Budget 2013: OPPI suggests notification of Specific Safe Harbor Rules

NEW DELHI: The Organisation of Pharmaceutical Producers ( OPPI) has propsed that Specific Safe Harbor Rules should be notified in the Budget 2013 to ease the compliance burden on taxpayers, curtail disputes and reduce administrative hassles for both, the taxpayers and the taxmen.

"This is especially critical for development centres in India in this industry," OPPI said. Adding that while making these rules, the CBDT should consider simplification measures involving CPM and CUP method.

The OPPI also suggested Safe Harbors for interest rates on borrowings and lending, reimbursement and recovery of expenses, would be a salutary simplification measure. "Such Safe Harbor may benefit large number of taxpayers but revenue implication may not be significant. Similarly, captive clinical trial services can be covered by Safe Harbor provisions. The Safe Harbor Rules in India can be framed keeping in view the national considerations and the most litigated and disputed aspects," OPPI noted.

OPPI explained that Safe Harbor has been defined to mean 'circumstances' in which the revenue authorities shall accept the transfer pricing declared by the taxpayer. Internationally used safe harbors take two forms:

- Exclusion of certain classes of transactions based on quantitative limits from Transfer Pricing regulations - Stipulation of margins / thresholds for prescribed classes of transactions / specified industries

It further added that the Income Tax act was specifically amended in 2009 to provide Safe Harbors to be formulated by the CBDT but even though almost 3 years have passed since then, no Safe Harbors have been announced yet.