Tax demands: FM Arun Jaitley signals end of Vodafone, Shell-type cases

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New Delhi | Updated: November 22, 2014 8:59 AM

Unsustainable tax demands will earn the country a bad name in the comity of global investors, says Arun Jaitley.

Unsustainable tax demands will earn the country a bad name in the comity of global investors even as it will fail in enriching the govt by a penny, FM Arun Jaitley said.Unsustainable tax demands will earn the country a bad name in the comity of global investors even as it will fail in enriching the govt by a penny, FM Arun Jaitley said.

Unsustainable tax demands will earn the country a bad name in the comity of global investors even as it will fail in enriching the government by a penny, finance minister Arun Jaitley said on Friday, expressing unambiguously his intent to embrace a benign, predictable and pragmatic tax policy. The minister’s remarks came within a couple of days of the Bombay High Court setting aside the taxman’s bid to add a whopping Rs 18,000 crore to the income of Anglo-Dutch energy giant Shell in India for funds flows from its parent in two specified years, with an intention to make extra tax claims.

“Undoing a lot of taxation decisions (of the previous government) is quite challenging, but that necessarily does not involve a legislative action. Only some areas require (such) action,” he said. However, he took comfort from the fact that taxation laws are the exclusive domain of the Lok Sabha, in which the ruling alliance has a majority, hinting at likely legislative decisions to allay taxpayers’ concerns.

Speaking at the HT Leadership Summit here, the minister described the perceived dichotomy between the government, keen for a boost in consumption and investment, and the inflation-combating Reserve Bank of India as part of a wholesome debate but added that the “centrality of the central bank in making its own judgements” in matters like monetary policy could also be a subject matter of discussion.

The RBI is coming out with its next policy review on December 2, amid a rising clamour for a rate cut from vast sections of the industry and analyst community. Wholesale price-based inflation decelerated at its fastest pace in five years to 1.77% in October, aided by a favourable base and steep moderation in the pace of price rise in food and fuel products, while the Consumer Price Index (CPI), the RBI’s new gauge, dropped to 5.52% in October, its lowest since the series’ introduction in January 2012.

Jaitley listed out some reform steps to pep up the economy, which is yet not clearly out of the woods. Dismantling LPG subsidies on the rich and limiting it to those “who are entitled to” the same, commercial coal mining by the private sector that would follow the reallocation of the first lot of captive coal blocks among those cancelled by the Supreme Court, changing the law governing other minerals with a similar policy objective and relaxations of the some of the difficult procedures for land acquisition under a new law are high on the government’s agenda.

The minister said the design of the goods and services tax (GST) was being finalised with the states and the required Constitution Amendment Bill for this would be tabled in the winter session of Parliament, starting Monday.

The insurance Bill that seeks to increase foreign direct investment limit in the sector to 49% from the current 26%, he hoped, would be passed in the session.

A decline in global crude prices has been of help to the government in various ways in reducing its budget deficit, but inadequate tax buoyancy is a cause for concern. Jaitley admitted that it would be hard to hit tax revenue targets this fiscal year as indirect taxes, he indicated, might fall short of target, while the goals on direct taxes would likely be met.

The tax revenue from excise, customs duty and service tax grew 5.6% in the April-October period to Rs 2.85 lakh crore, amounting to only 46% of the full-year target. The minister said he was expecting suggestions from the Expenditure Reforms Commission soon.

He raised the issue of the cost of capital and weak credit demand and rued lenders being cautious “going on the defensive”, in the process snapping the “lifeline” of the economy.

As far as subsidies on domestic LPG are concerned, the government aims at annual savings of Rs 10,000-12,000 crore when the direct benefit transfer scheme is rolled out across the country (the scheme was relaunched in 54 districts on November 15). The under-recovery on domestic LPG was Rs 46,458 crore out of the total under-recovery on petroleum products of Rs 1.4 lakh crore in FY14. The under-recovery on LPG is likely to be reduced to Rs 28,000 crore in FY15, while the total under-recovery is expected to be around Rs 86,000 crore.

Jaitley speak

* MMDR Act amendment for competitive bidding, stiff penalty for illegal mining in all minerals
* Easier land take over norms, social impact assessment requirement
LPG subsidy only for the needy through direct benefits transfer, rich to be excluded
* Insurance Laws Amendment Bill for greater foreign participation
* To unearth black money in real estate, jewellery market, luxury market and mining

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