Tax assessee’s word is final for us… trust is what we want’: FM

A day after offering the largest tax relief ever in absolute terms, FM Nirmala Sitharaman explained the macroeconomic context of her Budget to TOI’s Diwakar & Surojit Gupta. In an exclusive interview, she rejected the criticism that the concessions would further shrink the tax base, while asserting that strong fundamentals would help the economy weather global uncertainties.

Through income-tax relief, you appear to betting on rise in consumption. Was that the only consideration?

The consideration was that we should honour taxpayers, honest taxpayers who have been contributing to nation building.

And spurring consumption could be a byproduct?

It can be. It can boost savings too.

The salaried middle classes keep complaining that while they honestly pay taxes, they do no get bang for their buck because they do not get to use public schools or hospitals, there is no unemployment benefit or pension. How do you view this criticism?

I also wish public services moved commensurately, but they are not just in the central govt’s hands. They are also in the local bodies’ hands, and in the state govt’s hands. There are elected representatives in all these places. They are all not run by the central govt. But I do sincerely wish that they improved for the sake of people.

How do you plan to provide relief to those who are outside the ambit of this tax relief. For example, in rural and urban centres?

We have several schemes to provide them relief such as Kisan Credit Card, whose limit has been raised from Rs. 3 lakh to Rs. 5 lakh. Another Rs. 50 crore will be brought in the ambit of the revamped Stand-Up India loans. Banks are giving record number of loans at discounted rates for affordable housing, while start-ups are getting another Rs. 10,000 crore through the Funds of Funds. More than 2 lakh start-ups had registered for the hand-holding assistance in 2016. So, each sector has got affordable credit. At the grassroots, SHGs are getting a corpus for doing business.

The Economic Survey also spoke about wage growth not keeping pace with rise in corporate profits. How much does not have to do with weak demand?

Is true that after corporate tax rate was brought down in 2019, a lot of cleaning up of the books has happened. The twin balance sheet problem between companies and banks has been addressed. So, the companies are, I’m told, making profits but probably keeping it as passive investments, earning interest on the money but yet not feeling that at this time, it is adequate or proper for them to invest and expand capacities. So, they may take a call depending on how demand and export possibilities arise. It’s also true that globally, exports are facing challenges and they want the pace of growth of exports to pick up a lot more, even that would be part of their considerations for taking the call.

Is there any possibility of bringing fuel under GST?

GST Council turned down the suggestion. We suggested that at least aviation turbine fuel can be brought under GST and petrol and diesel remain outside, but state finance ministers did not agree. So, the question should be put to the state finance ministers, not to me.

Will GST rates be rationalised, particularly of essential commodities?

There is a discussion going on in the GST Council. We will let you know once they take the call.

Will the Centre nudge states towards that ends?

Centre is part of the GST Council and out inputs go into the eventual decision… meaning we’ll discuss. The Centre’s viewpoint will also go into it.

You have pursued a new Income tax law since July. Will the changes be limited to simplification of language or go beyond?

It will be a comprehensive approach to making the Income tax Act relevant to the 21st century; relevant to an era which is technology-driven; relevant to times where the taxpayer is most often doing the assessment and filing himself. So, for a citizen to be able to deal with income tax on his own, the system should be simple enough for him to handle. It is also something we are working on because of the looseness and ambiguity of language. There are also several issues in courts where both sides appear to be right. That is because of the language used in the Act. And why should it be like that? The Act came in 1965 and India has since seen major changes; in 1991 , the economy opened up, liberalization came in. Then, in 2020, Covid stuck. So many changes have happened, and there have only been additions to the Act in response. Are they all consistent? Are the additions aligned with the original intent of the law? All of this has necessitated a comprehensive relook.

In you speech, you hinted at a culture shift, saying the authorities have to first trust the assessee and then only scrutinise. Right now, the presumption, at least in practice, seems to be that you are guilty unless proven innocent. Will the bill shift the onus?

Even now, when it comes to the question of this Budget proposal on the people who have more than one residence or one house, we have said that self declaration, whether one is being used for personal purpose or whether one has been rented out is fine with us. It is for the tax assessee to say what he wants to say, and for us his word is final. That is already on.

Trust is what we want and, therefore , trust is what we are trying to use as a first step. Self-declaration , yes, trust is the first thing.

You have reduced customs duty on premium bikes. Is it a signal to the new US administration?

We have been engaged in rationalisation of customs duty for the past two years. We are looking at it item by item. There is no link between the new regime coming in and our work on rationalisation.

There is concern about the shrinking tax base which has further shrunk after the latest concessions. How do you see that? It is said the narrow tax base will lead to a longterm problem.

So, is it wiser to keep loading the narrow base with taxes because that is the only set of people I have for paying taxes? Even that’s not right. Therefor, we have said that we need to give relief. We will give relief because that’s honouring the taxpayer and he has been contributing all the while. But it is also equally upon us to widen the tax base and keep newer people coming in who have not been earlier paying taxes, who are probably in the tax payable net. So, we will draw them in.

The govt has been fiscally prudent. Whey you spoke to the PM on the tax relief issue, what was his response.

Right from the beginning, his guidance was to find out how you would be able do it , what is going to be the formulation and, so, we worked with the department of revenue, CBDT and only then went with the proposal. Various different.

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Source: The Times of India