The central board of direct taxes is busy finalising the draft of the direct taxes code, which is expected to be tabled in Parliament in the upcoming Monsoon session. The boards chairman, SSN Moorthy, explains the progress in drafting this revolutionary law and its possible impact on revenue collections in conversation with Media. Excerpts:
Direct tax collections have been very good in the first quarter. What does this trend mean? If collections of June are any indication, then we are on the right track because industrial growth has picked up from last year onwards. We do not see any effect of Greece or Portugal in India. Tax collections are reflecting it and if the tempo continues we could register a growth of about 16%. On the corporate side, the growth in June advance tax payouts is commendable. If the industry continues to grow then we shall be able to achieve our annual target of Rs 4,30,000 crore or even more.
What is the income tax departments strategy to boost collections? We will galvanise our tax deducted at source (TDS) machinery and make our assessments more result oriented. TDS contributes more than 35% of the total collections. So there is an emphasis on how to expand it. In TDS our reach is limited. So we would like to expand to all areas such as government departments, non-government departments, non-government organisations and semi-government agencies. The intent is to further widen and deepen our TDS net.
The last date for giving comments on the second discussion paper on the direct taxes code was June 30. Can we expect the bill in the Monsoon Session of Parliament? All major concerns have been addressed. Reactions have been reasonably warm and not much of criticism has come. We have given a chance to all stakeholders. We also had a meeting with the industry. They have given some ideas. They will now be considered. The draft is getting ready. If everything goes well and all legal drafting is complete, then we should be able to introduce it in the Monsoon session.
What does the code mean for the collections? We are in a situation when the tax rates are moderate. When the tax rates are low, compliance levels will be higher. We are looking to collect Rs 4,30,000 crore this years. With the direct taxes code, collections could be much higher. If the goods and service tax is also in place, then it will also boost direct taxes collections because transactions will be more transparent and there will be less chance of concealing them.
Could there be significant changes in the draft? I cant say anything. We have published our ideas. The concerns expressed by various stakeholders have been addressed. Some suggestions have come and now it is for us to see if to dilute it further or give it another orientation. But, by and large, all major issues have been addressed.