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The finance ministry is considering a proposal to make Large Taxpayer Units (LTUs) mandatory for some category of taxpayers. The proposed move may help check evasion as 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 taxpayer satisfaction survey, said an official from the Income Tax department.
If the LTUs are made mandatory, the finance ministry may also 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 are eligible to register with LTUs.
Currently, LTUs are functioning in Bangalore, Chennai, Mumbai and Delhi, however, officials said, the scheme has not taken off very well in some centres as not many taxpayers are volunteering for the fear of a closer scrutiny by the tax department. There is also a proposal to open 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 LTU in Bangalore, which was set up in 2006. These taxpayers 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 top clients at LTU Bangalore.
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. Considering the high threshold of tax benefit for invocation of GAAR, the majority of cases may come in LTU only, it said.
The concept of LTUs 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 the 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,” said a White Paper released by the finance ministry on black money.
Though all the 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 the Goods & Services Tax (GST) in the country, the scope of LTUs may be widened to cover states’ taxes too.
Analysts say one of the reasons for lukewarm response could be the apprehension among taxpayers that it might go against them as the government will have 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
