Defending the tax proposals in the recent Budget as a fine balancing act under the current economic milieu, Revenue Secretary Ajay Bhushan Pandey said that tax rates in India are “not repressive”, but among the most competitive in the world.
The Budget measures are focussed on getting the right balance between transforming the country into a modern economy and mobilising the revenues required for this purpose while ensuring social welfare, Pandey said at post Budget round-table with select CEOs organised by BusinessLine and presented by Shriram Transport Finance Company Ltd and powered by LIC Mutual Fund .
The corporate tax rate changes ushered in September last year and the removal of the Dividend Distribution Tax (DDT) in the recent Budget have placed India among the lowest taxed countries (on income tax front), he said. At the same time, Pandey also said that India was in no position to compete with countries that are tax havens or city-states.
“If India was like Mumbai, perhaps we could have done away with Income Tax Act. We could then have just remained with property tax or other kind of tax. But, India is not just Mumbai or Delhi. India is India. We have to understand that,” he said.
The senior executives who attended the post-Budget interaction were: Raghava Rao, Vice-President, Finance, Amazon Seller Services; Aloke Bajpai, CEO and Co-Founder, ixigo; Avneet Singh Marwah, Director and CEO, Super Plastronics (brand licencee for Thomson and Kodak TV); Vijay Sharma, Director, Jindal Stainless; and Seema Prem, CEO and co-founder, FIA Technologies, a fintech focussed on financial inclusion. The session was moderated by BusinessLine Editor R Srinivasan.
No un-level playing field
On the Budget proposal that required e-commerce platforms to deduct one per cent TDS, Pandey ruled out a rethink on it and asserted that the government was not looking to create an “un-level playing field” between online and “offline” sellers.
He was responding to Amazon’s Rao, who felt that the proposal could create an “un-level playing field” between online and offline sellers. Rao indicated that offline sellers — who are not under the tax net — could end up with an advantage vis-a-vis online sellers several of whom work with wafer thin margins.
“Nowhere in the Budget is our intention to create a non-level playing field. Our intention is to make everyone pay taxes,” said Pandey.
No cut in welfare spend
Detailing the philosophy and rationale behind several tax measures in the recent Budget in a nearly two-hour interaction, Pandey said that the Budget has not cut any ongoing welfare spend or allocation to infrastructure. He said that the Revenue Department was leveraging on data and new age technologies to widen the tax net.
The entire effort of the Budget has been to move India into a more modern economy and have a “modern tax system”.
While asserting that foreign investors will be the major beneficiaries of the removal of the DDT, Pandey explained why the government decided to retain the Long Term Capital Gains (LTCG) provision, despite the demands to do away with it in the run up to the Budget.
“If you carefully look around the world, LTCG is there in every modern economy, which we want India to be,” he said.
Pandey assured industry that the safeguards introduced in the recent Budget against the misuse of free trade pacts would be strictly enforced.
“The signal in the Budget is to convey that measures will be taken to cover both letter and spirit of the FTAs and any misuse and misdeclarations will be promptly acted upon,” he said. He was responding to Marwah’s submission that there is still lot of “mis declaration” in electronics imports.
Both Bajpai and Prem stressed on a single Central registration for GST compliance for online businesses, stating that mandatory registration of business in each State was adding to the cost of operations and making compliance difficult.
Prem also suggested that the Revenue Department should put up a portal to address the grievances of taxpayers and businesses and help sort out tax-related policy issues with other government departments.