In a pre-Budget meeting with finance minister Arun Jaitley on Friday, corporate India identified the 2012 retrospective changes in tax laws that had validated hefty tax bills on a host of large foreign investors in India as a key irritant to investors and almost in one voice pitched for their immediate abolition.
The captains of Indian industry conveyed to the minister the actions believed needed to salvage the economy given that private consumption spending grew at the slowest rate in a decade in FY14, but primarily stressed resolution of tax issues.
Arguing for early adoption of the goods and services tax (GST) in an undiluted form, industry leaders under the banner of apex chambers gave a thumbs down to the Direct Taxes Code (DTC) in its present form both CII and Ficci virtually suggested the code be dumped.
CII said the GAAR provisions, which are due to take effect from April 2016, could be deferred further given that there are a number of grey areas which needed to be removed and that our economy continues to be in the midst of a slowdown and green shoots of recovery are yet to become apparent.
GAAR, globally compatible rules to check tax evasion through shell companies, was proposed by the UPA-II government when Pranab Mukherjee was finance minister but was later diluted by his successor P Chidambaram, who also deferred its implementation from the originally proposed 2013-14.
Fridays meeting was attended by Sunil Mittal, Venugopal Dhoot, Tulsi Tanti, Kiran Mazumdar-Shaw, Ficci president Sidharth Birla, CII president Ajay Shriram and Assocham president Rana Kapoor, among others.
With the government's revenue productivity being undermined due to the economic slowdown (GDP grew 6.7% in FY12, 4.5% in FY13 and 4.7% in FY14), it has been aggressive in boosting revenue collections by raising tax demands on MNC arms in India. With these and the aggressive transfer pricing adjustments sought by the revenue department over the last few years, a sum of Rs 4.8 lakh crore is said to be locked in tax disputes.
Emerging from the meeting, Jaitley called it a constructive one. The economic situation at present is quite challenging but there is enthusiasm among the industry to turn it to its advantage. There is need to give directional thrust to translate the same into better results, a statement from the finance ministry later said, quoting Jaitley. The meeting was attended by ministers of state Nirmala Sitharaman and Ratan