Businesses paying all forms of central taxes under the single-window facility called Large Taxpayer Units (LTU) have sought simpler procedures and clarity on whether the scheme would continue to be available once the Goods and Services Tax (GST) comes into force in about a year from now.
Large “clients” of direct and indirect tax administrations are seeking a differential and easier treatment in terms of verifying invoices and forex remittances compared to how these are done in case of companies not registered with LTUs. Easier procedures can make LTUs, introduced by former finance minister P Chidambaram in 2005, much more appealing, they say.
According to Amit Gupta, director – tax, Dell India, the practice of tax authorities requiring foreign exchange realisation certificates from banks against each export invoice poses hardship for large businesses. What companies get from banks are Foreign Inward Remittance Certificates, which are not invoice-specific.
Companies also want easier ways of verifying trade transactions. RC Pillai, VP and head of indirect taxes, ABB, says that instead of insisting on checking hard copies of each invoice a company has to submit, it would be a great idea to verify electronic invoices of low-value transactions and insist upon hard copies for only select large transactions.
* “How LTUs will work in the GST regime is a big concern,” says G Elango, VP, indirect taxes, Bosch. If state GST (SGST) is administered in LTUs, it would be a major advantage for companies such as Bosch having more than a dozen manufacturing units in different locations. Elango says bringing transfer pricing audits on cross-border transactions of group companies also within LTU’s scope would be a great idea. The cost of doing business has come down because of LTUs, admits Elango.
Some experts say that allowing a large liability in one class of tax to be set off against a pending refund in another class of tax would also go a long way in making LTUs more attractive.
The finance ministry is at present examining the suggestions by the Tax Administrative Reforms Commission led by Parthasarathi Shome and two reports given by DRI additional director general John Joseph aimed at revamping the LTU scheme.
* “The Boards (CBDT and CBEC) have to take a call on the procedural changes taxpayers are asking for. These do not require any change in law,” explained a senior tax official. The official also said that once the Centre and the states decide on GST and the way it operates, the question on how it is administered in an LTU can be debated.
Dell, ABB, Toyota Kirloskar Motors, Canara Bank and HP India Sales are among the 58 companies that contribute more than Rs 12,000 crore of taxes a year to the LTU in Bangalore, the first such facility set up in 2006. LTUs have been set up in Chennai, Mumbai, Delhi and Kolkata as well. Despite the advantages of duty-free movement of goods across different production units, transfer of tax credits among them, quicker refunds and dispute resolution, LTUs have not been a major success, apparently because the scheme is optional. Some observers also point out that the fear of more intense scrutiny on LTU assessees due to the direct and indirect tax authorities working under the same roof has also kept taxpayers away from availing this facility.
LTUs at present offer significantly easier rules to large taxpayers than those who have not opted for the scheme. This includes self-sealing of export consignments. “We trust our assessees, but it does not preclude us from verifying what is reported to us. But that is done in a very friendly and non-adversarial manner,” said the official.
Companies that have paid Rs 10 crore as advance tax, or Rs 5 crore as central excise or service tax in the previous year, are eligible for paying excise on all their manufacturing units in different states, service tax and corporate tax in a single LTU.
* An official said that once the Centre and the states decide on GST and the way it operates, the question on how it is administered in an LTU can be debated
* The finance ministry is examining suggestions of the Parthasarathi Shome-led tax reforms panel and directorate of revenue intelligence aimed at LTU revamp
* experts say allowing a large liability in one class of tax to be set off against a pending refund in another class will make LTUs more attractive