The economy is growing slower than expected. Several institutions, including the Reserve Bank of India (RBI), have been cutting GDP forecasts. Do you expect the goods and services (GST) target given in the Budget to be met?
All I can say is that collection depends upon the overall economic activity. If growth projections are lowered, it will indeed impact GST
to that extent.
Will you be revising downwards the GST and direct tax targets to make it more realistic and to what extent?
We will consider that next month, when Budget-making exercise starts. At that time, we will take stock of revenue collection and projection for next year and will come up with revised estimates.
The GST collections have been lower than Rs 1 trillion in three months till September in FY20. What has gone wrong?
It is not fair to say that something has gone wrong, resulting in lower revenue collections, because in the month of April this year itself, we had a record collection, followed by good collection in May and June. In September, the collection was a little lower, as we are aware that a few sectors of the economy are posting lower growth, including automobiles. We also had floods in major parts of the country.
After cut in the corporation tax rate, has any company showed interest in switching to the new tax regime?
Whenever I talked to industry leaders from India or abroad, they are now quite excited about making investments in India. However, there is a small section of companies that are enjoying various tax exemptions and paying less than 22 per cent tax rate. They will continue to be in that beneficial regime till their exemption period is over. The recent tax is going to benefit a large number of companies, spur investment, employment and eventually growth.
What was the rationale behind not allowing companies to switch to the new corporation tax regime to use accumulated minimum alternate tax (MAT) credit?
The whole principle behind the new regime is that you come with a clean slate. Claiming MAT credit earned during the earlier regime means that you are also claiming certain exemptions. The idea is to have a simplified tax regime. This is what our tax regime would look like after a few years, once the exemptions and credits sunset. It will improve ease of compliance and reduce discretion and litigation.
With MAT credit not available to companies benefiting from the lower corporation tax rate, do you expect the revenue impact to be much lower than the estimated Rs 1.45 trillion?
We will have to wait and see how it plays out. Different companies are at different levels of exemptions. There are a large number of companies having tax rate of over 22 per cent. They will take advantage. If some companies do not take benefit, as they are already in a beneficial regime, net revenue outgo will be slightly less than Rs 1.45 trillion.
Do you think that the constitution of a committee to suggest measures of augmenting GST revenue is a decision taken a little too late?
After completion of two years of GST, various suggestions had come like what we can do more to simplify and improve compliance. We thought that the Centre and the states should sit together and deliberate on areas where manipulation and evasion could be plugged. We want to check evasion so that an honest taxpayer is not at a disadvantage and our revenue is not impacted. Once recommendations are received, we will take it to the GST Council and take it further from there.
Haven’t measures like the e-way Bill helped check evasion?
GST, including the e-way Bill system, provides an IT platform and is a new one, unparalleled in the world. However, there are some who want to play or break the system and attempt to manipulate it to their benefit by wrongful means. In such a scenario, we need to be proactive about what they could be doing or what they could do in future and would have to take action in advance so that any such possible misuse can be checked in time. The committee would also look into that.