Arbind Modi’s retirement delays Direct tax reform

In the midst of the overhaul of the Indian direct tax system, the convenor of the task force and the panel chief, Mr Arbind Modi, retired on September 30, 2018. The six-member panel was entrusted with the duty of submitting a report on the new law on India’s direct tax system, which will now be kept on hold until the appointment of a new convenor by the government.

It was reported that the government is currently in the process of finding a replacement for the exiting convenor of the panel. The six-person task force came into existence on November 22, 2017, following discussions on the need to reform the old Income Tax Act which was drafted more than 50 years ago. It is indicative of further delays in the submission of the draft report which was due on May 22, 2018, but was extended to August on request. Keeping in line with the existing tax systems in other countries that align with the international practices, the panel is said to be drafting its report on new direct tax legislation for adherence in India. It is reported to be taking into account the economic outlook and needs of the country in its analysis. The new law is to be inclusive of sections with regards to the General Anti-Avoidance Rule (GAAR), Place of Effective Management, etc., as part of its provisions under the Direct Tax Code.

The aim of introducing this new regime in the Direct Tax Code is to simplify the existing tax legislation and extend the tax base. It also seeks to remove some exemptions. According to a senior finance ministry official, until a new convenor is appointed, the draft report will be kept on hold.