At a post-Budget press conference, Finance Secretary Arvind Mayaram, Revenue Secretary Shaktikanta Das, Expenditure Secretary Ratan Watal, Disinvestment Secretary Ravi Mathur and Financial Services Secretary G S Sandhu speak on a variety of issues: Edited excerpts:
On retrospective amendments to the Income-Tax Act:
The government will not ordinarily undertake retrospective tax legislation. Though this is a sovereign right of the government, it will keep in mind the overall impact on the economy and investor sentiment. Cases pending in various courts will continue and reach their logical conclusion. There is no intention to interfere with those.
A high-level committee has been announced, and the Central Board of Direct Taxes will notify this within a week or so. The committee will review all fresh cases relating to transfer pricing, particularly indirect transfers, before any action is taken on such cases. Also, retrospective changes are brought to tax laws in a very routine matter, for technical corrections. Even in this Finance Bill, there are several retrospective changes. Ordinarily, however, there will be no retrospective changes that create fresh liabilities.
On FDI (foreign direct investment) in e-commerce:
This is a clarification. When we talk of e-commerce, it relates to trading companies. Nothing is said about that in the Budget speech. But if there are companies that are investing and manufacturing in India, these can sell the goods manufactured by them through e-commerce. There was a question; that question has been answered. We allow 100 per cent FDI in manufacturing, barring a few exceptions.
On whether the FDI cap in insurance has riders on voting rights:
We have only said the composite cap will be 49 per cent, with full Indian management control. There is nothing more to be added. Composite means that it could be any permutation-all 49 per cent could be FDI; or 49 per cent could be foreign institutional investment, with the approval of shareholders.
On changes in dividend distribution tax (DDT):
The DDT rate has not been changed; it is 15 per cent. For the past few years, companies have been paying taxes net of dividend tax. For example if the dividend amount is Rs 100, companies will deduct DDT and on the remaining 85, they will calculate the incidence of DDT. This has been corrected. The shareholder will continue to get the same amount of dividend.
On the Expenditure Management Commission:
An interim report will be given in five-six months. This will address the issue of subsidies, too. You don't have quick answers to these issues. We will find answers-there might be systemic changes, through which you might handle subsidies better. There are so many ways to do it. We don't have the answers right now.
On treating foreign portfolio investors' income from transaction in securities as capital gains:
The focus of the budget is tax clarity. There was a lot of confusion on whether this particular income was business income or capital gains. This deterred lots of fund managers from coming to in India. This lack of clarity also created confusion among portfolio investors, while bringing money into India. The whole focus was to remove ambiguity and bring in clarity. Henceforth, it will be treated as capital gains. We believe fund managers will now come back to India.
On the road map to fiscal consolidation:
There are two things: We have created a fiscal space, and have given up Rs 22,200 crore on the direct tax side. We have gained Rs 7,525 crore on the indirect tax side. If you look at the direct tax-GDP (gross domestic product) ratio, we have projected it to increase to 10.6 per cent this financial year from 10.1 per cent in the previous year; 10.1 per cent was on the GDP growth of 4.7 per cent. This year, our projections for economic growth are 5.4-5.9 per cent. So, a 10.6 per cent tax-GDP ratio is not an ambitious target. On the indirect tax-GDP ratio front, too, we have not projected much growth. But if you look at the non-tax side, we have increased the projection by Rs 31,752 crore. Also, we have reoriented many schemes announced in the interim Budget and created space of Rs 10,000 crore. So, the total fiscal space is Rs 56,400 crore. On this, we have shown additional expenditure.
On consolidation of public sector banks:
We are getting proposals from various stakeholders. These are being examined. We have to see how many we accommodate this financial year and how many in the next.