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fund management centre is sought to be fostered by including tax

provisions to clarify that international funds managed by an India-

based fund manager would not be liable to tax in India for this

reason alone. The taxation framework for REITs and InvITs has

been amended to address some concerns identified by

stakeholders. SARFAESI has been extended to NBFCs plugging a

gap in the debt resolution framework.

On the taxation front, the Finance Minister announced an intention to

bring down corporate tax rates to 25 percent over a 4 year period

commencing April 1, 2016, while simultaneously eliminating various

tax incentives; a road map for this purpose will be drawn up in

consultation with stakeholders. The Finance Minister affirmed his

intention to introduce GST with effect from April 1, 2016 and the

desire is to have the enabling Constitutional amendment bill passed

in the current session of Parliament. Turning to specifics, GAAR has

been deferred to April 1, 2017, with a further clarification that the

provisions would not apply to investments made prior to that date.Wealth tax has been abolished, but revenue foregone is expected to

be more than recouped through a 2 percent surcharge that will apply

to companies and to high net worth individuals. Guidance has been

provided for the operation of the ‘indirect transfer’ provisions

introduced to address the Vodafone transaction although

recommendations that the Shome Committee had made in this

regard have only been partially implemented. Similarly, while pass

through status has been granted to Alternate Investment Funds, this

has been made subject to conditions that were absent when a

similar status was available to Venture Capital Funds. Althoughinternational fund management activity is sought to be promoted, the

tax position of international funds is subject to as many as 17

conditions which must be met by an international fund and by the

India-based manager. Similarly, although the taxation framework for

REITs and InvITs has been amended to address some stakeholder

concerns, it still leaves gaps which could potentially stymie the

development of a robust REIT market in India. It has been clarified

that foreign portfolio investors will not be liable for MAT. However,

this clarification is worrying for a number of reasons. The

amendment refers to Foreign Institutional Investors, a category thathas been replaced by Foreign Portfolio Investors since July 2014; as

drawn up presently, it is therefore unclear that it applies to Foreign

Portfolio Investors. The amendment also appears to exempt only

income in the nature of capital gains from the levy of MAT, leaving

foreign portfolio investors potentially liable to MAT on other income

that they earn from investments in Indian securities. Also, the

amendment is to be take effect from April 1, 2015, thereby leaving

such investors exposed to MAT levy on all their income for

preceding periods. Beyond all of this, MAT was intended to apply

only to domestic companies as clarified in the explanatory

memoranda accompanying the relevant Budgets which introduced

or modified these provisions; clarifying that foreign portfolio

investors, which is a sub-set of foreign investors more generally, will

not be liable to MAT raises the apprehension that the Revenue will

seek to levy MAT for all other non-resident investors which is

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inconsistent with the intent underpinning the introduction of MAT.

The Depository Receipts Scheme, 2014, significantly revamped the

framework governing issuances of depository receipts by permitting

both capital raising and non-capital raising issuances and by

expanding the scope of securities on which depository receipts could

be issued from only listed equity shares to include all securities,

whether listed or unlisted. This required an amendment to the

taxation framework governing depository receipts. The amendment

which has been proposed is extremely limited leaving considerable

ambiguity with regard to the taxation of depository receipts that may

be issued under the new Scheme. Other notable amendments

include the reduction of tax on royalties and fees for technical

services paid to non-residents from 25 percent to 10 percent, and

the fourfold enhancement of the threshold for domestic transfer

pricing assessments to INR 200 mn.

Since assuming power, the Government has repeatedly averred that

it wishes to provide a stable, transparent, ambiguity-free taxationframework that reduces tax disputes. This requires a

comprehensive reform of the Revenue administration for which the

Tax Administration Reforms Commission has made substantial

recommendations. Other than a passing mention of these

recommendations, the Finance Minister made no substantive

observations in this regard.

On an overall basis, Budget 2015 is strong on macros where there is

much to commend. However, the challenge as always lies in the

micros, ie execution. Framing effective regulations requires clarity ofobjectives and regulations must be framed in a manner designed to

achieve the objective without unnecessary fetters or constraints. Far

too often, enlightened tax policy tends to get compromised by

ineffective drafting of tax regulations intended to implement tax

policy. For a Government focused on execution, it is somewhat

disappointing to see this pattern endure in Budget 2015. 

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