Tax refund: Take a leaf out of OECD's e-idea

G. Srinivasan New Delhi | Updated on March 12, 2018 Published on May 30, 2011

People file tax returns at an office in Erode, Tamil Nadu. — Photo: M. Govarthan

The Central Board of Direct Taxes (CBDT) plan to clear all refunds of assessment year 2010-11 and the current fiscal and the subsequent admission by the Revenue Secretary that this move should be “moderated” in keeping with the actual performance in direct tax collections have dampened many an ordinary tax payer looking for legitimate tax refund from the system.

The note of caution spelt out by the Revenue Secretary, Mr Sunil Mitra, at the Annual Conference of Chief Commissioners and Director-General of Income Tax here that is predicated on a likely drop in direct taxes target of Rs 5.32 lakh crore owing to unrelenting inflation and contraction in growth, is quite understandable.

Date limit

Set against this sober note, the ground reality is that the law stipulates that return of income received in a particular financial year could be processed up to the end of next financial year, by which the statutory limit to process tax returns and release refunds for the current fiscal is March 31, 2013.

As the direct tax receipts in recent years has been exceptionally buoyant even when there was economic slowdown, several innovative schemes such as opening a Centralised Processing Centre (CPC) at Bangalore with two more such CPCs at Manesar and Pune and another in the Eastern region under way, e-filing of returns and refund banker scheme, have all been set off by the tax authorities to ensure refunds expeditiously.

While all these innovative schemes in place in recent time have given the requisite relief to the taxpayers looking for faster settlement of tax returns and the refund realisation if any, the reality is way behind these reassuring measures as many taxpayers could dolefully admit to the inordinate delay in receipt of refunds filed years ago.

OECD example

Interestingly, the Indian tax authorities could take a leaf out of the experience of rich countries, even as India is already a member of G-20 and is keen on joining the club of rich world by 2020. The Paris-based inter-governmental think tank of rich countries, the Organisation for Economic Cooperation and Development (OECD) through its Committee on Fiscal Affairs which has set up the Forum on Tax Administration (FTA), has come out with a monograph on tax repayments. Though this report has a wonted caveat that national revenue bodies face a varied milieu within which to administer their taxation system, it rightly states that “a key activity in the administration of taxation systems is the effective management of tax refunds, repayments and credits, otherwise known as tax repayments.”

Service delivery

Though it has several recommendations, the most relevant to India pertains to service delivery. Being an information technology superpower, India should reap in improvements in technology which have enabled revenue bodies to reduce costs of service by interacting with taxpayers through digital channels. As the FTA found, this also produces service improvements for taxpayers requesting repayments by reducing the processing time, providing better certainty of accuracy and outcome and reducing the administrative burden. It has aptly asked revenue bodies elsewhere to encourage the shift to electronic channels for repayments through differentiating service standards for electronic interactions as compared to paper or mandating the use of electronic channels for selected segments or groups of taxpayers.

Auditors to whom Business Line spoke endorse this pragmatic view because though penetration of personal computer is not universal across the country and its use is also not ubiquitous due to access constraints, the taxpaying community of a fraction of hardly three million out of the country's huge population of one billion plus could manage to file e-returns and get comforted by receiving refunds through electronic bank transfer. This way, they said, the need for making personal visits to auditors or to the tax department to seek the status of their returns and to get the release order could be obviated.


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Published on May 30, 2011
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