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'Enable quick resolution of tax litigation'

Guruswamy Ganesh     February 27, 2013
Various reports peg India's share in the global electronics market at an estimated 11 per cent by 2015. The semiconductor policy 2012 was a much-needed effort by the government to provide an impetus for growth of the semiconductor and electronics industry in India. While it has come too late - other Asian countries have already made a mark - the good news is that it's finally here.
 
While the government is trying to woo investors by announcing such policies, enough attention is not being paid to the present system's coercive tax measures. They are hurting industry sentiment with a lot of time being spent on tax litigation. As per the Directorate of Transfer Pricing, there are about 3,500 transfer pricing litigation disputes, amounting to about Rs 1,11,299 crore, for 2010/11 and 2011/12. This makes India the country with third largest number of pending cases related to transfer pricing in the world, says global consultancy E&Y.

The government proposed Advance Pricing Agreements (APA) in 2012 to provide a solution to the ongoing transfer pricing litigation. However, the outcome of this will come three to four years from now, and by then the total quantum of money involved in pricing litigation will increase manifold.

Tax litigation at the tribunal level is increasing year-on-year due to the pro-revenue tax orders passed by various tax authorities. As per the Income Tax law, a period of four years is recommended to resolve such litigation. It only provides for a six to 12-month stay on the tax demand. At the end of the requisite stay period, businesses are at the mercy of tax authorities and subject to their coercive tax collection measures. Such anomalies in the law adversely affect the country's image as an investor-friendly economy.

The government needs to take efforts to strengthen India's position in the world economy by coming up with serious tax reforms, including introducing fast-track tribunals for early resolution of litigation, time limits to decide pending cases, fair judgement and accountability.

(Guruswamy Ganesh is Vice President and Country Manager of Freescale Semiconductor India)


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