Shreya Nandi Moneycontrol News
The Narendra Modi-led government's plans to simplify the direct tax regime may spill over to next year, and may well have to wait until the next government is in place in 2019.
The six-member task force headed by Arbind Modi, member of the apex policy making body Central Board of Direct Taxes (CBDT) may not submit the draft new direct tax law on May 22, the day the task force completes six months.
It may take at least another two months to submit its report on the new Direct Tax Legislation. The public consultations and debates will follow thereafter.
A Parliamentary approval will be ultimately required to make the draft tax policy proposals into a law.
“By the time all the changes are incorporated after consultations with the stakeholders and approval from the law ministry, it may be time for the general elections, 2019,” a senior government official said.
Besides, a new direct tax code will likely involve change in rates and slabs that will require amendments in the Finance Bill, which will unlikely happen in an election year when an outgoing government presents only an interim budget/vote on account.
The discussion on reforms pertaining to taxation started in September, 2017, when the Prime Minister Narendra Modi said that more than half a century old Income-Tax Act needs to be re-drafted and a new Direct Tax Code (DTC) needs to be introduced in ‘consonance with economic needs of the country’.
As the government overhauled the existing indirect tax system last year by implementing Goods and Services Tax (GST), on a larger scale, tax reforms would remain incomplete without revamping country’s direct tax system.
Acting upon it, the finance ministry on November 22 constituted a task force comprising six members, as well as the Chief Economic Adviser (CEA) Arvind Subramanian, as a permanent special invitee in the task force.
The task force is in the process of drafting a direct tax legislation keeping in mind, tax system prevalent in various countries, international best practices, economic needs of the country, among others.
Some of the provisions of the DTC such as General Anti-Avoidance Rule (GAAR) and Place of Effective Management (PoEM) has already been implemented.
While the GST replaced more than a dozen of central and state levies to bring in one unified nation-wide tax, DTC will consolidate and simplify the direct tax laws into a single legislation.
The erstwhile UPA government had finalised DTC and had introduced the Bill in the Parliament in 2010. However, the Bill lapsed with the dissolution of the 15th Lok Sabha. The draft law is likely to do away with various exemptions, increase threshold of taxation and lower tax rates.
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