Finance Minister Nirmala Sitharaman on Friday said honest taxpayers need to be commended, while those breaking rules should face stiff action. Speaking at The Economic Times Awards for Corporate Excellence 2023, FM Sitharaman said there is evidence of increased misuse of tax laws by some sections to claim unlawful refunds. She added that the use of deep data and artificial intelligence tools has unearthed a trail of funds to shell companies.
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“When these trails of funds going to shell companies are in your face, I don’t see how CBDT or CBIC can remain a mute spectator. This has to be plugged so that genuine taxpayers do not lose faith,” she said while responding to a question on increased search activity by the tax department.
“It’s only natural that you should go after them and I’m glad if they’re going after (the wrongdoers) efficiently.”
Giving an example, Sitharaman said there are over 300 companies, operating in a 50 sq m area, with minimum infrastructure, but which get Rs 400 crore as refunds. “If the tax authorities are going to fear of being accused of tax terrorism, the inefficiencies will perpetuate,” she said.
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Banking crisis
Talking about the banking crisis in the US, Sitharaman said there is no “contagion risk” for India but cautioned about a potential risk to exports if the big markets are hit by a recession.
“So that risk is definitely there. But I would think that the contagion risk, usually linked to the conduct of the central banks, is not there for us to face,” she said.
Refusing to comment on the interest rate revision, the finance minister said that it’s for the Reserve Bank of India (RBI) to decide on the next course of interest rate action, as it’s “getting the sense from the ground”.
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Earlier this month, the RBI decided to keep the repo rate unchanged at 6.5 per cent with readiness to act should the situation so warrant. Since May last year, the central bank has increased the rate by 250 bps over inflation concerns.
Investment banking firm Morgan Stanley in a report also said that going ahead the RBI is likely to maintain the current repo rate as inflation appears to be manageable.
Morgan Stanley’s report titled ‘India Economics – Macro Indicators Chartbook: Growth Sustains Momentum; Macro stability in Check’, co-authored by Upasana Chachra and Bani Gambhir, stated that the interest rates are expected to remain stable throughout 2023, with any shallow rate cut cycle starting from the first quarter of 2024.
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The report suggested that risks of the same may start earlier based on an improving inflation outlook. “We see risks of a shallow rate cut cycle starting earlier based on an improving inflation outlook,” the report stated.
The RBI’s next monetary policy committee meeting is scheduled to be held from June 6-8, 2023.
