Want to push new exemption-less tax regimes further: Revenue Secretary

'This year we should have got Rs 60,000-80,000 crore as capital gains tax', said Tarun Bajaj

On the face of it, a 9.6 per cent gross tax revenue growth rate in FY23 on the back of 11 per cent nominal GDP growth may seem like a reasonable target. However, Revenue Secretary Tarun Bajaj says if one removes the lower expected proceeds from excise duties, the revenue growth target is a much more challenging 14 per cent, something which he will strive to meet. In a detailed interaction with Arup Roychoudhury and Asit Ranjan Mishra, Bajaj also says the tax on cryptocurrency has been brought to avoid disputes because that income would otherwise have been shown as capital gains. Edited excerpts: 

For the current year’s revised estimates, nominal GDP growth is around 18 per cent and gross tax revenue increase is seen at 24 per cent. For FY23, at a nominal GDP growth rate of 11 per cent, you’re assuming only 9.6 per cent gross tax revenue growth. Is it too conservative so you exceed the target just as you did this year?

When you talk of 9.6 per cent growth in revenues for the next year, this is taking excise duty into account. So now excise duty, which is a specific duty and not ad valorem, is anticipated to go down by almost15 per cent. If you take that into account, then the growth rate for tax revenue is about 14.2 per cent, which is reasonable.

This year, the department got a lot of revenue through capital gains. Now capital gains are a game of the market. If the market continues to do well, we might get money. If it doesn’t do that well, we may not get that money. So the growth rate on that may not happen. This year we should have got around Rs 60,000-80,000 crore as capital gains tax. So keeping all that into account, we have been pretty realistic.

The assumption is that corporate and personal income tax will grow by 15 per cent in the next year. So is that a realistic estimate?

I would say it is a challenging target in the sense a 15 per cent increase has not happened to us often in the past. This is what we are anticipating or estimating to happen to us after a good year. If I get a 15 per cent increase, and GDP grows by 11 or 12 per cent that means my buoyancy is 1.25.

The finance minister said so far the government had not done a deeper analysis of how many individual taxpayers had shifted to the new income tax regime. What about corporate tax? Do you have an idea of how many companies shifted to the new tax regime?

For corporate tax, we have the figures for 2019-20, for which they filed returns in 2020-21. We have analysed the data for that. Sixty-five per cent in terms of income and about 16 per cent in terms of assessees have shifted to the new regime.

It basically means that companies with higher incomes have moved to the new regime. And our anticipation is that as and when the exemptions are exhausted, they will keep shifting. The 65 per cent may have gone up in the current year when we analyse it.

I think we can expect the same kind of shift in personal income tax as well unless they are taking the benefit of huge housing loans, donations, or LTC exemption.

We want to push the non-exemption regime. But at the same time we also want to analyse the data. Only then would we like to tinker with the new scheme to see what it is that is stopping people.

How big a challenge is taxing the crypto industry when it is not regulated yet? And what is your idea of how much could garner?

It is not necessary that every activity in the country should be regulated. Even if it is unregulated, it can be taxed. The crypto industry is unregulated at this point of time. If somebody says it is illegal, I think that is not correct. If it was illegal, we would have the enforcement agencies brought in. So it is an unregulated activity at the moment. Taxation is something that we wanted to bring in very consciously. While the Central Board of Direct Taxes has been working on this for a long time, real work happened in the past six-eight months, when we started analysing some data. We have not calculated as to how much tax we’ll get because it will depend on how much trade happens and whether people make profit or losses.

Do you expect increase in disputes because of no regulation but taxation on crypto assets?

It will be interesting to see this because the other thing which I feel is that the cryptos are not contributing to economic value as much as debt or equity does.

On the 1 per cent TDS, crypto players are saying it is too high if you want only to trace the investment.

The problem is I am also trying to understand this trade. Here, P2P transactions are also taking place. So how will the exchange do a securities transaction tax (STT) and who will do the STT there? And some transactions are happening through the exchange, some may not be happening through exchanges. There are 40-50 exchanges. In some transactions, we have found that they don’t have a trace in income tax (returns) and they have got huge investments over there, money is going abroad and they have not taken any permission, and they violated the Foreign Exchange Management Act. Some people are showing more sales and fewer purchases. So I’m not saying everybody is doing it, and I would say even if the number is minuscule, this is a number. So you’re charging 1 per cent TDS. If it is not payable by you, if you have not made profits, you will get a refund.

Since losses can’t be set off in accordance with regulations, even if one person exchanges two types of cryptos between his two wallets, is he allowed to set off the losses?

So let us see. Let us come out with the rules where these kinds of things will come up. That’s why we also have kept a difficulty removal provision. We have acted based on the information, knowledge, and wisdom at this point of time. Maybe we’ll become wiser as we go along and may need to take more steps.