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Updated: May 8, 2012 01:45 IST

GAAR deferred, levy on jewellery withdrawn

  • Ashok Dasgupta
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Union Finance Minister Pranab Mukherjee arrives at Parliament House in New Delhi on Monday for a debate on Finance Bill.
Union Finance Minister Pranab Mukherjee arrives at Parliament House in New Delhi on Monday for a debate on Finance Bill.

Bowing to intense pressure from diverse quarters both at home and abroad, the government on Monday deferred the introduction of GAAR (General Anti Avoidance Rules) provisions on foreign investors to the next fiscal year, withdrew the levy of one per cent excise duty on branded and unbranded precious metal jewellery and announced a slew of other relief amendments to tax proposals to allay the concerns of various stakeholders and attract low-cost funds for the infrastructure sector.

Moving the Finance Bill, 2012 in the Lok Sabha for discussion and approval, Finance Minister Pranab Mukherjee, however, held firm on his intent to retrospectively amend the relevant provisions of the Income-Tax Act so as to bring Vodafone-type acquisition deals into the tax net while holding out an assurance that the proposed “clarificatory” amendments would not override the DTAAs (Double Taxation Avoidance Agreements) that India has inked with 82 countries.

In keeping with his promise to provide relief to jewellery traders who had gone on over a three week-long countrywide strike in protest against budgetary levies, Mr. Mukherjee not only rolled back the one per cent excise duty on branded and unbranded jewellery but also raised the threshold limit for TCS (tax collection at source) by sellers on cash purchases from Rs. 2 lakh to Rs. 5 lakh.

Pointing out that the proposal on TCS at the rate of one per cent of the sale amount from the buyer for all cash transactions exceeding Rs. 2 lakh was aimed at curbing the flow of unaccounted money in bullion and jewellery trade, Mr. Mukherjee said: “Responding to the representations made by the jewellery industry that this would cause undue hardship, I propose to raise the threshold limit for TCS on cash purchases of jewellery to Rs.5 lakh from the present Rs. 2 lakh. The threshold limit for TCS on cash purchase of bullion shall be retained at Rs.2 lakh. However, it is being clarified that bullion will not include any coin or other article weighing 10 gm. or less.”

Apart from deferring to 2013-14 and subsequent years the applicability of GAAR provisions – a proposal that had unnerved foreign institutional investors (FIIs) and was mainly responsible for the stock market collapse and the consequent depreciation of the rupee – Mr. Mukherjee also sought to incorporate some of the suggestions of the Standing Committee on Finance which had scrutinised the Direct Taxes Code Bill, 2010.

Mr. Mukherjee proposed amendment in the GAAR provisions to remove the onus of proof entirely from the taxpayer to the Revenue Department before any action can be initiated under GAAR.

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How many times this govt. wants to make a mockery of itself and its
stupefying policies? First they permit something then they retract then
they won't amend it for another few months or years. Is there a word
called policy paralysis in this govt.'s dictionary?

from:  Rahul
Posted on: May 8, 2012 at 22:06 IST

The Finance minister has set a bad precedent by the retrospective application of laws , under the influence of idiot beurocrats , who don't think of how India should grow, but have a tunnel vision on how to collect more revenue , going against best international practice. In fact this one bad decision by Pranab can overshadow the much good he has done,over the years

from:  raj
Posted on: May 8, 2012 at 08:34 IST

There are 1000s of abbreviations and acronyms floating around in our heads thanks to media and internet that most of us are unable to keep track or figure out what some of them stand for! Also some of them dont sound appropriate and at times seem unintentionally funny for the concerned issue or organisation they represent! I hope that some magnanimous entreprenuer publishes a free booklet and distribute it free to all Indians so that we can use it as a reference everytime an acronymn or abbreviation comes our way!

from:  Aravind
Posted on: May 8, 2012 at 08:00 IST

It defies common sense to introduce a regressive tax proposal like GAAR at this crucial time when India's economy is slowing, balance of payment situation getting worse and FDI is declining. I think Pranab Mulherjee is smarter than that, he ought to know very well it is a sure fire way to help depreciate rupees and make its BoP situation precarious eventually heading to a disaster like 1991 and burying India's dream to emerge as a major economy in the world. Why is Mr. Mukherjee is so hell bent on moving India back to the "Hindu rate of growth" days!! Is he that desperate for revenue to pay for the profligate subsidy and spending by the govt to kill the goose that lays golden egg!!

from:  Jitendra Dutta
Posted on: May 8, 2012 at 06:07 IST

Since GAAR was being perceived as a threat to India's image as a country with sound laws and legal procedures, the Union Finance Minister's decision to defer its implementation by one year is most appropriate and timely. However, it is obviously necessary for the government to take other steps to protect interests of revenue. Misuse of the Mauritius Tax treaty and Participatory notes is an open secret. But all these years we have preferred to ignore the loss of revenue on account of such misuse. Time has come to close the gaps and eliminate or minimize such misuse at the earliest.

from:  Narendra M Apte
Posted on: May 7, 2012 at 17:34 IST

It's great relief to the poor that he gives concessions to the jewellery sector. Thanks!!!

from:  ajith
Posted on: May 7, 2012 at 16:32 IST
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