A contract between the Gas Authority of India Ltd (GAIL) and the Central Board of Direct Taxes (CBDT) was signed with the US for a period of five years, in which an advance pricing agreement (APA) was entered into in order to determine the transfer pricing margin for sourcing LNG on a long-term basis.After this agreement, GAIL will be Indias first public sector undertaking in the oil and gas sector to successfully sign the Advance Pricing Agreement. The APA scheme was launched in the year 2022 to enhance the governments goal of promoting a non-adversarial tax system and improve the ease of doing business in India.In the year 2011, GAIL signed a 20-year agreement with Sabine Pass LNG project, a unit of Cheniere Energy for sourcing 3.5 million tonne of liquified gas per year. The deal set the stage for the US to become one of the major suppliers in India.APA Programmes in other countriesAccording to the Income Tax department, APA programmes are operational in some of the countries and they are almost 30 years old in countries like Canada, USA, Japan and UK.Such programs have been developed with the primary aim of providing certainty to taxpayers regarding the transfer price of cross-border transactions that they undertake with their group entities in connection with the cross-border transactions undertaken by the taxpayer. It has become increasingly evident that the rapid growth in international trade through the expansion of multi-national enterprises has led to a number of tax disputes relating to the issue of transfer pricing.Approximately, 55 percent of local gas demand is met through imports in India. On the other hand, while gas meets only 6.2 percent of Indias energy needs, the Centre has been planning to raise this figure substantially, in order to reduce the dependence on petroleum. New Delhi is upholding an aggressive gas purchase policy, and balancing sources of import, most of which have originated from Qatar in recent years.
