Revenue Secretary Sanjay Malhotra on Friday said that GST collection from online gaming in three-month period surged by 475 per cent. In an interview with businessline, he also refuted the allegation by online gaming companies that higher tax has affected their business. Excerpts:
Growth of personal income tax has been higher that corporate income tax. There are expectations that some relief should be given to personal income tax payers. We did not see any relief in the interim Budget. What are reasons for that?
Collection from personal income tax has surged and rate of growth is higher than that of corporate income tax are good news. We feel this is results of various initiatives undertaken by the government over past few years. These include use of technology in a big way, permit filing of updated returns, use of Annual Information Statement (AIS), simplification and rationalisation of tax rates, beside others. And when you say that nothing done in this year interim Budget, you should remember that rate rationalisation under new tax regime took place only last year. It is necessary to evaluate the impact of changes made and one year time is too little to evaluate this. Making change in tax rates so quickly will not be in the interest of tax stability and tax certainty.
There is no extension in respect of special tax rate of 15 per cent on income of new manufacturing domestic companies which she has introduced in 2019 to promote India as a manufacturing capital of the world. The time period to set up a new manufacturing domestic company is going to expire on March 31. What were reasons for that?
Initially, a four-year time period was given which was later extended by one more year on account of Covid. Five-year time period is sufficient. Even a large industry would need 2-3 years to set up. We also need to understand that our corporate tax rate of 22 per cent is compatible and reasonable, if we compare with any other economy having size of Indian economy. Apart from tax, Central and State governments have initiated various measures to facilitate ease of doing business. There are also PLI schemes and phased manufacturing programme by the Central government. At the same time effort is to bring down logistic cost. GST has helped to check fragmentation of taxation. IBC is helping arrive at a resolution for various closed or troubled projects. I am hopeful that measures will facilitate domestic and foreign investment on a sustainable basis for longer term.
Last year, the government modified some of tax collected at source (TCS) provisions for various expenses under Liberalised Remittance Scheme (LRS). These came into effect from October 1. Now, Finance Bill 2024, prescribed amendment in the Income Tax Act for revised provisions. Will this impact taxes collected from October 1 till enactment of Finance Bill 2024?
Amendment aims to regularise changes made effective from October 1, 2023. There is no new change. As announced earlier, overseas tour programme package, sold by domestic or foreign tour operators, attract TCS at the rate of 5 per cent for the first ₹7 lakh per individual per annum and the 20 per cent rate only apply for expenditure above this limit. There is no issue of legality for tax collected between October 1 and now. Any operator violating this will face legal action. Also, I would like to say that if anyone come across instance where a foreign website, having no establishment here, selling tour package with TCS, then they should let us know, such websites can be blocked by IT Ministry.
Online gaming companies are complaining that they are facing problems because of 28 per cent GST as users have to pay more. Last year when GST Council recommended 28 per cent GST from October 1, it was also decided that this will be reviewed after six-month period, Soon, that period will be over. When will the GST Council review?
No date has been finalised for next GST Council meeting. At the same time just four-month period is over post the implementation. Also, tax has been paid only in three months. Now coming to issue of higher cost affecting the business, had it been so, companies would not have paid higher amount of tax. Our revenue from online gaming has surged nearly six times. CGST and SGST together gave ₹3,470 crore in three-month period (November, December and January) as against ₹605 crore during previous three months, showing a growth of nearly 475 per cent. We are expecting ₹13,000-14,000 crore of tax revenues from online gaming on annual basis which is around ₹10,000-12,000 crore more than previous fiscal. As decided by the GST Council, implementation of 28 per cent will be reviewed in the next meeting.
Rate rationalisation under GST is long pending. Now when collection has peaked up, can we see some development on that?
The GST Council on a regular basis review rates and gives appropriate recommendation. It is an ongoing exercise. As of now, there is no big proposal to make changes in rates, but final decision has to be taken by the GST Council. Please note that rates under GST for maximum goods and services are lower than sales tax-VAT regime.
How do you see tax collection targets for current fiscal?
Estimated growth rate for overall tax collection is 11.5 per cent for FY25. Direct tax is expected to grow by 13 per cent and indirect taxes by 9.5 per cent. Out of indirect taxes, GST is estimated to grow by 11.5 per cent, while custom and central excise are expected to grow by 5 per cent. These are realistic numbers on the basis of nominal GDP growth rate estimate of 10.5 per cent.
When you say that nothing done in this year interim Budget, you should remember that rate rationalisation under new tax regime took place only last year. It is necessary to evaluate the impact of changes made and one year time is too little to evaluate this.Sanjay Malhotra Revenue Secretary