On the direct tax mop-up, the first quarter collection was nearly 80% compared with last fiscal
Direct taxes on income are being hit more by the pandemic-induced economic torpor than the indirect taxes on transactions, finance secretary Ajay Bhushan Pandey said on Thursday, even as he added that a steady rise in GST collections and the e-way bill generations on the GSTN portal reflected economic improvement.
Also, while several tax experts asked for more clarity on the contentious ‘equalisation levy’, the secretary ruled out coming out with an FAQ on the impost on non-resident e-commerce companies, saying the law passed by Parliament in this regard is amply clear.
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Equalisation levy, also referred to as Google Tax, was first introduced by Finance Act, 2016, at the rate of 6% on payments for digital advertisement services received by non-resident companies without a permanent establishment there, if these exceeded a threshold. The levy is designed to nullify the advantage of foreign e-commerce firms sans a physical presence in India over local competitors.
The Budget 2020-21 expanded its scope to include consideration received by non-resident e-commerce operators from e-commerce supply or services, at a rate of 2%. The 2016 levy had impacted companies like Google and Facebook, among others. While the precise scope of the 2% levy is still being debated, some analysts have said an Indian resident purchasing goods from the Amazon (US) or Alibaba or even a transaction between the Amazon US and Amazon India, too, could trigger this levy, as the latter would be treated as resident.
According to Pandey, a few sectors like hospitality are suffering more from economic disruptions caused by Covid-19 while other businesses are finding ways to get started. In the case of indirect taxes, the levy is on transactions, which means if transactions reduce by, say, 20% then tax revenue will decline by the same proportion. But if the turnover of a company shrinks by 20%, the decline in corporate tax payable by it could be sharper; there could be situations where the companies slip into the red by that turnover loss, the official explained.
Speaking at a virtual conference organised by industry body Ficci, he further said the revenue collections in the first quarter of the fiscal itself were ‘encouraging”, in the current context. “In June we got Rs 91,000-crore GST but it wasn’t all related to transactions in May. We had given certain extensions in return filing. Our estimate is that May transactions contributed almost 70% to the (June) GST revenue collection,” he added.
On the direct tax mop-up, the first quarter collection was nearly 80% compared with last fiscal. The collection was made up of advance tax and TDS payments. Speaking on government’s effort at digitisation and reducing compliance burden, he pointed out that the taxation data for any entity used to exist in silos but with new Form 26AS, all the information would be available to taxpayer to assist in accurately reporting income.
“We have put most of this information together at one place which comes from banks, capital markets and property registrars. We have done this through data triangulation and the same would be available in Form 26AS. Without this, it was possible that a taxpayer may genuinely miss to report some relevant information. It helps the honest taxpayers and also gives a message to the elements on the fringe of the law that data is available with the government. What we want to promote is compliance instead of sending notices,” Pandey said.