The indirect tax collections are likely to exceed revised budget estimates. However, excise duty, despite strong manufacturing growth, would exceed the budget target by a modest amount. Better compliance remains high on the agenda of Central Board of Excise and Customs (CBEC). P C Jha, who has recently taken over as chairman of CBEC, talks about the indirect tax regime.
Excise collections have been growing at a slow pace largely because of exemptions and evasion. How are you planning to improve collections?
The final indirect tax figures for 2007-08 are still being computed as service tax collection figures are still coming in. In the case of customs we have exceeded the budget estimates by over Rs 3,000 crore. In excise, there is a shortfall. Overall, we would exceed the revised estimates for indirect tax collection, that is Rs 2,78,078 crore.
We want to encourage voluntary compliance so that taxpayers may have least contact with the department. Our entire system is based on trust because there is a large number of assessees which is willing to pay. For the honest taxpayer, the focus is on making the system more friendly and efficient. For the evaders there are penal provisions and deterrent measures.
We have taken various steps to ensure that exemption schemes are not misused. In the case of J&K, North-East and Kutch, where excise benefits are delivered through refunds, we have made it mandatory that all refunds would be based on actual value addition. In the case of Uttarakhand and Himachal, where there is a blanket exemption, the benefit will be available only to genuine production activity. We would also be improving the audit and anti-evasion system further to take care of the offenders.
The service tax collection in 2007-08 has not grown the way it did in 2006-07. Also some services such as telecom have shown lower growth in collections despite strong sectoral growth.
That fiscal 2006-07 was spectacular as the tax rate had been increased from 10% to 12%. In that sense the lower growth in 2007-08 is not comparable with that of the previous year. Nonetheless, we have done well and would exceed revised estimates. Telecom has shown negative growth primarily because of the large claims of CenVat credit by the industry on duty paid on capital goods. The department carried out extensive audits and they have taken action where some misuse was found.
Is there a scope of expanding the service-tax net further? Is a separate service tax Act on the anvil?
The pace of expansion of service tax has been faster than any other tax. In 1994, when we started taxing services, only three services were taxed. The rate of taxation was 5% and the number of assessees 3,943 and total collection was only Rs 410 crore. Now, it has reached the level where 100 services are under tax net. Six more services would be brought under the service tax regime this year. The total collection in 2008-09 is expected to be over Rs 64,000 crore and the number of active assessees over 5.5 lakh.
Every year we carry out an exercise to identify services which have the potential of being covered under service tax. In 14 years from three services, we have gone to 106; it is a constant endeavour. At present the service tax is governed by the Finance Act, 1994. Since a comprehensive goods and services tax (GST) would come in soon, in 2010, there is no need for a separate service tax Act.
The department's talent pool is shrinking with many people leaving for the private sector. How big is the exodus?
Firstly, exodus is not a big problem. We are creating a separate directorate for human resource development to take care of important personal matters. We have already got additional manpower of 4,000. The Sixth Pay Commission award should also have a positive impact.
What is the reform agenda for the department?
The main effort would be to make the revenue administration more efficient and taxpayer friendly. Making the system more responsive for redressing grievance of both taxpayers and the staff would be another priority in area. The emphasis would be on not just achieving but exceeding the 2008-09 budget estimates for collection of indirect tax revenue which is Rs 3,20,000 crore.