It is wanted to punish those who abuse the tax system: FM

Finance Minister Nirmala Sitharaman said at the Economic Times Awards for Corporate Excellence 2023 that sincere taxpayers should be acknowledged but those misusing the system should be held accountable.

The minister stated that the government was looking at areas where there may be more activity and that private investment is turning the curve and would have gotten more traction but for the epidemic and the crisis in Ukraine.

The minister denied any significant “contagion risk” from the US banking crisis for India, but he issued a warning about a possible danger to exports if the major markets experience a downturn.

A question on whether tax notices have been seen to have increased in recent years was directly addressed by the FM during a fireside chat.

The tax authorities are always prepared to address complaints, but at the same time, the abundance of artificial intelligence-driven data and faceless assessment systems force them to take action against dishonest elements to ensure that genuine taxpayers’ faith in the system isn’t shaken, she told the Mumbai audience of business leaders and top officials.

She acknowledged that there had been instances of harassment.

Sitharaman said, “But today, when you’re looking at deep data on AI-driven, faceless assessment systems, I can’t see how the CBDT (Central Board of Direct Taxes) or the CBIC (Central Board of Indirect Taxes and Customs) can remain mute spectators… when data is showing brazen misuse of (law) by some sections. “It’s only natural that you should pursue them, and I’m pleased if they’re successful in doing so.”

Sitharaman believed that the potential for the US banking crisis to have spillover effects was not a major concern.

India was worried about the potential decline in demand in those economies and the resulting impact on its exports.

“So there is undoubtedly a danger. However, I believe that we are not at risk of the contagion that is typically associated with central banks’ actions, she said.

Refusing to comment on the prognosis for interest rates, the minister stated that the Reserve Bank of India (RBI) will determine the future course of interest rate action since it is “getting the sense from the ground”.

The RBI and a few other central banks in emerging markets have already broken their ties to the US Federal Reserve’s action, she continued.

She said, “I believe it is only fair to give RBI its footing and it is for them to make a decision and I think most of you are very happy with RBI having paused.” Earlier last month, the RBI conducted its most recent policy review but did not hike interest rates.

The Insolvency and Bankruptcy Code, she insisted, is still “robust,” but she conceded that the resolution process is being hampered by the delays in filing vacancies at the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).

“The layers of decision-making involved in it only to track the right people, so that they are transparent in their operations and decision-making, is taking a lot of time,” she claimed.

According to the minister, switching back to the previous pension system (OPS) “is probably going to be extremely impossible” due to the long-term financial impact on the states that desire to leave the new pension system (NPS) of this action.

As a result, she claimed, individuals who don’t believe there is another way to win elections are the ones calling for a return to the OPS. She said that there have been times when parties have used these giveaways and still lost elections.

A group led by the finance secretary TV Somanathan is reportedly considering ways to make the new pension plan more appealing.

Sitharaman said that there was no need to alter the inflation-targeting monetary policy framework in order to provide the central bank additional freedom to handle problems other than price fluctuations. According to her, external factors like the pandemic and the disruption of global supply chains are a major driver of the present inflation trend.

According to her, the RBI only needed to explain in writing to the government once why it was unable to keep inflation within the 2-6% range.

“Indian democracy is mature enough to understand why it is happening, and it does not warrant at this stage for me to go and meddle with the law,” she said.

Self-help organisations and micro, small, and medium-sized enterprises (MSMEs), whose potential hasn’t yet been fully realised, would need to be given a decisive push if the economy was to be propelled from its current trajectory of about 6% growth to one of 8%+ growth, according to the economist.

It will be beneficial to maintain a focus on digitalisation, continued development work in desirable neighbourhoods, innovation, and regions and industries where there is still significant room for growth, according to the expert.

“These are the methods that I believe you’re ensuring that the economy becomes more active and that every pocket receives the proper attention. These are not modest moves; they will raise your indicators and broaden your GDP base as a result. Given that the population is young, you would anticipate an increase in per capita income if that gap widened, she added.

Regarding the southwest monsoon, the minister stated that the government continuously evaluates risks, such as the possibility of an increase in oil prices and the occurrence of drought conditions, and is ready to act. She claimed that despite not having a pre-made framework for an unusual and unforeseeable catastrophe like the pandemic, the government nonetheless handled it well.

Although there isn’t a designated gender budget per se, Sitharaman, India’s first full-time female finance minister, said the government is focusing on women-led policies and a number of initiatives have been started to empower them.

There are several initiatives in the works that involve private funding.

She stated, “Look at the zeal with which people are coming to India to set up in many fields, whether it is your semiconductors, looking at renewable energy, looking at rare earths, and also because the policy per se has now opened up even the space sector.”

For new manufacturing units, the government had significantly reduced the corporation tax rate from 35% to 15% in September 2019, but the pandemic broke out in early 2020, and the Ukraine conflict followed.

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