FINANCE MINISTER'S SPEECH DATED 7-5-2012 ON FINANCE BILL, 2012 : Part 1

Madam Speaker,

I presented the Budget for the year 2012-13 on 16^th of March, 2012. Since then I have received a large number of suggestions both from within the House and outside. Most of these pertain to tax proposals and range from seeking modification of some proposals to reconsideration or review of certain others. Requests have also been received for granting some fresh reliefs. I express my sincere gratitude to everyone for the interest they have shown in appraising my Budget proposals. I appreciate the valuable suggestions they have made and understand the concerns they have expressed.

2. While I propose to address some of these through amendments to the Bill, a number of concerns relating to indirect taxes can be addressed through notifications. I shall now take up the significant amendments to the Budget proposals.

Direct Taxes

3. I thank the members of the Standing Committee for examining the Direct Taxes Code Bill (DTC) and making valuable suggestions. Some of the proposals in the DTC such as removal of the cascading effect of the Dividend Distribution Tax, allowing Venture Capital to invest in all sectors, introduction of Advance Pricing Agreements and raising the threshold limit for audit and presumptive taxation to Rs. 1 crore which have been endorsed by the Standing Committee, have already been included in the Finance Bill. However, I could not consider all the recommendations of the Committee as the Report was received on 9^th of March, after most of the proposals of the Finance Bill, 2012 had been finalized.

4. In addition, certain provisions relating to a General Anti-Avoidance Rules (GAAR) have also been proposed in the Finance Bill, 2012. After examining the recommendations of the Standing Committee on GAAR provisions in the DTC Bill 2010, I propose to amend the GAAR provisions as follows:

 (i)  Remove the onus of proof entirely from the taxpayer to the Revenue Department before any action can be initiated under GAAR.

(ii)  Introduce an independent member in the GAAR approving panel to ensure objectivity and transparency. One member of the panel now would be an officer of the level of Joint Secretary or above from the Ministry of Law.

(iii)  Provide that any taxpayer (resident or non-resident) can approach the Authority for Advance Ruling (AAR) for a ruling as to whether an arrangement to be undertaken by her is permissible or not under the GAAR provisions.

5. To provide greater clarity and certainty in the matters relating to GAAR, a Committee has been constituted under the Chairmanship of the Director General of Income Tax (International Taxation) to give recommendations for formulating the rules and guidelines for implementation of the GAAR provisions and to suggest safeguards so that these provisions are not applied indiscriminately. The Committee has already held several rounds of discussion with various stakeholders including the Foreign Institutional Investors. The Committee will submit its recommendations by 31^stMay 2012.