The government is striving to broaden the tax base as 75% of total personal tax returns show income below Rs 5 lakh, Revenue Secretary Tarun Bajaj has said. In an interview with Aanchal Magazine and Sunny Verma, he also said that regulatory concerns regarding virtual digital assets should be addressed through legislation. Edited excerpts:
For tax revenue estimates, there appears to have been a lower amount forecast for the last quarter. Why is that?
What happened is that last year was very good. The first quarter was terrible, people didn’t pay taxes, the second quarter was not good either, the third was better and the fourth was the best. We therefore do not anticipate the same growth as in previous quarters, so it is in this context that we have maintained this figure. I think we should be around that. It can be more than Rs 10,000-20,000 crore more than the RE.
For next year, the objectives…
For next year, if you remove excise duties, the increase is 14%, which is a good increase. We actually haven’t reached a buoyancy of 1 in the last few years, so in this case, although they said nominal GDP will grow 11%, even if it grows a bit more, so 14 % is a good goal. The base is going to be much bigger this year because the growth this year is going to be much bigger.
If you include excise duty, the buoyancy factor will not be 1
If you include excise, it’s almost 1. But you don’t have to take excise into account, it’s not even related to GDP. It’s consumption, if consumption is up from this year to that extent, maybe 2% to 3%, no more than that. We have also reduced excise duties. So if you take the effect of that, there’s actually a 15% reduction. 100 excise duty.
What is the impact of the reduction of excise duties and customs duties on edible oil?
For excise duties, we took a hit of around Rs 50,000 to 60,000 crore and for customs duties, it was overall Rs 18,000 to 20,000 crore.
On crypto, the tax aspect is different and the regulatory side is different. From the perspective of small investors, this is developing now, there is the marketing of coins. Won’t that lead to a bad sale? Now, this could be seen as the government levying taxes for this.
This becomes a more regulatory issue. This is then a regulatory issue or a consumer protection issue. But if we hadn’t taxed it… now people will say that because it was taxed, it’s legal?
That’s how it will be sold, that’s the problem
So hopefully they will introduce a bill sooner rather than later. So if they come up with a bill, it will be regulated and keep the interest of the investor in mind. But the role of the taxman is very limited in the sense that we are just saying that if you make money from this product, please pay your taxes.
We have seen many cases of false input tax credit invoices. The government has also taken action. The GST system has been around for many years and has stabilized. Is there a system or strategy where this doesn’t happen? Have you thought about this?
We have thought, we use IT, we use artificial intelligence, but how do you do it? If I issue you a (fake) invoice and you are ready to accept it. Then? How are you going to stop it?
Honest taxpayers are also affected by the ITC restrictions.
How honest is the taxpayer if there is no movement of goods, only movement of invoices.
Conditions will be met to benefit from the input tax credit
The conditions will be set now. These are enabling provisions (in the finance bill). It has been there since, say, a peak comes in the first month posting a turnover of Rs 50 crore. We noticed in our analysis that in the second month this person is not there. There would be no imprint in the income tax. So we can create those kinds of things. But if someone shows that kind of edge, we’ll keep a check on them.
How has the new tax regime fared?
For individuals, we have not yet analyzed the data since this is the first year. It’s good for business. In 2019-20, 65% of revenue and 16% of ratings moved here. So every year the numbers would increase. As their sunset clause takes effect, they will continue to transition to the new regime. The tax rate we get from corporations is around 22% on average, which was 27-28% before the cut.
For individuals ?
We will do the analysis. But my anticipation is that those with lower incomes, they will not come to the new regime. For higher incomes, if you don’t have exemptions, then you will come. Of the returns we analyzed in 2019-2020, 75% of the returns are below Rs 5 lakh and 92% are below Rs 10 lakh.
So how do you broaden the tax base?
We are doing it. On the TDS side. 7 million people file returns but 11 million people pay taxes. 4 crore does not come because their TDS may have been deducted. We have introduced a clause that if your TDS is above Rs 50,000 and you have not filed a declaration, we will wait two years and if the declaration is not filed, then we will charge a double TDS. Now, that period has been reduced to one year. Plus, we have so much information. For this reason, we have introduced the updated tax return clause. We can now show you information, you will file the return before the tax department raises any questions.
Is this tax filing window an amnesty program?
No. You may have really made a mistake. So that gives you a chance to fix it. And you have two years to do it.
And pay taxes for it
Otherwise, I won’t pay tax either. Otherwise, I will just say that I will pay taxes after two years. The risk is that the tax authorities are also watching. So if you don’t pay tax and wait, the department may catch you before that.