'If the govt decides, service tax can go up to 16%'

Revenue secretary Shaktikanta Das in an interview with Deccan Herald’s Annapurna Singh has clarified that there may not be any exemptions on personal income tax this year but the middle class can expect a lot more when the government’s finances improve. He also said that though there will be an up to 16 per cent service tax on some services due to the Swachh Bharat Cess, rates will not go up overnight. Excerpts from the interview:

Questions are being raised that the effective Service Tax rate is going to be 16 per cent and not 14 per cent as announced in the Budget because the two per cent Swachh Bharat Cess will be added to the service tax?

It is two per cent or less. You should see the Budget speech also. The Budget speech clearly says that it is two per cent or less. That is the first aspect. Second thing is that it will be implemented from the date on which it is notified and also, the minister has said in his speech that it will be imposed only if the need arises. Therefore, it is under consideration of the government. As and when there is a requirement, it will be levied. It is not going to be levied overnight. The government will definitely take into account in what way it will impact various sectors and accordingly it will issue a guideline.

But it will take the service tax to 16 per cent on whichever services the cess is imposed?

It can be up to 16 per cent. If the government decides, it can be up to 16 per cent. But it is for the government to decide if it wishes to impose the Swachh Bharat Cess at two per cent or less than two per cent.

The Finance Minister left personal income tax rates unchanged and there were no deductions as well?

Only seven months ago, the government had given an unprecedented increase in the exemptions. Unprecedented in the sense that three things were done together. Rs 50,000 was given in exemption limit on income tax. Investment limit on 80C was increased from Rs1,00,000 to Rs 1,50,000. Interest on housing loan was increased from Rs 1,50,000 to Rs 2,00,000. All this was done just seven months ago. And the Finance Minister has said that as and when the fiscal space improves, the middle class can expect a lot more.

So we can expect something on I-T exemptions in the next Budget.Yes, it has to be in the next Budget depending on the fiscal situation.There is no announcement in the Budget about reduction in import duties on gold which still remains at 10 per cent ? There were expectations, even the Commerce Ministry had put in a request?

As and when a decision is taken to tweak the gold import duty, it will be announced. As of now, it stands at 10 per cent. If the gold import is down, it is good for India.

The corporate tax rate reduction is being seen as a pro-rich stance?

India has to offer a competitive environment to attract investment and to create jobs. The regulatory environment should be hassle-free and the tax regime should be attractive. On regulatory environment, the government has taken steps to improve the ease of doing business. On taxation, our corporate tax rates are higher compared with all other ASEAN countries which have 25 per cent or less. If I am an investor and I am evaluating, I have the option of going to Thailand and investing there and paying a lower corporate tax. This reduces the competitiveness of India. In that context we have said that the rates will be reduced over a period of time. And we have also said that the exemptions to corporates will be phased out. So on a net basis, it is not a bonanza to the corporates.

The Finance Minister’s Budget speech said there were deficiencies in the existing foreign black money laws. What about domestic black money laws? There is far more black money in India?

We found that so far as foreign black money is concerned there are a few deficiencies and therefore we thought it necessary to come out with a new law. For example, we have introduced the provision whereby if the black money is held abroad, the tax department can take action and attach and confiscate assets of equivalent value held in India. So that is a huge improvement in the law. It is a strong deterrent against future black money generation. As far as domestic black money is concerned, the current laws are strong enough and wherever there are loopholes, we have addressed them.