Vodafone case: Taxman kept on hold, line left open on conciliation

Mar 01 2014, 17:32 IST
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In a surprise development, the government on Friday decided not to call off in haste the conciliation. Reuters In a surprise development, the government on Friday decided not to call off in haste the conciliation. Reuters
SummaryGovt decided not to call off in haste conciliation process with Vodafone over Rs 20,000-crore tax dispute.

In a surprise development, the government on Friday decided not to call off in haste the conciliation process with Vodafone over the Rs 20,000-crore tax dispute. Instead, the Union Cabinet decided to instruct the Income Tax Appellate Tribunal and Vodafone to expeditiously resolve the Rs 3,700-crore transfer pricing case, which was the reason for the breakdown in talks over conciliation.

With the general election around the corner, the government also sought to be generous to the electorate on Friday, approving similar hikes in dearness allowance (DA) for employees and dearness relief (DR) for pensioners effective January 2014 in what would together cost the exchequer an annual Rs 11,074 crore. The hike in DA and DR from 90% of basic salary to 100% would benefit over 50 lakh central government employees and 30 lakh pensioners.

Government and PSU employees have more reasons to cheer. The Cabinet on Friday also set the terms of reference for the Seventh Pay Commission headed by justice AK Mathur and said the panel would review the pay structure with a view to “attracting suitable talent” in public services and improving governance. The Sixth Pay Commission proposals implemented since 2008, it may be noted, raised the government’s wage bill by Rs 22,000 crore annually.

Also, the government has approved the proposal to ensure Rs 1,000 minimum monthly pension under the Employees’ Pension Scheme-95, run by the Employees’ Provident Fund Organisation (EPFO). This would benefit 28 lakh pensioners and cost the government an additional Rs 1,217 crore annually.

Of course, the burden of all these would fall mostly on the next government. The third-quarter GDP date released on Friday revealed a slowing of government consumption growth, reflecting the expenditure squeeze to achieve the fiscal deficit target. The fiscal deficit up to January-end at 101.6% of the full-year revised target indicated tighter control on spending in February-March.

The Cabinet also declared President's rule in Andhra Pradesh, but refrained from announcing the promised special category status for Seemandhra. Friday's heavy-agenda Cabinet meetings also saw clearances coming for the Rs 6,284 crore six-laning of the Eastern Peripheral Expressway in the National Capital Region, which is expected to accelerate economic development in Haryana and Uttar Pradesh beside easing traffic in the capital.

Separately, the Public Private Partnership Appraisal Committee (PPPAC), headed by economic affairs secretary Arvind Mayaram, cleared seven PPP projects worth Rs 16,057 crore, including the Rs 6,571-crore Delhi- Meerut Expressway and

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