Cadre recast only if CBEC meets tax collection target

Written by Gireesh Chandra Prasad | Gireesh Chandra Prasad | New Delhi | Updated: Oct 29 2013, 11:26am hrs
Given that achieving the tax revenue target is critical to keeping the fiscal deficit within the budgeted level of 4.8% of GDP, the cabinet secretariat has told the Central Board of Excise and Customs (CBEC) that the proposed cadre recast of CBEC officials hinges on the board hitting the tax collection figure set for this fiscal. The indirect tax (excise, customs and service tax) target for 2013-14 is R5.65 lakh crore.

The cadre restructuring promises better career prospects for CBECs 20,000-strong staff and more secretary-level jobs in the department.

Sources privy to the development said that CBEC has given an undertaking to meet the revenue target to the cabinet secretariat in the form of a memorandum of understanding and is awaiting a decision by the Cabinet. Although the cost of the restructuring would only be about R2,000 crore a year, the government wants to ensure that every paisa it spends yields results. Official sources said the cost of hiring more officials is negligible compared to the revenue collected by the department, for which a stronger field force is vital. We are not even getting replacements for officials who are retiring as the cadre restructuring proposal is pending, said an official, who asked not to be named.

The direct tax collection target for 2013-14 is R6,68,109 crore, up 19.69% from last year. This now looks difficult as GDP growth has been lower than what the Budget pegged it at.

Following the CBECs MoU with the cabinet secretariat, one could expect more aggressive field staff at customs centres and excise evasion is likely to be checked more meticulously. A drive to step up service tax collection is already on.

Although missing the revenue target is a distinct possibility, going by the persistent slow growth in manufacturing, the CBEC's optimism stems from last year's trend of collecting more taxes in the second half of the fiscal. It collected 62% of the total central excise duty, 63%of service tax and 53% of the customs duty in the October-March period last fiscal.

The board is now paying extra attention on collecting tax arrears and tackling possible cases of undervaluation of import consignments. In the first half of this fiscal, indirect tax receipts grew only 3.5% from last year, mainly on account of an 11% contraction in excise collection that reflected the poor performance of the manufacturing sector. Imports in rupee terms have gone up only 5.6% during the period despite a sharp depreciation in the value of the domestic currency against the dollar.

Official sources said that in many cases overseas clients have demanded renegotiation of prices in view of the rupee's weakness, limiting any windfall gains to Indian buyers and lowering customs duty receipts.

Officials said the proposed cadre restructuring would be a major morale booster for pursuing revenue mobilisation. The proposals, similar to those already approved for the income tax department, give the most senior tax officers greater chances of getting the rank and pay of a special secretary to the government.

Cadre restructuring, based on the Sixth Pay Commissions report, will also reserve secretary-level posts only for those who have served long enough in the department. At present, recruitment rules do not specify that revenue service officers alone can be considered for top jobs in the CBEC, theoretically allowing competition from other services.

Once implemented, chief commissioners handling large customs and central excise zones will be eligible for the rank and pay of a special secretary to the government. Besides, heads of agencies like the Directorate of Revenue Intelligence will also get special secretary rank and pay. Currently, the chairperson and members of CBEC have the rank and pay of a special secretary.

Indirect taxes, including central excise, customs duty and service tax, used to account for a larger share of the Union government's gross tax revenue for five years up to 2007-08. However, from 2008-09 onwards, direct taxes comprising taxes on corporations, personal income and net wealth account for a larger part of the government's tax receipts. In 2012-13, direct taxes accounted for 55% of the Centre's gross tax revenue, while indirect taxes made up the remaining.