I don’t want to tinker with my taxes every year, that’s not good, says Tarun Bajaj.
It would be much easier for the government to relieve people if the tax base was wider, says revenue secretary Tarun Bajaj, noting that four million people are not filing returns despite the tax department receiving TDS collections on their account. Once the major rationalization of customs duties is carried out and the corporate tax is settled, the government hopes to complete some outstanding personal income tax and GST reforms, thus creating a stable tax system for the next decade. Excerpts:
How do you respond to concerns from rating agencies about the lack of new revenue ideas in the budget?
The only new tax we have is the crypto tax. I don’t know how much it will bring in but the tax regime has been explained. We hope that as the economy continues to recover and GDP continues to grow, revenue should arrive as capital spending takes effect.
We are also better placed now on direct and indirect taxes, to ensure compliance and obtain taxpayer information. This budget introduces some clauses – if a person has not filed their return even for a year and has a TDS (tax withheld at source) of ₹50,000 per year, that TDS will double. If you get a benefit from a business that reports it as a business expense, it must be added to the recipient’s income. We took care of bonuses and dividends, stripping, exploited by high income groups and corporations. So we look at the avenues that taxpayers use and when we close that avenue, they take another. With all the information we have and share with the taxpayer, because we don’t intend to surprise or confuse them, our income should be good. If you ask me what the new tax is, I don’t want to tinker with my tax every year. This is not good in itself and we complain about it. I cannot have my tax policy dictated to me by rating agencies. Earlier they were saying that we don’t give money directly to people. I used to tell them, ‘You say I’m worried about my taxman, [but] once my taxman leaves, then you’ll say, ‘taxman, taxman, taxman!’ Now they are talking about borrowing and budget deficit.
India’s tax-to-GDP ratio has stagnated. Do we have a medium-term objective and strategy to increase the tax base?
We were at 9.88% in 2019-20, 10.11% in 2020-21. This year, I would not be surprised if it is close to 11%. It is important. The tax-to-GDP ratio cannot increase by 5% in one year. Compared to similar countries it is not good and needs to improve, there is no doubt. Compliance is a hassle… but now we have lots of information and are offering an upcoming facility within two years to pay your taxes. So I think things should change in the next few years. The income tax department is considering where to track expenses that can be compared to income. Provisions such as TDS on luxury cars over ₹10 lakh aim to ensure that people know that we know. There are about four million people in this country who don’t file returns, but we collect TDS on something from them. There is this habit [of not filing returns]. It is much easier to relieve people if the base is broad. When I look at returns this year, it should improve this year…because we also have more personal income tax revenue. While the wealthy would have paid more, I guess the others would have as well.
Would you say that the customs rationalization exercise is largely complete?
We have done a lot of cleaning this year. As it was, we had a tariff rate set in our act that said 30% tax, so people are interpreting that as a 30% levy. But then there is a notification where we say 10% tax and also give exemptions. We’ve streamlined it all. Some tasks that were not relevant, such as on floppy disks and pagers, are removed. Some exemptions have existed for 30 years, which we wish to maintain but which have reduced the tariff rate. On other points, where the exemptions should go, we let them go after consulting the industry and crowdsourcing. We have maintained exemptions or reduced duties for everything not produced in India and our raw materials – gems and jewellery, chemicals, fuel, embellishments like buttons that our exporters need, and even some electronics like camera lenses. Some changes will continue to occur based on changing trends.
What did FM mean when it spoke of aspiring to meet some of the challenges that still remain in the GST system?
the [high] The GST collection data mentioned by the Minister of Finance is due to the economy, but also to many technological, political and other reforms. This will continue on the IT front as we have a lot more data. We have arrested over 600 people since November 2020, because now we know [evaders] and when we check, they admit the problem. We have reached that level of technology where we are able to catch. The second aspect is basically to say that there is a need to streamline the GST and if you are able to do that in the next year, if we have the will to do it, we will have put some order in the taxation. On customs, corporation tax, we have already done a lot. With respect to personal income tax, further tweaking may be required. So once we’ve done that, the exemptions can go away and we’re home. Then we can try to implement it for the next decade and create the stable tax system that we value very much.
Oil prices are on hold here even though they have risen globally. Do you foresee the need for another round of excise duty reductions?
Let’s see. The Economic Survey assumes between $70 and $75 a barrel. If it stays around that, we can live with it. When we reduced the duty it was $83 or $84 and it is now $88. Lots of geopolitical issues are active and once they settle down that should help.