LTUs might become mandatory

Move could be for some large classes of corporate taxpayers to aid combined scrutiny of operations and to check evasion

The finance ministry is considering a proposal to make Large Taxpayer Units (LTUs) mandatory for some categories of taxpayers. The idea is to help check evasion: LTUs act as a single window facilitation centre for all large entities paying excise duty, service tax and income tax.

A committee of the Central Board of Direct Taxes (CBDT) has looked into various aspects of LTUs, including making it mandatory, having an independent budgetary authority and undertaking a taxpayer satisfaction survey, said an official from the income tax department. If the LTUs are made mandatory, the finance ministry might review the thresholds for availing the facility. At present, those paying excise or service tax of over Rs 5 crore or advance tax of over Rs 10 crore in a year are eligible to register with LTUs.

Currently, LTUs are functioning in Bangalore, Chennai, Mumbai and Delhi. However, officials said, the scheme had not taken off very well in some centres, with not many volunteering for fear of a closer scrutiny by the department. There is also a proposal to open an LTU in Kolkata. If more assesses come to LTUs, it will help increase government revenues while lowering administrative costs. For instance, 56 assessees have registered with the LTU in Bangalore, set up in 2006. These account for 26 per cent of the revenue collected in the region. Toyota Kirloskar Motors, Bosch, IBM India, Canara Bank, HP India Sales Ltd, Vijaya Bank and State Bank of Mysore are some of the clients at LTU Bangalore.

The Shome panel on General Anti Avoidance Rules (GAAR) has also suggested making LTUs compulsory for a specified class of taxpayers, in line with international practice.

The concept of an LTU was introduced to assist large taxpayers in filing of documents, refund claims and settlement of disputes. As LTUs handle cases of companies having presence at several locations, the ministry believes these can play a crucial role in tax scrutiny of large taxpayers, through a closer coordination between income tax and excise departments. "This enables in-depth analysis of the finances of big corporates and helps prevent tax evasion. The LTU may become more effective if the audit cycle of the income tax, service tax and excise departments is aligned," stated a position paper issued by the finance ministry on unaccounted money.

Though all three departments are included under LTUs, they scrutinise different accounting periods at the same time, which reduces the scope of simultaneous scrutiny and examination. As the government is trying to introduce a Goods & Services Tax in the country, the scope of LTUs could be widened to cover states' taxes, too.

Analysts say one reason for the lukewarm response could be the apprehension among taxpayers that it would give the government a lot of information about them.
WHAT LTUs DO

• Filing of returns/documents at one place
• Electronic filing of return and tax payment
• Single point interaction with tax officers
• Inter-unit transfer of Cenvat credit
• Taxpayers not subjected to mandatory audit
• Uniformity in all tax related issues
• Faster disposal of claims and other processes