The recent controversy over a tax case involving Vodafone has prompted the government to set up a group to advise it on the issues of international taxation. While the terms of reference of the committee, comprising government officials and industry chambers, do not specifically talk about the issue the UPA dispensation recently had with the British telcommunications firm, the finance ministry today formed the panel with an aim to reduce disputes in international transactions.
“An advisory group has been set up in order to reduce tax litigation and bring tax certainty in the area of international taxation and transfer pricing,” a finance ministry official said.
The constitution of the 12-member body, headed by finance and revenue secretary R S Gujral, comes in the wake of the government receiving widespread criticism from the industry for proposing retrospective amendments in the Income Tax Act to tax cross-border deals like one that happened with London-based Vodafone. It went a step further and put a validation clause in the Finance Bill 2012, giving the the government the powers to overrule the decision of the Supreme Court that has gone in favour of the telecom MNC. Earlier, this week the apex court rejected the government’s review petition in this regard.
| WHO'S IN THE GROUP |
| * The 12-member advisory committee will be headed by Finance & Revenue Secretary RS Gujral |
| * The panel will also comprise Central Board of Direct Taxes Chairman, Director General of Income Tax (International Taxation), two joint secretaries from the revenue department, one representative each from industry chambers CII, Ficci, Assocham and Institute of Chartered Accountants of India |
| * One joint secretary from the revenue department will be the member secretary. While the committee would be allowed to co-opt any other member, the revenue secretary would nominate one tax advisor to the group |
As the industry’s concern grew, based on the feeling that such retrospective amendments would not augur well for their businesses as well as for foreign investment in the country, the finance ministry got keener to address the issue. “The idea is to assure the industry that the government has no intention to make provisions that hound them,” said a finance ministry official.
On its part, the group will hold consultations on emerging issues of taxation in the area of international taxation and transfer pricing to understand each other’s viewpoints. It can also advise the government about legislative amendments and administrative measures to reduce litigation and bring more tax certainty.
The retrospective amendment was made after the government felt that the Supreme Court’s judgment in the Vodafone case would have its effect on many similar cases, resulting in a loss of Rs 35,000-40,000 crore to the government. Similar cases pending before various courts include case of Cairns UK Holding Ltd, Unilever HPC Finance Services Inc USA, Accenture Services Pvt Ltd, Euro Pacific Security Ltd, Tata Industries Ltd/AT&T, Mcleod Russel India Ltd, SAB Miller, Sanofi Pasteur Holding SA.
The advisory body will also comprise the chairman of the Central Board of Direct Taxes, the director-general of income tax (international taxation), two joint secretaries from the revenue department and one representative each from industry chambers CII, Ficci and Assocham, besides the Institute of Chartered Accountants of India. One joint secretary from the revenue department will be the member-secretary. While the committee would be allowed to co-opt any other member, the revenue secretary would nominate one tax advisor to the group.
