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Business News/ Politics / Policy/  Finance minister keen to introduce GST as soon as possible: Revenue secretary
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Finance minister keen to introduce GST as soon as possible: Revenue secretary

Shaktikanta Das says govt will continue to defend the retrospective amendments on indirect transfer transactions in various courts

The government expects the growth momentum to revive because of the various measures that the finance minister Arun Jaitley has taken in Union Budget, said Shaktikanta Das. Photo: Ramesh Pathania/MintPremium
The government expects the growth momentum to revive because of the various measures that the finance minister Arun Jaitley has taken in Union Budget, said Shaktikanta Das. Photo: Ramesh Pathania/Mint

New Delhi: The government is examining concerns raised by companies on proposals, made in the Union budget, to tax debt mutual fund (MF) units sold between 1 April and 10 July, revenue secretary Shaktikanta Das said.

He also said the government will continue to defend the retrospective amendments on indirect transfer transactions in various courts where it is locked in litigation with companies, though fresh demand made by the tax department will be reviewed by a panel of the Central Board of Direct Taxes (CBDT). In an interview, he spoke about the challenging indirect tax collection targets and the implementation of the goods and services tax. Edited excerpts:

What are the broad tax principles this budget is based on?

If you see Part B of the budget speech of the finance minister (FM), he has started by saying that there was extremely limited fiscal space, but nonetheless he has taken measures to revive the economy, to revive the manufacturing sector, to rationalize taxes so as to reduce litigation, provide tax clarity and, last but not the least, also to address the problem of inverted duty structure, especially in the area of excise and customs. These were the broad objectives with which the FM has approached the budget. Although the government needs a lot of resources, the FM has refrained from bringing in too many additional taxes or extra burden on the taxpayers. It is precisely in this background that even before the budget, the extension of the excise duty cut was given in automobiles and other sectors for six months.

With 5.4% gross domestic product growth expected this fiscal, will you be able to meet the tax collection targets that you have set?

Direct tax targets we should be able to achieve, because the growth rate is same as the last year. In indirect taxes, it is a challenge. But we expect the growth momentum to revive because of the various measures that the FM has taken in the budget. We hope for better buoyancy in the coming weeks and months. If that happens, then tax collections will be higher.

The tax rates in India are very high and many experts have highlighted the need to bring it to the Asean (Association of South East Asian Nations) level. Do you see that happening any time soon?

With regard to Asean rates, first we have to attempt and move towards goods and services tax (GST). That is our immediate priority in tax reform.

The FM has talked about introducing some form of GST even if it is not the best form of GST. Does it mean that the states’ demand of exclusion of petroleum products from GST will be agreed by the Centre?

I think it basically means that FM is keen to introduce GST as early as possible. What he means is that some small areas of differences we need to resolve in a manner of give and take. When there is a principle of give and take, then naturally there could be some adjustments here and there. Nothing has been decided. These are all open issues.

Central Sales Tax (CST) compensation is pending from 2011-12 and hence the Centre will have to pay a very high amount to the states. The FM has said he has to mobilize resources to make those payments. Where will this money come from given the fiscal constraints?

What he has said is, ‘We will try and find the resources to meet the requirements.’ When we prepared the budget, we did not have the resources at that time. But during the year, we will see the trend of expenditure. Already four months have gone, and because of elections, the tempo of implementation of various schemes was not as they should be in a normal year. So there could be savings and then we will see how the revenue inflows work out. Depending on that, we will find the resources.

What kind of stand will you now take in courts where companies have challenged the validity of the retrospective amendments or are fighting the tax department over demands raised? Will you defend the validity of the retrospective amendments to indirect share transfers?

Naturally, if you say that the tax demand is baseless, then nothing remains. The FM has clearly said in his budget speech that the cases that are there in the courts where the demand has been raised, where the assessment has already been made, they have to reach their logical conclusion. So whatever litigation is going on, let the courts decide. Government will not interfere with that. But in new cases the new mechanism will apply.

So this also applies to the Vodafone case?

That will be subject to the outcome of international arbitration.

Industry had raised concerns over tax on debt mutual funds and unlisted securities. Are you reviewing these provisions?

The provision (is) that if you hold shares for more than one year, it will be treated as long term and that was provided because the shares are listed in the stock market and you know the fair market value of the shares.

But unlisted shares are not determined in the stock market and there is no fair determination of the fair value.

What representation from the industry says (is) that ‘we have sold units between 1 April to 10 July and we didn’t know we are going to be taxed at a higher rate’. So that is under examination.

The FM has sought to reduce litigation and punish non-compliance by taxpayers. But should it not be accompanied by administrative reforms where a tax officer is taken to task for levying high tax demand?

These things need to be addressed administratively. These things need to be addressed by giving a very clear and unambiguous message to the tax department, which I think the finance minister has already done. The message is clear: all assessments should be done properly and correctly.

The finance minister said the government would like to revive special economic zones (SEZs), but no concrete steps were taken as far as the tax aspects are be concerned. What are the measures being considered?

SEZs are a different ball game and they have to be looked at comprehensively and in totality. We are discussing this with the ministry of commerce.

Why hasn’t the government clarified on what constitutes ‘substantive assets’ for an indirect transfer transaction to be taxable in India?

It’s a work in progress. Certain things we have corrected in this budget. There are so many other aspects of indirect transfers that are yet to be addressed. We have got various representations on various aspects.

Though general anti-avoidance rules (GAAR) were a part of the Direct Taxes Code (DTC), their implementation was announced before DTC came into force. What is the thinking now? Will GAAR be implemented with DTC?

The finance minister has not yet taken a call on DTC or GAAR. We have not yet decided on this.

Has the government reviewed the recommendations of the tax administration reforms commission?

The report came only a few days before the budget. We have not had the time to go through it.

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Published: 16 Jul 2014, 12:13 AM IST
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