The Vijay Kelkar task force on direct and indirect taxes would closely examine the issue of persistent delay in corporate refunds by the tax department.
Not only do delays lock up fund for the corporates, they also cost the exchequer substantially.
According to senior finance ministry sources, despite repeated complaints on refund delays by corporates, the revenue department has done precious little to resolve them.
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The task forces under Kelkar are expected to address the issue by undertaking a comprehensive review of the present refund mechanism.
In the last financial year, corporate refunds topped Rs 17,000 crore, while this year the figure has already crossed the Rs 11,000 crore mark.
While the corporate sector is not averse to paying tax in advance, it is the locking up of funds due to delay in tax refunds that bothers them.
Industry chambers have time and again brought it to the notice of the finance ministry that the revenue department stops allowing companies to claim Modvat credit in the last quarter of the financial year.
Further, duty drawback to exporters and refunds under various export incentive schemes remain due for over three months, chambers complain.
The government is required to pay an interest of 9 per cent a year if refunds are delayed beyond three months.
However, according to industry chambers, particularly the exporters, suffer a lot due to the delay in refunds.
Several chambers including the Confederation of Indian Industry and Federation of Indian Chambers of Commerce and Industry had represented to both the commerce and the finance ministries this year too prior to the Exim Policy for quick and timely tax refunds.
Most of the refunds are on indirect taxes like Modvat credit, duty drawbacks, excise duties on deemed exports, and export incentive schemes.
A delay in refunds costs the exchequer also substantially. According to the expenditure budget of the government, interest payments on account of late refunds was over Rs 200 crore during the previous financial year.
The expenditure department too has taken up the issue with the revenue department asking for quick redressal of refund complaints by compani