India's finance minister Arun Jaitley indicated that the government was unlikely to appeal against court orders quelling a government decision to tax sale of shares of Vodafone and Shell in offshore transactions. He also said that a break through in the Goods and Services Tax (GST) impasse was in the offing with the government calling a meeting of the empowered committee next week to facilitate a constitutional amendment allowing for the introduction of the law in the winter session.
Delivering a meeting, Jaitley said the government was working on a plan to introduce an appropriate tax regime, better infrastructure and competitive interest rates to ensure that its ambitious `Make in India' programme succeeds, besides making manufacturing zones competitive and cost-effective.
Emphasizing the reforms that the government wants to introduce, he said an ordinance on coal block allocation was due next week and the Centre would also have a similar transparent mechanism for mining of other minerals. Criticizing the UPA government for its attempt to tax transfer pricing deals retrospectively, Jaitley said taxes that were payable could be collected, but taxes which are not payable cannot be compulsorily extracted. “We have a fair judicial system, there are redressal mechanisms, there are tribunals and there are international tribunals. The kind of taxation regime which scared investors away and has not resulted in the exchequer getting a single rupee are stuck in legislation where the government is unlikely to succeed. They eventually ended in only giving us a bad name as an investment decision.“
Should the government not appeal against the Shell and Vodafone verdicts several other multinationals in India would also stand to gain. Companies such as IBM, Nokia, Cairn India and Leighton India are facing similar demands from tax authorities. He also assured tax payers that there would not be any harassment for them going forward.
Stressing on land acquisition as another requisite for reform, the finance minister said that present laws were flawed and needed a fresh look. “I have been working on the land law along with others in the government. I came across a curious provision which said that no land acquired under the law can ever be used for a private educational institution, private hospital or a hotel,“ said Jaitley. The finance minister said the myriad restrictions on land acquisition were applicable not only to the private sector but even to defence.
Capturing yhe improved sentiments in the economy, Vineet Jain, MD, BCCL, in his inaugural address, said that in the first six months Prime Minister Narendra Modi has raised spirits and wowed investors. “The gloom of the last few years is a distant memory. The finance minister has introduced number of reforms in coal mining, labour and ease of doing business. But yeh dil maange more,” he said.
Meanwhile, Attorney general Mukul Rohatgi has advised the income-tax department not to appeal against a Bombay high court order in the Rs 32 billion transfer-pricing case involving Vodafone.
“I have advised that we should accept the order because allotment of shares is capital receipt and not income and the judgment says so,“ Rohatgi told TOI, adding that he has advised against filing an appeal in SC. In doing so, the government's top law officer has overruled the solicitor general who in October advised the government to appeal in the apex court.
Rohatgi has gone with the advice given by the chief commissioner, income tax, and chairman, Central Board of Direct Taxes, who had suggested that the government desist from appealing.
The HC ruled in favour of the British mobile service provider and said the company was not liable to pay the income-tax demand. The I-T department had asked the company to pay additional income tax alleging it had undervalued its shares in the subsidiary Vodafone India Services while transferring them to the parent company in Britain. Attorney general Mukul Rohatgi has advised the IT department not to appeal against a Bombay high court order in the transfer-pricing case involving Vodafone. The transfer-pricing case against Vodafone was in addition to the Rs 11,000 crore dispute related to capital gains tax on it's acquisition of Hutch's interest in the Indian telecom firm, which is under arbitration.
The move, also aimed at boosting business sentiment, may set a precedent of sorts as the government is involved in a slew of transfer-pricing cases.Earlier this month, it lost another case in the HC, which ruled that Shell was not liable to pay taxes in India in one case. The stance in the Vodafone case reflects the government's intent to regain the trust of investors, many of whom had shunned India in recent years, citing “unreasonable“ tax demands.
