On 28 June 2022, the Indian Central Board of Direct Taxes (CBDT) issued Notification No. 70/2022, clarifying the calculation procedure of the arm’s length price under the income tax act. The notification provides a tolerance range of 1 % for wholesale trading and 3 % for all the other cases for assessment year (AY) 2022-23.
Accordingly, “Wholesale trading” means an international transaction or specified domestic transaction of trading in goods, which fulfills the following conditions:
(i) Purchase cost of finished goods is 80% or more of the total cost pertaining to such trading activities; and
(ii) Average monthly closing inventory of such goods is 10% or less of sales pertaining to such trading activities
