Budget 2019: Tax growth projected for FY 2019-20 is realistic, says revenue secretary AB Pandey

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February 03, 2019 5:21 AM

The Budget estimate for the growth in direct tax collections in FY19 was 15%.

Ajay Bhushan Pandey, Revenue Secretary

A day after the interim budget for FY2019-20, Sumit Jha spoke with revenue secretary Ajay Bhushan Pandey on the large deficit in GST collection and the revenue trajectory for the current and next financial years. Given the way procedures have been eased and tax rates made more benign, GST compliance would improve next year, he said, adding that it was natural for such a major tax reform to take time to stabilise. Edited excerpts:

Though revised estimate for GST collection shows deficit of Rs 1 lakh crore, you have still budgeted for an over 18% growth for FY20. Isn’t this too optimistic?

This year we had to revise down our figures from BE on account of various rationalisation steps, including rate cuts. The rate cuts so far have revenue implication of Rs90,000 crore per year. Extending such relief to consumers would impact the revenue collections temporarily.

But compliance, especially lack of facility for invoices matching delayed rollout of e-way bills, may also have impacted collections.

GST is a large reform, so the system is still undergoing a phase of stabilisation. People are getting used to the system. In December, 73 lakh people have filed returns, an increase over last month. Given this trend, we expect to see (revenue) gains next year. Rate cuts and easing of procedures usually improve collections, as is evident from sharp increase in average monthly GST revenue this fiscal from the previous year’s. While average monthly collection was Rs 90,000 crore last fiscal, it was Rs 97,000 crore in April-January this fiscal.

You have assumed direct tax buoyancy of 1.3 in FY20. Although this is upon a strong figure of 2.1 in FY19, it seems you have reconciled to slowing of revenue growth after the post-demonetisation jump. Clearly, you are not hoping much from Operation Clean Money.

The Budget estimate for the growth in direct tax collections in FY19 was 15%.

For the next year, too, we have estimated the growth roughly at the same level. Annual growth rates in the last three years have been in the impressive range of 15-18%. After demonetisation and GST, the economy’s formalisation has gathered pace. Last year saw one of the sharpest increases (28%) in total I-T returns — electronic and otherwise — to 6.74 crore (returns mostly pertaining to FY17, the demonetisation year). The effective assessees rose an unprecedented 27.5% to 8 crore in FY17 and direct tax buoyancy rose sharply from 0.6 in FY16 to 1.3 in FY17 and 1.9 in FY18.

In FY19, too, e-returns for income tax have seen a big jump. Given such consistent increases over the last few years (that has led to a huge expansion of the base), we are realistic in projecting the buoyancy level for FY20.

What’s the rationale behind raising the rebate threshold under personal income tax instead of a blanket exemption for income up to Rs 5 lakh?

It’s a question of equity. Why should people earning a lot more gain from such provisions? The government needs the income tax revenue to run programmes like the PM Kisan Yojana, the pension scheme, etc. The revenue has to be collected but in a manner that the low income earners don’t feel the tax burden. Just like welfare schemes are targeted towards low- income groups, the benefit of lower taxes should also go to those who need it the most.

Why do the monthly GST collections fluctuate widely in the range of Rs94,000 crore to Rs1 lakh crore?
GST is just 18 months old, and it has undergone a lot of changes during this period. For any trend analysis we need more time and data. This is the first time taxes are being collected online through one portal nationally. It needs to be understood that in pre-GST regime, analysis was happening sector-wise and state-wise but it requires more time to analyse how something will behave in totality, especially while constant changes are being made.

Why is GST compliance improving at a very slow pace? Even for December, only 73 lakh assessees have filed returns out of over a crore.
That’s why we have taken the decision to allow smaller taxpayers to file quarterly or annual returns. Once all these changes have come into effect then we can perform any analysis as to how many have not filed.

Has anti-profiteering mechanism under GST yielded the desired results? There is a view it is redundant.
We have identified certain companies under this provision. We have recovered some money and this shows it is indeed a functioning mechanism. In short amount of time, if cases are being registered, and orders are being passed leading to recovery of some money, then clearly the system is yielding.

Has the GST system become more complex with assorted composition schemes and 7-8 tax rates, while the idea is to have a simple tax structure?
The purpose of GST was to have a pan-India system and merge state and central tax authorities and subsume as many as 17 different indirect taxes into one. The administration must be open to incorporate new ideas to improve the system when such a large reform is implemented. It is not correct that the overall direction of GST is not towards simplification. Compliance has been eased and revenue threshold has been raised. All these things are heading towards simplification. As far as different rates under GST are concerned, it makes sense in a country as diverse as ours. We cant tax essential food items at 18%, for instance.

Has the government resolved the issue faced by start-ups on account of angel tax?
This is the question of implementation. Section 56 of the IT Act (under which notices have been issued to angel investors in star-ups) is basically an anti-abuse provision. We have to carve out a mechanism that checks abuse but at the same time start-ups gets the intended tax relief. The department for promotion of industry and internal trade, which is competent to recognise start-ups, has given suggestions in this regard and we are implementing them.

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