TOUGH DISCLOSURES NEEDED IN CORPORATE TAX AUDIT REPORTS DEFERRED BY A YEAR – LIVEMINT
The Central Board of Direct Taxes (CBDT) on Tuesday deferred two key disclosures companies were required to make in their tax audit reports by a year to give businesses more time to prepare for it.
Disclosure of tax avoiding transactions that could get caught in the dreaded general anti-avoidance rules (GAAR) and break-up of payments to various suppliers that are registered for goods and services tax (GST) and those that are not have been deferred till end of March 2020. A circular from CBDT said that the decision was taken after it received industry representations.
These disclosure requirements which were introduced with effect from August 2018 were once deferred till 31 March 2019. Clause 30C of the tax audit report mandates companies to disclose whether they have entered into any transactions primarily designed to avoid taxes and if yes, details of such deals. Tax audit reports are to be filed by certain specified entities like businesses with more than ₹1 crore sales and professionals with income of more than ₹50 lakh.
Only the disclosure requirement in the tax audit report is deferred by a year, not the application of GAAR provisions per se, explained Amit Maheshwari, partner, Ashok Maheshwary & Associates Llp. GAAR empowers tax authorities to check whether r a business arrangement has commercial substance or is merely a ploy for obtaining tax benefits. If the transaction is found to be an impermissible arrangement that is legal only in form and is mainly aimed at saving tax, such benefits would be denied.
Tax audit report requirement for businesses to disclose a break-up of payments made to vendors classified as per their GST registration status has also been deferred. Making such classification may be onerous for small businesses.