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.