The government on Wednesday iterated its commitment to carry out reforms on direct and indirect taxes, saying a draft legislation on DTC is likely to be tabled in Parliament in the monsoon session and talks with the states are on regarding the design of the proposed goods and services tax.
"I am happy to inform that in the case of direct taxes code, the process of consultation with the stakeholders for revising the first draft is almost over. We expect to place a revised discussion paper in the public domain by next month.
"After a quick round of consultations with some of the major stakeholders, we should be able to submit the draft legislation to Parliament in the monsoon session," finance minister Pranab Mukherjee told the Lok Sabha, while initiating the debate on the Finance Bill.
The government has proposed to replace the Income Tax Act of 1961 with a direct taxes code, which would simplify the legislation.
The code is also expected to minimise tax exemptions, but widen tax slabs.
The first draft discussion paper proposed to levy tax at the rate of 10 per cent on annual income between Rs 1,60,000 and Rs 10 lakhs (Rs 1 million), against the present upper range of Rs 500,000, while 29 per cent on income between Rs 10 lakhs (Rs 1 million) and Rs 25 lakhs (Rs 2.5 million), against Rs 500,000-800,000 currently.
Similarly, the highest income tax slab of 30 per cent was proposed to be imposed on annual income above Rs 25 lakhs (Rs 2.5 million) against over Rs 800,000 at present.
But there were many complaints against the first draft against its proposal to tax long-term savings and retirement money at the time of withdrawal and the silence on tax rebates on housing loans.
Besides, the draft DTC proposed to impose minimum alternate tax on gross assets of companies, instead of gross profits, a suggestion which did not go down well with the industry.
MAT is a levy imposed on profit-making companies which do not fall under the tax net due to various exemptions.
The finance minister had assured the members of the Parliament earlier that he would try to address the grievances against some provisions of the first draft.
As regards indirect tax reform in the form of goods and services tax, the finance minister said the Centre is engaged with the states in finalising the design of new tax system, which will replace VAT at state level and excise and service taxes at the national level, besides a host of local levies.
Earlier, Mukherjee had expressed his intention of introducing GST from next fiscal, a delay of one year from the scheduled date of implementation.
He said the Centre is willing to provide compensation to the states for initial years in case they lose revenue after switching over to GST, provided there is agreement in various aspects of GST.
"The design and modalities of providing this compensation would be worked out in discussion with the states and the empowered committee," the finance minister said.
Image: Pranab Mukherjee
