Retro tax gone, industry must revive animal spirits: Revenue Secretary

Revenue Secretary Tarun Bajaj says withdrawal of retrospective tax amendments is the government's policy to provide a stable and predictable tax regime

Days after the Centre withdrew the retrospective tax amendments that led to international arbitration, Revenue Secretary Tarun Bajaj on Wednesday said it was the government’s policy to provide a stable and predictable tax regime.
 
He added that robust tax revenues in the first quarter of the current fiscal were encouraging but urged industry to revive the “animal spirit” as far as private investment is concerned. “This is now the government’s policy to give a stable and predictable tax regime. This emanates from 2019. We came up with lower tax rates for the corporate sector, and also lower taxes for new units that would be set up by 2023,” said Bajaj, while speaking at the Confederation of Indian Industry (CII) annual meeting.

 
“So the whole idea is to give the corporate sector time to plan itself, and give it a stable tax regime so that you're able to decide on other things like, whether you want to invest, where you want to invest and how you want to invest,” he added. He asked industry to come forward to invest, manufacture, start services and tell the government about what it requires from it.
 

The government, last week, introduced the Taxation Laws (Amendment) Bill, 2021, to withdraw retrospective tax demands made using a 2012 legislation on indirect transfer of Indian assets and also refund the amount paid in these cases without any interest. On industry’s demands for reduction of goods and services (GST) rates on certain items, Bajaj pointed out that the council would look at solutions to bring down the rates. It would take out certain items from the tax-exempt category and correct the inverted duty structure in the upcoming meetings.

 
The revenue-neutral rate of GST is about 15.6 per cent, while the current rate is around 11.4-11.5 per cent, according to a RBI study.
 
The government has seen robust tax collections in the first quarter, suggesting that the corporate sector is doing better that expected. “I see very, very robust tax revenues that are coming. So, it is not that we have increased the taxes or we have become more intrusive. I don't think any of you can complain that you received a call from my officers asking you to pay more advanced tax because the target has not been achieved,” he said. On the contrary, he said that he asked his officers to not look at every penny, suggesting that they focus more on economic growth.

 
“I am okay to lose a pound, if the economy gives me 10 pounds. So, that is the attitude I would say that the revenue department should be working on,” said Bajaj.
 
The Centre’s net direct tax collection doubled in the April-June quarter to Rs 2.46 trillion, against Rs 1.17 trillion collected during the same period last year. Net GST collection during Q1 was over Rs 1.67 trillion, which is 26.6 per cent of the budget estimate of Rs 6.3 trillion for the full fiscal year.
 
On raising the tax-to-GDP ratio, Bajaj said hiking rates to increase tax collection was not a solution. Instead, the tax base has to be expanded to bring more people under the tax net.

 
“Increase in tax buoyancy in the current year is also the result of certain quiet steps taken by the I-T department,” he said. He added that the government is trying to rope in a large part of the informal sector, or non-corporate and non-salaried sector, by bringing in some of their transactions or businesses into focus.