"The committee would suggest for harnessing the tax potential of un-organised sector and in particular those categories, not subject to regular TDS, making even avoidance of tax as par with evasion inviting heavy penalties...," Parliamentary Standing Committee on Finance said in its report tabled in Parliament today.
The panel also suggested doing away with unnecessary tax exemptions and case by case exemption -wise impact assessment; and arresting rampant tax evasion in the informal market ecosystem.
Expressing concern over rise in quantum of refunds from Rs 1.22 lakh crore in 2015-16 to Rs 1.41 lakh crore in 2016-17 up to January 31, 2017, the committee said, "the revenue department appears to be entangled in the vicious web of raising of unrealistic demands and then subsequently making refunds and paying huge interest thereupon."
"It is high time a thorough probe is made in this regard and the tax processes are reviewed so that the need of raising unrealistic demand as also payment of disproportionately large advance tax by assessees is obviated," the panel added.
It said the rather low level of tax-GDP ratio of our economy, which stands at 16.6 per cent requires to be re-visited in comparable parameters with BRICS countries.
Citing findings of the Shome panel report which says the direct tax collection has increased by more than 700 per cent, but the number of tax payers has merely grown 35 per cent in the last ten years, the panel said, "the measures adopted by the Finance Ministry so far to address this issue have proved to be incremental and thus insufficient."
The panel also pointed out that the posts in the income tax department have been created on the basis of number of tax payers and returns rather than the actual increase in tax collections and tax buoyancy.
"The Committee therefore feel that if such additional posts do not bring in additional revenue, these posts should be reviewed," it said.
It also reiterated its earlier recommendation that the practice of levying cess and surcharge should progressively be done away with, as their proceeds are not shared with states and their utilisation is also not being made wholly for the intended purpose.
The panel said efforts should also simultaneously be made to gradually move towards Tax Deductible at source or Tax Collected at Source, which will help widen and deepen the tax base in the most non-intrusive manner.
As suggested by the committee earlier, it noted that the excise structure of products such as pan masala etc, should also be rationalised in manner that does not result in needless complexity and revenue loss to government.
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