Tax certainty is important and to expect major changes every year in the Budget on the direct tax side is “not correct”, Revenue Secretary Sanjay Malhotra said. In an interview with Aanchal Magazine and Anil Sasi, Malhotra said while the corporate tax cut in 2019 has resulted in about 57 per cent of the corporate tax mop up now coming from the reduced bracket, he is hopeful of a similar traction from the new personal income tax regime that was tweaked last year. Q: Is there a thought process for tax restructuring or rationalisation of taxes, both direct and indirect taxes? A: Goods and Services Tax is done by the (GST) Council, that’s an ongoing exercise. Similarly, Customs is an ongoing exercise. Nothing to do with the Budget. It’s only direct taxes primarily (in Budget). We introduced major changes in the personal income tax last year. Major change in corporate tax in 2019. So, tax certainty and stability is also very important. Keeping that in mind, to expect major changes every year in the Budget on the taxation side is not correct. But yes, rationalisation, simplification like the scheme we have brought in, these are ongoing things. Q: The changes in the personal tax front were made more for the new tax regime and not the old tax regime. Does that mean that the government’s stance will remain in favour of the new tax regime? A: The government has very categorically said that it wants simplified taxation. That’s why corporate tax (was cut) along with reduction in taxes to make it more transparent and simple. With deductions and exemptions, you do not know what the effective tax rate is. It’s not so transparent. Similarly, in GST, now you know what the (tax) incidence is. Previously, there was a multiplicity of taxes and a cascading effect. Now, there is transparency and simplicity of tax rates. The government is on record to say that we will promote a simplified tax regime without any exemptions and deductions. In that light improvements were made last year to the new taxation regime. Q: How has been the response? A: We will come to know. As far as corporate tax is concerned, about 57 per cent of the corporate tax revenue has come from the reduced rate. There has been a good offtake for the new tax scheme for the corporates. The new personal tax regime, without exemptions and deductions, was not doing well. That’s why we improved it last year. What the offtake will be, it will be known next year because the returns start getting filed only after the end of the financial year. But we are hopeful that a substantial number will shift to the new regime. Q. Is there scope to sweeten the new tax scheme further? A. It's not good, you know, to change the rates too often. There is a need for tax stability. Let's watch. This is an ongoing exercise. you know, simplification, rationalisation, improvement. These are ongoing, but year to year, making major changes is not something which we should promote. Q Any particular reason that the 15 per cent tax rate for new manufacturing units has not been extended beyond March 31, 2024? A. As I mentioned, there should be, as far as possible, certainty in tax policy. So, if it was to end on March 31, 2024, it should end (there) because these pertain to investment decisions which have a long gestation period. The investments take a long time…from the conceptualisation, planning, financial closures and putting them on ground and then starting the operation…that's why a long period had been given, which was announced in 2019. It was extended earlier, it gave the hope that it will be further extended because it was extended last year. I don't think that this expectation was justified. Q. So is there disappointment on the side that corporate tax cuts and concessions did not result in a perceptible private sector investment push? A. Tax is only one of the factors, a very small factor. I think there are more important factors which determine as to whether or not investments are made, whether in a particular state, because of certain taxation rules.there are other things and the government has taken cognisance of and taken steps to improve the investment climate to make it easier for doing business. Then there are PLI (production-linked incentive) schemes, where the government feels that there is good potential for investment. We are already seeing benefits of some of those gains for example, mobiles, the exports of mobiles doubled last year. Q. When it comes to new Free Trade Agreements (FTAs) that are being signed, are the revenue implications of these deals being taken into consideration? A. Customs is not the primary source of revenue. And neither is revenue the primary reason for customs.we (have to take) a balanced view on these factors that go beyond revenue. Q. On the issue of the withdrawal of direct tax cases, you have said this is not a waiver. Is that because you're probably looking at the legal position for the larger demands that are stuck in litigation? A. This is not a waiver because in most of these cases, the demands are actually non-existent. Most of them are non-existent. Because of non-updation of our records, some of the very old records, pre-CPC (Centralised Processing Centre). And those in the five-year period after CPC was introduced. The limit was Rs 10,000, so the amount involved is very small. A majority of them would be because of system-related issues.which could be because the tax payment was to be done on one platform. and the record is updated on the CPC side, which is on a different system. When they do not communicate properly with each other, sometimes, then this updation does not happen. These are small demands. and so, mostly they are not there on a system and not recoverable. That's why we are saying, technically, it may be a remission or a waiver, but mostly they are nonexistent. Q. But the larger demands… A. They (will) continue. While they constitute a large bulk, more than 1.1 crore tax demands out of 2.68 crore, but, in terms of amount, they are less than one in thousand, of the total demand.so, it’s a small amount. This (move) will help improve taxpayer services. will help in refunds (getting cleared). Q. There is a general feeling that income tax, like some of the other agencies, is quite proactive in doing searches, seizures, raids etc. And perhaps some of these actions don't reach a logical conclusion. A. There are time limits, given in the (Income-tax) Act, for them to reach a logical conclusion. So, it's not possible that they will not reach a logical conclusion. Beyond three years, demand cannot be raised unless the demand is more than Rs 50 lakh. Then once you have raised that demand, there is a time limit to finalise the assessment.any search or any survey has to conclude. It is provided in the Act within a particular period. And if it is not finalised, then it dies automatically…it can lead to a dispute, that the taxpayer doesn't pay up. And it ends up with the commissioner appeals or the ITAT, and further on, it can go up.for that we have given monetary limits.
