Finance secretary Ajay Bhushan Pandey is leading the government’s drive to check tax evasion, improve ease of paying taxes, and make tax administration more sophisticated. In an interview with Mint, Pandey gives an overview of the tax trends in a difficult year. Edited excerpts:
What helped goods and services tax (GST) receipts in December ( ₹1.15 trillion) to be the highest ever?
The reasons are three-fold. One, of course, is that the economy is on the path of fast recovery. Also, over the last more than a year, we have brought in many systemic changes in GST processes. For example, the input tax credit available to taxpayers is now getting auto-populated in a GST return form (2B). It provides great convenience to honest taxpayers as they don’t have to spend time calculating the tax credit available from each supply. It also deters those who try to take input tax credit they are not eligible for. That itself is an important factor. Third, using artificial intelligence (AI) and data analytics, we are able to identify companies issuing and using fake invoices. In the last one month and a half, we have taken action against about 7,000 entities and have arrested 187 persons, including five chartered accountants and one company secretary. All these are leading to better compliance, which is getting reflected in higher tax collection.
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Will this have a positive effect on direct tax collections?
Direct tax collection will also improve with the economy recovering. However, if the turnover of the company reduces, then its impact on income tax is much higher than that on the indirect tax. If the turnover is less than a certain benchmark, then instead of making profits, the company goes into loss, which will have to be adjusted against income in subsequent years. As part of the Atmanirbhar package, we had reduced the rate of tax deducted at source (TDS) and tax collected at source (TCS), a major contributor to direct tax receipts, by 25%. Also, we have abolished dividend distribution tax (DDT), which used to fetch substantial revenue. There will be some revenue loss there too. Though the economy is recovering, the impact on income tax will be higher than that on indirect taxes. Till now, year-to-year, direct tax receipts are down by 9.9% to ₹7.68 trillion at the end of December. This gap used to be much higher towards the end of the second quarter. In the fourth quarter, we hope that the situation will improve.
What has been the response to the Vivad se Vishwas direct tax dispute resolution scheme?
By December end, we have got about 96,000 cases out of total pending appeal of 5,10,000 cases. The disputed amount that would get settled in these cases is ₹83,000 crore. The due date has now been extended and we hope to get even higher numbers by the end of it.