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In stricter measures on tax defaulters, the department of revenue has decided to block their Permanent Account Number (PAN), cancel their cooking gas subsidy and ensure non-sanction of loans by banks, among others.
The measures are contained in the income tax department’s Central Action Plan for 2016-17, presented at the recent conference of tax officials. The department also aims at augmenting collection from tax deduction at source (TDS), by identifying focus areas such as large companies and the e-commerce segment.
The department aims to collect Rs 54,000 crore in taxes from arrears in 2016-17.
The paper also asked tax recovery officials to use the provisions of arrest and detention contained in the Income Tax Act against defaulters. However, the finance ministry on Tuesday issued a clarification that no such statement had been authorised by the I-T department. “Though the provisions for arrest and detention in respect of defaulters are contained in the Act, these are used extremely sparingly,” it stated.
“Ensuring compliance from identified non-filers with potential tax liabilities is key to widening of the tax base,” said the paper.
It suggests blocking the PAN of tax defaulters in such a way that they are not allowed to file any return on income, disallowing them from availing the benefit of carry-forward of business loss.
The number of non-filers with potential tax liabilities has risen from 2.21 million in 2014 to 5.89 million in 2015.
Also, such blocked PANs could be shared with credit rating agencies and banks, so that the defaulters are not sanctioned any loans or overdraft facility by state-run banks as ‘the same is bound to become NPAs (non-performing assets)’. Defaulters with blocked PANs may also be barred from buying immovable property. “The list of such blocked PANs can be circulated to the registrar of properties, with a request for not allowing any registration of immovable properties where such PANs are involved,” it said.
The department also decided to subscribe to Credit Information Bureau Ltd data, to check on the financial activities of defaulters and undertake action against them for recovery and freezing of assets. The Bureau collects and maintains records of payments pertaining to loans and credit cards.
Last year, the department also began to ‘name and shame’ large tax defaulters (over Rs 20 crore arrears) by publishing their names and other details in national dailies and on its official web portal. Till now, the names of 67 such entities have been put in the public domain. From this financial year, it has also decided to publicly name all categories of taxpayers with a default of Rs 1 crore and above.
It has also implemented a ‘non-filers monitoring system’ as an experimental project.
The direct tax collection target for 2016-17 is Rs 8.47 lakh crore, almost half of which is to come from the Mumbai and Delhi I-T circles. The strategy paper also laid down measures to augment TDS collections, 37 per cent of gross direct taxes collections. It recommended focusing on top companies, public sector undertakings and large employers, and examine the entire compensation structure of top executives to review the nature of allowances, perquisites and reimbursements. “The treatment of employees as consultants also needs to be probed,” it said.
TDS on payments to sub-contractors by infrastructure companies and catering contracts in star hotels is another area worth monitoring, it said.
It also noted that banks have been defaulters in non-deduction of TDS on interest to state governments, public sector units, corporations, autonomous bodies and development authorities. “This area needs sensitisation and education of deductors,” it said.
The contribution of TDS to overall gross direct tax collections during 2015-16 was Rs 325,000 crore, growth 11.6 per cent over the previous financial year.
E-commerce, which has emerged as a huge business in the past few years, is another focus area listed to yield ‘significant revenue’. The segments include advertisements on the websites/portals of agencies and payments for job work, such as building of websites, translation of pages, data entry of text, research and so on.
The department also plans a drive to ensure compliance by local bodies. The strategy also emphasised on ensuring no impediment in tax realisation on account of court orders. “The apex court in a case of Vodafone had directed the company to pay 25 per cent of the taxes and the balance 75 per cent by way of bank guarantee, even before admittance of the appeal. The underlying principle is that the government needs funds in the public interest and there should be no impediment in recovery of taxes,” it said.
Standing Counsel could be briefed to get such court stays removed. And, to explore the filing of caveats in cases where the taxpayer was likely to seek a stay.
The department also aimed to promote voluntary compliance by sending reminders through e-mail or SMS to persons who had filed a return earlier but had not done so in the current year.
