Plan panel Deputy Chairman Montek Singh Ahluwalia on Sunday said that generally changes to the laws should not be implemented retrospectively even as he termed the proposed amendment to the I-T Act to tax Vodafone-like deals as 'appropriate'.

"I think, objectively, the change is not only appropriate one....it is something we have singled in the Direct Taxes Code (DTC). Going by general rules. But I agree with you that one should avoid retrospective amendments," Ahluwalia told Karan Thapar in 'Devil's Advocate' programme on CNN-IBN when asked why should this amendment be effected retrospectively.

As per amendments proposed in the I-T Act by Finance Minister Pranab Mukherjee in his Budget proposals, all persons, whether residents or non-residents, having business connection in India, will have to deduct tax at source and pay it to the government even if the transaction is executed on a foreign soil.

The amendments, once carried out, will have implications on Vodafone which won the Rs 11,000-crore tax dispute case against tax authorities in the Supreme Court. It will also impact other similar cases involving taxes to the tune of about Rs 30,000 crore.

About the impact of the proposed amendment on Vodafone case, Ahluwalia said, "I do not want to comment on the impact on any particular company. I think... it is not only appropriate one, but something we have singled in the proposed DTC. We are going to do that anyway."

On the impact of this move on foreign investment flows, he said, "Whenever you have retrospective amendment which affects an individual, he will certainly feel that he has been treated unfairly."

However, he allayed fears that this will impact the flow of foreign funds into the country. "I think that foreign investors should have absolutely no doubt in their mind that the government does not intend to change some of the basic conditions retrospectively.

On the negative reactions to the proposed amendments, Ahluwalia said, "I am aware of this very negative reaction. I am sure the Finance Minister is also aware of it."

Some industry leaders have termed the Budget proposal by Finance Minister Pranab Mukherjee to amend the I-T Act with retrospective effect from 1962 as the most negative step in Budget and will hurt foreign direct investment (FDI) flows.

On reopening of Vodafone case, he said, "I do not know what the thinking of the ministry is on this. They should not, use it, not only for Vodafone but for any other (such case)."

Ahluwalia, however, added that this amendment is very important. On concerns that the Budget is not reform-oriented, he said, "Most of the things that need to be done are actually outside the Budget."

About the mounting fiscal deficit, he said the projections given by the Finance Minister in the Budget are realistic.

For the 2012-13, the Finance Minister has pegged the fiscal deficit at 5.1 per cent of the GDP. Lower tax revenues and poor disinvestment receipts have pushed up the government's fiscal deficit for 2011-12 to 5.9 per cent of the GDP, as against the target of 4.6 per cent.

Ahluwalia also lauded the Budget announcement allowing financial institutions and others to raise about Rs 60,000 crore through tax-free bonds in 2012-13 for the infrastructure sector development.

He also supported introduction of a negative list that is aimed at bringing more services under the service tax net.

Ahluwalia said capping subsidies at 2 per cent is another important step. The government has pegged its outgo on food, fuel and fertiliser subsidies in the 2012-13 fiscal at over Rs 1.79 lakh crore, nearly 14 per cent lower than the revised estimates for the current fiscal.

About the Budget projection of 7.6 per cent economic growth next fiscal, he said, "I think its tough but can be done assuming that you don't have some kind of huge explosion externally which disrupts everything.''