SENSEX NIFTY
May 16, 2012, 10.57 AM IST | Source: CNBC-TV18

Plan to introduce DTC Bill in next Parliament session: FM

The Direct Taxes Code (DTC) Bill will be introduced in the next Parliamentary session where it will be scrutinized and examined, said Finance Minister Pranab Mukherjee.

The Direct Taxes Code (DTC) Bill will be introduced in the next Parliamentary session where it will be scrutinized and examined, said Finance Minister Pranab Mukherjee.

Most of the recommendations by the Standing Committee on the DTC will be accepted, said Mukherjee. Last week, the FM said that the proposed retrospective amendment of the income tax laws would not override tax break treaties.

The Standing Committee recommended that the General Anti-Avoidance Rules (GAAR) provisions be implemented, along with DTC, in April 2013. Mukherjee said that the GAAR provisions would apply to income generated from FY14 onwards.

He also added that any clarifications to the amendments would not override India’s tax treaty. “Retrospective amendments to the Income-tax Act will not override Double Taxation Avoidance Agreement (DTAA) with 82 countries” said Mukherjee. It would impact those cases where the transaction has been routed through low tax or no tax countries with who India does not have a DTAA.

“The retrospective clarificatory amendments now under the consideration of the Parliament will not be used to reopen any case where assessment orders have already been finalized,” he added.

The government still has to fix a meeting with Mauritius authorities to iron out the crumples in the exiting tax pact. The government claims that Mauritius has so far not cooperated on the bilateral tax pact change.

To promote further depth of the capital markets through listing of companies, he proposes to extend the benefit of tax exemption on long-term capital gains to the sale of unlisted securities in an initial public offer. The FM has now provided a levy on the Securities Transaction Tax (STT) at the rate of 0.2% on such sale of unlisted securities.

In order to augment long-term low cost funds from abroad for the infrastructure sector, the Finance Bill also proposes a lower rate of withholding tax of 5% for funding specific sectors through foreign borrowings. To further facilitate access to such borrowings, Mukherjee has proposed to extend the lower rate of withholding tax to all businesses. “This lower rate of tax would also be available for funds raised through long-term infrastructure bonds in addition to borrowing under a loan agreement.”

The Reserve Bank of India is formulating a scheme for subsidiarisation of Indian branches of foreign banks to ring fence Indian capital and Indian operations from economic shocks external to the Indian economic scenario. To support this effort, the FM has proposed to provide tax neutrality for such subsidiarisation.

The Finance Bill also proposed to withdraw the provision for levy of TDS on transfer of immovable property. To curb the flow of unaccounted money in the bullion and jewellery trade, the Finance Bill proposed the collection of Tax At Source (TCS) by the seller at the rate of 1% for the sale amount from the buyer for all cash transactions exceeding Rs 2 lakh.

Responding to the representations made by the jewellery industry that this would cause undue hardship, he has raised the threshold limit for TCS on cash purchases of jewellery from Rs 2 lakh to Rs 5 lakh. The threshold limit for TCS on cash purchase of bullion will be retained at Rs 2 lakh. However, it has been clarified that bullion will not include any coin or other article weighing 10 gm or less.

A related proposal was the imposition of central excise duty on unbranded precious metal jewellery at the rate of 1%. In view of the outpouring of sentiments both within and outside the House, the government has decided to withdraw the levy on all precious metal jewellery, branded or unbranded, with effect from March 17, 2012.

The House would recall that certain amendments were proposed in the Customs and Central Excise Law in respect of the classification of offences as cognizable and non-bailable. In response, he has proposed the omission of this provision. In addition, only serious offences under the customs law involving prohibited goods or duty evasion exceeding Rs 50 lakh, shall be cognizable. However, all these offences shall be bailable.

Taxation of services has undergone a paradigm shift with the introduction of a Negative List. This initiative has been widely welcomed. Some of the States, through the Empowered Committee of State Finance Ministers have expressed their concerns. To address their concerns, he has made changes in the definition of “service” which will exclude the activities specified in the Constitution as “deemed sale of goods”.

The definition of “works contract” has also been enlarged to include movable properties. Exemption for specified services relating to agriculture in the Negative List has also been extended to agricultural produce enlarging the scope of the entry. There are some other minor changes in the definitions based on the feedbacks and suggestions that he has received from various stakeholders and are specified in the revised draft.

Watch the accompanying video for the FM's speech.

ADS BY GOOGLE

video of the day

Don’t try to time market; OMCs, paint cos to benefit: Emkay

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.