Vodafone tax, GAAR stump I-T Dept

The retrospective tax amendments for the Vodafone case and the General Anti Avoidance Rules, pushed by the Income-Tax Department in the Budget to tackle tax avoidance and perk revenue collections, are, in fact, doing just the opposite, an internal assessment of the department has shown.

A discussion paper on exploring new areas in revenue mobilisation, prepared for the two-day annual conference of chief commissioners and directors general of income tax held on June 11 and 12, says: "Retrospective tax changes due to the apex court decision on Vodafone, and GAAR provisions, are dampening the sentiments of non-resident Indians and foreign residents.

"That will affect liquidity in the market and rupee may fall further."

A senior official of the department said the papers were prepared after serious deliberations, and the I-T department's admission on these measures at this juncture could be significant pointers to achieving the direct tax collection target for 2012-13.