(GIST OF YOJANA) Ushering in a New Era of Tax Reforms
The present Government from its very inception has shown its
commitment to tackle the menace of black money. The very first decision of the
present Government after taking over in May 2014 was to set-up a Special
Investigation Team (SIT) headed by the Hon'ble Mr. Justice M.B. Shah, former
Judge of the Supreme Court as Chairman and Hon'ble Mr. Justice Arijit Pasayat,
former Judge as Vice Chairman. The constitution of Special Investigating Team
(SIT) was approved by the Union Cabinet in its First Meeting to implement the
decision of the Hon'ble Supreme Court on large amounts of money stashed abroad
by evading taxes or generated through unlawful activities.
Another major step undertaken by the present Government to
unearth black money from domestic market was the Income Declaration Scheme
(IDS)-20 16 which was a huge success. This Scheme was the latest initiative of
the Government of India to tackle the menace of domestic black money. It was
announced by the Union Finance Minister in his Budget Speech of 2016.
Accordingly, the Government had formally launched the Income Declaration Scheme
(IDS) 2016 from 1 "June, 2016 which was kept open for four months i.e. till 30th
September, 2016. It provided an opportunity to persons who had not paid full
taxes in the past to come forward and declare their domestic undisclosed income
and assets. Declarations could have been made online as well in printed copies
of the prescribed form up to the midnight on 30th September, 2016.
Under IDS-2016, 64275 declarations were filed upto the
midnight of 30th September, 2016 with an aggregate of Rs.65,250 crore worth of
hitherto undeclared incomes in the form of cash and other assets being declared.
With the final stock taking of declarations being filed in physical printed
forms all over the country, this number is likely to be further revised upwards.
The response to the Scheme was much higher than the
expectations of the tax experts and others. Under IDS-20 16, the declarer had to
pay 45 per cent tax on the declarations made which include a penalty of 15
Before that, the Government had brought a Scheme i.e.
Undisclosed Foreign Income and Assets and " Imposition of Tax Act, 2015 to
unearth the black stashed outside the country. The Act provided for one time
compliance window to declare assets held abroad and pay due taxes and penalty on
the value of ass.ets declared.
Besides above, various interactional treaties were signed for
exchange of information about tax evasion and undisclosed assets including
signing of FATCA with USA; amendment of Mauritius Treaty; Initiative for signing
of Automatic Exchange of Information Treaty with all major countries including
Switzerland initiatives under BEPS (Based Erosion and Profit Sharing) such as
country by country reporting, PoEM (Place of Effective Management) etc.
Other major tax initiatives in case of Direct Taxes
undertaken by the Government include reversal of retrospective tax laws,
increase in the threshold limit for filing appeals by the Income Tax Department
and making the tax laws simpler and transparent so that more and more people
become tax compliant. The efforts of the Government is to widen the tax base by
including maximum people who are liable to pay the taxes under its tax net and
make the people tax compliant by making payment of due taxes in time. This will
not only increase the revenue collections of the Government, but would also help
in bringing down the tax rates to a reasonable level. The Government focuses to
provide maximum tax based services online so that there is minimum human
interaction i.e., Minimum Government, Maximum Governance. This will bring down
not only corruption, but would also bring more transparency and efficiency in
the tax system. Accordingly, to prevent undue harassment, the Income Tax
Department is also focusing on electronic based communication with the tax
payers at large. Providing a fair environment to not only corporate but
individual taxpayers seems to be the key focus of the Government. The Prime
Minister in various PRAGATI Meetings had also asked the tax officials to take
care of pending grievances and resolve them at the earliest.
Similarly, in a bid to settle pending tax disputes with
companies, the Union Budget 2016-17 also announced a one-time settlement window
for resolution of tax disputes. Terming litigation as a "scourge" for a tax
friendly regime which also creates an environment of distrust, the Finance
Minister in the Budget had announced a Dispute Resolution Scheme (DRS).
Another area of tax reforms includes the field of Corporate
Tax. India, companies are also looking forward to Budget 2017-18 when the
Finance Minister is expected to throw more light on his roadmap to lower
As far as tax reforms in the field indirect Taxes are
concerned, the historical tax reform being undertaken by the present Government
as a challenge is the Goods and Services' Tax (GST), which is at present under
the process of implementation. The Government has decided to implement this law
with effect from 1st April, 2017. The Economic Survey 2015-16 had termed GST as
a reforms measure "perhaps unprecedented in the modem global tax history." In
fact, this is the result of the present Government's strenuous efforts to carry
every political party on board and get the 122nd Constitution Amendment Bill
passed by both the Houses of Parliament unanimously in the first week of August
this year during the last Monsoon Session. This Constitution Amendment Bill was
stuck for the last more than ten years I.e. since 2006, in the Parliament for
one reason or the other.
Businesses with an annual turnover of to Rs 10 lakh in North
Eastern States and upto Rs 20 lakh in other States will be exempted from GST. On
the issue of administrative control, States will have the sole control over
manufacturing businesses with an annual turnover of up to Rs.1.5 crore. For
those above the threshold, there will be an element of dual control and either
the State or Centre will have control over the businesses based on the risk
However, a pragmatic approach will allow the Centre and States to reach a
consensus on issues easily, and allow for the timely roll-out of GST.
Notwithstanding these concerns, the Centre is hopeful that the model .Bills for
Central GST, State GST and Integrated GST will be finalized by next month i.e.
November, 2016 and can be passed by the Parliament and respective State
Assemblies during their respective Winter Sessions before the end of December,
Simultaneously, the work on IT infrastructure for GST - GST Network (GSTN) that
will provide a common system to States, Centre and taxpayers, is almost
complete. Working of GST Network will be tested in January and February next
The International Monetary Fund (IMF) in its recent World
Economic Outlook had said that the advent of GST would boost India's medium term
growth prospects. Noting that it is positive for trade and investment, the IMF
report said, "This tax reform and the elimination of poorly targeted subsidies
are needed to widen the revenue base and expand the fiscal envelope to support
investment in infrastructure, education and healthcare."
The Union Finance Minister said during his recent visit to
Washington in October 2016 that structural reforms like GST can only add to
India's growth prospects. The IMF and the World Bank have pegged India's growth
rate to 7.6 per cent in the next two years.
As per various estimates, GST will boost revenue collections by plugging
leakages and evasion and will have the potential to boost the country's gross
domestic product by as much as 2 per cent.
Thus, this overall gamut of large scale tax reforms both in
case of Direct and Indirect taxes will go '} long way in making India one of the
fastest growing emerging economy the world with a tax friendly base.