Strategies to increase awareness about Invoices

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Discussion of Models as a solution to Invoicing problems in India. Based on Research done in Summer 2013.

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Strategies to increase awareness about Invoices

  1. 1. End Term Report Gaurav Singh 14th July 2013 2012 Rakshak Foundation. All Rights Reserved.
  2. 2. Contents Project Overview •Introduction •Goals and Objectives •Scope of the project Research Methodology for the project Field visits and Mentor Discussion Key Findings Results and Discussions Recommendations, their scope and Strategy for Implementation Time Line References Appendix 2012 Rakshak Foundation. All Rights Reserved. 2
  3. 3. Project Overview An invoice or a bill is a commercial document that is issued by a seller to a buyer. Pro forma Credit Memo Timesheet Invoices Debit Memo ERS Selfbilling Invoice 2012 Rakshak Foundation. All Rights Reserved. Commercial Invoice
  4. 4. Taxes Entertainment Tax Professional Tax Sales Tax Income Tax Anti Municipal Tax Corporate Tax Direct Taxes Stamp Duty Wealth Tax Perquisite Tax 2012 Rakshak Foundation. All Rights Reserved. Duty Capital Gains Tax Registra -tion Fee Securities Transacrion Tax Educatio n Cess, Surchar ge Service Tax Toll Tax Dumping Indirect Taxes Value Added Tax Excise Duty Gift Tax Dividen d Distribu tion Tax Custom Duty and Octroi
  5. 5. Why Issue An Invoice??? Benefits Organized Business Client confidence develpment Tax Collection Guarantee/Warantee Assessment Quality Assurance Legal Owneship 2012 Rakshak Foundation. All Rights Reserved.
  6. 6. Addressing Problems and Scope of the project Lack of Awareness Fraudulent Unorganized Business Sector Ignorant Behaviour Invoice Requirement at Certain Places Compliance Issues History of Problems 2012 Rakshak Foundation. All Rights Reserved. No Standardisation Concerns Devaluation of Goods
  7. 7. Goals and Objectives Identify Root Causes Long Term Behaviour Change Goals and Objective New Management System 2012 Rakshak Foundation. All Rights Reserved. Spreading the message Eradicate Fraudulent 7
  8. 8. Research Methodology Methodology Literature Search Books and Articles Internet 2012 Rakshak Foundation. All Rights Reserved. Newspaper Field Visits Journals and Reports Jia Sarai Market 8 Vyapar Bhawan Surveys IIPA Odisha Meetings and Interviews Krishi Bhawan
  9. 9. Field visits and Mentor Discussion Sr. No. Date and time Person or Organization Place Aim Findings 1. 29th May Dr. Mrinalini Darswal Vyapar Bhawan, I.P. Estate To get a lead on the project Found new contacts in Delhi Department of Trade and Taxes, to discuss the issues. 2. 29th May Mr Tarun Sharma Vyapar Bhawan, I.P. Estate Discuss the issues pertaining to invoices The cost to monitor the small retailers in tax collection would be greater than that paid by them. 3. 29th May Shri R. N. Mangla Vyapar Bhawan, I.P. Estate The feasibility and scope of the project There certainly are chances to increase the compliance by increasing the awareness about invoices. Discussed the ideas of e-invoicing system 2012 Rakshak Foundation. All Rights Reserved. 9
  10. 10. Field visits and Mentor Discussion (cont…) Sr. No. Date and time Person or Organization Place Aim Findings 4. 18th May Shri Manoj Ahuja Cuttack (Over Phone) To get a lead on the project and general path to be followed The VAT Act of Odisha, 2005. Research should be focussed with primary data, so field visit and talking to people is required. 5. 4th June Shri Manoj Ahuja Cuttack (Over Phone) Discuss the feasibility of recommendatio ns to be mentioned in report. No need to worry about the feasibility on first hand. All the recommendations should be considered and follow up should be made keeping in mind the time limit of the project 6. 5th June Retailers Jia Sarai Market, Beside IIT Delhi To know the present status of prevalent in the market. So many to be listed here. Precisely, zero level awareness about the laws and taxation system. Not in the habit of issuing invoices. 2012 Rakshak Foundation. All Rights Reserved. 10
  11. 11. Field visits and Mentor Discussion (cont…) Sr. No. Date and time Person or Organization Place Aim Findings 7. 19th June Retailers in Chandni Chowk Area Chandni Chowk, Delhi To know the present status of prevalent in the market. The dealers are aware of the tax payment rules and regulations by the government, but most of them do not issue any invoice. 8. 27th and 28th June Retailers in Bhubaneswar Range, Circle IV Bhubanes war Market survey and interview the retailers. All the findings and relations have been established in the end term report. Honesty in business is an important factor. 9. 26th and 29th June 2013 Shri Manoj Ahuja Sales Tax Office, Cuttack Discuss the feasibility of the models developed. The model developed is ideal, but its implementation have to be found out. Concluding the results and project presentation. 2012 Rakshak Foundation. All Rights Reserved. 11
  12. 12. Key Findings and Discussions Lack of resources (both technological and human), it is currently very tedious to monitor the tax compliance at such low levels of retail sector. Possibility of getting caught is very low. So many dealers who are not registered with the sales tax department, and the system has various loopholes which help them in escaping the penalties. There is no standardisation in the invoice format in the country. Also at regional level, the formats of the invoices vary widely. 2012 Rakshak Foundation. All Rights Reserved. In small shops like, a tea stall, there is even no record maintenance for anything. Invoices cannot be thought from his side. 12
  13. 13. Key Findings and Discussions (cont…) Most of the dealers excuse by saying that they do not find time for their business, once they start maintaining records on each and every sale that is made. Technological override has become mandatory. Many retailers being unaware about the taxation system, have employed Chartered Accountants (C.A.) for filing their tax returns to the state. They do not see any discrepancy in the system and taxation does not affect their business. The efforts made by the government do not reach at such low levels, the incentives offered are still unknown to them. The top 1% of the dealers pay nearly, about 80% of the total tax collected, so the importance of the rest is not realized. The cost of monitoring the rest will account more than the taxes they pay. 2012 Rakshak Foundation. All Rights Reserved. 13
  14. 14. Key Findings and Discussions (cont…) 2012 Rakshak Foundation. All Rights Reserved. 14
  15. 15. Key Findings and Discussions (cont…) Kashoo Invoicera Xero Quickbooks Online Freshbooks Harvest FreeAgent Yendo Less Accounting Wave Accounting 2012 Rakshak Foundation. All Rights Reserved. 15
  16. 16. Key Findings and Discussions (cont…) Should be? 2012 Rakshak Foundation. All Rights Reserved. 16 Should be?
  17. 17. Recommendations, their scope and Strategy for Implementation Awareness Campaigns Scope: Awareness in consumers as well as sellers about the issuance of invoices Issues: General ignorant behaviour and mutual fradulent that exists among people. Proposal: Various strategies like television and newspaper advertisements, radios and posters, hoardings etc. with street plays. Need to contact NSD, National School of Drama (if feasible) to incorporate this issue in their play. 2012 Rakshak Foundation. All Rights Reserved. 17
  18. 18. Recommendations, their scope and Strategy for Implementation Moral Science Education Scope: It is a good strategy to educate ourselves from the beginning so that, in future there are no chances for problems. Incorportion of this in the education system, and that too in moral education would have an effect on the behaviours of people. Issues: The time at which this should be taught, as this may require a higher knowledge as a prequisite. Proposal: Apart from being taught in economics, at lower level students should be taught on the tax payment and importance of invoices. This would have an impact upon their parents as well as they will be a better citizen when they grow up. 2012 Rakshak Foundation. All Rights Reserved. 18
  19. 19. Recommendations, their scope and Strategy for Implementation Technological Reforms Scope: Electronic systems are more benefiacial than manual ones, as they have better record maintenance facilities and advantages. Issues: The money spent on this will account to be too much, as hardware installments and getting the records digitized will have cost of education for the retailers as well. Proposal: Because it is a one time investment, this is actually feasible by providing loans to the retailers to help them install the required hardwares in theor shops. Education may be made free for those who comply to this policy. 2012 Rakshak Foundation. All Rights Reserved. 19
  20. 20. Recommendations, their scope and Strategy for Implementation Innovative Methods of Advertisements Scope: Reaching out public through various new channels which other department have employed can influence their minds. Innovative methods of advertisement may target large and quality audience in interest. Issues: These methods may vary from state to state and also in different regions within the state, a pre-requisite for this plan would be to set up a Public Relations department before deploying this. Proposal: Local TV actors, public transportation, collaboration with National Consumer Helphline and department of Consumer Affairs, stickers on passbooks (banks and post offices), hordings at market places etc. 2012 Rakshak Foundation. All Rights Reserved. 20
  21. 21. Recommendations, their scope and Strategy for Implementation Every sale to be monitored, Idealised model Scope: For controlling the market and monitoring all the sales and transactions that are made, we can ask the retailers to use the model shown in figure. Issues: The sellers may not agree for intervention by government in their business, and might refuse to follow the above model. Proposal: The efficiency rest on the projection of the model, realization of other benefits along with invoice monitoring may incentivize the dealers to use this model. 2012 Rakshak Foundation. All Rights Reserved. 21
  22. 22. Recommendations, their scope and Strategy for Implementation Model #1 2012 Rakshak Foundation. All Rights Reserved. 22
  23. 23. Recommendations, their scope and Strategy for Implementation Model #2 2012 Rakshak Foundation. All Rights Reserved. 23
  24. 24. Recommendations, their scope and Strategy for Implementation Invoice Pooling Model Scope: For controlling the market and monitoring all the sales and transactions that are made, we can ask the retailers to use the model shown in figure. Creating an invoice pool can remove the behaviour issues all the dealers in the nearby market shall be using this technology, and market competition will be equal. Issues: The sellers may not agree for intervention by government in their business, and might refuse to follow the above model. Proposal: The efficiency rest on the projection of the model, starting with a pilot testing with the willing dealers and spread it gradually. It is important make the dealers realize their part of benefits. 2012 Rakshak Foundation. All Rights Reserved. 24
  25. 25. Recommendations, their scope and Strategy for Implementation Invoice Pool 2012 Rakshak Foundation. All Rights Reserved. 25
  26. 26. Recommendations, their scope and Strategy for Implementation Need for Public Relations Department Scope: To address the citizens about the happenings and listen to the grievances of any common man, publicity research and media and marketing and generating awareness and answering to people. Issues: Lack of resources and interests in the department. People may start misusing this and the load on the department is surely to increase. Proposal: Setting up this section in the tax department is important, and employing dedicated and talented people who have been in public relations can efficiently manage it. The after effect development after establishment of this department is important and should not be undermined. 2012 Rakshak Foundation. All Rights Reserved. 26
  27. 27. Recommendations, their scope and Strategy for Implementation Lower threshold to Invoice Issuing Scope: Putting a lower threshold ensures that invoices are issued on a significant number of sales, though monitoring every sale with every denomination is not possible presently. Other states should also follow this strategy. Issues:The key point here rests with the optimization, the more close this value is to zero, higher shall be the monitoring index. But also at the same time, the burden of maintaining records and resource utilisation would be more. Proposal: This value must be dependent on various variables and has to be different for different states in the country. Along with this awareness about the laws pertaining to these issues should be spread. 2012 Rakshak Foundation. All Rights Reserved. 27
  28. 28. Recommendations, their scope and Strategy for Implementation New Place to issue invoices Scope: Promoting new places for issuing invoice should also improve behaviour issue for asking invoices on our purchases. Issues: Lack of knowledge and litereacy, also the small dealers nonchalant attitude may not encourage buyers to ask for invoices. Proposal:The start can be flexible as to write on a piece of paper and give the records of the purchase, but it should begin in the market as soon as possible if we have to keep track of the sales made within our state. 2012 Rakshak Foundation. All Rights Reserved. 28
  29. 29. Timeline (Tasks Completed) Week 1: Gained theoretical background on the concepts of Invoices, taxation system in India, case studies on Value Added Tax, tax collection reports and CAG reports. Week 2: Field Visit to Vyapar Bhawan, talked to various Government Officials about the scope and feasibility of project. Discussed various issues pertaining to invoices in India. Week 3: Field visit and sample survey in the Jia Sarai Market beside IIT Delhi Campus. Researched upon the government efforts to monitor tax collection. Week 4: Searched about various invoicing techniques that are prevalent in different parts of the globe. Methods like online database management, filing returns through various gateways etc. 2012 Rakshak Foundation. All Rights Reserved.
  30. 30. Timeline (continued) Week 5: Research on the Jaago Grahak Jaago scheme of the government, and try to collaborate the issues relevant to invoices. Go through various reports and news articles on usage of invoices. Week 6: Went to a field visit to Cuttack Odisha, compared and contrasted the status of invoices prevalent in that state with that of NCR region. Developed a model to increase the compliance towards invoice issuing. Week 7: Researched on the option for strict penal provisions, searched for better penalty systems that can increase compliance. Week 8: Decided final ideas and strategies of public awareness so that people can be educated about the usage of invoices and can escape fraudulent. 2012 Rakshak Foundation. All Rights Reserved.
  31. 31. Suggestions and Questions ???? 2012 Rakshak Foundation. All Rights Reserved.
  32. 32. APPENDIX 2012 Rakshak Foundation. All Rights Reserved. 32
  33. 33. REFERENCES Delhi Value Added Tax (DVAT) Act, 2004 Odisha Value Added Tax Act, 2005 Delhi Department of Trade and Taxes, Implementation of VAT, Working Paper Number 218, Submitted by Rahul Garg to Centre for Civil Society Step 4E, World Bank Report on Public Awareness Citizen’s Charter National Portal of India (http://india.gov.in/) Department of Revenue of India (http://dor.gov.in/) Ministry of Finance, Government of India (http://mof.gov.in/) Department of Trade and Taxes, Government of Delhi (http://delhi.gov.in/wps/wcm/connect/doit_tradeandtaxes/Trade AndTaxes/Home) Commercial Tax Department (https://odishatax.gov.in/) Mai H. and Meyer T. “E-Invoicing” Final Step Towards Efficient Invoicing Process, Deutsche Bank Research, Economics 76 (2010) 2012 Rakshak Foundation. All Rights Reserved.
  34. 34. THANK YOU 2012 Rakshak Foundation. All Rights Reserved. 34

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