The new BJP-led government appeared to have steered clear of the retrospective tax legislation that had spooked investors and dented investment into India in the past couple of years.
Although the Budget document said that the government will not create any fresh liability under retrospective taxation, Finance Minister Arun Jaitley later clarified that his government would not rely on retrospective taxation.
“Will this government rely on retrospective tax legislation. My answer is no,” he said in a post-Budget interview. “Does Indian parliament have a jurisdiction to legislate retrospectively. The answer is Yes it has. I can’t curtail this jurisdiction and I won't do that,” he said.
The Budget speech of the finance minister had said that his government would not ordinarily bring about any change retrospectively which creates a fresh liability. It, however, said that the earlier cases related to retrospective taxation at different stages of pendency would reach their conclusion.
“On retrospective tax, I have not repealed it, I have actually said it's wrong and we are not going to do it. And if some fresh dispute comes in, there won't be an assessment, and the CBDT (Central Board of Direct Taxes) would do it. The existing disputes are pending in court and I hope the court will resolve it and we will accept the verdict,” Jaitley said in the Budget.
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