With the initial euphoria over the draft Direct Taxes Code now giving way to flak, the Central Board of Direct Taxes has formed an internal committee to review the provisions of the draft Bill.
The committee, which includes CBDT officials dealing with investigation, assessment, foreign tax and treaties, tax deduction at source and appeal and judicial work, has also asked all field formations to send in their opinions on the draft Code. The committee is scheduled to submit its report by September 15, 2009 to the Board, which will then be submitted to finance minister Pranab Mukherjee.
?While the Direct Taxes Code is an improvement in many areas of taxation, there are still some issues which need to be revisited. So it was decided to set up an internal panel on it,? an official said.
The restructured income tax slabs and rates, definitions and provisions on tax treaties are some of the areas that the CBDT wants to revisit. ?The restructured income tax slabs bring people with income between Rs 1.6 lakh and Rs 10 lakh in a 10% tax bracket. This will have significant revenue implications,? the official explained. Further there is also a view that the income tax structure is also tilted towards higher income groups.
Similarly, income tax officials are of the view that there is a need for more clarity in definitions in the draft code. For instance, the description given for business income, income from employment and foreign companies that are deemed as residents are not adequate and could lead to confusion and litigation, officials explained.
Tax experts too have calledfor removing grey areas in the draft Code.
?The General Anti Avoidance Rules (GAAR) are extremely widely worded, and thus need to be ring-fenced. Till such time this is done, not only will uncertainty prevail, but will also significantly increase the level of tax-risk of doing business in India,? said Sandeep Ladda, associate director, PricewaterhouseCoopers.
Meanwhile, various sections of trade and industry too have called for debate on the draft Code before it is tabled in the Parliament. Finance minister Pranab Mukherjee has promised to take suggestions from all stakeholders, before finalising the Bill.