Clear tax laws, stable policy to attract investors
Looking to attract greater foreign investments, the finance minister has spelt out major reforms in tax administration that will give greater clarity and an assurance of a stable policy to foreign and domestic investors.india Updated: Jul 11, 2014 02:20 IST
Looking to attract greater foreign investments, the finance minister has spelt out major reforms in tax administration that will give greater clarity and an assurance of a stable policy to foreign and domestic investors.
“This government will not ordinarily bring about any change retrospectively which creates a fresh liability… we are committed to provide a stable and predictable taxation regime that would be investor friendly and spur growth,” said Arun Jaitely said in his budget speech.
While no change has been made in the retrospective tax, Jaitley assured that henceforth, all cases arising out of the retrospective amendments of 2012 in respect of indirect transfers would be scrutinised by a high-level committee to be constituted by the Central Board of Direct Taxes (CBDT), before any action is initiated.
To reduce litigation in direct taxes, he has promised legislative and administrative changes. For instance, Jaitley has extended the facility to obtain an advanced ruling on tax liability from the “Authority for Advance Ruling”, previously available only to FDI, to domestic investors as well.
As this authority is already under stress with pending cases, Jaitley also assured it would get additional benches to hasten rulings.
“I propose to enable resident taxpayers to obtain an advance ruling in respect of their income tax liability above a defined threshold. I also propose to strengthen the Authority for Advance Rulings by constituting additional benches,” Jaitley said in the House.
“The expansion of Advance Rulings scope to include domestic companies and expansion in scope of the Settlement Commission, both in the long run, are expected to provide some certainty and reduce litigations,” said Harishanker Subramaniam of Ernst & Young LLP.
The finance minister also enlarged the scope of the Income-tax Settlement Commission, for speeding up the tax disputes before it. “This would continue to be once in a lifetime opportunity for any taxpayer,” Jaitley said.
A high-level committee would be set up to interact with trade and industry on a regular basis to help investors get clarity on tax laws, he said.
Based on the recommendations of the Committee, the Central Board of Direct Taxes and the Central Board of Excise and Customs would issue appropriate clarifications, wherever considered necessary, on the tax issues within a period of two months.