We want tax law compliance facilitators or tax collectors

Source: The Hitavada      Date: 03 Apr 2017 14:21:40

By B C Bhartia,

Whether tax collection by whatever means is the object of VAT Department or the object should be to use power for enforcement of law to ensure 100 per cent tax compliance. What is more important for success of law. Enforcement of law for meeting of tax collection targets or 100 per cent law compliant society.

What should be the approach of Department. If the present approach where culprits are not punished but tax is collected from victims by following letters of law or arms twisting of victims under disguise of provisions of law is continued then it is a big concern expressed by most of the dealers under present VAT regime. This approach of tax Department leads to motivation to commit fraud by collecting tax and not deposting the same with Government treasury. The tax evaders enjoy at the cost of innocent taxpayers.

The motivation for fraud under the new GST era will be higher than in the past. In the past, most people suffered just one leg of tax (for example, just VAT-when buying from a distributor/ stockist), and saw only a ‘milder’ percentage of tax fraud than what they will see with GST having higher rate of tax.

When this motivation meets ‘convenience for fraud’- fraud goes up dramatically. But if fraud is made ‘more inconvenient’ then its possible benefits, and in contrast ‘compliance’ is more convenient’- compliance goes up dramatically. The approach of tax administrator should be to ensure that tax compliance is 100 per cent by making it cheap & easy. This will make a smart tax compliant society.
Under indirect tax laws, the dealers are tax collectors and not taxpayers.

They are agents of Government. Who authorises the dealers under law to collect taxes on its behalf and deposit in treasury. So the question comes who is to be punished. The person who while purchasing goods has paid taxes and obtained tax invoice from selling dealer or the seller who has collected taxes but has not deposited it with Government treasury or has not filed the return. If the actions and way of working of VAT Department is seen, we will realise that it is the victim, who has paid taxes while purchasing goods, is punished and the culprit who has collected tax but not deposited or filed return continues enjoying immunity.

Some what, same provisions of VAT laws are carried in Model GST law. If Government stand for denying input tax credit on pretext that how can Department give credit for taxes not received in Government treasury or confirmed by selling dealer through filing tax returns is acceptable then the same logic has to be extended and applied for victims who have paid taxes while purchasing goods and obtained tax invoice but because of non deposit of tax in Government treasury or non compliance by the supplier, why the purchaser is by law asked to pay again. Where is natural justice.? A trader wants to question the Government that when we have paid tax to your authorised agent “the seller” then why credit for tax paid is denied and why purchasers are asked to pay again.?

There are definitely provisions in law which authorises the officers to take action against those who issue tax invoice unauthorisedly, collect taxes but do not deposit the same in Government treasury or who do not make tax compliance timely, correctly or completely. However, it is sorry state of affairs that instead of being law enforcement and facilitation agency for getting law compliance done, these officers appear more of a tax collectors. Experience show that these officers use all the powers vested with them to recover the taxes from victims. But the provision to book the culprits it appears is seldomly used. We want success of GST where we have taxpayer and law compliant society. Those doing compliance timely, completely and correctly should not be punished because of leniency in taking harsh action against non complier of law.

“The culprits” who either don’t deposit tax or do not file tax returns timely, correctly and completely. Don’t further victimise in the victims says the dealer. The Government should set targets of 100 per cent tax compliance to its officers rather than setting targets of tax collection.