With both direct and indirect tax collection posting a dismal growth during the April-July period, the government is working on ways to augment revenue collection, including streamlining large taxpayer units (LTUs). The revenue department has decided to do away with the option of exiting the LTU system, which since inception has seen only 174 units join. The exiting will depend on the discretion of chief commissioners. The department is also considering expanding the scope of such units by bringing under it group companies even if they don’t meet the threshold criteria of Rs 5 crore.
Parthasarathi Shome, who headed the panel on GAAR set up by the Prime Minister has approved the decision. Last year, seeking compulsory compliance to make LTUs more effective, he had said that India should focus on strengthening the system for better tax administration.
LTUs were set up in 2006 by finance minister P Chidambaram as a single point for large taxpayers to reduce compliance cost and delays, and bring uniformity in matters of tax or duty determination. The facility is currently optional for assessees who pay excise or service tax of over Rs 5 crore or income tax of over Rs 10 crore.
However, number of units which joined LTUs has been dismally low, with many exiting, making the scheme a virtual non-starter.
To address the operational and administrative issues faced by LTUs, the department had last year formed a group, which submitted its recommendation early this year.
“The system of optional entry or exit has seriously affected the effectiveness of LTUs in managing the compliance of large businesses. The board has decided that exit option may not be automatic and will be subject to the discretion of the concerned chief commissioner after taking into account the reasons for exit and the inquiry pending against the unit,” an official said.
There are four functional LTUs — Bangalore, Chennai, Mumbai and Delhi. Since inception only 56 taxpayers have registered with the Bangalore unit and 39 taxpayers with the Mumbai unit.
“It has also suggested abolishing the present restriction of admitting large taxpayers assessed only in major