India’s Tax Bodies Pledge Better Service, Expanded Reforms

Posted by Reading Time: 4 minutes

By Dezan Shira & Associates
Editor: Tracie Frost

For the first time, India’s Central Board of Direct Taxation (CBDT) and the Central Board of Excise and Customs (CBEC) met together for their annual conference of tax administrators.  The national conference aimed to give the two taxation bodies the opportunity to assess the performance of the previous year and deliberate on emerging issues.  Prime Minister Narendra Modi opened the inaugural session with remarks designed to reassure taxpayers and foreign investors alike. 

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Modi’s comments touched on several areas of importance for investors including India’s notoriously adversarial tax system, the need for greater tax compliance, and plans for improved customer service.  Modi stressed that “fear of the law rather than the law enforcer should be the maxim on which tax administrators should work.” He also asked the two boards to widen the tax base in order to increase tax revenues to boost growth through infrastructure and social welfare spending.  (By some estimates, India’s tax collection is less than 9 per cent of GDP.) While he acknowledged the important role of revenue collection in India’s economic development, he was quick to emphasize that revenue officers must have higher standards for taxpayer friendly services towards compliant taxpayers.

To bring his goals to fruition, Modi rolled out a five-phase plan to reform and to expand the net base of the direct tax.  He termed his plan, “RAPID” – Revenue, Accountability, Probity, Information, and Digitization.  In a press release, the Ministry of Finance gave the salient features of RAPID as 1) a focus on digitization, voluntary compliance, and improvement of physical infrastructure of tax administrators, 2) reform of the current revenue administration, 3) greater accessibility for taxpayers, and 4) economic reforms designed to enhance the respect for law among citizens. 

During the conference, CBDT and CBEC each held breakout technical sessions.  For CBDT, technical sessions included deliberations on taxpayer services, E-governance, foreign information exchange (including its relation to undisclosed foreign assets), litigation management and dispute resolution.  CBEC sessions covered subjects including analysis of revenue trends, GST, strategy to mitigate litigation, expanded digital services, facilitation of trade, and standardization of processes and dissemination of knowledge to officers.

CBDT listed its primary takeaways as

  • Defining field officer roles and responsibilities at all levels
  • Organizing the Department on functional lines and instituting periodic performance reviews
  • Reducing litigation and providing alternative dispute resolution mechanisms
  • Creating a “Litigation Management Corner” on the website
  • Increasing voluntary acceptance of paperless assessments
  • Upgrading infrastructure like computers, scanners, and Wifi, for assessing officers
  • Instituting fast-tracking as an incentive for taxpayers to opt for e-assessment.

CBEC’s takeaways included

  • Preparing for roll-out of GST with focus on technology and increased capacity-building through training of officers
  • Focusing on dispute resolution
  • Reviewing powers of adjudication and enhancing them for speedier disposal of adjudication

Despite this week’s disappointing news of the resignation of Reserve Bank of India chair Raghuram Rajan, the Modi government continues to promote tax reforms.  The creation of a modern, non-adversarial tax regime is largely seen as a crucial step in catapulting India ahead as it seeks to take advantage of its relatively strong economic growth position globally.

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