When the previous FM, Pranab Mukherjee announced GAAR & Retrospective Tax, on the advise of some bureaucrats in the Tax department & Finance Ministry, he actually shot himself in the leg and had to hastily defer it by one year and the PM, who was told off by the British PM David Cameroon, had to put the retro tax, in case of Vodafone, on the backburner
Despite these measures, which were totally uncalled for, India lost atleast 1% in GDP growth because of the uncertain investment climate created during the current fiscal 2012-13.
GAAR was actually a part of the Direct Tax Code (DTC), which was under discussion with all stakeholders and the DTC with all amendments would have taken effect either from 1st April 2013 or 2014 at the latest.
For this reason, it took the new FM, P. Chidambaram, a good 10 months to appoint the Shome Panel, which took on board all apprehensions and made several pragmatic changes, most of which have now been accepted by the FM, allaying all fears of investors, and was promptly given a thumbs up by the stockmarkets.
This is like taking 2 steps back and one forward! But the job is only half done. Now he has to address the retro tax and specifically the Vodafone case. Despite a Supreme Court judgement in favour of Vodafone, the government attempted last year to circumvent all natural justice after a 3 year long legal battle, which was rightfully won by Vodafone, by introducing the retro tax.
The restrospective tax is another retrogade step, which has still to be addressed, because, despite the SC judgement in favour of Vodafone, and a subsequent rejection by the SC of a review petition by the government, and despite the PM's intervention, the Income Tax department has still sent a notice to Vodafone, asking for Rs.12,000 crores, as recently as a month back.
Now, as the FM departs in the next 10 days to the developed countries for roadshows, to invite FDI in India, investors are going to ask him uncomfortable questions, on retrospective taxation, a matter which will still come back to haunt him ....
Despite these measures, which were totally uncalled for, India lost atleast 1% in GDP growth because of the uncertain investment climate created during the current fiscal 2012-13.
GAAR was actually a part of the Direct Tax Code (DTC), which was under discussion with all stakeholders and the DTC with all amendments would have taken effect either from 1st April 2013 or 2014 at the latest.
For this reason, it took the new FM, P. Chidambaram, a good 10 months to appoint the Shome Panel, which took on board all apprehensions and made several pragmatic changes, most of which have now been accepted by the FM, allaying all fears of investors, and was promptly given a thumbs up by the stockmarkets.
This is like taking 2 steps back and one forward! But the job is only half done. Now he has to address the retro tax and specifically the Vodafone case. Despite a Supreme Court judgement in favour of Vodafone, the government attempted last year to circumvent all natural justice after a 3 year long legal battle, which was rightfully won by Vodafone, by introducing the retro tax.
The restrospective tax is another retrogade step, which has still to be addressed, because, despite the SC judgement in favour of Vodafone, and a subsequent rejection by the SC of a review petition by the government, and despite the PM's intervention, the Income Tax department has still sent a notice to Vodafone, asking for Rs.12,000 crores, as recently as a month back.
Now, as the FM departs in the next 10 days to the developed countries for roadshows, to invite FDI in India, investors are going to ask him uncomfortable questions, on retrospective taxation, a matter which will still come back to haunt him ....
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