Central Board of Excise & Customs (CBEC) Chairperson JM Shanti Sundharam says the indirect tax collection target this year would be challenging but hopefully an uptick in manufacturing would help. In a post-Budget interview with Vrishti Beniwal, she said steps would be taken to improve tax base. Edited excerpts:
Service tax revenue for the first time will surpass excise collections as per the Budget Estimates for 2014-15. 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 GST.
The overall tax target seems ambitious. How will you achieve that?
We will take normal actions like realization 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 improve its misuse.
Duty relief to automobiles and consumer durable sectors was given in the interim Budget on the assumption that increase in sales would offset the revenue loss. But that did not happen, and 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 there was a need to extend the benefit a little more. These are not the 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 that at least part of that loss would be mitigated.
The Budget has provided relief to the industry by amending valuation rules for products sold below manufacturing cost. What happens to show-cause notices already issued after 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. Whatever show-cause notices have been issued at the time of adjudication we will examine with reference to what the circular has clarified. We are making it clear that if you are selling anything below manufacturing cost and profit then the difference doesn’t need to be added and the duty will be paid only on the transaction cost.
But the industry is saying it is not clearly worded.
Let them come back to us we with whatever framing of the words they want. We will have a relook at it. If there is a scope to make something crystal clear we will do that.
The Budget proposed an increase in rate of interest from 18% to 30% on delay in payment of service tax beyond six months.
This is in case of 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 a simple interest.
What is the preparedness level of the Centre and various states on IT network for GST?
If I am prepared for my regular service tax and central excise returns I’m as well prepared for GST. We are on sound footing as far as registration and return filing is concerned. I can’t say about states. The Department of Revenue doesn’t always consult CBEC. There should be appropriate consultation so that legal, fiscal and administrative issues are sorted out at the central level.
Earlier CBEC was refusing to share data with GST-N 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 assesse. 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 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 of taking this thing would take a long time we have suggested building in necessary safeguards in the MoU for transfer of assets.
Has the government decided to retain gold duty at 10%?
We will have to take a view on that.
Do you benefit more with 10% 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.
