The financial implication of rate reduction is about ₹90,000 crore a year, says the Revenue Secretary
The hit suffered by the exchequer following the income tax rebate announced for individuals with incomes of up to ₹5 lakh will be more than offset by the overall growth in direct tax collections, Revenue Secretary Ajay Bhushan Pandey says. On the indirect tax side, he says that the government expects to at least achieve its revised estimate for GST revenue, which is lower than what has been initially budgeted for the year. Excerpts from the interview.
Can you estimate by how much Goods and Services Tax (GST) revenue for the year will fall short of what is needed?
We have done a realistic assessment of how much revenue we are going to get in this year and accordingly we have revised our budgetary estimates for the current year.
In the case of the GST, we have brought down our revised estimates to a lower value as compared to what we had given in our budgetary estimate.
The reason is that during the 1.5 years of GST, we had done lots of adjustments in terms of process as well as rates. The rates have been brought down on many items.
The financial implication of the rate reduction is about ₹90,000 crore a year. Based on all these, accordingly for the current year, we have brought down our revenue estimates. And that much we hope to achieve.
Have you been able to estimate the impact on revenues following the I-T rebate given to those earning up to ₹5 lakh a year?
We have given a full income tax rebate to those whose total taxable income is less than ₹5 lakh a year.
This is basically to provide relief to the people who are in the middle class and particularly those who are earning even in that class. The total benefit that we are going to provide to this class is about ₹18,500 crore in a year, so that is the likely impact on our revenues.
Can the government afford this the when GST revenue has already been revised downwards?
If you see our direct tax revenue, there we have increased the revised estimate by ₹50,000 crore. And this, despite the reduction in tax rates.
Companies are asking for corporate tax rates to be reduced to 25%…
We have a policy, which we had announced in 2015, that the rates of the income tax for the corporates would be brought down to 25% and it has been, over the years, brought down to that level. About 99% of the companies are being taxed at a rate of 25%. Only 1% of the companies are in the range of 30%. Now, we will have to watch for the revenue trend and then the appropriate decision will be taken in due course. As far as the remaining tax proposals are concerned, they will be considered by the government when the full Budget is presented in July.
Is the GST 2.0 system of invoice matching still on track to begin from April 1, 2019?
The GST Council has already taken a decision that the new return system will come from July 1. The new return system will be a very simplified system. Earlier, we had a system of GSTR 1, GSTR 2, and GSTR 3. Now, in place of that, there will be only one return.
The system will be such that it will require minimum information from the taxpayers so that the compliance burden will be less. At the same time, it will also incentivise self-compliance because the entire design of the GST system is such that it promotes self-compliance rather than someone going and doing inspections and forcing compliance.
What additional information will this new return filing system give?
If you see the design of the new return system, first of all what we have done is that the monthly returns will be applicable to only those who are having a turnover of more than ₹5 crore. The smaller taxpayers will be given relief. People with a turnover of between ₹1.5-5 crore will file only on a quarterly basis. These are some of the advantages we have given. Only the minimal information, which is required for the system to determine the compliance, has been taken and this was done in consultation with the States and stakeholders.