In the course of a four-hour debate on the Finance Bill 2019 and the Appropriation Bill in Rajya Sabha on Tuesday, Finance Minister Nirmala Sitharaman reiterated the Modi government's promise to lower the corporate tax to 25 per cent for all of India Inc. "We have brought it [corporate tax] down in order that now 99.3 per cent industries are all covered by the 25 per cent rate and, therefore, hardly any is left behind," she informed the Upper House, adding, "We shall cover them sooner".

On July 5, while presenting her maiden Union Budget, Sitharaman announced that companies with an annual turnover up to Rs 400 crore will now be taxed at the lower rate of 25 per cent as a step towards phased reduction in tax rates. Previously, the lower rate was only applicable to companies having annual turnover up to Rs 250 crore while the rest of India Inc incurred a 30 per cent tax rate.

"Reduction in corporate tax rate is done with an intention," Sitharaman said in the Rajya Sabha, explaining the rationale behind the move. "A trajectory was given to us as to how we will bring the corporate tax from the high rate that it was, from 30 per cent down to 25 per cent. It was a commitment given in the first ever Budget in 2014. I had to honour it."

Sitharaman also touched upon the other changes that have been introduced under direct taxes, such as the incentive on buying electric vehicles and exempting start-ups from angel tax - a tax on the premium (over the fair value) received on its shares when sold to investors. "All these underline the fact that unless we continuously make taxation come down and make sure that the larger principle of redistribution is attended to, equity is not going to be addressed," she added.

Indirect taxation

According to her, on the indirect taxation front too, changes had been made from the point of view of getting a level-playing field. "Customs Act has been touched because we want to have greater compliance. Some repetitive errors, which are being done, should not be done. People who are repeatedly gaming the system, if we have enough evidence, we want to take them to a Magistrate Court and be able to search them physically," she said. Such a physical search of violators was not possible with amending the Act. "But, of course, it will be done in the presence of a Magistrate and, therefore, no worries about empowering the Customs without a responsibility," she clarified.

2% TDS on cash withdrawals exceeding Rs 1 crore

Responding to Rajya Sabha members alleging that the Budget punishes cash withdrawals, Sitharaman defended the move on the grounds of greater transparency and accountability. "We have had several instances of people dealing and transacting huge sums of money in cash from their accounts. When we trace it to their names, they have not even filed their Income Tax Return," she explained.

Significantly, she made it clear that this TDS will not be over and above the tax liability of the individual or the entity and can be set off when income tax returns are filed. The total TDS paid on cash withdrawal beyond Rs 1 crore will not be constituted as income in hands of the taxpayer. This provision would come into effect from September 1, 2019.

Direct Tax Code

Sitharaman also informed the House that the Task Force has completed its job on the Direct Taxation Code and is likely to submit the report on July 31 "Ultimately, we are interested, whether it is direct or indirect taxation, we are working towards simplifying the burden on compliance, which every assessee undergoes," she said. The Finance Bill and the Appropriation Bill were returned by the Rajya Sabha on Tuesday after being endorsed by voice vote.

Amendments to various Acts

The FM claimed that the most important change was the amendment to the Prevention of Money Laundering Act (PMLA). "Of the eight different changes that we are bringing into the PMLA, six relate to explanatory notes because we find that in the courts, many of those offenders under the PMLA - if there are two cases happening - try to club both the cases although they may be materially different and seek a bail," she explained. In the bargain,  the law does not get invoked in its true letter and spirit and the government is now taking steps to make this Act more effective. So, such changes in the definition and explanatory matters have been done in the PMLA.

The RBI Act has also been amended. "We needed to change this because we are giving powers to the RBI now in order that they will be able to regulate and also give resolution in the matters of NBFC-related areas," she explained, adding, "The SEBI Act is also being changed because we needed to make sure that some of the surplus fund and alteration; destruction and mutilation-related matters are all taken up."