It is highly uncertain if the intended reforms will roll out next fiscal

The Direct Taxes Code (DTC) will come under the scanner again. Finance Minister P. Chidambaram, on Tuesday, stated that the tax reform initiative had undergone a number of changes and would require a fresh look.

In reply to a question at a press interaction after his meeting with top officials of the Central Board of Excise and Customs (CBEC) here, Mr. Chidambaram said: “The DTC has gone through various versions...I need time to look at the DTC. I am only 28 days old...It requires a fresh look.”

With this, it is highly uncertain whether the intended reforms in both direct and indirect tax laws by way of the DTC and the Goods and Services Tax (GST) will roll out next fiscal starting April 1, 2013.

The initiative on DTC seeking to replace the archaic Income-Tax Act, 1961 was Mr. Chidambaram’s brainchild when he was Finance Minister in the UPA-I coalition government. Since then, it went through a number of revisions in drafts on the basis of consultations with stakeholders. While the DTC Bill, introduced in 2010 by his successor Pranab Mukherjee, has little resemblance to the original version, a number of new provisions were added later by way of tax exemptions which were not there in the first draft.

Moreover, apart from changes recommended by the Standing Committee on Finance to the controversial provisions relating to retrospective tax amendments and GAAR (General Anti-Avoidance Rules), the Finance Ministry chose to pick them up for enactment in the Finance Bill, 2012, which are now under review.

As for the GAAR controversy, Mr. Chidambaram said that he was awaiting the report of Shome Committee, which is reviewing its provisions to address the concerns expressed by foreign and domestic investors.

On the indirect tax front, Mr. Chidambaram expressed confidence that the revenue collection target of Rs.5.05 crore for the current fiscal would be met. At the same time, he noted that while the authorities would be friendly to tax compliant assessees, the department would be firm with tax evaders for whom “non-compliance is a business”.

“Most people would like to be compliant with tax laws. It is only a very small number that wishes to be non-compliant. I have told the department that we have to be firm with the small number of those non-compliant people,” he said.

Mr. Chidambaram said that he had told CBEC officials to zero down on the top 100 tax payers in each charge pertaining to excise, customs and service tax.

“If you take customs and excise zone wise, top 100 tax payers of the customs, top 100 in excise and top 100 in service tax account for about 95 per cent of taxes collected…So really, each charge has to focus on top 100 ... All the others contribute only about 5 per cent. So if we maintain an interactive, friendly tax administration with them ... we will achieve our target," he said.

“It's only a small number which makes its business to be non-complaint with tax laws. I have held this philosophy very long ... We should be friendly to the large number of tax payers who wish to be complaint with tax laws and we have to be firm with the small numbers (who do not comply) with tax laws,’’ he said.

As for service tax, Mr. Chidambaram said that while 16 lakh people were registered for paying the levy, 10 lakh did not do so. “…This could be out of ignorance, this could be because they do not have adequate assistance to understand how to pay service tax ... So we are going to launch a massive campaign that people must pay taxes and the tax administration will help them pay taxes and will be friendly to tax payer,” he said.

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