The Finance Secretary, Mr R. S. Gujral, on Tuesday expressed disappointment over industry circles grumbling over retrospective amendments to tax laws proposed in Budget 2012-13.
“People say India's image will go down if we go in for retrospective amendments. Absolutely incorrect. I don't understand why we create a bogey that India will get a bad name”, Mr Gujral said at a post-Budget meeting organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).
Parallels
India is not the only country to go in for retrospective amendments to its tax laws, Mr Gujral said, adding that countries such as the UK and Australia have also gone in for similar changes.
According to tax experts, the Government has moved 29 retrospective amendments on the income-tax front in the Finance Bill. There may be an equal number on the indirect tax front, they rued. Mr Gujral, however, did not see any merit in industry being surprised about the move.
“The issue is not that of amendments. We are only clarifying that it was always the intent of the legislature to subject such transactions (indirect transfers) to tax. Why has it come as a surprise to you? Vodafone is a case of no tax and not double taxation. Can you stand up and justify that any transaction with such huge gains should not pay any tax anywhere in the world?” Mr Gujral asked FICCI members.
Mr Gujral also virtually ruled out any roll-back of the Budget proposal that sought to bring to tax the share premium received by closely-held companies in excess of their fair market value.
Extra safeguards
The Finance Ministry is, however, open to additional safeguards to ensure that genuine start-ups are not impacted. The proposed provisions have two safeguards that should take care of the interests of venture capital activities, a Revenue Department official said.
The idea behind this Budget proposal is to curb the malpractice of using closely-held companies for converting black money into white, Mr Gujral said.