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Highlights of CBDT's 6th Annual Report on APA Program
The Advance Pricing Agreement (APA) program has proven to be an effective tool for dispute resolution since its inception in 2012 in India. The Sixth Annual Report, covering FY 2023-24, clearly highlights the progress made by the Central Board of Direct Taxes (CBDT) in entering into APAs. The previous annual report, issued in September 2023, provided statistics up to FY 2022-23, offering valuable insights into the growth and impact of the program over the years
- Notably, the trend of taxpayers opting for Bilateral Advance Pricing Agreements (BAPAs) over Unilateral Advance Pricing Agreements (UAPAs) continues to strengthen, driven by the desire for greater bilateral tax certainty.
- During FY 2023-24, agreements were largely in the service sector, focusing on software development, BPO, and KPO. This underscores India's role as a global outsourcing hub for IT and business processes, attracting foreign multinationals to its IT clusters.
- The Transactional Net Margin Method (TNMM) is the preferred method to conclude the determination of Arm's Length Price (ALP) of the covered transactions.
- The signed APAs have ensured certainty for approximately 3,430 assessment years (including around 804 years of roll-back), which is a significant relief in the long-drawn litigation process.
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