Anuradha Shukla &
Deepshikha Sikarwar in an interview that the tax structure also has to be made more stable. Edited excerpts:
What’s next on the agenda for the tax structure?
I am not involved in the discussions on the budget now, but there is definitely a need to further bring reforms in both direct and indirect taxes. We have to rationalise rates under the Goods and Services Tax (GST), too…reduce the number of slabs and relook at exemptions. Then there are some issues like online gaming, and the setting up of tribunals. Such issues will keep coming up, so they need to be resolved. In due course, we should also look at getting gas and ATF (aviation turbine fuel) into GST. And, later, when states see an uptick in revenues and the industry sees the advantage, there will be pressure to move to a very pure GST structure.
On the direct taxes side, (there are) about two, or three issues. One is to fix the capital gains on all fronts. Second is the personal income tax and the third is to rewrite the code to simplify it. If you do that, litigation will reduce. We are reaching a stage where we need to give complete stability to the tax structures on both sides. We’ve done a bit of a journey on this, but I think some bits are still left out.
How do you see convergence in terms of the two personal tax regimes — exemption-free and the regular one?
We need to rewrite it to make the new regime better than the old one. Under the new regime, the exemption limit is Rs 2.5 lakh while in the old scheme you don’t have to pay any taxes up to Rs 7.5 lakh. Most people fall within this income bracket and so they have no incentive to come to the new tax regime.
Despite multiple efforts to simplify the tax structure, industry and businesses still complain about it being complicated. What is the way forward?
We have done quite a bit; some complaints would be there, some genuine, some not. We are now trying to provide one income-tax return form in place of six. This itself is a way toward simplification. We have introduced a faceless system in direct tax and customs. We have brought in a lot of reforms but there are still a lot of things that need to be done. The boards (CBDT and CBIC) are regularly issuing instructions and standard operating procedures. We have tweaked the compounding (of tax offences) to make it more effective. Then there is a change in stance on criminalisation of offences. We should let people pay taxes, pay penalties, and move forward, though in some cases it is needed as a deterrent.
There has been talk about a re-look at the capital gains regime. What is your view?
I am not sure of what may come in this budget but there is a need to simplify it (capital gains).
The economy is shifting towards rapid digitisation and new products such as cryptos are emerging. What is the tax system doing to gear up to meet those challenges?
We are moving pretty fast towards technology. There are some other areas where we need to work a little more, but we are… using Artificial Intelligence (AI) and algorithms very extensively and effectively. We detected gold and drug smuggling using these. In many recent seizures, we were able to identify exactly those people by just analysing the patterns via AI.
What about new kinds of businesses such as online gaming?
We are working on that. On online gaming, there are people sitting across the border. How do I catch them? But the money goes from here. There is a virtual border where we can stop. We have teams working on all these fronts. We may be a little behind the people who are doing these things, but we will soon get there. It is something that even advanced countries are facing.
Increased compliance is widely seen as one of the reasons for the tax buoyancy…
If you see the GDP growth in 2021 and 2022, compared to that the tax buoyancy is really good. This is a result of improved compliance. We have been using data extensively. We have caught a large number of fake invoice cases and even taken deterrent action like registering FIRs against the accused. When people realise that they cannot get away with tax evasion they will pay. We have got about 4.5 lakh updated returns and some corporates have also filed updated returns. I was not expecting updated corporate returns 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 agreements. Is there a case for tightening, for instance, the rule of origin under Customs to prevent misuse?
India is a peculiar country. It is a slightly higher customs duty nation and offers a large market. So, we need to be very, very careful when negotiating these agreements. In the next 5-10 years, we have to become competitive. The duties have to come down.
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