Tough steps needed to make India more tax-compliant: Arun Jaitley

FINANCE MINISTER Arun Jaitley on Friday said that the government has taken measures to simplify direct and indirect taxes but “some tough steps (are) required” to ensure that India becomes an increasingly tax-compliant society. This will lead to higher resources with the government for spending on infrastructure projects, he said.

“The last few years have seen several significant changes. The opening up of many more sectors, the simplification of the process of attracting investments. I am now in the final stages of doing away with the FIPB (Foreign Investment Promotion Board)… the process of ease of doing business, the process of eliminating all the governmental discretions and resorting to a market mechanism in allocation of all resources… the entire effort to simplify both direct and indirect tax structures,” Jaitley said at the annual session of the Confederation of Indian Industry (CII).

“Some tough steps are required to see that India increasingly becomes a tax-compliant society because higher resource with the state is going to now mean that greater investment in infrastructure and greater investment in rural India, and these are going to be the two primary drivers of growth itself,” he said.

As per data presented by Jaitley in the budget 2017-18, as against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore. As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore.

Out of the 13.94 lakh companies registered in India up to March 31, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. The number of individuals and companies filing returns and paying taxes was even lower.

Roughly only about 5.5 per cent of earning individuals in India are within the tax net, while the tax to GDP ratio is 16.6 per cent, lower than the emerging markets economy average of 21 per cent.

On the rates that will be proposed under the Goods and Services Tax (GST) regime, Jaitley said the government will not spring any surprises, as the rates will not be very different from the present level of taxation.

“We are now in final stages of fixing tariffs for different commodities. The formula under which it is being done has also been explained and therefore nobody is going to be taken by surprise, it’s not going to be very significantly different (from present),” he said.

He said companies should pass on to consumers the benefit of reduction in taxes under GST, which will replace the plethora of central and state taxes that currently exist. “Profit is not a bad word…but unfair enrichment is. And therefore the benefit of reduction in taxation is a benefit that consumers are entitled to. And that’s not a principle that can be seriously contested,” he said.

The GST laws approved by Parliament have incorporated an anti-profiteering provision to ensure that the reduction of tax incidence is passed on to the consumers.

The GST Council, headed by Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagar on May 18-19 to finalise tax rates on different goods and services. Fitment will be done by adding the total incidence of current taxation (central plus state levies) and then putting the good or service in the tax bracket closest to it.

On the proposed defence manufacturing policy, Jaitley said, “We are in the advanced stages of formulating a policy where we can ensure that instead of just being buyers… on the strength of technological and other tie-ups, India also becomes a manufacturing economy.” The government wants to reduce imports of defence products and encourage foreign manufacturers to set up plants in India in collaborating with local industries, he said.

“India is the world’s largest arms importer, spending some 1.8 per cent of its GDP on defence. It imports about 70 per cent of defence equipment, a proposition which the government wants to change,” said Jaitley.

 

FINANCE MINISTER Arun Jaitley on Friday said that the government has taken measures to simplify direct and indirect taxes but “some tough steps (are) required” to ensure that India becomes an increasingly tax-compliant society. This will lead to higher resources with the government for spending on infrastructure projects, he said.

“The last few years have seen several significant changes. The opening up of many more sectors, the simplification of the process of attracting investments. I am now in the final stages of doing away with the FIPB (Foreign Investment Promotion Board)… the process of ease of doing business, the process of eliminating all the governmental discretions and resorting to a market mechanism in allocation of all resources… the entire effort to simplify both direct and indirect tax structures,” Jaitley said at the annual session of the Confederation of Indian Industry (CII).

“Some tough steps are required to see that India increasingly becomes a tax-compliant society because higher resource with the state is going to now mean that greater investment in infrastructure and greater investment in rural India, and these are going to be the two primary drivers of growth itself,” he said.

As per data presented by Jaitley in the budget 2017-18, as against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore. As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore.

Out of the 13.94 lakh companies registered in India up to March 31, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. The number of individuals and companies filing returns and paying taxes was even lower.

Roughly only about 5.5 per cent of earning individuals in India are within the tax net, while the tax to GDP ratio is 16.6 per cent, lower than the emerging markets economy average of 21 per cent.

On the rates that will be proposed under the Goods and Services Tax (GST) regime, Jaitley said the government will not spring any surprises, as the rates will not be very different from the present level of taxation.

“We are now in final stages of fixing tariffs for different commodities. The formula under which it is being done has also been explained and therefore nobody is going to be taken by surprise, it’s not going to be very significantly different (from present),” he said.

He said companies should pass on to consumers the benefit of reduction in taxes under GST, which will replace the plethora of central and state taxes that currently exist. “Profit is not a bad word…but unfair enrichment is. And therefore the benefit of reduction in taxation is a benefit that consumers are entitled to. And that’s not a principle that can be seriously contested,” he said.

The GST laws approved by Parliament have incorporated an anti-profiteering provision to ensure that the reduction of tax incidence is passed on to the consumers.

The GST Council, headed by Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagar on May 18-19 to finalise tax rates on different goods and services. Fitment will be done by adding the total incidence of current taxation (central plus state levies) and then putting the good or service in the tax bracket closest to it.

On the proposed defence manufacturing policy, Jaitley said, “We are in the advanced stages of formulating a policy where we can ensure that instead of just being buyers… on the strength of technological and other tie-ups, India also becomes a manufacturing economy.” The government wants to reduce imports of defence products and encourage foreign manufacturers to set up plants in India in collaborating with local industries, he said.

“India is the world’s largest arms importer, spending some 1.8 per cent of its GDP on defence. It imports about 70 per cent of defence equipment, a proposition which the government wants to change,” said Jaitley.

Tough steps needed to make India more tax-compliant: Arun Jaitley

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