Terming the controversial retrospective taxation regime a “legacy issue”, Finance Minister Arun Jaitley has assured US investors that PM Narendra Modi led government does not intend to legislate retrospectively and is looking to put a “quietus” to the matter.
Jaitley said the government has categorically made it clear that “we do not intend to legislate retrospectively. We do not intend that any fresh action under the old retrospectively laws be taken.”
“So for the future, this is a closed issue. And the investors are quite appreciative of that. As far as past is concerned it relates to only some individual companies and the issue is pending before some judicial or dispute redressal mechanism body,” he told reporters here.
“And therefore, when I said we are looking for putting a quietus to this, I had in mind waiting for the expeditious disposal of that dispute,” Jaitley said yesterday.
Jaitley said: “Just as some transfer pricing has been resolved by a judgement of the Bombay High Court, which we accepted and we put an end to the whole issue, that is what the similar quietus I was referring to,” he said.
Jaitley, who is on a nine-day visit to US, has held talks with senior American officials including Treasury Secretary Jacob Lew, Commerce Secretary Penny Pritzker and US Trade Representative Michael Froman and met some top CEOs on a one-on-one basis and also collectively.
He termed the controversial retrospective taxation regime a “legacy issue.”
The Finance Minister said the Indian economy would become more efficient, with a possible future rate cut.
“Normally I do not comment on what the central bank is going to do. All what I can say that with inflation broadly under control, there is a large expectation that with possible future rate cuts, the economy would become more efficient,” he said.
“I am sure that the central bank in India as a responsible institution will take all these factors into consideration,” Jaitley said.
Referring to the meetings he had with the banks last week, Jaitley said: “We have been nudging the banks to transfer the maximum benefit to the customers itself.”
Responding to a question, Jaitley said the Government in principle has agreed to be a party to Foreign Account Tax Compliance Act (FATCA). He, however, said the details of the signing date has to be worked out.
Jaitley said FATCA would have a “positive impact” on automatic sharing of information on a real time basis.
“That would help in our campaign to prevent undisclosed assets from being accumulated outside the shores of India,” he said.
Talking about the adverse affect of a “low monsoon” on rural sector, he said the government intends to increase spending on National Rural Employment Guarantee Act programme.
“In my budget speech, over and above the Rs 54,000 crore which is earmarked for MNREGA, I already indicated there was a likely surplus resource this year. Therefore, we would enhance spending on MNREGA,” Jaitley said.
He said the monsoon this year appears to have started off quite well. “I am still keeping my fingers crossed. But, the impact of the adverse weather condition both a low monsoon and also the hail storm had adversely affected the rural sector.”
“Therefore, the increase in rural income has not been at the level that would have pleased us. We want to have an increased spending,” he said.
Jaitley said the government is “seriously considering” some budgetary support in infusing capital.
“Inducting capital is on our agenda,” Jaitley said, adding that this can be done in two ways.
“One is to bring down the government equity to 52 per cent, which we have already announced. Banks can slowly move in that direction,” he said.
“And the second of course is that the government is seriously considering some budgetary support in infusing capital. The exact amount as we finalise would let you know,” Jaitley said in response to a question.
According to him, as economy picks up and stalled projects take-off, plus some actions by the banks themselves, the NPA (non-performing assets) would gradually improve.
So from an all-time high of 6 per cent, the NPAs came down to 5.64 per cent and to 5.2 in the quarter ending in March.
“It is still too early to detect a pattern in it. I will wait for a quarter or two to analyse if there is some pattern in improvement,” he said.