Finance Minister has presented the finance bill 2012. The full speech of finance minister Mr. Pranab Mukherjee is as under.
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PRESS INFORMATION BUREAU
GOVERNMENT OF INDIA
*****
OPENING REMARKS MADE BY THE FINANCE MINISTER SHRI PRANAB
MUKHERJEE AT THE BEGINNING OF THE DISCUSSION ON FINANCE BILL
2012
New Delhi:
Jyaistha 17, 1934
May 07, 2012
The text of the Opening Remarks made by
the Union Finance Minister Shri Pranab Mukherjee at thebeginning of the
discussion on Finance Bill 2012 in Lok Sabha
is given below:
“I presented the Budget for the year 2012-13 on 16th
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.
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
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 9th of March, after most of the proposals of the Finance
Bill, 2012 had been finalized.
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.
1.(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.
(ii) 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.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 31st May 2012.
To provide more time to both taxpayers and the tax
administration to address all related issues, I propose to defer the
applicability of the GAAR provisions by one year. The GAAR provisions will now
apply to income of Financial Year 2013-14 and subsequent years.
Hon‟ble Members are aware that a provision in the Finance
Bill which seeks to retrospectively clarify the provisions of the Income Tax
Act relating to capital gains on sale of assets located in India through
indirect transfers abroad, has been intensely debated in the country and
outside. I would like to confirm that clarificatory amendments do not override
the provisions of Double Taxation Avoidance Agreement (DTAA) which India has
with 82 countries. It would impact those cases where the transaction has been
routed through low tax or no tax countries with whom India does not have a DTAA
.The retrospective clarificatory amendments now under consideration of Parliament
will not be used to reopen any cases where assessment orders have already been
finalized. I have asked the Central Board of Direct taxes to issue a policy
circular to clearly state this position after the passage of the Finance Bill.
Currently, long term capital gain arising from sale of
unlisted securities in the case of Foreign Institutional Investors is taxed at
the rate of 10% while other non-resident investors, including Private Equity
investors are taxed at the rate of 20%. In order to give parity to such investors,
I propose to reduce the rate in their case from 20% to 10% on the same lines as
applicable to FIIs.
To promote further depth of the capital markets through
listing of companies, I propose to extend the benefit of tax exemption on long
term capital gains to the sale of unlisted securities in an initial public
offer. For this purpose, I propose to provide the levy of Securities
Transaction Tax (STT) at the rate of 0.2 per cent on such sale of unlisted
securities.
It has been proposed in the Finance Bill that any
consideration received by a closely held company in excess of the fair market
value of its shares would be
taxable. Considering the concerns raised
by „angel‟ investors who invest in start-up companies, I propose to provide an enabling
provision in the Income Tax Act for exemption to a notified class of
investors.
2.In order to augment long-term low cost funds from abroad
for the infrastructure sector, Finance Bill proposes a lower rate of
withholding tax of 5% for funding specific sectors through foreign borrowings.
To further facilitate access to such borrowings, I propose to extend the lower rate
of withholding tax to all businesses. This lower rate of tax would also be available
for funds raised through long term infrastructure bonds in addition to
borrowing under a loan agreement.
The Reserve Bank of India is formulating a scheme for
subsidiarisation of Indian branches of foreign banks to ring fence Indian
capital and Indian operations from economic shocks external to the Indian
economic scenario. To support this effort, I propose to provide tax neutrality
for such subsidiarisation.
The Finance Bill proposes that every transferee of immovable
property (other than agricultural land), at the time of making payment for
transfer of the property, shall deduct tax at the rate of 1% of such sum. I have received a number of representations
pointing out the additional compliance burden this measure would impose. I,
therefore, propose to withdraw this provision for levy of TDS on transfer of
immovable property.
To curb the flow of unaccounted money in the bullion &
jewellery trade, the Finance Bill proposes the collection of tax at source
(TCS) by the seller at the rate of 1 per cent of the sale amount from the buyer
for all cash transactions exceeding Rs.2 lakh. Responding to the representations
made by the jewellery industry that this would cause undue hardship, I propose to
raise the threshold limit for TCS on cash purchases of jewellery to Rs.5 lakh
from the present Rs.2 lakh. The threshold limit for TCS on cash purchase of
bullion shall be retained at Rs.2 lakh. However, it is being clarified that
bullion will not include any coin or other article weighing 10 gms or
less.
Customs and Central Excise
A related proposal that has attracted public attention is
the imposition of Central Excise duty on unbranded precious metal jewellery at
the rate of 1%. Madam Speaker, I would like to reiterate that the levy was
well-intentioned and introduced not so much for raising revenue as for rationalization
and movement towards GST. However, the outpouring of sentiment both within and
outside the House indicates that we are
not ready for it. As such, the Government has decided to withdraw the levy on
all precious metal jewellery, branded or unbranded, with effect from 17th
March, 2012.
The House would recall that certain amendments were proposed
in the Customs and Central Excise Law in respect of the classification of
offences as cognizable and non-bailable. In response to concern expressed by
Members that the proposal regarding grant of bail only after hearing the public
prosecutor is too harsh, I propose to omit this provision entirely. In
addition, only serious offences under the customs law involving prohibited
goods or duty evasion exceeding Rs.50 lakh, shall be cognizable. However, all
these offences shall be bailable.
There are a few other proposals relating to rationalization
and adjustment of central excise and
custom duties which I will place before the House while replying to the debate.
3.Service Tax
As Hon‟ble Members are aware, taxation of services has
undergone a paradigm shift with the introduction of a Negative List. This initiative has been widely welcomed.The
negative list has been drawn keeping in view the federal nature of the
polity. Some of the States, through the
Empowered Committee of State Finance Ministers, have expressed their
concerns. I have decided to address
their concerns by making changes in the definition of “service” which will
exclude the activities specified in the Constitution as “deemed sale of goods”. The definition of “works contract” has also
been enlarged to include movable properties.
Exemption for specified services relating to agriculture in
the Negative List has also been extended to agricultural produce enlarging the
scope of the entry.There are some other minor changes in the definitions based
on the widespread feedbacks and suggestions that we have received from various
stakeholders and are specified in the revised draft.
Notifications to give effect to these changes would be
issued in due course and laid on the table of the House.
I would now like to hear the views of my colleagues from
both sides of the House on the Budget proposals.”
