Neither Scrooge nor Santa: Satya Poddar

FM has left the basic tax structure untouched and relied on surcharges to meet the deficit numbers

The finance minister has lived up to his promise of providing a stable tax regime. He has played neither Scrooge nor Santa Claus and has avoided any nasty surprises in the Budget. He has left the basic tax structure untouched and relied on surcharges to meet the deficit numbers.

But investors do wish the government had clarified its position on certain controversies that have plagued the system, including the retrospective taxation of indirect transfers enacted in the previous Budget. It was widely anticipated that the government would at least remove the interest and penalties on transactions made taxable with retrospective effect. Could it be that even this would have been controversial, given that the Shome Committee had recommended a complete reversal of these provisions?

The Goods and Services Tax was another widely anticipated tax reform initiative. However, the FM's muted statement in the Budget is indicative that all is not settled yet.

The same is the fate of the Direct Taxes Code (DTC). While he promises to bring DTC in the Budget Session, he has indicated that it would not be a simple amendment of the Income-Tax Act but a new code based on the best international practices, compatible with the needs of the fast developing economy. If this is indeed the intent, it would require a major rewrite of the DTC. Producing a new avatar in the Budget session could be a significant challenge. Overall, on the tax front, the Budget is just a statement of work in progress.

Satya Poddar
Tax Partner, Ernst & Young