Retrospective taxation not desirable: ICRIER

The introduction of retrospective taxation on overseas transactions is not desirable, as it might create a conflict between the Judiciary and the Legislature, a top executive of the Indian Council for Research on International Economic Relations said today.

Speaking at the launch of his book 'Tax Shastra: Administrative Reforms in India, United Kingdom and Brazil' at the Bharat Chamber of Commerce, ICRIER Director and Chief Executive Parthasarathi Shome said it might affect the investment climate despite clarifications to the contrary from the Union Finance Minister.

"Retrospective taxation gets into relative independence of three branches of government. It (taxation) has to be prospective and not retrospective. It is even banned in some countries constitutionally," Shome said.

On the proposed goods and services tax (GST), Shome said that there were some lacunae in its design. Pointing out the defects in the system, Shome said tax rate on goods and services should be the same. "If you separate the tax rates of goods and services, then don't call it a goods & services tax. "There should be a common base that includes everything and if you want a higher rate for products, then you can impose additional excises on them. It's a global practice to have the same rate," he said.

Alcohol and petroleum should be included in the GST, Shome said. On the recent move of the West Bengal government to introduce entry tax, Shome said the entry tax was better than octroi, but it will create a distortion. "It's a distortion in trade and movements. It moves away from common market in our country," Shome added.