The 2014 general elections heralded a vote for hope, ambition and aspiration as India sought to shrug off its recent past of dismal economic performance, declining growth, high inflation and slackening in investments. With aspirations to regain its vigour, India was seeking a strong government to provide economic and political stability.
Many believe that the new government, which has risen to power with a thumping majoritya historic achievement in its own standingwould prove to be the catalyst, enabling economic growth for the country. With such responsibility, the new government is largely expected to take the initiative ahead through its budget and policy reforms in the first few months. The surge in the stock market indices and the strengthening of the currency are harbingers of the expectations that the market and the populace harbours.
Among the key components requiring urgent attention is tax policy reforms. The past few years have seen the tax policy being a subject of unilateral legislative actions, primarily to bridge the fiscal gaps without much regard for the voice of the industry, businesses and investors. So much so that policy inaction, retrospective amendments, high pitched and prolonged litigation, ineffective dispute resolution mechanics and minimalistic tax incentives for economic development and fresh investment have come to be termed as tax terrorism. And it is impacting, maybe not the first time but surely in the most severest of ways, the confidence of industry and investors.
Amongst the many things that form the core of the new governments pre-poll manifesto, tax policy and related initiatives are the centrepiece. The possible tax policy initiatives culled from the manifesto comprise the following promises: (1) providing a non-adversarial and conducive tax environment; (2) rationalising and simplifying tax regime; (3) overhauling dispute resolution mechanisms; (4) bringing consensus with states on GST; and (5) incentivising research and development with a focus on indigenisation of technology and innovation. It does not take much introspection to recognise that all of the above touch the most sensitive nerves of the discord prevailing in the current tax law and its administration. Indias reputation on tax policy front is probably at its lowest, contributed by frequent retrospective amendments negating the importance of the grinding litigation. These retrospective amendments need to be addressed suitably to restore the confidence of the investor community.
It is rather a misfortune that we have a significantly arduous and uncertain litigation process as also the absence of a speedy and