Collect 40% of tax demand by March 31, CBDT tells officials

The Central Board of Direct Taxes (CBDT) has asked its field force to collect before March 31 at least 40 per cent of the total demand raised for the current financial year.

CBDT officials said this measure is aimed at boosting corporate tax collection and compensate for the fall in indirect tax collection. Indirect tax collection through Customs, Central Excise and Service Tax has fallen due to lower tax rates announced as part of a financial stimulus in 2008.

Sources said an assessee has to pay the entire tax demand raised for a particular financial year within 35 days of finalisation of the dues by the tax department. However, some assessees go on appeal or contest it depending on the nature of the demand. Therefore, every year, CBDT informally fixes a certain proportion of the demand which needs to be collected even if the assessee has a problem with the assessment. Later, a refund is made if the final tax liability is less than the assessed value. “This year, the limit has been made a formal and mandatory direction. This is effective only for companies,” the sources added.

For the demands raised in this financial year, at least 40 per cent of it will be collected before March 31 where the companies have resources and claim is not disputed. Usually, even if the companies do not opt for litigation, they prefer to pay when filing returns in the next financial year, since they also need funds for financial year closing.

Loss-making companies, which pay taxes under minimum alternate tax under self-assessment returns have been urged to pay dues before March 31, 2010. To this effect, in order to help the companies with funds, the department has decided to process refunds faster this year — by April — after tax collection is through, so much so that the month may be virtually called “month of refunds”, a CBDT official said. The refunds were stopped after the department’s software was hacked. The case was handed over to the Central Bureau of Investigation.

The officials added that high refunds this year is one of the reasons for decline in tax collection. Till January 2010, Rs 12,000 crore had been issued as refunds against Rs 6,000 crore for the same period last year. Sharp fall in tax-deducted-at-source is another reason. Advance tax collection for the fourth quarter, which is expected to grow 15-20 per cent, would have been more but for banks and oil marketing companies. The officials said public sector banks contribute 34 per cent in total tax collection. Even if other sectors contribute, it is difficult to compensate for the overall fall.