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The government has set up a committee headed by the Law Commission chairman on Minimum Alternate Tax (MAT) demands faced by foreign portfolio investors, on a case-to-case basis.
Retired judge A P Shah is the head of the Law Commission. Finance Minister Arun Jaitley told the Rajya Sabha in his reply to the debate on the Finance Bill that the MAT exemption announced in the 2015-16 budget was in effect on a prospective basis, and the Shah panel would look at the retrospective cases, see if these could also be exempted.
"We have decided to refer this matter, as well as a few other tax issues, which are essentially legacy issues, to (this) committee," he told the House.
"The committee is requested to give its recommendation of the specific issues of MAT on FPIs expeditiously. The government will consider the recommendation and take an appropriate decision as early as possible," he said.
Following a decision of the Authority for Advance Rulings, the income tax department slapped 68 notices on FPIs, saying they have to pay 20 per cent MAT totalling Rs 602.8 crore on untaxed capital gains over the past three years. Some FPIs have approached the courts against the department.
Among other issues, Jaitley rejected the demand for relaxing the norms for quoting of a PAN number for payments above Rs 1 lakh. He said the government had already issued 210 million PAN cards and "dealing in black money is not a fundamental right". He said the government planned to launch a big campaign to expeditiously issue more PAN cards.
The House later returned the Bill, already passed by the Lok Sabh, thus completing the budgetary exercise for 2015-16.
Minister of state for finance Jayant Sinha gave part of the reply to the Bill. On the relationship between the government and the Reserve Bank of India, he said: "We have utmost respect for the professionalism of RBI and other regulatory bodies. We need time for further consultations on the setting up of the proposed Public Debt Management Agency (PDMA) and regulation of bond markets. We would like to establish a detailed road map for both."
To which, Jaitley added, "There is no conflict of interest between RBI and the government."
On May 1, Jaitley withdrew the clauses from the Finance Bill pertaining to setting up of a PDMA and amendments to the RBI Act that would have taken away its powers to regulate government securities. The minister said the government, in consultation with RBI, would later prepare a road map in this regard, in line with the global practice.
Elaborating on tax policies, Jaitley said: "The government is fully committed to the principle of certainty of taxation, avoidance of retrospectivity and providing an enabling environment to business and investment, both domestic and foreign. We will ensure that these principles are adhered to in letter and spirit."
He also sought cooperation of the Rajya Sabha, where the ruling coalition does not enjoy a majority, to support the constitutional amendment bill for rollout of the proposed national goods and services tax. Else, he said, the April 1, 2016, target for its implementation would be missed.
These initiatives were necessary to send "right signals" to investors, he said.
