The Nominal GDP Growth This Year Will Be 17.6%, Says Revenue Secy. Tarun Bajaj

While the budget was overall well-received, the middle class felt left out due to the lack of tax rebates. Are any changes on this expected in the future?
The world lives on hope, but let me explain some realities here. Out of 6.3 crore people who file returns, 75% file to the tune of Rs 5 lakhs and below. If we consider Rs 10 lakhs, then it is 92%. When we talk of relief, it is those who have filed returns that are essentially asking for it. If you give relief of Rs 6 lakhs, they will start showing income of that amount and would build capital without paying taxes to the government.

If we had announced relief, it would have gone to a very minuscule bracket of tax-paying citizens who would have benefitted. This was not the right year to do that though. We needed money to be spent and focus on the people we had to spend it on. If you are giving free food to people, you are doing just that but if you are spending on MGNREGA (Mahatma Gandhi NREGA), you are focusing on a particular class of people that require assistance. The idea was that instead of giving relief to a smaller percentage of people, we would rather collect the revenue and give relief to people via the expenditure route. While there are some areas we need to rectify, which will happen over time, it is distressing to know that even among people who should be paying taxes, a lot do not do so yet. 

Can technology be utilised to address this problem, like in GST, which has been around for so many years and is working well?
We use technology and artificial intelligence in a big way. For example, in the case of GST itself, by now we have registered several cases. We have also arrested more than 600 people since November 2020. Out of these, 20 are professional charted accountants and company secretaries. We can now pinpoint the guilty and take action, unlike earlier when we had to visit individual houses for further investigation.

On the income tax front, we have started taxing high-value transactions. If you are buying a car of say Rs 10-15 lakhs, the assumption is that you are a person of means. This can be adjusted against the advance tax or the ultimate taxes which you ought to pay. The result of that is that 11 crore people pay TDS (tax deduction at source), but only seven crore file returns. However, this does not mean that every person who must pay TDS has to pay income tax. It implies many more people should be filing returns.

Last year we came up with a clause that anyone with TDS of over Rs 50,000 in two years and is filing returns, would have TDS deducted at twice the rate. Once we start taxing transactions, then if you buy mutual funds beyond a limit or send money beyond an amount, we will be able to deduct taxes. We are showing all these transactions to the public via the AIS system. People will also know that the income tax department is aware of this. This year, I am sure there has been an improvement.

We are hearing for some time now that expenditure tax will come in and income tax will be done away with. Do you think at some stage this is likely to happen?
The Indian economy is still largely informal. We earn our money that is outside the formal system and spend our money in the informal system as well. Bringing in expenditure tax and doing away with income tax may not be an effective system right now. If I go and buy something from the grocery store and pay him cash. Once you put an expenditure tax you will notice that many people are doing that. When a shopkeeper says there will be 18% tax, he is incorrect. Sixteen percent of tax has already been paid along the supply chain, so the addition is only one or two percentage points.

GST collections have been very robust. They have been more than expected. This tells us the economy is on the rebound. However, despite this, what is the long-term effect on the Indian economy due to the pandemic, given that we have weathered both short- and medium-term impacts?
We have lost two years of development due to the pandemic. One year we went down by 6.6% in real terms, and this year even if we go with 9.2%, we will be one or two percent over and above. The two years we have lost are a loss unless we can make it up in the next few years. To cope with the pandemic, we went for high debt and high fiscal deficit, which will take us at least 10 to 15 years at a debt level, which is there at present. It has for sure had an impact on the state. Fortunately, this year we have had robust revenues, which was unexpected. Having followed our policies, we have been able to cope up and come back much faster and better than some of the commentators, and even we had imagined. 

If we were to headline the budget, it would be a budget for infrastructure. Given this, what kind of jobs do you expect to be created in the next three to five years?
Spending on infrastructure gets the economy’s wheels moving. With that, the infrastructure industry should move, and we are hoping that we will achieve what we have strived for. We might also see the private sector chipping in. The infrastructure will produce jobs at the lower end, which is construction and the like. But it will also lead to services. For example, transport would be linked to it, telecom, banking, insurance, etc as well. It will generate a complete spectrum of jobs.

Also because of the vaccination drive and other factors, the virus at this point is down. People’s sentiments are positive and corporates have made good profits as well. You will also see pent-up demand from people in terms of going back to malls, restaurants, travelling and so on. All this also adds to the services and each is linked to the other, creating a much wider impact.

Another fascinating point in the budget was the crypto assets and their taxation. What is the regulation around them?  
After conducting an intensive study, we have brought certainty to taxation. We found that taxation was becoming murky on digital assets. People were showing whatever income they wanted to show, be it via capital gains, long-term and short-term, business income, or other sources that have different tax rates. We have streamlined and brought a structure to these domains. In terms of regulation, it’s still too early to say that the government will be regulating or legalising crypto. It is also difficult to stop crypto completely, given the way it is designed. We are doing a consultation depending on what people say. The Reserve Bank of India, as you know, is very vehement in its opposition to this. But it is not necessarily linked to its taxation.

The Prime Minister has spoken about a $5 trillion economy for the last five years. Do you think the budget sets us for the same?
We are one of the fastest-growing large economies of the world. We would be growing even more than China is. India is on the right path for a $5 trillion economy. The other thing to be seen is whether we can recover the lost ground or not. This year the nominal growth of GDP will be 17.6%, thanks to the high deflator, and it will rise to Rs 230 lakh crore. 

Given that multiple figures are projecting India’s growth, can you give us a realistic image of what recovery will look like?
While there are predictions by various agencies, for example, NPCI said 9.2 percent, I predict we will grow between 8.5- 9% approximately.

(With inputs from Ruhail Amin)