Tax policy debate must go beyond sectoral interests: Sitharaman

Bengaluru, Sep 16 (PTI) Union Finance Minister Nirmala Sitharaman on Wednesday said tax policy discussions must look beyond sectoral interests and focus on the larger requirements of India’s economy, including creating a system that is fair, predictable and supportive of investment and innovation.

Speaking at the Eighth International Tax Conference on ‘New Age Taxation’ here, Sitharaman said tax reforms undertaken in recent years were aimed at simplifying compliance, reducing litigation and providing greater certainty to taxpayers. The event was organised by International Tax Research and Analysis Foundation.

“A mature tax policy debate must go beyond sectoral consideration,” she said, urging tax professionals to look beyond their immediate interests and consider the wider consequences of their recommendations.

Sitharaman said the government had rationalised provisions relating to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), raised thresholds and reduced unnecessary criminal consequences, with the objective of making voluntary compliance easier.

“The philosophy is simple: make voluntary compliance easier and reserve enforcement capacity for cases that genuinely require it,” she said.

She said the government had also sought to reduce tax litigation through measures such as the “Vivad se Vishwas” scheme and by raising the monetary thresholds for departmental appeals in 2024.

The thresholds were raised to Rs 60 lakh before the Income Tax Appellate Tribunal, Rs two crore before High Courts and Rs five crore before the Supreme Court, she said.

Sitharaman said the government had introduced faceless assessment and appeals, pre-filled tax returns and updated returns, while most refunds were now issued within a few days.

On direct taxation, she highlighted the reduction in corporate tax to 22 per cent in 2019 and the rationalisation of the personal income tax structure in 2025.

She also pointed to the new Income Tax Act, which replaced the 1961 legislation, saying the new law was designed to provide greater clarity through a more concise and simpler code.

On GST, Sitharaman said the indirect tax regime had undergone further reforms since its introduction in 2017, including rate rationalisation in 2025.

She said the next meeting of the GST Council, scheduled for the first week of October, would focus on process reforms.

“Not yet at 3.0. In two itself, we are doing it,” she said, responding to a question on whether the next phase of GST reforms could be described as “GST 3.0.” On international taxation, Sitharaman said India had renegotiated tax treaties with Mauritius, Singapore and Cyprus to restore its right to tax capital gains at source.

She also referred to the country’s adoption of the multilateral instrument, general anti-avoidance rules, country-by-country reporting and automatic exchange of information, besides the Advance Pricing Agreement programme.

On the emerging digital economy, she said taxation of digital companies, virtual digital assets, cloud services and cross-border transactions required careful examination, particularly because tax measures could influence future investments.

“The implications for India and implications for outside, coldly studied. And above all, the implication that it can have in terms of further investments coming into India, coldly studied as well,” she said.

Sitharaman also called for greater adoption of digital payments, saying some high-street shops still preferred cash despite the expansion of digital payment infrastructure.

She said the success of digital payments in India was reflected in NPCI data and urged consumers, professionals and businesses to encourage wider adoption.

“As much as the digital is a success, you see the numbers of NPCI (National Payments Corporation of India), it’s an envy of the world,” she said.

Responding to a question on the country’s 7.8 per cent growth in the first quarter, Sitharaman attributed it to the efforts of citizens, industry and small and medium enterprises rather than taking credit for it herself.

“The 7.8 per cent quarter one growth is not a random number, and I don’t take the credit from my side or the government’s side. I give the entire credit to the people of India, the hard-working industry, small MSME, and everybody,” she said.

She, however, cautioned that the global economic environment remained challenging, citing tariff threats, three ongoing wars, complications around the Strait of Hormuz and the prices of crude oil and fertilizers.

“There are the tariff threats, there are three wars going on, Hormuz is a big complication, crude and fertilizer which are so critical for us, making up for the biggest imports for this country, are still a challenge,” she said.

Despite these challenges, Sitharaman said India was better placed because of the certainty brought by the government and urged businesses to retain confidence and continue investing and expanding.

“India is far better placed despite all these challenges around in the world,” she said.

On foreign investment, she said most sectors had seen their FDI limits widen since 2014 and that a large proportion of investments now came through the automatic route, except where security considerations required government approval.

She said global investors were increasingly looking at India as part of a “China plus one” strategy and highlighted the role of the National Investment and Infrastructure Fund, National Bank for Financing Infrastructure and Development and GIFT City in attracting long-term capital.

On the space sector, Sitharaman said research and innovation should receive a lenient tax approach, while commercialised activities could appropriately come within the tax net.

“If you’re talking of research towards greater understanding of space and how to reach space, how to have space vehicles going up and other things, I’ll be very lenient about taxing that,” she said.

Sitharaman said tax policy should ultimately support India’s development objectives while remaining predictable and conducive to economic activity.

“Tax policy should not add to those challenges or become a deterrent to investment, enterprise, and innovation. It must provide the revenues required for our development while remaining fair, predictable, administrable, and supportive of economic activity,” she said. PTI GMS SA

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