In a move to legalise liquefied petroleum gas (lPG) subsidy tax free for the beneficiaries, All India Federation of Tax Practitioner (AIFTP) is demanding for an appropriate amendment of the proposed Income Tax Act as soon as possible. Finance Minister Arun Jaitley in the Budget had proposed that the lPG subsidy would be taxable initially, but later the Government took a U-turn on May 5, 2015, saying that such schemes would be tax free in a public notification only. The tax experts, however, are of view that as the beneficiaries are not convinced by the Government’s notification, hence its release in public domain would not serve the purpose for them and there should be an appropriate amendment of the Act which is yet to be done by the Government.
Rajesh Mehta, Secretary, All India Federation of Tax Practitioner (AIFTP), Central Zone told The Pioneer, “Only issue of press release or notification in the public domain is not legal for making it tax free. Hence, an appropriate amendment in the Act itself is necessary to be make it tax free for the beneficiaries.” The federation is, however, planning to meet the concerned official in the Finance Ministry and submit a memorandum in this connection soon. “As we are studying all details about this matter, we are planning to meet the Finance Ministry officials in few days. We are preparing a memorandum and will submit it before the Government soon.”
Definition of Income has been enlarged by insertion of section 2(24) (xviii) of the Income Tax Act which has come into effect from April, 2015 for the next assessment year, which covers all types of Government grants and subsidies. Even if not desired by the Government, but due to brevity of Section 2(24)(xviii) lPG subsidy and other public welfare subsidies has now become taxable. later, the Government in a press release on May 5, 2015, has clarified that in case of individual, not having income from business or profession lPG subsidy and other public welfare subsidies are not taxable.
When asked about the status of the subsidy tax if amendment is not done till the next year budget, he said, “I think the Government may not amend it till Feb 2016, but they will take a retrospective call about this matter just before the next budget. Meanwhile, what they can do is they may notify an order for implementation through Central Board of Direct Taxes (CBDT) in June or thereafter for which the beneficiaries can get the exemption from the proposed tax.”
Recently, the CBDT issued ten Income Computation and Disclosure Standards (ICDS) on March 31, 2015, out of which one disclosure standard refers to the ‘Government Grants’ which deals with subsidies granted with intention to compensate cost of assets or revenue expenditure incurred by the assessee. Thus, it seems that above amendment has been proposed to tax even those subsidies which are received by individual for public welfare, for instance, the lPG subsidy or received by any industrialist for setting up an industry in specified areas and generation of employment or for any other benevolent purposes.
“It is desired that applicability of these ICDS should be kept limited to all corporate entities and llP and partnership firms and for individuals who are liable to get their books of accounts audited U/s 44AB of the Income Tax Act, so that compliance cost will not increase in case of individual small taxpayers. Also, the Government should focus the industries in backward areas on this issue,” Mehta said.
As per the Government data, the direct tax collection target for the current fiscal year has been fixed at Rs7,97,995 crore, which is 14 per cent higher than the actual collection of Rs6,95,988 crore in 2014-15 fiscal. Prioritising the settlement issues of tax payers, Jaitley opened the two-day annual conference which focused non-adversarial tax regime, expeditious settlement of tax payer’s grievances and significant expansion of tax base.