Avoid retro tax law as a principle: Shome panel

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Parthasarathi Shome
Parthasarathi Shome

Proposes abolishing the post of Revenue Secretary

Retrospective amendment to tax laws should be avoided as a principle, the Parthasarathi Shome commission on tax reforms has suggested. The Commission’s view on retrospective tax amendment comes at a time when efforts are on to restart conciliation between the Government and Vodafone over the ₹20,000-crore tax dispute.

The UPA Government, while presenting the Budget for 2012-13, had brought in a retrospective amendment to the Income Tax Act in order to nullify the verdict of the Supreme Court which was in favour of Vodafone. The BJP manifesto also promises to provide a non-adversarial, conducive tax environment.

In its report, the Tax Administration Reform Commission (TARC) also endorsed the recommendations given by the 1992 committee on tax reforms headed by Raja J Chelliah for abolishing the post of Revenue Secretary in the Ministry of Finance. It feels that the functions of the Revenue Department should be allocated to the Central Board of Direct Taxes and the Central Board of Excise and Customs.

The commission has submitted its first report to Finance Minister Arun Jaitley. It further said that the administrative decisions and tax policy are neither based on any analysis nor have any international standards. “Pre-budget discussions are usually back-of-the-envelope calculations of revenue impact. The impact on a taxpayer is considered in a cursory manner, if at all. Retrospective amendments clustered during 2009-12 may reflect this lackadaisical approach. In turn, this reflects complete lack of accountability at any level except on grounds of lagging behind in revenue collection,” the report said.

On abolishing the post of the Revenue Secretary, it said: “This would empower the tax departments to carry out their assigned responsibilities efficiently.” Currently, the post of Revenue Secretary is held by an Indian Administrative Service Officer, while the Chairmen of two boards, CBDT (for handling issues related with Personal Income Tax, Corporate Tax, STT & CTT and Wealth Tax) and CBEC (for handling issues related with Custom Duty, Central Excise Duty and Service Tax) are Indian Revenue Service officials.

The commission argued that an IAS officer is likely to have little experience or background in tax administration at the national level and little familiarity with tax, including international tax, issues that are increasingly taking the centre stage.

“Yet she/he is the final signatory on decisions on tax policy and administration matters prior to their arrival for the Finance Minister’s consideration,” the Commission observed. The Commission has recommended that the two Boards embark on selective convergences immediately to achieve better tax governance, and, in the next five years, move towards a unified management structure with a common Board for both direct and indirect taxes, called the Central Board of Direct and Indirect Taxes.

Tax boards rejig

It suggested the setting of a Governing Council, headed in rotation by the chairpersons of the two Boards and with participation from outside the government, to oversee the functioning of the two Boards.

(This article was published on June 16, 2014)
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Union Budget 2014-15 Highlights

  • Following are the highlights of the Union Budget 2014-15 presented by Finance Minister Arun Jaitley in Parliament on July 10, 2014
  • Income-tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh
  • Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.
  • Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh
  • Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
  • Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012
  • Fiscal deficit target retained at 4.1% of GDP for current fiscal and 3.6% in FY 16
  • Rs 150 crore allocated for increasing safety of women in large cities
  • LCD, LED TV become cheaper
  • Cigarettes, pan masala, tobacco, aerated drinks become costlier
  • 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
  • 5 more IITs in Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
  • 4 more AIIMS like institutions to come up in AP, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP
  • Govt proposes to launch Digital India’ programme to ensure broad band connectivity at village level
  • National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed
  • Rs 100 cr scheme to support about 600 new and existing Community Radio Stations
  • Rs 100 cr for metro projects in Lucknow and Ahmedabad
  • Govt expects Rs 9.77 lakh crore revenue crore from taxes
  • Govt’s plan expenditure pegged at Rs 5.75 lakh crore and non-Plan at Rs 12.19 lakh crore.
  • Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’
  • Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
  • FDI limit to be hiked to 49% pc in defence, insurance
  • Disinvestment target fixed at Rs 58,425 crore
  • Gross borrowings pegged at Rs 6 lakh crore
  • Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.
  • ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
  • Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants
  • Set aside Rs 11,200 crore for PSU banks capitalisation
  • Govt in favour of consolidation of PSU banks
  • Govt considering giving greater autonomy to PSU banks while making them accountable
  • Rs 7,060 crore for setting up 100 Smart Cities
  • A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.
  • Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology
  • Expenditure management commission to be setup; will look into food and fertilizer subsides
  • Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
  • Long term capial gains tax for mutual funds doubled to 20%; lock-in period increased to 3 years
  • Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
  • EPFO to launch the ‘Uniform Account Number’ service to facilitate portability of Provident Fund accounts
  • Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
  • Minimum pension increased to Rs 1,000 per month
  • Union Budget 2014: List of products getting cheaper/ costlier

  • Finance Minister Arun Jaitley today spared the common man from price hikes by keeping duties on commonly used day-to-day items unchanged but made it costlier for smokers and tobacco consumers with a steep increase in excise rate in tax proposals in Budget 2014—15.
  • Following is a list of what will be cheaper and costlier:
  • CRT television
  • LED/LCD TVs especially below 19 inch
  • Footwear priced between Rs 500 to Rs 1,000 per pair
  • Soaps
  • E—book readers
  • Desktop, laptops and tablets
  • RO based water purifiers
  • LED Lights, fixtures and lamps
  • Pre forms of precious and semi—precious stones
  • Sports Gloves
  • Branded petrol
  • Matchbox
  • Life micro insurance policies
  • HIV/AIDS drugs and diagnostic kits
  • DDT insecticides
  • Cigarettes
  • Aerated drinks with sugar
  • Pan masala
  • Gutka and chewing tobacco
  • Jarda scented tobacco
  • Radio Taxi
  • Imported electronic products
  • Portable X—ray machines
  • Half cut/broken diamonds.


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