Finance Minister Urges Tax Experts To Suggest Removing Outdated Provisions, Calls For Evidence-Based Reforms

Finance Minister Nirmala Sitharaman has asked tax professionals and industry bodies to move beyond seeking tax cuts and exemptions, urging them to identify provisions that no longer serve the tax system.

Speaking at the International Tax Research and Analysis Foundation’s (ITRAF) 8th International Tax Conference in Bengaluru, Sitharaman said stakeholders should submit detailed proposals backed by data, including the number of taxpayers affected, compliance costs, revenue impact and possible consequences of proposed changes.

“I wish to hear a submission that says, ‘here is a provision that no longer serves the tax system and ought to be removed even though we presently benefit from it’,” she said.

Focus on reducing disputes and improving compliance

Sitharaman said the government’s tax reform agenda is focused on preventing disputes rather than merely clearing pending cases. She said the objective is to make voluntary compliance simpler while ensuring enforcement is targeted at cases requiring action.

She highlighted the increase in monetary limits for departmental appeals as part of efforts to reduce litigation. The thresholds have been raised to ₹60 lakh before the Income Tax Appellate Tribunal, ₹2 crore before high courts and ₹5 crore before the Supreme Court.

On GST reforms, Sitharaman said GST 2.0 has primarily focused on rationalising rates, while process-related reforms will be discussed at the next GST Council meeting scheduled for October 7.

“In our eagerness to bring down the rates, the process reform agenda was kept for the next meeting, which is now scheduled to happen in October first week,” she said.

Digital economy and emerging sectors pose challenges

Sitharaman said taxation of the digital economy, including cryptocurrency and cloud computing, requires further examination. She said India is awaiting greater clarity on cryptocurrency-related issues while continuing to tax transactions at source.

On cloud computing, she highlighted difficulties in determining the origin of digital services and ownership of infrastructure.

“In a digital era how do you segregate how a product made in India has its roots outside India. For example, cloud… how do I tax it, who owns the cloud system,” she said.

She added that commercial space activities should be taxed, while research and development efforts could receive a more favourable approach.