05 Feb, 24

Revenue Secretary Sanjay Malhotra: Existing taxation structure reasonable, will stop abuse of GST flexibility

In an interview with PTI, Revenue Secretary Sanjay Malhotra said the Interim Budget provides for continuity in taxation regime and the benefits given are responsible for huge buoyancy

By Zimble Digital

In September 2019, the government announced a cut in base corporate tax for then existing companies from 30 per cent, down to 22 per cent and for new manufacturing firms, incorporated after October 1, 2019, to 15 per cent from 25 per cent.

Revenue Secretary Sanjay Malhotra said this existing taxation structure is ‘very reasonable’ when compared to an economy of the size of India and hence the concessional tax regime which was in force for four years for new manufacturing units was not extended beyond March 2024.

In an interview with PTI, Malhotra said the Interim Budget 2024-25 provides for this continuity and the benefits given to taxpayers in the last years is responsible for the buoyancy in personal income tax.

‘Taxpayer services have been a major focus of the government and this will continue going forward. Taxpayer services includes rationalization, simplification and trust-based taxation with less scrutiny and more pinpointed assessments and use of technology. We are hopeful taxpayer services will continue to improve helping us in compliance and improving tax collection efficiency,’ Malhotra said.

To a question on why the concessional tax regime was not extended, Malhotra said companies were given a long time to set up new units to avail of the concessional rate.

‘A long period of four years was given. This is the time that a large company put on the ground right from conceptualization, planning, raising of funds, sufficient time was given it was extended by another year till March 31, 2024, because of Covid. These investments have a long gestation period.

The existing taxation of our country now for corporates at 22 per cent, when compared to the economy of our size, is very, very reasonable. In light of all these, it was felt that this was the date that it was to sunset and it should sunset,’ Malhotra said.

‘Those new manufacturing companies which are able to commence their operation before March 31, 2024, will continue to get that benefit,’ Malhotra added.

The government in 2019 announced that any new domestic company incorporated on or after October 1, 2019, making fresh investment in manufacturing, will have the option to pay income tax at the rate of 15 per cent if they commenced their production on or before the set sate of March 31, 2023. The date was then extended by a year to March 31, 2024, in last year’s Budget.

Companies had to forego all exemptions and incentives if they availed of the new tax rates. The effective tax rate for existing units, after considering surcharges and cess, such as Swachh Bharat cess and education cess, which are levied on top of the income and corporate tax rates, is 25.17 per cent as compared to the earlier 34.94 per cent.

In the Interim Budget, the Government also announced withdrawal of outstanding small tax demands of up to INR 25,000 till 2014-15 in respect of income, wealth and gift taxes.

Currently, there are about 1.11 crore such disputed cases, with the aggregate tax demand amounting to INR 3,500-3,600 crore.

‘These are not in the nature of disputes, these are more in the nature of non-reconciled tax demands and some are very old. They will help in better tax administration,’ Malhotra said.

Govt. to prevent evasion and abuse of GST, says Rev Sec

The government will take steps to prevent evasion of Goods and Services Tax (GST) by entities abusing the flexibility given to businesses to correct errors in transaction, Malhotra said.

Malhotra explained many business entities game the system, abusing the flexibility to correct errors and the extent of the tax credit they can claim.

Although the authority has information about the transaction details, some entities do not pay the correct amount of tax. Some buyer also claim the seller has made a mistake in making the invoice, claiming false credits on the tax due.

‘GST has given the flexibility to the buyer to make upward revision in the inputs tax credit available,’ Malhotra said

The correction steps taken will entail proper validation of transactions and claims without affecting genuine tax payers. An effective Invoice Management system will play a key role in ensuring compliance.

The move is part of efforts to ensure that tax revenue collection grows faster than economic growth rate in nominal terms

‘We have a lot of data on direct and indirect taxes. But there are still pieces where we need to work upon and need to make more effective use of data. With this, we hope to sustain tax revenue buoyancy,’ said Malhotra.

He added ‘We will make use of information available and curtail the facility of editing downward the liability to pay taxes by the seller and the flexibility given to increase the input tax credit by the buyer.’

The government will also integrate the IT platforms used by customs authorities and GST authorities for scaling up tax compliance using data analytics, so that the entire process is smoother. At present each agency uses its own IT systems.

The government predicted a revenue buoyancy of over 1 in the interim budget for FY25, implying faster tax revenue growth compared with the economic growth rate.

The interim budget for FY25 has projected that the Centre’s gross tax revenue will grow at 11.5% over the revised estimates for FY24, while Gross Domestic Product (GDP) is projected to grow at 10.5% in nominal terms, leading to tax buoyancy forecast of 1.1.

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Revenue Secretary Sanjay Malhotra: Existing taxation structure reasonable, will stop abuse of GST flexibility

Govt. to prevent evasion and abuse of GST, says Rev Sec

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