New tax norms target shell firms, rule to impact auto, pharma, software cos

Fresh PoEM guidelines will affect pharma, energy, automobiles, manufacturing and software companies

The government on Tuesday issued guidelines to plug tax evasion by shell companies or foreign firms set by groups in India to retain income outside the country.

The rules will affect companies in industries like pharmaceuticals, automobiles, energy, manufacturing and software.

The guidelines have a few safeguards that were not present in draft norms issued in 2015 such as a collegium of officers to vet whether companies are to be taxed on the basis of their place of effective management (PoEM) and test of active business.

However, experts warned even then there could be subjectivity in establishing PoEM.

The rules