A taxpayer-friendly administration could get friendlier still4 min read . Updated: 13 Aug 2020, 11:19 AM IST
- As taxation in India shifts focus from revenue collection to taxpayer services, faceless assessment being a major breakthrough, the Centre should also work at tying up loose ends
Over the past few years, the government has embarked on a mission of major tax reforms, with the focus on reduction in tax rates, simplification of tax laws, efficiency, transparency and ease of paying taxes. The sustained efforts of the finance ministry at making India’s tax administration taxpayer-friendly and gearing it towards the facilitation of voluntary compliance is commendable. There has been a marked shift in the role of the tax department in recent years, from being just a revenue collecting organization to becoming a more citizen-centric one.
A number of pathbreaking reform measures have been undertaken recently for companies, including, inter alia, the introduction of a new, simpler tax regime and reduced corporate tax rates, with lower rates for domestic manufacturing companies, which is expected to pave the way for an Aatmanirbhar Bharat (self-reliant India). The country’s tax agencies have been responsive to the needs of taxpayers during the pandemic period. They have relaxed various compliance requirements and addressed their liquidity concerns. Industry is hopeful that not only would the tax department continue to play a critical role in the growth of the nation, but will also strive to continue setting new standards.
Ease-of-doing-business efforts have been made in providing efficient taxpayer services across the spectrum. E-governance has been a key endeavour, while the Vivad Se Vishwas Act has helped to reduce litigation and provide dispute resolution, among other measures.
Over the past few years, the government has taken various steps to improve the taxpayer experience by reducing physical interaction between tax officers and taxpayers and by making available various functionalities online. Some of the important steps introduced recently include a facility to verify authenticity of tax notices through the use of a document identification number (DIN), allotment of an e-PAN using the taxpayer’s Aadhaar card, and PAN-Aadhaar interchangeability. The Income Tax Department has moved forward with prefilling of income tax returns to make compliance more convenient for individual taxpayers. Compliance norms for startups have also been simplified.
To effectively reduce taxpayer grievances and litigation, the monetary thresholds for filing of departmental appeals in various appellate courts have been raised. Several measures have been taken to promote digital transactions and electronic modes of payment. The Income Tax Department has also made efforts to ease compliance for taxpayers during covid times by extending statutory timelines for filing returns and releasing refunds expeditiously to increase liquidity in the hands of taxpayers.
While having to navigate a delicate balance between enforcement and service, the tax department has been increasingly oriented towards becoming taxpayer-service centric without compromising its enforcement role by deploying non-intrusive tools of data mining and data analytics.
The faceless e-assessment system for income tax that is currently being piloted is a milestone initiative towards these goals. This places India as one of the few countries in the world to adopt a system of faceless assessment. The scheme will go a long way in eliminating a human interface in the income tax assessment system.
With reduced hardships for the taxpayer, the faceless e-assessment system should foster voluntary tax compliance and bring about an expansion of the tax base. The transparency and objectivity brought in by the new system will reduce tax litigation, which hitherto has been a major challenge. The objective is to ensure a hassle- and harassment-free process of assessment for honest taxpayers and thus foster a non-adversarial and conducive tax environment. The use of technology to that end will help build trust within industry and among wealth creators.
Industry would like to work with the government in scaling up faceless assessment for all. Its optimal implementation would benefit more than 60 million income tax return filers in the country.
The system comes at an appropriate time, as the digital nature of the process ensures continuity through the covid pandemic. Recently, the government has also announced that all faceless e-assessments in the pilot stage are expected to be completed by mid-September 2020, which is an ambitious and welcome move.
Some other key areas which would simplify the taxation regime include India’s equalization levy on e-commerce supply or services, where more clarity could be provided. There are also practical issues in terms of taxes deduced and collected at source, which the Tax Department should work on. Amidst unprecedented challenges posed by coronavirus, which has also impacted the advance pricing agreement (APA) programme on various fronts, the government could consider allocation of additional resources to this programme, adjustments to be factored in on account of the pandemic effect, and a fast-track initiative for the renewal of APAs, etc.
Industry is hopeful that the government will carry forward the journey of tax reforms by implementing new schemes and legislation that would continue to usher in greater transparency, efficiency and predictability in the tax system, and would reward honest and compliant taxpayers.
Sanjiv Bajaj is vice-president, Confederation of Indian Industry, and chairman and managing director, Bajaj Finserv Ltd