New income tax regime needs to be changed to make it more attractive, says Revenue Secretary Tarun Bajaj
Anuradha Shukla &
Deepshikha Sikarwar in an interview that the tax structure also needs to be made more stable. Edited excerpts:
What’s next on the agenda for the tax structure?
I am not taking part in the budget discussions at the moment, but it is absolutely necessary to continue the reforms of direct and indirect taxes. We also need to rationalize the Goods and Services Tax (GST) rates…reduce the number of slabs and review the exemptions. Then there are issues like online gambling and setting up courts. These issues will continue to arise, so they need to be addressed. In due course, we should also consider integrating gas and ATF (aviation turbine fuel) into the GST. And, later, when states see a slight increase in revenue and industry sees the benefit, there will be pressure to move to a very pure solution. GST structure.
On the direct tax side, (there are) about two or three problems. The first is to fix capital gains on all fronts. Second, the staff income tax and the third is to rewrite the code to simplify it. If you do this, disputes will decrease. We are getting to a stage where we have to give complete stability to the tax structures on both sides. We’ve come a little way on this, but I think some things are still missing.
How do you see the convergence of the two personal tax regimes, the exemption and the regular regime?
We need to rewrite it to make the new regime better than the old one. Under the new scheme, the exemption limit is Rs 2.5 lakh while under the old scheme, you do not have to pay tax up to Rs 7.5 lakh. Most people fall into this income bracket and therefore have no incentive to adopt the new tax system.
Despite multiple efforts to simplify the tax structure, industry and businesses still complain about its complexity. What is the way forward?
We did a lot of things; some complaints would be there, some genuine, some not. We are now trying to provide one tax return form instead of six. This in itself is a path towards simplification. We have introduced a faceless system in direct taxes and customs. We have made a lot of reforms, but there is still a lot to do. The boards (CBDT and CBIC) regularly publish instructions and standard operating procedures. We have changed the capitalization (of tax offences) to make it more efficient. Then there is a change of position on the criminalization of offences. We should let people pay taxes, pay penalties and move on, although in some cases it is necessary as a deterrent.
There was talk of reviewing the capital gains regime. What is your point of view ?
I’m not sure what can come in this budget but it needs to be simplified (capital gains).
The economy is moving towards rapid digitization and new products such as cryptos are emerging. What is the tax system doing to prepare for these challenges?
We are moving towards technology quite quickly. There are other areas where we need to work a bit more, but we use… artificial intelligence (AI) and algorithms very intensively and effectively. We detected gold and drug smuggling using them. In many recent seizures, we were able to identify exactly these people simply by analyzing the patterns via AI.
What about new types of businesses such as online games?
We are working on it. On online games, there are people sitting on the other side of the border. How can I catch them? But the money goes from here. There is a virtual border where we can stop. We have teams working on all of these fronts. We may be a little behind the people doing these things, but we’ll get there soon. This is something that even advanced countries face.
Increased compliance is widely seen as one of the reasons for fiscal dynamism…
If you see GDP growth in 2021 and 2022, compared to that, the fiscal buoyancy is really good. This is the result of better compliance. We used data a lot. We have detected a large number of cases of false invoices and even taken deterrent measures such as the registration of FIR against the accused. When people realize they can’t evade taxes, they will pay. We have about 4.5 lakh updated returns and some companies have also filed updated returns. I didn’t expect updated company feedback to come. There are more than a dozen cases in which the tax paid was more than Rs 1 crore.
India is looking to sign more trade deals. Should, for example, the rule of origin be tightened in customs to prevent abuse?
India is a special country. It is a nation with slightly higher tariffs and offers a large market. So we have to be very, very careful when negotiating these deals. In the next 5 to 10 years, we have to become competitive. Homework must go down.