, without requiring different goods. Delhi HC in Pitambra Books Pvt Ltd said: “Circulars can clarify, not contradict the law.” Translation: “Dear CBIC, you can’t make up new rules just because you had a bad day.” 🚗 Cess Credit: The Forgotten Cousin Auto dealers paid Compensation Cess on luxury vehicles. GST 2.0 says: “No more cess!” But the credit? Stuck. Like that one sock in your washing machine. Unless allowed to transfer to CGST/IGST, it’s non-refundable and non-usable. 📊 Business Impact: What You Need to Do -Reverse ITC on exempted goods (even capital goods). -Update pricing and invoicing before Sept 22. -Reflect rate changes in invoices (no new e-way bills needed). -Brace for litigation—many are challenging the circular. 🤹♀️ Funny But True: GST 2.0 Is a Magic Show You see ITC in your ledger. You expect a refund. The government pulls out Circular 135/2020 and says: “Abracadabra! It’s gone.” 💸 Will Consumers Benefit? In theory: Yes. In practice: Not always. Why? -No ITC refund = higher cost retention. -Inventory bought at 18% sold at 5% = margin squeeze. -No anti-profiteering enforcement = no legal push to reduce prices. So, while the government hopes for price drops, the market may respond with stagnation or marginal cuts, especially in FMCG, auto, and durables. Faced ITC blockage or pricing dilemmas post-GST 2.0? Let’s discuss. #GST2.0 #Circular135 #ITCBlockage #CessCredit #TaxReform #IndirectTax #ICAI

🇨🇳 China released two regulatory updates that will offer greater flexibility for CFOs of foreign enterprises.   In recent weeks, several Chinese authorities jointly introduced two regulatory changes that - while perhaps not headline news - may have a positive impact on the financial situation of certain foreign-invested enterprises:   1️⃣ New Tax Credit Policy for Profit Reinvestments   On 27 June 2025, China’s Ministry of Finance, the State Taxation Administration, and the Ministry of Commerce jointly released the “Announcement on the Tax Credit Policy for Direct Reinvestment by Foreign Investors Using Distributed Profits” (《关于境外投资者以分配利润直接投资税收抵免政策的公告》, Announcement [2025] No. 2).   The Announcement provides for a 10% tax credit for foreign investors who reinvest their profit distributions into “encouraged industries” (“鼓励类产业”) in China between 1 January 2025 and 31 December 2028.   ⏰ When?   The policy applies to reinvestments made from 1 January 2025 onward and will remain in force until 31 December 2028. Tax credits can continue to be applied beyond 2028 until exhausted.   📌 What’s new?   The Announcement builds on earlier deferral rules (e.g., Circular 102, 《关于境外投资者以分配利润直接投资暂不征收预提所得税政策的通知》), but now adds an actual credit worth 10% of the reinvested amount.   However, the application of this credit is subject to several conditions, such as:   ✅ The reinvestment must be retained for at least five years; ✅ The industry of the reinvested entity must fall within the national encouraged industry catalogue.   2️⃣ Clarification on Loss Offsets and Capital Reserve Use under the Revised Company Law   On 9 June 2025, the Ministry of Finance released the “Notice on Accounting Issues Following the Implementation of the Company Law and the Foreign Investment Law” (《财政部关于公司法、外商投资法施行后有关财务处理问题的通知》, MoF Circular [2025] No. 101).   The Circular provides detailed guidance on how companies may offset accumulated losses using capital reserves.   ⏰ When?   The new rules apply retrospectively to loss-offsetting decisions taken on or after 1 July 2024 and must be aligned with audited financial statements from 2024 onward.   📌 What has been clarified?   Typically, companies may offset accumulated losses by following a certain sequence: first, they must use current-year profits, then they may use funds from the discretionary reserves (任意公积金) or statutory reserves (法定公积金).   If, following this sequence, losses continue to persist, companies may now offset such losses using certain forms of capital surplus (资本公积), but only under specific conditions, including:   ✅ Recognized capital surplus must derive from capital contributions made in the form of cash or qualifying non-cash assets (e.g., IP rights, land use rights, equity or claims); ✅ A shareholder resolution is required; without approval, no offset is permitted; ✅ Affected companies must notify creditors within 30 days of the shareholder resolution.

📚 How I Stay Updated on India’s Complex Tax Laws (So My Clients Don’t Have to) Indian tax laws aren’t just complex. They evolve constantly, often without warning. As a Chartered Accountant, I don’t have the luxury of "catching up later." My clients rely on me to know now — whether it's a last-minute CBDT circular, a GST rate change, or the latest tribunal ruling. Here’s how I stay ahead of the curve (without losing my mind): 📰 1. Daily Ritual: Reading Bare Acts & Notifications I start each day by scanning updates from: Income Tax Department GSTN RBI (for FEMA & international tax intersections) SEBI (for startups or listed companies) Pro tip: I subscribe to alert services that summarize circulars & judgments in plain English — then I ALWAYS verify with the source text. 📚 2. Weekly Deep Dives: Journals & Case Law I dedicate time weekly to read: Taxmann CAclubIndia KPMG, EY, PwC tax bulletins Select ITAT / High Court / Supreme Court judgments 💡 Real learning happens not just from the “what” but the “why” behind rulings — especially in grey areas. 👥 3. Peer Discussions & Professional Forums I actively engage in: Local study circles Online LinkedIn/Telegram CA communities Webinars from ICAI, NASSCOM, CII I’ve found shared interpretation sharpens understanding better than reading alone — and avoids echo chambers. 🧠 4. Reverse Mentoring Yes, I even learn from my juniors. New CAs often spot nuances in tech-led compliance (like e-invoicing or the new ITR utility) before I do. I encourage dialogue within my team — it's a two-way street. ✅ Why It Matters Clients don’t pay me to just file returns. They pay me to interpret, apply, and anticipate tax law in a way that protects and empowers their business. In a system this complex, staying updated isn’t optional — it’s a responsibility. 💬 How do you stay on top of regulatory chaos in your field? . . . . . . #Taxation #IndiaTax #CharteredAccountant #GST #IncomeTax #Finance #ICAI #ThoughtLeadership #BusinessAdvisory LinkedIn LinkedIn News LinkedIn for Marketing #finance #fintech #economy #india

New clarity on GST discounts The latest CBIC Circular (251/08/2025) finally settles long-running disputes on trade discounts, ITC reversal and promotion services. It draws a clear line between a simple price support, a manufacturer-funded price promise, and a genuine promotional service—something the field has debated for years. I’ve broken down the pre- and post-circular positions with worked examples in a detailed jurisprudence note. If discounts, credit notes or dealer schemes are part of your GST strategy, this update is worth a careful read. TaxTru Business Advisors LLP

Delighted to share my latest article published by Taxsutra 🥳🔥🤩🎉, an attempt to critically analyze the impact of recent Circular 233/27/2024 -GST. The Circular clarifies that where inputs were initially imported without payment of IGST by availing the benefit of exemption and subsequently, IGST on such imported inputs are paid back at a later date, along with interest, and the Bill of Entry in respect of the import of the said inputs has been reassessed by jurisdictional customs authorities, the IGST, paid on exports of goods, refunded to the said exporter shall not be considered to be in contravention of rule 96(10). The circular mandates a reassessment of bill of entry in addition to the repayment of IGST exemption availed at the time of import, as a pre-requisite to attain the “no default” status. However, practically, getting a bill of entry re-assessed from Customs Authorities may turn out to be a daunting task. It is worthwhile to note that there is no time limit prescribed under section 149 of Customs Act, 1962 for amendment in import documents as on date. In this context, recently the CBIC has issued a draft of The Bill of Entry (Post Import Amendment) Regulations 2024. The draft regulations provide that the application for post import amendment of bill of entry is to be filed within a period of one year from the date of order for clearance of goods. Considering the proposed amendment, even if a taxpayer seeks to benefit from the circular by paying IGST along with interest for BoEs older than one year, customs authorities may practically deny reassessment citing limitation, potentially rendering the circular's benefits unavailable for BoEs older than one year. In cases, where the taxpayers have repaid the IGST exemption availed at the time of import along with interest, the GST authorities may still initiate proceedings under section 73/74 of CGST Act, 2017 for recovery of erroneous refund (availed at the time of export with payment of tax) citing that the cumulative conditions of the circular (including the reassessment of BoE) have not been satisfied. Whether jurisdiction under section 74 for alleging fraud, willful misstatement or suppression of facts (up to F.Y 2023-24) can be exercised when all information has been disclosed in GST returns in addition to filing of valid shipping bills is another question.

The Federal Tax Authority has released the latest edition of the VAT Administrative Exceptions Guide (VATGEX1), effective from 5 December 2025. This comprehensive update introduces several substantive changes designed to align with recent regulatory developments including e-invoicing. What’s New? Major Changes at a Glance: ✔️ Detailed definitions added: The guide now includes a glossary clarifying technical terms such as “Electronic Invoice” and “Taxable Person,” aligning it with VAT Law and E-Invoicing mandate. ✔️ Scope Refined: Exception categories for changing VAT return period (“stagger”) and tax period length have been removed, since these changes can now be made directly via Emara Tax. ✔️ Eligibility Clarified: Only VAT-registered persons (TRN holders) or their authorized VAT tax agents/legal representatives may apply. Corporate Tax-only agents are not eligible for VAT exception requests. ✔️ Supporting Documentation Enhanced: Applicants must provide a detailed cover letter, specific evidence, and alternative documents where relevant. The requirements are now more exhaustive to ensure completeness. ✔️ Export Evidence Requirements Updated: Following a legal amendment effective 15 November 2024, the guide clarifies to first refer to new combinations of acceptable export documentation, before applying for any exception. ✔️ Validity Period Defined specially under E-Invoicing: Approved exceptions are generally valid for three years, with automatic expiry if the law changes or when e-invoicing becomes mandatory for the taxpayer.   ⭕ Why These Changes? The FTA’s revisions reflect recent legislative updates (including new Tax Procedures Law and e-invoicing rollout), a drive to reduce errors and incomplete applications and alignment with best practices and enhanced taxpayer education.   What Should Businesses Do Now? ➖ Review the new guide carefully to understand the updated eligibility, documentation, and process requirements. ➖ Ensure applications are complete and accurate, using the new checklist and flowchart provided. ➖ Prepare for e-invoicing: Any exceptions related to tax invoices will expire once electronic invoicing is mandatory for your business. For further details, access the attached full guide or reach out to Grant Thornton - UAE Imran Mushtaq, PhD Anuj R. Kapoor #UAEVAT #FTA #TaxUpdate #VATExceptions #EmaraTax #EInvoicing #Compliance #TaxGuidance

Circular Issued by CBIC on Post-Sale Discount Credit Reversal CBIC has issued a circular providing a mechanism for suppliers to verify the reversal of input tax credit by recipients for post-sale discounts. This is a significant development that will impact businesses across India. Key Highlights: ·      Suppliers providing post-sale discounts through credit notes must ensure the recipient has reversed the corresponding ITC. ·      Until a system is available on the GST portal, suppliers must obtain a certificate from a CA or CMA confirming the recipient's ITC reversal. ·      For discounts under ₹5 lakh per year, the supplier can instead obtain a self-declaration undertaking from the recipient. ·      The circular has retrospective effect, impacting all post-sale discount cases since 2017. Compliance Challenges: This new requirement poses a herculean task for companies. Obtaining CA/CMA certificates or self-declarations for every post-sale discount will significantly increase the administrative burden. Businesses must update their accounting systems and processes to ensure meticulous compliance. The Need of the Hour: Companies should consider setting up a robust Project Management Office (PMO) to streamline the implementation of this new circular. This will involve reviewing existing discount policies, automating the reversal process, and establishing strong audit trails. Proactive compliance will be crucial to avoid potential disputes with the tax department. The CBIC's circular aims to bring clarity and consistency in the treatment of post-sale discounts under GST. While it promises long-term benefits, the immediate implementation will require significant effort from businesses. Companies must act swiftly to ensure they are well-equipped to navigate this new compliance landscape. #GST #GoodsandServiceTax #Deloitte #GSTonDiscounts #CBIC

UPDATE: Revised Circular on "Tax Treatment of Foreign Exchange Transactions" by the FIRS. - 11 key highlights 1. Introduction - This circular clarifies the tax treatment of foreign exchange transactions, replacing the previous Information Circular No. 2024/3 of 14th June 2024, previously issued by the Service on the subject. 2. Legal Framework - Only expenses that are wholly, exclusively, necessarily, and reasonably incurred in the production of taxable income are deductible. - References to relevant sections of the Companies Income Tax Act (CITA), Personal Income Tax Act (PITA), and Petroleum Profits Tax Act (PPTA). 3. Realised and Unrealised Exchange Differences - Unrealised exchange differences: Occur due to revaluation for reporting purposes without actual payment or receipt. - Realised exchange differences: Occur when a transaction is closed at a different rate from the booking rate. - Unrealised differences do not affect tax liability; realised differences are included in tax calculations. 4. Monetary and Non-Monetary Items - Realised exchange differences on monetary items are taxable or deductible. - Conversion of foreign currency balances results in realised exchange differences. - Tax implications for monetary items. 5. Hedging Transactions - Tax treatment of foreign exchange differences from hedging transactions is deferred until the hedged item is realised. 6. Tertiary Education Tax (TET) - Same tax treatment of exchange differences applies to TET as for Companies Income Tax (CIT). 7. Other Taxes - Unrealised exchange differences are not adjusted when computing NASENI levy, NITDA levy, and minimum tax under CITA. 8. Tax Exempt Items - Exchange differences on tax-exempt items are not taxable or deductible. Example: Gains or losses on Federal Government of Nigeria’s Eurobonds are not taxable. - Income and expenses related to tax-exempt items must be disclosed separately. 9. Documentation and Returns - The revised circular provides more detailed requirements for documentation and reconciliation of foreign currency transactions, including deferred tax analysis. 10. Artificial Transactions - The Service will adjust tax dues if it determines that foreign exchange gains or losses are artificially realized or deferred to avoid taxes. 11. Other Matters - Commissions, fees, and other charges related to foreign exchange transactions are subject to tax deductibility tests. - All income, including realised exchange gains, is taxed unless exempt. - Exchange gains or losses must be segregated by business line and tax regime. - The revised circular includes additional guidance on the treatment of commissions, fees, foreign exchange hedging, and the use of unofficial exchange rates. It also addresses the application of transfer pricing rules to peer-to-peer exchange rates between related parties. Disclaimer: Opinions are mine and not of related entities.

Most Important Circular of Next-Gen GST Reforms Is Here CBIC’s latest Circular No. 251 (12 Sept 2025) finally clarifies one of the most debated issue such as GST treatment of secondary and post-sale discounts. Financial/commercial credit notes will no longer create confusion. Since the supplier’s tax liability stays the same, recipients can continue to enjoy full ITC without reversal. Post-sale discounts from manufacturers to dealers remain simple price reductions and not a “consideration”, where there is no direct agreement with the end customer. However, where a manufacturer has an arrangement with an end customer and issues credit notes to dealers to pass on that discount, the amount will form part of the taxable value. Routine discounts don’t become taxable services. Only specifically agreed promotional activities (advertising, co-branding, exhibitions, customer support etc.) with clear consideration will attract GST as a separate supply. This circular calls for a fresh look at dealer agreements, credit-note practices and promotional arrangements to ensure your GST position is robust and defensible. Circular attached herewith for your reference. #TaxTalksWithAnish