Gross tax revenue in FY21 will be close to last year’s level: Finance Secretary Ajay Bhushan Pandey

Gross tax revenue in FY21 will be close to last year’s level: Finance Secretary Ajay Bhushan Pandey

“The investment coming due to these measures is a form of stimulus to the economy but we won’t be left behind when direct support in the form of liquidity or working capital support is needed,” Pandey said.“The investment coming due to these measures is a form of stimulus to the economy but we won’t be left behind when direct support in the form of liquidity or working capital support is needed,” Pandey said.

A potentially robust economic recovery in the second half of the fiscal may help the government reach the same level of gross tax collections as achieved last year, despite a 20% y-o-y decline in April-September period, finance secretary Ajay Bhushan Pandey, who also holds the charge of revenue secretary, has told FE.

The gross tax collection in the first half of the current fiscal year stood at Rs 7.2 lakh crore, while it was Rs 20.8 lakh crore in the whole of FY20.

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Pandey said that the daily trends of e-way bill and e-invoice generation pointed towards an economy that was not only coming back onto the rails but also speeding up. “The finance minister has said we will be near that level (tax collection achieved last year). However, in order to reach there we have to catch up very fast in the remaining months of the year,” the official said.

He added that e-way bill generation saw 10% rise in September, followed by 22% growth in October over the same periods last year. The e-invoices touched a peak of 29 lakh on October 30 which is currently mandatory only for GST-registered companies with turnover of Rs 500 crore and above.

Similarly, while corporate tax collection in April-September was down 32%, it was largely due to a 25% reduction (from 30% to 22%) in corporate tax rate announced last year along with abolition of dividend distribution tax in this year’s Budget, he noted. In April-September period last year, corporate advance tax till September was paid at the higher rate as concessional rates were announced later. This showed that adverse impact on the collections isn’t so deep to frustrate a recovery in the latter half of the year, the finance secretary said.

The systemic changes introduced into the taxation system, including IT infrastructure developed to expedite refunds, making e-invoice mandatory for all taxpayers from April next year, data analytics to catch tax evasion and fraud, and faceless assessment are already showing results, Pandey said.

On the need for another dose of fiscal stimulus, the finance secretary said the focus was now on creating jobs and bringing investment through performance-liked incentive (PLI) schemes for electronic and mobile manufacturing along with pharmaceutical industry.

In addition to PLI scheme, the finance secretary counted corporate rate cuts, tax incentives to sovereign wealth and pension funds announced in the Budget this year and modified labour laws as measures towards attracting investment.

“The investment coming due to these measures is a form of stimulus to the economy but we won’t be left behind when direct support in the form of liquidity or working capital support is needed,” Pandey said.

With the introduction of PLI scheme, further reforms in simplifying taxation system by eliminating area-based exemption provided under special economic zone (SEZ) scheme were also being considered, Pandey said.

“When we have one of lowest corporate tax rates globally, the question of tax free zones is redundant. He added that it was also difficult to estimate if industry derived the desired benefit from tax reliefs like enhanced depreciation.

On whether the government will challenge the arbitration award favouring Vodafone on the tax demand, Pandey said. “We have received the award order and at this stage I will only say that we are examining it for an appropriate response.”

Separately, he said that Centre’s plan to borrow Rs 1.1 lakh crore this fiscal to compensate states for GST shortfall was also a liquidity injection into the economy which will spur demand. He added that the Centre would convince the 9 states that have opposed the borrowing plan and have not yet signed up for it.

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