DIRECT TAX CODE-CONSOLIDATED TAX STRUCTURE
william simon said that " The nation should have a tax system that looks like someone designed it on purpose".
There is a stable goverment in the centre and now the stage is set for introducing new reforms which are needed to put the economy back to high growth trajectory. NDA in its previous terms demonstrated resolve to push through bold reforms as well as by discarding old laws. On the direct tax side, the wealth tax act, 1957, was scrapped and a panel constituted in november 2017 to rewrite the existing Income Tax Act. It is expected to submit a report to the goverment by july 31, 2019. It is expected that on july 5 in union budget a framework for introduction of Direct Tax Code (DTC) will be laid down. The Income Tax Act was introduced in 1961, but it failed to keep up with fast growing economy and evolving bussineses. Another example of digital businesses, which can potentialy result in significant tax leakages and also has been focused upon by the OECD in its action plan-1 on base Erosion and profit profit shifting project.
DTC is an attempt to make it a consice, coherent and consolidated direct tax structure.Even UPA tried to bring in DTC and introduce the first draft bill in 2009 and a revised version in 2014, but the idea of DTC was shelved shortly after the change of goverment.
The economy is going through a rough time. The introduction of tax incentives and tax cutting rates have been used as a tool to reignite growth- Indai has one of the highest corporate tax rates among other big economioes.DTC is an oppertunity to rationalise the tax rates as well as introduce new provisions of incentivise high growth sector such as IT/ITes, retail,e-commerce, etc.providing the certinity by minimising tax for foriegn and domestic investors uis another focus area of DTC. For example, in many countries, tax authorities generally answer inquires made by the taxpayers even without a formal rulling procedure and in other there is advance statutary back up procedure.
DTC is going to be the most important tax legislations as well as it will replace not just the income tax but also possibly tax jurisprudence of the last 60-odd years. So the demand of new DTC is real and immediate.