InFINeeti Annual Issue | September 2012
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InFINeeti Annual Issue | September 2012
GOV ER NM ENT AND TAXES
GOV E RN M E N T A N D TAX E S
Ta x R e fo r m s : An I n di a n Perspec ti ve I n o rder to mak e it s el f an attractive business destin at io n an d to in creas e tax receipts, India is working on t wo major tax refor ms. DTC ( D i re c t Ta x Co d e ) a n d G S T ( G o o d s a n d S e r v i c e s Ta x ) . L e t ’s
look
at
the
trend
in
combined
tax receipts for Union and the States.
I n co m e Ta x
Co r p o rate Ta x
Wh at p e rce nt a g e o f ove r 1 .2 1 b i l l i o n p o p u-
I n d i a h a s e n t e r e d i n t o D o u b l e Ta x a t i o n
l at i o n o f t h e co unt r y p ays i n co m e t a x ?
A v o i d a n c e A g r e e m e n t ( D TA A ) ; w i t h d i f f e r e nt co unt r i e s. S o m e m u ltinationa l compa nie s operating in I ndia exploit the loopholes in the DTAA by routing their investment through the co unt r i e s I n d i a h a s DTAA with. While the re is n o w ro n g i n h avi n g a hold ing compa ny the re, i t o f t e n t u r n s o u t t o b e a s h e l l c o m p a n y. Thus, to tax such transactions, GAAR (General Anti Avoidance Rules) was introduced in the Union Budget of 2012-13.
Direc t Tax
Just about 2.8 %! Compare this with over
But, it was received with apprehension
4 5 % fo r U S A . Th u s t h e re i s a n e e d to b r i n g
because of lack of clarity and cer tain pro-
m o re p e o p l e un d e r t h e a m b i t o f t h e I n co m e
visions related to its retrospective nature.
Ta x . DTC i s p r o p o s e d t o a c h i e v e t h i s g o a l . The investor confidence took a dip and the FII
Th e tre nd looks h ear ten in g. I n f ac t t h e rate o f growth has outpaced the GDP growth rate by a
DTC i s s a i d t o r e p l a c e t h e e x i s t i n g I n d i a n
S o m e o f i t s s a l i e nt fe at ure s a re a b o l i t i o n o f
inflows took a U-turn. In contrast to high invest-
huge margin. But, if we look at this with a back-
I ncome Tax Ac t, 1961. I t seeks to consolidate
s urc h a rg e, e d uc at i o n ce s s a n d Le ave Trave l
ment in stock market in the Jan-Mar quar ter, FII
d ro p o f t h e p i l i n g f i s c a l d e f i c i t , p l u m m e t i n g
a n d a m e n d t h e l aws u n d e r I T Ac t a n d f a c i l i -
Allowance. Deductions up to 1.5 lakhs,
i n f l ows we re n e g at i ve for the month of Apr il.
investor confidence and widening trade deficit
tate voluntar y compliance to help increase
u n d e r ‘ S e c 8 0 C ’, t o b e a l l o w e d . N o d i f f e r -
The stock market saw a gradual fall from about
we’ l l u n d e r s t a n d w hy t h e f i n a n ce m i n i s t r y i s
the tax- GDP ratio.
e n ce i n t a x s l a b s fo r m a l e a n d fe m a l e s a n d
17500 points in March end to about 16000
m a ny m o re. Th e s e c h a n g e s a i m to i n c re a s e
points in May end. Thus to boost investor confi-
L e t ’s f o c u s o n t h e t a x r e f o r m s r e l a t e d w i t h
the compliance base and thus increase
dence CBDT, in May, formed a six-member com-
I nco m e Tax and Co r po rate Tax.
t h e Ta x r e c e i p t s . T h e c h a n g e s a r e b e i n g
mittee to draf t guidelines for enforcing GAAR.
b u sy look i ng for aven ues to in crease re ceipts. Th e broa d s tr uc ture o f t h e t ax system and the associated tax refor ms are shown in the figure
i m p l e m e n t e d s t e p b y s t e p e v e r y y e a r.
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