Govt takes first step towards GST

Also, to fulfill the tall dreams of a 25 per cent hike in tax collections announced in the Budget last month, the Finance Ministry today set up two task forces to recover direct and indirect tax arrears running into a whopping Rs 87,000 crore.

While the task force on direct taxes would be headed by member (revenue), that on indirect taxes would be headed by chief commissioner (tax arrears and recovery). No new posts would be created for the task forces. The task forces, which start functioning from today, would report to the respective boards — the CBDT and the CBEC.

Concerned over a whopping Rs 87,000 crore of direct tax arrears, Chidambaram had recently said a ‘‘sizeable amount’’ of this was undisputed and recoverable. The target this year is to collect at least 10 per cent of the tax arrears amounting to Rs 8,000 crore by March 31, 2005.

The FM had earlier stated that he would approach the Chief Justice of India and Chief Justice of High Courts in states to take up big tax cases quickly. The government also proposes to come up with media campaigns as part of the multi-pronged approach to recover arrears. A 3-stage approach would be adopted — tax authorities would first issue notices to companies and individuals who have not cleared arrears. Taxmen would go after them if this failed to work.

As far as the credit for taxes is concerned, the ministry said the proposed Cenvat Credit Rule 2004 would replace the existing rules of 2002. ‘‘This would include certain services which are received prior to commencement of manufacture but the value of which gets absorbed in goods,’’ the draft norms said.

As for services received after the clearance of goods from the factory, the norms state that credit would be extended on services received up to the stage of place of removal as per Central Excise Act. Services like advertising and market research would be permitted for credit. Full credit of service tax in areas like telephone, construction, advertisement and market research, received in relation to the offices pertaining to the service provider would also be allowed.