There have been a few good months on the GST front. How do you ensure the momentum continues?
For the last four months, GST collections have shown an upward movement and there was a record collection in the last two months. There are two reasons, one being the economy making a sharp recovery and it gets reflected in higher collections. A lot of work has happened in the last one and a half years in simplifying the regime and making certain structural changes. We have introduced many measures, one is quantifying the input tax credit. This depends on the returns being filed by the supplier.
Last year, monthly returns were around 73-74 lakh. By January 31 it crossed 90 lakh returns. The ecosystem is promoting the filing of returns by all stakeholders. Plus, we have introduced an electronic invoice that makes it simple.
Now we have complete visibility of data that has been drawn from various sources, even the banks, the customs. Even if various intermediaries are used, we will still figure out (if) the originator of the invoice is bogus or a dummy company… The remarkable thing is on a tax base of 1.2 crore, only 7-8,000 have been identified. Whether direct or indirect tax, the collection used to hover around Rs 95,000 crore. The collection of Rs 1,20,000 lakh crore has happened without tinkering with rates. The mentality that higher tax collections need higher rates, or that if you want a higher collection, you need to get after a large number of taxpayers… both myths have been discarded.
The argument would be made that demands for relief by a sector may to be met through a change in tax rates.
The Budget time must not be perceived, unfortunately as was the case, to tinker with rates — up or down. Every year something or the other used to get done. What is important is the stability of the rates. Once you have brought down tax rates, like one and half years back we brought down the corporate tax rate. Even if you see the personal income tax rates, they are at an appropriate level. Now further tinkering with rates creates instability in the minds of people, investors. The stability of the rate is very important. Revenue augmentation has to come from improving the system and compliance and evolving a system so that collection improves.
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Why is this model not being replicated in direct tax. There are people who are under-reporting or not reporting at all.
In indirect tax, you can see the impact month to month. There is a time lag (with direct tax) because business happens, profits are calculated and income calculated. In the case of income tax, there is a two-way flow of data. The 26A form is being populated (in GST). Many of these details are being pre-filled in income tax and that itself will make people aware about how they should calculate their profits and pay income tax. We are seeing encouraging results in direct tax also. Even in these pandemic times, when direct tax will be hit more severely as profits can get wiped out. In this situation, y-o-y at January the gross collection is down by 6.7%. Our refunds have become very fast. In terms of refunds we are 8% higher than the previous year. Our net collection is down by only around 9.5%…This is because the data is shown to the taxpayer. This should lead to voluntary compliance.
Excise on petrol and diesel has been increased and now you have the cess. What is the rationale for higher taxes when there is a slowdown?
Now we have readjusted various other taxes and earmarked a part for the agricultural infrastructure development cess and while doing so we have ensured… if you see very very minutely, the total tax incidence is, along with cess and excise duty, lesser than what was before. AIDC is not an additional burden. It has been redistributed. Now so far as the overall rates are concerned, now see this is an exercise where the central government relies upon the resources through these duties and state governments also do so because they impose their value-added taxes there.
How do you see the overall target?
We have shown the revenue growth, tax revenue growth of 16.7% Now considering the GDP nominal growth rate of somewhere between 14%-15% assumes a tax buoyancy of 1.15, so we should be able to achieve this. Next year we will have so much expenditure on infrastructure and that will help. Ultimately if people get the money increased sharing of information between different arms of the government and the banks has made hiding income or evading tax an increasingly difficult task. GST collections have consequently risen, indicating an economic recovery, as well as better compliance than earlier, finance secretary Ajay Bhushan Pandey, tells TOI’s Sidhartha, Rajeev Deshpande, and Surojit Gupta.