Not only the Goods and Services Tax (GST), a key indirect tax reform is being left to the next government at the Centre to anchor and implement. The fate of the Direct Taxes Code (DTC) will be in the hands of the 2014 post-election dispensation.
This is because the amended version of the DTC, which may include a set of new provisions including one to the tax the super rich at a higher rate, will have to be cleared by the Cabinet first and can be introduced earliest in the Winter session of Parliament.
The House would then have to refer the modified code to the standing committee on finance yet again for deliberation and vetting.
The House panel’s review would take at least three months and by the time its report is out, the electoral code of conduct would likely be in place.
DTC seeks to widen the tax base, lower the rates and remove a flurry of exemptions. ?DTC is no longer top on items of priority for the government,? said a person familiar with the development.
A mention of DTC was conspicuous by its absence in Prime Minister Manmohan Singh’s statement on the state of the economy in Parliament last week, which on the other hand, highlighted the need for difficult-to-do reforms like the proposed GST on the indirect taxes side.
It is another matter that on many of the GST provisions, a political consensus is still elusive and the elaborate process of Constitutional amendments and state legislatures’ ratification of the new law could take much longer than claimed by policymakers.
Finance ministry recently proposed amendments to the earlier version of DTC to incorporate provisions to tax personal income above R10 crore a year at 35%, wealth above R50 crore at 0.25% and dividend receipts above R1 crore at 10% tax.
For a government that is already grappling with rising import cost of oil and fertilisers due to a sharply weaker rupee, sticking to the fiscal consolidation road map would warrant discipline in spending as well as new revenue generating measures.
In the first four months of the current fiscal, the government could only collect 16% of its R8.8 lakh crore of tax revenue target (net to centre) at R1.4 lakh crore.
The food security programme itself is expected to cost the exchequer R1.3 lakh crore a year.
Sources said the nature of the proposed amendments to the DTC requires another round of wide consultations that could be time consuming.
