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Shome bets on tax reforms

Parthasarathi Shome in Calcutta on Saturday. Picture by Kishor Roy Chowdhury

Calcutta, Jan. 11: Parthasarathi Shome, adviser to Union finance minister P. Chidambaram, today said the current delay in implementation of the two big tax reforms of the country — direct tax code (DTC) and goods and services tax (GST) — is on account of political factors.

Shome, who was speaking at an interactive session of the Calcutta Chamber of Commerce, said most of the technical aspects of both the bills had already been taken care of and both could see the light of the day in 2014-15.

“I think it is a matter of political economy,” Shome said. He added, “Somehow I feel confident with the stage at which the technical work has reached, both of them could certainly come in 2014-15.”

Work on DTC, which is set to replace the Income Tax Act of 1961, began in 2007-08 and the original bill was mooted in 2009. But several changes were introduced to it later on with the most noted being the provisions relating to the retrospective tax amendment and GAAR.

Shome today pointed out that retrospective tax should only be applied in the rarest of rare cases to correct anomalies and technical snags and protect the tax base of the country rather than to enhance the tax base.

On GST, Shome said most of the disputed parts such as conversion of CST into an interstate GST and identification of collection points were already discussed. “Even the constitutional amendment has been meticulously seen by the finance minister,” he said.

Tax on intangibles

Shome said one of the emerging areas of concern for the authority was the implementation of tax on intangibles. He said the issue was more prominent particularly when a subsidiary in India with the parent company abroad incurred significant cost in promoting brands locally.

He said that many Bollywood artistes were increasingly endorsing foreign brands for which they might have to shell out more money in the coming days.

 
 
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