'With concerted action against fake invoice dealers and those involved in tax fraud, coupled with other measures, it has been shown it is possible to achieve higher revenue collection without increasing the tax rate,' says Finance Secretary
NEW DELHI :
The budget for 2021-22 indicates that central taxes on petrol and diesel are here to stay at current levels for another year, that the compliance enforcement drive will continue and goods and services tax (GST) compensation to states will remain a live issue.
Finance secretary Ajay Bhushan Pandey explains the philosophy behind the current tax policy in an interview. Edited excerpts from an interview:
The rejig in the customs duty structure to introduce farm cess may not pinch consumers but it may affect states’ revenue, will it not?
Improving infrastructure in agriculture is the need of the hour. We need to make agriculture more productive and efficient so that farmers gain by better infrastructure. For that, what was needed is dedicated funding for infrastructure (investment) activity. This could be done by earmarking the resources and ensuring the certainty of funds. For that the cess is imposed on a very limited number of items. Another objective was that while doing so, it should not cast a burden on consumers. If you have to spare consumers of any burden, some existing duties have to be readjusted. What we have done is reducing the customs duty and putting the cess to a limited extent. Similarly, we adjusted excise duty and the additional excise duty which is meant only for the central government to provide space for the cess.
The excise duty receipts estimated for FY22 is about at ₹3.3 trillion, similar to this year, which implies there would be no reduction in taxes on petrol or diesel until March 2022. Your comment?
We made an estimate based on consumption expected in the next few years. Fuel price is decided by oil companies based on their international price. Our estimate is based on consumption and tax in terms of rupees per litre. It is not dependent on price.
Will the ₹1 trillion GST cess estimated for FY22 be enough for compensating states’ revenue loss next year?
The guaranteed revenue to states gets compounded by 14% annually. Next year, one more compounding of 14% will happen. Whatever gap is there in (states’) revenue, that you will have to meet by way of compensation. GST Council has already decided to extend the compensation date.
Will the Centre have to continue the special borrowing arrangement for another year?
That decision has not yet been taken. The decision to borrow was for the current year. This is something that I cannot expect to say because that decision has to be taken by the government. But the decision to extend the period of cess collection beyond 2022 has been taken.
We have seen strong compliance drive boosting GST revenue collection. What will be the future direction of tax administration?
This trend has to continue. Reducing compliance burden and making tax administration simple and effective is something that we will need to do. Today we can see the result of using technology in GST. With data analytics, in a tax base of 1.2 crore people (GST registered entities), we could precisely identify a few thousands trying to game the system. With concerted action against fake invoice dealers and those involved in tax fraud, coupled with other measures, it has been shown it is possible to achieve higher revenue collection without increasing the tax rate and without any harsh coercive action on the ground.
If you can take targeted action against tax evaders, identified through technology, and make life simpler for honest taxpayers, it gives very good results. It has been demonstrated in GST and in direct tax, if you look at direct tax revenue collection between April to January this fiscal and the last, the gap is only 6.67%. In the next two months, this gap is going to reduce. We are going in this direction.
How do you plan to address the concerns of employees of state-run companies and banks planned for disinvestment?
Disinvestment of government holding does not mean the company is getting closed down—it is only a management (and ownership) change. The new management also needs employees to work for the company and all these aspects have to be looked into by the ministry concerned.