Will GST provisions be a body blow to reverse factoring?, by Nidhi Bothra

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Come midnight of 30th June, 2017, with the hitting of the gong, India will have its tryst begin with GST. The GST implementation and digging deeper into the provisions seemingly will go hand-in-hand. This article intends to discuss small proviso to the input credit availability provision in the Central GST Act (CGST Act) and its implications on trade financing. The nuances are worth the consideration and mulling. Read more →

GST implications for sale of repossessed assets, by Nidhi Bothra

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Lending is always to good borrowers but often the good borrowers become bad borrowers. Thus, the business of lending brings with it the trouble of enforcement of security interests as well. The repossession of the collateral asset and eventual sale for recovery of the losses due to default are a common phenomenon in lending business. This article deals with the GST implications for sale of repossessed assets. Read more →

Impact of GST on factoring transactions

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By Abhirup Ghosh, (gst@vinodkothari.com)

Factoring is a very popular product mode of working capital funding across the globe. In India, however, the picture is not quite rosy for factoring companies. Nevertheless, like every other thing in the country, factoring transactions will also be affected by the introduction of GST in India. Here in this article, we intend to walk you through the probable impact, GST would create on factoring transactions. Read more →

No pass through status to trusts if the beneficiaries are not identified on the date of institution of trust.

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By Nidhi Bothra & Vijaylakshmi Agarwal, (finserv@vinodkothari.com)

Executive summary

This tax update summarises a recent ruling of Chennai Income Tax Appeallate Tribunal (“Chennai ITAT”) in the case of TVS Investments iFund Vs ITO[1] wherein the issue before Chennai ITAT was whether interest income of beneficiaries rolled over to another venture capital fund would be taxed in the hands of the iFund or in the hands of the new fund (TVS Shriram Growth Fund). While contemplating on the issue, the matter pertaining to determinacy of the trust/ fund and tests relating to the same to achieve pass-through status under the Income Tax Act was also briefly discussed. Read more →

GST on securitisation transactions.

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By Nidhi Bothra, (gst@vinodkothari.com)

Transitioning into GST, assessing its impact on business and taking appropriate measures to bring about tax neutrality/ efficiency are the prime concern for all and sundry. GST therefore also has an impact on the securitisation transactions in India which now happens to be Rs. 85,000 crores[1] odd industry. In this article we are broadly trying to deal with GST impact on securitisation of standard as well as non-performing assets and its various facets. Read more →

GST loom on guarantee services, by Nidhi Bothra

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Related party transactions always follow the presumption of not being at arm’s length and therefore tax provisions prescribe that the transactions should be undertaken at market value and be based on usual commercial terms, as if done with a third party. Transactions with related parties are always subject to scrutiny and are required to demonstrate that the transactions are driven by commercial understanding. The GST regime also prescribes for Read more →

FAQs on impact of GST on financial services, by Financial Services Division, 24th May, 2017

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  1. What is the meaning of financial services?

Financial services have no meaning ascribed to it under the GST regime. However, for the purpose of this write up, by financial services, we mean any supply of goods or services by a person to another person, meant for the purpose of extending credit support. This includes, but is not limited to the following: Read more →

Section 94B: Thin capitalization rules may impede operations of NBFCs, by Nidhi Bothra & Kanishka Jain, 24th May, 2017

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Genesis of the thin capitalization rules

The genesis of the thin capitalization rules lies in the distinction between tax treatment of debt and equity.  A company typically finances its projects either through equity and debt or mixture of both, equity being costly in terms of cost and ownership is less attractive than the debt financing where interest is a deductible expense. Debt is not only less expensive to service, it also reduces tax liabilities and enhances return on equity.

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