Lok Sabha passes Finance Bill with amendments

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New Delhi | Published: May 6, 2016 5:48:06 AM

The Lok Sabha on Thursday approved the Finance Bill 2016, the legislative vehicle containing the FY17 Budget proposals, including a monetary policy committee that would now set interest rates in tune with an inflation-targeting approach adopted by the Reserve Bank of India.

The Lok Sabha on Thursday approved the Finance Bill 2016, the legislative vehicle containing the FY17 Budget proposals, including a monetary policy committee that would now set interest rates in tune with an inflation-targeting approach adopted by the Reserve Bank of India.

Finance minister Arun Jaitley secured the Lower House’s assent for the Bill retaining the contentious 1% excise duty on non-silver jewellery, though only jewellers with more than `12 crore annual turnover will have to pay the duty.

Jaitley moved some amendments to the Bill — which was introduced by him on February 29 — including for the rollback of a proposal to tax part of Employees’ Provident Fund (EPF) withdrawals. He listed out measures taken by the Modi government since it came to power to give relief to small taxpayers and reduce tax litigation.

A series of measures against black money resulted in mainstreaming of `71,000 crore of undisclosed assets, he said. Even though some people might be camouflaging income from other sources as agriculture income, Jaitley said the government had no plans to bring such income into tax net, as large farm-based income was rare.

The Bill, which mainly comprises tax proposals, was passed by the Lok Sabha with the amendments by voice vote. The passage of the Bill in the Rajya Sabha, where the government is in minority, is certain as the Lok Sabha has final say on money Bills like this and it is customary that the Finance Bill is not blocked.

A key proposal to reform how the Reserve Bank of India sets monetary policy is now closer to reality. The Bill gives the central bank a mandate to target inflation, guided by a six-member committee that would set interest rates through a majority vote, a practice followed by major central banks in the world. The committee would constitute of three external members appointed by the government and three members from RBI, including its governor who would have a casting (extra) vote in the event of a tie. At present, the RBI governor is the sole authority to decide on monetary policy.

Speaking on the economy, Jaitley said India remains the fastest growing major economy in the world despite a bleak global outlook. The growth rate could further improve if monsoon turns out to be normal in the current fiscal. “Economy which had been expanding on strength of public investment, highest FDI and urban demand, can grow faster if rural demand is added,” he said.

India’s weather office has predicted an above-average rainfall in the country this year. India’s economy grew by 7.6% in FY16 and the Economic Survey projected it to grow by 7-7.5% in the current fiscal.

Among the major rollbacks, the minister withdrew the budget proposal to tax a part of the EPF corpus at the time of withdrawal and limit the employer’s annual EPF contribution to `1.5 lakh for taking tax benefit. However, Jaitley retained the proposal to make 40% of the National Pension System (NPS) withdrawal tax-free (in addition to the 40% that has to be converted into annuity products).

Bipin Sapra, Tax Partner, EY, said, “While the levy of Central excise on jewellery would increase compliance cost on jewellers, it is a move to broaden the tax base and move towards an eventual GST. Since this is an indirect tax levy, the same should be passed on to the customers”.

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