The Central Board of Direct Taxes is considering expanding the system of tax collection at source as expenditure pressure forces the central government to increase revenue vistas.

At present, tax collection at source is applicable only to payments made in the liquor industry.

Segments likely to be brought under the tax collection at source umbrella include a part of the $70-billion worth non-oil imports, importers procuring goods for outright sale to wholesalers and retailers in India, importers purchasing goods for their own manufacturing (processing industries would be exempted) purposes, lease, licence or royalty payment for timber contracts, auction of parking lots, mining and quarrying, and toll plazas.

Some industries that could also be brought under the ambit of tax collection at source include aluminium, tanneries, precious stones, yarn, plastics and granules.

tax collection at source, explained a CBDT source, is similar to purchase tax, which is levied on profit made when goods and services are transferred from one seller to another.

A seller will have to collect the tax from the buyer based on the value of goods. This is collected on the assumption that buyers in the entire marketing chain -- that is, just before the goods are bought by the ultimate consumer -- will make some profit as they pass on the goods.

The assessees who pay tax collection at source could, however, offset it against their income tax payments to avoid double taxation.

The source said the proposal is currently being examined by the board.

If accepted, it will help in reducing tax slippages that are very common in the unorganised sector -- specifically in the tanneries, plastics and yarn industries, said the source.