The finance ministry has completed most of the work on revised draft of the Direct Taxes Code (DTC), and is now planning to introduce the code for public discussion next month.
Finance Minister Pranab Mukherjee on Wednesday said the government was firmly committed to the goal of comprehensive tax reform through the introduction of DTC, as well as the Goods and Services Tax (GST).
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 told Lok Sabha while initiating the debate on the Finance Bill.
Mukherjee said, after a quick round of consultations with some of the major stakeholders, the government should be able to submit the draft legislation to Parliament in the monsoon session.
The government is planning to introduce DTC, which will replace the Income Tax Act, 1961, from April 2011. The finance minister also reiterated that the government would intend to introduce GST from April 2011 a year after the missed original deadline of April 2010. He, however, cautioned the states that the Centre would compensate them for loss of revenue in the initial years of GST only if they agreed to an acceptable rate and common threshold and exemption list.
Some of the states apprehend they may lose some revenue in the initial years of the GST regime. The Centre is willing to provide compensation to the states for these initial years, provided there is an agreement on the broad framework for a common threshold for goods and services between the Centre and the states; common exemption lists between the Centre and the states; mechanism to check deviations; and acceptable level of overall GST rates, he said.
The empowered group of state finance ministers has proposed different thresholds for the states and the Centre. The finance minister also expressed his concern over the current price situation, while hoping the inflation would come down in the coming months.
Indications of softening of food inflation are clearly visible. There has been a significant decline from the peak food inflation of over 20 per cent recorded in December 2009 to 17.7 per cent in March 2010. Besides, the inflation in essential commodities also declined from the peak of 23.8 per cent in January 2010 to 19.8 per cent in March 2010. It is expected that this decline would continue in the coming months uninterruptedly, he added.
On his outlook for 2010-11, Mukherjee said there was a significant pick-up in corporate earnings and profits, and the outlook was further brightened by the prediction of a normal monsoon this year. The economy was expected to grow at around 8.5 during 2010-11 and to breach the 9 per cent mark in 2011-12, he said.