 "We'll use IT to improve tax mop-up: J M Shanti Sundharam")
J M Shanti Sundharam, head of the Central Board of Excise & Customs, agrees the indirect tax collection target this year would be challenging. In a post-Budget interview with Vrishti Beniwal, she said steps would be taken to improve the tax base. Edited excerpts:
Going by the Budget Estimate for 2014-15, service tax revenue will for the first time surpass excise collections. Is service tax going to drive future growth in indirect taxes?
A saturation point will be there for excise duties but services are bound to grow. However, at one point, both central excise and service tax would get merged into a Goods & Services Tax (GST).
The overall tax target seems ambitious.
We will take normal action like realisation of arrears, going after cases in courts, improving our audit performance. We will also use information technology for improving our collections. A committee report is already there on Cenvat credit verification, to check its misuse.
Duty relief to automobiles and consumer durables was given in the interim Budget on the assumption that increase in sales would offset the revenue loss. That didn't happen. Now that the lower tax rates have been extended for another six months, are you hopeful of a rebound in manufacturing activity and, thus, revenue collections?
It appeared to us that there was a need to extend the benefit a little more. These are not sectors where you find a change
overnight. The fact that there would be immediate losses was factored in. Over a period of one year, the expected losses, assuming sales don't pick up, are around Rs 8,000 crore. But since things are looking up, we expect at least part of that loss would be mitigated.
The Budget has provided relief to industry by amending valuation rules for products sold below manufacturing cost. What happens to the showcause notices already issued after the Fiat ruling?
In January, we had already issued a circular clarifying the context of the Supreme Court judgment and how it is to be applied. We will examine whatever showcause notices were issued at the time of adjudication with reference to what the circular has clarified. We are making it clear that if you're selling anything below manufacturing cost and profit, the difference doesn't need to be added and the duty will be paid only on the transaction cost.
Industry is saying it is not clearly worded.
Let them come back to us we with whatever framing of words they want. We will have a relook. If there is a scope to make something crystal clear, we will do that.
The Budget proposed an increase in the rate of interest from 18 per cent to 30 per cent on delay in payment of service tax beyond six months.
This is for service tax which is collected and not paid by a particular date. The person has used this amount. So, interest will act as a deterrent. It is only simple interest.
What is the level of preparedness of the Centre and various states on the information technology (IT) network for GST?
If I'm prepared for my regular service tax and central excise returns, I'm as well prepared for GST. We are on a sound footing on registration and return filing. I can't talk about the states. The department of revenue doesn't always consult CBEC. There should be appropriate consultation, so that legal, fiscal and administrative issues are sorted at the central level.
Earlier, CBEC was refusing to share data with GST-N, (the special purpose vehicle for providing a common IT infrastructure to the Centre and the states in the proposed GST regime), fearing litigation on data privacy issues. Has a solution been reached?
CBEC had done a pilot project in which we got data from some of the states and our database of dealers and assessees.
GST-N wanted to take over this pilot project from CBEC. That was part of the cabinet note, too, but at that time, nobody had gone into what it contained. The asset is not the hardware; the asset is what is inside the server, and that is the database. It is kept by us in a fiduciary capacity. Where is the legal authority of the department to hand it over to someone else? Taxpayers can take me to court for that. Since the legislative route on taking this thing would take a long time, we have suggested building in necessary safeguards in the memorandum of understanding for transfer of assets.
Has the government decided to retain gold duty at 10 per cent?
We will have to take a view on that.
Do you benefit more with 10 per cent duty?
The government is aware of smuggling. When duty rates are high, we had high revenue despite gold imports coming down but it did lead to a spurt in smuggling.
Going by the Budget Estimate for 2014-15, service tax revenue will for the first time surpass excise collections. Is service tax going to drive future growth in indirect taxes?
A saturation point will be there for excise duties but services are bound to grow. However, at one point, both central excise and service tax would get merged into a Goods & Services Tax (GST).
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We will take normal action like realisation of arrears, going after cases in courts, improving our audit performance. We will also use information technology for improving our collections. A committee report is already there on Cenvat credit verification, to check its misuse.
Duty relief to automobiles and consumer durables was given in the interim Budget on the assumption that increase in sales would offset the revenue loss. That didn't happen. Now that the lower tax rates have been extended for another six months, are you hopeful of a rebound in manufacturing activity and, thus, revenue collections?
It appeared to us that there was a need to extend the benefit a little more. These are not sectors where you find a change
overnight. The fact that there would be immediate losses was factored in. Over a period of one year, the expected losses, assuming sales don't pick up, are around Rs 8,000 crore. But since things are looking up, we expect at least part of that loss would be mitigated.
The Budget has provided relief to industry by amending valuation rules for products sold below manufacturing cost. What happens to the showcause notices already issued after the Fiat ruling?
In January, we had already issued a circular clarifying the context of the Supreme Court judgment and how it is to be applied. We will examine whatever showcause notices were issued at the time of adjudication with reference to what the circular has clarified. We are making it clear that if you're selling anything below manufacturing cost and profit, the difference doesn't need to be added and the duty will be paid only on the transaction cost.
Industry is saying it is not clearly worded.
Let them come back to us we with whatever framing of words they want. We will have a relook. If there is a scope to make something crystal clear, we will do that.
The Budget proposed an increase in the rate of interest from 18 per cent to 30 per cent on delay in payment of service tax beyond six months.
This is for service tax which is collected and not paid by a particular date. The person has used this amount. So, interest will act as a deterrent. It is only simple interest.
What is the level of preparedness of the Centre and various states on the information technology (IT) network for GST?
If I'm prepared for my regular service tax and central excise returns, I'm as well prepared for GST. We are on a sound footing on registration and return filing. I can't talk about the states. The department of revenue doesn't always consult CBEC. There should be appropriate consultation, so that legal, fiscal and administrative issues are sorted at the central level.
Earlier, CBEC was refusing to share data with GST-N, (the special purpose vehicle for providing a common IT infrastructure to the Centre and the states in the proposed GST regime), fearing litigation on data privacy issues. Has a solution been reached?
CBEC had done a pilot project in which we got data from some of the states and our database of dealers and assessees.
GST-N wanted to take over this pilot project from CBEC. That was part of the cabinet note, too, but at that time, nobody had gone into what it contained. The asset is not the hardware; the asset is what is inside the server, and that is the database. It is kept by us in a fiduciary capacity. Where is the legal authority of the department to hand it over to someone else? Taxpayers can take me to court for that. Since the legislative route on taking this thing would take a long time, we have suggested building in necessary safeguards in the memorandum of understanding for transfer of assets.
Has the government decided to retain gold duty at 10 per cent?
We will have to take a view on that.
Do you benefit more with 10 per cent duty?
The government is aware of smuggling. When duty rates are high, we had high revenue despite gold imports coming down but it did lead to a spurt in smuggling.