While the Finance Ministry is working on the Direct Tax Code (DTC), advisor to the Finance Minister Parthasarathi Shome told CNBC-TV18 in an exclusive conversation that going back to the original draft now is not possible. However, he is hopeful of both goods and service tax (GST) and DTC being introduced by 2014.

“We will have a final form, which will reflect to the extent feasible, optimal tax policy. That is what we are working on. Of course, the DTC has many improved features compared to the current I-T Act. The Parliament Committee on Finance has looked at it and given their comments and so now we are going through that process,” he says.

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“Similarly on GST on one hand you say that overall structure needs further improvement etc, being a fiscal federal country, this is the best i can see in terms of experience comported to Brazil and Canada which have more resources,” he told reporters.

Below is the verbatim transcript of Parthasarathi Shome’s interview on CNBC-TV18

Q: What are your expectations from RBI?

A: There is space now to rethink about what kind of tightening you might need. I don’t want to put the onus on the Reserve Bank of India (RBI) governor. There is a little space now in order to revive the economy that needs more loans – the cash maybe there but you need the loans at rates of interest that you can afford given the overall economic climate.

Q: In DTC there were principles that you had brought in, in the first draft. Given the fact that the standing committee has already given its recommendations on the DTC, can some of those principles be brought back?

A: We cannot go back to the first version. We have to work with the current version, take a look carefully at what the standing committee has given back to us. Union Finance Minister has instructed, is participating and is looking at those comments carefully so we have to respond on that basis.

Q: Given the political opposition, do you see GST coming even by 2014?

A: I do not think it is impossible because the centre has now unlocked the gates, on the other side there were a lot of complaints from the states in terms of compensation for the lost revenue because of the lowering of the central sales tax (CST) rate. The Finance Minister has indicated that he would compensate and has allocated more than Rs 9000 crore to complete the first year.

Now, it is the structure and the states, the chairman of the empowered committee is from the opposition but it is a technical committee. Still there are some finance ministers who have doubts but the vast majority that I found were in the empowered committee. The FM has recently given a statement saying that the committee agrees with 80 percent and there is no difficulty and those also will be resolved.