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Chidambaram brings Indian DTC Bill back into focus

While this month’s interim Budget in India was merely a vote-on-account and went largely unheralded in the corporate tax world, Finance Minister Palaniappan Chidambaram did make pledges regarding the Direct Taxes Code (DTC) and goods and services taxation (GST).

Chidambaram confirmed that the DTC will be put on the government’s website for public consultation. First introduced in 2010, the DTC Bill has seen successive delays and push-backs. And with some provisions originally included in the DTC Bill having since been implemented under separate legislation, any new DTC is likely to look rather different.

“Mention of GST and DTC rollout in the speech didn’t surprise me,” said Mukesh Butani, managing partner at BMR Legal. “He has agreed to put out the reworked DTC for public debate. I anticipate that the new version would see substantial changes.”

Chidambaram said he hopes both the DTC and GST Bills will be passed in 2014/15. Butani said this will depend, to a certain extent, on political mandates.

“GST will be on the next government’s agenda and will entirely depend on the political mandate as the implementation is contingent upon constitutional amendment,” said Butani. “Recommendations of the Tax Administrative Reforms Commission (TARC) would be keenly awaited, though there was no mention in the interim Budget.”

In December, Chidambaram spoke exclusively with International Tax Review to say the DTC Bill was ready and that he hoped to get it passed in the winter parliamentary session.

“The DTC is ready and if we are able to pass the Bill before the expiry of the term of Parliament then that would be [my biggest] achievement,” said Chidambaram. “In the past 12 months, I have put in long hours finalising the DTC.”

But when it became clear that the Bill would not be passed, fresh doubts emerged as to whether the new code would ever be adopted.

“India has to wait until a newly-elected government takes up DTC for final enactment. With yet another postponement, it is unclear whether the new tax legislation will see the light of day,” said Sagar Wagh, international tax and transfer pricing specialist based in Mumbai. “Enactment of DTC into the Act will now be fully within the domain of the newly-elected government.”

Stakeholders now have a chance to influence the new shape of the DTC, with comments being invited now that the code has been published on the government’s website.

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