Bill to speed up tax collection

The finance ministry is considering introducing new legal provisions to make sure assessees clear excise and Customs duty arrears.

Amendments for the purpose, to be incorporated in the central excise and Customs laws, are likely to be tabled in the ongoing Budget session of Parliament.

The government is expected to introduce a Bill during the session to strengthen direct and indirect tax provisions and penalties besides simplifying the tax system.

The Customs and excise arrears are estimated at around Rs 15,000 crore (Rs 150 billion). During 2004-05, the Central Board of Excise & Customs managed to recover arrears of around Rs 1,800 crore (Rs 18 billion), against a target of Rs 3,000 crore (Rs 30 billion).

Last year, the revenue department had launched a drive to recover tax arrears estimated at over Rs 100,000 crore (Rs 1000 billion) and managed to close the year with a record collection.

Revenue department officials said the amendments would be particularly useful for collecting arrears from fly-by-night operators who transferred assets from one company to another to avoid payment of arrears.

In many instances, it has been found that those setting up export oriented units only hired premises and installed basic machinery and vanished after claiming huge exemptions from the government, the officials added.

They pointed out that the provisions would plug the present loopholes. So far, the government can only compound excisable goods, but not immovable property.

"Often an assessee, who owes arrears to the government, disposes of property to a third party and then claims that he has no disposable assets," an official said.

Present norms pertaining to arrears recovery are covered under Section 11 of the Central Excise Act and Section 142 of the Customs Act.

On service tax, too, the government intends to tighten the penal provisions to ensure better compliance.

Plugging the legal loophole

• The amendments to the Central Excise and Customs laws are likely to be tabled in the ongoing Budget session
• The Bill is expected to strengthen the direct tax and indirect tax provisions and penalties, besides simplifying the system
• The Customs and excise arrears are estimated at about Rs 15,000 crore
• During 2004-05, only Rs 1,800 crore of Customs and excise arrears were recovered against a target of Rs 3,000 crore
• The amendments are likely to be particularly useful to collect arrears from fly-by-night operators who transfer assets from one company to another to avoid payment of arrears