Chidambaram sees 5% GDP from direct taxes

Confident of collecting over 5 per cent of the country's gross domestic product (GDP) from direct taxes, Finance Minister P Chidambaram today asked tax officials to improve their collection strategies, including monitoring of the top 100 corporate tax payers under each commissionerate.

"In 2005-06, the direct tax-GDP ratio is expected to cross 5 per cent. For the first time, direct taxes as a proportion of GDP had crossed the milestone of 4 per cent during 2004-05," Chidambaram said at the 21st annual conference of Chief Commissioners and Director General of Income Tax held in New Delhi.

He pointed out that during 2005-06, direct tax revenue would for the first time exceed revenue from indirect taxes.

"This is an important turning point in tax collection in India. Like in any other developed country, direct taxes will play an increasing role and contribute largely to exchequer," he said adding that direct tax collection so far was on track. Of the Centre's total tax revenue of Rs 370,025 crore for 2005-06, Rs 176,812 crore is budgted to come from corporate and income tax.

Asked about the shortfall in the income tax in the first two months of this year, Chidambaram said not to "jump into conclusions." There have been changes made in the income tax laws, the exemption limit and the savings limit in this year's Finance Bill, he said.

He said the Central Board of Direct Taxes(CBDT) should gear up and have a vision for the next five to 10 years for becoming the biggest tax collecting agency of the government.

To a query on whether chief commissioners were asked to monitor the top 100 taxpayers, he said there was nothing wrong in tracking them if the corporates have filed their TDS (tax deducted at source) returns on time and their tax payments were in accordance with what they have disclosed in their quarterly statements.

On the issue of refunds, Chidambaram said, "there will be a time frame for refund cases to be disposed off.

There have been some bad cases. Assessees claiming refunds will be asked to give their bank account number and the refund will be automatically transferred to the account. However, in some stations the facility to credit the refund directly into the bank account was not there. There is already a time frame(for refunds), this will be strictly enforced and reduced if possible."

The meeting also discussed measures to bring those with income above Rs 10 lakh into the tax net.

Another idea discussed pertained to changing the investigation time for scrutiny cases to September or December end so that the recoveries made can be part of the financial year in which the scrutiny cases have been completed.

At present, the scrutiny cases can be investigated for two years from the end of an assessment year. Officials, however, pointed out that the move if approved would require a legal amendment. Several issues pertaining to the administration of the new taxes like the cash withdrawal tax, the fringe benefit tax were also discussed at the meeting.