Any tax rate rationalisation has to be balanced and calibrated activity and the revenue requirement of states and Centre have to be kept in mind, Revenue Secretary Ajay Bhushan Pandey said. In an interview with Aanchal Magazine, Pandey said more needs to be done in GST: more simplified, easier to operate. “And also, if there are certain sections of people, of course, very small in number, but who are trying to misuse the system and trying to take an undue advantage, then can we do something to fix such things”. Edited excerpts:
Revenue shortfall is being anticipated for both direct and indirect taxes. How are you going to manage the revenue targets?
Very soon, we are going to start the Budget exercise for the next year and while preparing the revised estimate, we will see the revenue trends and try to reconcile the numbers. So far as the current trend is concerned, for the first six months, (in) direct tax we have seen growth of around 10 per cent, and in the corporate tax, we are at lower, but the overall growth is at 5 per cent. In case of GST for the first six months, the overall growth is 5 per cent. It has been a trend in the direct taxes that the revenue collection picks up in the later half of the year and which we are hopeful that it will pick up. Because of the corporate tax cut, there will be some impact. So we’ll have to work on those numbers and see as to what extent it impacts us.
On the expenditure for the welfare programmes, the capital expenditures, the government will be committed to make those expenditures. The government has also announced disinvestment. That also will be a source of revenue.
In GST, the recent order says that there will be some consideration for reforms. What could be the reform? Isn’t it too hurried to think of reforms at this stage when you are experiencing a slowdown?
After having completed two years, a need was felt if we can look at further suggestions that were received from various quarters, States, Centre and also from various experts, users and taxpayers to take a holistic view; whether something more needs to be done to make the system more simplified and easier to operate. And also, if there are certain sections of people, of course, very small in number, but who are trying to misuse the system and trying to take an undue advantage, then can we do something to fix such things. With these objectives, this committee has been formed and tasked to look at all these things in depth and come out with concrete recommendations within the next 15 days. And then we will take it to the GST Council.
You said after two years of GST, more needs to be done. So all the ideas of a merger of slabs or doing away with a slab. Earlier the opposition to a single rate was that flip-flops and premium cars cannot be taxed at the same rate, certain items need to be kept at a lower rate.
We have introduced the GST system with certain tax slabs, and various items as per requirements have been put into different slabs. Now, as we go along, depending upon the revenue position of the states and Centre, the items could be moved from one slab to another, or maybe some slab could be eliminated. To some extent, we have done this exercise in the last two years, various items have been moved on to the lower slabs. So we’ll have to watch the revenue trend and then arrive at a decision.
But the frequent changes might lead to some issues in the online GST returns system?
The system is broadly stable and we also have learned in the last two years that whenever we make a change, we follow a set protocol. So, there is a lot of testing that goes into this, and then there is a beta version released, the people are made aware and then we bring that change... So, we have said that from the 1st day of the next financial year, we will introduce the new system. However, during the interim, if there’s some minor tweaking that can be done without causing great amount of inconvenience or instability, we must try and quickly do that to improve the system.
So what are the options you are exploring?
This GST committee has been tasked with this job and… they’ve been given 15 days. Within 15 days, they will make certain recommendations, some of which will be short term; some will be for the medium term, some for the long term. We will deliberate these recommendations and will take them to the GST Council. So far the rate part is concerned, while working on any rate rationalization, the revenue has to be seen, and the revenue collection part is very, very important, because we don’t want to do anything which will put the revenue of the States and the Centre under stress.
There are many items where certain rationalization can be done. However, there is also a point that how frequently you should go and change the rates, some stability to settle down is also very-very important. Industry must be sure that this is the kind of a tax rate which should be there, and should prevail over a certain time, so that they can plan their business accordingly. So any rate rationalization has to be balanced and calibrated activity and keeping in mind, the revenue requirement of the states as well as Centre.
All the giveaways so far have been on the supply side, what about the demand side. A lot of talk about giving more money in the hands of people, about income tax cuts. What do you have to say on that?
So far as giving more money in the hands of people is concerned, you see this targeted disbursement of government spending by way of benefits and subsidies, and various other social welfare schemes... Beyond that, again, I would say that any decision about any tax relief has to also be seen in the context of the revenue position and budgetary requirements of the Centre and the states and only then a decision has to be arrived. Usually these measures are taken at the time of budget because at that time we have a fairly good idea of what is the revenue position in the current year, and then what will happen during the next year and that is the time when the entire stock taking takes place and certain decisions are taken.
So, any income tax-related decisions should be expected at the time of Budget?
That is what usually the practice is.