Pranab Mukherjee justifies reforms in tax laws

Finance Minister Pranab Mukherjee considers legislative changes in taxation law with retrospective effect as valid. He said that this was required in order to protect “the interests of the (tax) department”.

“Sometimes, retrospective effect is to be made in order to protect the interests of the department. Otherwise, instead of collecting taxes, we shall have to refund the amount due from them,” said Mukherjee during debate on the Finance Bill in the Rajya Sabha.

The Finance Bill often gives clarifications on tax proposals which have retrospective effect. For instance, Finance Bill 2010 added an explanation to the definition of “commercial training or coaching service” with retrospective effect from July 1, 2003. This brought all such institutions, non-profit or otherwise, into the ambit of service tax if they were rendering service for a consideration