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Centre managed to raise tax revenue by nudging taxpayers to file updated returns: Tarun Bajaj

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The Union government has managed to increase revenue by encouraging taxpayers to file updated tax returns where the income tax department has intelligence about unreported income, revenue secretary Tarun Bajaj said, adding efforts to widen India’s tax base will continue. In an interview, Bajaj said that given the comparatively low tax-to-GDP ratio in India (10.7% as per the FY23 Union budget estimate), the tax base has to continue widening before the government could think of lowering personal income tax rates.

Bajaj also said voting is not the only option to decide on the vexed issue of taxation of online gaming, horse racing and casinos as consensus may be possible. The GST Council will meet next on 17 December. Edited excerpts:

Won’t windfall tax affect investments in oil and gas exploration and in refining capacity?

I do not think companies would be banking on windfall profits for making investments. They would be banking on normal profits, and normal profits are good. Besides, we have not taken away everything above a normal profit. We have left a lot on the table. Now, even with windfall taxes, they are making more profits than normal profits in the case of both crude oil and refined products.

The salaried class is heavily taxed, while professionals and businesses have greater leeway and resources for tax planning. There is a case for offering a more favourable tax regime for the salaried class, especially when there is buoyancy in revenue collections; is there not?

There is a need to expand the tax-to-GDP ratio before we decide to give any relief. If you consider individual taxpayers, there are 70-75 million. Only 25% of them pay taxes, and the remaining just file returns. Not too many people pay taxes, unlike the message that the middle class does. The middle class may account for 200 million people, but the taxpaying population is not more than 10-15 million. I think there is a need to broaden the tax base and simplify the tax. If we could do the simplification that we have done on the corporate tax side, on the personal income tax also, that would help.

Since the ministerial group set up to decide on taxation of online gaming, horse racing, and casinos could not arrive at a consensus, will the GST Council have to decide on it by voting?

I do not know whether it (the GoM’s report) will figure in the next GST Council meeting, and if it is coming, what is there in the report. If the GoM says there is no consensus and these are different views, then the Council will take a view on that. I think we should move away from the notion that we will agree on everything. Even when we disagree, there is a case for one to say, “Yes, I will give up and go along with you though I disagree.” It must have happened in so many cases in the Council. We really need to accept and admire the wisdom of the political executive. In so many cases, debates have taken place, and the House was divided for it to agree on an alternative proposal.

What are the pressing matters at Council’s next meet?

It is scheduled to meet on 17 December. The matter on the GST tribunal may come.

What are the biggest gains from technology in tax administration?

We have used technology in a big way. In direct taxes, we have started matching information with data from third-party sources such as the GST establishment and the ministry of corporate affairs. We also get direct tax information from banks, insurance firms, etc. Use of tech will only go up. In direct taxes, other than people with income, we have also tried to cover people who fit into certain criteria, for example, foreign travel or electricity consumption above a specified amount. We feel people spending so much on these items have a taxable income and, therefore, should file returns. We have also doubled the rate of tax deducted at source (TDS) in the case of people who fail to file returns, as per our criteria. The trend of widening the tax base will continue. We are now issuing notices to people who have evaded taxes, and we are asking them to file updated tax returns. When I last checked, about 300,000 updated tax returns had come, and 500 crore has come. About 2,400 corporate tax returns have come, and close to 20 people have filed taxes of 1 crore and above. We tell people if you have forgotten to file returns, pay taxes and move on. As we do all these things, taxpayers are happy to pay taxes and be comfortable. Once they come into the net, they will keep paying taxes.

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