Economy

Dividend distribution tax here to stay, says Garg

Our Bureau New Delhi | Updated on July 12, 2019 Published on July 12, 2019

Subhash Chandra Garg   -  Kamal Narang

Finance Secretary also justifies buyback tax

The Centre has ruled out doing away with dividend distribution tax (DDT). It has also attributed the reason behind introducing buyback tax in the Budget to the need to promote investments by corporates with surplus funds, besides closing the tax arbitrage.

“It (DDT) is here to stay,” Subhash Chandra Garg, Finance Secretary, said in reply to a question on DDT at a post-Budget conference organised by the Confederation of Indian Industry (CII) here on Friday.

“Two things stand out in the Budget — we have articulated a clear goal, the need to get India to a $5-trillion economy with lot of equity. The second is to open up the economy to private sector and to the world,” Garg said.

Meanwhile, the government and industry do not seem to be on the same page as to who should propel investments to give a reboot to the economy. While Garg felt that time has come for India Inc to step up its investments in infrastructure and digital economy, the CII felt that government could have relaxed the fiscal deficit by few basis points to create assets after ring-fencing them.

“A little relaxation in fiscal deficit in the current times of pain points for industry would have helped,” said Vinayak Chatterjee, Chairman of CII’s Economic Advisory Council.

Garg said that India Inc has not made adequate investments in infrastructure. The whole package of recent Budget is to enable the private sector to go after growth and help India achieve goal of $5-trillion economy, he said..

Noting that achieving a $5-trillion economy is “doable and achievable”, Garg said that it is private sector that will help in achieving this goal.

Chatterjee highlighted that demand compression and liquidity are currently big pain points for the industry. He also said that delayed payments from government departments are causing stress for industry.

Garg, however, maintained that there was no liquidity problem at the aggregate level, especially when viewed against the fact that banks in the last four weeks have been parking funds (of nearly ₹1 lakh crore) in the reverse repo window of the RBI. There may be solvency problems in certain firms which is coming out to be seen as liquidity problem in the system, he noted.

Fiscal deficit

On fiscal deficit, Garg said that any one percentage relaxation of fiscal deficit would bring ₹2 lakh crore of additional money into system. This could prove inflationary if it goes for consumption. It is industry that had always been saying that government investments are not productive, Garg noted, hinting that asking government to step on the investments pedal may not be good idea.

“Effort has to be taken to build productive capacities in the private sector,” Garg said.

Buyback tax

On buyback tax, Garg, replying to another question, said that he will discuss the grandfathering issue with the revenue department.

CII members wanted the government to exclude those buybacks that are already under way from the purview of the buyback tax. They wanted this levy to be imposed on only those buyback that commenced post July 5.

Meanwhile, Disinvestment Secretary Atanu Chakraborty said on Friday that 10 more central public sector enterprises will be listed on bourses this fiscal. “The number of listed CPSEs is 59. We are going to add 10 more this year”, he said.

Published on July 12, 2019
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