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Indian government banking on a bigger tax take

Indian government banking on a bigger tax take

The government’s Revenue Department is expecting “very, very robust” tax revenues in the current tax year, given a better-than-expected performance from the corporate sector.

However, Revenue Secretary Tarun Bajaj admitted that high goods and services taxes (GST) were hampering the recovery in some sectors, and said the GST Council would be looking at ways of bringing down rates.

He said: “It is not that we have increased the taxes, or we have become more intrusive and we are coming to you asking to pay more taxes... the happy thing behind this is, perhaps the corporate sector is doing better than what we had anticipated it to,” Bajaj said.

The net direct tax collection in the April-June quarter of the current fiscal stood at over ₹2.46 lakh crore ($330bn); the figure was ₹1.17 lakh crore during the same period in 2020-21.

Net Indirect Tax (GST and Non-GST) revenue raised in the June quarter of the current fiscal year was at ₹3.11 lakh crore.


Stable economy

Bajaj said while GST rates could be adjusted for certain goods and services, it was more important to ensure the economy was stable.

He urged the private sector to increase investment, based on their better-than-expected performance. He said: “I don’t see private investment happening that much... for a sustained and long-term growth of the economy we want you people to come forward to invest, manufacture, start services and please tell us what is it that you require from us.”


Retrospective tax demands

One thing the government will not do is issue corporations with retrospective tax demands. Currently, the tax department has the power to go 50 years back and levy capital gains tax on overseas firms where their business assets remain in India.

The legislation, introduced in 2012, was used to raise ₹1.10 lakh crore of tax from 17 foreign-owned companies. But the Taxation Laws (Amendment) Bill, 2021 seeks to withdraw the tax demands made using a 2012 legislation on the indirect transfer of Indian assets and also refund the amount paid in these cases without any interest.


Increase the tax base

Bajaj ruled out raising tax rates as a way of increasing revenues, saying instead that the solution was to bring more people into the tax system, focusing on ‘more informal’ sectors of the economy.

“I am actually looking forward to expanding that effort. I don’t want to tax the corporate sector which already pays taxes in the country, and contributes a major part of taxes in the country,” he said.