Revenue Minister Tarun Bajaj said higher duties on gold imports are not meant to increase revenue. In an interview with Business line, he made it clear that once the windfall for upstream companies stops, the windfall tax will automatically disappear. Samples
After imposing export duty on petrol, diesel and ATF and duty on domestic crude oil, the government will review the situation every two weeks based on international price movements. Does this mean the new levies have a sunset clause?
We will review the situation every 14 days as international prices are also fluctuating for petrol, diesel and ATF on one side and crude oil on the other. Suppose that if prices fall significantly, then we would like to cut taxes. We don’t want these companies to feel that they are paying the windfall tax when there is no windfall. This is one aspect. We don’t want to say how long it will last, but that’s the formula. We will continue to monitor every two weeks and if we find that there is no windfall they are making then the new levies will automatically disappear.
Is it correct to say that oil marketing companies will not have to pay tax if they import crude oil?
There is no additional tax on imported crude oil. This is traded at international prices anyway. The tax is on locally produced crude oil. Local upstream companies produce crude oil in the country. Their production costs are about the same, minus the inflationary impact.
Also, they get margins. But the price of crude oil went from $70-$80 per barrel to $120 per barrel, which means they are making $40 more. We ask that you give a portion of the $40 to the government as taxes. This crude oil is used to produce diesel fuel, gasoline and ATF. The prices of these products in the world market have risen even more.
After getting crude oil, one has to spend some money to refine it and then there is a margin called Cracks (differences between crude oil and prices of wholesale petroleum products that are derived from it such as petrol, diesel and ATF ). The cracks have even increased. So if Crack was earlier say 12-14$ and now it is 50$ which means the refiners get 30-40$ more, we say they share some part with the government as taxes and keep the rest. And they will get the raw material at the same price whether they import it or buy it from local producers here. This means there is no arbitrage and no impact on end users.
Availability of diesel, petrol and ATF can be improved domestically 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. Since we have imposed an export duty on the refiners, let’s say if their margin is $50 per barrel and we put a duty of $30, they get $20 per barrel. When local oil trading companies buy from them, they will be able to get products at a lower price than international prices because of this duty. Thus, oil companies will benefit from this measure.
Are you expecting some rationalization of domestic product prices?
This will not affect the end user price, but will not create arbitrage. It won’t distort the market. This can help in: a) greater availability of diesel, petrol, ATF in the domestic market and b) local oil marketing companies will be able to buy these products at a lower price than what they were buying so far. In this case, under-recoveries or losses of oil marketing companies are likely to decrease
What kind of revenue do you expect from the increase in import duties on gold?
We are not targeting revenue by raising the import duty on gold. If the revenue goes down, we’ll be happy. This measure was not taken to increase revenue but to reduce gold imports and ensure a reduction in India’s current account deficit. Some items that are heavily imported into the country, some of which are inelastic, such as oil and metal products that we have to import. But there are some products like gold that we think can be controlled. If we can reduce imports, it will help the economy in the current circumstances.
There are fears that higher tariffs could lead to higher smuggling…
Our analysis so far shows that smuggling is not directly related to higher duty. In fact, there have been cases where higher tariffs have been accompanied by higher imports. This time, however, due to the slightly higher duty, we expect imports to decrease. If imports decrease, it will be good.
Now coming to GST, what will be the roadmap for GST next year?
The 47th GST Council meeting held last week took some decisions on how to improve GSTN. We will do some of them in the next three months, some in 6, some in 9 and some in the next 12 months. The implementation will improve player compliance and crack down on unscrupulous people. We are also taking steps to make life easier for 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 that everyone is talking about GST suffering from, so that in the next one or two years GST becomes an absolutely stable tax rate regime where people have to focus on their business and not to deal with a quarterly meeting of the council and they can be accepted as routine work. Our efforts are to make life easier for taxpayers and improve revenue.
What changes are being made to the electronic invoicing system?
E-invoicing started with those with an annual turnover of ₹500 crore, then scaled down to ₹100 crore and now to ₹20 crore. We plan to bring it down to ₹10 crore first and then to ₹5 crore. There is a timeline to bring down the threshold to ₹10 crore, but before that we want stability in the IT system. The number of grades between 10 and 20 crores will increase significantly, so we want to make sure that our IT system is good. GSTN is working on the plan and it should be ready in next 3-4 months.
What is your plan to monitor high-risk ratings?
We are already working in this regard. We plan to further strengthen our efforts and use AI and ML. We have a lot of our own data and are now collaborating with data from direct taxes, corporate affairs, government data, etc. and we build algorithms to track such risk assessments.
A Government of M has also been formed and in the recent Council meeting their first set of proposals was passed to use IT systems to ensure that we don’t even let suspicious people into GST. For example, we will see if a suspected/violated PAN number in one country does not get registration in another country. Also, if the candidate has given an address like XYZ, South Moti Bagh, New Delhi, we will say that it is not the correct address. The candidate is risky and requires a physical examination. These parameters will be set through the IT platform, which will help to screen out at-risk people. In addition, Aadhaar authentication and geomapping will also be done. After doing such mapping, we also understand whether the mentioned place has 50 registrations or 100. So the system is improved with the help of machine learning and AI. Once all of that is in place, we’ll know that an assessment is risky and then we’ll monitor it. We will do his Aadhaar, PAN number and CA number authentication as mentioned in the electricity bill to see if the said person is running a factory. After doing all such things, we will ensure that these people will not come into the GST arena.