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Tax Governance Reforms in small federal states India _ Jena
 

Tax Governance Reforms in small federal states India _ Jena

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This is an attempt to study the Value Added Tax (VAT) policy, organization, functions, functionaries, Governance and E-governance measures, citizens charter, E-services, processes, business ...

This is an attempt to study the Value Added Tax (VAT) policy, organization, functions, functionaries, Governance and E-governance measures, citizens charter, E-services, processes, business intelligence (BI), performance indicators of Commercial Taxes Department of a small federal state/ UT in India, benchmark against progressive states and recommend reforms in policy, organization, people, functions, processes and other areas as mentioned above.

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    Tax Governance Reforms in small federal states India _ Jena Tax Governance Reforms in small federal states India _ Jena Presentation Transcript

    • TAX GOVERNANCE REFORM RECOMMENDATIONS for a SMALL FEDERAL STATE Chidananda Jena Email: chidananda.jena@gmail.com Skype/ YM: chidanandajena
    • VISION STATEMENT 2 A modern tax administration that is Efficient, Effective and Equitable, which is conducive to investment, economic growth and free flow of goods and services within the common market of India, with reduction of tax burden, cost of compliance & administration and interface paving the way for expanding tax base and tax buoyancy through centralized planning & technology and decentralized implementation of service delivery
    • OUTLINES 3
    • TAX GOVERNANCE REFORM GUIDE4  PRINCIPLES of MODERN TAX ADMINISTRATION  MODERN TAXPAYER SERVICE STRATEGY  SERVICE ORIENTATION & ENTERPRISE ARCHITECTURE  AREAS OF BUSINESS PROCESS REENGINEERING (BPR) & POLICY RECOMMENDATIONS
    • ORGANIZATION RESTRUCTURING  CURRENT ORGANIZATION STRUCTURE  WINGWISE OFFICERS DEPLOYMENT  DIVISION COMPARISON 2011-12  CRITICAL ANALYSIS of FUNCTIONS & FUNCTIONARIES  BASIS of PROPOSED RESTRUCTURING  PROPOSED ORGANIZATIONAL STRUCTURE  COMMISSIONERATE  CENTRALIZED REGISTRATION & ASSESSMENT  TERRITORIAL ASSESSMENT DIVISIONS  ENFORCEMENT WING  UPGRADATION/ REDESIGNATION 5
    • BEST PRACTICE STUDY  CLIENT NEED STUDY FOCUS  ANDHRA PRADESH  TAMIL NADU  KERALA  KARNATAKA  MAHARASTRA 6
    • REGISTRATION  CRITICAL ANALYSIS of REGISTRATION  RECOMMENDATIONS  COMMODITY CLASSIFICATION  MODIFIED HSN CODE for GST 7
    • RETURN 8  ANALYSIS of RETURN  RECOMMENDATIONS  INFORMATION CAPTURE in RETURN & ANNEXURE  CST RETURN
    • ITC VERIFICATION in INTRA-STATE TRADE9  BUSINESS ENVIRONMENT in a SMALL STATE/ UT  CURRENT PRACTICE in VATIS SYSTEM  ITC VERIFICATION  KERALA  ANDHRA PRADESH  TAMIL NADU  KARNATAKA  MAHARASTRA  CONCLUSION from STUDY of other STATEs  BUSINESS INTELLIGENCE (BI) of IT SYSTEM
    • ITC VERIFICATION in INTRA-STATE TRADE10  MODELS of TAX INFORMATION COLLECTION  CHARACTERS of a TRANSACTION  INVOICE vs TIN LEVEL CAPTURE  EASE of PROVIDING INFORMATION  ITC CROSS VERIFICATION at TIN LEVEL  RECOMMENDED MODEL-TIN & TAX RATE  INVOICE LEVEL CAPTURE of INTER- STATE TRANSACTION
    • PAYMENT and RECONCILIATION  CRITICAL ANALYSIS of PAYMENT  CRITICAL ANALYSIS of RETURN PAYMENT  RECOMMENDATIONS  OUTSOURCE CHEQUE/ DD COLLECTION  OUTSOURCE CASH COLLECTION  CRITICAL ANALYSIS of RECONCILIATION  RECOMMENDATIONS  CRITICAL ANALYSIS of TDS PAYMENT  RECOMMENDATIONS  GROUP TDS CERTIFICATE FORM 11
    • REFUND  CRITICAL ANALYSIS of REFUND  RECOMMENDATIONS 12
    • BUSINESS INTELLIGENCE, AUDIT, ENFORCEMENT 13  PARAMETERS for BUSINESS INTELLIGENCE  AUDIT SELECTION PARAMETERS of MAHARASTRA  COMPARATIVE ANALYSIS OF ENFORCEMENT  RECOMMENDATION on ENFORCEMENT WING  RECOMMENDATION on MOBILE ENFORCEMENT  CRITICAL ANALYSIS of ASSESSMENT  RECOMMENDATIONS on SETTLEMENT  RECOMMENDATIONS on ASSESSMENT
    • STATUTORY FORM MANAGEMENT  ANALYSIS of CURRENT SCENARIO  FORM ISSUE by the STATE  SUBMISSION of FORM RECEIVED from OTHER STATEs  RECOMMENDATIONS  CANCELLATION of E-FORMS  AS-IS  RECOMMENDED to BE  ABOLISH ISSUANCE of FORMS to DEALERS  AS-IS  RECOMMENDED to BE 14
    • TAXPAYER ASSISTANCE & APPEAL15  Inquiry and Grievance Management  Communication  Front Office  Advance Ruling & Alternate Dispute Resolution  Appeal
    • PERFORMANCE INDICATORS 16  Sample Performance Indicators  Modified Karnataka Model
    • DETAIL 17
    • TAX GOVERNANCE REFORM GUIDE
    • PRINCIPLES of MODERN TAX ADMINISTRATION 19  Self Assessment by Taxpayers  Law is comprehensible by most tax payers  Simple return form to fill in  Simple record keeping  Best knowledge of own business and application of tax laws to business  Easy computation of tax  Quick refund for access tax paid  Enforcement by Tax Administrations  E-Services, timely advance ruling & dispute resolution  Focus on recalcitrant taxpayers  Stringent penal provisions and reduced discretion  System guided audit selection on transparent parameters  Reduce compliance and administrative cost  Strong MIS support to reduce evasion, fraud & non-compliance and enhance planning & policy capability
    • MODERN TAXPAYER SERVICE STRATEGY 20  Understand taxpayer needs  Tailor service delivery to taxpayer needs  Constant quality improvement in service delivery  Use multiple approaches  Transform the mindset and capability of tax personnel  Measure Performance Source: Odisha Modernizing Economy Governance & Administration
    • SERVICE ORIENTATION & ENTERPRISE ARCHITECTURE 21 Enterprise Architectu re Administrati on Taxpayer Functio n Process Technolo gy Resour ce Modified from OMEGA Report, 2011
    • AREAS OF BPR & POLICY RECOMMENDATIONS 22 • Registration • Commodity Classification • Return • ITC Verification • Return Scrutiny • Payment • TDS • Refund • Accounting & Reconciliation • Organization Restructuring • People Deployment • Outsourcing • Inquiry & Grievance Mgt • Advance Ruling & Appeal • Performance Indicators • Best Practice Study • Business Intelligence Parameters • Audit • Investigation • Statutory Forms Management Audit Intelligen ce Forms Organizatio n Functionari es PPP Grievance Performanc e Registratio n Return Payment Refund Accounti ng
    • ORGANIZATION RESTRUCTURING
    • Commissioner of Commercial Taxes Dy CCT CTO HQ AC (A&I) CTO I CTO II CTO IAC DCTO CRU DCTO Internal Audit CTO IW CTO Mahe DCTO Mobile CTO Yanam CTO Karaikal Legal Cell AAC (Appeal ) Finance Department Secretary to the Government (CT) Administrativ e Field Operatio n 24 CURRENT ORGANIZATION STRUCTURE
    • WINGWISE OFFICERS DEPLOYMENT Number of Officers HQ Function Total 8 Administration in Commissionerate 2 Head Quarter Cell 3 Statistics Cell 2 EDP centre 1 Statutory Monitoring of Officers Action Total 6 Legal Cell 1 Appeal Cell 2 Internal Audit Wing 3 Centralized Field Operation Total 10 Head of Audit & Assessment (A&I) 1 Mobile Wing 3 Registration Wing 2 Intelligence/Enforcement Wing 4 Decentralized Field Operation Total 18 Division I 4 Division II 4 Division IAC 5 Karaikal 2 Mahe 2 Yanam 1 25
    • Data not Complete/ Available for some key functions Revenue in Crore Dealer strength Officer Strength Region wise revenue collection/de aler in Rs. Lac Division wise revenue/O fficer in crore Region wise dealer /office r Works Executed Outstandi ng Old Arrear (Rs. Crore) Outstandi ng Current Arrear (Rs. Crore) Pending Appeal & Revisio n Cases Division I 253 4 63.25 Return, Payment, Scrutiny, Assessment, Forms, Arrear etc 57.35 4.64 Division II 222 4 55.50 Return, Payment, Scrutiny, Assessment, Forms, Arrear etc 73.54 24.21 Division IAC 258 5 51.60 Return, Payment, Scrutiny, Assessment, Forms, Arrear etc 5.92 0 Division IW 94 4 23.50 Return, Payment, Scrutiny, Assessment, Forms, Arrear etc. Enforcement for entire UT 20.9 2.49 Total (Capital) 827 10033 17 8.24 48.65 590 157.71 31.34 Division City 2 69 1934 2 3.57 34.50 967 Registration, Return, Payment, Scrutiny, Assessment, Forms, Arrear etc 3.41 0 Division City 3 78 653 2 11.94 39.00 327 Registration, Return, Payment, Scrutiny, Assessment, Forms, Arrear etc 20.54 0.01 Division City 4 34 524 1 6.49 34.00 524 Registration, Return, Payment, Scrutiny, Assessment, Forms, Arrear etc 0.55 0 Total (State) 1008 13144 22 7.67 45.82 597 182.2 31.35 26 DIVISION COMPARISON 2011-12
    • CRITICAL ANALYSIS of FUNCTIONS & FUNCTIONARIES • Empirical data is not comprehensive and conclusive for planning redeployment • Officers belong to Commercial Tax Cadre • Long Hierarchy of Officers • Clerks are transferable to other Depts.-institutional memory lies with Officers • Role of Officers in HQ Cell, Statistics Cell, Internal Audit not clear • Enforcement work of Mobile Wing & Intelligence Wing (IW) not visible • IW conducting Assessment- is against natural law of Justice • Industrial Assessment Circle (IAC) is not specialized • More Officers in HQ/ Non-Statutory Functions • More Clerks in Statutory Functions in field 27
    • BASIS of PROPOSED RESTRUCTURING  Revenue targets to be complimented by performance efficiency and effectiveness of functions  Separation of operations design from operations delivery • Business process re-engineering recommendations require less clerks in filed operations • Can outsource, but can’t increase manpower, Vacancy (30%) shall be filled up immediately-No point creating new post, when vacancy is so high • Reduce dealer/officer ratio-More officers in field operation • Centralized E-Services require less interface, hence • More large tax paying dealers from entire state brought under LTU and IAC located centrally at state capital • Develop functional specialization • Reduce pressure on CTD offices in periphery • Enforcement activity by one independent centralized wing • More division required to absorb dealers withdrawn from IAC and IW 28
    • PROPOSED ORGANIZATION STRUCTURE Commissioner of Commercial Taxes Addl CCT Admini stratio n Internal Audit Legal Cell Business Intelligenc e DCCT (A) ACCT IAC ACCT (RC) ACCT (LTU) Territorial Assessment Divisions (7) DCCT (I) DCCT (Appeal) Finance Department Secretary to the Government (CT) Administrative Field Operation PROPOSED ORGANIZATION CHART 29
    • COMMISSIONERATE Proposed Administrative set up in Commissionerate Commissioner Addl CCT Computerizat ion/ MIS/ Statistics Cell Programmer Data Processing Operator (3) HQ Administrat ion Superinten dent Staff (5) Internal Audit Cell ACCT (3) Staff (3) Business Intelligence Unit ACCT (1) Staff (1) Legal Cell Un Secy Staff (1) Grievanc e Superint endent Staff (2) Staff (1) Staff (1) 30
    • CENTRALIZED REGISTRATION & ASSESSMENT Proposed Centralized Registration and Assessment DCCT (A) Centralized Registration Cell (Puducherry) ACCT(1) Staff (1) LTU (50 largest dealers) ACCT(2) Staff (3) IAC (500 industries) ACCT (1) CTO (4) Staff (6) Staff (1) 31
    • TERRITORIAL ASSESSMENT DIVISIONS Proposed Assessment Division Operation DCCT (A) Division I, Puducherry ACCT (1) CTO (4) Staff (6) Division II, Puducherry ACCT (1) CTO (4) Staff (6) Division III, Puducherry ACCT (1) CTO (4) Staff (6) Division IV, Puducherry ACCT (1) CTO (4) Staff (6) Karaikal Division ACCT (1) CTO (2) Staff (4) Mahe Division ACCT (1) CTO (2) Staff (4) Yanam Division ACCT (1) CTO (1) Staff (3) 32
    • ENFORCEMENT WING Proposed Centralized Enforcement Wing DCCT (I) ACCT (2) CTO(3) Staff (2) 33
    • UPGRADATION/ REDESIGNATION Sl No Position in CTD Present Proposed 1 Head Deputy Commissioner Commissioner 2 Second in Command Asst. Commissioner (Senior most) Addl. Commissioner 3 Field Operation and Appeal Head Asst Commissioner (2) Deputy Commissioner (3) 4 Division Heads and Equivalents Commercial Tax Officer (8) Asst. Commissioner (17) 5 Other Officers Deputy CTO (14) and Asst. CTO (23) Commercial Tax Officer (28) Total 49 50 34
    • MORE OFFICERS in FIELD Present Proposed Statutory/ Field Function Officer 29 44 Assistants 52 49 Non-Statutory/ HQ Function Officer 20 6 Assistants 9 12 Total Officer 49 50 Assistants 61 61 35
    • BEST PRACTICE STUDY
    • CLIENT NEED STUDY FOCUS  Registration Policy & Process  Return Filing Policy & Process  Input Tax Credit (ITC) Cross Verification Policy & Process  Payment Policy & Process  Tax Deducted at Source (TDS) Payment Policy & Process  Reconciliation Process  Audit Parameters/ Return Scrutiny/ Business Intelligence (BI)  LTU and other Specialised Wings  Audit/Assessment  Enforcement  Statutory Forms, Way Bill/ Delivery Note/ Transit Pass Issue and Receipt  Electronic & Mobile (E & M)-Communication & Grievances Handling  Use of Services of Sales Tax Practitioners (STP), Citizen Service Centres (CSC) etc.  IT System, software and hardware infrastructure), e-services 37
    • BEST PRACTICES of ANDHRA PRADESH  Registration  Pre Verification in 30 minutes  Centralized  No Cost for any sub processes  No Renewal / Cancellation  No Security  Return  Simple, one page  No annexure  No ITC cross matching  Revised return upward/downward  Payment  Part payment allowed  Not linked to return – prior/ post return  Penalty and tax payment not linked  Audit Parameters  Parameters are evolving  Assessment  Selection by higher up  By another territory officer  Communication  Email  STP Link  Access to limited dealer services on authorization 38
    • BEST PRACTICES of TAMILNADU Registration  Pre verification  Territory Officer issues RC in 7 days  Check list for desk and field verification  Sensitive trade – post verification by Enforcement  Sensitive Commodity notified  No renewal  Return  Staggered return filing  ITC cross matching done at invoice level  Payment  Grace period for e-payment  TDS Payment  Centralized collection Audit Parameters  Parameters are evolving  Inspection and Assessment  Selected by Commissioner/ from Enforcement Inspection report  No visit of dealer’s premises  Steps for inspection and assessment defined  Large Taxpayer Unit (LTU)  Chennai and Coimbatore City  Roving Squad  Carries Point of Transaction (PoT) device  Accesses dealers profile and history through device  Enters tax collection in portal  Generates receipt for tax collection 39
    • BEST PRACTICES of KERALA  Registration  Sensitive commodity notified  No security for composition dealers  Return  Staggered return filing  ITC cross matching done at invoice level  System generated annual return  Digitally signed  Revised return downward allowed  VAT, GST and CST return integrated  Payment  All payment e-payment  Advance tax and TDS reflect in return  TDS Payment  Electronic uploading by awarder  Reconciliation  Electronic of bank and treasury scroll in CTD VATIS  Audit Parameters  Parameters are evolving  Assessment  Selected by Commissioner/ Enforcement Inspection report/ Assessment Officer  Team for Assessment  Steps for Assessment defined  Statutory Form  Digitally signed application  Captures information from return  Form electronic and instant  Appeal  Online filing and status tracking  Communication  Official Communication internally by email  Communication to dealer by email ID provided by CTD  Akshyaya and STPs  File return (Akshyaya fee partly borne by 40
    • BEST PRACTICES of KARNATAKA 41  Registration  Upload of scanned copies of documents & photo with online application  Online Tracking of status  GPS coordinates captured  Download unsigned Regn. Certificate  No renewal  System based deactivation & deregistration  100 commodity list for CST  Return  Composition (Qrly) and regular (Mnly) dates differ  No sale figures obtained for ITC cross verification  ITC purchases & CST receipts obtained at invoice level  Revised return upward/ downward n times in 6 months  Payment  E-Payment mandatory >25K  Payment precedes return acknowledgement  Online payment in 18 banks  Payment reported in the same day till 12 midnight  Statutory Forms  Obtain online (optional) without approval  Verification of form in mobile  E-SUGAM/ Transit Pass (external)  Mandatory for passing check post  E-SUGAM by mobile and online  Online transit pass mandatory for notified commodities  Enforcement  28 vehicles fitted with GPS  Other Good Practices  E-Grahak/ Consumers  E-Grievances
    • BEST PRACTICES of MAHARASTRA 42 Registration  Pre-verification RC in one day, time line for each sub-functions  Advisory visit: Good, Average, Poor Rating  End to end service by Registration wing  Application received at counter & distributed to Regn. Offices in Mumbai  Issue statutory CST form  Return  Electronic mandatory  Periodicity Mnly, Qrly, Bnly  ITC verification at TIN level  Payment  Electronic mandatory  Private banks added to online tax payment  Part payment allowed  TDS  Higher TDS for Unregd dealers Audit, Investigation  System selects audit centrally on parameters  Random audit 20%  Audit on prior intimation  Audit note book provided by Dept  Time Limit and days for audit completion  Investigation-specific audit – prior approval & Search Warrant  Investigation followed by Audit in next 3 yrs  Refund  ECS of RBI credits to beneficiary accounts  Communication  Communication to dealer by email provided by CTD  Dealer to submit documents with DSC  Others  Identification Certificate to Mega Units under Package Scheme of Incentive
    • REGISTRATION
    • CRITICAL ANALYSIS of REGISTRATION  Prevention of bogus dealers versus mitigation of compliance risk not defined  E-Registration still involves multiple visit of dealer to office  Submission of Hard Copy  Long list of information and documents  One Officer in Central Registration Unit (CRU) handles entire verification and RC issue process  Hundred percent post verification  Wait period is high  No Tax payer profiling  No Industry/Standard Commodity Classification 44
    • RECOMMENDATIONS  RC to be issued on dealer profiling – Avoid Bogus Dealers  No Verification-instant by VATIS system on the portal  Pre Verification- 7 days, Officer to upload scanned copy in dealers page for the later to download  Post Verification  Sensitive Sector - verification by Enforcement (Circular on Sensitive Trade/commodity)  Others - verification by Assessment Officer  Do away with submission of physical application and documents  Outsource part activities and fix a cost  Application one pager-few information/ document  Build profile gradually through different wings  Checklist based verification  Amendment as important as issue of RC 45
    • RECOMMENDATIONS (Contd.)  Renewal is a huge exercise - Discontinue  Cancellation – Discontinue  Segregate dealers active and passive  Organize Registration Camps-Issue instant RC  Reduce Work Load  Security Deposit – Ask as Exception  Cost of Registration and Renewal- Discontinue  Dealer to pay service fee to CSCs/ STPs  Enhance Enforcement for Enrolment 46
    • COMMODITY CLASSIFICATION  Schedule in VAT law gives commodity tax rate wise  Commodity grouping not done  Standard Industrial Classification (SIC) required for PAN India uniformity  Harmonised System of Nomenclature (HSN)-Customs & Excise  National Industry Classification (NIC 2008)-CSO  Empowered Committee has customized HSN Code for VAT  One code shall have one tax rate  Objective is to track macro economic and fiscal trend of the particular sector  Recommend HSN with addition of code for manufacturing and Trading  Recommend as profile information, not at return level capturing  Dealer’s business volume may be segregated sector wise to the extent possible  If not, business volume shall be taken as per his dominating 47
    • HSN Code Code for Manufacturing (1)/ Trading (2)/ Description 3006 10 00 1 Sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns) and sterile tissue adhesives for surgical wound closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or dental adhesion barriers, whether or not absorbable. 3006 10 00 2 Sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns) and sterile tissue adhesives for surgical wound closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or dental adhesion barriers, whether or not absorbable. 48 MODIFIED HSN CODE for GST
    • RETURN
    • ANALYSIS of RETURN 50  Return and Annexure Long  Four VAT+ one CST return forms  E-Return for VAT, non VAT and CST  Annexure and Return form not fully integrated  VAT and CST return form not fully integrated  Return and Tax Payment Linked  Downward revised return not allowed in portal  Few channels of return filing
    • RECOMMENDATIONS 51  VAT return form can be simplified  Should be simple, small and uniform for all states - (Empowered Committee & CTMMP Guideline)  Proposed return forms– two in VAT law+ one CST  1.Non Composition (VAT and non VAT)  2. Composition (Trading and Works Contractor)  Payment to be delinked from Return, Penalty for late return and tax due be separate  Annexure to be integrated with return  System should answer the provision of law - accept downward revision in revised return  Tax is collected from Consumer. Withholding the same attract more penalty  Grace period for e-payment  Staggering of return filing last date  Discontinue annual return & ITC statements  Outsource to CSC and STPs for a user fee
    • INFORMATION CAPTURE in RETURN & ANNEXURE 52  Return form captures total value of transactions, tax rate wise, tax due, tax adjustments by way of ITC, TDS, tax due and tax payment  Commercial Taxes Dept captures commodity wise tax rate in annexure - Purchase and Sale  Not relevant, hence discontinue  Discontinue CST Annex on commodity wise sale  Collect as much additional information for cross verification as can be used for business intelligence
    • CST RETURN 53  May be Integrated with VAT return, if current format of VAT return retained  New Annexure and Return linked
    • ITC VERIFICATION in INTRA STATE TRADE
    • BUSINESS ENVIRONMENT in a SMALL STATE 55  Small territory  Intra-state trade chain is short  Dealer base is small  Scope for circular trade/bill trading within state is less  Physical cross verification of sales and purchase records of dealers is easy in cases selected through return scrutiny/ VATIS system based audit parameters
    • CURRENT PRACTICE in VATIS SYSTEM 56  Monthly return annexure capture commodity wise value and tax rate in VATIS  System calculates tax in annexure, which is populated in return  No list of commodity or commodity and tax rate linkages  No information of TIN dealers from whom purchased and to whom sold  No information on invoices of purchase and sale
    • KERALA – ITC VERIFICATION 57  Purchase and sales invoices are uploaded by dealers to claim ITC  Details captured include:  Invoice no. & date  Purchaser/seller TIN  Invoice value  Tax Amount  System facilitates electronic cross verification of sale and purchase invoices of dealers in backward and forward transactions  Automated detection of undeclared purchases/sales
    • ANALYSIS of INVOICE TRACKING in KERALA 58  Commodity group wise along with tax rate are captured in sales front from drop down list.  Commodity group wise with tax rate and Invoice are captured independent of each other.  Requiring too much information from the dealer.  System performance in uploading of invoice data not verified.  Time consuming method of providing commodity group wise tax rates  Invoice detail is also time consuming and not accurate, if the dealer does not have computerized accounts  Invoice details of sale and purchase can not be imported from the computerized accounts of the dealers  Returns of two reputed firms are cross checked-out of sales made on 15, 19 and 27 in a month by the seller, purchaser has reflected invoice dated 27, not previous ones  This indicates lack of sincerity of dealers in providing information or system deficiency in processing the same
    • ANDHRA PRADESH-ITC VERIFICATION 59  No annexure to return form  No capturing of invoice level details  Hence no cross matching  Return asks sum of non ITC purchase and non tax due (under VAT Act) sales  Tax rate wise gross value for ITC and Sale  Assessment selection is done by DCCT from the minimum information in one page return, system generated exception report
    • 60
    • 61
    • TAMIL NADU- ITC VERIFICATION 62  VAT (Form I) dealers fill in following annexures  Anx I- All goods receipts with transaction code  Anx IA-CST purchase  Anx II- All goods dispatch with transaction code  Anx III- Purchase with ITC claim against export / zero rated sale  Anx IV-Sale details of export and zero rated sales  Annexures Capture  Invoice no. & date  Purchaser/ seller TIN  Commodity  Tax Rate  Tax Amount  One invoice is entered several times as per commodity &
    • ANALYSIS of INVOICE TRACKING in TN 63  Computerized accounting system of dealer need to be customized a lot to provide invoice as well as different commodities in the invoice having different tax rate.  Dealers not having computerized accounting shall spend lot of time in filling in the downloaded format  Chance of entering wrong data is high  System performance in uploading huge data not verified  Invoice mismatch happens in almost all dealers  One invoice entered several times creates further scope for mismatch-Out of several entries of one invoice, one may not match
    • KARNATAKA-ITC VERIFICATION 64  E-Sugam requires seller/buyer to upload invoice details for verification at check post  TIN and Name of Buyer  Commodity Group  Value (No Tax Rate or Tax Value)  Annexure I of Return captures ITC purchases  TIN  Invoice No/ Date  Value  Tax Value(not Rate)  No Cross Matching as information is not complete
    • KARNATAKA-INVOICE of PURCHASES 65
    • MAHARASHTRA –ITC VERIFICATION 66  Captures TIN wise Purchases and Sales  Format captures  TIN (Not Name of the Dealer)  Net Taxable Value  Total Tax (not tax rate wise)  Total  Tax is not calculated from tax rate in Annexure  Tax rate wise taxable value and tax amount is not auto reflected in return from Annexure
    • MAHARASHTRA-TIN WISE SALES 67
    • MAHARASHTRA-TIN WISE PURCHASES 68
    • CONCLUSION from STUDY of other STATES 69  Invoice matching does not serve the purpose, because dealer may not be able to provide accurate data  There cant be penal provision for wrong/ incorrect invoice number as long as total value and tax amount (due and ITC) are correct  System level cross matching designing may be correct  In case of system generated sale invoices, selling dealer may provide accurate invoice number and date in importable format.  Purchasing dealer may receive different series of invoice number such as AI-23487 C, BC-984578 K, I 123456789/P. Purchasing dealer can not provide hundred percent correct information as this is a manual data entry in his computerised accounting system.  Invoices received by purchasing dealer may have varying series and varying characters with special characters. Purchasing dealer may add a space, delete a hyphen or insert an askii character by mistake.  Exception report is bound to happen on cross matching  Ends up in return scrutiny assessment/ intimated visit of the business premises of most of the dealer
    • BUSINESS INTELLIGENCE (BI) of IT SYSTEM 70  Business Intelligence (BI) requires standardization  TIN and ToT number is standardized  Tax rate is standardized  Commodity not standardized by the VAT administration  Invoice no of dealers vary-cannot be standardized  Value/ Amount cannot be standardized  Use of non-standardized data will lead to huge mismatch
    • FACTORS in ANNEXURE DESIGN 71 Confidentiality of Information of Dealer  Invoice level figures reveal business strategy of the dealer.  Standards followed by the CTD on guarding the privacy of the data provided by the dealer is not established Usability of Information  Unless the authority can use the information, the same should not be collected  Information collected over a period, if not used promptly, becomes garbage or load on the system Cost of Compliance Vs Outcome  Collection of information slows down the return submission process, return scrutiny process and follow up action.  Cost is huge for dealer, CTD officials and CTD System. Intelligent Use of Limited Information  Effective enforcement and return scrutiny of minimum information is the key to increase voluntary compliance.  If intended benefit can be obtained from alternative less laborious model,
    • MODELS of TAX INFORMATION COLLECTION 72  Gross amount, when tax rate increases with volume of business/ income (Aggregate/ Income Level) – for Direct Tax and ToT Dealers  Gross amount each tax rate wise (Tax Rate Level)  Gross amount for goods receipt and dispatch from and to registered TIN dealers from all over India plus gross amount of export and import (TIN Level)  Invoice level detail capturing TIN/others, gross amount & gross tax (Invoice Level). However, if one invoice, there are more than five entries with different tax rate is given, this detail shall not be captured.  Detail break up of commodity/ commodity group wise amount, tax rate (Line Item/ Commodity Level). This shall not capture TIN/ invoice wise receipt/ dispatch.  Combination of Tax Rate and Line Item/ Commodity Level  Combination of TIN level and Line Item/ Commodity Level  Combination of Invoice and Line Item/ Commodity Level
    • CHARACTERS of a TRANSACTION 73 VATDealertoVATDealer • TIN of Seller • TIN of Purchaser • Invoice No • Date • Commodit y • Value • Tax Rate • Tax amount VATDealertoToTDealer • TIN of Seller • ToT No of Purchaser • Invoice No • Date • Commodit y • Value • Tax Rate • Tax Amount VATDealertoUnrgd.Dealer • TIN of Seller • Name of Unregd Dealer • Invoice No • Date • Commodit y • Value • Tax Rate • Tax Amount •TIN of Seller •No Name •Invoice No •Date •Commodi ty •Value •Tax Rate •Tax Amount VATDealertoConsumers
    • INVOICE vs TIN LEVEL CAPTURE 74  Invoice or TIN level capturing  TIN to TIN can be tracked  TIN to ToT can be tracked  TIN to Unregd. dealer may be tracked  TIN to Consumer can’t be tracked  Shall have same result in tracking above four transaction  TIN level capturing shall find out composition & unregistered dealers crossing the threshold limit
    • INVOICE vs TIN LEVEL CAPTURE (Contd) Invoice  Invoice level data shows value & tax of each invoice that will sum up to one TIN wise purchase or sale value & tax  Unless, commodity wise/ tax rate wise break up will be asked within the invoice, annexure shall not auto calculate, tax rate wise return page  Dealer will resist providing tax rate wise TIN  TIN level data will be sum up done by dealer, value &Tax  As number of entries in TIN level capturing will be less, dealer will be willing to provide tax rate wise break up of each TIN  Thus tax rate wise calculation in annexure can be reflected in return 75
    • INVOICE vs TIN LEVEL CAPTURE (Contd) ITC Purchases in the month of Jan 2013 TIN Name of the Firm Invoice Number Date Amount Tax Paid 33112 58015 7 M/s ABC Corpn Pvt Ltd AI- 23487 C 15- Jan-13 500000 36000 Do BC- 984578 K 27- Jan-13 600000 32000 Total 1100000 68000 ITC Purchases in the month of Jan 2013 TIN Name of the Firm Amount Tax Rate Tax Paid 3311258 0157 M/s ABC Corpn Pvt Ltd 800000 4% 32000 Do 300000 12% 36000 Total 1100000 68000 76
    • EASE of PROVIDING INFORMATION  Can generate data, dealer wise and within dealer, tax rate wise  Can generate invoice detail wise and within invoice, tax rate wise  Unless tax rate wise information is captured, Annexure and return cant be  Very small dealers enter all invoices serially date wise, tax rate wise/no tax rate wise  Can provide -invoice wise data and within invoice, tax rate wise /no tax rate wise  Medium and Large dealers maintain party ledger wise and tax rate wise  Can provide TIN and Tax Rate wise  Extra effort shall be more in providing invoice and tax rate wise data  Small Dealers can modify accounting to party ledger wise to provide TIN wise 77 Electronic Account Manual Account
    • ITC CROSS VERIFICATION at TIN LEVEL 78  Minimum error shall happen at TIN and Tax Rate and hence minimum mismatch  Gross values of transaction and Tax value may mismatch if one party does not report in same tax period  System shall give cumulative figure and carry forward the balance mismatch from previous period (positive or negative) just like ITC carry forward  No exception report on absolute hundred percent value non-matching-difference in percentage of total claim  Report shall be generated on variation of 20% in case of small, 10% in medium and 5% or more in large dealers
    • Recommended Model-TIN & Tax Rate79  Current Practice of Commodity and tax rate wise capture without any guidance in VATIS of commodity and tax linkage does not serve any meaningful purpose - Hence be discontinued  TIN and within TIN, Tax Rate wise Value of ITC purchase and taxable sale under VAT be captured  TIN level matching shall give the same effective result as Invoice level matching, but with less effort of all
    • INVOICE LEVEL CAPTURE of INTER-STATE TRANSACTION 80  Single point capturing of data from dealer  Interstate transactions, which do not have bearing on ITC, but linked to statutory forms (issue/ receipt)- be captured-TIN and invoice wise, but not tax rate wise  Interstate transactions shall have a code each for CST purchase/sale, zero rated purchase / sale, commission/ branch transfer, export/import-match forms issue and receipt, special rate of tax declared by the CTD for an industry
    • PAYMENT & ACOUNTING
    • CRITICAL ANALYSIS of PAYMENT  Cash, Cheque/ DD and E-Payment  E-Payment only for return, cancellation of statutory form & Advance Tax (vehicles & cars)  Once dealer opts for online payment cannot go back to other mode of payment  Online payment by internet banking of CBS of Indian Bank, Bank of Baroda, Indian Overseas Bank, IDBI, SBI  Cannot make payment through debit/credit card, Master/Visa  No Bank Payment Gateway-dealers having 82
    • CRITICAL ANALYSIS of RETURN PAYMENT  E-Payment linked to completion of return filing  Once return completed, dealer may continue making online payment from return or approach CTD office for manual payment  No grace period for online payment, while cheque clearance takes 5 to 10 days time  Manual payment system is complex, long queue in peak period, many people involved  Linkage of tax & penalty makes it more complex- cash payment of penalty at one counter and cheque/DD payment of tax at another 83
    • RECOMMENDATIONS  Grace Period for online payment and Cash Payment  Multiple Payment options  Mandatory e-payment for large tax payers  Zero Balance Accounts in approved banks for online payment to dealers having business accounts in other banks  Return filing and payment of tax delinked  Tax due and Penalty payment delinked  Any types of payment be accepted by designing a suitable Commercial Tax Chalan in VATIS leading to CBS of banks  Bank Payment Gateway  Central Bank of India (CBI), service provider bank, is providing such service to CTD, Odisha for 35 such banks  CBS of CBI integrated to CTD/ Treasury and issues acknowledgement receipt immediately to dealer and CTD  CBI is providing dealers payment gateway to respective banks  fund is transferred to a pool account of the CBI through online transfer from other banks.  CBI transfers such receipt on T+1 basis to govt treasury 84
    • OUTSOURCE CHEQUE/ DD COLLECTION  Option 1:Treasury Bank  Access in VATIS just like Clerks and Cashiers  Information Exchange between VATIS and CBS instead of manual acknowledgement  Generate acknowledgement from bank CBS and VATIS with bank branch code  Bank anyway get paid by RBI, RBI may pay more or use its Goodwill  Option 2: Reengineered current process  One counter for all divisions in state capital city  Counter like banks- Air conditioned sitting facility & queue Management  Staggering collection through out the month  Information Exchange between VATIS and CBS instead of manual acknowledgement 85
    • OUTSOURCE CASH COLLECTION  Option 1:Treasury Bank  As discussed before  Option 2: CSCs and STPs  Service fee for cash receipt  Authorized by VATIS to transact  Make e-payment from their own bank account  Generate receipt from VATIS and Bank for dealer with CSC regn. number recorded on it  Frequently replenish their account with cash deposit  Option 3: CTD Officials: must discontinue  Option 1 is recommended strongly for both Cash & Cheque/DD Payment-real time updation 86
    • CRITICAL ANALYSIS of ACCOUNTS  It is only two way between Bank and Treasury for each transactions in the state  Ideally, there is a three way reconciliation for CTD - CTD, Treasury and Bank each transaction wise  CTD and Treasury reconcile at gross figure level monthly due to lag in computerization of treasury  E-payment is electronically reconciled by processing e-scroll received from bank  There is no reconciliation of manual payments  Manual chalans returned back by bank are accepted as sacrosanct-no check if a forged chalan comes from bank 87
    • RECOMMENDATIONS  Accounts ledger made available online to respective dealers  As treasury is not computerized, three way electronic reconciliation can’t happen  Proposed outsourcing model can enable hundred percent e-reconciliation between bank and VATIS  Batch reconciliation on T+1 basis  Different reconciliation between Citizen Service Centres (CSCs), respective banks & VATIS may be done  Reconciliation will be done on progressive and cumulative basis. The status will be  Posted/Realised/Received/ Cheque/DD cleared  Pending 88
    • CRITICAL ANALYSIS of TDS PAYMENT  TDS deducted by work awarder to works contractors (WC) as per VAT law  Manual, no control over awarders making payment on time  Contractors receive payment, but could not file return due to non receipt of certificate from awarders and non reflection of TDS in their e- return  Awarders make payment by DD/ Cheque, but don’t give correct list (form R) and TIN number of contractors against the DD amount  Collection goes to the CTD division to which 89
    • RECOMMENDATIONS Policy  Register awarders with a registration number other than TIN (if they have any).  Simplify form R, make it consolidated one form for all works contractors and generate it online from VATIS – mandatory  No separate TDS certificate form T to WC-WC can generate from VATIS based on form R submitted by Awarder  Online issue of form S for no deduction of tax or reduced deduction of tax to awarder and WC 90
    • RECOMMENDATIONS (Contd.) Process Re-engineering  Map form S to form T & form T to form R  Collection on behalf of the works contractors be shown in the revenue collection of the AO to which the contractor belongs to.  The payment shall be automatically reflected in the dealers ledger and the return to which the TDS belongs  Works Contractors e-return should be flexible to accommodate late receipt of TDS, if the works contractor has reported tax deduction 91
    • GROUP TDS CERTIFICATE FORM 92 Form R Awarders Regn. No 1234567890 Awarders Name M/s ABC Public Ltd Sl No TIN Number Name of the Works Contractor Work Order No Amount Released TDS @ TDS Amount
    • REFUND
    • CRITICAL ANALYSIS of REFUND  No standard procedure for refund claim verification  Revenue collection: no approval by CTD, no role of Treasury except accounting  Refund: approval by CTD and Treasury  Law has provision for refund with penal interest for delay beyond 90 days  Refund claim is done through return  No electronic monitoring of refund claim settled against the claim  No reconciliation of refund made by bank 94
    • RECOMMENDATION on REFUND VERIFICATION 95  Authenticity of Purchase Invoice - TIN level matching as recommended in ITC verification  100% purchase invoice verification not practical  Define sampling procedure to eliminate discretion  Star rating of dealers claiming refund be based on  Percentage of purchases made through bank payment  Refund claim of higher star dealers processed quickly
    • RECOMMENDATIONS  E-refund processing and reconciliation required to close a refund claim = prevent double refund  E-refund shall be partial electronic till treasury automation and integration with treasury system  Time lines for each sub steps of refund be defined  Delay responsibility be fixed in case interest payment arises  After bank makes refund, electronic scroll reconciled against payment claim, period of claim, e-refund order and amount in VATIS 96
    • BUSINESS INTELLIGENCE ENFORCEMENT ASSESSMENT LARGE TAXPAYER UNIT
    • BUSINESS INTELLIGENCE
    • SAMPLE PARAMETERS for BI  Sales: Purchase ratio less than 80% on cumulative basis over a period of time  Industry sector growth rate (all dealers registered in that industry sector): Growth rate of the dealer belonging to that industry  Return not filed in number of months in last 12 months  Credit return (ITC Carry forward) in number of months in last 12 months  TIN level matching exception report top hundred highest differences cumulatively in last 12 months  Import / export details provided in return annexure are cross matched with port consignment declaration to trace purchase suppression/ wrong ITC refund claims  Details of CST statutory forms issued to other state dealers and received from other state dealers are verified against CST purchase and sale invoices disclosed in return annexure respectively.  Opening stock particulars, transactions during the year and closing stock particulars and audited statements are verified against the annual return - If differences in stock position is 20% or more and the revenue implication is Rs. 1 lakh or more (at appropriate tax rate)  Offence records and crime records are more  Sensitive goods  Export and Interstate despatch high 99
    • MAHARASTRA PARAMETERS for AUDIT SELECTION 100 Parameters Extreme End Maximum Risk Tax Throughput Input + Output tax >Rs 10 Lakh in last 12 months 60 Compliance Tax from assessment order of return scrutiny exceeds Rs 1 Lakh or advisory visit reports poor rating 40 Complexity of Business >5 types from international importer, branch transfer/commission agent, inter state sale, interstate purchase, works contract, exempt goods, multiple branches =10 points SEZ = 20 points Package scheme of incentives = 20 points 50 Mark UP <40% of the average of the business/ commodity 40 Date of last Audit >3 Years 40 Legal Entity Proprietor 20
    • ENFORCEMENT
    • COMPARATIVE ANALYSIS OF ENFORCEMENT 102 Nature of Evasion Retur n Scruti ny Audit/ Investi gation Mobil e Squa d E- wa y bill s Che ck post s Manual Statuto ry forms Statuto ry e- forms Un reported Intra State No Yes Limite d No Ltd No No Inter State No Yes Ltd No Ltd No No Reported Correct Reporting Yes Yes Yes Yes Yes Yes Yes Under reporting sales Yes Yes Ltd No Ltd No No Over reporting purchase Yes Yes Ltd No Ltd No No Undervaluation No Yes Ltd No Ltd No No Forged statutory forms No Yes Ltd NA Ltd Ltd Yes
    • RECOMMENDATION on ENFORCEMENT 103  Merge Enforcement (IW) & Mobile Wing  No requirement for check post/ way bill  Remove assessment functions from IW  Law does not speak of inspection report, even though this should be the main activity of enforcement  Procedure for Inspection and Report suggested  Instruction from higher up on record  Verification & return of accounts in time  Time bound reporting  Transparency by generating report from VATIS  Approval before dispatch to Assessing Officer
    • RECOMMENDATION on MOBILE ENFORCEMENT  Technological enablement for proper verification of consignment, quicker disposal, collection of tax  Use of mobile phone with GPRS and GPS may be used to access VATIS portal to  Verify TIN and CST Registration status  Verify Profile  Principal place of Business  Godown  Branch  Commodity  View return filing and payment status  Enters security collection if any  Generates receipt for fine collection from handheld printer operating in blue tooth connection to mobile 104
    • ASSESSMENT
    • CRITICAL ANALYSIS of ASSESSMENT  Law: Dealer to be audited at least once in three years  No real audit, only compliance of law  Assessment can be initiated on  return scrutiny by Assessment Officer (AO)  the list provided by the Commissioner  the inspection report submitted by the Enforcement Wing  AO can  Call for accounts and documents  Can do audit visit on prior intimation 106
    • RECOMMENDATIONS on SETTLEMENT  One type of Assessment originates from Return Scrutiny due to  factual error / or clear case of wrong ITC claim/ selection of lower tax rate  No Audit visit  Verification of Accounts in CTD office  If admitted by dealer, only twice penal interest of delay tax payment  If not, taken up under assessment procedure 107
    • RECOMMENDATIONS for ASSESSMENT  Once in three year provision be removed  Officer be given a target  Assessment be done in team of three  Team head from other territory  No audit visit in case of Inspection Report  Assessment Proposal and draft assessment approved by higher up  Provisional assessment order communicated  Reply considered and final order served  AO generated from VATIS for transparency 108
    • LTU and IAC
    • ANALYSIS and RECOMMENDATIONS  There is no specialized unit  Industry Assessment Circle (IAC) is too crowded with small manufacturers  Highest tax payers need priority attention and quicker service  Highest taxpayers return scrutiny and assessment requires specialization  50 highest taxpayers be selected from entire UT under LTU  500 next highest tax payers in manufacturing be kept in IAC 110
    • STATUTORY FORMS
    • ANALYSIS of CURRENT SCENARIO FORM ISSUE by the STATE  End to end electronic-process is fairly OK  Application filling in invoice details  Deemed approval after 7 days  Generates filled in form-no blank form  Downlodable pdf form  No visit to CTD for signature of officer  Pain Areas  Upload data for one form at a time  System performance is not satisfactory  Data loss with error message or rejection  Matching form issue month to invoice date is against the law 112
    • ANALYSIS of CURRENT SCENARIO (Contd) SUBMISSION of FORM RECEIVED from OTHER STATEs  Upload data for one form at a time  System performance is not satisfactory  Data loss with error message  Dealer takes print of data uploaded for one form at a time  Brings forms received along with prints to CTD  Waits for officers time for verification and acceptance of documents  System performance is so slow, officers unable to check uploaded information from VATIS 113
    • RECOMMENDATIONS  Invoice wise one time data entry with return for CST transactions, both receipt and dispatch  All invoices to be uploaded once with code of transaction  Online application of a form for a particular dealer shall fetch all pending invoices of the that dealer cumulatively till admissible period  Dealer selects invoices without any restrictions of matching form period to invoice date  Once selected those invoices shall be freezed  System performance to be improved  Blocking of system from15th to end of month removed 114
    • CANCELLATION of E-FORMS AS-IS  Fee is flat Rs 1000 for all  Indemnify against the revenue loss  Cancellation application is online  But officer approves it after updation in TINXSYS  Can generate fresh form again uploading data 115
    • CANCELLATION of E-FORMS (Contd) RECOMMENDED TO BE  Cancellation fee should be gradual with increasing risk  Freezing and de-freezing of already uploaded invoice data- no repeated data upload  TINXSYS uploading of cancelled form status before approving fresh issue of another form is good, but not practiced in other states  TINXSYS does not accept modification or correction of same form, without cancelling- Empowered Committee may be approached 116
    • ABOLISH ISSUANCE of FORMS to DEALERS AS IS  Dealer of State A furnishes interstate purchase/ receipt invoice level data to Tax Dept of State A  Dealer asks for forms for goods receipts for a particular dealer of another state, State B.  Tax Dept, State A issues form to the dealer  Dealer sends the forms to the dealer of State B  Dealer of State B submits the form against the invoice details to the Tax Dept of State B 117
    • ABOLISH ISSUANCE of FORMS to DEALERS (Contd) RECOMMENDED TO BE  Dealer of State A furnishes interstate purchase/ receipt invoice level data to Tax Dept of State A  Dealer of State A asks for forms for goods receipts for a particular dealer of State B.  Tax Dept of State A confirms the reflection in return of Dealer of such goods receipt from such TIN vide such invoice numbers.  Confirmation will be available for dealer to view in his log in and download.  Tax Dept of State A sends the confirmation in usable format to respective state, State B Tax Dept and TINXSYS  State B Tax Dept shall consume the same information in its VATIS  State B Tax Dept shall reflect in the ledger of the dealer of that state & match against the invoice detail provided at the time of filing of return.  AO of that dealer shall accept that information and assess.  Misuse of forms shall be eliminated and cancellation shall be 118
    • INTERSTATE DATA EXCHANGE FORMAT 119 Goods Received in Interstate Transactions from State X in the returns period of __ TIN of supp lying deal er Name of the supply ing dealer TIN of recei ving deale r Name of the receivi ng dealer Inv oice No Invo ice Date Amo unt Tax in the invo ice Transaction Code (sale, branch transfer. Commission sale, in the course of export) Data exchange shall be done once in a month among all the states tax administrations bilaterally Can be experimented among few willing states
    • TAX PAYER ASSISTANCE & APPEAL
    • INQUIRY & GRIEVANCE MANAGEMENT 121  Does not exist  E-mail receipt not logged  Grievance addressed selectively  Call Centre with IVR and executives required to guide on tax laws, update on tax payers account, receive and address grievances  Systematic log & addressed on FIFO  System to record complain by SMS, Voice, email, portal or hard copy and time of resolution  System guides call centre staff for consistency and accuracy of reply  Two Tier executives to manage Call Centre Management  Tier 1- resolve fundamental inquiries and grievances  Tier 2- resolve complex issues referred from tier 1 and forward further to respective officers in the dept. and follow up on resolution by later
    • COMMUNICATION 122  Not effective  Comprehensive communication program throughout  Use wide variety of channels  General guidance booklets explaining forms, law, process and taxpayers’ obligations  Sensitization of Target Group & guide on target sector  Gadget Notifications, Circulars, FAQs, Taxpayers guide made available on the portal, IVR, email and SMS
    • FRONT OFFICE 123  Single window for all services including payment  Inquiry Counter cum help desk separate in the same front office  PPP model for managing Front Office  Online services made available in the front office  Modern facility and Queue Mgt System in the office  Specialized staff o handle front office functions
    • ADVANCE RULING & ALTERNATE DISPUTE RESOLUTION 124  Advance ruling not working  No alternate dispute resolution mechanism  Recommended time bound response by Advance Ruling Body  Advance Ruling Body reconstituted keeping two highest officers of the department and a judge of High Court as Chairman- Majority decision  Ruling Case Specific, but need to be made available to tax payers for guidance  Facilitator for ADR to avoid time consuming litigation and high cost for both tax administration & taxpayers
    • APPEAL 125 Commissioner of Commercial Taxes AAC (Appeal) AO Dealer Finance Department Secretary to the Government (CT) STAT High Court Revisio n Suo- motto Revision Appeal Appeal Revie w Appeal Revie w Suo- motto Revision Revisio n Writ Writ Supreme Court
    • APPEAL 126  Appeal process is fair & elaborate, but time consuming  Not many cases in a small federal state  Recommended time bound disposal till Tribunal- review of High Court process is not in scope  Appeal Case Management System required with work flow, document and order available for all stakeholders  Online filing of appeal petition by taxpayers and online service of notice  Alert generated to all stakeholders on time limit and submission of documents  Cases of legal interpretation on same theme grouped and joint hearing taken up  Legislative measures may be introduced benchmarking against best practices and give relief to taxpayers retrospectively.
    • PERFORMANCE INDICATORS
    • SAMPLE KPIs 128 Grou p KPIs Uni t Formulae A. FUNDAMENTAL INDICATORs 1 Revenue collection % Tax wise and tax payer category wise gross collection against budgeted projection 2 Cost of collection % Revenue collection by Expenditure of Dept/ Unit 3 Tax payment compliance % % of taxpayers pay self assessed tax by due date 4 Return Compliance % % of regd. taxpayers file return by due date 5 Audit Effectiveness % % of revenue realized from audit (including conditional stay) to revenue paid in those returns B. REGISTRATION INDICATORs 1 Growth in Registration % % growth in category wise tax registrants 2 Registration % % of registrations in camps total registrations Reference: A Draft Plan for Implementing VAT in Bangladesh by IMF Jan 2013
    • SAMPLE KPIs (Contd) 129 Grou p KPIs Uni t Formulae C. RETURN & PAYMENT INDICATORs 1 E-Return % % of E- return to total returns filed by due date 2 E-Payment % % of number of E-payment to number of payments 3 Return Processing tim e Avg time for processing a return from date of filing 4 Payment Processing tim e Avg time from date of payment by taxpayer till reflection in his accounts ledger in VATIS 5 Refund Processing tim e Avg time from date of filing refund claim by taxpayer till refund approval 6 E-Refund tim e Avg time from refund approval till credit of refund to tax payers account 7 Taxpayer satisfaction on manual & web nu mer ic Time spent at web portal, bank, front office or service centre, number of visits, easy of filing return, annexure, making payment and refundReference: A Draft Plan for Implementing VAT in Bangladesh by IMF Jan 2013
    • SAMPLE KPIs (Contd) 130 Grou p KPIs Uni t Formulae D. TAXPAYER ASSISTANCE INDICATORs 1 Call Centre Performance tim e Avg wait time to get through to the call centre executive and hold time during the call 2 Inquiry Resolution tim e Avg days from Inquiry request by different modes to reply conveyed by Dept through designated mode 3 Grievance Resolution tim e Avg days from grievance request by different modes to reply conveyed by Dept through designated mode 4 Advisory Visit Nu m Number of visits to taxpayers at doorstep for guidance 5 Counseling communications % Number of recorded counseling communications to number of return scrutiny flaws observed 6 Effectiveness of Advance Ruling tim e Avg time from application to disposal Reference: A Draft Plan for Implementing VAT in Bangladesh by IMF Jan 2013
    • SAMPLE KPIs (Contd) 131 Grou p KPIs Uni t Formulae E. AUDIT INDICATORs 1 Refund audit % Amount of wrong refund claim denied to total claim 2 Demand audit % Amount of tax & penalty demanded to total tax paid in related returns 3 Settlement % Number of settlements to sum of audits & settlements 4 Quality of audit % Revenue realized from final appeal proceedings wrt audit demand raised in those cases 5 Audit time tim e Time spent on audit to demand Rs 1 lakh tax & penalty 6 Audit taxpayer satisfaction nu mer ic Transparency in selection and conduct, timeliness, fairness, quality through survey (develop survey index) 7 Risk based Audit nu Feedback from Auditors on the parameters and Reference: A Draft Plan for Implementing VAT in Bangladesh by IMF Jan 2013
    • SAMPLE KPIs (Contd) 132 Grou p KPIs Uni t Formulae F. ARREAR INDICATORs 1 Arrear collection % Arrear collection to total return payment in the area 2 Old arrears % Arrear collection from cases >1 yr of return period/ demand/appeal order to total arrear collection 3 Arrear resolution % Number of accounts resolved to total arrear cases 4 Arrear taxpayer satisfaction nu mer ic timeliness, fairness, quality through survey (develop survey index) G. ENFORCEMENT INDICATORs 1 Effectiveness of enforcement $ Avg gross/ taxable turnover declared in return of tax payers selected for enforcement visits 2 Efficiency of % Tax realized in a financial year from enforcement Reference: A Draft Plan for Implementing VAT in Bangladesh by IMF Jan 2013
    • SAMPLE KPIs (Contd) 133 Grou p KPIs Uni t Formulae H. APEAL INDICATORs 1 Closure of appeal nu m Number of cases closed 2 Appeal process tim e Avg time taken for closure of appeal cases from admission of appeal 3 Appeal quality % Higher Appellate forum/ Court changed amount of appeal outcomes of lower court in percent 4 Appeal taxpayers satisfaction nu m timeliness, fairness, quality through survey (develop survey index) Reference: A Draft Plan for Implementing VAT in Bangladesh by IMF Jan 2013
    • MODIFIED KARNATAKA MODEL 134 Objectiv e Action Succes s Unit Weig ht Target/ Criteria Value Excelle nt=100 % Very Good=9 0% Good= 80% Fair=70 % Poor=6 0% Revenu e mobilizati on Achieve Target, Complete Audit of 3% Taxpayers Reach Target or Exceed $100 Bn num ber 40 Services at the Door Step Statutory Forms Availabl e to all Dealers Per cent 4 100 90 80 70 60 e-SUGAM do 4 100 90 80 70 60 Transit Pass do 2 100 90 80 70 60 Adoption of E- Governa nce E-Payment 80% Per cent 2 80 70 65 60 55 E-Return PT 50% do 1 50 45 40 35 30 E-Return 50% do 1 50 45 40 35 30
    • MODIFIED KARNATAKA MODEL (Contd) 135 Object ive Action Succes s Unit Weig ht Target/ Criteria Value Excelle nt=100 % Very Good=9 0% Good= 80% Fair=70 % Poor=6 0% Tax Collect ion Efficie ncy Assessment of old Sales Tax Assessment Comple ting ≥50000 num ber 2 Collection of old Arrears Achieve ≥$1 Bn do 1 Image of Tax Admn Consultative Meeting ≥15 num ber 2 15 13 11 10 ≤10 Media Campaign ≥4 do 1 4 3 2 1 0 Capac ity Buildin g Training of Officers ≥ 250 num ber 1.5 Training of Officials ≥ 300 do 1 Advance ≥ 50 do 0.5
    • 136 Objectiv e Action Success Unit Wei ght Target/ Criteria Value Excelle nt=100 % Very Good =90% Good =80% Fair =70% Poor =60% Restruct ure Record Room in100 offices num ber 1.5 100 90 80 70 ≤70 Functional In 10 functions do 1.5 10 9 8 7 ≤7 Transpar ency in Posting Posting at Checkpost on rotation Achieve by date Date 3 Efficient functioni ng of Result Framewo rk Approval of Draft RFD Achieve by date Date 2 Submission of annual result Achieve by date Date 2 Long Term Strategy 5 yr plan by date Date 2 Stakehold er Officials Survey % 5 Taxpayers do do 5 MODIFIED KARNATAKA MODEL (Contd)
    • 137 Objec tive Action Success Unit Wei ght Target/ Criteria Value Excelle nt=100 % Very Good =90% Good =80% Fair =70% Poor =60% IT Syste m Website server Uptime 100% % 1 100 98 95 90 ≤90 E-services 100% E- % 1 E- Procurement 100% E- % 2 M&E source 100% MIS % 1 GOs available 100% by next day % 1 Plan, Budget available 100% in a week % 1 Griev ance Handl e Through IVR 100% % 2 Resolve all (IVR+other) 100% % 2 Admin reform Amend archaic Notify Num bers 1.5 10 9 8 7 ≤7 MODIFIED KARNATAKA MODEL (Contd)
    • Chidananda Jena Email: chidananda.jena@gmail.com Skype/ YM: chidanandajena