Revenue Secretary Tarun Bajaj has said that higher import duty on gold is not meant for revenue augmentation. In an interview with BusinessLine, he made it clear that once windfall for upstream companies stops, windfall tax will automatically go away. Excerpts
Post imposition of an export levy on petrol, diesel and ATF and cess on domestic crude, the Government will review the situation every fortnight based on international price movement. Does this mean that new levies have a sunset clause?
We will review the situation every 14 days as international prices also fluctuate for petrol, diesel and ATF on one side and crude on the other. Suppose, if prices come down substantially, then we would like to reduce the taxes. We don’t want these companies to feel they are paying the windfall tax when there is no windfall gain. That is one aspect. We do not want to say how long it would continue, but this is the formula. We will keep watching on a fortnight basis, and if we find there is no windfall profit they are making, then new levies would automatically go away.
Is it correct to say oil marketing companies will not have to pay cess if they import crude?
There is no additional tax on imported crude. This is traded at international prices anyways. The tax is on domestically produced crude. Domestic upstream companies produce crude in the country. Their manufacturing cost is almost the same, exclusive of inflationary impact.
Also, they are getting margins. But the price of crude oil has gone from $70-$80 a barrel to $120 a barrel, meaning they are making $40 more. We ask that out of $40, give a part to the government as taxes. This crude is used to make diesel, petrol and ATF. Prices of these products in the global market have gone up even more.
After sourcing crude, one has to spend some money to refine it and then there is a margin called Cracks (differences between crude oil and the prices of the wholesale petroleum products that derive from it, such as petrol, diesel and ATF). Cracks have even gone up further. So, if Crack was earlier, say 12-14$, and now it is $50, which means refiners are getting 30-40$ more, we are saying share some part with the government as taxes and keep the remaining. And they will get the crude at the same price whether they import it or buy it from domestic producers here. This means, there is no arbitrage and no impact on the end consumers.
Availability of diesel, petrol and ATF may improve in the domestic market as the government also has a quota. So, if you have to export two units, you have to give one unit to oil marketing companies or put it in your own petrol pumps. Because we have imposed an export duty on refiners, suppose, if their margin is $50 a barrel and we have put a duty of $30, they are getting $20 a barrel. When domestic oil marketing companies buy from them, they will be able to get products at a lesser price than international prices because of this duty. Oil marketing companies will thus benefit from this measure.
Do you expect some shorts of price rationalisation of products in the domestic market?
It won’t affect the final consumer price but will not create arbitrage. It won’t distort the market. It might help in a) more availability of diesel, petrol, ATF in the domestic market and b) domestic oil marketing companies will be able to buy these products at a lower price than what they were buying till now. In that case, under-recoveries or losses of oil marketing companies are likely to come down
What kind of revenue do you estimate from the import duty hike on gold?
We are not targeting revenue through a hike in import duty on gold. If the revenue reduces, we will be happy. This measure has not been taken to augment revenue but to reduce the import of gold and ensure India’s Current Account Deficit is brought down. Some items which are imported heavily into the country, out of which some are inelastic such as petroleum and metal products, which we have to import. But there are some products like gold, which we feel, can be controlled. If we can reduce imports , it will help the economy in the present circumstances.
There is apprehension that higher duty may lead to higher smuggling…
Our analysis so far says that smuggling is not directly co-related to a higher duty. In fact, there have been occasions when higher duty has been accompanied by higher imports . Though, this time because of a little higher duty we expect imports to come down. If imports reduce, it will be good.
Now coming to GST, what will be a road map for GST in the next year or so?
47th meeting of the GST Council, which was held last week, took some decisions regarding how to improve GSTN. We will implement, some of them in the next three months, some in 6, some in 9 and some in the next 12 months. Implementation will improve the compliance of players and also hit unscrupulous people. We are also taking steps to make life easier for the taxpayers.
Take the example of a decision regarding small businesses selling their products through e-commerce operators without registering under GST. Thirdly, we would like to see some structural changes which everybody keeps talking about GST suffering from, so that GST in the next one year or two years becomes an absolute stable tax rate regime where people should focus on their business and not bother for a quarterly council meeting, and they can be taken as routine business. Our effort is to make life easy for the taxpayers and improve revenue.
What kind of changes is being brought into the e-invoicing system?
E-invoicing started with those having an annual turnover of ₹500 crore, then brought down to ₹100 crore and now to ₹20 crore. We plan to bring it down first to ₹10 crore and then to ₹5 crore. There is a timeline for lowering the threshold to ₹10 crore, but before that, we want stability in the IT system. The number of assesses between 10 and 20 crore would go up substantially, so we want to be sure that our IT system is good. GSTN is working on the plan, and it should be ready in the next 3-4 months.
What is your plan to keep an eye on high-risk assesses?
We have already been working in this regard. We plan to strengthen our efforts further and use AI and ML. We have a lot of data of our own, and now we are also collaborating with data from Direct Taxes, Corporate Affairs, State data etc and build algorithms to keep an eye on such risky assesses.
A GoM has also been constituted, and in the recent Council meeting, their first set of suggestions have been accepted to use IT systems to ensure that we don’t even let suspect people onboard GST. For example, we will see whether a PAN number suspect/delinquent in one state does not get registration in another state. Also, if an applicant has given an address such as XYZ, South Moti Bagh, New Delhi, we will say this is not the exact address. The applicant is risky and requires physical inspection. These parameters will be set in through the IT platform which will help cull out risky people. Besides, Aadhaar authentication and geo-mapping will also be done. Once we do such mapping, we also realise whether the said place has 50 registrations or 100. So, the system is being improved with the help of machine learning and AI. Once all these are in place, we will know that a particular assesses is risky and then we will monitor him. We will do his Aadhaar authentication, PAN number, and CA number as mentioned in the electricity bill to see whether the said person is running a factory. Once we do all such things, we will ensure that these people don’t come into GST arena .