Challenging to-do list for the new CBEC chief

Praveen Mahajan has taken over as the first woman chairperson of the Central Board of Excise and Customs (CBEC). As a professional Indian Revenue Service officer, who has climbed up the ladder diligently, she might choose to ride the momentum rather than do anything spectacular. However, there is abundant scope for her to make a mark during her tenure, as the head of a seven-member board that would comprise only women from the beginning of next year.

Mahajan takes over at a time when raising revenue takes the highest priority. Her task is made somewhat easier by a hike in central excise duty and service rates, each by two per cent, in this year’s Budget; wider coverage through introduction of service tax on all services except those on a negative list and significant depreciation of rupee that would bring in more customs duties. However, the advantage is somewhat lost due to the slowdown in economic growth rate.

The next priority would be to ensure a smooth transition to the Goods and Services Tax (GST). Though more difficult decisions holding up the GST have to be taken by the political leadership, CBEC would have to do most of the preparatory work; set out the details; assist states in putting the required laws in place; and educate its workforce and taxpayers to ensure proper implementation.

The present finance minister is renowned for taking measures that impose heavy compliance costs. Fringe benefits tax, education cess and secondary higher education cess are ready examples of nuisance taxes, which bring in more ill will than revenues. While taxpayers understand the revenue compulsions and would not mind a hike in taxes, they would resent unnecessary paperwork and expenses in modifying software. They would expect the CBEC chairperson to stand up to the finance minister and insist on a simpler tax regime.

The commerce ministry is fond of coming up with more and more duty credit schemes and relaxations in the export promotion schemes that can leak revenues without necessarily boosting exports. The finance ministry has been playing along, bungling the details in drafting some of the consequential notifications and amendments.

A lot of interest would centre on how CBEC tackles the demands of the commerce ministry and gives effect to the schemes through its notifications, interpretations and instructions.

The service tax law based on a negative list is quite new and the central excise law went through a dramatic simplification 11 years back, but the Customs law, made at a time when duty rates were very high and smuggling quite rampant, is now 50 years old. Although the laws have gone through several changes over the years, there is enough scope to take a fundamental review of the laws and, if necessary, rewrite them to enable the average taxpayer understand and comply with the laws without requiring specialists.

Finally, while her own staff would expect Mahajan to push through the cadre restructuring exercise, she must insist for a sensible balance between trade facilitation, enforcement and revenue collection in return. She will be substantially judged by whether she makes life easier at the operating levels and whether litigations come down.

Mahajan starts with best wishes from everyone for a very successful innings.

Email: tncr@sify.com