‘Increased eco activity will lead to better tax mop-up’

NEW DELHI: Increased economic activity is expected to result in improved tax mop-up in the coming quarters, finance secretary Ajay Bhushan Pandey said on Wednesday as GST collections from the sale of goods in the domestic market almost reached last year’s level in June.
“Although things seem to be looking better in terms of the economic activity, the collections in June also reflect a part of the payments for previous months as we had given an extended deadline for those months on account of Covid19 situation. The overall trends are encouraging because we had lockdown in a large part of May and in June there was higher activity, which will show in next month’s collections,” Pandey told TOI in an interview.
He also said GST compensation process is being debated in light of slower growth. “There is discussion around how we can increase collections, whether it can through a correction of inverted duty structure, rationalisation of rates or other steps.”
Pandey said the picture on the direct tax front was not as grim as was made out to be. “In the first quarter, the revenue from income tax and corporation tax is 77% of the last year’s level on a gross basis, which includes advance tax and TDS. While we compare the tax collection with that of the last year, we also need to consider that the corporate tax rate was higher at the rate of around 35% when the first installment of advance tax was paid last year, and it came down subsequently to about 25%. Plus, in this quarter we had Covid situation and lockdowns in most parts of the country, which also impacted profitability of companies.”
While the top bureaucrat appeared to be satisfied with the overall progress of GST over the last three years, he said that the government was working to improve the taxpayer experience and make the filing system glitch-free.
Dismissing suggestions of a friction between the Centre and states over compensation cess, Pandey said, the GST Council was looking at multiple options to address.
“Last year, there was some slowdown and rates were also changed so collections did not match the requirement. If collections are impacted, and 14% growth in collection is not achieved, the GST Compensation law itself provides for dealing with the situation and that is what is being discussed in the council.”

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