House panel calls for total overhaul of I-T exemptions: Financial Chronical News
Concerned over ever increasing revenue foregone due to income tax exemptions, which crossed Rs 5.5 lakh crore in 2013-14, the parliamentary standing committee on finance on Tuesday sought a comprehensive review of I-T exemption regime ahead of the Union budget in February.
The committee, which tabled its report on revenue in Parliament, said as the matter lingered on for long, it is desired that the outcome of the review be shared with the committee within three months.
The standing committee headed by senior Congress leader Veerappa Moily said the revenue was foregone on account of various tax incentives and exemptions given from time to time in public interest for fulfillment of various policy objectives of the government.
The committee said there should be a comprehensive review of the exemption regime involving revenue foregone of Rs 500 crore or more in the last 10 years, so as to explain how it has served the intended economic objectives or social purpose.
In 2013-14, the revenue foregone in corporate tax was Rs 1.02 lakh crore, personal income-tax Rs 33,293 crore and indirect taxes comprising excise, customs and service tax totalled Rs 4.56 lakh crore.
The committee criticised the government for the undisputed and uncollected tax, both direct and indirect, assuming “alarming proportions” in the last five years.
“The committee is not convinced with the routine reply of the government that the tax arrears recovery has been restrained by authorities or that assesses are not traceable or they have inadequate assets,” the report said.
It defies logic as when the government is exploring all avenues, including disinvestment, to mop up funds, this captive source has such a long rope, it said.
While taking a serious view of the “laxity” of the tax department in collecting even undisputed taxes, the committee recommended urgent “time-bound and concrete” action plan for recovery of the undisputed yet uncollected tax revenue.
Critical of huge pendency of tax arrears, which is increasing year by year, the committee said direct tax arrears totalled Rs 5.80 lakh crore in 2013-14 and indirect tax arrears amounted to Rs 1.09 lakh crore.
In 2014-15, these arrears spiralled to Rs 6.75 lakh crore for direct taxes and Rs 1.49 lakh crore for indirect taxes. Gross direct tax collections are projected at Rs 7. 58 lakh crore and indirect tax collections at Rs 6.17 lakh crore.
The committee found that in many cases demands without accompanying responsibility for recovery led to a situation of tax arrears locked up in long-winding disputes between the tax administration and taxpayers with a low recovery rate.
“This has led to wastage of resources and inefficiency in collections,” it said recommending a time-bound action plan for realising tax arrears and for minimising litigations.
Asking the tax department to be “transparent and accountable”, the committee wanted the government to make explicit provision for interest liability of tax refunds in the central budget. The interest outgo ranged between Rs 6,486 crore and Rs 10,499 crore annually since 2009-10.
Noting that the tax department is a “significant contributor” to litigation, the committee said it is a matter of serious concern that the number of appeals decided against the department before ITAT was a little over 50 per cent during the last three years. In high courts, it was a little over 60 per cent and in Supreme Court, it ranged from 39-64 per cent in the last three years.
This was not a “happy state of the affairs”, the committee said, and desired that the government conduct an analysis of the assessment orders, orders of appellate commissioners and the success rate of appeals.
It wanted that appeals be filed judiciously only after close scrutiny of pros and cons and not as a matter of course. The quality and sustainability of appeals should be duly factored in.
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