Amendments to GAAR, the controversial law against tax avoidance through foreign investments, have been finalised, finance minister P Chidambaram disclosed on Sunday.
"I have finalised the amendments to the Chapter 10A of the Income Tax Act. Now it will go to the PMO and then we should be ready with the amendments and then the GAAR rules will reflect the amended Chapter 10A.
"That is under preparation and I think the work is almost complete. The drafting work is complete. So, GAAR is under control. I have taken the decisions, subject to Prime Minister's approval and then Cabinet," he told PTI in an interview.
Chapter 10A of the Income Tax Act deals with taxation of investments.
GAAR (General Anti-Avoidance Rules), which was proposed in 2012-13 budget with a view to preventing tax evasion, evoked sharp reactions from foreign as well as domestic investors who feared that unbridled powers to taxmen would result in harassment of investors.
The government later appointed a committee headed by tax expert Parthasarthi Shome to look into their concerns.
Chidambaram, during the interview, spoke on a variety of subjects including his optimism on meeting disinvestment and spectrum sales target, confidence on pushing through with reforms measures and the relationship with RBI which he said was not antagonistic.
On the issue relating to retrospective tax amendment on which the Shome Committee had submitted its report, he said: "The CBDT has given its views. I have taken decisions at my level. The drafting is going on. Again it will go to the PMO and then to the Cabinet."
Referring to the Direct Taxes Code (DTC), a bigger matter, he said, "We have now started work. This morning I spent two hours on that. Earlier I had spent several hours. We are looking at it. We have tabulated it...will take final decision."
Chidambaram said that government was keen to get the investment engine going and measures were being taken by the government to create a "better climate".
Optimistic that the economy will still clock 5.5 to 6 per cent growth in the current fiscal, he said public sector undertakings have been put on notice to invest their surplus or be prepared to lose it while industrial houses will be 'goaded' to invest.
"Today there is reluctance to invest because they (industry) perceive a number of hurdles to investment. They also don't see the economic situation very propitious or conducive for investment.
"I think some steps we took in September have broken this wave of fear but some part of it is still there. We have to now get down to the detail, get each PSU, each sector, each business house why are you not investing. Invest. That is the effort," he said.
Chidambaram said no PSU will be allowed to fall short of its announced intention to invest.
Performance of the CMDs will be measured on how much did he invest in terms of declared intention to invest.
"And now we are talking to individual business houses and goading them to invest. They are all sitting on piles of cash. We are also asking sectorally what is the hindrance to investment and trying to remove those hindrances or hurdles. But will have to get the investment engine going.
"It has come to life but it is still not running at full speed. Once we get the investment engine going the results will begin to happen next year. Steel, cement will be in demand and that will drawn more investment in small and medium enterprises, ancillary industries which will bring more jobs," he said.
Chidambaram said some industries like automobile and housing have perked up a bit but it was not so in the consumer durable and non-durable sectors.
"So, I hope the engine will start purring and then moving forward. And then I think the investment will pick up. Once investment picks up, I am sure we get back to high growth. It is a difficult year," he said.
Noting that the council of ministers and the party-government conclave were fully sensitised to the nature of the challenge, Chidambaram expressed the confidence that he will use the opportunity to sensitise the Opposition as well as Parliament.
"Nothing to be gloomy about. We are still one of the three or four large economies that are growing at a decent rate. But we will have to rev up quickly so that we get back to the high growth path," he said.
Chidambaram ruled out any fiscal measures between now and the next budget saying anything on the tax side would come up only in the budget.
"Anything on the fiscal side, we will come up with it only in the Budget. So, I don't plan any fiscal measure. There is no major fiscal legislative measure that is on the anvil," he said.
Elaborating on the growth prospects, Chidambaram said: "All I can say is this year we will probably hover around 5.5-5.6% or may be 6% if things pick up in third and fourth quarters. This year is practically set and no major dramatic changes can be expected this year."
The minister, however, sounded positive about the next financial year and hoped that growth will pick on the back of steps being taken by the government.
"Next year, I am absolutely confident that growth will pick up because investment will start taking place and measures we are implementing will take place," he added.
Chidambaram said he would present a more balanced Budget and present realistic numbers taking note of the slowdown.
Referring to pressure points, he said meeting the revised fiscal target of 5.3% of the GDP was a challenge in the backdrop of revenue numbers and inability to compress expenditure beyond a point.
On the revenue side, the efforts would be made to achieve tax revenue target, he said, adding raising Rs. 40,000 crore from spectrum and Rs. 30,000 crore from disinvestment would be a challenge.
"But we still intend to achieve those two numbers. And we will try to be as close as possible to the revenue estimates", he added.
As regards expenditure, Chidambaram said: "We have to compress expenditure in order to remain within a manageable limit of fiscal deficit...we have in fact given ourselves a little headroom by saying 5.1 per cent fiscal deficit is not doable we will try to do 5.3 per cent."
The rating agencies have not reacted too adversely to 5.3% fiscal deficit number but they do want a credible path to achieve that, he added.
The immediate task, he further said, was to tide over these five months and see through the difficult year and end March 2013 without too much deviation from original number.
On disinvestment, which "appears to be difficult", the minister said, "I think there are some options there. Apart from 7-8 companies we have lined up, there is some residual sale in couple of companies which were strategically sold earlier actually privatised. Government is no longer is majority owner.
"There is also SUUTI holdings (of PSU and private sector equity). So, there are some options in disinvestment. But we will resort to those options only when we exhaust the companies which we have lined up for disinvestment," he added.