Lok Sabha Question No. 2127 (UNSTARRED), answered on 2021-08-02
Subject: Restructuring of Direct Taxes Regime
Ministry: FINANCE
Asked by: Thalikkottai Rajuthevar Baalu

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA UN-STARRED QUESTION NO. 2127

TO BE ANSWERED ON MONDAY, AUGUST 02, 2021 SRAVANA 11, 1943 (SAKA)

## RESTRUCTURING OF DIRECT TAXES REGIME

2127. SHRI T.R. BAALU:

Will the Minister of FINANCE be pleased to state:

- (a)    whether  it  is  a  fact  that  since  two-thirds  of  the  Central  cess  and  surcharges  are levied  through  indirect  taxes,  higher  collections  in  indirect  taxes  allow  the  Union Government to share less taxes with the States;
- (b)  if so, the details thereof;
- (c)    whether  the  Government  agrees  with  the  view  that  the  agenda  for  a  revamped direct taxes structure should be not just to phase out exemptions, but also to widen the tax base; and
- (d) if  so,  the  measures  taken/proposed  to  be  taken  by  the  Government  to restructure the direct taxes regime to fetch increased revenues for the Centre?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) & (b): States share of central taxes and duties are determined after deducting cesses and surcharges apart from cost of collection of the respective tax. Higher collections in indirect  taxes  do  not  necessarily  mean  lesser  share  to  States.  However,  it  may  be mentioned  that  cesses  from  part  of  Consolidated  Fund  of  India  and  are  used  for  the purpose for which they are levied,  which in many cases involves grant to States. For example,  the  entire  GST  compensation  cess  is  levied  for  the  purpose  of  giving compensation to States for loss of revenue due to introduction of GST. Similarly, 100% of  Prarambhik  Shiksha  Kosh  and  a  substantial  portion  of  the  Central  Road  and Infrastructure  Fund,  Pradhan  Mantri  Swasthya  Suraksha  Nidhi  and  Madhyamik  and Uchchtar Shiksha Kosh is given to States as grants for respective purposes.

The  total  amount  of  cess  (including  surcharge)  collected  under  Indirect  Taxes (GST +Non-GST) during the last four years are as under:-

(In Rs. Crore)

| Tax Head                                                              |   F.Y 2017-18 |   F.Y 2018-19 |   F.Y 2019-20 |   F.Y 2020-21 (P) |
|-----------------------------------------------------------------------|---------------|---------------|---------------|-------------------|
| Total Cess& Surcharge Collection under Indirect Taxes [GST + Non-GST] |        217029 |        267698 |        287402 |            439508 |

Source: Receipt Budget; PrCCA(CBIC)   (P)= Provisional

(c)  &  (d):    Yes  Sir.  The  Government  agrees  with  the  view  that  the  agenda  for  a revamped direct taxes structure should be not just to phase out exemption, but also to widen the tax base.

The  Government  has  taken  many  steps  to  restructure  the  direct  taxes  regime  to increase direct tax revenues for the Centre, through curbing tax evasion, widening/deepening  of  tax  base,  promoting  voluntary  compliance,  reducing  litigation and promoting digital transactions.  Details of these steps are as Annexure.

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Steps taken to restructure direct tax regime to fetch increased revenues for the Centre.

## I. Government has taken step to curb tax evasion and widen and deepen the tax base

-  Tax deduction at source (TDS) and Tax Collection at Source (TCS) scope has been widened by including new transactions like foreign remittance, purchase of luxury  car,  e-commerce  participants,  purchase/sale  of  goods,  acquisition  of immovable property, etc.
-  TDS/TCS for non-filers and for non-PAN cases have been increased.
-  Equalisation  Levy  at  6%  for  online  advertisement  and  at  2%  for  sale  of goods/provision of services through e-platform, has been introduced.
-  Quoting of PAN has been mandated and linking of PAN and Aadhaar has also been made compulsory.
-  Black Money Act has been enacted and Benami Act has been operationalized.
-  Various  amendments  have  been  made  in  the  Income-tax  Act  to  curb  tax evasions.

## II. Government  has  promoted  voluntary  income-tax  compliance  through easing of compliance for taxpayers

-  No ITR for senior citizen above 75, if no income other than pension and interest income in the same bank.
-  Faceless  assessment,  faceless  appeal  and  faceless  penalty  schemes  have started to promote transparent, efficient and accountable income tax administration.
-  Time limit for completion of income tax proceedings has been reduced.
-  CPC 2.0 and E filing 2.0 have been launched to provide better interaction with taxpayers.
-  Taxpayer charter has been adopted to respect taxpayer's rights and make them aware of their obligation.
-  Document Identification Number has been introduced to promote transparency.
-  Pre-filing of returns has been introduced to facilitate easy and accurate filing of income-tax return.
-  Form 26AS has been redesigned to give more information to taxpayers enabling correct income tax return filing.
-  Many compliances have been reduced.
-  Threshold limit for small trusts for exemption from registration/approval has been increased from 1 crore to 5 crore .
- III. Government has taken steps to reduction litigation
-  Vivad  se  Vishwas  scheme  has  helped  in  reducing  litigation.  Total  of  1,32,353 declarations have been received under the scheme covering tax arrears of Rs 99,756 crores.
-  Monetary  limit  for  filing  appeal  have  been  increased  resulting  in  less  litigation from department's side.
-  Finance  Act  2021  has  introduced  Dispute  Resolution  Committee  for  easy resolution of tax disputes.

## IV. Government has taken steps to promote digital transactions to create less cash economy

-  Threshold for tax audit has been increased to 10 crore where 95% transaction in business are in non-cash mode.
-  TDS on cash withdrawal above a threshold has been introduced
-  Presumptive tax rate for small business has been reduced, if business is through digital transactions
-  Business over 50 crore of turnover has been mandated to provide non fee based electronic mode of payment
-  Threshold limit for cash transactions has been reduced.

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