By TIOL News Service

NEW DELHI, APRIL 27, 2013: THE Parliamentary Standing Committee (PSC) on Finance has recommended a slew of initiatives by the Department of Revenue (DOR) to enhance tax receipts and tax collection efficiency.

The recommended initiatives include expansion of scope of presumptive tax, tax deduction at source, levy of green tax, widening of tax base and tax policy reforms and bipartite agreements for recovery of black money stashed in tax heavens.

PSC also believes that the tax receipts projected in the Union Budget for 2013-14 are under-estimated. It has thus advised DOT to revise them to reflect estimated actual receipts and their revenue mobilization potential.

In its report on DOR's ‘Demand for Grants' for financial year 2013-14 presented to Lok Sabha on 22 April, PSC observed: " income tax base in revenue terms is rather narrow which has adversely affected tax buoyancy."

It pointed out that Permanent Account Number (PAN) has been allotted to more than 11 crore entities, while income tax returns have been filed by only 3.5 crore entities. "Further, a huge gap has also been noticed between number of entities to whom Tax Deduction and Collection Account Number (TAN) has been allotted vis-à-vis number of deductors filing TDS submissions,"it says.

The Committee thus recommended that DOR should make "strenuous efforts"both in terms of policy as well as enforcement action in widening the tax base, which obviously is not commensurate with the growth in income and wealth witnessed over the years.

As put by PSC, "the present presumptive tax regime be reviewed so that substantial tax is generated through this source, as there is evidently a large number of individuals in businesses, trades, services and professions which are still outside the tax net."

The Committee suggested that "TDS / TCS coverage should be further expanded so as to cover more and more transactions which involved large amount of cash but remained outside tax net. The Committee also believe that TDS / TCS method is not only efficient and revenue buoyant but also non-intrusive in nature, which will minimize discretion and foster better tax compliance."

Reiterating the need for widening tax base, the report says: "the Committee cannot but conclude that tax policies presently being pursued are seemingly not as progressive as they ought to be."

PSC would thus like to be apprised of the extent of new assesses added to the tax base each year slab-wise within a period of one month. The Committee would also like to urge the Department to widen the tax base in a genuine manner by adding new assesses to the base at the higher income slabs rather than plateauing it off by way of accretions at the lower income slabs, which will only increase the number of returns without commensurate revenue. The Committee also desire that slab-wise, category-wise data of tax collections should also be maintained so that appropriate policy responses can be formulated.

It also advised DOR to levy green tax on different products and services keeping in view the fact that the country is over-populated and has scarce natural resources.

As regards Finance Ministry's initiatives to recover unaccounted or black money within and outside the country, PSC observed: "action / investigation on the names reported by HSBC on unaccounted money stashed abroad has still not been concluded."

The report continues: "The Committee, therefore, desires that expeditious action be taken to finalise the investigation in this matter and a report submitted to the Committee within one month on the outcome thereof. In this context, the Committee also recommends that economic intelligence should be better developed and bipartite agreements concluded with regard to plugging generation of unaccounted money through tax havens."

Referring to the introduction of a new tax named Commodities Transaction Tax (CTT) in the Indian Budget for 2013-14, PSC recommended that the Finance Ministry should conduct a study on the impact of CTT, especially on food inflation, over a period of one year.

PSC has also made certain recommendations on other issues such as recovery of tax arrears, tax appeals and Settlement Commission.