Indian Finance Minister Arun Jaitley struck a conciliatory tone towards investors on Friday, promising to tax corporate profits at competitive rates and saying the government would do all in its power to implement a new national sales tax on time.
Foreign portfolio investors have complained about surprise tax claims and, during a news conference to mark Prime Minister Narendra Modi’s first year in power, Jaitley said a judicial resolution was in the works.
Modi’s nationalist Bharatiya Janata Partyhad accused the previous Congress-led government of “tax terrorism”. But having pledged to overhaul the tax regime, Modi’s pro-business government was caught flat-footed in a row with foreign portfolio investors over demands they pay minimum alternate tax, for which they had not previously been liable.
Addressing those concerns, Jaitley said taxes should be applied fairly and promised to bring down the rate at which companies pay tax on profits, reiterating a budget pledge to cut the tax rate to 25 percent from 30 percent over four years.
“We must … remove discretion, phase out exemptions and bring the effective rate down to global levels,” Jaitley said.
He also told reporters he hoped that the upper house of parliament would “soon” pass an enabling amendment that would make it possible to implement on time a new goods and services tax that would unify Asia’s No.3 economy into a common market.
The government failed to push through the GST legislation before the end of parliament’s budget session and was referred to joint committee of both houses, creating concern that the measure would not take effect as planned on April 1, 2016.
Jaitley acknowledged that there was a risk of “cutting it too fine” but said the government would “make every effort to ensure that there is no delay”.