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Cad Is Under Control J M Shanti Sundharam

Date 19-February-2014
Subject Cad Is Under Control J M Shanti Sundharam

The excise duty reduction for automobiles, mobile handsets and consumer goods would both spur manufacturing and bring more revenue to the exchequer as sales would go up, says J M Shanti Sundharam, chairperson of the Central Board of Excise & Customs (CBEC). The duty concessions, she tells Vrishti Beniwal, would automatically expire in June if the new government doesn't extend it. And, that she'd like to have draft legislation ready for implementation of the Goods & Service Tax (GST) as soon as a consensus on the latter is had. Edited excerpts:

The reduction in excise duty for certain sectors in the interim Budget has come before the elections. Is it politics or economics?

Industrial growth is sluggish and there was a need to give some stimulus to manufacturing industry. Yes, it could have been given a couple of months earlier but that it is given now needn't attract political overtones. There are 40 days to go before the end of the financial year and whatever has to be done for meeting the revenue targets will be done.

What will be the revenue loss to the exchequer due to this reduction? Whatever the likely loss on account of reduction in excise duties would be offset by increase in sales. So, the purpose is two-fold. While encouraging the domestic manufacturing industry, our revenue targets are also likely to be met, as it's unlikely the sales would remain at the same level. Particularly in cars, commercial vehicles and mobiles. We also have some customs duty concessions which are partly trade facilitation and partly stimulus for the domestic industry, to provide them a level field with imported goods.

By the revised estimates, there will be a shortfall of Rs 45,000 crore in indirect tax collections. Would you blame it entirely on the slowdown or there are other factors?

In excise, definitely the growth has been considerably slower than what we expected. In customs and service tax, we expected to meet the targets given to us. The Budget Estimate was given at a time when the economy was projected to grow at a better rate. Customs duty collections are also lower because of the higher duty on gold, to contain the current account deficit (CAD). So, it is a combination of factors.

So, are you considering reducing the import duty on gold, now that the CAD has been contained? The CAD is definitely under control but we still have time till the end of the financial year. We will be very cautious on this matter, so that the CAD doesn't go out of hand.

Despite a shortfall this year, you are projecting 19 per cent growth in indirect tax collections next year. Isn't this too ambitious?

The finance minister has already said he expects the growth to improve. We have also given some stimulus to industry. So, it is not too ambitious. It considers the existing realities. The Voluntary Compliance Encouragement Scheme for service tax has also expanded the base, as people who declared dues under it will pay tax from next year.

Will the excise duty concessions announced in the interim Budget automatically expire after June? In the case of mobile handsets, it is not up to a particular date. However, for capital goods and the automobile sector, the new rates are valid only till June. After that, a call will have to be taken.

What if the new government doesn't touch these decisions? It would automatically expire. How high is the possibility of the new government tinkering with tax rates?

The new government would come sometime in mid-June. I think any tinkering will depend on the state of the economy. Excise cuts were basically for improving the domestic industry's prospects. So, seeing how it has improved would definitely be a factor in any change there.

What will be the fate of GST?

As far as the Centre is concerned, we think GST is the way to go ahead. It is absolutely necessary to have a common market because that is the way we are going to improve our revenue collections. It was not because of the Centre that things didn't move ahead. There were a lot of differences of opinion among the states, too. I would like the CBEC to have a draft law ready, so that whenever it (consensus) comes in, the rules and the draft legislation is in place.

The government's efforts to enforce tax compliance in case of income tax have yielded results. What about excise, service tax and customs?

We have got some data from the income tax department, based on the returns and other documents filed, and expect the field formations to use this to widen the base, particularly in service tax. For excise, we have set up a study group. It will shortly give its report on matching Cenvat credit with the person who has issued the invoice. A lot of leakage in revenue takes place here. We have also moved a proposal for a committee which would give us a road map for an improved information technology infrastructure, to encourage voluntary compliance, business intelligence and analytics.

Source :

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