Before enacting any law in India, I am sure that government would have received feedback from all sectors and stake holder. The law has undergone many amendments due to correcting drafting errors, changing business scenario and difficulty faced in adopting such provisions equally.
In this paper, the authors try to express how to increase the tax revenue by the exchequer in a diligent, transparent manner.
In fact, famous economists Chanakya said “a government should collect taxes in the manner a honeybee collects honey from the flowers”
The following are the methods which could be adopted to collect the tax fairly:
1) Reducing the GST tariff rates: Compare to any many other country, India is levying more taxes on income, immovable property, goods and services which comes around 43% of total income (both Direct + Indirect tax) as reported by Aditya Birla capital ventures survey report. For a country where only a small percentage of the entire population is paying taxes, the burden on tax payers is very high. It was expected that over the years the GST rates would be reduced but this seems like a decade away. Higher rates could induce tax payers to find tax evasion schemes to avoid the hardship caused due to high tax burden. Therefore, increasing the taxpayer base is the only other route.
2) Eliminating different tax rates and adopting single rate: In most of the developed countries this system is followed. Having multiple rates would create much litigation and it is the tendency of tax payers to adopt lower rates rather to opt for higher rate. To avoid such practices, the Government should frame single rate for goods or services. However, if they wish to collect more tax on consumption of luxury/sin goods, a schedule can be made to that extent and levy higher rates only to sin goods.
The above 2 points could be enumerated with a simple illustration as given below:
| Particulars | Numbers – July-20 | GST revenue-Oct-20 (in crs) | GST Tax/person |
| Active tax payers | 1,04,75,118 | 1,05,155 | 1,00,386 |
| Assume increase in taxpayers by 300% | 3,14,25,354 | 1,10,000 | 35,004 |
| Average tax rate – PRESENT (assumed) | 12% | ||
| Average tax rate – FUTURE | 4% |
3) Eliminating the concept of exemptions: Owing to India’s federal tax structure, and its diverse culture and economic societal gap, exemptions in tax laws have been an ongoing issue. Before discussing the problems of having exemptions, let us understand why the exemptions will be considered?
a. To be compliant with constitutional provisions – like education, mandatory functions, exercising of basic rights/fundamental rights.
b. Basic/essential consumption product or services – vegetables, fruits, cereals, meat, etc.
c. Backbone – sector specification – like agriculture/floriculture
d. Keeping the public interest at large
e. Exercising dominance over the parliament/political pressure
However, having exemptions will lead to the following problems:
a. Classifying taxable supplies under exemptions
b. Cascading effect of taxes
c. Increased litigation
d. Strict interpretations – the codified law, loses its character
e. Creates discriminatory practices in society
4) Increasing pay level to inspectors and superintendent’s: It is widely reported that the governmental administrative/executive staff are colluding with consultants and other professionals which causes lower collection of tax or incorrectly closing the identified potential issues. If the Government adopts proper pay mechanism and strict verification processes with visible punishment to those involved, such parallel economy could be curbed. Further, appropriate training needs to be given on moral values and constitutional provisions.
5) Outreach to Rural parts of India: It is known fact that, people living in interior parts of each city are involved in trading/manufacturing and developing economically. However, they are not registered under the law (even though they are required to be). To avoid this, the executive staff of the department should actively conduct awareness programmes and if required search and seizure operations.
6) Automation/accountability and more transparency: I always wonder why private organizations do well compare to public organizations? Is it because of management? Yes. Self-discipline and accountability and responsibility for actions is very important. In a governmental establishment, these concepts are sparsely visible. Lack of punctuality, corruption, disregard for citizens difficulties, govt. job security vis-à-vis lack of punishment for unacceptable actions are the predominant reasons why a governmental establishment fails. Every penny of the Government counts, as it is not accrued to anyone other than the citizens of India. This is also one of the reasons why, we see many tax defaulters and honest tax paying citizens who have faced unpleasant situations with the department choosing the tax evasion route.
It is generally seen that the Govt. officials are going after the already registered instead of curbing the parallel economy. The compliant are being harassed while the corrupt roam free. Many schemes which drive home this attitude have been seen such as VCES scheme, SVLDRS scheme, IDS scheme, post-dated waiver of late fees for non-filers, etc.
If we understand the vision, mission and core values of the CBIC department, and compare to our practical experience, whether the tax payers are exercising their duties rightfully? Is the department is treating them as evaders? This is a purely subjective discussion. Before we understand the vision, mission and core values, let us understand the expectation from the tax payers:
- Uphold and respect the laws of the land
- Voluntarily discharge all tax liabilities
- Fulfil their duties and legal obligations in time
- Be honest in furnishing information
- Be co-operative and forthright in inquiries and verifications
- Avoid unnecessary litigation.
Vision: Partnering in India’s socio-economic growth by formulating and implementing progressive indirect tax policies adopting stakeholder-centric approach and protecting the frontiers.
Mission: A robust indirect tax and border control administration, with a view towards delivery of services, which is –
1) Simple and predictable
2) Fair and just
3) Transparent
4) Technology-driven and which
i. Encourages trust – based voluntary compliance
ii. Protects honest taxpayers’ rights
iii. Facilitates trade with risk-based enforcement
iv. Enables legitimate movement of people, goods and services.
v. Supplement the efforts to ensure national security, and;
vi. Continually invests in capacity building to achieve professional and ethical excellence.
Motto: “Desh Sevarth Kar Sanchay” Tax collection in Service of the Nation
Core Values:
- Integrity and judiciousness
- Impartiality and Fairness
- Courtesy and Understanding
- Objectivity and Transparency
- Uprightness and Conscientiousness
- Promptness and Efficiency
Conclusion:
Although the ideals of government are commendable, the practical implementation albeit difficult are achievable in the long run. A sense of humanity, empathy coupled with effort and transparency will help India’s tax revenue swell to numbers unheard of. Which will in-turn, ensure India fast-tracks towards becoming a developed nation?
(This article has been prepared by Advocate Venkatnarayana G M and by CA Akshay Hiregange. The author could be reached at [email protected])
Disclaimer: – The views expressed in this article are personal views of the Author. This article includes general information about legal issues and developments in the law of GST in India. Such materials are for information purpose only and may not reflect the most current legal developments. These information materials are not intended, and must not be taken, as legal advice on any set of facts or circumstances. We disclaim all liability in respect to actions taken or not taken based on any or all contents of this article to the fullest extent permitted by law.
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