Of the huge pending tax dues of R8.25 lakh crore that individuals and businesses owe the government by way of direct and indirect taxes, only a small fraction of just over 5.5% is immediately recoverable, tax authorities have informed a parliamentary panel.
Due to the judicial restraints on the recovery of a large part of ‘tax arrears’, at different stages, field officers of the income tax , central excise, customs and service tax departments are focusing their recovery effort on the undisputed amounts.
Of the R6.75 lakh crore direct tax arrears at the beginning of this fiscal, only R22,801 crore is undisputed, while almost equal amount of R22,210 crore is undisputed out of a total indirect tax arrears of R1.5 lakh crore. A small part of the tax arrears is unrecoverable because the assessees do not have adequate assets, according to the submissions made by the tax departments before the panel.
Large unrecovered tax arrears is a head ache not just to the government, but also to businesses as this leads to spending time and resources to deal with legal proceedings. A part of the pending tax arrears is on account of the controversial tax demands on multinational companies that eventually obtained favourable rulings from various courts.
Finance minister Arun Jaitley, who is attempting to build a stable tax regime, recently said that unsustainable demands won’t get the country any revenue. He said that tax demands that do not stand the scrutiny of judiciary would only earn the country a bad name as an investment destination.
The Central Board of Direct Taxes (CBDT), the apex policy making body for direct taxes, which is attempting a makeover of its image as a regulatory as well as service providing agency, recently advised all chief commissioners and field officers to follow a non-intrusive and humane approach while trying to meet revenue targets.