The government will announce fresh relief to some sectors on Thursday, amid demands from the Opposition parties to review proposal to levy service tax in the housing sector. Finance minister Pranab Mukherjee indicated this in Lok Sabha on Wednesday while initiating the discussion on the Finance Bill 2010. The Bill is scheduled to come up for passage on Thursday.
I shall cover the reliefs we propose to grant, the amendments that we seek in the Bill and our response to the issues that are raised in discussions, in my reply (to the discussion on the Finance Bill), Mukherjee said.
Mukherjee said he had received various representations from industry and other stake holders for modification of tax proposals. While some seek modifications to the existing proposals, others have urged for fresh reliefs, he said.
Many members during the debate on the Bill had urged the government to withdraw the proposal to levy service tax on residential complexes having more than a dozen units. They argued such a tax would increase the cost of residential properties.
The other important tax proposals that can be reviewed include increase in minimum alternate tax -- the portion of book profit that is taxed-- to 18% from 15%. The government, however, is unlikely to heed the Opposition demand for a roll back of levies imposed on petrol and diesel in the Budget.
Mukherjee also reiterated governments commitment towards taxation reform. He said the government will table a draft bill on the Direct Taxes Code (DTC) in the monsoon session. The Centre is also working out the modalities and design of the proposed of the Goods and Services Tax (GST) with the state governments.
I am happy to inform that in the case of DTC, the process of consultation with the stakeholders for revising the first draft is almost over. We expect to place a revised discussion paper in the public domain by next month, he said. After a quick round of consultations with some of the major stakeholders, we should be able to submit the draft legislation to Parliament in the monsoon session, he said, while initiating the debate on the Finance Bill.
The DTC proposes to replace the Income Tax Act of 1961, in order to give a brand new look the direct tax laws in line with the changing realities. The code is expected to minimise tax exemptions and widen tax slabs.
With regard to the indirect tax reform envisioned in the GST, Mukherjee said the Centre is engaged with the states in finalising the GST design. The GST intends to create a uniform market across the country by subsuming a plethora of central and state indirect taxessuch as VAT, excise and custom into a single tax. Mukherjee said the Centre is willing to provide compensation to the states against any revenue losses, provided there is agreement on the broad framework for a common threshold for goods and services; common exemption lists; mechanism to check deviations and acceptable level of overall GST rates.
The finance minister further said inflation in essential items is likely to decline. Indications of softening of food inflation are clearly visible. It is expected that this decline will continue in the coming months uninterruptedly, he said.