06 Feb We will surpass Estimates
The focus of the revenue department in 2017-18 will be to ensure the successful implementation of the goods and services tax (GST), said Hasmukh Adhia, revenue secretary in the ministry of finance. In a Mint-CNBC TV18 post-budget event, Adhia explained the rationale of the tax measures announced in the budget. Edited excerpts:
On demonetisation gains:
In the revenue department, we always have to be very conservative. The Pradhan Mantri Garib Kalyan Yojana is going to close on 31 March. We don’t know how much money we are going to get in that so we are not taking any figure in the current year’s revised estimate as far as that scheme is concerned. Whatever comes will be available for use in government schemes but haven’t accounted for it in the revised estimates.
On growth in tax collections:
As far as next year’s growth is concerned, we have predicted a good solid growth rate of 15.3% as far as direct taxes is concerned. We are very sure that we would be surpassing this growth rate because we are seeing early signs of improvement in compliance of personal income tax. We hope that the same trend would continue in the next year as well.
On increase in tax-to-GDP ratio:
The increase in tax-to-GDP ratio will happen. We have got some bonanza on the indirect taxes in the form of indirect tax revenues from petroleum products last year and this year. Now on top of that, the increase in tax-to-GDP ratio doesn’t seem to be very impressive. But the 15% growth rate that we are estimating in direct taxes will be surpassed and we would have a much better tax-to-GDP ratio next year.
On corporate tax rates:
The budget provision that we have made says that any company whose turnover was not exceeding Rs50 crore in the financial year 2015-16 will get the benefit of 25% corporate tax rate. Even if this company’s turnover is Rs100 crore in the current year and Rs150 crore in the next year, they will still get the benefit of 25%. So we are freezing it.
On the long-term capital gains tax anti-abuse measure:
This provision has been brought in as an anti-abuse measure because a lot of people were creating penny stock companies, investing money in that to inflate the stock and then exiting while getting the benefit of long term capital gains tax rate. The amendment has been brought in to avoid that. Genuine transactions will not be covered in this provision. We will bring out a comprehensive exemption list.
What industry is looking forward to hear about are the law and rules because they could make their individual software. The next meeting will look at the three laws and rules will be taken up subsequently. As far as the rates are concerned, there would be a simplistic formula which industries can determine themselves. If they add the excise and value added tax (VAT) and calculate the current tax incidence, then the tax rate under GST will be close to this tax incidence. There would be only a few items where the tax will be much lower under GST.
On West Bengal finance minister Amit Mitra’s dissent on some GST provisions:
The clause of power to arrest for tax default is provided for in the excise and service tax law and is also there in the VAT laws of states like Gujarat and Bihar. The decision was taken after a lot of discussion in the council and what was decided was that up to Rs2 crore of tax evasion, there will be no arrest. Tax evasion between Rs2 crore and Rs5 crore will be a bailable offence and above Rs5 crore will be a non-bailable offence.