The government is ready to launch the goods and services tax (GST) and the fiscal year would end with a minimal shortfall in taxes, says revenue secretary Hasmukh Adhia. In an interview with ET, he says the proposed Place of Effective Management (POEM) rules are in line with international norms.
You have access to the most appropriate economic indicator, tax revenues. What do they tell us about the economy?
The growth in the direct taxes from April to November is 12.6% which is better than the current nominal GDP growth rate. As far as indirect tax figures are concerned for the period, the growth rate without accounting for additional tax measures (ARM) has been 10.3%. The increase in service tax without ARM is 13% which indicates that the service sector of GDP is doing well. The increase in customs duty without ARM is 8% in spite of the overall import volume registering a negative growth of 11.77% (in rupee terms). I must admit that we have got revenue of Rs 80,000 crore extra on account of additional resource mobilisation which happened due to increase in excise duty, customs duty and service tax.
Will the Budget revenue targets be achieved?
We expect that part of the shortfall in direct taxes will be met out of the extra gain in indirect taxes. On the whole, there would still be a minor shortfall of about Rs 30,000-40,000 crore in revenue target of Rs 14.5 lakh crore. Many decisions have been taken to put a lid on controversial tax issues. What is being done to avoid aggressive taxation? The government has taken a decision not to resort to any retrospective amendments. However, the legacy issues will continue to be taken care of within the existing legal framework. For the future, we have now put in a system of checks and balances to ensure that excessive tax demands are not raised without proper justification. In case of search and seizure as well as transfer pricing cases, approval of higher authorities is a must.
While top levels in the government are sensitive about a softer touch in tax administration, many feel it is yet to permeate down to the assessing office levels…
We are trying to change the culture of Tax Department by bringing in more measures of accountability and by giving clear cut instructions to the field authorities. The focus is on use of e-mail as a preferred source of communication, minimising the occasions for contacts between the assessing officers and the assesse and use of IT Tools for fixing accountability. The decision to go for e-assessment and e-filing of appeals is in this direction.
The Vodafone case is again back on negotiating table. What is the progress?
I would not like to discuss any individual case.
The black money amnesty window is over. Have those making use of onetime window paid up tax dues?
During the disclosure window under the Black Money Act, over Rs 4,000 crore was selfdeclared. All these people are supposed to pay 60% of the amount declared (30% tax and 30% penalty) by December 31, 2015. We would come to know about the exact figure only after this date. Most would prefer to pay tax only on the last date, which is obvious.
Has the department taken up cases under the law against those who have not come clean in the compliance window?
The department has been taking a lot of enforcement actions through search and seizures. In 2014-15 and 2015-16 (till November 2015), a total of 782 searches were carried out in which Rs 16,000 crore of undisclosed income was detected, for which, assessments are in progress. Also, during 2014-15 & 2015-16 (till September 2015) prosecution has been filed in 774 cases in the court of law for tax offences by the I-T Department.
How is the rising use of online processing of returns changing the way the department functions? Has it freed up resources for pursuing tax evasion?
The e-assessment procedure is initiated on a pilot basis in five major cities in limited number of cases. Once we see the results and once a proper IT solution is ready, we would like to roll-out e-assessment for the whole country in phases.
There is now greater focus on cutting down litigation. How is the department approaching this?
In a first of its kind decision, the Tax Department Boards — CBEC & CBDT — have issued instructions to withdraw appeal by the government in tribunal and high courts in which the tax effect is less than Rs 10 lakh and Rs 20 lakh respectively. This move is appreciated by everyone.We hope to free up resources for early completion of normal assessment of scrutiny cases.
Is the department ready to launch GST should the legal process be sorted out?
Yes, of course. We are fully ready to launch GST. The steps to GST are very clearly laid out. Once the Constitutional Amendment Bill is passed, it will have to be ratified by 50% of the states after which the Presidential assent can be obtained. The draft GST Bill is being given a final touch and it would be put in public domain as early as possible. However, it can be presented to Parliament and the state assemblies only after the Constitutional Amendment Bill gets Presidential assent. In the meantime, a massive training of the central and state government officials is going on. Also, the contract for system for GST is already awarded by the GSTN Ltd and it would be ready before March 2015.
We have committed to the BEPS framework. How prepared are we in implementing it?
BEPS is an international initiative of OECD/G-20 to which we are fully committed. Implementation of BEPS will happen in phases. Once fully implemented by all countries, it will not be possible for any MNC to do treatyshopping and tax income of all the countries would be protected. Right now, the MNCs are taking advantage of certain tax haven jurisdictions to escape tax from the country of the residence as well as from the country of source of income. This kind of double nontaxation will not be possible under BEPS. We are fully prepared to implement BEPS.
What would be the broad direction of next phase of tax reforms? Will the corporate tax reforms be rolled out from this Budget?
Broad direction of tax reforms is towards reducing exemptions and tax rates over a period of time. While policy measures for this would be covered in the Budget, many steps required for improvement in tax administration are already being taken by the government.
The draft POEM norms seem to have unsettled the industry. There are fears of double taxation. Would the government be addressing some of these concerns in the final version?
POEM is in line with global practices. India must decide its own POEM. So we have done it. I checked other countries’ POEM guidelines and every country has left some space for discretion.
If we make it complete black and white then people would be at disadvantage. There would always be some discretion. It is important for us not to do injustice to anyone. We are looking at all the representations which are still coming on POEM and would decide on the final outcome and on the date of implementation as early as possible.