Tax arrears target close to recoverables

The revenue department has fixed an arrear collection target of Rs 11,700 crore for direct taxes for 2006-07. The total outstanding direct tax arrears as on April 1, 2006 were Rs 1,17,000 crore.

The revenue department had last year collected Rs 8,000 crore by way of arrears against an intended target of Rs 10,000 crore.

"If one uses the same formula for fixing the arrear target as last year, the target should have been around Rs 16,000 crore which may not be possible to achieve. Since the arrear collected in 2004-05 was Rs 7,000 crore and Rs 8,000 crore last year, the ministry has kept the actual recoverables in mind while finalising the arrear target," a ministry official said.

Also while the Central Board of Direct Taxes is targeting to scrutinise at least two per cent of the income tax returns, the Central Board of Excise and Customs is hoping to scrutinise at least five per cent of the excise and service tax returns once its automation project is made operational later this year.

Pilot testing of the CBEC's Automation of Central Excise and Service tax (Aces) is expected to begin in October this year. The software for automation has been designed by Wipro.

"Since there is self assessment in excise and service tax, the percentage of scrutiny will be higher than on the direct tax side. In case of income tax, the assessment is done by the department before a case is taken up for scrutiny," an official said.

Officials said the automation project had an element of risk management system, similar to Cass (computer assisted scrutiny system) introduced for direct tax.

"Under Aces there will be eight to 10 parameters such as the amount of tax paid in cash over the last three years or credit utilised, which will be used by the computer for selecting cases for scrutiny," an official said.

Besides this, under the automation project, banks will provide details of the monthly excise and service tax deposited by the taxpayers, to the service tax department on-line. This will allow the CBEC to collate the actual tax paid to banks with amount shown in the tax return.