System in place to fix reconciliation row over tax payments: Revenue secy

Malhotra speaks of the Paytm probe, goods and services tax on online gaming companies, and revenue projections

With rate rationalisation, simplifying procedures, and the upgrade of systems on direct taxes, there is no need to revive proposals on the direct tax code (DTC), Revenue Secretary Sanjay Malhotra tells Indivjal Dhasmana. He also speaks of the Paytm probe, goods and services tax on online gaming companies, and revenue projections. Edited excerpts.

Revenue projections in the Revised Estimates (RE) for 2023-24 seem modest since only personal income tax receipts are pegged higher than the Budget Estimates (BE) despite so-called robust tax collection. Do you agree?

One can only say taxes other than personal income tax were estimated well. So, we are more or less sticking to the BE projections. But yes, in some places, there is a decrease, especially on indirect taxes -- excise and customs duties. This has been made up by better collection in personal income tax. Projections are made on the basis of the actual figures for the first nine months in the case of the indirect taxes and the first 10 months in the case of the direct taxes. So, they should be very close to what we will get at the end of the year.

You have kept tax buoyancy at just 1.09 for next financial year. That, many say, is low. What is your take on this?

Average tax buoyancy is about 1.1 if you look at the last 10 years. There are instances of less than one during some years while there have been periods of more than one also. To expect tax buoyancy at more than 1.1 year after year is not correct. Ours is a realistic projection, based on what the historical average points to. We have done better than projections this year. This makes it even more difficult to achieve a buoyancy of more than one during the next year.

Transfers from the Reserve Bank of India (RBI) and dividends from public-sector banks and others were kept only a bit lower at Rs 1.02 trillion for FY25 against Rs 1.04 trillion for FY24. Are you expecting a high transfer from the RBI next year too, similar to the Rs 87,000 crore for this year?

We don’t have a breakup of the RBI transfer and dividends from public-sector banks and others now.

What is the breakup of 10 million taxpayers (individuals and small companies) against whom you will withdraw minor demands for specific periods?

This relates to both personal income tax and small companies. They are mostly personal income tax payers but there could be corporation tax demand too. As many as 99 per cent of these would be individuals.

Such demands came after the period for which you are withdrawing them and they will be raised in future too. What is the guarantee that you will not withdraw these demands again?

It is a one-time exercise because our systems were not in place then. These are not disputes but are reconciliation errors. Records were kept in a decentralised manner before 2010-11. That is why we have taken 2009-10 as the cut-off. In future, these things will be few because we will have records due to the systems upgrade. The number of demands stands at 26.7 million. Of these 22 million are of less than Rs 25,000 each. We are taking 11 million off the books. We will continue to pursue the remaining 11 million cases which are of less than Rs 25,000 each for the years after 2009-10 and try to resolve them. If taxpayers show payment receipts, we will remove them from the list of pending demands. But we will pursue all demands even if some of these are over Rs 100 after 2014-15.

Goods and services tax (GST) notices sent to online gaming companies were for entire bets whereas the law imposes tax on entry-level bets. Why should there be two parameters for taxing online gaming companies?

New provisions are with prospective effect from October 2023. Before that the old provision will prevail.

But there was no clarity earlier…

This is what taxpayers are saying. Our view was that GST at 28 per cent was to be imposed on each bet. They (taxpayers) were paying 18 per cent on gross gaming revenue (GGR).

How much tax has been collected from online gaming companies since the new law was put into effect?

We have got Rs 3,470 crore in three months since October against Rs 605 crore in the preceding three months. So it works out to around Rs 1,167 crore for each month now against Rs 202 crore earlier. This means an increase of Rs 965 crore per month since the new provisions were put into effect.

What are the expectations from GST collection from online gaming companies for six months of FY24 and the whole of FY25?

If we continue at this rate, we will get about Rs 14,000 crore in FY25. Similarly, we will get Rs 7,000 crore this financial year. We got only Rs 1,600 during 2022-23.

Is there any possibility of reviving the earlier proposal on the direct tax code?

In the last few years we have rationalised rates, improved systems, and simplified procedures in direct taxes. There is no need for a direct tax code.

There are money-laundering charges against Paytm Payments Bank. Will the Enforcement Directorate (ED) probe the bank?

We have not received anything as of now. If the ED receives any such information, especially relating to money laundering, it will take action.

Union Finance Minister Nirmala Sitharaman has promised that the government will bring a white paper on the alleged mismanagement of the economy during the United Progressive Alliance (UPA) years. If the revenue department is asked to give feedback on the controversial retrospective amendment to the Income Tax Act, what will those inputs be?

We have to give it a thought. We will examine it.

Congress MP D K Suresh recently said in Parliament the southern states were being discriminated against in terms of sharing taxes. What is the position?

Devolution of central taxes is not our department’s remit. However, the GST compensation cess is. We pay the cess due to the states periodically. We first pay a provisional amount and the final 20 per cent when the audited figures are presented. We give the final amount as soon as we get the audited figures from the states.