JOIN USThe government already has its bags full when it comes to a wish-list for the Union Budget from corporates as well as industry bodies. When it comes to taxes, especially direct taxes, the expectations are sky high with the previous UPA government earning flak for its retrospective tax amendment.
“The Government should remove the ambiguity surrounding indirect transfer provisions by clarifying what constitutes ‘substantial’ value from India assets. Further, some of the recommendations of the Shome committee such as exempting intra-group transactions and transfers by small shareholders should be brought into the statute,” says GV Krishna Kumar, partner (tax & regulatory services) Ernst & Young.
There is an expectation around deferring of GAAR. Together with this, the government will do well to remove the overriding effect of GAAR over DTAAs, Krishna Kumar adds.
“It is expected that the government would come out with detailed guidelines that prescribe the trigger thresholds for taxability, and prescribe applicable exemptions and safe harbours so as to remove ambiguity in this regard. It will be interesting to see the position adopted by the government on the implementation of the General Anti-Avoidance Rules (GAAR) considering the various representations for deferment that are being made,” say Girish Vanvari, head of tax, KPMG in India.
“The Vodafone type transaction with much less Indian connection results in the entire gains being taxable in India. There is an immediate need to specify the threshold for substantial value and the manner of value determination; only gains proportionate to Indian assets should be taxable in India; transfer of shares of offshore listed company should be exempt. This will enable Indian companies to access cheaper foreign capital,” says Daksha Baxi, Executive Director, International Taxation, Khaitan & Co.
AAR needs reform
The non-binding nature of tax officer's withholding certificate, and the time consuming AAR process need to be set right through administrative measures, Baxi says, adding that foreign companies without business income and presence in India, as well as Indian companies eligible for tax holidays, should be exempt from MAT, Baxi adds.
The experts also believe that the government could do well to hike income tax limits for individuals so that there is more disposable income in the hands of individuals.