Rashtriya Swayamsevak Sangh-affiliated Swadeshi Jagran Manch said withdrawal of super-rich surcharge on foreign investors is a result of ‘an act of blackmailing’ of the government by overseas investors, and if the situation permits the Centre should reimpose this tax after some time.
The remarks of the Swadeshi Jagran Manch, an economic wing of the Bharatiya Janata Party’s ideological parent RSS, came after Union Finance Minister Nirmala Sitharaman announced to roll back the enhanced surcharge, imposed on foreign portfolio and domestic investors in the 2019-20 Budget, as part of a slew of measures to boost sagging economic growth.
“Under the circumstances where the country’s economy is dependent on investment from foreign investors or foreign portfolio investors… they always try to blackmail you.
“Removal of the tax should be seen in that direction,” SJM co-convener Ashwani Mahajan said.
“The SJM sees it as a result of an act of blackmailing by foreign investors,” he said, adding if the situation permits the ‘government should reimpose the tax after a gap’.
He also suggested that in the long term, the government should substitute imports to minimise its foreign exchange requirement ‘so that the future dispensations are able to take decisions in the best interest of the country as they had done earlier in this case, but they were pressured’.
Mahajan said the dependence on FDI and FPI has to be reduced so that ‘foreign investors are not able to blackmail you’.
“We need to reduce our dependence on our foreign investment so that nobody is able to impose restriction. We have seen in the last couple of weeks there have been pressure from FPIs,” he said.
The move to roll back the enhanced surcharge imposed on foreign portfolio and domestic investors will dent government revenues by Rs 1,400 crore.
Sitharaman had in her maiden Budget hiked the surcharge on income tax paid by super-rich individuals.
The surcharge, levied on top of the applicable income tax rate, was hiked from 15 per cent to 25 per cent for those with taxable income of Rs 2-5 crore, and to 37 per cent for those earning more than Rs 5 crore.
This increased the effective tax rate for these two groups by 3.12 per cent and 7 per cent to 39 per cent and 42.74 per cent, respectively.
Some 40 per cent of foreign portfolio investors (FPIs) automatically came under the higher tax rate as they have been investing as a non-corporate entity such as trust or association of persons (AOPs), which in the Income Tax law are classified as an individual for the purpose of taxation.
The SJM, however, welcomed the government’s decision that all the pending GST refunds to micro, small and medium enterprisies (MSMEs) till date shall be paid within 30 days, while future refund matters will be sorted out within 60 days.