Vikas Vasal, Global Tax Head-Grant Thornton InternationalIndia’s taxation policy is getting more certain with each passing year, but a lot more needs to be done to further enhance the trust of businesses towards policymakers, according to Vikas Vasal, Global Tax Head, Grant Thornton International.
The tax veteran lauded the government’s recent measures like setting up of Faceless Dispute Resolution Committee and bringing Vivad Se Vishwas to reduce pending litigation. But timely clarifications on contentious issues, as well as avoiding litigation on repetitive matters, he stressed, are further required to improve the tax environment. Edited excerpts of the interview.
Q: What do you think about India’s taxation regime for businesses? Has the needle moved or is it still a work in progress?
India’s taxation regime is continuously evolving to keep pace with the changing business environment.
In 2019, the government had introduced a concessional tax regime for newly set up manufacturing companies as well as other domestic companies that did not claim specified exemption/incentives. This has been well received by the industry and is acting as a catalyst for new investments into the manufacturing sector.
While India is still going through challenging times due to Covid, the government has announced various relief measures and provided incentives to spur growth and investment in India under the Atmanirbhar Bharat and related schemes.
The needle has definitely moved on the tax and regulatory front. But a lot more needs to be done to usher in an environment of trust and confidence between the taxpayer and tax administration. Timely clarifications on contentious issues, avoiding litigation on repetitive matters, strengthening alternate dispute resolution mechanisms will go a long way in further addressing this issue..
Q: Contract enforcement and litigation problems appear to be continuing unabated… Are you disappointed with the progress made there?
This is an area of concern and the government has taken some steps in the past, however, it’s a long journey.
From a tax perspective, a number of measures have been taken in the recent past to reduce litigation and avoid unnecessary litigation. In order to provide early tax certainty to small and medium taxpayers ‘Faceless Dispute Resolution Committee’ has been introduced vide Finance Act 2021.
Further, Vivad Se Vishwas scheme has been introduced in order to reduce pending litigation. Similarly, a dispute resolution scheme for indirect taxes yielded good response from the taxpayers.
The big step towards digitisation and Faceless Assessments and Faceless Appeals, could change the way tax assessments and tax appeals have been done in the past. It is expected that this will also bring in more certainty and transparency in the whole process..
Q: What are your views on digital taxation? The topic has come buzzing again after the G7 corporate tax pact…
Tax systems across the globe are playing a catch up with the evolving business models. Tax statutes in different counties were designed to address the tax issues relating to brick and mortar models.
Now with the advent of technology, the digital transactions have increased both in value and volume. Based on the recommendations of the OECD, India has been one of the pioneers in introducing an equalisation levy. India introduced an equalisation levy of 6% on online advertising services and in 2020 it introduced an equalisation levy of 2% on non-residents e-commerce operators.
There has been a strong reaction to this from certain quarters like the US Trade Representative (USTR) and some retaliatory action like a proposal to levy ad valorem duty of 25% on goods imported in the US from India. This issue is under active discussion between the two countries.
Recently, the G7 nations agreed to establish a global minimum tax rate of 15% on a country-by-country basis. They have also agreed on the allocation of taxing rights to market countries (i.e. where users are based) on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises.
The agreement will now be discussed in detail at the G20 meeting. Key details remain to be negotiated over the coming months. The devil is in the details, therefore, we have to wait for the fine print on this matter. It’s a daunting task as consensus needs to be built with most of the countries to make this announcement a success and its implementation.
Q: What will be your take on India’s use of technology in tax? The GST regime is yet not glitches free…
There have been measures in the right direction to adopt digitisation vis-à-vis tax administration and its processes. An important landmark development has been making tax assessment proceedings faceless. This development will eliminate the need for face-to-face interaction between the taxpayer and the revenue authorities. In line with this scheme, the faceless penalty scheme has also been introduced.
Also, the government has mandated the first level of appeals with the Commissioner of Income-tax (Appeals) and the second level of appellate proceedings with the Income-tax Appellate Tribunal to be also shifted to online mode.
The initial teething issues are bound to be there which would eventually get addressed through changes in the IT systems, processes and procedures. In the context of GST, despite its roller-coaster ride for the taxpayers due to frequent changes, it is gradually settling in. This is evident from the record collections on a month on month basis..
Q: Last, to become a $5 trillion economy, what should be further done to bring in tax certainty?
A mindset change is required in the society at large. For taxpayers to understand that it is their duty to pay the right amount of tax and for the tax administration to understand that taxpayers are their partners in nation-building. One cannot exist without the other.
There have to be robust businesses to pay taxes, and there must be tax collections to support the marginalised sections of the society and achieve larger socio-welfare objectives.