The Finance Ministry will soon issue detailed guidelines on Advance Pricing Agreement (APA) to provide clarity to taxpayers on the newly introduced scheme, a top revenue department official has said.
The guidelines will most likely come in the form of frequently asked questions (FAQ), Promila Bharadwaj, Director General (International Taxation), told Business Line here.
APA provisions have been introduced in the income-tax law with effect from July 1 this year. The rules for the APA scheme have also been notified.
An APA is an agreement between a taxpayer and tax authority determining the transfer pricing methodology for pricing the taxpayer's international transactions for future years.
Earlier, in her keynote address at a Taxsutra APA event, Bharadwaj said that APA will be a game changer in transfer pricing matters in India.
It will not only help in reducing litigation, but also help in fostering a new relationship with taxpayers—one based on trust and confidence, she said.
She said the tax department will not adopt an adversarial attitude towards taxpayers looking to enter into an APA. The Government also wants to reduce litigation in right earnest, Bharadwaj said.
Bharadwaj also said that it would be natural for the tax department to expect taxpayers to have an open mind on all issues and not come to the APA team with a baggage of historical experiences.