Delhi, India: Sanjay Malhotra, the revenue secretary, recently joined the department after moving in during the preparation of the budget. However, he appears to have settled quickly. He tells TOI in an interview that the government has budgeted for two-thirds of taxpayers to transition to the new tax system, and that those who are not part of the government stand to gain at least Rs 20,000 annually as a result of the new tax rules for leave encashment.
Excerpts:
In the budget, you have assumed a buoyancy of one (the ratio of GDP growth to taxation). What is the reasoning behind such a level of buoyancy? Is it traditional?
The buoyancy has increased to 1 plus or minus 0. 1-0. 2. The buoyancy has decreased in years when we have cut taxes. On the side of direct taxes, our tax rates have decreased. In the Budget, we implemented 14 measures to increase collection rates. In order to make up for lower tax rates, we need to enhance our tax administration and make use of more technology.
The issue of expanding the tax base is addressed in the Budget in what way?
We have sealed the gaps. We are doing something else. It is not about raising rates; rather, it is about enhancing our analytics and information systems without being intrusive.
The faceless assessment ran into some difficulties. How are you getting over those?
We are aware that there will be challenges in the beginning of this journey. We need to improve, and a lot of work is already being done to resolve the conflicts between the jurisdictional view and faceless on the one hand. In her Budget speech, the FM made it clear that we want to strengthen our grievance-redress mechanism because we need to improve our systems to reduce these issues. Throughout the year, we will work on aspects to alleviate any pain points. That is still unimportant.
You want to increase the amount of GST collected.
At the moment, the 10-month average is Rs 1. 5 million crore. It depends on how much you spend and how much you make. This will only rise as incomes rise. We are attempting to accomplish Rs 1. 6-1. 7 lakh crore annually.
What actions are planned to increase collection rates?
Since rates have not increased, they may have decreased, so it is a function of the economy. The last-year's rate increase may have contributed to some of the GST's buoyancy. When this effect wears off, our buoyancy will be different. After that, it will depend on how efficiently the collection is done. Our systems are getting more rigid. We must increasingly rely on technology, particularly tax payments that do not require a human interface.
Will the current tax system be phased out over the medium to long term?
The FM has stated publicly that both are present and that there is no expiration date for the previous scheme. Yes, the trend is toward a less complicated and more transparent tax system with no exemptions and lower rates. That is the direction, but there is no strategy for overthrowing the previous regime.
People are encouraged to move away from the previous tax system by the change in the new one. Are those who use other exemptions or have a mortgage in better shape?
People can choose how they want to spend their money. They can put their money where they want. Let me inform you that salaried workers account for fifty percent of income reported by taxpayers. We anticipate an impact of Rs 37,000 crore assuming that two-thirds shift from old to new. You are better off if you do not have a home equity line of credit and a mortgage. The increase in the tax-free leave encashment limit from Rs 3 lakh to Rs 25 lakh will benefit everyone, not just those employed by the government, whether they shift today or not. At a rate of 30% or higher, the Rs 22 lakh tax benefit amounts to nearly Rs 7 lakh. If you spread it out over 30 to 35 years, it comes to more than Rs 20,000 per year. Everyone in the public sector, including AIIMS employees, will benefit from this.
Our average customs rate has increased over the past seven to eight years. Given the criticism of that, how is it calibrated?
We should not compare ourselves to other nations because we are still a developing nation and require assistance for our industry. The duty structure places intermediates and final goods at the highest rate, while raw materials are taxed at the lowest rate. The effective rate is much lower when FTAs are taken into account.