The government is committed to phasing out tax exemptions, says Revenue Secretary Ajay Bhushan Pandey. The proposed exemptions for certain sunrise sectors and advanced tech would be offered as part of a global bid and only the winners would be eligible for them. Edited excerpts from an interview with ET.

Government has proposed tax exemption for electric vehicles. Does that mean that government will now not pursue its intent to phase out exemptions?
We are committed to phasing out exemptions. There are two types of exemptions — general and specific. What we have given is a specific exemption to attract manufacturers in sunrise and advanced tech sectors. Industry would be invited through a global bid to set up manufacturing. Prior to the bidding, companies will be offered tax exemption. Those giving the best terms will be offered the facility. It is not that the exemption would be given to everyone.

There is a growing view that India is turning protectionist.
That is completely unfounded. We have increased customs duties only on a few items that are being manufactured in India. Question of protectionism will arise only when you exceed the bound rate (tariff offered to the Most Favoured Nations). Increasing your rate marginally to encourage your industry cannot be termed protectionist by any stretch of imagination.

How will this help? A number of items already face lower or zero duties under the free trade agreements.
The problem arising out of FTAs will be looked at by the commerce ministry. The government has only tried to provide some support to domestic industry and to encourage them by raising duties on finished goods and reducing them on inputs. This is another way to counter cheap imports coming from other countries.

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You have raised surcharge on high net worth individuals. This at a time when there are reports of HNIs shifting base out of India. Was it really necessary?
The highest marginal tax rate before this increase was 35.88%, which is lower than 54% in Canada, 50.3% in US and 45% in the UK. So, compared to these rates, even after this increase, it is not much. Also, from the equity point of view, a person earning `10 lakh a year should not be in the same bracket as someone earning Rs 10 crore. People should be taxed according to their capacity to pay — this is a basic principle of taxation. I am not aware of this data about people leaving. People do not make the decision to live in a country on the basis of taxation.

On the indirect taxes side, GST collections estimate has been scaled down…
With respect to actual collections last year, we have assumed a 14% growth. In the current economic situation when your economy is growing at a nominal growth rate of 11%, assuming 14% is not scaling down. It is actually making a realistic assessment.



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