LexTalk World Talk Show with Navneet Singal, Head of tax & Digital Transformation, Syngene Int. Ltd.
LexTalk World Interviews Navneet Singal. Navneet is currently working as Head of Tax and Digital Transformation in Syngene International Limited (Biocon Group). He carries over 20 years of experience in the field of taxation (Direct Tax, Indirect Tax, International Tax and Transfer Pricing), BEPS strategy, litigation management, industry and regulatory policies, automation and digital transformation. During his stint in different MNCs, he has worked in different verticals of industries which includes IT, ITeS (HCL Technologies Ltd.), Infrastructure and Power (GMR Group), Oil and Gas (Royal Dutch Shell Plc.) and currently in Pharma (BIOCON Group). He is a chartered accountant and also possess degree in Company Secretaryship, Diploma in International Taxation from IFA, NL. He is member of Core Group of BEPS of Confederation of Indian Industries (CII). Navneet is a seasoned author and speaker where his passion for tax has inspired him to spread awareness about tax matters and to bring business transparency via analytical review of tax legislations world-wide by writing articles. In the last few years, he has written more than 50 articles. Most of his articles has got published in acclaimed tax sites and journals, including but not limited to Taxmann, Taxsutra and TIOL.
Host: Tell us about a complex legal issue you worked on. Describe the complexity and tell us how you approached it?
Navneet: "The law is so complex and voluminous that no one, not even the most knowledgeable lawyer, can understand it all." said Jay M. Feinman, a distinguished professor of law. The life of a law consultant is full with intricate issues that are difficult to not only interpret but also to apply in practice.
When I started at Syngene, the company was dealing with a complicated legal issue involving the nature of R&D services and their taxation under the old Service Tax Act. This investigation looked into the company's overall turnover over the previous five years, which was more than Rs. 3,500 crores. At Syngene, we provide contract research and development (R&D) services to all of the world's leading pharmaceutical companies. Our client base is based in the United States, and the company conducts R&D in India for them. Our services are R&D in nature, and we collect foreign cash through our overseas client, thus they should be classified as export services under the heading of Scientific and Technical Research.
According to the Service Tax Act, if the input material constitutes an essential part of the service and is provided by the client, the tax point is the location where the services are performed. Because the actual R&D and testing was done in India, the Revenue Authorities believed that the point of taxation should be regarded in India and that it was not treated as export services. Syngene's R&D services, according to the business, cannot be compared to testing services (e.g. diagnostic services), in which the client gives samples and the tests are performed on those samples. We provide end-to-end R&D services, with the input molecule accounting for only a small percentage of the overall R&D and being destroyed in most cases. The authorities classified most of our services as exports after a protracted discussion and interpretation of the method, while others, such as DMPK, in vivo, invitro, and other services for which we have separate individual contracts, were classified as domestic services. The matter is still in the hands of the Tribunal, which is hoping for a favorable outcome.
Thousands of interpretation issues still exist at various levels of government, and I have no idea how long they will take to settle. It is, nonetheless, a crucial aspect of a law consultant's job, and he should endeavor to settle such issues by translating them in layman language in their most practical and real-life application.
Host: How do you see existing frame work of international tax on which OECD is working for applicability of Minimum Tax Rate in terms of globalization of business?
Navneet: Globalization and digitalization of business have completely altered the way we do business. It has raised a slew of questions for revenue officials, including how to tax, where to tax, what to tax, when to tax, and so on for the same services and people. Some governments, dubbed "tax havens," have made arrangements for zero tax rates in order to attract good business, and others have found themselves in a bind where 100 percent of service consumption occurs in their country without payment of a single penny of tax. Base Erosion and Profit Shifting are two terms used by the international tax community to describe this predicament (BEPS).
The implementation of Pilar 1 and Pilar 2, which most nations have accepted under the OECD platform, is one of the most recent advances in this concept. In simple terms, Pilar 1 allocates a company's earnings to the nations where it is consumed, manufactured, or any other connected aspect on which work is being done on the finalization of nexus regulations. Pilar 2 dealt with the Minimum Tax Rate (MTR), which ensured that a corporation pays the least amount of tax on its global profits regardless of where it is established or conducts business. Initially, these laws will only apply to large corporations.
Host: What are your thoughts on tax and legal technology, as well as digital transformation in general?
Navneet: Nowadays, digital transformation is the newest buzzword in the market. It's the gossip of the town. Leaders who want to employ digital technology to improve organizational performance frequently have a specific instrument in mind. "Our company requires a machine learning approach," you may say. However, the overall business strategy should influence digital transformation.
Companies are investing millions of dollars in "digital transformation" efforts, but a large number of them fail. That's because businesses put the wagon before the horse, focusing on a single technology rather than first putting in the hard work of integrating the change into the overall business plan. They should not only align tech investments with business goals, but they should also rely on insider knowledge rather than outside consultants, acknowledge insiders' fears of job loss, develop a deep understanding of how changes will affect customer experience, and use process techniques borrowed from the tech world to facilitate change (experimentation, prototyping, etc.).
Host: The pandemic saw some courts begin moving towards more remote proceedings and availability. Is this sustainable, and a possible way to increase access to justice, in your opinion?
Navneet: Starting simple and building slowly is the greatest method to introduce complex new systems. My thoughts on the future of the legal system have always gone beyond video hearings. We're just getting started. It is important to note that, in the long run, the benefits of virtual courts are likely to outweigh the downsides, given that the Courts invest in infrastructure, training, and effective methods for recording evidence and cross-examinations. The Supreme Court and numerous High Courts have decided to conduct legal sessions online due to the spread of Coronavirus and the nationwide lockdown.
During the COVID-19 outbreak, the Supreme Court has outlined the steps to ensure that justice is administered consistently. The IT infrastructure is being set up to support the virtual presence of the clients and their legal representatives throughout the proceedings. Only once there is sufficient infrastructure in place to serve the public should the Court completely implement virtual courts. Even yet, it should be the responsibility of High Courts to design a suitable model based on basic procedures, taking into account the experience and procedures of lower courts.
While such measures are necessary in the current situation, it is critical that the free and fair administration of justice is not jeopardized. Douglas Adams had said, “We are stuck with technology when what we really want is just stuff that works.”
Host: You have worked in IT, pharma, infrastructure, oil & gas, and other industries. What are your thoughts on how working in different spheres of the industry affects one's tax or legal situation? How much one has to associate himself with the depth of the business while working on it from Tax and legal standpoint?
Navneet: The Supreme Court has outlined the steps that will be taken to guarantee that the administration of justice is not disrupted during the COVID-19 pandemic. The IT infrastructure is being installed to support the virtual presence of the clients and their legal representatives throughout the proceedings. Only once there is sufficient infrastructure in place to serve the citizens should the Court completely implement virtual courts. Even yet, it should be the responsibility of High Courts to design a suitable model based on straightforward procedure, taking into account the practice and procedures of lower courts.
Tax strategy whether direct tax or indirect tax totally depend upon the business, how it works. Tax serves as a support function for the company, its many operating divisions, and verticals. I've worked in a variety of industries, including IT, medicine, R&D, oil and gas, and infrastructure. The first thing I'd recommend is that you should understand the business and all of its transactions before implementing any tax strategy.
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