Sanjay Kumar Agarwal, chairman, Central Board of Indirect Taxes and Customs (CBIC), tells Fortune India what is driving the buoyancy in GST (goods and services tax) revenues. Edited excerpts.

What explains the cut in revised estimates (RE) in customs and excise revenues for FY24 in the Interim Budget?

As far as excise duties are concerned, these are levied on very few items, mainly fuels and crude oil, and may be on tobacco, but the collection is mostly from petroleum products. In May 2022, the duty rate was reduced by ₹8 per litre on petrol, and by ₹6 per litre of diesel. Initially, the collection is less because the rate was cut drastically. Next year, the impact may not be there.

Apart from that, there is special additional excise duty, or windfall tax. It was reduced by 56% last year. That again is dependent on global oil prices, and domestic petrol and diesel rates. Accordingly, the windfall tax rate is calibrated. This year, maybe because of those conditions, it was calibrated at a lower rate. So there is less collection on that count. That has led to a negative (-6%) growth in the Union excise duty collection, but in the next financial year, we are expecting a growth of 5%.

On the customs duty front, the merchandise import in India has come down from $548 billion last year to $505 billion in value terms in the first nine months, as per the Department of Commerce. Due to a drastic reduction in commodity prices in the international market maybe the quantity has not come down to that extent and could even remain the same, but in value terms there is a contraction of 8%. So, while India may have benefitted from lower commodity prices, it has impacted customs duty collection, which has grown 2% in the current year. We have taken into account the duty collection on the customs side while fixing the target for the next fiscal.

When we are talking about nominal GDP growth of 10.5%, would you also agree that despite the buoyancy in GST collection, this projection is conservative?

On the GST side, the collection is linked with nominal GDP growth. Last year, the GDP growth which was mentioned during the budget was also 10%. Normally, we are noticing a tax buoyancy of 1.1. So that makes it a growth of around 11%. This year we are growing at 10.7%. But in the last quarter, there has been some additional growth of 5-6% in GST revenue. Currently, around 73% of the budget estimate has been collected, but in the last quarter, the collection has to be 28%. That 28% will be met by this 5 or 6% growth, which we have historically noticed in the GST collection. That gives us the confidence that we will achieve the BE (budget estimate) for the current financial year. The estimated nominal GDP growth is 10.5%, so if you apply the tax buoyancy of 1.1, it works out to be 11.6. BE has been fixed for the next financial year at 11.7, and it is quite realistic. It's neither on the higher side nor on the lower side. It is at par. Tax buoyancy projections are made after taking measures to encourage voluntary compliance and by using data analytics to ensure wherever there is evasion or avoidance of tax, we can ask taxpayers to pay up. That is the reason we are noticing a tax buoyancy of more than one. We expect this trend to continue.

You have mentioned the use of Big Data and AI for enhancing tax collections. Can you give us some sense of how and to what extent, and what different data sets have been synced for this purpose?

We are receiving data from returns paid by taxpayers for GST. They are filing their returns on the income tax side, making deductions on TDS. All such data is collated. Other than that we are getting RFID data about the movement of goods. All this data is used when we do network analysis. We use data analytics to see whether there is a missing link or a missing supply so that it gives an indication of fake entities. Then we catch them.

Any estimate of cases being unearthed?

We are working very hard to identify entities that may be indulging in these activities and are booking cases against them. We are concentrating on busting syndicates. There is a concerted drive going against them and that is giving good results.

The Finance Minister has said the coming years will be that of big reforms. What are the big-ticket reforms one can expect on the indirect tax front?

On GST rate rationalisation, a GoM (group of ministers) has been constituted by the GST Council. Maybe after the elections, they will submit the report. That will be a big thing for rationalisation on the GST front, which will bring in a lot more simplicity. But that reform will come from the GST Council. On the excise front, the duty is on very few commodities. On petrol or diesel, if the Centre raises the duty by ₹2 per litre, it will be immediately felt by consumers. If it is reduced, again, it will be known to consumers. So there is not much scope for change, but that decision can be taken at any point in time. On the customs side, duties are calibrated as per the needs of the country. Customs is not a revenue-raising measure. It is to control the availability of commodities to ensure the industry is not impacted if there is a surge in imports. If there is a shortage of commodities, custom duties will be lowered irrespective of whether it will result in lower duty collection.

Central Board of Indirect Taxes and Customs (CBIC)

'Big Data, AI aiding higher tax collection'