Exemption to foreign Companies engaged in supplying capital goods, tools etc. to Contract Manufacturer in Custom bonded warehouse.
Finance Bill 2026 provides tax exemption to foreign Companies which are engaged in supplying capital goods, tools etc. to Contract Manufacturer based in Custom bonded warehouse.
This tax exemption is available upto FY 2030-31. One of the primary condition to avail this exemption is that contract manufacturer produces electronic goods on behalf of the foreign company for a consideration.
Primary purpose to provide such exemption to promote manufacturing of electronic goods by a contract manufacturer and provide certainty on taxation of supply of capital equipment by a foreign company to such manufacturer.
Exemption to foreign companies by way of procuring data centre services from specified data centres.
Exemption has been provided to foreign companies who are provided services through data centres located in India.
Thee 2 major conditions to avail this tax exemption upto 31st March 2047:
1) Such foreign Company does not own or operate physical infrastructure of specified Data centre & such specified data centre is owned by an Indian Company.
2) All sales by such foreign company to users located in India are made through a reseller entity being an Indian company.
Minimum Alternate Tax (MAT) Exemption available to foreign Companies
Foreign companies which are engaged in the following businesses & who have opted for presumptive taxation scheme are excluded from the applicability of MAT:
- Business of operation of cruise ships.
- Business of providing services or technology for the setting up an electronics manufacturing facility in India to a resident company.
Determination of ALP as per Safe Harbour Rules as per Transfer Pricing (TP) regulations
Safe Harbour (GCC)
Under the TP regulations, Safe harbour is defined to mean circumstances in which income-tax authorities shall accept the transfer price declared by the assessee.
Previously, provision of software development services, provision of IT services & Research & development services were defined under separate rules of safe harbour.
To promote the establishment of Global Capability Centres (GCC) & to reduce litigation on GCC companies, it is proposed to club the provision of software development services, provision of IT services & Research & development services under one specific rule of Information Technology services.
Common safe harbour margin of 15.5 percent applicable to all such services under Information Technology Services.
The threshold for availing safe harbour for Information Technology Services being enhanced substantially from INR 300 crore to INR 2,000 crores.
Once applied by an Information Technology Services company, the same safe harbour can be continued for a period of 5 years at a stretch at its choice.
Safe Harbour – Data Centres
A safe harbour of 15 percent on cost in case the company providing data centre services from India, is a related entity, is being introduced.
Safe Harbour – Logistics for electronic manufacturing
It is proposed to introduce a safe harbour to nonresidents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value.
CA Vidhu Duggal
www.vidhuduggalandco.com | vidhu@vidhuduggalandco.com | Profile
