Narendra Modi govt to review GAAR implementation

Written by fe Bureau | New Delhi | Updated: Jul 13 2014, 05:58am hrs
Arun JaitleyThe Budget presented by finance minister Arun Jaitley on Thursday was silent on the subject.
The Narendra Modi government is open to reviewing the decision taken by the previous regime to implement the dreaded General Anti-Avoidance Rules (GAAR) from April 1, 2015. The Budget presented by finance minister Arun Jaitley on Thursday was silent on the subject.

In a post-Budget interaction with industry on Saturday, organised by Ficci, senior finance ministry officials also promised to consider some other demands of corporate India on taxation that were missed out in Budget 2014-15, including relief for special economic zones (SEZs) from 18.5% minimum alternate tax (MAT) and stopping the practice of transfer pricing audits on cross-border capital inflows.

The officials said the government would look into certain difficulties arising from the Budget proposals, as pointed out by investors, such as the increased dividend distribution tax (DDT) liability. They, however, left open what might be the eventual decision on these matters.

Revenue secretary Shaktikanta Das clarified that the government was not averse to looking into industry demand for deferring enforcement of the rigorous anti-tax avoidance rules. There is sufficient time. We are still eight months away from the deadline, he said. GAAR is aimed at thwarting tax avoidance by firms by channelling profits through tax havens.

Das suggested that some of the industry demands could be taken up while preparing the budget for 2015-16. Give us a detailed representation, we shall look at them. Another budget is coming up in eight months. The new government has done the best it can in the circumstances (in Budget 2014-15), Das said.

Industry leaders asked for relief on MAT on SEZs, as well as from the new provision to levy DDT on the gross amount of dividend being distributed, instead of on the dividend amount net of taxes. The proposed change will increase the effective DDT outgo to 20.48% from the present 17%, inclusive of cess.

Das also promised to look at the industry concern on applying transfer pricing provisions on capital inflows, which has led to several disputes with companies, including Vodafone and Shell.

I wont comment on this now as many court cases are pending. But we shall examine (the recommendations), he said.

Central Board of Excise and Customs (CBEC) chairperson JM Shantisundharam said the Board will look at suggestions for fine-tuning a circular issued on Friday relating to implementation of a Supreme Court judgment on the valuation of goods sold at a discount for computing excise duty liability.

Financial services secretary GS Sandhu said the government was working on proposals for setting up six more debt recovery tribunals, a national asset reconstruction company, consolidation of PSU banks, and setting up a R10,000-crore fund to finance venture capital funds. We need ARCs to take care of stressed assets in the power and road sectors. Eventually, we should come out with a national ARC, said Sandhu.

Meanwhile, finance secretary Arvind Mayaram defended Jaitleys fiscal deficit target of 4.1% of the GDP and said the numbers were very credible.

If you look at the numbers as they stand today, I think its a very credible number, Mayaram said at the same event. We are looking at bringing the investment cycle back, he said, adding that the finance ministry is projecting a GDP growth of 5.8-5.9% in FY15. Mayaram also said the disinvestment target of about R58,400 crore is likely be exceeded, as the markets are stronger this fiscal.

More tax relief when economy improves: Jaitley

Finance minister Arun Jaitley on Saturday promised more concessions in income tax when the economy improves.

We do not want a high taxation regime. It was because of the high taxation regime of the previous government that inflation rose. I think there was never a Union Budget since 1947 that gave relief up to R50,000 across all three classes of tax payers right from lower to the middle and higher income brackets, he said in an interview to a TV channel.

The finance minister said had the government had more money in its coffers, he would have given more reliefs. Maybe, if the government has more money tomorrow, I will raise (reliefs), Jaitley said. PTI