Budget 2014-15: Bring clarity on indirect tax laws, says
KPMG
Payal Thaker,Santosh Dalvi and Taxpayers are looking
up to the finance minister to bring clarity on the
various ambiguous tax provisions which lend
themselves to multiple interpretations and lead to
tax litigations.
Citizens, primarily the business community, are
awaiting anxiously the announcement of the Union
Budget 2014/15. The ascent to power of the Narendra
Modi-led National Democratic Alliance has kindled
hope among the business community which has so far
been trying to survive in an unstable economy. All
eyes are now on Finance Minister Arun Jaitley as he
prepares to unveil the Budget in Parliament on 10
July, 2014.
A stable tax regime has a substantial role to play
in economic growth. Indirect taxes are a major
contributor to the tax revenue. People are expecting
that certain tough measures may be announced in the
tax proposals of Budget 2014/15.
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After the government announced a substantial hike in
railway fares recently. However, at the same time
there is an air of optimism and taxpayers are
hopeful that the Union Budget will address most of
their indirect tax concerns.
A simple tax regime clubbed with easy procedures,
effortless compliance and straightforward
interpretation of tax laws is what is expected from
the new finance minister. As a step towards a Goods
& Services Tax ('GST'), Point of Taxation Rules and
Place of Provision of Service Rules were introduced
under the Service Tax Law by the earlier government.
However, simultaneously the definitions of input
services and inputs (under the Cenvat Credit Rules,
2004) which determine the eligibility of credit
pertaining to input services and inputs respectively
were amended. For example, words like 'services used
in relation to setting up' and 'activities related
to business' have been omitted from the definition
of input services. This has led to several different
interpretations of the said definition creating an
ambiguity as far as the eligibility of credit
pertaining to various input services is concerned.
Thus, the aforementioned amendment in the law has
slowed down the Indian economy's progress towards
GST which has the basic principle to allow credit of
all input indirect taxes to business. The new budget
is expected to resolve such anomalies in the
indirect tax laws. Taxpayers are also looking upto
the finance minister to bring clarity on the various
ambiguous tax provisions which lead to multiple
interpretations thereby causing huge tax
litigations. This will help to reduce the number of
ongoing as well as future litigations which in turn
will facilitate the release of the revenue blocked
due to such litigations. Further, a clear road map
on implementation of GST is also anticipated.
Industries are also expecting relief on certain
other pain points. Auto and pharma industries are
suffering heavily due to the inverted duty structure
where duties paid on raw materials are more than the
duties paid on finished output products.
Accordingly, these industries face huge blockage of
credit since they are unable to completely utilise
the credit pertaining to the duties paid on the raw
materials given the fact that the duty on the output
finished product is lesser. Industries like
entertainment and software are facing the brunt of
double taxation i.e. both value added tax as well as
service tax are levied on licensing of copyright and
software respectively. Such inconsistencies in the
indirect tax laws should be done away with. Also,
laying down of simple procedures and issuing of
appropriate guidelines for tax authorities so that
the tax refunds eligible to exporters are released
at the earliest by the authorities without much
hassle being faced by the exporters is also on the
list of expectations from Arun Jaitley. Thus, it is
now the responsibility of the Modi government
especially of its finance minister Arun Jaitley to
strike a balance between the expectations of
taxpayers and earning the revenue required for the
economic growth of the country. The government will
have to bear in mind that the people of the country
will decide whether Modi 'sarkar' has lived upto to
its slogan 'Ache Din Aanewale Hain' after going
through the proposals in the Union Budget.
Source: Business Today, India, dated 26/06/2014.... |
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