Revenue Secretary Tarun Bajaj believes that if the windfall tax is done away with, it'll be good for the economy because it would mean that crude prices are down and consequently, prices of diesel and petrol products.

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“To that extent, our import bill reduces, and our current account deficit improves. So if that happens, that is far, far better than the small amount of windfall taxes that will be collected through this process,” he told CNBC-TV18 in an exclusive interview on Tuesday.

Bajaj noted that the day the windfall gains tax was introduced, there was a lot of apprehension, including in the media that it's there to stay, but within 14 or 15 days, it was changed — increased or decreased at regular intervals. So, as the prices come down, the windfall taxes will either reduce or will go away, he assured.

Talking about the fiscal deficit, he said the government is confident of meeting the target of 6.4 percent despite higher fuel and fertiliser/food subsidy spends. “The higher revenues and some other measures which the expenditure side would have taken, would see us this year at 6.4 percent.”

The Revenue Secretary also feels the need to rethink and reinvent the personal income tax regime completely and maybe come up with something new and only one regime rather than having two regimes.

“The aim should not be to increase the tax rates, even if it is revenue neutral or even if it gives up some revenue if it makes it simple. If there are less exemptions or exemptions are simple, and if you make more money than me, you pay more taxes, if I make less money than you I pay less taxes and not vice versa, which is the situation right now,” he said, adding that some people who take benefit of a lot of exemptions today will be the losers.

“That is what we have done in the corporate tax, where it has been brought down to 22 percent without exemptions and now about 70 percent of the total income of the corporate sector has moved into this though the number of players is much less, they are about close to 20 percent. But 70 percent of the income has moved there. As we move from year on year, the 70 percent figure will start touching 100, it will go to 200 and the same thing would happen for the personal income tax,” Bajaj added.

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The Revenue Secretary also spoke about India’s capital gains tax regime, which he said is complicated and needs simplification.

“We have various buckets under which we put all the products. Financials, also we put in different buckets and then we charge different taxes on them as capital gains. Then we have different time periods to decide short term and long term. Then in some cases, we have indexation and in others we don't. All this needs cleaning up,” he said.

Bajaj, however, mentioned that whether it will happen this year or not will be known during the Union Budget 2023 announcement on February 1.

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