Weekly Round-up on Tax and Corporate Laws | December 30th to January 3rd 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from December 30^th, 2024 to January 03^rd, 2025, namely:

1. Govt. floats draft Digital Personal Data Protection Rules, 2025; seeks public comments;
2. No TDS under section 194Q on goods purchased from IFSC if seller opts for sec. 80LA relief: CBDT;
3. Clarification regarding requirement of reversal of ITC by ECO’s liable to pay tax u/s 9(5) of CGST Act: Circular;
4. Clarification on availability of ITC on goods delivered by supplier at his place of business under Ex-Works Contract: Circular;
5. Clarification on place of supply of online services supplied by the supplier of services to unregistered recipient: Circular;
6. CBIC issues clarification on various issues pertaining to GST treatment of vouchers; and
7. Accounting for government grants in the Oil and Gas Sector: Ind AS 20.

1. Govt. floats draft Digital Personal Data Protection Rules, 2025; seeks public comments

The evolving digital age demands robust systems to protect personal data and uphold privacy rights. In response, the Ministry of Electronics and Information Technology has introduced the draft Digital Personal Data Protection Rules, 2025 under the Digital Personal Data Protection Act, 2023^[1]. This framework emphasises transparency, accountability, and secure digital practices to safeguard individual information while driving seamless, tech-driven governance. The key highlights of the draft rules include:

1.1 Clear Communication: Responsibilities of Data Fiduciaries to Data Principals

In this context, A “Data Fiduciary” is any person who decides, either alone or with others, why and how personal data is processed. A “Data Principal” means the individual to whom the personal data relates. Rule 3 of the DPDP Rules, 2025 prescribes the conditions with regard to the issuing of notice by the Data Fiduciary to the Data Principal, the notice must:

1. Be presented in a clear and understandable manner, independent of any other information that may be provided by the Data Fiduciary;
2. Provide a clear and concise explanation, using plain language, of the details necessary for the Data Principal to give informed consent to process personal data.

• Include a communication link to the Data Fiduciary’s website or app, and provide other methods, if any, for the Data Principal to: (i) easily withdraw consent, (ii) exercise rights under the law, and (iii) file a complaint with the Board.

1.2 The Role of Consent Managers

‘Consent Manager’ means a person registered with the Board who acts as a single point of contact to enable a Data Principal to give, manage, review and withdraw her consent through an accessible, transparent and interoperable platform.

1.3 What are the Registration Requirements of Consent Managers?

Following are the conditions for registration of Consent Managers:

1. The applicant must be a company incorporated in India.
2. The applicant must have the technical, operational, and financial capacity to fulfill its obligations as a Consent Manager.
3. The applicant’s financial condition and management’s character must be sound.
4. The applicant’s net worth must be at least two crore rupees.
5. The applicant’s business volume, capital structure, and earning prospects should be adequate.
6. Directors, key managerial personnel, and senior management must have a reputation for fairness and integrity.
7. The company’s memorandum and articles of association must include provisions ensuring adherence to certain obligations, and policies to ensure compliance.
8. The applicant’s operations must align with the interests of Data Principals.
9. The applicant must be independently certified that its Data Principal consent platform complies with Board-published data protection standards and has measures to ensure ongoing compliance.

1.4 State-Driven Processing of Personal Data for Public Welfare

The State and its instrumentalities may process personal data of a Data Principal to provide or issue any subsidy, benefit, service, certificate, licence, or permit under law, policy, or using public funds^[2].

1.5 What are the Security Safeguards for Protecting Personal Data by Data Fiduciaries?

A Data Fiduciary must protect personal data it controls, including data processed by a Data Processor, by implementing reasonable security safeguards to prevent breaches. These safeguards must include, at a minimum:

1. Data security measures like encryption, obfuscation, masking, or using virtual tokens.
2. Measures to control access to computer resources used by the Data Fiduciary or Processor.
3. Visibility on data access through logs, monitoring, and reviews to detect unauthorized access and enable investigation and remediation.
4. Measures to ensure continued processing if data confidentiality, integrity, or availability is compromised, including data backups.
5. Retaining logs and data for one year for detecting and investigating unauthorized access, unless otherwise required by law.
6. Contractual provisions with Data Processors to ensure reasonable security safeguards.

1.6 How Should a ‘Data Fiduciary’ Intimate a Personal Data Breach?

In the event of a personal data breach, the Data Fiduciary must promptly notify the affected Data Principals, providing clear and concise information through their registered user accounts or other communication methods. The notice must include the following details:

1. Description of the breach, including its nature, extent, timing, and location.
2. Likely consequences relevant to the Data Principal.
3. Measures taken by the Data Fiduciary to mitigate risks.
4. Safety measures the Data Principal can take to protect their interests.
5. Contact information for a representative to respond to queries.

The Data Fiduciary must notify the relevant Board:

1. Provide a description of the breach, including its nature, extent, timing, location, and impact.
2. The Data Fiduciary must submit a detailed report within 72 hours (or extended period) including the breach description, facts and circumstances, mitigation measures, findings on the responsible individual, remedial actions, and a report on notifications to affected Data Principals.

1.7 Verifiable Consent for Processing of Personal Data of Children or Individuals with Disability

A Data Fiduciary must ensure verifiable consent from a child’s parent or a lawful guardian before processing personal data. The Data Fiduciary must also verify that the individual claiming to be the parent is an adult, using reliable identity and age details, either from the Fiduciary’s records or voluntarily provided information, or through a virtual token issued by an authorized entity, such as a Digital Locker service provider.

1.8 What Are the Restrictions on Processing and Transferring Personal Data Outside India?

The transfer of personal data processed by a Data Fiduciary, whether:

1. within India, or
2. outside India in relation to offering goods or services to Data Principals in India, is subject to restrictions. The Data Fiduciary must comply with any requirements specified by the Central Government, through general or special orders, regarding making such personal data available to any foreign state or entity under the control of, or an agency of, that state.

Read the Notification

2. No TDS under section 194Q on goods purchased from IFSC if seller opts for section 80LA relief: CBDT

Section 197A of the Income Tax Act, 1961 lays down several cases in which the tax deduction is not required to be made. Section 197A(1F) prescribes that no deduction of tax shall be made, or deduction of tax shall be made at such lower rate, from such payment to such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as may be notified by the Central Government in the Official Gazette.

In this regard, the Central Board of Direct Taxes (CBDT) has issued a notification specifying that no tax deduction at source (TDS) under Section 194Q will be required for purchases made from units of International Financial Services Centres (IFSC), provided both buyers and sellers meet specific conditions. Section 194Q provides that every buyer responsible for payment to a resident seller must deduct tax at source at the rate of 0.1% if the aggregate value of goods exceeds Rs. 50 lakhs.

The conditions required for a seller to meet in order to qualify for the exemption are as follows:

1. The seller shall furnish a  statement-cum-declaration  in  the  format  provided  in  Form    1  to the buyer, giving details of previous years relevant to the ten consecutive  assessment  years  for  which  the  seller  opts  for  claiming  deduction  under  sub-sections (1A) and (2) of section 80LA; and
2. such statement-cum-declaration so furnished shall be verified in the manner specified in the said Form for each previous year relevant to the ten consecutive assessment years for which the seller opts for claiming deduction under sub-sections (1A) and (2) of section 80LA.

The conditions prescribed for a buyer are as follows:

1. The buyer does not deduct tax on payment made or credited to  the  seller after the date of receipt of the copy of the statement- cum-declaration in the said Form from the seller and
2. Furnish the particulars of all the payments made to the seller on which tax has not been deducted in pursuance of this notification in the statement of deduction of tax referred to in section 200(3) read with Rule 31A of the Income-tax Rules, 1962.

Further, the relaxation under this notification shall be available to the seller only during the said previous years relevant to the ten consecutive assessment years as declared by the seller in the said Form for which deduction under section 80LA of the said Act is being opted and the buyer shall be liable to deduct tax on payments made or credited for any other year.

Read the Notification

3. Clarification regarding requirement of reversal of ITC by ECO’s liable to pay tax under section 9(5) of CGST Act: Circular

The CBIC has clarified that an Electronic Commerce Operator (ECO) liable to pay tax under Section 9(5) of the CGST Act for specified services is not required to reverse the input tax credit (ITC) on inputs and input services under Sections 17(1) and 17(2) for such supplies.

Additionally, it has been clarified that the ECO will be required to pay the full tax liability for supplies made under section 9(5) only through the electronic cash ledger. The ITC availed on inputs and input services used to facilitate such supplies cannot be used to settle this tax liability. However, the credit availed by the ECO for such inputs and input services can be utilized to discharge any tax liability related to the supply of services made on the ECO’s own account. In this regard, Circular No. 240/34/2024-GST dated December 31st, 2024 has been issued.

Read the Circular

4. Clarification on availability of ITC on goods delivered by supplier at his place of business under Ex-Works Contract: Circular

The CBIC has issued circular to clarify that input tax credit may be available to the registered person on receipt of goods by the said registered person from the supplier at his (supplier’s) factory gate or business premises where the contract between the supplier and recipient is an Ex-Works contract.

In Ex-works contracts, the property in the said goods to be considered to have been passed on to the recipient, at the time of hand over of the said goods at the factory gate of the supplier, even though the goods may be physically received by the recipient after the transit. Resultantly, ITC can also be availed upon handover of the said goods at the factory gate of the supplier, even though the goods may be physically received by the recipient at a later stage. In this regard, Circular No. 241/35/2024-GST dated December 31st, 2024 has been issued.

Read the Circular

5. Clarification on place of supply of online services supplied by the supplier of services to unregistered recipient: Circular

The CBIC has clarified that when the services are supplied to an unregistered person, the place of supply of the said services shall be the location of the recipient, if his address is available on record, and shall be the location of the supplier if the address is not available on record.

Additionally, it was clarified that Rule 46(f) of the CGST Rules applies to all online services, including e-newspapers, e-magazines, OTT subscriptions, telecom, digital services, etc. Suppliers must establish mechanisms to collect recipient details. If suppliers fail to follow these requirements, such as not recording the necessary details, they may be liable to penal action under Section 122(3)(e) of the CGST Act. In this regard, Circular No. 242/36/2024-GST dated December 31st, 2024 has been issued.

Read the Circular

6. CBIC issues clarification on various issues pertaining to the GST treatment of vouchers

The CBIC has issued a circular to clarify that transactions in vouchers would be treated neither as a “supply of goods” nor as a “supply of services. However, the supply of underlying goods and/or services for which vouchers are used as consideration or part consideration may be taxable under GST.

Also, the service fee/service charge/affiliate charge or other amount for supply of such additional services to the voucher issuer as per the contract/agreement terms would be liable to GST.

Read the Circular

7. Accounting for government grants in the Oil and Gas Sector: Ind AS 20

The accounting treatment for government grants is guided by Ind AS 20, which specifies the conditions and manner of recognition. Government grants are defined as transfers from the government to an entity in exchange for compliance with specific conditions. Grants related to assets mandate the acquisition of long-term assets, while grants intended to cover expenses should be recognized systematically in profit or loss over the periods when the associated costs are incurred.

Ind AS 20 emphasizes that grants should only be recognized when there is reasonable assurance of meeting the attached conditions and receiving the grant. For expense-related grants, recognition occurs in profit or loss once the grant becomes receivable, with no further associated costs.

The oil and gas sector faces significant challenges in accounting for grants received from the Ministry of Petroleum and Natural Gas (MoPNG) for operational and maintenance (O&M) activities. The key difficulty lies in determining the appropriate timing for grant recognition, particularly when funds are disbursed in installments and may not precisely match the actual O&M expenses incurred.

Ind AS 20 addresses these concerns by requiring that grants for O&M expenses be systematically recognized in profit or loss, aligning with the periods in which related expenses are incurred. This approach ensures accurate matching of income and expenses, maintaining financial statement integrity. Additionally, when grants are received in advance or exceed the actual expenses, the excess is treated as deferred income and recognized progressively as expenses are incurred. This mechanism helps align cash inflows with expense recognition.

For Example, a company engaged in the construction and operation of crude oil storage caverns receives revenue grants from MoPNG under the PFMS Scheme. Following the principles of Ind AS 20, the company recognizes these grants in profit or loss only when related O&M expenses are incurred and there is reasonable assurance of receiving the grant. The grants are disbursed in installments based on annual budget estimates, with any surplus either returned to the government or carried forward to the next year. If the grant exceeds the expenses or is received in advance, the excess is recorded as deferred income and systematically matched against expenses as they arise.

Read the Story

[1] Notification No. G.S.R. 02(E) dated 03.01.2025

[2] ‘Using public funds’ refers to the provision or issuance funded by the Consolidated Fund of India or the Consolidated Fund of the State, or other public accounts, or funds of any local or other authority.