E-payment of tax above Rs 1 lakh a must

In a bid to increase compliance and widen the tax net, the government on Wednesday made it mandatory for traders to make online payment of excise duty and service tax for amounts exceeding Rs 1 lakh. Earlier, those with dues of Rs 10 lakh and above were required to electronically pay their taxes.

“It has now been decided to reduce the threshold of mandatory e-payment from Rs 10 lakh to Rs 1 lakh for both central excise and service tax payment with effect from January 1, 2014,” the Central Board of Excise and Customs (CBEC) said.

The government notified the changes on Friday. Thus, from January 1, a manufacturer or a service taxpayer who has paid tax of more than

Rs 1 lakh in the previous financial year would be required to pay tax through internet banking.

TAX REGIME TIGHTENED

• Threshold of mandatory e-payment reduced from Rs 10 lakh to Rs 1 lakh for both central excise and service tax payment
• Changes applicable from January 1, 2014
• Move taken as measure of trade facilitation
• E-filing of service tax and excise duty will help the government make a smooth transition to GST
• The threshold annual turnover above which traders have to pay central excise tax is Rs 1.5 crore; for service tax, it is Rs 10 lakh

CBEC said the move has been taken as a measure of trade facilitation and it is expected that increased coverage of e-payment would make it convenient for traders to pay taxes electronically.

Currently, service tax and excise duty are levied at 12 per cent. This means anybody with an annual turnover of more than Rs 9 lakh would have to pay taxes online. The present assessee base for excise duty is Rs 1,30,000, while it is Rs 7,00,000 for service tax. The threshold, the annual turnover below which traders are not required to pay taxes, is Rs 1.5 crore for central excise and Rs 10 lakh for service tax. “If a payment is made through a cheque, it takes a lot of time. Sometimes the cheque is not cleared. E-payment will make the process faster,” said a finance ministry official.

E-filing of service tax and excise duty will help the government make a smooth transition to the Goods & Services Tax (GST) regime. According to a report by global consultancy firm EY, 57 per cent of the 39 countries that provided information for their report required VAT/GST returns to be filed electronically, 35 per cent have an optional e-filing facility and eight per cent do not offer or require e-filing.

In order to reduce the transaction cost of the importers and expedite the time taken for Customs clearance, in 2012, e-payment of Customs duty was also made mandatory for importers paying an amount of Rs 1 lakh or more per transaction.

Earlier this year, the government had made electronic filing of returns mandatory for taxpayers with taxable income above Rs 5 lakh. Prior to that, those with income above Rs 10 lakh were required to file their returns in the electronic mode. This provision was introduced in the Budget for 2012-13.

Since about 80 per cent of the taxpayers who were not mandated to file e-returns were already doing so, the finance ministry thought of making it compulsory to include others in the category.