More than 2/3rd or around ₹29 lakh crore of total direct tax arrears are difficult to collect, the Department-related Standing Committee on Finance has noted in its report presented in Parliament on Wednesday. In this backdrop, the Committee has recommended writing off demands/ imposing moratoriums.
The report highlighted total arrears of direct taxes as on February 14 at over ₹43 lakh crore, out of which around ₹29 lakh crore have been categorised as ‘Demand difficult to collect’. In his submission before the Committee, Chairman, CBDT (Central Board of Direct Taxes), said huge arrear demand which is a cause of concern for us.
“Partly, this is a legacy issue. These arrears pertain to mid-90s because earlier, what used to happen was that there were essentially manual registers that we were keeping,” he said.
The process of digitising those registers started somewhere in 2010/2011. But it was partly manual and partly digitised. And at that point in time, PAN were not the identifiers. “When we talk about mid-90s or even early 2000s, PANs were not being quoted,” he said.
tax demand arrear
Further explaining the issue of huge tax demand arrear, the Revenue Secretary felt that a lot of this demand is fictitious. In the manual system, they were not accounting for the interest. Suppose they cannot collect any demand, nothing is there. But on that demand, which they are not able to collect, the system will calculate every year interest as well,” he said.
“Every year of delay will keep on adding to the demand, which is, in any case, non-collectible,” he said.
The Committee expressed their concern over the present scenario and said that there is a pressing need to review the tax assessment system to make it more efficient in collection of taxes. The Committee said while genuine demands should be strictly collected, the Tax Authorities should also undertake a thorough introspection of the existing tax assessment system and remain sensitive to the hardships faced by honest taxpayers due to erroneous or inflated tax demands.
“Since all the tax records have been digitised, it is high time to take decisive interventions, including writing off demands/ imposing moratoriums, to reduce and trueing up the huge backlog of demand arrears in a time-bound manner,” the Committee recommended.
