To crack down on those shying away from paying indirect taxes, especially excise duty evaders, the Central Board of Excise and Customs (CBEC) is finalising a system of gathering third party information on manufacturers on the lines of the Annual Information Return (AIR) system of the direct taxes.
Electricity dues and transport bills of companies are likely to be used as indicators of their excise duty liability, according to officials. The excise department will use this data to get a clearer picture of the production and actual stock position maintained by the manufacturers will use these. It will then be used to tally the excise duty paid by them.
The department plans to make it mandatory for power companies and transport operators to share such information and is expected to seek a necessary legal leeway for this as well. The guidelines are being fine-tuned and are likely to be issued soon, a source close to the development said. Depending on its effectiveness, a similar system may be designed for service tax later.
?It is hoped that through such information, the department will be able to better tax compliance. Assessees will also begin paying taxes voluntarily, once they realise that the department is checking up on them through other sources,? R Muralidharan, executive director PricewaterhouseCoopers said.
The CBEC?s move comes soon after finance minister P Chidambaram asked the excise department to come up with a system of third party information-gathering, similar to the AIR system used by the income tax wing.
AT the annual conference of CBEC chief commissioners in May this year, Chidambaram had pointed out that some states were already matching payments of value added tax by manufacturers with their excise duty liabilities. ?This must be done on an all
India basis,? the minister had said.
The Central Board of Direct Taxes gathers data from seven types of entities and people, such as banks, mutual funds, the Reserve Bank of India and companies, on transactions over a certain limit. The department then uses this data to get a better picture of the income and expenditure of individuals and their concomitant tax liability.
Banks, for instance, have to provide information on cash deposits over Rs 10 lakh and credit card payments over Rs 2 lakh in a year. MFs are expected to share information on customers who invest over Rs 2 lakh for acquiring units in their schemes. Data on people who invest over Rs 5 lakh in bonds and debentures of a particular company, is also provided to the income tax department, as part of the AIR. The department is also notified in case of sale or purchase of immovable property worth Rs 30 lakh or more.
The decision of the indirect tax department to emulate this system comes at a time when there is rampant evasion of excise duty. The department has embarked on a string of initiatives such as a production-based levy on pan masala and gutkha manufacturers, more frequent audits as well as raids, in order to check evasion of the duty.
Collections from the tax till July this year increased by a mere 4.4% to Rs 36,109 crore although in the month of July, excise collections improved marginally and rose by 8.9% to Rs 10,227 crore. Department officials point out that achieving the target of Rs 1,37,874 crore as excise duty this fiscal may be a formidable task.