Arun Jaitley in New Delhi on Friday. Picture by Prem Singh
New Delhi, July 18: The government today said it planned a series of reforms outside the budget in the months ahead.
Replying to a debate on the general budget, finance minister Arun Jaitley told the Lok Sabha: “There are a series of steps that we have to take. The budget was only some of those steps. It was directional. It only shows direction. There will be many steps that will be taken outside the budget. It is not necessary that everything is announced in the budget.”
Jaitley said he had been receiving a large number of suggestions to change or clarify his tax proposals. He said he would respond to them during the debate on the Finance Bill later.
Mutual fund players are among those who are demanding a change. They want the government to defer the imposition of long-term capital gains tax on debt funds.
Beside, there are demands for clarity on depreciation rules for wind farms and on the imposition of General Anti Avoidance Rules (GAAR).
The first stage consideration of the budget was completed today with the Lok Sabha approving it. The second stage will involve discussions on demands for grants followed by the approval of the Finance Bill.
According to Jaitley, the government will not levy any tax with retrospective effect that creates additional burden, adding that existing anomalies will be corrected.
Many took Jaitley’s comment to mean that the imposition of long-term capital gains tax on debt mutual funds would not be retrospective.
“One thing we have made very clear: No retrospective tax creating fresh liabilities will be imposed,” the minister said.
He said the government had no qualms about being “pro-business”, asserting that it was necessary to generate more revenues and increase spending, which would benefit the poor and marginalised sections of society.
The government is trying to restore the confidence of domestic and foreign investors by bringing “civility” in the taxation system and removing the perception of “tax terrorism”, he said.
Jaitley said he preferred low taxes to encourage economic activity. “If you put higher taxes on products, people will buy products from outside. Lower taxes will increase economic activities.”
He noted that investors over the last few years had developed “doubts” about the India story in the backdrop of an unpredictable tax regime.
Lower interest rate
Jaitley also said he hoped interest rates would be reduced should inflation ease, days after data showed consumer inflation easing to their lowest since the figures were first published in January 2012.
“Interest rates have gone up. Hopefully, if inflation moderates, they will come down,” Jaitley told Parliament.
Data released by the government earlier this week, showed consumer price-led inflation eased to 7.31 per cent in June, helped by a slowdown in food inflation and a favourable statistical base.
The Reserve Bank of India, which uses retail prices as its main inflation gauge while deciding on the country’s monetary policy, will review policy rates on August 5.
Jaitley also defended his proposal to raise the foreign direct investment limit in defence and insurance, stating that there is an urgent need to attract foreign capital and expertise in the defence sector as India imports almost 70 per cent of its defence equipment which entails a huge foreign exchange outgo.