"Structural Reforms initiated by the Government would lead to Greater Tax Compliance and Revenue Buoyancy": Dr Hasmukh Adhia

The structural reforms implemented by the Government including path-breaking initiatives such as demonetization, sustained campaign against tax evasion and the implementation of GST have resulted in greater tax compliance and hopefully shall garner higher revenues for the Government, said Dr Hasmukh Adhia, Secretary (Finance and Revenue), Ministry of Finance, Government of India.

Elaborating on the issue, Dr Adhia said that the benefit of reforms is becoming visible in terms of an increase in personal income tax collections and the prognosis for the next two years is bright as far as revenue collection is concerned. Dr Adhia also cautioned that the Government machinery is keeping a track and notices have been sent to those with disproportionate bank accounts in relation to the income tax returns.

While acknowledging the need to reduce corporate tax rate across the board, Dr Adhia said that the tax base under income tax would have to go up to avoid revenue loss and with the 25 percent tax rate now prescribed for companies having a turnover of upto 250 crores, almost 99 percent of the companies would be covered into this slab, resulting in better tax adherence and compliances. He further stated that investment in new manufacturing units and Foreign Direct Investment has been facilitated by the recent tax rate reductions.

On long term capital gains tax coexisting with securities transactions tax (STT), Dr Adhia said that STT is a small amount and does not form a big component of the overall cost of holding the securities. Besides, the sharp drop in the sensex is not a result of LTCG alone as the stock market across the world is on a tailspin due to the global market forces.

Dr Adhia further stated that revenue is expected to further increase considerably, in the light of the e-way bill, which shall be introduced in due course with the system fully enabled, and with the invoice matching mechanism under GST. Dr Adhia also stressed on the use of technology to remove anomalies in the system to avoid tax evasion.

Mr Sushil Chandra, Chairman, Central Board of Direct Taxes, Government of India, reiterated the commitment of the Government towards bringing clarity in the provisions of the tax laws and removing ambiguity. On the issue of corporate tax rates, Mr Chandra clarified that 99 percent of the total number of companies filing returns are entitled to a lower tax rate after the budget announcement of taxing companies with turnover upto 250 crores at the rate of 25 percent.

In the Budget, a lot of benefits have been extended to the senior citizens, middle class and salaried persons. So far as the reduction in tax rates is concerned, we have to move in a phased manner to maintain fiscal balance. Prosecutions are being initiated not for the honest taxpayers, but for shell companies and pass through entities for cash, who are blatantly abusing the tax laws. The Government would like to request industry to be more tax compliant, so that the anti abuse provisions can be done away with and there is a higher tax collection, leading to further reduction in tax rates, explained Mr Chandra.

On valuation concerns for start-ups, he said that Notices are being served only in cases where there is a scope for misuse. However, an Assessment Committee has been constituted within the Department in case the assessment is perceived to be too high and unfavourable. It is only in a small number of cases that the valuation made by the company is not accepted by the authorities.

As a comprehensive move, Mr Chandra said that the Budget provisions are aimed at fulfilling three main objectives viz tax rationalisation, provide benefit to the assessee and revenue generation. He said that greater tax compliance would lead to a reduction in tax rates.

Mr John Joseph, Member (Budget), Central Board of Excise and Customs, Government of India commented that the Government is committed to make calibrated changes to the duty structure under the Customs law, in a bid to boost local manufacture and employment. The Government will take all necessary steps needed to deepen value addition.

Mr Rajiv Memani, Chairman, CII National Committee on Taxation mentioned that the last couple of years have seen a lot of activity from the Government in the field of taxation, which is expected to result in tremendous long term benefits and tax buoyancy. Among the major concerns, Mr Memani stressed on the competitive advantage which a high tax rate brings to the Indian economy while globally the tax rates are going down; challenges to the ease of doing business to the implementation of ICDS; the need to review the progress of AAR and the requirement of a diligent process to be followed for smooth implementation of the startup tax.

Mr Chandrajit Banerjee, Director General, CII congratulated the Government for presenting a balanced and pragmatic Budget, given the fiscal constraints and challenges. Mr Banerjee assured that CII is committed in advocating and supporting the initiatives of the Government in terms of bringing in simplified taxation reforms and a transparent compliance system.

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