Will set up high-level panel to sort out MAT issue: Jaitley

Arun Jaitley
Finance Minister Arun Jaitley has said a high-level committee will be set up to sort out taxation issues of the past and make the system a predictable one. The statement, made through a guest column in the Financial Times, dated April 26, comes at a time when the Centre has sought to minimise the adverse fallout of the revenue department’s move to send notices on pending cases of Minimum Alternate Tax (MAT) to foreign investors.

“I am considering a high-level committee to explore what can be done to resolve the past, and move beyond it in a way that would provide real predictability and certainty to investors. This committee will be instructed to report expeditiously so that early actions can be taken,” Jaitley wrote in the guest column.

Government sources here said the issue would either be taken up by the existing Lahiri committee or it could be given to a new committee altogether.

The Lahiri committee, headed by former chief economic advisor Ashok Lahiri, was set up last year to interact with trade and industry on tax-related issues to ascertain areas where clarity in tax laws is required.

In the column, Jaitley sought to defend the revenue department’s stance, saying pending MAT cases were carried over even before the Narendra Modi government assumed power.

“Though it is only the legacy issues (concerning taxation) that haunt us, we must put a quick end to them,” he said.

Explaining the levy of MAT on foreign portfolio investors, Jaitley said the decision was taken not by the government but by quasi-judicial bodies, created well before the present government came to power.

Following a ruling by the Authority for Advance Rulings (AAR), the revenue department sent notices to 68 foreign institutional investors (FIIs) for payment of dues totalling Rs 602.83 crore towards MAT.

“However, we have made clear these rulings can be contested in higher courts, which will respect due process and have the power to quash faulty decisions. We also made clear that our international tax treaties cannot be overridden by these rulings,” said Jaitley.

Since some of the rulings of quasi-judicial bodies went in favour of foreign investors, the tax department had little choice but to respect these decisions, he added.

“The rule of law cuts both ways. We cannot say it is undermined when we take retroactive actions and at the same time seek to override, retroactively, the decisions of our institutions,” said Jaitley.

Separately, at an event organised by the Central Bureau of Investigation (CBI) on Monday morning, Jaitley again promised a non-adversarial tax regime. He said the government had no intention to tax people retrospectively and  would make it easier to do business in the country.

“Unless we can increase our investments, make our taxation structure comparable, present a competitive labour regime, offer utilities at competitive prices, offer capital at competitive cost, the manufacturing sector will not grow,” said Jaitley.

Referring to the retrospective tax amendment by the United Progressive Alliance government, he said: “Our taxation policy has to be non-adversarial. The present government has no intent to tax people retrospectively.”

“A balance has to be struck. You cannot impose unfair taxation and you cannot have unfriendly contact of revenue department and the assessee. You cannot have an environment of distrust with the assessee. And, at the same time, the fairness of the state cannot be that there is a licence not to pay taxes which are due,” he added.

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