Industries in city look to radical tax reforms next fiscal

The Bangalore Chamber of Industry and Commerce (BCIC) on Friday welcomed the initiatives of the government in setting up the Tax Administration Reform Commission (TARC) under the chairmanship of Parthasarathi Shome to review the application of Tax Policies and Tax Laws in India in the context of the global best practices. The BCIC was the official nodal agency to coordinate and organise this stakeholders meeting for the commission in Bangalore which met today.

K R Sekar, Chairman, Direct Taxes Expert Committee and Partner, Deloitte, while presenting the chamber's recommendation said: "The administration of tax laws in right and fair manner will contribute to the growth of economy. The tax payers are positive on the reforms in administration of the tax laws with an aim to resolve the disputes and reduce the litigation with intent to achieve certainty."

"It is widely believed that significant portion of potential tax revenue not collected can be collected through proper tax administration. The tax laws if properly and rightly administered may pave way for better collection of tax as implementation of proper administration of tax always has a direct impact on tax policy formulation. In other words, in practice, it is likely that both tax policy and tax administration have mutually affected each other," he added.

In order to improve tax services and dispute resolution, the BCIC has sought several policy and administrative changes in filing of Income Tax Returns, Refunds, Tax Assessments, Practical Issues in Assessment, Transfer Pricing, Effective use of Information/Technology, Tax Payer's Education Programme, Witholding Taxes, Multiple benches of Authority of Advance Rulings, dissenting views of AAR on similar set of facts, Technical Advisory Cell and Pre-filing rulings among others.

Sekar said: "If these recommendations are accepted, it can minimise disputes and ensure a fair collection of taxes in a more transparent manner." P V Srinivasan, Chairman, Indirect and State Taxes Expert Committee, BCIC, asked the TARC to remove "Administrative difficulties in claiming service Tax Exemption/ Refunds for SEZ as the present procedure entails three levels of approvals".

He also requested the TARC to clarify that the service tax is discharged under reverse charge mechanism, Form A-1 and Form A-2 may be drawn in the name of the person discharging the service tax i.e. 'own' name.

It was submitted that the need to amend the service tax registration for new services should be removed and the information with regard to new services could be declared in the returns. The time frame for issuance/ amendment of centralised service tax registration should be adhered to rigorously. He said, the taxation of services under the negative list regime, which is in force since July 2012, is ambiguous and suggested that clarifications should be issued to ensure that export of services are not subject to any service tax, owing to technicalities in the law. He sought a clarification that service tax will not be levied by the Centre on pre-packaged software while the States will have to ensure that VAT is not levied on development of customized software for clients.

Despite many measures introduced by CBEC, the refunds of Special Additional Duty are not being granted and the importers are frustrated as the objective of mitigating dual levies is not met.