Finance Secretary Ajay Bhushan Pandey is hopeful that the positive trend in the GST regime will continue, and that e-invoicing will become a medium for availing of loans from banks.
In an interaction with BusinessLine , he said indirect taxes, particularly the GST, have been on the road to recovery. “Overall, with further improvement in indirect taxes, we hope there will be some positive impact on direct taxes,” he said. Edited excerpts:
How is the revenue collection trend?
In indirect taxes, particularly the GST, indications are that it is picking up. E-Way bill growth in September (2020) against September last year was 10 per cent, and in October, the growth is 21 per cent annually.
Take another parameter of the e-invoice — assessees having a turnover of ₹500 crore or more are mandatorily required to use e-invoice from October 1. For the first few days, it (number of assessees) was eight lakh daily and now it has reached 29 lakh daily against our anticipation of 20-21 lakh a day. The GST collection in September moved into a positive territory and picked up further in October, not only crossing ₹1 lakh crore but now going beyond ₹1.05 lakh crore, which is 10 per cent higher than last October. This trend is likely to continue, because what we see in e-invoice and e-Way bill now, will actually get reflected in next month’s collection.
In direct taxes, if you see the gross collection, corporate tax collection during the first seven months (April-October) is down by 32-33 per cent and personal income tax collection is down by 14-15 per cent. Both together show direct tax gross collection is down by around 22 per cent. This indicates two things — first, even if there is an impact of a pandemic on the economy, income tax collection is there at some reasonable level. Second, we collect data from third party such as banks, stock market, real estate purchases, foreign remittance and data from GST and Customs and seamlessly share with income tax. We show these to taxpayers and when advance tax has to be paid, he is aware that the department has full 360 degrees view about the assessee. It means risk premium — taking risk for not disclosing his income fully — is higher now.
One thing, I would like to emphasise here that irrespective of trend, tax refund amounting to around ₹2 lakh crore has been given during the first seven months. This includes ₹1.27 lakh crore in direct taxes and ₹70,000 crore in GST. Overall, with more and more improvement in indirect taxes, we hope there will be some positive impact on direct taxes.
Is there any plan to introduce new revenue enhancement measures?
At this point of time, there is no such proposal, as this is the time to consolidate. Also, stability as well as predictability in the taxation system is also veryimportant. We should not make frequent changes in the tax system; it does not give a good signal to domestic as well as global investors. We need to be cautious in tinkering with tax rates or changing provisions.
The GST is attracting litigation. How do you deal with it?
The GST is a new law. More than 1.20 crore assesses are there. More than one crore returns are filed every month. Around ₹1 lakh crore gets collected every month. Now with this scale of operation, if we see the number of disputes going to the court, it is not very alarming. However, I would admit even these small numbers need to be brought down. One of the reasons for the dispute in the GST are rates. Ideally, we should have minimum slabs. Now the question is can we have fewer rates, rate rationalisation and avoidance of inverted duty structure? There is a broad consensus on taking these reforms. Considering the pandemic situation, the GST Council is of the view that such reforms should be initiated once the pandemic situation stabilises.
We are trying to move in the direction where we will have fewer rate slabs and we will be minimising the inverted duty structure. Doing away with the inverted duty structure will resolve the problem of refunds permanently for domestic supply, while the refunds for export have already been streamlined. All these will provide more capital for the industry, reduce the prices and finally will bring down the number of litigations.
There are complaints from corporates that they are getting notices under the GST on petty compliance issues. How do you respond to this?
Our effort is to reduce overall compliance. Under GST, one of the important compliance measures is filing return. Now NIL returns can be filed just with one SMS and this benefits 25-30 lakh GST assessees every month. Then from October 1, we have brought e-invoices which is mandatory for companies having turnover of ₹500 crore. From January 1, it will cover companies with over ₹100-crore turnover; and from April 1 next year, everyone will be brought under the scheme. With the help of the e-invoice, the entire return will be automatically pre-populated and at the end of month, the taxpayer will just need to validate pre-populated return and pay due tax.
In due course, the e-Way bill will be linked to the e-invoice. For exporters, the e-invoice can become a declaration for custom. Also, the e-invoice can lead to invoice-based lending. Banks can judge the potential of a borrower on the basis of e-invoices as it has information on receivables.
Any decision on Singapore Tribunal’s verdict in the Vodafone matter?
We are examining the matter and will make appropriate decisions within the time limit.