Prime Minister's Office (PMO) on Thursday sought clarification from Finance Ministry to clear the air on contentious tax proposals, including retrospective amendment of the I-T Act which required Vodafone to pay of Rs. 20,000 crore in taxes and interest.
"PMO sought clarifications on taxation issues and Section 9 of Income Tax Act (related to tax on indirect transfer of assets) ... We asked them to give us 2-3 weeks time," said Finance Secretary RS Gujral who again met Prime Minister Manmohan Singh on Thursday.
Ruling out any plans to further defer implementation of the controversial General Anti-Avoidance Rules (GAAR), which had evoked sharp reactions from both domestic and foreign investors, Gujral said the Ministry would be issuing draft guidelines shortly to seek comments from stakeholders.
"We have finalised the GAAR draft rules after three meetings with the stakeholders. The draft will have examples for what would be deemed as permissible and impermissible arrangement," Gujral added.
Earlier in the day Cabinet Secretary Ajit Seth held a meeting of top bureaucrats of key economic ministries to take stock of the economic situation to firm up steps for arresting the slowdown in growth.
The flurry of activity in Finance Ministry follows directions from Singh, who assumed charge of the Finance portfolio earlier this week. Singh has called for reversing the climate of pessimism.
Meanwhile, Vodafone India Chairman Analjit Singh met Planning Commission Deputy Chairman Montek Singh Ahluwalia. Vodafone has been in the running battle with the government over tax dispute totaling Rs. 20,000 crore for its $12 billion Hutchison deal of 2007.
The government had already postponed the Budget proposal of implementing GAAR, which is aimed at targeting deals whose purpose is tax avoidance, by one year to April 2013 following concerns expressed by domestic and foreign investors.
"GAAR will be applicable for income arising from April 1, 2013. Certain grey areas have been highlighted. We need to clear the legislative intent of the proposal," Gujral added.
The stakeholders would have 15 days to give their comments on the draft GAAR rules, following which the finance ministry would come out with final guidelines on the same.
Further, Gujral said the Finance Ministry would also be coming out with certain clarification on indirect transfer of assets by foreign investors.
He said that foreign investors had sought clarification as to whether sale of shares by any one shareholder would be taxed.
"We will make clear the legislative intent of not taxing deals in case where one shareholder of FII sells share," he said.
On the retrospective amendment, Gujral stressed that the Income Tax Department will not re-open cases where assessment proceedings have been finalised till March 2012.
The decision of former finance minister Pranab Mukherjee to amend the Income Tax Act with retrospective effect to tax overseas deals involving domestic assets had generated a lot of controversy.
Gujral said that a Cabinet note will soon be circulated for enacting the Direct Taxes Code (DTC) Bill, which seeks to overhaul the 50-year-old income tax laws.
India's economic growth during 2011-12 slipped to 9-year low of 6.5% and the current fiscal it is not expected to do much better. The domestic currency too has depreciated sharply in the recent weeks going below Rs. 57 to a dollar.