We have tried to ensure industry is not taken by surprise when GST comes in: CBEC chief

The government's indirect tax proposals in the budget were in sync with the changes needed to move towards a comprehensive goods and services tax. Although industry reaction has been largely positive, some of the proposals haven't been well received. S Dutt Majumder, chairman, central board of excise and customs, talks about the impact of the budget in an interview to ET. Excerpts:


You are assuming the growth momentum in indirect taxes to continue even in the next fiscal. What makes you so optimistic when there are concerns about industrial performance?

We have taken number of measures that would give a fillip to the industry. The finance minister, in his budget speech, has outlined his broad vision for the manufacturing sector. He expects the share of this sector in GDP to increase to 25% from present level of 16%. In line with this thinking, he did not raise excise duty even though he had the option to do so. He has, however, asked the industry to reinvest the surplus in their businesses. The objective was also not to take any measure that would hurt the common man by feeding into inflation while ensuring that changes in the structure are in line with the (proposed) goods and services tax.

Even on the customs duty front, measures are largely aimed at giving a boost to local value addition and manufacturing. Therefore, we are encouraging import of raw material and inputs by lowering duty on them.

All these measures will give a leg up to manufacturing, and indirectly also help the collections grow. We are very confident of achieving the targets set in the budget.


Industry has expressed concerns on measures such as treating repackaging as manufacturing. What was the idea behind such a move?

Once goods and services tax is implemented, the word "manufacturing" will cease to exist. Its place would be taken by "supply". It would be supply from one point to another point. We have only attempted to prepare the ground for GST. This would ensure that industry is not taken by surprise when GST comes in and is well prepared for it. Revenues also have been a consideration behind this move. Revenues also have to grow in line with government's expenses. The government has to allocate money to fulfill several social sector objectives under various schemes. But, the overall theme in this budget has been to make only those pay who can pay.


The emphasis is on a non-intrusive tax administration. How is the department changing its strategy?

In the case of central excise and service tax we have self-assessment, and the department only conducts audits. In the case of customs we have introduced self-assessment. This will allow an importer to assess, decide and pay the duty himself and take his goods without any customs interference. We have made the system very taxpayer friendly as we believe that facilitation increases compliance. But, we will have a very robust post-audit system. We also have an effective risk management system in place that ensures random scrutiny on special pre-fed parameters. The directorate of revenue intelligence and SIIB (Special Intelligence and Investigations Branch) will be revamped to ensure that these agencies give more inputs on intelligence. Similarly, the Directorate of Central Excise and Service Tax will also be strengthened. This would be done in line with the GST framework.


You have brought in more services under the tax net. But what is the thinking on having a negative list for services?

Negative list in services is a highly debated subject. Globally also opinion has been divided on it. Some countries have a positive list while some have a negative list. Under the positive list approach, you have separate tariff codes for services you tax, and you can exempt a service from the tax. But, there is a view that why make the tax system clumsy with multiple tariff codes and have a negative list. Under the negative list approach, you only list out service you do not tax. Both methods have their pros and cons. Even within the department there are different views. So we will have a public debate on the issue and take decision.


So, we will have a draft paper soon?

We will be working out something.


Industry has also raised issues on the points of taxation rules for service tax?

We have received representations from industry. There are some issues. Industry has said they want more clarity on when the tax would be due. We are examining those issues.