The Tax Tan­gle

The gov­ern­ment ask­ing cor­po­rates and pro­fes­sion­als to re­port es­ti­mates of in­come and tax li­a­bil­ity will add to the com­pli­ance bur­den.

Business Today - - CONTENTS - BY DI­PAK MON­DAL @Di­pak_Journo

20 The gov­ern­ment ask­ing cor­po­rates and pro­fes­sion­als to re­port es­ti­mates of in­come and tax li­a­bil­ity will add to the com­pli­ance bur­den

At a time when com­pli­ance is­sues un­der the Goods and Ser­vices Tax ( GST) are prov­ing to be a night­mare, the gov­ern­ment has dropped an­other bomb by ask­ing cor­po­rate and pro­fes­sional tax­pay­ers to vol­un­tar­ily re­port es­ti­mates of cur­rent year’s in­come, tax pay­ment and ad­vance tax li­a­bil­ity.

The move, which is likely to in­crease the com­pli­ance bur­den of tax­pay­ers yet again, shows the gov­ern­ment’s ag­gres­sive stance to­wards any tax eva­sion or de­fer­ment of tax pay­ment. How­ever, it could prove to be an­other blow to busi­nesses, al­ready hit by the gov­ern­ment’s over-the-top quest for the erad­i­ca­tion of black money and tax eva­sion.

In a draft no­ti­fi­ca­tion, the Cen­tral Board of Di­rect Taxes has “pro­posed to cre­ate a mech­a­nism for self-re­port­ing of es­ti­mates of cur­rent in­come, tax pay­ment and ad­vance tax li­a­bil­ity by com­pa­nies and per­sons el­i­gi­ble for tax au­dit on a vol­un­tary ba­sis”.

The ini­tia­tive aims to en­sure that tax­pay­ers would not de­fer ad­vance tax pay­ments by un­der­es­ti­mat­ing in­come and tax li­a­bil­i­ties. The thresh­old for a tax au­dit is a turnover of `1 crore for busi­nesses and `50 lakh for pro­fes­sion­als.

The gov­ern­ment says the move is nec­es­sary to en­sure a con­tin­u­ous flow of tax rev­enues through­out the year so that it can meet var­i­ous bud­getary al­lo­ca­tions.

Al­though it is just a draft no­ti­fi­ca­tion and the gov­ern­ment has not taken a fi­nal call, tax­pay­ers are wor­ried. If the draft rule is no­ti­fied in its cur­rent form, it would lead to ad­di­tional com­pli­ance and un­nec­es­sary ha­rass­ment of tax­pay­ers.

The draft no­ti­fi­ca­tion says that a tax­payer should re­port the es­ti­mated in­come and pay­ment of taxes – as on Septem­ber 30 of the fi­nan­cial year – by Novem­ber 15 of that year. If the es­ti­mated in­come (as on Septem­ber 30) is `5 lakh or 10 per cent (whichever is higher) less than the in­come gen­er­ated in the year-ago pe­riod, the tax­payer has to re­port the de­tails as on De­cem­ber 31, and it must be be sub­mit­ted by Jan­uary 31.

Com­ment­ing on the de­vel­op­ment, Shailesh Ku­mar, Direc­tor, di­rect taxes, at Nan­gia & Co LLP, says, “Right now you have to re­port your in­come only once, at the time of fil­ing the re­turns. What­ever be the es­ti­mates of your ad­vance tax, that is an in­ter­nal ex­er­cise. But go­ing ahead, you not only have to re­port cur­rent year’s es­ti­mates but also have to com­pare it with the pre­vi­ous year’s. If there is any dras­tic change in in­come, you have to do a bit of ex­plain­ing.”

Amit Sing­ha­nia, Part­ner ( Tax) at Amarc­hand Man­gal­das & Co, says if the es­ti­mates made in ad­vance are more than the fi­nal in­come and tax li­a­bil­ity cal­cu­la­tion, the tax­payer may be hauled up.

Ex­perts also ques­tion the ra­tio­nale of the new re­port­ing re­quire­ment given that a tax­payer is any way li­able to pay an in­ter­est if the ad­vance tax paid falls short of the as­sessed tax by 10 per cent or more. The in­ter­est charged is 1 per cent per month.

Ac­cord­ing to sources, in­dus­try bod­ies are pre­par­ing a rep­re­sen­ta­tion to con­vince the gov­ern­ment that the no­ti­fi­ca­tion would be detri­men­tal to the busi­nesses al­ready strug­gling with GST com­pli­ance and it should be com­pletely with­drawn. It re­mains to be seen if the author­i­ties will soften their stand and roll back the ini­tia­tive. ~

The gov­ern­ment says the move is nec­es­sary to en­sure a con­tin­u­ous flow of tax rev­enues to meet bud­getary al­lo­ca­tions

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