The finance ministry is preparing a road map for dealing with the large number of tax disputes pending in various courts, a senior official said on Monday. Cases where assessees have invoked arbitration proceedings against the government as in the case of Cairn and Vodafone would, however, proceed on its course.
Revenue secretary Hasmukh Adhia said that the Justice RV Easwar panel set up last week will look into ways of simplifying Income Tax laws, although it will not specifically deal with issues concerning the retrospective tax amendment of 2012. “We are preparing a road map for dealing with the existing tax litigation,” he said on the margins of a conference here.
When asked whether the 5 percentage point reduction in corporate tax rate to 25% promised by finance minister Arun Jaitley in his 2015-16 Budget could happen before the end of the four-year transition period given the need to stimulate corporate investments, Adhia said it could happen “ïn three or four years”. Jaitley had said that the tax reduction and the concomitant phased removal of tax exemptions would be implemented over four years starting from 2016-17. A draft time-frame for phasing out the exemptions is expected soon.
Jaitley announced the tax rate reduction to bring it at par with globally competitive rates. At present, although the effective corporate tax rate is 23% because of tax breaks, the country is counted as a high tax regime while the exchequer does not realise revenue corresponding to the 30% rate. (With the surcharge and education cess, the marginal tax rate for domestic companies is around 34%).