Broadening Tax Base - No Clarity about measures to be taken by the Commissionerates - CAG
AN action plan was drawn by the Director General of Service Tax and circulated to Chief Commissioners on 26 May 2003, under which the field formations were required to obtain information: -
++ On unregistered service tax providers from yellow pages, service providers' associations, newspaper advertisements, regional registration authorities and websites like Indiamart.com.
++ From Banks about property which may be covered under architectural/consulting engineer services.
++ From Municipal corporations and major assessees including PSUs and private sector organisations regarding various services being availed by them and to obtain details of such services providers including their addresses.
++ From major hotels, auditorium, banquet halls, conference hall about convention services and event management service providers.
++ By making discrete market enquiries.
++ By collecting intelligence and conducting field surveys.
CAG enquired as to what measures had been taken by the Commissionerates towards broadening of tax base of service tax assessees in pursuance of the specific items of DGST action plan. It was informed by 17 Commissionerates out of 35 test checked Commissionerates that they had not carried out these procedures for broadening the tax base.
Six Commissionerates intimated that the items of work prescribed by DGST were carried out. However, they intimated that the results of such efforts were not available with them. Visakhapatnam I Commissionerate stated that items of works prescribed by DGST for broadening the tax base were being carried out but it was difficult to co-relate number of registrations made with any particular measure. However, the total number of registrations achieved, from a combined application of these measures, was also not furnished.
Delhi ST Commissionerate and ST division, Jaipur, under Jaipur I Commissionerate stated that the DGST instructions were no longer applicable.
CAG observes that there is lack of clarity about measures to be taken by the Commissionerates.
The DGST instructions provided for submission of a fortnightly report by the divisional offices to the Commissioners and by the Commissioners to the Chief Commissioners regarding efforts made for increasing the tax base. The report had to specially cover areas such as surveys conducted and outcome thereof, data base maintenance, meetings with the service provider associations etc.
The selected Commissionerates reported that no fortnightly reports were being submitted regarding efforts to broaden the tax base. The selected Commissionerates also reported that no targets were fixed for the measures required to be taken for broadening the assessee base.
A Service Tax Officer tells us :
The DGST instructions were issued when there was no small service provider exemption. In most of the instances, the information published in yellow pages need not be correct as they hardly conduct any verification.
Most of the unserviced registrations in every Commissionerate are those because of the registration drive conducted during those days by giving forced registrations to all and sundry. This has caused lot of administrative problems to monitor these unserviced/non serious registrations and Board had to give instructions to close such registrations. After 2003 the service tax administration has come a long way with most of the Commissionerates/even DGCEI booking service tax cases and therefore the instructions of DGST are archaic.
Further, as rightly mentioned by Visakhapatnam Commissioner, it is very difficult to monitor/record as to which registration has come as a result of which particular measure (yellow pages/telephone directory etc)
CAG Recommends:
++ The Board may prescribe a deadline for Commissionerates to verify cases already pointed out by CAG in the earlier Performance Audit Reports. It may also fix targets for doing such verifications and issue comprehensive guidelines for this work to remove ambiguities and contradictions.
++ As a long-term measure, the Board may identify sources from where information can be imported electronically into ACES, to form an intelligence gathering system on potential taxpayers.
++ The Board may prescribe an effective monitoring mechanism to identify potential assessees and get them registered.
DDT Recommends:
DGST and the Chief Commissioners are same rank officers. So, the letters to the Chief Commissioners from DGST are not taken very seriously. In an organisation where “batch protocol” is widely prevalent, no Chief Commissioner would ever welcome a direction from DGST on what needs to be done in his jurisdiction. CBEC should consider upgrading the post of DGST above the rank of Chief Commissioners in the ensuing cadre restructuring.
Source: CAG's Report No. 25 of 2011-12 (Indirect Taxes – Central Excise and Service Tax)