Finance Minister Arun Jaitley today spelt out wide-ranging reform in the tax administration aimed at simplifying procedures and reducing litigation.
He announced various measures to phase out tax deductions, reduce discretion in the hands of the taxman and provide a predictable dispute resolution mechanism, which would make the tax regime more stable for the taxpayer..
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"The Budget rolls out a host of administrative reforms by way of fixing loopholes and measures to improve taxpayers' experience, and that is definitively a step in the right direction," BMR Legal Managing Partner Mukesh Butani said.
To allay fears of retrospective taxation, the bugbear of many a multinational, Jaitley said that the government will not resort to such amendments in the future. "I would like to reiterate that we are committed to provide a stable and predictable taxation regime," he said.
Jaitley had announced the formation of a high-level committee that would oversee any fresh case where the assessing officer proposes to assess or reassess the income in respect of indirect transfers by applying the retrospective amendment. "In order to allay any fear of tax adventurism, this committee will now be chaired by the revenue secretary and comprise the chairman of the Central Broad of Direct Taxes and an expert from outside," Jaitley said.
He also proposed a one-time scheme of dispute resolution for past cases ongoing under retrospective amendment. One can settle the case by paying only the tax arrears in which case the liability of the interest and penalty shall be waived. This is subject to agreeing to withdraw any pending case lying in any court or tribunal or any proceeding for arbitration, mediation et cetera under BIPA.
Vodafone, which is involved in one such tax dispute with the government, said in a statement: "We will, of course, study the detail of what the Finance Minister has proposed today, while continuing to seek resolution of this matter through international arbitration."
KPMG Partner (tax) Naveen Aggarwal, meanwhile, said, "Retrospective amendments not to be made going forward and the special regime to settle past disputes on indirect transfer tax showcase the government's commitment towards creating a stable and predictable tax regime in India."
PwC India Leader (tax) Gautam Mehra said that this was an improvement over last year when Jaitley had said that retrospective taxation would not be invoked. "He has sent out a message that the government is ready to take a step forward and the companies should come forward and settle the matter."
The reform is in line with the Narendra Modi-led government's promise to make India a more investor-friendly destination. In order to improve the ease of doing business, Jaitley announced a series of other steps as well.
Thus, 13 levies imposed by other ministries and administered by the department of revenue, where the annual collection is less than Rs 50 crore, have been done away with.
Interest rates on delayed payment of tax across all indirect taxes have been rationalised at 15 per cent, except in the case of service tax collected but not deposited to the exchequer, in which case the rate of interest will be 24 per cent from the date on which the service tax payment became due.
Jaitley in his budget proposed amendments to the Central Excise and Service Tax laws so as to provide for closure of proceedings against co-noticees, once the proceedings against the main noticee have been closed, with effect from date of enforcement of Finance Bill, 2016.
The number of returns for a central excise assessee, above a certain threshold, will be being reduced from 27 to 13 (one annual and 12 monthly), Jaitley said. The facility for revision of return, hitherto available only to a service tax assessee, will be extended to manufacturers as well, he added.
The limit for launching prosecution will be increased to Rs 2 crore of service tax evasion and the power to arrest restricted only to situations where the tax payer has collected the tax but not deposited it to the exchequer above the threshold of Rs 2 crore.
The Customs Act will be amended to provide for deferred payment of customs duties for certain class of importers and exporters, Jaitley said. And chief commissioners would be instructed to withdraw cases where the sum involved is less than Rs 5 lakh and the matter has been pending for more than 15 years.
AT A GLANCE
Threshold limit for audit of accounts raised from Rs 25 lakh to Rs 50 lakh
Threshold limit of presumptive taxation upped from Rs 1 crore to Rs 2 crore
No penalty in respect of income-tax disputes of up to Rs 10 lakh will be levied
Thirteen cesses imposed by other ministries where collection is less than Rs 50 lakh done away with
Interest rates on delayed payment of duty across all indirect taxes rationalised at 15 per cent
Number of returns for central excise assessee, above a certain threshold, reduced from 27 to 13
- Monetary limit for prosecution increased to Rs 2 crore of service tax evasiona