While a task force on direct tax reforms will submit its report by May, the Budget speech may indicate broad pointers of the blueprint.
Finance minister Arun Jaitley may give an idea about the broad contours of a comprehensive direct tax reforms in the union budget 2018-19 that the government intends to rollout later during the year.
In September, Prime Minister Narendra Modi had said that more than half a century old Income-Tax Act needs to be re-drafted and a new Direct Tax Code (DTC) needs to be introduced in ‘consonance with economic needs of the country’.
The finance ministry in November constituted a six-member task force. Arbind Modi, Member (legislation) of Central Board of Direct Taxes (CBDT) is the convenor. Chief Economic Adviser (CEA) Arvind Subramanian is a permanent special invitee in the task force.
While the report needs to be submitted to the government by May, 2018, the Budget speech may include some direction on the tax law.
The task force will draft a direct tax legislation keeping in mind, tax system prevalent in various countries, international best practices, economic needs of the country, among others.
Some of the provisions of the Direct Tax Code such as General Anti-Avoidance Rule (GAAR) and Place of Effective Management (PoEM) has already been implemented.
While the Goods and Services Tax (GST) replaced more than a dozen of central and state levies to bring in one unified nation-wide tax, DTC will consolidate and simplify the direct tax laws into a single legislation.
The erstwhile UPA government had finalised DTC and had introduced the Bill in the Parliament in 2010. However, the Bill lapsed with the dissolution of the 15th Lok Sabha. The draft law proposed to do away with various exemptions, increase threshold of taxation and lower tax rates.
As the government overhauled the existing indirect tax system last year by implementing GST, on a larger scale, tax reforms would remain incomplete without revamping country’s direct tax system.
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