Are you providing your products or services to a related company or customer? In this episode of eLagaan Whiteboard Friday, the eLagaan team explains the concept of transfer pricing as applicable to companies in India (the concept is also applicable to companies worldwide with some differences – based on local laws & regulations).
The video goes over who are these related companies e.g. your branch or subsidiary (locally or internationally) or if you are subsidiary of a international company (USA, Uk, etc). Or you have two companies who have common share holder or officers. The same thing also goes with related customers.
The goal with the transfer pricing is that government would like to catch any price fixing between two related businesses to avoid various taxes (i.e. transactions have taken place at arms length).