The government is open to a detailed examination in seven critical areas of the new direct taxes code, Finance Minister Pranab Mukherjee assured the industry on Friday.
The areas to be re-examined are the proposals on the minimum alternate tax (MAT), capital gains tax, double taxation avoidance agreement, general anti-avoidance rule, taxation of charitable organisations, taxation of foreign companies in India, and taxing investments at the withdrawal stage.
At an interaction session with the representatives of the industry, Mukherjee said: “We want to present the stakeholders with a tax regime that is simple and broad-based, leading to lowering of tax rates, better tax compliance and reduced litigation.”
Industry voiced its concerns on the proposal of shifting to an EET (Exempt Exempt Tax) regime for taxing long-term savings and investments. In the present EEE (Exempt Exempt Exempt) regime, savings are tax exempt at all stages — investment, accumulation and withdrawal. In the new EET regime, savings will attract tax at withdrawal stage.
Gaurav Taneja, senior partner, Ernst & Young, said: “There are 60-70 issues (in the direct taxes code) that are of serious concern. Every section of the code has a problem and it affects all taxpayers.”
Mukherjee explained the government was trying to incorporate the best practices prevailing across the globe and to use innovative methods for attaining equity. The new direct tax system would also take into account the established and time-tested practices that have withstood judicial scrutiny, he said.
On the apprehensions expressed regarding the time schedule for implementation of the code, Mukherjee assured the next step would be taken only after a comprehensive review of the draft code, based on the suggestions from the different sections of the industry.
The industry strongly opposed the direct taxes code proposal of MAT, based on the value of gross assets of a company. The finance minister said he had got various suggestions from the industry on this, like the tax be levied on net assets, turnover or book profits.
Revenue Secretary P V Bhide said the government was open to making necessary changes in the code, but a sweeping change was not required. He assured the proposal on double taxation avoidance agreement was only for empowering the government in the future and it would not override the 75 existing treaties with other countries.
Taneja, however, said this was a very contentious issue, because once the new code was notified, all these treaties might get cancelled and re-notified.
