CBDT chief PC Mody
Corporate tax collection would take a year or two to stabilise and reflect the full impact of the corporate tax rate reduction announced in 2019, PC Mody, chairman at Central Board of Direct Taxes (CBDT) told Moneycontrol in an exclusive interview a day after the Union Budget 2021-22 was presented.
“Whatever lull in the economic activity was there, it is going to bounce back. Secondly, people who had to opt for the new regime, sans reduction, exemption but a lower rate, the results of that would be visible now. The filing is yet to take place. Maybe in a year or two, things would really get stabilised,” Mody said.
On Direct Tax Code (DTC), Mody said these committees were constituted in a certain context and with a certain intent in mind.
“I think we have done much more than that, in terms of bringing about that change in the behavioral pattern of the taxpayers as well as the department. It is not essential that each and every suggestion of such committees get implemented,” Mody said.
The Budget has projected tax revenue to grow in double-digits again, despite missing targets in the last few years. How achievable do you think the targets are in the backdrop of a pandemic?
I think the targets which have now been projected, are very realistic. Of course, as you said, we have had a slight uneven revenue growth. Though this year was an exceptional year, a lot of things have happened, which makes one feel confident.
A few months back, I was staring at a negative figure of almost 30 percent. That has got reduced to a single digit now. So, the movement from a minus 30 percent to minus 9 percent gives me that comfort.
Certain simpler things like 26 AIS (Annual Information Statement), which the department is sharing with the taxpayers in their own portal, would be a game-changer. Earlier, this information was kept with the department. It would issue a reassessment notice but the taxpayer would feel very uncertain and tentative about his tax affairs, which was a psychological dampener on where he stands.
We have tried to address both issues.
Now, this information is provided upfront to the taxpayers. It also enables the department to pre-fill the returns because its specific information is coming under different heads. This further eases the compliance burden. The taxpayer also has the option of editing the information that is being disclosed.
This will promote a lot of voluntary compliance. The changes which we have made in the processes, like faceless assessment, faceless penalty, faceless appeal, reinforces a taxpayer’s belief that the department is doing what they are saying.
It’s a big psychological change towards transparency that we are attempting. So more transparency, more efficiency, and more uniformity in approach – all put together would result in better collections.
Hence, I feel confident that we will be able to meet the targets.
There were expectations that there would be some kind of relief on the income tax front. What was the thinking behind not walking on that front?
I think a taxpayer would be happier with a stable regime rather than a frequently changing one. What is more important is the overall experience a taxpayer has with the department. For instance, in terms of filing returns, he expects a quick refund. And we have done it this time.
The amount of refund which we have issued is 7 percent more than the last year. Apart from that, the speed with which we have issued refunds is equally important.
In the past two budgets, we have seen some parts of the direct tax code (DTC) been implemented through some of the actions but how is it that the DTC has been on the back burner for such a long time and when can we see a full implementation or will we see a full implementation at all?
All these committees were constituted in a certain context and with a certain intent in mind. I think we have done much more than that, in terms of bringing about that change in the behavioral pattern of the taxpayers as well as the department.
It is not essential that each and every suggestion of such committees get implemented because it is relevant in a certain context and in a certain timeframe. Requirements change, expectations change and the mode and mechanism also undergo a change. I think we have done far more than even what they had suggested.
The government had announced slashing of corporate taxes in 2019 and then the pandemic followed. Do you see higher corporate tax collections, compared to 2019-20, leaving aside 2020-21?
I would think so. Whatever lull in the economic activity was there, it is going to bounce back. Secondly, people who had to opt for the new regime, sans reduction, exemption but a lower rate, the results of that would be visible now. The filing is yet to take place. Maybe in a year or two, things would really get stabilised.
The kind of linkages which we now have, say which is seen in terms of GST (Goods and Services Tax) numbers, and the turnover that is being reflected in the ITRS (Income Tax Returns), are real-time matching.
All these things would cumulatively bring about that change, a higher collection than the last fiscal year (2019-20).